<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LIONBRIDGE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7389 04-3398462
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
</TABLE>
LIONBRIDGE TECHNOLOGIES, INC.
950 WINTER STREET, SUITE 4300
WALTHAM, MASSACHUSETTS 02451
(781) 890-6612
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
RORY J. COWAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
LIONBRIDGE TECHNOLOGIES, INC.
950 WINTER STREET, SUITE 4300
WALTHAM, MASSACHUSETTS 02451
(781) 890-6612
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
GEORGE W. LLOYD, ESQ. STEPHEN A. RIDDICK, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP BROBECK, PHLEGER & HARRISON LLP
125 HIGH STREET 701 PENNSYLVANIA AVENUE NW, SUITE 220
BOSTON, MASSACHUSETTS 02110 WASHINGTON, D.C. 20004
(617) 248-7000 (202) 220-6000
</TABLE>
------------------------
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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / _______________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _______________
If 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,
check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.01 par value............................................................ $57,500,000 $15,985
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION-- , 1999
PROSPECTUS
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
LIONBRIDGE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
- --------------------------------------------------------------------------------
Shares
[Lionbridge logo]LIONBRIDGE TECHNOLOGIES, INC.
Common Stock
- ----------------------------------------------------------------------
Lionbridge Technologies, Inc. is offering shares of its common stock in an
initial public offering. Prior to this offering, there has been no public market
for Lionbridge's common stock.
Lionbridge is a provider of globalization and multilingual Internet services to
technology companies worldwide.
It is anticipated that the public offering price will be between $ and
$ per share. The shares of Lionbridge will be quoted in the Nasdaq National
Market under the symbol "LIOX".
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price........................................... $ $
Underwriting discounts and commissions.......................... $ $
Proceeds, before expenses, to Lionbridge........................ $ $
</TABLE>
SEE "RISK FACTORS" ON PAGES 7 TO 14 FOR FACTORS THAT SHOULD BE CONSIDERED BEFORE
INVESTING IN THE SHARES OF LIONBRIDGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
The underwriters may, under certain circumstances, purchase up to
additional shares from selling shareholders at the public offering price,
less underwriting discounts and commissions. Delivery
and payment for the shares will be on , 1999.
PRUDENTIAL SECURITIES
U.S. BANCORP PIPER JAFFRAY
ADAMS, HARKNESS & HILL, INC.
, 1999
<PAGE>
INSIDE FRONT COVER
[graphic showing the lion head from the company logo
with the letter "E" wrapped around the head]
Multilingual Internet Services
Because the "e" doesn't stand for English
Multilingual eRelease
Software Products
Web Applications
Firmware
User Manuals
Multimedia Tutorials
Multilingual eLearning
Web-based Product Training
Self-paced Certification Programs
Intranet Distance Learning
Multilingual eSupport
Web-based Self-help
Knowledgebases
Interactive Email
Product Information
Multilingual eCommerce
Online Marcom
Product Catalogs
Customer Extranets
Web Storefronts
<PAGE>
INSIDE FRONT COVER - FOLDOUT
Simultaneous Worldwide Release ...Continuous Multilingual Updates
[Two-page graphic illustrating Lionbridge processes and customer
examples. The graphic contains three sections.
On the far left are three computer screen capture images of English software
products from Lionbridge customers. Below each screen shot is text
indicating the customer and describing software.
On the far right are the corresponding foreign language versions of the
screen samples in Japanese, Chinese, and French. Below each screen shot is
text describing the work performed by Lionbridge.
In the middle is a large circle representing the Lionbridge globalization
process. Centered inside the circle is the lion head from the company logo.
Surrounding the outside of the circle are eight ovals, each representing a
step in the Lionbridge process. Below the circle is a rectangular box
representing Lionbridge's global network of translation resources.]
Text inside the circle, above the lion head: "Rapid Globalization
Methodology"
Text inside the circle, below the lion head: "LionTrack Workflow Systems"
Text inside the ovals:
Oval #1 "Localization Engineering"
Oval #2 "Internationalization Engineering
Oval #3 "Multilingual Technical Publishing"
Oval #4 "Project Management"
Oval #5 "Translation Management"
Oval #6 "Localization Testing"
Oval #7 "Compatibility Testing"
Oval #8 "Logo Certification"
Text inside the rectangular box: "Lionbridge global community of 2,000
language resources"
Above and below each of the three sections of the graphic are rectangular
boxes with the following text:
Upper left (above the English screen shots): "Internet drives demand for
Lionbridge services" Upper middle (above the Lionbridge circle): "Internet
enables the Lionbridge infrastructure" Upper right (above the foreign
language screen shots): "Internet provides global access for end users"
Lower left (below the English screen shots): "Lionbridge customers are
technology leaders" Lower middle (below the Lionbridge circle): "They rely
on Lionbridge services and systems." Lower right (below the foreign language
screen shots): "...to reach over half of their global customer base"
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 5
Forward-Looking Statements..................... 14
Use of Proceeds................................ 15
Dividend Policy................................ 15
Capitalization................................. 16
Dilution....................................... 17
Selected Consolidated Financial Data........... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 22
<CAPTION>
PAGE
-----
<S> <C>
Business....................................... 32
Management..................................... 41
Certain Transactions........................... 49
Principal and Selling Stockholders............. 51
Description of Capital Stock................... 54
Shares Eligible For Future Sale................ 59
Underwriting................................... 61
Legal Matters.................................. 63
Experts........................................ 63
Available Information.......................... 63
Index to Financial Statements.................. F-1
</TABLE>
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The term "Lionbridge", "we", "our" and "us" refer to Lionbridge
Technologies, Inc. and its subsidiaries unless the context suggests otherwise.
The term "you" refers to a prospective investor. "Lionbridge" is a registered
trademark and "lionbridge.com" and the Lionbridge logo are trademarks of
Lionbridge. "VeriTest" is a registered trademark of Lionbridge. All other trade
names and trademarks referred to in this prospectus are the property of their
respective owners.
- --------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
making an offer of these securities in any jurisdiction where the offer or sale
is not permitted. You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the front cover of
this prospectus.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Investors should read the entire prospectus carefully.
LIONBRIDGE
Lionbridge is a provider of globalization and multilingual Internet services
to technology companies worldwide. Our software, test, Web, and linguistic
engineering groups create and maintain multilingual versions of our clients'
software and hardware, as well as Web-based technical support, training
materials, and sales and marketing information for worldwide release via
traditional means and the Internet. Lionbridge is strategically positioned at
the intersection of four business trends that are driving the demand for our
services:
- the growing importance of global markets,
- the widespread adoption of information technology,
- the impact of the Internet on commerce, and
- the increased outsourcing by companies of technology services.
Lionbridge serves as a globalization partner throughout our clients' product
development and support lifecycle by offering:
- localization, translation, and internationalization services,
- compliance, compatibility, and localization testing of software and
hardware, and
- project management throughout the globalization process.
Our multilingual Internet services are organized into four service
offerings, called ERELEASE, ESUPPORT, ELEARNING, and ECOMMERCE, each designed to
meet the unique requirements of our clients' product development, technical
support, training, and sales and marketing activities. We use our RAPID
GLOBALIZATION METHODOLOGY and LIONTRACK workflow systems to achieve operational
efficiencies and predictable, measurable results across multiple geographies and
languages.
We service our industry-leading technology clients, including IBM,
Microsoft, Motorola, Novell, Oracle, and Sun Microsystems from our facilities in
the United States, Europe, and Asia.
OUR MARKET OPPORTUNITY
Companies around the world are increasingly operating on a global scale. To
operate efficiently, they must standardize their hardware, software, and
telecommunications infrastructures throughout their global organization.
Historically, technology providers first developed products for their home
markets and then created foreign language versions that were compatible with
local operating systems and standards. The complexity of developing these
localized versions often resulted in product releases being delayed from six
months to a year after delivery of the home-country version. In the interim, end
users often faced version and compatibility conflicts throughout their global
organizations. As a result, global end users of technology now demand:
- simultaneous product release of the home country and localized versions,
- independent third party testing and certification to provide assurance of
compatibility with local operating systems and international standards,
and
- customer support, testing, and training in local languages wherever the
end user operates.
3
<PAGE>
To meet these end user demands, the market for globalization services has
evolved beyond translation to encompass:
- LOCALIZATION (L10N). The re-engineering and translation of user
interfaces, online help, documentation, knowledgebases, training
materials, and sales and marketing information.
- INTERNATIONALIZATION (I18N). The re-engineering of source code so that
products and applications are compatible with country-specific operating
systems and software.
- MULTILINGUAL PRODUCT TESTING. The assurance that foreign language versions
appear and function properly and are compatible with local operating
systems and standards.
With the increasing complexity of many technology products, globalization
requires the application of sophisticated project management skills to integrate
a broad range of disciplines and specialized technical resources.
Technology companies now use the Internet to release products, provide
technical support, deliver product training, and sell and market products.
Internet content is predominantly in English, but a growing percentage of
Internet users do not speak English as their first language. Although the
Internet offers significant opportunities, companies cannot take full advantage
of these opportunities on a global basis unless they accommodate users' local
languages, cultures, and technical environments.
Few companies have the combination of engineering, linguistic, testing, and
project management skills needed to globalize their products successfully. We
offer a complete globalization and multilingual Internet solution that improves
the quality, consistency, and timeliness of our clients' international product
releases, technical support, training materials, and sales and marketing
information.
We believe that expanded global competition and worldwide Internet access
will increase the demand for our services. We also believe that by offering a
one-stop solution to globalization and multilingual Internet service needs,
Lionbridge is an attractive partner to companies operating in a global
marketplace.
OUR STRATEGY
Lionbridge's goal is to become the leading provider of globalization and
multilingual Internet services. The following are the key elements of our
strategy:
- leverage existing clients,
- continue strategic acquisitions,
- evolve our methodology and workflow systems,
- pursue multi-year relationships with clients, and
- expand into additional vertical markets.
OUR HISTORY AND OFFICES
We were incorporated in Delaware in September 1996. We reorganized in
February 1998 under the name Lionbridge Technologies Holdings, Inc. In June
1999, we changed our name to Lionbridge Technologies, Inc. Our principal
executive offices are located at 950 Winter Street, Suite 4300, Waltham,
Massachusetts 02451, our telephone number is (781) 890-6612, and our Web site is
www.lionbridge.com. Information contained on our Web site is not a part of this
prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Shares offered by Lionbridge................ shares
Total shares outstanding after this shares(1)
offering....................................
Use of proceeds............................. To (i) redeem our series B redeemable
preferred stock, (ii) repay our subordinated
debt and (iii) provide for other general
corporate purposes.
Proposed Nasdaq National Market symbol...... LIOX
</TABLE>
(1)Based on 19,129,019 shares of common stock outstanding as of June 15, 1999.
Excludes 125,000 shares issuable upon exercise of warrants and 3,948,800 shares
issuable upon the exercise of stock options as of June 15, 1999 and 2,820,320
shares available for future grant or issuance under our 1998 Stock Plan.
Except as set forth in the consolidated financial statements or as otherwise
indicated, all information in the prospectus:
- does not include shares offered by the selling stockholders if the
underwriters' over-allotment options are not exercised,
- reflects the exchange of all outstanding shares of our Series A
convertible preferred stock and Series D nonvoting convertible preferred
stock into shares of our Series B redeemable preferred stock and Series C
convertible preferred stock upon the closing of this offering,
- reflects the redemption of all outstanding shares of our Series B
redeemable preferred stock, issuable upon exchange of our Series A
convertible preferred stock and Series D nonvoting convertible preferred
stock, for $100,000 per share plus an 8% annual premium upon the closing
of this offering,
- reflects the conversion of all outstanding shares of our Series C
convertible preferred stock, issuable upon conversion of our Series A
convertible preferred stock and Series D nonvoting convertible preferred
stock, into shares of our common stock upon the closing of this offering,
and
- reflects the exercise of warrants to acquire 2,299,889 shares of our
common stock.
RISK FACTORS
You should consider the risk factors before investing in Lionbridge's common
stock and the impact from various events which could adversely affect its
business.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes the financial data for our business. We
commenced operations on December 23, 1996 through the acquisition of the
localization businesses of Stream International in Europe. The information for
the year ended December 31, 1996 reflects Stream International's results of
operations relating to their operation of the European localization business.
For the years ended December 31, 1997 and 1998 and the three months ended March
31, 1998, our loss from operations and net loss include nonrecurring charges of
$541,000, $501,000 and $451,000 related to workforce reductions in France.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------- ------------------------
1996 1997 1998 1998 1999
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue..................................... $ 28,134 $ 26,462 $ 38,412 $ 7,438 $ 11,690
Gross profit................................ 3,157 7,548 12,866 2,094 3,495
Income (loss) from operations............... 13 (6,909) (3,404) (1,832) (1,721)
Net loss.................................... (213) (7,654) (4,262) (1,912) (3,415)
Basic and diluted net loss per common share
attributable to common stockholders....... $ (5.90) $ (1.99) $ (0.98) $ (1.17)
Shares used in computing basic and diluted
net loss per share attributable to common
stockholders.............................. 1,477 2,673 2,229 3,140
</TABLE>
The pro forma as adjusted column below gives effect upon the closing of this
offering to:
- the exchange of all outstanding shares of our Series A convertible
preferred stock and Series D nonvoting convertible preferred stock into
shares of our Series B redeemable preferred stock and Series C convertible
preferred stock,
- the redemption of all outstanding shares of our Series B redeemable
preferred stock for $100,000 per share plus an 8% annual premium,
- the conversion of all outstanding shares of our Series C convertible
preferred stock into shares of our common stock,
- the payment in full of the subordinated notes and the related impact on
the accumulated deficit for the charge for the unamortized original issue
discount on these notes,
- the exercise of warrants to acquire 2,299,889 shares of our common stock,
and
- the sale of shares of common stock in this offering at an assumed
initial public offering price of $ per share, after deducting
underwriting discounts and commissions and estimated offering expenses,
and application of the estimated net proceeds.
<TABLE>
<CAPTION>
MARCH 31, 1999
---------------------------
DECEMBER 31, PRO FORMA
1998 ACTUAL AS ADJUSTED
------------ ----------- --------------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
CONSOLIDATED BALANCE SHEET DATA:
Cash.................................................................. $ 732 $ 3,802 $
Total assets.......................................................... 22,481 29,366
Working capital (deficit)............................................. (7,718) (947)
Long-term debt, net of discount....................................... -- 7,155
Redeemable convertible preferred stock................................ 15,395 15,660
Total stockholders' equity (deficit).................................. (13,419) (10,661)
</TABLE>
6
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, in addition to the
other information set forth in this prospectus, before purchasing shares of
common stock of Lionbridge. Each of these risk factors could adversely affect
our business, operating results and financial condition, as well as adversely
affect the value of an investment in our common stock. This investment involves
a high degree of risk.
RISKS RELATED TO OUR BUSINESS
OUR REVENUE COULD BE NEGATIVELY AFFECTED BY THE DELAY OF ONE OF OUR CLIENTS'
PRODUCT RELEASES OR THE LOSS OF A MAJOR CLIENT.
A significant portion of our revenue is linked to the product release cycle
of our clients. As a result, we perform varying amounts of work for specific
clients from year to year based on their product development schedule. A major
client in one year may not have use for a similar level of our services in
another year. In addition, we derive a significant portion of our revenues from
large projects and programs for a limited number of clients. In 1998, IBM
accounted for approximately 14% of our revenue and our five largest clients
(including IBM) accounted for approximately 39% of our revenue. In the first
three months of 1999, our five largest clients accounted for approximately 35%
of our revenue. As a result, the loss of any major client or a significant
reduction in a large project's scope could materially reduce our revenue and
adversely affect our business, financial condition or results of operations.
WE GENERALLY DO NOT HAVE LONG-TERM CONTRACTS, WHICH MAKES REVENUE
FORECASTING DIFFICULT.
A majority of our revenue is derived from individual projects rather than
long-term contracts. We cannot assure you that a client will engage us for
further services once a project is completed or that a client will not
unilaterally reduce the scope of, or terminate, existing projects. You should
not predict or anticipate our future revenues based on the number of clients we
have or the size of our existing projects. The absence of long-term contracts
creates an uncertain revenue stream, which could negatively affect our business,
financial condition, and results of operations.
OUR BRIEF OPERATING HISTORY MAKES IT DIFFICULT TO PREDICT OUR SUCCESS.
Lionbridge was formed in September 1996 to acquire certain assets of Stream
International and commenced operations at the end of December 1996 upon closing
this acquisition. As a result, we have a brief operating history upon which you
can evaluate our business and prospects. Our historical results of operations do
not fully give effect to the operations of the companies we have acquired after
the Stream acquisition. As a result, our historical results of operations may
not give you an accurate indication of our future results of operations or
prospects. We are in an early stage of development and the market for some of
our services is new and rapidly evolving. We cannot be sure that we will be
successful in meeting the challenges we face. If we are unable to do so, our
business will not be successful and the value of your investment in Lionbridge
will decline.
WE HAVE AN ACCUMULATED DEFICIT, ARE NOT CURRENTLY PROFITABLE, AND ANTICIPATE
FUTURE LOSSES.
We have incurred substantial losses since Lionbridge was founded, and we
anticipate we will continue to incur substantial losses for the foreseeable
future. We had an accumulated deficit of approximately $17.9 million as of March
31, 1999 and a net loss of $4.3 million for the year ended December 31, 1998.
Although our revenues have grown significantly since 1997, this growth may not
be sustainable or indicative of future results of operations. We intend to
continue to invest in internal expansion, infrastructure, integration of our
acquired companies into our existing operations, select
7
<PAGE>
acquisitions, and our sales and marketing efforts. In addition, our acquisitions
significantly increased our intangible assets, such as goodwill, and the charges
we expect to incur in connection with the amortization of these intangible
assets will have a material adverse impact on our results of operations for the
foreseeable future. We cannot predict when we will operate profitably, if ever.
POTENTIAL FLUCTUATIONS IN OUR QUARTERLY RESULTS MAKE FINANCIAL FORECASTING
DIFFICULT AND COULD AFFECT OUR COMMON STOCK TRADING PRICE.
As a result of fluctuations in our revenues tied to our clients' product
release cycles, the length of our sales cycle, rapid growth, acquisitions, the
emerging nature of the markets in which we compete, and other factors outside
our control, we believe that quarter-to-quarter comparisons of results of
operations are not necessarily meaningful. You should not rely on the results of
any one quarter as an indication of our future performance. We may not
experience revenue increases in the remainder of 1999 comparable to the revenue
increases in 1998. If in some future quarter our results of operations were to
fall below the expectations of securities analysts and investors, the trading
price of our common stock would likely decline.
WE MAY NEED ADDITIONAL FINANCING.
If our losses continue, we may not have sufficient funds to pay all of our
operating or other expenses. If we fail to generate sufficient cash from our
operations to pay these expenses, our management will need to identify other
sources of funds. We may not be able to borrow money or issue more shares of
common stock to meet our cash needs. Even if we can complete any financing
transactions, they may not be on terms that are favorable or reasonable from our
perspective.
WE MUST ATTRACT AND RETAIN PROFESSIONAL STAFF IN ORDER TO COMPLETE OUR
PROJECTS AND OBTAIN NEW PROJECTS.
Our failure to attract and retain qualified employees could impair our
ability to complete existing projects and bid for or obtain new projects and, as
a result, could have a material adverse effect on our business, financial
condition, and results of operations. Our ability to grow and increase our
market share largely depends on our ability to hire, train, retain, and manage
highly skilled employees, including project managers and technical, translation,
and sales and marketing personnel. There is a significant shortage of, and
intense competition for, personnel who are qualified to perform the services we
provide. In addition, we must make sure our employees maintain their technical
expertise and business skills. We cannot assure you that we will be able to
attract a sufficient number of qualified employees or that we will successfully
train and manage the employees we hire.
WE MAY BE UNABLE TO CONTINUE TO GROW AT OUR HISTORICAL GROWTH RATES OR TO
MANAGE OUR GROWTH EFFECTIVELY.
Continued, planned growth is a key component of increasing the value of our
common stock. In the past two years, our business has grown significantly and we
anticipate future internal growth and growth through acquisitions. From December
31, 1996 to May 31, 1999, our staff increased from approximately 270 to
approximately 450 employees. This rapid growth places a significant demand on
management and operational resources. In order to manage growth effectively, we
must implement and improve our operational systems and controls. In addition,
the proceeds of this offering will be used in part to expand our operations and
our sales and marketing capabilities. This additional growth may further strain
our management and operational resources. Our growth could also be adversely
affected by many other factors, including economic downturns. As a result of
these concerns, we cannot be sure that we will continue to grow, or, if we do
grow, that we will be able to maintain our historical growth rate.
8
<PAGE>
WE MAY BE LIABLE FOR DEFECTS OR ERRORS IN THE SOLUTIONS WE DEVELOP.
Many of the services we provide are critical to our clients' businesses. Any
defects or errors in these solutions could result in:
- delayed or lost client revenues,
- adverse reaction to our clients from their end users and, ultimately,
toward Lionbridge,
- claims against us,
- negative publicity, and
- additional expenditures to correct the problem.
Liability claims could require us to spend significant time and money in
litigation or to pay significant damages. Although we maintain general liability
insurance, including coverage for errors and omissions, we cannot assure you
that this coverage will be available in amounts sufficient to cover one or more
large claims, or that the insurer will not disclaim coverage as to any future
claim.
WE COULD LOSE MONEY ON ACQUISITIONS OF COMPANIES' INTERNAL OPERATIONS.
As part of our strategy, we may acquire selected companies' internal
localization operations and enter into multi-year contracts with these companies
to meet their globalization requirement on an outsourcing basis. If we pay too
much for these acquisitions or these contracts prove unprofitable, our business,
financial condition, and results of operations could be materially and adversely
affected.
OUR INTANGIBLE ASSETS REPRESENT A SIGNIFICANT PORTION OF OUR ASSETS;
AMORTIZATION OF OUR INTANGIBLE ASSETS WILL ADVERSELY IMPACT OUR NET INCOME
AND WE MAY NEVER REALIZE THE FULL VALUE OF OUR INTANGIBLE ASSETS.
Our original purchase of the business operations from Stream International
together with subsequent acquisitions have resulted in the creation of
significant goodwill and other intangible assets, which are being amortized over
five-year periods. At March 31, 1999, we had goodwill of approximately $11.1
million, net of accumulated amortization. The amount of goodwill associated with
our acquisitions of Japanese Language Services and VeriTest may increase in the
future as a result of the contingent purchase price that may become payable if
the agreed-upon operating targets for Japanese Language Services and VeriTest,
as the case may be, are fully met. We will continue to incur non-cash charges in
connection with the amortization of our intangible assets over their respective
useful lives, and we expect these charges will have a significant adverse impact
on our results of operations for the foreseeable future.
We cannot assure you that we will ever realize the value of these intangible
assets. In the future, as events or changes in circumstances indicate that the
carrying amount of our intangible assets may not be recoverable, we will
evaluate the carrying value of our intangible assets and may take an accelerated
charge to our earnings. Any future determination requiring the write-off of a
significant portion of unamortized intangible assets could have a material
adverse effect on our business, financial condition, and results of operations.
WE MAY HAVE DIFFICULTY IN IDENTIFYING AND COMPETING FOR ACQUISITION
OPPORTUNITIES.
Our business strategy includes the pursuit of strategic acquisitions. From
time to time, we have engaged in discussions with third parties concerning
potential acquisitions of niche expertise, businesses, and operations. We
currently do not have commitments or agreements with respect to any acquisition.
In executing our acquisition strategy, we may be unable to identify suitable
acquisition candidates. In addition, we expect to face competition from other
companies for acquisition candidates, making it more difficult to acquire
suitable companies on favorable terms.
9
<PAGE>
PURSUING AND COMPLETING POTENTIAL ACQUISITIONS COULD DIVERT MANAGEMENT
ATTENTION AND FINANCIAL RESOURCES AND MAY NOT PRODUCE THE DESIRED BUSINESS
RESULTS.
If we pursue any acquisition, our management could spend a significant
amount of time and management and financial resources to integrate the acquired
business with our existing business. To pay for an acquisition, we might use
capital stock, or cash, including the proceeds from this offering, or a
combination of both. Alternatively, we may borrow money from a bank or other
lender. If we use capital stock, our stockholders will experience dilution. If
we use cash or debt financing, our financial liquidity will be reduced. In
addition, from an accounting perspective, an acquisition may involve
nonrecurring charges or involve amortization of significant amounts of goodwill
that could adversely affect our results of operations.
Despite the investment of these management and financial resources and
completion of due diligence with respect to these efforts, an acquisition may
not produce the revenue, earnings or business synergies that we anticipated, and
an acquired service or technology may not perform as expected for a variety of
reasons, including:
- difficulties in the assimilation of the operations, technologies, products
and personnel of the acquired company,
- risks of entering markets in which we have no or limited prior experience,
- expenses of any undisclosed or potential legal liabilities of the acquired
company,
- the applicability of rules and regulations that might restrict our ability
to operate, and
- the potential loss of key employees of the acquired company.
IF WE FAIL TO KEEP PACE WITH CHANGING TECHNOLOGIES, WE MAY LOSE CLIENTS.
Our market is characterized by rapidly changing client requirements, and
evolving technologies and industry standards. If we cannot keep pace with these
changes, our business could suffer. The Internet's recent growth and strong
influence in our industry magnifies these characteristics. To achieve our goals,
we need to develop strategic business solutions and methodologies that keep pace
with continuing changes in industry standards, information technology, and
client preferences.
IF WE LOSE THE SERVICES OF OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER, RORY
J. COWAN, OR OTHER KEY PERSONNEL, OUR BUSINESS AND STOCK PRICE COULD SUFFER.
Our future success depends in large part on the continued services of a
number of our key personnel, including our President and Chief Executive
Officer, Rory J. Cowan. The loss of the services of Mr. Cowan or any of our
other key personnel could have a material adverse effect on our business,
financial condition and results of operations. We might not be able to prevent
key personnel, who may leave our employ in the future, from disclosing or using
our technical knowledge, practices or procedures. One or more of our key
personnel might resign and join a competitor or form a competing company. As a
result, we might lose existing or potential clients.
DIFFICULTIES PRESENTED BY INTERNATIONAL ECONOMIC, POLITICAL, LEGAL,
ACCOUNTING, AND BUSINESS FACTORS COULD NEGATIVELY AFFECT OUR BUSINESS IN
INTERNATIONAL MARKETS.
A large component of our operations includes our ability to operate in
international markets, as evidenced by the majority of our operations currently
existing outside of the United States. The following risks, among others, are
inherent in doing business internationally:
- unexpected changes in regulatory requirements,
- changes in existing union and similar employee arrangements,
10
<PAGE>
- difficulties in staffing and managing international operations,
- tariffs and other trade barriers,
- long payment cycles,
- problems in collecting accounts receivable,
- political and economic instability,
- international currency issues, including fluctuations in currency exchange
rates and the conversion to the euro by several members of the European
Union,
- seasonal reductions in business activity, and
- potentially adverse tax consequences.
Any of these factors could have a material adverse effect on our business,
financial condition, and results of operations.
WE COMPETE IN A HIGHLY COMPETITIVE MARKET THAT HAS LOW BARRIERS TO ENTRY.
Lionbridge provides a broad range of globalization and multilingual Internet
service offerings to its clients. As a result, the market for our services is
highly fragmented as we compete against companies in various markets. Our
current competitors include the following:
- localization or translation services providers such as Berlitz
International, Bowne & Co., Lernout and Hauspie, Sykes Enterprises, and
regional vendors of translation services,
- companies providing outsourcing of technical support call centers
including Stream International and Sykes Enterprises, and
- independent testing labs providing testing and logo certification services
such as National Software Testing Laboratories (a division of CMP Media),
and Keylabs.
We cannot assure you that we will compete successfully against these
companies in the future. Many of these companies have longer operating
histories; significantly greater financial, marketing and other resources; and
greater name recognition than Lionbridge. If we fail to be competitive with
these companies in the future, our business will be materially and adversely
affected.
Lionbridge also faces competition from internal localization departments in
large multi-national companies. Although many companies are finding that
simultaneous global release and ongoing maintenance of Web-based applications
require new skill sets that are not available in-house, many companies may still
perform these services in-house rather than outsourcing them. If these companies
continue to localize their own products, Lionbridge's business, financial
condition, and results of operations may be adversely affected.
We may also face competition from companies that provide outsourcing of
technical support call centers. As businesses shift from telephonic support
centers to Web-based support, companies such as Stream International, Sykes
Enterprises, and others that currently provide traditional outsourcing services
may decide to provide comparable services over the Internet. If these or other
companies choose to expand their service offerings, we cannot assure you that
Lionbridge will be able to compete with them successfully.
There are relatively few barriers preventing companies from competing with
us. We do not own any patented technology that precludes or inhibits others from
entering our market. As a result, new market entrants pose a threat to our
business. In addition to our existing competitors, we may face further
competition in the future from companies that do not presently offer
globalization services. Companies currently providing information technology
services may choose to broaden their range of services to include globalization.
While we presently use translation memory software in our localization
11
<PAGE>
process, and to a lesser extent machine translation software, these technologies
may improve and become sophisticated enough to compete with our localization
service offering. We cannot assure you that we will be able to compete
effectively with these potential future competitors.
WE MAY NOT BE ABLE TO MAINTAIN OUR REPUTATION OR EXPAND OUR NAME
RECOGNITION.
We believe that establishing and maintaining a good reputation and name
recognition is critical for attracting and expanding our targeted client base.
We also believe that the importance of reputation and name recognition will
increase due to the growing number of service providers in our segment. If our
reputation is damaged or if potential clients do not know what services we
provide, we may become less competitive or lose our market share. Promotion and
enhancement of our name will depend largely on our success in providing high
quality globalization and multilingual Internet services, which we cannot
assure. If clients do not perceive our services to be of high value or high
quality, our brand name and reputation could be materially and adversely
affected.
PROBLEMS RELATED TO THE YEAR 2000 ISSUE COULD REQUIRE US TO INCUR
UNANTICIPATED DELAYS AND EXPENSES IN THE OPERATION OF OUR BUSINESS.
Year 2000 problems could require us to incur unanticipated delays and
expenses in the operation of our business. These delays and expenses could have
a material adverse effect on our business, financial condition and results of
operations. Clients' and potential clients' purchasing patterns may be affected
by Year 2000 issues as companies expend significant resources to correct or
replace their current systems for Year 2000 compliance. These clients and
potential clients may have fewer funds available to purchase our services. We
may experience operations difficulties because of undetected errors or defects
in the technology we use in our internal systems. We have made representations
to clients concerning Year 2000 compliance and may become involved in disputes
regarding Year 2000 problems involving our solutions.
RISKS RELATED TO THIS OFFERING
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK AND THE PRICE OF
OUR COMMON STOCK AFTER THIS OFFERING MAY BE LOWER THAN THE PRICE YOU PAY.
Prior to this offering, there has not been a public market for our common
stock. We intend to include the common stock for quotation in the Nasdaq
National Market. We do not know the extent to which investor interest in
Lionbridge will lead to the development of a trading market for our common stock
or how our common stock will trade in the future. The public offering price will
be determined by negotiations between us and the representatives of the
underwriters. You may not be able to resell your shares at or above the initial
public offering price.
OUR COMMON STOCK IS PARTICULARLY SUBJECT TO VOLATILITY BECAUSE OF THE
INDUSTRY IN WHICH WE OPERATE.
The market price of our common stock could fluctuate significantly as a
result of:
- variations in our operating results which may cause us to fail to meet
analysts' or investors' expectations,
- general economic and stock market conditions,
- changes in financial estimates by securities analysts,
- earnings and other announcements by, and changes in market valuations of,
providers of similar services as well as those of our clients,
- changes in business or regulatory conditions affecting us,
- announcements by us or our competitors of new service offerings,
12
<PAGE>
- announcements or implementation of technological innovations, and
- trading of our common stock.
The securities of many companies have experienced extreme price and volume
fluctuations in recent years, often unrelated to the companies' operating
performance. For example, market prices for securities of technology companies
have frequently reached elevated levels, often following these companies'
initial public offerings. These levels may not be sustainable and may not bear
any relationship to these companies' operating performances. If the market price
of our common stock reaches an elevated level following this offering, it is
likely to materially decline. In the past, following periods of volatility in
the market price of a company's securities, that company's stockholders have
often instituted securities class action litigation against the company. If we
were involved in a securities class action suit, it could have a material
adverse effect on our business, financial condition, and results of operations.
Declines in the trading or price of our common stock could also materially and
adversely affect employee morale and retention, our access to capital, and other
aspects of our business.
WE ARE CONTROLLED BY A SMALL NUMBER OF STOCKHOLDERS.
Immediately following this offering, Rory Cowan, Morgan Stanley Dean Witter
Venture Partners, Advent International, and Capital Resource Partners
collectively will beneficially own approximately % of the outstanding shares
(or % if the underwriters' over-allotment options are exercised in full). If
these stockholders choose to act or vote in concert, they will have the power to
influence the election of our directors, the appointment of new management and
the approval of any other action requiring the approval of our stockholders,
including any amendments to our Certificate of Incorporation and mergers or
sales of all of our assets. In addition, without the consent of these
stockholders, we could be prevented from entering into certain transactions that
could be beneficial to us.
SHARES ARE RESTRICTED FROM IMMEDIATE RESALE BUT MAY BE SOLD INTO THE MARKET
IN THE NEAR FUTURE. THIS COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO
DROP SIGNIFICANTLY.
After this offering, we will have outstanding shares of common
stock. This includes the shares we are selling in this offering and the
shares if the underwriters exercise their over-allotment options in
full, which may be resold in the public market immediately. The remaining
shares, of our total outstanding shares will become available for
resale in the public market as shown in the chart below.
As restrictions on resale end, the market price could drop significantly if
the holders of these restricted shares sell them or are perceived by the market
as intending to sell them.
<TABLE>
<CAPTION>
DATE OF AVAILABILITY FOR RESALE
NUMBER OF SHARES INTO PUBLIC MARKET
- ------------------ ----------------------------------------------------------------------------------------------
<S> <C>
180 days after the date of this prospectus due to a lock-up agreement these shareholders have
with Prudential Securities. However, Prudential Securities can waive this restriction at any
time and without notice.
Between 90 and 365 days after the date of this prospectus due to the requirements of the
federal securities laws.
</TABLE>
OUR MANAGEMENT HAS BROAD DISCRETION OVER THE USE OF A PORTION OF THE NET
PROCEEDS FROM THIS OFFERING AND MAY ALLOCATE THESE NET PROCEEDS IN WAYS IN
WHICH YOU DO NOT AGREE.
Our management has significant flexibility in applying the proceeds we
receive in this offering. Although we are required to repay our subordinated
indebtedness and to redeem our Series B redeemable preferred stock, the
remaining net proceeds will not be allocated to any specific investment or
transaction.
13
<PAGE>
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION BECAUSE THE NET TANGIBLE
BOOK VALUE OF OUR COMMON STOCK ISSUED IN THIS OFFERING WILL BE LESS THAN THE
OFFERING PRICE.
The initial public offering price for this offering is substantially higher
than the net tangible book value per share of the outstanding common stock
immediately after the offering. If you purchase common stock in the offering,
you will incur immediate and substantial dilution. Dilution is a reduction in
the net tangible book value per share from the price you pay per share for our
common stock. We also have outstanding a large number of stock options and
warrants to purchase common stock with exercise prices significantly below the
estimated initial public offering price of the common stock. To the extent these
options or warrants are exercised, there will be further dilution. We intend to
continue to grant a significant number of stock options to our employees.
YOU SHOULD NOT EXPECT TO RECEIVE DIVIDENDS FROM US.
We are not permitted to pay dividends under our commercial credit facility
and do not expect to declare or pay any cash dividends in the near future.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements based largely on our
current expectations and projections about future events and financial trends
affecting the financial condition of our business. The words "believe", "may",
"will", "estimate", "continue", "anticipate", "intend", "expect" and similar
expressions, as they relate to Lionbridge, our business or our management, are
intended to identify forward-looking statements. These forward-looking
statements are subject to a number of risks, uncertainties and assumptions,
including, among other things:
- general economic and business conditions, both nationally and in our
markets,
- our expectations and estimates concerning future financial performance,
financing plans and the impact of competition,
- anticipated trends in our business,
- existing and future regulations affecting our business,
- our acquisition opportunities, and
- other risk factors set forth under "Risk Factors" in this prospectus.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus may not occur and actual results
could differ materially from those anticipated or implied in the forward-looking
statements.
14
<PAGE>
USE OF PROCEEDS
The net proceeds to Lionbridge from the sale of the shares of common
stock in this offering, assuming a public offering price of $ per share,
are estimated to be $ million, after deducting underwriting discounts and
commissions and estimated offering expenses of $ . We intend to use the
net proceeds as follows:
- To pay off an aggregate of $12,000,000 principal amount of our senior
subordinated notes. The notes accrue interest of 12.0% per year and mature
upon the earlier of February (in the case of $10,000,000 of the notes) or
March (in the case of $2,000,000 of the notes) 2006, and the completion of
an underwritten public offering.
- To redeem all outstanding shares of our Series B redeemable preferred
stock at $100,000 per share plus and 8% annual premium upon the closing of
this offering. As of May 31, 1999, the redemption amount is $15,837,000.
- For general corporate purposes, including capital expenditures and
potential acquisitions.
Pending these uses, we may invest the net proceeds from this offering
temporarily in short-term, investment-grade, interest-bearing securities or
guaranteed obligations of the United States government. Lionbridge will not
receive any proceeds from the sale of common stock by the selling stockholders
if the underwriters exercise their over-allotment options.
DIVIDEND POLICY
Lionbridge has not declared or paid and does not anticipate declaring or
paying any dividends on its common stock in the near future. In addition, the
terms of our credit facility with Silicon Valley Bank prohibit the payment of
cash dividends on our capital stock. We currently intend to retain future
earnings, if any, to fund the expansion and growth of our business. Any future
determination as to the declaration and payment of dividends will be at the
discretion of our Board of Directors and will depend on then existing
conditions, including our financial condition, results of operations,
contractual restrictions, capital requirements, business prospects, and other
factors as our Board of Directors considers relevant.
15
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1999:
(i) the actual capitalization of Lionbridge,
(ii) the pro forma as adjusted capitalization of Lionbridge after giving
effect upon the closing of this offering to:
- the exchange of all outstanding shares of our Series A convertible
preferred stock and Series D nonvoting convertible preferred stock into
shares of our Series B redeemable preferred stock and Series C convertible
preferred stock,
- the redemption of all outstanding shares of our Series B redeemable
preferred stock for $100,000 per share plus an 8% annual premium,
- the conversion of all outstanding shares of our Series C convertible
preferred stock into shares of our common stock,
- the payment in full of the subordinated notes and the related impact on
the accumulated deficit for the charge for the unamortized original issue
discount on these notes,
- the exercise of warrants to acquire 2,299,889 shares of our common stock,
and
- the sale of shares of our common stock in this offering at an
assumed initial public offering price of $ per share, after deducting
underwriting discounts and commissions and estimated offering expenses,
and application of the estimated net proceeds.
You should read the following table in conjunction with Lionbridge's
consolidated financial statements and related notes appearing elsewhere in this
prospectus. This information excludes 3,948,800 shares of common stock issuable
upon exercise of outstanding options as of June 15, 1999, of which options to
purchase 436,161 shares were then exercisable, and 2,820,320 shares of common
stock reserved for future issuance under our 1998 Stock Plan. This information
also excludes 125,000 shares of common stock issuable upon exercise of warrants
as of June 15, 1999.
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE DATA)
<S> <C> <C>
Amounts owed to banks................................................................... $ 175 $
Short-term debt......................................................................... 4,943
Long-term debt, net of discount......................................................... 7,155
Redeemable convertible preferred stock, $0.01 par value:
Series A convertible preferred stock, 17,271,314 shares authorized; 13,271,314 shares
issued and outstanding actual; no shares issued and outstanding pro forma as
adjusted ........................................................................... 15,660
Series B redeemable preferred stock, 200 shares authorized; no shares issued and
outstanding actual and pro forma as adjusted........................................ --
Series C convertible preferred stock, 17,271,514 shares authorized; no shares issued
and outstanding actual and pro forma as adjusted.................................... --
Series D nonvoting convertible preferred stock, 200 shares authorized; 140 shares
issued and outstanding actual; no shares issued and outstanding pro forma as
adjusted............................................................................ --
Stockholders' equity (deficit):
Common stock, $0.01 par value; 25,950,867 shares authorized; 3,460,598 shares issued
and outstanding actual; shares issued and outstanding pro forma as
adjusted............................................................................ 35
Additional paid-in capital............................................................ 9,563
Accumulated deficit................................................................... (17,879)
Deferred compensation................................................................. (2,763)
Accumulated other comprehensive income (1)............................................ 383
----------- -------------
Total stockholders' equity (deficit).................................................. (10,661)
----------- -------------
Total capitalization.................................................................... $ 17,272 $
----------- -------------
----------- -------------
</TABLE>
- ------------------------------
(1) Represents the cumulative effect of foreign currency translation
adjustments. For more information, see Note 2 of notes to consolidated
financial statements.
16
<PAGE>
DILUTION
Purchasers of the common stock in this offering will experience immediate
and substantial dilution in the net tangible book value of the common stock from
the initial public offering price. Net tangible book value per share represents
the amount of the total tangible assets less total liabilities of Lionbridge,
divided by the number of shares of common stock outstanding. At March 31, 1999,
Lionbridge had a pro forma net tangible book value of $ or $ per
share of common stock, assuming
- the exchange of all outstanding shares of our Series A convertible
preferred stock and Series D nonvoting convertible preferred stock into
shares of our Series B redeemable preferred stock and Series C convertible
preferred stock upon the closing of this offering,
- the redemption of all outstanding shares of our Series B redeemable
preferred stock for $100,000 per share plus an 8% annual premium upon the
closing of this offering,
- the conversion of all outstanding shares of our Series C convertible
preferred stock into shares of our common stock upon the closing of this
offering, and
- the exercise of warrants to acquire 2,299,889 shares of our common stock.
After giving effect to the sale of shares of common stock offered by
Lionbridge at an assumed initial public offering price of $ per share
and the deduction of underwriting discounts and commissions and estimated
offering expenses, the pro forma net tangible book value of Lionbridge as of
March 31, 1999 would have been approximately $ , or $ per share.
This represents an immediate increase in pro forma net tangible book value of $
per share to existing stockholders and an immediate and substantial dilution
of $ per share to new investors purchasing shares of common stock in
this offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price...................................... $
Pro forma net tangible book value per share at March 31,
1999........................................................ $
Increase attributable to new investors........................ $
---------
Pro forma net tangible book value after this offering...................... $
---------
Dilution in pro forma net tangible book value to new investors............. $
---------
---------
</TABLE>
The following table summarizes, on the pro forma basis set forth above as of
March 31, 1999, the differences between existing stockholders and new investors
in this offering with respect to the number of shares of common stock purchased
from Lionbridge, the consideration paid to Lionbridge and the average
consideration paid per share (before the deduction of underwriting discounts and
commissions and estimated offering expenses):
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED
------------------------ ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................ % $ % $
New investors.................................... % $ % $
----- ----- ----- -----
Totals..................................... 100% $ 100%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
The foregoing discussion and tables assume no sale of shares of common stock
held by existing stockholders pursuant to the underwriters' over-allotment
options. The foregoing discussion and tables also do not assume exercise of any
stock options or warrants after June 15, 1999. As of June 15, 1999, there were
125,000 shares of common stock issuable upon exercise of outstanding warrants at
an
17
<PAGE>
exercise price of $1.60 per share. As of June 15, 1999, there were 3,948,800
shares of common stock issuable upon exercise of outstanding stock options, at a
weighted average exercise price of $1.14 per share; and 2,820,320 shares of
common stock reserved for issuance under Lionbridge's 1998 Stock Plan. In
addition, in June 1999, effective upon closing of this offering, Lionbridge will
adopt the 1999 Employee Stock Purchase Plan, pursuant to which 1,000,000 shares
of common stock were initially reserved for issuance. To the extent that these
options are exercised, there will be further dilution to new investors.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
Lionbridge was incorporated on September 11, 1996 and commenced operations
on December 23, 1996 through the acquisition of the localization businesses of
Stream International in Europe. Stream's European localization businesses
consisted of legal entities in France, Ireland, and The Netherlands. Until 1996,
Stream did not maintain complete accounting records for these localization
businesses in Europe. As a result, the accounting information required to
prepare financial statements for any period prior to 1996 is not available; and,
therefore, we cannot present selected financial data for 1994 and 1995.
The selected financial data for the year ended December 31, 1996 relating to
Stream's European localization businesses have been derived from the combined
financial statements of The Localization Businesses of Stream International
Holdings, Inc. in Ireland, The Netherlands and France which appear elsewhere in
this prospectus and which have been audited by PricewaterhouseCoopers LLP,
independent public accountants. The selected consolidated financial data as of
December 31, 1997 and 1998 and for the years then ended have been derived from
the consolidated financial statements of Lionbridge which appear elsewhere in
this prospectus and which have been audited by PricewaterhouseCoopers LLP,
independent public accountants. The selected financial data as of March 31, 1999
and for the three months ended March 31, 1998 and 1999 have been derived from
unaudited consolidated financial statements which appear elsewhere in this
prospectus. In the opinion of management, the unaudited consolidated financial
statements have been prepared on a basis consistent with the audited
consolidated financial statements that appear elsewhere in this prospectus and
include all adjustments, which are only normal recurring adjustments, necessary
for a fair presentation.
The results of operations of Lionbridge for the period from inception
(September 11, 1996) to December 31, 1996, are immaterial, consisting of a net
loss of $159,000 with no revenues. As a result, we do not present selected
consolidated financial data for this period.
The historical results presented are not necessarily indicative of future
results. You should read the data set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
elsewhere in this prospectus.
19
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, THREE MONTHS ENDED
------------------------- MARCH 31,
1996(1) 1997 1998 -------------------------
------- ------- ------- 1998 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue........................................... $28,134 $26,462 $38,412 $ 7,438 $11,690
Cost of revenue................................... 24,977 18,914 25,546 5,344 8,195
------- ------- ------- ----------- -----------
Gross profit.................................. 3,157 7,548 12,866 2,094 3,495
------- ------- ------- ----------- -----------
Operating expenses:
Sales and marketing (1)......................... -- 1,306 2,735 527 1,172
General and administrative...................... 3,144 8,210 10,889 2,387 3,233
Amortization of acquisition-related intangible
assets........................................ -- 4,400 2,145 561 766
Nonrecurring charges............................ -- 541 501 451 --
Stock-based compensation........................ -- -- -- -- 45
------- ------- ------- ----------- -----------
Total operating expenses...................... 3,144 14,457 16,270 3,926 5,216
------- ------- ------- ----------- -----------
Income (loss) from operations..................... 13 (6,909) (3,404) (1,832) (1,721)
Interest expense:
Interest on outstanding debt.................... (154) (127) (648) (86) (346)
Amortization of original issue discount......... -- -- -- -- (1,122)
Other income (expense), net....................... (72) (506) 49 42 (181)
------- ------- ------- ----------- -----------
Loss before income taxes.......................... (213) (7,542) (4,003) (1,876) (3,370)
Provision for income taxes........................ -- 112 259 36 45
------- ------- ------- ----------- -----------
Net loss.......................................... (213) (7,654) (4,262) (1,912) (3,415)
Accrued dividends on preferred stock.............. -- (1,062) (1,062) (265) (265)
------- ------- ------- ----------- -----------
Net loss attributable to common stockholders...... $ (213) $(8,716) $(5,324) $(2,177) $(3,680)
------- ------- ------- ----------- -----------
------- ------- ------- ----------- -----------
Basic and diluted net loss per share attributable
to common stockholders (2)...................... $ (5.90) $ (1.99) $ (0.98) $ (1.17)
Shares used in computing basic and diluted net
loss per share attributable to common
stockholders.................................... 1,477 2,673 2,229 3,140
</TABLE>
- ------------------------
(1) Results for the year ended December 31, 1996 reflect Stream International's
results of operations for the businesses we acquired from Stream
International on December 23, 1996. These businesses did not have any
dedicated sales and marketing personnel; therefore, Stream International
allocated a portion of its total sales and marketing expenses to these
businesses and these expenses are reflected within general and
administrative expenses for that period.
(2) See Note 2 to Lionbridge's consolidated financial statements for an
explanation of the basis used to calculate net loss per share attributable
to common stockholders.
20
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------- --------
MARCH 31, 1999
-------------------------
ACTUAL PRO FORMA
----------- AS ADJUSTED
(UNAUDITED) -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash........................................................ $ 1,098 $ 732 $ 3,802
Working capital (deficit)................................... (1,476) (7,718) (947)
Total assets................................................ 18,756 22,481 29,366
Long-term debt, net of discount............................. -- -- 7,155
Redeemable convertible preferred stock...................... 14,333 15,395 15,660
Stockholders' equity (deficit).............................. (8,063) (13,419) (10,661)
</TABLE>
The pro forma as adjusted column above gives effect upon the closing of this
offering to:
- the exchange of all outstanding shares of our Series A convertible
preferred stock and Series D nonvoting convertible preferred stock into
shares of our Series B redeemable preferred stock and Series C convertible
preferred stock,
- the redemption of all outstanding shares of our Series B redeemable
preferred stock for $100,000 per share plus an 8% annual premium,
- the conversion of all outstanding shares of our Series C convertible
preferred stock into shares of our common stock,
- the payment in full of the subordinated notes and the related impact on
the accumulated deficit for the charge for the unamortized original issue
discount on these notes,
- the exercise of warrants to acquire 2,299,889 shares of our common stock,
and
- the sale of shares of our common stock in this offering at an
assumed initial public offering price of $ per share, after deducting
underwriting discounts and commissions and estimated offering expenses,
and application of the estimated net proceeds.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the accompanying financial statements
and related notes included elsewhere in this prospectus.
OVERVIEW
GENERAL
Lionbridge is a provider of globalization and multilingual Internet services
to industry-leading software publishers, computer hardware manufacturers, and
telecommunications companies. Since 1996, we have focused primarily on
globalization services, including localization, internationalization, and
testing, that enable simultaneous worldwide release and ongoing maintenance of
products and product-related technical support, training materials, and sales
and marketing information in multiple languages. More recently, as product
release, technical support, and training have evolved toward a Web-based
business model, we have begun to offer multilingual Internet services.
Lionbridge's revenues are derived from fees for services generated on a
project-by-project basis. Projects are generally billed on a time and materials
basis. Revenue is recognized using the percentage of completion method of
accounting, based on management's estimate of progress against the project plan.
The agreements entered into in connection with projects are generally terminable
by clients upon 30 days' prior written notice. If a client terminates an
agreement, it is required to pay Lionbridge for time and materials incurred
through the termination date. If clients terminate existing projects or if
Lionbridge is unable to enter into new engagements, our financial condition and
results of operations could be materially and adversely affected.
Lionbridge has experienced operating losses, as well as net losses, for each
year of its operations and, as of March 31, 1999, had an accumulated deficit of
$17.9 million.
ACQUISITIONS
We have grown our business through a combination of acquisitions and organic
growth. Since our inception, we have acquired the following businesses and
assets.
Lionbridge was formed in 1996 in order to acquire the localization
businesses of Stream International in Ireland, The Netherlands, and France.
Lionbridge acquired these businesses on December 23, 1996 for $11.3 million in
cash and the assumption of $100,000 of liabilities. Our acquisition of the
businesses was recorded as though the purchase had occurred on December 31,
1996, as the results of operations and changes in financial position between the
actual date of the purchase (December 23, 1996) and this date were immaterial.
In connection with this acquisition, Lionbridge recorded $9.2 million of
goodwill, which is being amortized over five years. Additionally, during 1997,
Lionbridge purchased assets in Japan, China, South Korea and Taiwan from Stream
International in exchange for approximately $100,000 in cash plus the assumption
of liabilities of $317,000. Following this transaction, we expanded our business
in Asia.
As of January 2, 1998, Lionbridge acquired Japanese Language Services, a
company specializing in Japanese localization services with operations in the
United States and Japan, for $2.6 million in cash and 466,835 shares of our
common stock, including payments made and shares issued subsequent to the
acquisition date. The former Japanese Language Services stockholders have the
option to require us to repurchase these shares of common stock at $0.90 per
share at any time from July 2001 to September 2001. Lionbridge may be required
to pay up to an additional $125,000 in cash based on future operating results of
Japanese Language Services through December 31, 1999. In connection with this
acquisition, we recorded $2.6 million of goodwill, not including any additional
contingent amounts that may be paid. The goodwill is being amortized over five
years. The acquisition of Japanese Language
22
<PAGE>
Services provided us with a group of highly specialized individuals with
expertise in the localization of products for the Japanese language.
In April 1998, Lionbridge acquired assets of the Monterey, California-based
localization services division of Lucent Technologies for $1.0 million in cash.
In connection with this acquisition, Lionbridge recorded $470,000 of goodwill,
which is being amortized over five years. The purchase of assets from the former
Lucent business provided us with a west coast, U.S.-based operation to enable us
to further penetrate U.S.-based customers.
In January 1999, Lionbridge acquired all of the stock of VeriTest, a
California-based provider of contract and logo certification testing services.
Lionbridge paid $3.3 million in cash and issued notes totaling $750,000 and
100,000 shares of our common stock. Lionbridge may also be required to pay up to
an additional $1.0 million in cash dependent upon future operating performance
of VeriTest through December 2000. In connection with this acquisition,
Lionbridge recorded $4.3 million of goodwill, not including any additional
contingent amounts that may be paid. The goodwill is being amortized over five
years. Our acquisition of VeriTest has provided us with a base of highly
qualified career test engineers and relationships with key customers.
We believe our acquisitions contributed to our growth by rapidly expanding
our employee base, geographic coverage, client base, industry expertise, and
technical skills. Lionbridge anticipates that a material portion of its future
growth will be accomplished by acquiring existing businesses. Most of
Lionbridge's growth in personnel to date has been through acquisitions. The
success of this plan depends upon, among other things, Lionbridge's ability to
integrate acquired personnel, operations, products, and technologies into its
organization effectively; to retain and motivate key personnel of acquired
businesses; and to retain customers of acquired firms. Lionbridge cannot
guarantee that it will be able to identify suitable acquisition opportunities,
obtain any necessary financing on acceptable terms to finance any acquisitions,
consummate any acquisitions, or successfully integrate acquired personnel and
operations.
NONRECURRING CHARGES
During the fourth quarter of 1997, the first quarter of 1998, and the fourth
quarter of 1998, Lionbridge recorded nonrecurring charges of $541,000, $451,000
and $50,000, respectively, in operating expenses. These charges related to
reductions to our workforce in France, where we reduced our technical staff by 9
and 5 employees in 1997 and 1998, respectively. All employees had been informed
of their termination and related benefits in the period that the corresponding
charge was recorded and have now left Lionbridge. The liabilities recorded in
relation to the cost of these reductions were matched by corresponding
expenditures in 1998, and we do not anticipate any future costs related to these
actions.
NON-CASH CHARGES
DEFERRED COMPENSATION
Lionbridge recorded deferred compensation of $2.8 million in the first
quarter of 1999, representing the difference between the exercise price of stock
options granted and the fair market value for accounting purposes of the
underlying common stock at the date of the grant. The deferred compensation is
being amortized over the four-year vesting period of the applicable options. Of
the total deferred compensation amount, $45,000 had been amortized as of March
31, 1999. The amortization of deferred compensation is recorded as an operating
expense. We currently expect to amortize the following remaining amounts of
deferred compensation as of March 31, 1999 in the fiscal periods ending:
<TABLE>
<S> <C>
December 31, 1999................................................. $ 519,000
December 31, 2000................................................. $ 702,000
December 31, 2001................................................. $ 702,000
December 31, 2002................................................. $ 702,000
December 31, 2003................................................. $ 138,000
</TABLE>
23
<PAGE>
ORIGINAL ISSUE DISCOUNT ON SUBORDINATED NOTES
Interest expense for the quarter ended March 31, 1999 includes $1.1 million
for the accretion of the original issue discount on $12.0 million of
subordinated notes issued in that period. This discount represents the $6.0
million value attributable to detachable warrants to purchase 2,299,889 shares
of common stock, at an exercise price of $0.01 per share, granted in connection
with this debt financing. As we are required to repay the subordinated notes
upon the closing of this offering, we are recording the expense of this discount
on a straight-line basis over a six-month period from date of debt issuance to
the date by which we expect this offering to occur. We currently expect to
record an expense for the discount remaining as of March 31, 1999 over future
periods as follows:
<TABLE>
<S> <C>
Quarter ending June 30, 1999................................... $3.0 million
Quarter ending September 30, 1999.............................. $1.9 million
</TABLE>
If this offering occurs prior to the end of this six month period, we will
record an extraordinary loss equal to the discount remaining at that time.
RESULTS OF OPERATIONS
The following table presents results of operations data for Lionbridge as a
percentage of total revenue for the periods presented:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------- --------------------
1996(1) 1997 1998 1998 1999
----------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................ 88.8 71.5 66.5 71.8 70.1
----- --------- --------- --------- ---------
Gross profit................... 11.2 28.5 33.5 28.2 29.9
----- --------- --------- --------- ---------
Operating expenses:
Sales and marketing(1)....... -- 4.9 7.1 7.1 10.0
General and administrative... 11.2 31.1 28.4 32.1 27.6
Amortization of acquisition-
related intangible
assets..................... -- 16.6 5.6 7.5 6.6
Nonrecurring charges......... -- 2.0 1.3 6.1 --
Stock-based compensation..... -- -- -- -- 0.4
----- --------- --------- --------- ---------
Total operating expenses... 11.2 54.6 42.4 52.8 44.6
----- --------- --------- --------- ---------
Loss from operations......... -- (26.1) (8.9) (24.6) (14.7)
Interest expense............... (0.5) (0.5) (1.6) (1.2) (12.6)
Other income (expense), net.... (0.3) (1.9) 0.1 0.6 (1.5)
----- --------- --------- --------- ---------
Loss before income taxes....... (0.8) (28.5) (10.4) (25.2) (28.8)
Provision for income taxes..... -- 0.4 0.7 0.5 0.4
----- --------- --------- --------- ---------
Net loss....................... (0.8)% (28.9)% (11.1)% (25.7)% (29.2)%
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Results for the year ended December 31, 1996 reflect Stream International's
results of operations for the businesses we acquired from Stream
International on December 23, 1996. These businesses did not have any
dedicated sales and marketing personnel; therefore, Stream International
allocated a portion of its total sales and marketing expenses to these
businesses and these expenses are reflected within general and
administrative expenses for that period.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
REVENUE. Revenue for the three months ended March 31, 1999 increased 57.2%
to $11.7 million as compared to $7.4 million for the same period of the prior
year. This increase results from additional
24
<PAGE>
project volume during the first quarter of 1999 as compared to the first quarter
of 1998, reflecting the continued impact of a strengthened sales organization.
In addition, the first quarter of 1999 also reflects revenue derived from the
operations of VeriTest and the Monterey facility, which were not included in the
first quarter of 1998.
COST OF REVENUE. Cost of revenue consists primarily of outsourcing expense
incurred for translation services provided by third parties as well as salaries
and associated employee benefits for personnel related to client projects. As a
percentage of revenue, cost of revenue decreased to 70.1% for the three months
ended March 31, 1999 as compared to 71.8% for the corresponding period of the
prior year. This decrease is principally due to improved utilization of
employees as we continued to realize increased operating leverage from our
services personnel.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and associated employee benefits, travel expenses of sales
and marketing personnel, and promotional expenses. Sales and marketing expenses
increased 122.4% to $1.2 million for the three months ended March 31, 1999 from
$527,000 for the three months ended March 31, 1998. This increase is
attributable to increases in the number of employees and additional marketing
initiatives to support the continued growth of the business. As a percentage of
revenue, sales and marketing expenses increased to 10.0% for the three months
ended March 31, 1999 from 7.1% for the three months ended March 31, 1998. Sales
and marketing expenses are expected to continue to increase in absolute dollars
as we continue to expand our marketing programs and sales force.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
salaries of the management, purchasing, process and technology, finance and
administrative groups, and associated employee benefits; facilities costs,
including depreciation and amortization; information systems costs; professional
fees; travel; and all other site and corporate costs. General and administrative
expenses increased 35.4% to $3.2 million for the three months ended March 31,
1999 from $2.4 million for the three months ended March 31, 1998. This increase
was principally due to increased staffing and additional depreciation expense
from a larger fixed asset base necessary to support Lionbridge's continued
growth. As a percentage of revenue, general and administrative expenses
decreased to 27.6% for the quarter ended March 31, 1999 from 32.1% for the
corresponding quarter of 1998 as we continued to realize the operating leverage
from our established infrastructure.
AMORTIZATION OF ACQUISITION-RELATED INTANGIBLE ASSETS. Amortization of
acquisition-related intangible assets consists of amortization of goodwill and
other intangible assets resulting from acquired businesses. Amortization
increased 36.5% to $766,000 for the three months ended March 31, 1999 from
$561,000 for the three months ended March 31, 1998. This increase was due to the
amortization of goodwill recognized on the acquisition of VeriTest in the first
quarter of 1999.
INTEREST EXPENSE. Interest expense represents interest payable on debt and
the accretion of original issue discount on subordinated notes with detachable
warrants. Interest expense increased to $1.5 million for the three months ended
March 31, 1999 as compared to $86,000 for the three months ended March 31, 1998.
This increase was principally due to accretion of $1.1 million on the original
issue discount on our subordinated notes issued in 1999 and to increased
interest as a result of greater borrowings through notes issued, and our
commercial credit facility.
OTHER INCOME (EXPENSE) NET. Other income (expense), net consists primarily
of foreign currency transaction gains or losses arising from exchange rate
fluctuations on transactions denominated in currencies other than the local
currencies of the countries in which the transactions are recorded. As a
percentage of revenue, other income (expense), net decreased to (1.5)% for the
quarter ended March 31, 1999 from 0.6% for the corresponding quarter of 1998.
PROVISION FOR INCOME TAXES. The provision for income taxes in the
three-month periods ended March 31, 1999 and 1998 represents taxes generated in
foreign jurisdictions for which U.S. tax credit utilization is currently
uncertain. We recorded no tax benefit for losses generated during these periods
due to the uncertainty of realizing any benefit.
25
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUE. In 1998, revenue increased 45.2% to $38.4 million from $26.5
million in 1997. This increase results from additional project volume during
1998 as compared to 1997, reflecting the impact of a more established sales and
marketing organization in 1998. Additionally, 1998 results reflect the impact of
the Japanese Language Services acquisition and opening of the Monterey and
Ballina facilities in that year.
COST OF REVENUE. As a percentage of revenue, cost of revenue decreased to
66.5% during 1998 as compared to 71.5% during 1997 due to improved utilization
of employees as Lionbridge realized increased operating leverage from its
services personnel.
SALES AND MARKETING. Sales and marketing costs increased 109.4% to $2.7
million in 1998 from $1.3 million in 1997. This increase was primarily due to
expenses associated with the hiring of additional direct sales personnel in
fiscal 1998 as we continued to establish our sales and marketing organization.
As a percentage of revenue, sales and marketing expenses increased to 7.1% from
4.9% during 1997.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased
32.6% to $10.9 million in 1998 from $8.2 million in 1997 as a result of the
hiring of additional employees and other personnel-related costs as well as the
additional infrastructure costs of adding the Japanese Language Services,
Monterey and Ballina facilities. As a percentage of revenue, general and
administrative expenses decreased to 28.4% in 1998 from 31.1% in 1997 as we
began to realize the operating leverage from our infrastructure.
AMORTIZATION OF ACQUISITION-RELATED INTANGIBLE ASSETS Amortization
decreased 51.3% to $2.1 million in 1998 from $4.4 million in 1997. This decrease
is due to the amortization of a six-month non-compete agreement between
Lionbridge and Stream International, valued at $2.6 million, which was fully
amortized in 1997. Partially offsetting this decrease is amortization expense
attributable to goodwill on the acquisition of the Japanese Language Services
and Lucent businesses in 1998.
INTEREST EXPENSE. Interest expense increased 410.2% to $648,000 in 1998
from $127,000 in 1997. The increase is due to additional interest incurred on
our commercial credit facility during 1998 as outstanding borrowings rose from
$2.2 million at December 31, 1997 to $7.7 million at December 31, 1998 to
support our growth.
OTHER INCOME (EXPENSE), NET. Other income (expense), net, was $49,000 for
the twelve months ended December 31, 1998 as compared to $(506,000) for the
twelve months ended December 31, 1997, or 0.1% and (1.9)% of revenue,
respectively.
PROVISION FOR INCOME TAXES. The provision for income taxes for the years
ended December 31, 1998 and 1997 represents taxes generated in foreign
jurisdictions for which U.S. tax credit utilization is currently uncertain. The
benefit from our utilization of net operating loss carryforwards in Europe
during those periods was recorded as a reduction of goodwill, rather than a tax
provision benefit, since the deferred tax assets associated with these
carryforwards had been fully reserved at the time we acquired Stream
International's localization businesses. We recorded no tax benefit for losses
generated during these periods due to the uncertainty of realizing any benefit.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUE. In 1997, revenue decreased 5.9% to $26.5 million as compared to
Stream International's revenues from the European localization business of $28.1
million in 1996. The decrease is primarily due to the expiration of two large
contracts at the end of 1996 and beginning of 1997. In addition, because Stream
International did not transfer any sales and marketing personnel to us, we
needed to build a sales and marketing team. As a result, sales in 1997 were
adversely impacted as we built this team.
26
<PAGE>
OPERATING COSTS AND EXPENSES. Operating costs and expenses consist of cost
of revenue, sales and marketing, general and administrative expenses, and
nonrecurring charges. Our operating costs and expenses increased 3.0% to $29.0
million in 1997 from $28.1 million in 1996. As a percentage of revenue,
operating costs and expenses increased to 109.5% of revenue in 1997, up from
100.0% in 1996, reflecting the costs of establishing our direct sales force,
increased marketing activities, and the addition of centralized management and
finance functions after the purchase of Stream International's businesses in
1996.
PROVISION FOR INCOME TAXES. The provision for income taxes for the year
ended December 31, 1997 represents taxes generated in foreign jurisdictions for
which U.S. tax credit utilization is currently uncertain. The benefit from our
utilization of net operating loss carryforwards in Europe during that period was
recorded as a reduction of goodwill, rather than a tax provision benefit, since
the deferred tax assets associated with these carryforwards had been fully
reserved at the time we acquired Stream International's localization businesses.
We recorded no tax benefit for losses generated during this period due to the
uncertainty of realizing any benefit. There was no tax provision recorded for
the year ended December 31, 1996 because Stream International benefited the tax
provision with the utilization of previously unrecognized net operating loss
carryforwards.
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth unaudited consolidated quarterly financial
data for the periods indicated. We derived this data from our unaudited
consolidated financial statements, and, in the opinion of management, they have
been prepared on the same basis as the audited financial statements contained
elsewhere in this prospectus and include all adjustments, which consist only of
normal
27
<PAGE>
recurring adjustments, necessary to present fairly the financial results for the
periods. The operating results for any quarter are not necessarily indicative of
results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1998 1998 1998 1998
-------- --------- -------- --------- -------- --------- --------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue........................................... $ 6,838 $ 6,866 $ 7,382 $ 7,438 $10,694 $10,021 $10,259
Cost of revenue................................... 4,519 5,161 5,138 5,344 6,882 6,550 6,770
-------- --------- -------- --------- -------- --------- --------
Gross profit.................................. 2,319 1,705 2,244 2,094 3,812 3,471 3,489
-------- --------- -------- --------- -------- --------- --------
Operating expenses:
Sales and marketing............................. 316 341 369 527 679 749 780
General and administrative...................... 2,104 2,139 2,327 2,387 2,851 2,690 2,961
Amortization of acquisition-related intangible
assets........................................ 1,100 1,100 1,100 561 633 441 510
Nonrecurring charges............................ -- -- 541 451 -- -- 50
Stock-based compensation........................ -- -- -- -- -- -- --
-------- --------- -------- --------- -------- --------- --------
Total operating expenses...................... 3,520 3,580 4,337 3,926 4,163 3,880 4,301
-------- --------- -------- --------- -------- --------- --------
Loss from operations.............................. (1,201 ) (1,875) (2,093) (1,832) (351) (409) (812)
Interest expense.................................. (16 ) (36) (27) (86) (179) (196) (187)
Other income (expense), net....................... 8 60 (535) 42 (64) (22) 93
-------- --------- -------- --------- -------- --------- --------
Loss before income taxes.......................... (1,209 ) (1,851) (2,655) (1,876) (594) (627) (906)
Provision for income taxes........................ -- -- 112 36 17 36 170
-------- --------- -------- --------- -------- --------- --------
Net loss.......................................... $(1,209 ) $(1,851) $(2,767) $(1,912) $ (611) $ (663) $(1,076)
-------- --------- -------- --------- -------- --------- --------
-------- --------- -------- --------- -------- --------- --------
AS A PERCENTAGE OF REVENUE:
Revenue........................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................................... 66.1 75.2 69.6 71.8 64.4 65.4 66.0
-------- --------- -------- --------- -------- --------- --------
Gross profit.................................. 33.9 24.8 30.4 28.2 35.6 34.6 34.0
-------- --------- -------- --------- -------- --------- --------
Operating expenses:
Sales and marketing............................. 4.6 5.0 5.0 7.1 6.3 7.5 7.6
General and administrative...................... 30.8 31.1 31.5 32.1 26.7 26.8 28.9
Amortization of acquisition-related intangible
assets........................................ 16.1 16.0 14.9 7.5 5.9 4.4 5.0
Nonrecurring charges............................ -- -- 7.3 6.1 -- -- 0.4
Stock-based compensation........................ -- -- -- -- -- -- --
-------- --------- -------- --------- -------- --------- --------
Total operating expenses...................... 51.5 52.1 58.7 52.8 38.9 38.7 41.9
-------- --------- -------- --------- -------- --------- --------
Loss from operations.............................. (17.6 ) (27.3) (28.3) (24.6) (3.3) (4.1) (7.9)
Interest expense.................................. (0.2 ) (0.5) (0.4) (1.2) (1.7) (2.0) (1.8)
Other income (expense), net....................... 0.1 0.8 (7.3) 0.6 (0.6) (0.2) 0.9
-------- --------- -------- --------- -------- --------- --------
Loss before income taxes.......................... (17.7 ) (27.0) (36) (25.2) (5.6) (6.3) (8.8)
Provision for income taxes........................ -- -- 1.5 0.5 0.1 0.3 1.7
-------- --------- -------- --------- -------- --------- --------
Net loss.......................................... (17.7 )% (27.0)% (37.5)% (25.7)% (5.7)% (6.6)% (10.5)%
-------- --------- -------- --------- -------- --------- --------
-------- --------- -------- --------- -------- --------- --------
<CAPTION>
<S> <C>
MARCH 31,
1999
---------
<S> <C>
Revenue........................................... $11,690
Cost of revenue................................... 8,195
---------
Gross profit.................................. 3,495
---------
Operating expenses:
Sales and marketing............................. 1,172
General and administrative...................... 3,233
Amortization of acquisition-related intangible
assets........................................ 766
Nonrecurring charges............................ --
Stock-based compensation........................ 45
---------
Total operating expenses...................... 5,216
---------
Loss from operations.............................. (1,721)
Interest expense.................................. (1,468)
Other income (expense), net....................... (181)
---------
Loss before income taxes.......................... (3,370)
Provision for income taxes........................ 45
---------
Net loss.......................................... $(3,415)
---------
---------
AS A PERCENTAGE OF REVENUE:
Revenue........................................... 100.0%
Cost of revenue................................... 70.1
---------
Gross profit.................................. 29.9
---------
Operating expenses:
Sales and marketing............................. 10.0
General and administrative...................... 27.6
Amortization of acquisition-related intangible
assets........................................ 6.6
Nonrecurring charges............................ --
Stock-based compensation........................ 0.4
---------
Total operating expenses...................... 44.6
---------
Loss from operations.............................. (14.7)
Interest expense.................................. (12.6)
Other income (expense), net....................... (1.5)
---------
Loss before income taxes.......................... (28.8)
Provision for income taxes........................ 0.4
---------
Net loss.......................................... (29.2)%
---------
---------
</TABLE>
28
<PAGE>
Lionbridge has experienced quarter-to-quarter variability in its revenues
and gross profit. This variability is due to fluctuations in our clients'
product release cycles, the length of our sales cycle, rapid growth,
acquisitions, the emerging nature of the markets in which we compete and other
factors outside our control. We believe that quarter-to-quarter comparisons of
results of operations are not necessarily meaningful. You should not rely on
these comparisons as a measure of future performance.
LIQUIDITY AND CAPITAL RESOURCES
Since its formation, Lionbridge has relied primarily on private sales of
equity securities (totaling approximately $13.3 million through December 31,
1998) and borrowings to fund operations. We have incurred significant losses
since our inception and, at March 31, 1999, had an accumulated deficit of $17.9
million and a working capital deficit of $947,000.
We have a commercial credit facility that allows Lionbridge to borrow up to
$8.0 million, and which expires on August 20, 1999. The facility requires
Lionbridge to maintain financial ratios and restricts the payment of dividends.
The facility bears interest at the bank's prime rate plus 1% (8.75% at May 31,
1999) and is collateralized by worldwide accounts receivable and work in
process. As of March 31, 1999, $4.2 million was outstanding under the facility.
In the first quarter of 1999, we entered into subordinated loan agreements
with a stockholder and a third party. Under the terms of the agreements, we
issued $12.0 million of subordinated notes with detachable warrants to purchase
2,299,889 shares of our common stock at an exercise price of $.01 per share.
These notes bear interest at 12% per year and are due upon the earlier of the
closing of this offering or between 2003 and 2006.
Net cash used in operations was $1.4 million in 1997, $1.7 million in 1998,
and $1.6 million in the three months ended March 31, 1999. Cash used in these
periods was primarily to fund the net losses of $7.7 million, $4.3 million and
$3.4 million incurred during these periods, respectively, offset in part by
depreciation, amortization and other non-cash expenses and increases in
operating assets and liabilities. Increases in operating assets and liabilities
were largely the result of the growth of our business operations during these
periods.
Net cash used in investing activities was $426,000 in 1997, $4.5 million in
1998, and $3.8 million in the three months ended March 31, 1999. Investing
activities for these periods were primarily purchases of equipment, the
acquisitions of Japanese Language Services in 1998 and VeriTest in 1999, and the
purchase of assets from Lucent in 1998.
Net cash provided by financing activities was $1.3 million in 1997, $5.9
million in 1998, and $8.5 million in the three months ended March 31, 1999,
primarily due to the borrowings against our bank line of credit in each period
as well as the issuance of the subordinated debt in 1999.
As of March 31, 1999, Lionbridge's other significant financial commitments
consisted of $750,000 of notes payable as well as obligations under operating
leases. Additionally, we will redeem our Series B redeemable preferred stock
upon the closing of this offering. The redemption amount at March 31, 1999 was
approximately $15.7 million.
As of March 31, 1999, we had cash of $3.8 million and an additional $3.8
million available for borrowing under the bank line of credit. Our future
financing requirements will depend upon a number of factors, including the
Company's operating performance and increases in operating expenses associated
with growth in our business. We anticipate that the net proceeds of this
offering, together with existing cash and available financing, should provide
adequate cash to fund our currently anticipated cash needs through at least the
next 12 months. We cannot assure you that additional financing, if needed, will
be available to Lionbridge at terms acceptable to us, if at all.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 problem is the potential for system and processing failures of
date-related data arising from the use of two digits by computer-controlled
systems, rather than four digits, to define the applicable year. Because we and
our clients are dependent, to a very substantial degree, upon the
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proper functioning of our and their computer systems, a failure of our or their
systems to correctly recognize dates beyond December 31, 1999 could materially
disrupt our operations, which could materially and adversely affect our
business, results of operations, and financial condition. Additionally, our
failure to provide Year 2000-compliant services to our clients could result in
financial loss, harm to our reputation and legal liability. Likewise, the
failure of computer systems and products of the third parties with which we
transact business to be Year 2000-compliant could materially disrupt their and
our operations.
STATE OF READINESS. We have made a preliminary assessment of the Year 2000
readiness of our information technology ("IT") systems, including the hardware
and software that enable us to provide services. Our Year 2000 readiness plan
consists of:
- quality assurance testing of our internally developed proprietary
software,
- contacting third-party vendors and licensors of material software and
services that are both directly and indirectly related to the delivery of
our services,
- assessing our repair and replacement requirements, and
- creating contingency plans in the event of Year 2000 failures.
We have begun to contact our third party vendors and service providers to
assess their Year 2000 compliance. We have been informed by all of our material
software component vendors that the products we use are currently Year
2000-compliant. We are currently assessing our non-IT systems and will seek
assurance of Year 2000 compliance from providers of material non-IT systems.
Until testing is complete and we contact these vendors and providers, we will
not be able to completely evaluate whether our IT systems or non-IT systems will
need to be revised or replaced.
COSTS. We have made the majority of our equipment and other purchases over
the course of the last two years, and we believe this equipment is Year
2000-compliant. As a result, we have not incurred any material costs in
identifying or evaluating Year 2000 compliance issues. Based on our assessment
to date, we do not anticipate that costs associated with remediating our
non-compliant IT systems or non-IT systems will be material. We expect that our
existing employees or consultants will perform any significant work pertaining
to Year 2000 compliance.
RISKS. We believe that our internal software and hardware systems will
function properly with respect to dates in the Year 2000 and thereafter, but we
can give you no assurance in this regard until these systems are operational in
the Year 2000. In addition, Year 2000 problems of our clients, suppliers and
service providers could affect our systems or operations. Our primary vendors
consist of individual translators and other service professionals who are not
expected to be materially impacted by the Year 2000 issue. We do have
relationships with various financial institutions and telecommunications
providers throughout the world which could be materially impacted by this
problem. In addition, we cannot assure you that governmental agencies, utility
companies, Internet access companies, third party service providers, and others
outside our control will be Year 2000-compliant. Because we depend heavily on
the availability of the Internet to conduct our business and provide services to
our clients, disruptions in the use of the Internet arising from Year 2000
problems could materially affect our business, financial condition, and results
of operations.
Widespread Year 2000 difficulties could also decrease demand for our
services as companies expend resources upgrading their computer systems.
Although, as a general matter, we do not specifically contract with or warrant
to our clients that our work will be Year 2000-compliant, certain clients have
requested and received this warranty. In these cases, we do not warrant the
compliance of the client's source material; rather, we warrant only that the
localized version created by us will not include new routines which fail to be
Year 2000-compliant. However, even absent a Year 2000 warranty, there is a risk
that clients for whom we have localized or tested software will attempt to hold
us liable for any damages that result in connection with Year 2000 problems.
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CONTINGENCY PLAN. As discussed above, we are engaged in an ongoing Year
2000 assessment and are developing contingency plans in case of Year 2000
disruptions. We will take into account the results of our Year 2000 simulation
testing and the responses received from third party vendors and service
providers in determining the nature and extent of any contingency plans.
FOREIGN CURRENCY EXCHANGE RATE LOSSES
A significant portion of our revenues, costs and expenses are denominated in
foreign currencies. In the future, an increasing percentage of our revenue may
be impacted by fluctuations in these currencies and the value of these
currencies relative to the U.S. dollar. In addition, a portion of our assets and
liabilities are denominated in foreign currencies. Therefore, we are exposed to
foreign currency exchange risks. We have not historically tried to reduce our
exposure to exchange rate fluctuations by using hedging transactions. However,
we may choose to do so in the future. We may not be able to do this
successfully. Accordingly, we may experience economic loss and a negative impact
on earnings and equity as a result of foreign currency exchange rate
fluctuations.
CONVERSION TO THE EURO
On January 1, 1999, 11 European countries began using the "euro" as their
single currency, while still continuing to use their own notes and coins for
cash transactions. Banknotes and coins denominated in euros are expected to be
in circulation by 2002, at which time local notes and coins will cease to be
legal tender. Lionbridge conducts a significant amount of business in these
countries. The introduction of the euro has not resulted in any material adverse
impact upon our operations, although we continue to monitor the effects of the
conversion.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair values. Changes in
the fair values of derivatives are recorded each period in current earnings or
other comprehensive income (loss), depending on whether or not a derivative is
designated as part of a hedge transaction and, if it is, depending on the type
of hedge transaction. SFAS No. 133 is expected to be effective for Lionbridge's
fiscal quarter beginning January 1, 2001, and we do not expect its adoption will
have a material impact on our financial position or results of operations.
In April 1998, AcSEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SOP 98-5, the cost of start-up activities should be expensed as incurred.
SOP 98-5 is effective for our fiscal 1999 financial statements, and we do not
expect its adoption will have a material effect on our financial position or
results of operations.
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BUSINESS
OVERVIEW
Lionbridge is a provider of globalization and multilingual Internet services
to industry-leading software publishers, computer hardware manufacturers, and
telecommunications companies. Since 1996, we have focused primarily on
globalization services, including localization, internationalization, and
testing, that enable simultaneous worldwide release and ongoing maintenance of
products and related technical support, training materials, and sales and
marketing information in multiple languages. More recently, as product releases,
technical support, and training have evolved toward a Web-based business model,
we have begun to offer multilingual Internet services.
Lionbridge is positioned at the intersection of four business trends that
are transforming the world market for technology products and related services,
and are in turn transforming the market for our globalization and multilingual
Internet services:
- increasingly global operations of companies around the world,
- growth in the use of information technology products and services,
- the Internet's revolutionary impact on how businesses communicate
internally and interact with their customers and business partners on a
worldwide basis, and
- businesses' focus on core competencies, leading to the increasing use of
outsourcing for technology services.
Lionbridge's multilingual Internet services are organized into four services
offerings, called ERELEASE, ESUPPORT, ELEARNING and ECOMMERCE, each designed to
meet the unique requirements of our clients' product development, support,
training, and sales and marketing organizations. We apply the Lionbridge RAPID
GLOBALIZATION METHODOLOGY in each of these service areas. Our RAPID
GLOBALIZATION METHODOLOGY integrates project management and engineering with
language and workflow technologies to create multilingual, localized versions of
our clients' products, technical support, training materials, and sales and
marketing information.
We service our industry-leading technology clients, including IBM,
Microsoft, Motorola, Novell, Oracle, and Sun Microsystems from our facilities in
the United States, Europe, and Asia.
INDUSTRY BACKGROUND
Companies around the world are increasingly operating on a global scale. To
operate efficiently, companies must standardize their hardware, software, and
telecommunications infrastructures throughout their global organization. As a
result, technology companies that provide hardware, software, and
telecommunications products must also operate on a global scale to address their
customers' needs. It is for this reason that in 1997 approximately 54% of
worldwide software sales were generated outside of the U.S., according to
International Data Corporation ("IDC").
Historically, technology companies first developed products for their home
markets and then created foreign language versions that were compatible with
local operating systems and standards. The complexity of developing these
localized versions often resulted in product releases being delayed from six
months to a year after delivery of the home-country version. In the interim, end
users of technology products often faced version and compatibility conflicts
throughout their global organizations. As a result, global end users of
technology now demand:
- simultaneous product release of the home-country and localized versions,
- independent third party testing and certification to provide assurance of
compatibility with local operating systems and international standards,
and
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- customer support, testing, and training in local languages wherever the
end user operates around the world.
To meet these demands, the market for globalization services has evolved
beyond translation to encompass:
- LOCALIZATION (L10N). The re-engineering and translation of user
interfaces, online help, documentation, technical support databases
("knowledgebases"), training materials, and sales and marketing
information.
- INTERNATIONALIZATION (I18N). The re-engineering of source code so that
products and applications are compatible with country-specific operating
systems and software.
- MULTILINGUAL PRODUCT TESTING. The assurance that foreign language versions
appear and function properly and are compatible with local operating
systems and standards.
With the increasing complexity of many technology products today, product
globalization requires the integration of a broad range of disciplines and
specialized technical resources with a global communications and project
management infrastructure.
The Internet is transforming business worldwide by removing the barriers of
time and geography. As the world becomes more technology-enabled, companies are
using the Internet to conduct operations, manage constituents, distribute
products, and communicate both internally and externally on a worldwide basis.
Internet content is predominantly in English, but a growing percentage of
Internet users do not speak English as their first language. Computer Economics,
an independent research firm, predicts that by 2002 a majority of Internet users
will be non-English speaking. Although the Internet offers significant
opportunities, companies cannot take full advantage of these opportunities
unless they accommodate users' local languages, cultures, and technical
environments.
Technology companies now use the Internet to:
- RELEASE PRODUCTS. Software products are increasingly distributed over the
Internet or redesigned as Web-based applications. Today, many software
publishers regularly post product updates and enhancements on their Web
sites.
- PROVIDE TECHNICAL SUPPORT. Demonstrated cost benefits and improved
customer satisfaction are driving businesses to provide Web-based
technical support for their end users. As a result, companies are
supplementing technical support call centers with Web-based self-help
offerings such as Frequently Asked Questions ("FAQs") and knowledgebases.
Gartner Group has estimated that the cost of providing Internet-based
support ranges between $0.25 and $3.50 per request compared to $5.01 per
call using traditional telephone-based customer support. IDC estimates
that this market was approximately $1.8 billion in 1998 and expects it to
grow to approximately $13.9 billion in 2003.
- DELIVER PRODUCT TRAINING. Self-directed Web-based courseware, product
training, and accreditation is beginning to replace classroom-based,
instructor-led training. IDC estimates that the market for Internet-based
information technology learning will grow from $440 million in 1998 to
$4.1 billion in 2002.
- MARKET AND SELL PRODUCTS. Lionbridge believes that e-commerce, while
predominately U.S.-based today, will become a global phenomenon. Today,
companies routinely localize their sales and marketing information for
posting to their Web site. Lionbridge believes this trend will expand to
include Internet storefronts and e-commerce applications.
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The following diagram depicts the effect the Internet is having on the way
companies conduct business.
[GRAPHIC]
Few companies have the combination of engineering, linguistic, testing, and
project management skills needed to successfully globalize their products and
services for simultaneous worldwide release. In addition, because the demand for
globalization services at most companies is variable, it is usually not
cost-effective for them to maintain a full suite of in-house globalization
resources. Lionbridge believes that technology companies recognize that
localization is not a core competency. As a result, they are increasingly
outsourcing their globalization and multilingual Internet activities in order to
accelerate time-to-market, minimize their fixed costs, and reallocate their
resources to core product development activities.
Although many companies provide translation and other discrete
localization-related services, Lionbridge believes few companies offer a
complete globalization and multilingual Internet solution. Lionbridge believes
that technology companies are demanding a one-stop globalization and
multilingual Internet service provider to meet their global product development,
technical support, training, and sales and marketing requirements.
LIONBRIDGE'S SOLUTION
We offer a complete globalization and multilingual Internet solution to
businesses, particularly industry-leading software publishers, computer hardware
manufacturers, and telecommunications companies. We provide a full suite of
services that improve the quality, consistency, and timeliness of our clients'
international product releases, technical support, training materials, and sales
and marketing information. Lionbridge serves as a globalization partner
throughout a client's product development and support lifecycle by offering:
- localization, translation, and internationalization services,
- compliance, compatibility, and localization testing of software and
hardware, and
- project management throughout the globalization process.
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We have invested in our proprietary RAPID GLOBALIZATION METHODOLOGY ("RGM"),
a process which is at the heart of each client engagement. RGM standardizes
processes, defines key activities, and specifies goals for each project. RGM
benefits our clients by enabling Lionbridge to provide consistent quality and
timely delivery of localized versions of products and related materials across
multiple geographies and languages. RGM emphasizes the integration of process
and technology into the globalization process to achieve operational
efficiencies and predictable, measurable results. RGM also facilitates the
identification, capture, and sharing of valuable knowledge and best practices
throughout our organization, enabling us to continuously improve the quality and
efficiency of our services. RGM is generally supported by our proprietary
internal LIONTRACK workflow systems, LIONTRACK WORKGROUP and LIONTRACK
ENTERPRISE.
- LIONTRACK WORKGROUP enables our clients to submit files and translation
instructions to us via the Internet for automated routing throughout the
localization process. Our clients can use LIONTRACK WORKGROUP to monitor
the real-time progress of individual components of an assignment, which
allows them to plan their product release schedule more effectively.
- LIONTRACK ENTERPRISE is being designed for the demanding localization
requirements of large, complex Web sites that are subject to continuous
updating, and is expected to be operational in July 1999. LIONTRACK
ENTERPRISE will connect directly to our client's Web site, automatically
detecting and extracting required changes through our Web-crawling
technology. LIONTRACK ENTERPRISE will route those changes for translation
and localization, and automatically insert the localized material into the
client's multilingual Web sites. We expect LIONTRACK ENTERPRISE to enable
clients to maintain continuously updated multilingual Web sites without
disruption, freeing them to focus on content development.
We believe that expanded global competition and worldwide Internet access
will increase the demand for our services. We also believe that by offering a
one-stop solution to globalization and multilingual Internet service needs,
Lionbridge is an attractive strategic partner to companies operating in a global
marketplace.
LIONBRIDGE'S GROWTH STRATEGY
Lionbridge's goal is to become the leading provider of globalization and
multilingual Internet services. The following are the key elements of our
strategy:
LEVERAGE EXISTING CLIENTS. We seek to increase the services we provide to
our existing clients by selling to other product groups within the same
client organization. In addition, we seek to leverage product knowledge
acquired on one project (for example, globalization of a product release) to
sell services to different enterprise functions within the same client (for
example, compliance testing, logo certification, localization of customer
support knowledgebases, and training materials).
CONTINUE STRATEGIC ACQUISITIONS. We intend to continue pursuing strategic
acquisitions that provide greater niche expertise, complementary service
offerings, additional geographic reach, and new clients. In 1998, we
acquired businesses that gave us valuable expertise in Japanese localization
and a facility on the west coast of the United States. In 1999, we acquired
compliance testing and certification capabilities.
EVOLVE OUR METHODOLOGY AND WORKFLOW SYSTEMS. Lionbridge intends to continue
investing in development of our RAPID GLOBALIZATION METHODOLOGY and ongoing
development of our LIONTRACK workflow systems. We have a dedicated process
and technology group who work closely with our operations groups to refine
and enhance our core methodology and systems based on best practices and
client feedback. This focus enables Lionbridge to continuously improve the
quality, predictability, and efficiency of our services across geographies
and languages.
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PURSUE MULTI-YEAR RELATIONSHIPS WITH CLIENTS. We intend to pursue multi-year
relationships with clients who seek an outsourcing partner. This could
involve the acquisition of selected companies' internal localization
operations and entering into multi-year agreements with the sellers of these
operations.
EXPAND INTO ADDITIONAL VERTICAL MARKETS. We initially focused on providing
globalization and multilingual Internet services to software publishers and
computer hardware manufacturers. Our client base has since expanded to
include telecommunications companies. We intend to continue expanding into
additional industries that are global and information-intensive, such as the
automotive and medical device industries.
LIONBRIDGE SERVICES
We provide a full suite of globalization and multilingual Internet services
to businesses--primarily technology businesses--to improve the quality,
consistency, and timeliness of their international product releases, technical
support, training materials, and sales and marketing information. Our services
consist of the following:
- SOFTWARE LOCALIZATION. Lionbridge creates foreign language versions of
software products and applications, including the user interface, online
help systems, and documentation. We provide our clients with
re-engineered, fully tested, and culturally adapted multilingual versions
of their products and applications.
- INTERNATIONALIZATION. Lionbridge provides source code analysis and
engineering services that enable software to be compatible with
country-specific operating systems and localized software. Through a
complex and highly specialized process, we re-engineer code to support the
"double-byte" character set requirements of the Japanese, Chinese, and
Korean languages.
- TRANSLATION. Lionbridge uses a combination of internal and external
translators, as well as translation software, for its projects. We have
established relationships with a global network of over 2,000 in-country
translators, including independent agencies and freelance professionals.
We develop and apply glossaries to ensure consistent terminology across
projects for a specific company or industry. We also use translation
memory software to identify previously translated material for re-use. Our
project editors review translated material to ensure that it meets our
standards for quality and accuracy.
- LOCALIZATION AND COMPATIBILITY TESTING. We provide both localization and
compatibility testing for software, hardware, and telecommunications
products through our global network of VeriTest labs. Testing provides an
opportunity to uncover errors before the product is placed into production
and into the hands of end users. The goal of localization testing is to
ensure that local language versions of the product perform consistently
with the source language version. Compatibility testing is necessary to
ensure that localized products function properly in the local hardware and
software environment, including local operating systems, peripheral
devices, and networking and communications standards.
- LOGO CERTIFICATION. Lionbridge, under its VeriTest brand, provides logo
certification programs for many of the leading software companies,
including Autodesk, BMC Software, Microsoft, Oracle, and Sun Microsystems.
These sponsoring companies retain Lionbridge to develop and administer
test criteria that independent software vendors must satisfy before they
may display the sponsor's logo (such as Microsoft's CERTIFIED FOR WINDOWS
2000-TM-) on their products. The logo is an indication of software quality
and compatibility for end users. Other Lionbridge logo programs include
BUILT WITH OBJECT ARX-TM- (Autodesk), BMC CERTIFIED FOR PATROL-TM-,
DESIGNED FOR MICROSOFT WINDOWS NT AND WINDOWS 98-TM-, ORACLE E-CERTIFIED
WAREHOUSE-TM-, and SUN MICROSYSTEMS SOLARIS READY-TM-.
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- MULTILINGUAL TECHNICAL PUBLISHING. We localize user manuals, marketing and
training materials, and other product support information using a variety
of desktop publishing and graphics software. Using workflow technology,
multiple language versions are simultaneously delivered to our clients in
formats ready for printing or Internet delivery.
As our clients increasingly use the Internet to deliver products, technical
support, training materials, and sales and marketing information, we are
adapting our service offerings to support our clients' Web-based initiatives. We
are organizing our multilingual Internet services in four key areas:
ERELEASE
Lionbridge localizes software products and Web applications into multiple
languages. With the emergence of the Internet, our clients are redesigning their
software products as Web components and applications, then releasing them and
providing continuous updates over the Internet. Lionbridge provides the
methodology and workflow systems to support continuous release of multilingual
products and updates via the Web.
ESUPPORT
We offer localization and maintenance of technical support Web sites,
including Frequently Asked Questions, product specifications, white papers, and
knowledgebases. As our clients continuously update this Web-based information,
we automatically update the multilingual versions as well. We have also begun to
assist our clients in providing local language responses to technical support
questions through e-mail.
ELEARNING
Our multilingual eLearning services enable our clients to provide updated
training materials on the Web in multiple languages and culturally appropriate
formats as they move from instructor-led classroom training to Internet distance
learning.
ECOMMERCE
We localize Web-based sales and marketing materials for our clients who sell
their products via the Internet. Our services support continuous updates and
revisions to these materials.
As corporate Web sites become an integrated global resource, Lionbridge
believes that our multilingual Internet services will assist multinational
corporations in maintaining the quality and consistency of their Web-based
products and content in multiple languages.
SALES AND MARKETING
Substantially all of Lionbridge's revenue has been generated through its
dedicated direct sales force. We currently have 20 direct sales professionals
based in the United States, Europe, and Asia who sell the full range of
Lionbridge globalization and multilingual Internet services. Our sales approach
is highly consultative and often involves planning for an organization's ongoing
requirements, including future versions of products, and ongoing support,
maintenance, and training, related to both traditional and Web deployment. There
are often several different functional areas within the same organization that
require one or more of our services. Many of our clients do not coordinate these
purchases but buy these services at the department head level. As a result, our
sales professionals may call on several functional departments and at various
management levels within the same client organization. Our sales cycle varies
significantly, but typically takes six to twelve months.
Lionbridge's marketing efforts are designed to create brand recognition and
demand for Lionbridge services throughout the world. Lionbridge's seven-person
corporate marketing team is
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supplemented by marketing representatives in each country in order to provide a
consistent global message. Marketing programs include targeted industry and
solution-specific advertising campaigns, trade show participation, speaking
engagements, and promotion of customer success stories. We plan to continue
expanding our sales and marketing activities.
CLIENTS
Lionbridge customers are generally large multi-national organizations in the
software, hardware and telecommunications industries. The following companies
are representative Lionbridge clients in 1998:
<TABLE>
<S> <C> <C>
3Com Corel Novell
Adobe Data General Oce
Aurum Gateway Oracle
Autodesk IBM Page Factory
Avio J.D. Edwards Parametric Technology
Baan Kodak Portal
Bentley Systems Macromedia PowerQuest
Bull Microsoft Silicon Graphics
Candle Corporation Motorola SPSS
Cognos Network Associates Sun Microsystems
</TABLE>
In 1998, Lionbridge's largest client, IBM, accounted for approximately 14%
of total revenue. In 1997 and 1998, our five largest clients accounted for
approximately 52% and 39%, respectively, of revenue. Revenues from existing
clients increased 59% in 1998 as compared to revenues from these clients in
1997.
COMPETITION
Lionbridge provides a broad range of globalization and multilingual Internet
service offerings to its clients. As a result, the market for our services is
highly fragmented as we compete against companies in various markets. Lionbridge
believes the principal competitive factors in providing its services include
project management expertise, quality, speed of service delivery, vertical
industry knowledge, the ability to provide to clients end-to-end localization
solutions, corporate reputation, and expertise in Internet-related services. Our
current competitors include the following:
- localization or translation services providers such as Berlitz
International, Bowne & Co., Lernout and Hauspie, Sykes Enterprises and
regional vendors of translation services,
- companies providing outsourcing of technical support call centers
including Stream International and Sykes Enterprises, and
- independent testing labs providing testing and logo certification services
such as National Software Testing Laboratories (a division of CMP Media),
and Keylabs.
Although we have competed favorably with these companies to date, we cannot
assure you that we will be able to do so in the future. Many of these companies
have longer operating histories; significantly greater financial, marketing and
other resources; and greater name recognition than Lionbridge. If we fail to be
competitive with these companies in the future, our business will be materially
and adversely affected.
Lionbridge also faces competition from internal localization departments in
large multi-national companies. Although many companies are finding that
simultaneous global release and ongoing maintenance of Web-based applications
require new skill sets that are not available in-house, many companies may still
perform these services in-house rather than outsourcing them. If these companies
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continue to localize their own products, Lionbridge's business, financial
condition and results of operations may be adversely affected.
We may also face competition from companies that provide outsourcing of
technical support call centers. As businesses shift from telephonic support
centers to Web-based support, companies such as Stream International, Sykes
Enterprises and others that currently provide traditional outsourcing services
may decide to provide comparable services over the Internet. If these or other
companies choose to expand their service offerings, we cannot assure you that
Lionbridge will be able to compete with them successfully.
There are relatively few barriers preventing companies from competing with
us. We do not own any patented technology that precludes or inhibits others from
entering our market. As a result, new market entrants pose a threat to our
business. In addition to our existing competitors, we may face further
competition in the future from companies that do not presently offer
globalization services. Companies currently providing information technology
services may choose to broaden their range of services to include globalization.
While we presently use translation memory software in our localization process,
and to a lesser extent machine translation software, these technologies may
improve and become sophisticated enough to compete with our localization service
offering. We cannot assure you that we will be able to compete effectively with
these potential future competitors.
INTELLECTUAL PROPERTY RIGHTS
Our success is dependent, in part, upon our proprietary RAPID GLOBALIZATION
METHODOLOGY, our LIONTRACK workflow systems, and other intellectual property
rights. We do not have any patents or patent applications pending. Lionbridge
relies on a combination of trade secret, nondisclosure and other contractual
agreements, and copyright and trademark laws to protect its proprietary rights.
Existing trade secret and copyright laws afford us only limited protection. We
enter into confidentiality agreements with our employees, require that our
consultants and generally our clients enter into these agreements, and limit
access to and distribution of Lionbridge's proprietary information. We cannot
assure you that these arrangements will be adequate to deter misappropriation of
our proprietary information or that we will be able to detect unauthorized use
and take appropriate steps to enforce our intellectual property rights.
EMPLOYEES
As of May 31, 1999, we had 449 employees. Of these, 358 were consulting and
service delivery professionals and 91 were management and administrative
personnel performing marketing, sales, operations, process and technology,
finance, accounting, and administrative functions.
We have been successful in hiring individuals with leading-edge technical
skills and project management experience. In addition, Lionbridge is committed
to employee training and retention. Lionbridge has a dedicated process and
technology team that initiates and oversees the training and development of
Lionbridge professionals. Key organizational development initiatives include
ongoing technical and project management classes as well as career path
management and guidance. We plan to continue to invest in attracting the best
employees.
Lionbridge's employees in Paris, France are represented by a labor union,
and we have a works council in The Netherlands. We have never experienced a work
stoppage. We believe our employee relations are good.
FACILITIES
We maintain offices in the United States, Ireland, France, The Netherlands,
China, Japan, and South Korea. We maintain sales offices in Charlotte, North
Carolina and the metropolitan areas of
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Seattle, Houston, Los Angeles, and San Francisco in the United States; Dublin,
Ireland; Paris, France; Beijing, China; Tokyo, Japan; and Osaka, Japan.
Lionbridge's headquarters and principal administrative, finance, legal, and
marketing operations are located in leased office space in Waltham,
Massachusetts. Lionbridge's lease is for a term of 3 years and expires on August
1, 2002. Lionbridge maintains a facility in metropolitan Dublin, Ireland and
leases three floors under three separate leases expiring between September 14,
2025 and March 1, 2026. We also lease office space in Santa Monica, California;
Monterey, California; Ballina, Ireland; Velizy, France; Sophia Antipolis,
France; Amsterdam, The Netherlands; Seoul, South Korea; Beijing, China; Tokyo,
Japan; and Osaka, Japan. Lionbridge expects that it will need additional space
as it expands its business and believes that it will be able to obtain
additional space as needed on commercially reasonable terms.
LEGAL PROCEEDINGS
Lionbridge is not a party to any material legal proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table presents information about each of Lionbridge's
executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -------------------------------------------------------
<S> <C> <C>
Rory J. Cowan................. 46 Chairman of the Board, Chief Executive Officer and
President
Stephen J. Lifshatz........... 40 Chief Financial Officer, Treasurer and Secretary
Myriam Martin-Kail............ 45 Vice President, Operations
Peter H. Wright............... 37 Vice President, Sales
Guy L. de Chazal.............. 51 Director
Marcia J. Hooper.............. 44 Director
Stephen M. Jenks.............. 40 Director
Paul Kavanagh................. 57 Director
Claude P. Sheer............... 49 Director
</TABLE>
RORY J. COWAN founded Lionbridge in September 1996. Mr. Cowan served as
Chairman and Chief Executive Officer of Stream International, Inc., a software
and services provider, from May 1995 to June 1996. Mr. Cowan was also the Chief
Executive Officer of Interleaf, Inc. from October 1996 to January 1997. He was
an Executive Vice President of R.R. Donnelley & Sons, a provider of commercial
print and print-related services, from January 1991 to June 1996. Mr. Cowan also
serves as a director of NewsEDGE Corporation and Interleaf, Inc., where he is
Chairman of the Board.
STEPHEN J. LIFSHATZ joined Lionbridge in January 1997. Mr. Lifshatz served
as the Chief Financial Officer of The Dodge Group from May 1996 to January 1997.
He served in a number of senior financial roles, including Chief Financial
Officer, of Marcam Corporation, a publicly traded software company from May 1984
to May 1996.
MYRIAM MARTIN-KAIL joined Lionbridge in December 1996. Ms. Martin-Kail
served as European Director for Localization of Stream International, Inc. from
April 1995 to December 1996 and Operations Manager, Dublin from September 1994
to September 1995. She was Internationalization Manager for Digital Equipment
Corporation in Europe from January 1992 to November 1994.
PETER H. WRIGHT joined Lionbridge in January 1997. Mr. Wright was previously
the Sales Director at Berlitz International, Inc. for their localization
business from August 1991 to November 1996.
GUY L. DE CHAZAL has been a director of Lionbridge since February 1998. Mr.
de Chazal has been with Morgan Stanley since 1984, most recently as a managing
director of Morgan Stanley and the President and a general partner of Morgan
Stanley Dean Witter Venture Partners. Mr. de Chazal is a director of PageMart
Wireless, Inc. and several private companies.
MARCIA J. HOOPER has been a director of Lionbridge since December 1996.
Since May 1996, Ms. Hooper has been a partner with the Information Technology
Group of Advent International Corporation, a venture capital company. From July
1994 to April 1996, she served as a partner of Viking Capital Group, a venture
capital company focused on early stage investments. Ms. Hooper was a partner of
Paine Webber/Ampersand Ventures, a venture capital company, from September 1985
to June 1994. Ms. Hooper is also a director of Wang Laboratories, Inc.,
Interleaf, Inc., Worldgate Communications, Inc. and PolyMedica Corporation.
STEPHEN M. JENKS has been a director of Lionbridge since March 1999. Mr.
Jenks has been a member of Capital Resource Management, LLC since 1993. He is
also a director of several privately held companies.
41
<PAGE>
PAUL KAVANAGH has been a director of Lionbridge since December 1996. Mr.
Kavanagh has served as an industry consultant since January 1998. Mr. Kavanagh
served as President of Europe of Stream International, Inc. from May 1995 to
January 1998. From January 1990 to May 1995, Mr. Kavanagh was European Managing
Director of R.R. Donnelley & Sons.
CLAUDE P. SHEER has been a director of Lionbridge since March 1999. Mr.
Sheer has served as Chief Internet Strategist of Ziff Davis since November 1998.
From 1980 to November 1998, Mr. Sheer served in a number of executive roles for
Ziff Davis, including President, ZD Publishing; President US Publications; and
President, Business Media Group.
The Board of Directors is currently fixed at six members. Lionbridge's
second amended and restated certificate of incorporation, as in effect
immediately following this offering, divides the Board of Directors into three
classes. The members of each class of directors serve for staggered three-year
terms. The Board of Directors is composed of (i) two Class I directors (Messrs.
Jenks and Sheer), whose terms expire upon the election and qualification of
directors at the annual meeting of stockholders to be held in 2000, (ii) two
Class II directors (Mr. de Chazal and Ms. Hooper), whose terms expire upon the
election and qualification of directors at the annual meeting of stockholders to
be held in 2001, and (iii) two Class III directors (Messrs. Cowan and Kavanagh),
whose terms expire upon the election and qualification of directors at the
annual meeting of stockholders to be held in 2002.
Our executive officers are elected by and serve at the discretion of the
Board of Directors. There are no family relationships among any of our executive
officers and directors.
COMMITTEES OF THE BOARD OF DIRECTORS
We have a standing compensation committee and audit committee of the Board
of Directors. The members of the compensation committee consist of Messrs. de
Chazal, Kavanagh and Sheer. The compensation committee's duties are to review
and evaluate the salaries and incentive compensation of our management and
employees and administer our 1998 Stock Plan and, upon adoption at the closing
of this offering, our 1999 Employee Stock Purchase Plan.
The members of the audit committee consist of Messrs. Jenks and Kavanagh and
Ms. Hooper. The audit committee is responsible for the selection of and
determination of fees paid to Lionbridge's independent public accountants,
reviewing the scope and results of audits and other services provided by our
independent public accountants and reviewing Lionbridge's system of internal
accounting and financial controls. The audit committee also reviews other
matters with respect to our accounting, auditing, and financial reporting
practices and procedures as it may find appropriate or may be brought to its
attention.
DIRECTOR COMPENSATION
Lionbridge does not currently compensate its directors. Each director is
reimbursed for reasonable travel and other out-of-pocket expenses incurred in
attending meetings of the Board of Directors or of any committee of the Board.
Non-employee directors are eligible to receive options to purchase shares of our
common stock.
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<PAGE>
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the total compensation
paid or accrued for the year ended December 31, 1998 for our Chief Executive
Officer and all other executive officers whose salary and bonus for services
rendered in any capacities to Lionbridge for the fiscal year ended December 31,
1998 exceeded $100,000. We will use the term "named executive officers" to refer
to these people later in this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- -------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS/SARS
- ----------------------------------------------------------- ---------- ---------- ----------------- -------------
<S> <C> <C> <C> <C>
Rory J. Cowan.............................................. $ 249,144 $ 112,500 -- --
Chairman of the Board, President and Chief Executive
Officer
Stephen J. Lifshatz........................................ $ 182,750 $ 41,250 -- 55,000
Chief Financial Officer, Treasurer and Secretary
Myriam Martin-Kail......................................... $ 128,256 $ 31,205 -- 30,000
Vice President, Operations
Peter H. Wright............................................ $ 151,614 $ 30,000 -- 50,000
Vice President, Sales
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes the options granted to each of Lionbridge's
named executive officers during the fiscal year ended December 31, 1998.
<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 OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION --------------------
NAME GRANTED FISCAL YEAR PRICE(1) DATE 5% 10%
- ------------------------------------------- ----------- --------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rory J. Cowan.............................. -- -- -- -- -- --
Stephen J. Lifshatz........................ 55,000 9.0% $ 0.20 2/08/08 $ 6,918 $ 17,531
Myriam Martin-Kail......................... 30,000 4.9% $ 0.20 2/08/08 $ 3,773 $ 9,562
Peter H. Wright............................ 50,000 8.2% $ 0.20 4/01/08 $ 6,289 $ 15,937
</TABLE>
- ------------------------
(1) The exercise price equals the fair market value of the common stock as of
the grant date as determined by our board of directors.
(2) The potential realizable value is calculated based on the term of the option
at the time of grant (10 years). Assumed stock price appreciation of 5% and
10% is based on the fair value at time of the grant.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to exercisable and
unexercisable stock options held as of December 31, 1998 by each of the named
executive officers and with respect to stock options exercised by the named
executive officers during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1998 AT DECEMBER 31, 1998(2)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rory J. Cowan............................ 281,536 $ 53,492 281,536 1,126,148
Stephen J. Lifshatz...................... 145,732 $ 34,004 -- 297,890
Myriam Martin-Kail....................... -- -- 182,184 333,643
Peter H. Wright.......................... -- -- 67,155 128,593
</TABLE>
(1) The value realized by Messrs. Cowan and Lifshatz upon the exercise of these
options represents the aggregate amount of the difference between the fair
market value for a share of our common stock on the date of exercise and the
exercise price per share, multiplied by the number of shares underlying such
options.
(2) There was no public trading market for our common stock as of December 31,
1998. Accordingly, as permitted by the rules of the Securities and Exchange
Commission, the value of unexercised in-the-money options has been
calculated by determining the difference between the exercise price per
share payable upon exercise of such options and an assumed initial public
offering price of $ .
STOCK PLANS
1998 STOCK PLAN. The 1998 Stock Plan has a total of 8,283,048 shares of
common stock reserved for issuance. The 1998 Stock Plan provides for the grant
of stock-based awards to our employees, officers, directors, and consultants.
Under the 1998 Stock Plan, we may grant options that are intended to qualify as
incentive stock options within the meaning of Section 422 of the Code, options
not intended to qualify as incentive stock options, stock-based awards and
opportunities to make direct purchases of stock. Incentive stock options may be
granted only to employees of Lionbridge. In general, options granted pursuant to
the 1998 Stock Plan are exercisable within ten years of the original grant date
and become exercisable over a period of four years as follows: 25% on the first
anniversary of the date of grant and semi-annually thereafter, in six equal
installments over the remaining three-year period. As of June 15, 1999, an
aggregate of 3,948,800 shares of common stock at an average exercise price of
$1.14 per share were outstanding under the 1998 Stock Plan. The maximum number
of shares with respect to which options, awards or purchase rights may be
granted to any employee under the 1998 Stock Plan shall not exceed 3,500,000
shares of common stock during any fiscal year of Lionbridge.
The 1998 Stock Plan is administered by the compensation committee. Subject
to the provisions of the 1998 Stock Plan, the compensation committee has the
authority to select the persons to whom options, awards or purchase rights are
granted and determine the terms of each option, award or purchase right,
including the number of shares of common stock subject to the option or award.
The compensation committee may also provide that any option shall become
immediately exercisable, in full or in part. Payment of the exercise price of an
option or award or purchase rights may be made in cash or check or, if approved
by the compensation committee, shares of common stock, a promissory note, an
assignment of common stock proceeds or any combination of the foregoing.
Incentive stock options are not assignable or transferable except by wills or
the laws of decent or distribution. Non-qualified
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<PAGE>
stock options and other awards or purchase rights are assignable or transferable
to the extent set forth in the agreement relating to the non-qualified stock
option or award or purchase rights.
1999 EMPLOYEE STOCK PURCHASE PLAN. The 1999 Employee Stock Purchase Plan
(the "1999 Purchase Plan") was adopted by the Board of Directors and our
stockholders on June 15, 1999, to be effective upon the closing of this
offering. The 1999 Purchase Plan provides for the issuance of a maximum of
1,000,000 shares of common stock.
The 1999 Purchase Plan will be administered by the compensation committee of
the Board of Directors. All employees of Lionbridge whose customary employment
is for more than 20 hours per week and for more than three months in any
calendar year are eligible to participate in the 1999 Purchase Plan. Employees
who would own 5% or more of the total combined voting power or value of our
stock immediately after the grant of the option may not participate in the 1999
Purchase Plan. To participate in the 1999 Purchase Plan, an employee must
authorize us to deduct an amount (not less than one percent nor more than 10
percent of a participant's total cash compensation) from his or her pay during
six-month payment periods (each, a "Payment Period"). The first Payment Period
will commence on the earlier to occur of (1) November 1, 1999 and (2) the first
day of the first calendar month following the effective date of the Registration
Statement on Form S-8 filed with respect to the shares issued under the 1999
Purchase Plan and shall end April 30, 2000. Thereafter, the Payment Periods will
commence on the six-month periods commencing on May 1 and November 1,
respectively, and ending on the following October 31 and April 30, respectively,
of each year, but in no case shall an employee be entitled to purchase more than
500 shares in any one Payment Period. The exercise price for the option granted
in each Payment Period is 85% of the lesser of the average market price of the
common stock on the first or last business day of the Payment Period, in either
event rounded up to the nearest cent. If an employee is not a participant on the
last day of the Payment Period, such employee is not entitled to exercise his or
her option, and the amount of his or her accumulated payroll deductions will be
refunded. Options granted under the 1999 Purchase Plan may not be transferred or
assigned. An employee's rights under the 1999 Purchase Plan terminate upon his
or her voluntary withdrawal from the plan at any time or upon termination of
employment. No options have been granted to date under the 1999 Purchase Plan.
401(K) PLAN
We maintain a 401(k) plan qualified under Section 401(a) of the Code. Most
of our U.S.-based employees who are at least 21 years of age are eligible to
participate in the 401(k) plan. Under the 401(k) plan, a participant may
contribute a maximum of 15% of his or her pre-tax salary, commissions and
bonuses through payroll deductions (up to the statutorily prescribed annual
limit of $10,000 in calendar year 1999) to the 401(k) plan. The percentage
elected by more highly compensated participants may be required to be lower. In
addition, at the discretion of the Board of Directors, we may make matching
contributions to the 401(k) plan for all eligible employees. During the plan
year ended December 31, 1998, we made no matching contributions to the 401(k)
plan.
PENSION PLANS
We maintain a defined contribution pension plan for our employees in
Ireland. Our permanent employees in Ireland are eligible to participate in the
plan after one year of employment with us. Under the Ireland pension plan, we
contribute 5% of a participant's gross salary (excluding any overtime or bonus
payments) to the plan and a participant is entitled to contribute between 5% and
15% of his or her total earnings (gross salary plus bonus, overtime, and other
earnings) to the plan.
We also maintain a defined benefit pension plan for our employees in France
as required by and in accordance with French law. All of our employees in France
are entitled to participate in the plan.
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<PAGE>
We and our employees in France contribute to the plan in varying amounts based
upon French statutory requirements.
We maintain a defined benefit pension plan for our employees in The
Netherlands. All of our employees in the Netherlands with a fixed contract are
entitled to participate in the plan. The cost of funding the plan is split
equally between us and the participants. For married employees, 8% of their
salaries are contributed to the plan on an annual basis. and, for single
employees, 5% of their salaries are contributed to the plan on an annual basis.
EMPLOYMENT AND NON-COMPETITION AGREEMENTS
Rory J. Cowan entered into an employment agreement with Lionbridge on
December 23, 1996. Mr. Cowan's employment agreement provides for a two-year term
with automatic one-year renewals. Under the terms of his employment agreement,
Mr. Cowan receives a base salary of $225,000, subject to increase from time to
time by the Board of Directors in its sole discretion, and an annual
discretionary bonus in an amount up to Mr. Cowan's then current base salary.
Pursuant to his employment agreement, we also issued Mr. Cowan options to
purchase up to 2,252,293 shares of our common stock at an exercise price of $.10
per share. Mr. Cowan's options vest over a four-year period and 50% of any
unvested options held by Mr. Cowan will vest and become immediately exercisable
upon a merger or sale of all or substantially all of the assets of Lionbridge or
upon the disposition by certain stockholders of Lionbridge of more than 50% of
the aggregate amount of our capital stock owned by the stockholders. If
Lionbridge terminates Mr. Cowan's employment other than for cause, he is
entitled to receive twelve monthly severance payments, each in an amount equal
to his then current monthly base compensation (i.e., 1/12(th) of Mr. Cowan's
base salary). If Mr. Cowan is terminated for cause, he will not be entitled to
any severance payments or other benefits except as required by law.
Mr. Cowan entered into a non-competition agreement with Lionbridge on
December 23, 1996. The agreement provides that Mr. Cowan will not, during the
course of his employment and the twelve months following the date of the
termination of his employment with Lionbridge (1) engage or otherwise have a
financial interest in any business activity which is in competition with any of
the products or services being provided by Lionbridge, (2) solicit our employees
or (3) solicit or do business with any present or past customer of ours, or any
prospective customer of ours in connection with any business activity which
would be in violation of the non-competition agreement.
Stephen J. Lifshatz entered into an employment agreement with Lionbridge on
February 11, 1997. Mr. Lifshatz's employment agreement provides for a one-year
term with automatic one-year renewals. Under the terms of his employment
agreement, Mr. Lifshatz receives a base salary of $165,000, subject to increase
from time to time by the Board of Directors in its sole discretion, and an
annual discretionary bonus in an amount up to 50% of his then current base
salary. In connection with his employment agreement, we also issued Mr. Lifshatz
options to purchase up to 388,622 shares of our common stock at an exercise
price of $.10 per share. Mr. Lifshatz's options vest over a four-year period.
If, during the six-month period following a change in control of Lionbridge, Mr.
Lifshatz ceases to be the Chief Financial Officer of the parent of the surviving
entity or suffers a substantial diminution of his responsibilities, 50% of any
unvested options then held by Mr. Lifshatz shall vest and become immediately
exercisable. If Lionbridge terminates Mr. Lifshatz's employment other than for
cause, he is entitled to receive six monthly severance payments, each in an
amount equal to his then current monthly base compensation (i.e., 1/12(th) of
Mr. Lifshatz's base salary). If Mr. Lifshatz is terminated for cause, he will
not be entitled to any severance payments or other benefits except as required
by law.
Mr. Lifshatz entered into a non-competition agreement with Lionbridge on
February 11, 1997. The agreement provides that Mr. Lifshatz will not, during the
course of his employment and the twelve months following the date of the
termination of his employment with Lionbridge (1) engage or
46
<PAGE>
otherwise have a financial interest in any business activity which is in
competition with any of the products or services being provided by Lionbridge,
(2) solicit our employees or (3) solicit or do business with any present or past
customer of ours, or any prospective customer of ours in connection with any
business activity which would be in violation of the non-competition agreement.
Myriam Martin-Kail entered into an employment agreement with Lionbridge on
January 1, 1997. Under the terms of her employment agreement, Ms. Martin-Kail
receives a base salary of 650,000 French Francs, subject to increase from time
to time by the Board of Directors in its sole discretion, and an annual
discretionary bonus in an amount up to 50% of her then current base salary. Ms.
Martin-Kail is also entitled to a car allowance of up to 63,000 French Francs
per year. In connection with her employment agreement, we also issued Ms.
Martin-Kail options to purchase up to 485,827 shares of our common stock at an
exercise price of $.10 per share. Ms. Martin-Kail's options vest over a
four-year period. If Lionbridge terminates Ms. Martin-Kail's employment, she is
entitled to receive twelve monthly severance payments, each in an amount equal
to her then current monthly base compensation (i.e., 1/12(th) of Ms.
Martin-Kail's base salary).
Ms. Martin-Kail entered into a non-competition agreement with Lionbridge on
February 24, 1997. The agreement provides that Ms. Martin-Kail will not, during
the course of her employment and the twelve months following the date of the
termination of her employment with Lionbridge (1) engage or otherwise have a
financial interest in any business activity which is in competition with any of
the products or services being provided by Lionbridge or (2) solicit or do
business with any present or past customer of ours or any prospective customer
of ours which would be in violation of the non-competition agreement.
Peter H. Wright entered into an employment agreement with Lionbridge on
February 28, 1997. Mr. Wright's employment agreement provides for a one-year
term with automatic one-year renewals. Under the terms of his employment
agreement, Mr. Wright receives a base salary of $125,000, subject to increase
from time to time by the Board of Directors in its sole discretion, and an
annual discretionary bonus in an amount up to 50% of his then current base
salary. In connection with his employment agreement, we issued Mr. Wright
options to purchase up to 145,748 shares of our common stock at an exercise
price of $.10 per share. Mr. Wright's options vest over a four-year period. If
Lionbridge terminates Mr. Wright's employment other than for cause, he is
entitled to receive six monthly severance payments, each in an amount equal to
his then current monthly base compensation (i.e., 1/12(th) of Mr. Wright's base
salary). If Mr. Wright is terminated for cause, he will not be entitled to any
severance payments or other benefits except as required by law.
Mr. Wright entered into a non-competition agreement with Lionbridge on
February 28, 1997. The agreement provides that Mr. Wright will not, during the
course of his employment and the six months following the date of the
termination of his employment with Lionbridge (1) engage or otherwise have a
financial interest in any business activity which is in competition with any of
the products or services being provided by Lionbridge, (2) solicit our employees
or (3) solicit or do business with any present or past customer of ours, or any
prospective customer of ours which would be in violation of the non-competition
agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to June 1999, we did not have a separate compensation committee or
other board committee performing equivalent functions. These functions were
performed by our board of directors. In June 1999, we established a compensation
committee and appointed Messrs. de Chazal, Kavanagh and Sheer to serve on the
compensation committee.
The compensation committee evaluates the salaries and incentive compensation
of management and employees of Lionbridge and administers our equity incentive
plans. No member of this committee was at any time during the past year an
officer or employee of Lionbridge, was formerly an officer of
47
<PAGE>
Lionbridge or any of its subsidiaries, or had any relationship with Lionbridge.
During the last year, none of our executive officers served as:
- a member of the compensation committee (or other committee of the Board of
Directors performing equivalent functions or, in the absence of any such
committee, the entire Board of Directors) of another entity, one of whose
executive officers served on the compensation committee of Lionbridge;
- a director of another entity, one of whose executive officers served on
the compensation committee of Lionbridge; or
- a member of the compensation committee (or other committee of the Board of
Directors performing equivalent functions or, in the absence of any such
committee, the entire Board of Directors) of another entity, one of whose
executive officers served as a director of Lionbridge.
48
<PAGE>
CERTAIN TRANSACTIONS
ORGANIZATION OF LIONBRIDGE
In September 1996, Lionbridge America, Inc., our predecessor holding company
and current wholly owned subsidiary, issued 3,000 shares of its common stock to
Rory J. Cowan, our President and Chief Executive Officer at a purchase price of
$.10 per share, for an aggregate of $30.
SALES OF STOCK OF LIONBRIDGE AMERICA
In December 1996, Lionbridge America issued 701,454 shares of its Series A
convertible preferred stock at a purchase price of $1.00 per share, for an
aggregate of $701,454, and an option to purchase up to 2,252,293 shares of its
common stock at an exercise price of $.10 per share to Mr. Cowan.
In December 1996, Lionbridge America issued an aggregate of 1,000 shares of
its Series AA preferred stock to five affiliated limited partnerships
(collectively, the "Advent entities") of Advent International Corporation, at a
purchase price of $.01 per share, for an aggregate purchase price of $10.00. In
December 1996, Lionbridge Technologies Holdings, B.V., a subsidiary of
Lionbridge, issued an aggregate of 248 of its ordinary shares to the Advent
entities at purchase price of $24,193.55 per share, for an aggregate of
$6,000,000. Marcia J. Hooper, a partner of Advent, has served as a member of the
Board of Directors of Lionbridge since December 1996.
In December 1996, Lionbridge America issued an aggregate of 6,000,000 shares
of its Series A convertible preferred stock to Morgan Stanley Venture Capital
Fund II Annex, L.P. and Morgan Stanley Venture Investors Annex, L.P.
(collectively, the "Morgan Stanley entities") at purchase price of $1.00 per
share, for an aggregate of $6,000,000. Guy L. de Chazal, the managing general
partner of Morgan Stanley Venture Partners II, L.P., the general partner of each
of the Morgan Stanley entities, has served as a member of the Board of Directors
of Lionbridge since February 1998.
SALES OF STOCK, NOTES AND WARRANTS OF LIONBRIDGE
In February 1998, Lionbridge America became a subsidiary of Lionbridge. We
accomplished this by issuing an aggregate of 2,039,990 shares of our common
stock, 13,271,314 shares of our Series A convertible preferred stock and 140
shares of our Series D nonvoting convertible preferred stock to Mr. Cowan, the
Advent entities, the Morgan Stanley entities, and the other stockholders of
Lionbridge America in exchange for all of the outstanding shares of capital
stock of Lionbridge America held by these stockholders and the outstanding
ordinary shares of Lionbridge Technologies Holdings, B.V. held by the Advent
entities. Lionbridge America also redeemed all of the outstanding shares of its
Series AA preferred stock held by the Advent entities at the original purchase
price of $.01 per share, for an aggregate of $10.00.
In January 1999, Lionbridge borrowed $4,000,000 from Capital Resource
Lenders, III, L.P. ("CRL") under a 12% senior subordinated convertible note due
January 8, 2000. In connection with our issuance of the note to CRL, many of our
subsidiaries executed guarantees in favor of CRL. In February 1999, we borrowed
an additional $2,000,000 from CRL under an amended and restated 12% senior
subordinated note due February 26, 2006 in the aggregate principal amount of
$6,000,000 and issued to CRL and an affiliated entity of CRL common stock
purchase warrants exercisable for an aggregate of 1,916,574 shares of our common
stock at an exercise price of $.01 per share. These warrants will be exercised
in connection with this offering.
In February 1999, our indirect wholly owned subsidiary, Lionbridge
Technologies Holdings, B.V. borrowed $4,000,000 from CRL under a 12% senior
subordinated note due February 26, 2006. In connection with Lionbridge
Technologies Holdings, B.V.'s issuance of the note to CRL, many of our
subsidiaries executed guarantees in favor of CRL. Stephen M. Jenks, a member of
Capital Research Partners III, L.L.C. which is the general partner of CRL, has
served as a member of our Board of Directors since March 1999.
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<PAGE>
In March 1999, Lionbridge and Lionbridge Technologies Holdings, B.V.
borrowed an aggregate of $2,000,000 from the Morgan Stanley entities under 12%
senior subordinated notes due March 9, 2006 and issued to the Morgan Stanley
entities common stock purchase warrants (the "Morgan Stanley Warrants")
exercisable for an aggregate of 383,315 shares of our common stock at an
exercise price of $.01 per share. In connection with our issuance of the notes
to the Morgan Stanley entities, many of our subsidiaries executed guarantees in
favor of the Morgan Stanley entities. These warrants will be exercised in
connection with this offering.
TRANSACTIONS OCCURRING AT THE CLOSING OF THIS OFFERING
Upon closing of this offering:
- the notes issued to CRL and the Morgan Stanley entities will be paid in
full,
- the 13,271,314 outstanding shares of our Series A convertible preferred
stock and 140 outstanding shares of our Series D nonvoting convertible
preferred stock will automatically exchanged for an aggregate of 132.7145
shares of our Series B redeemable preferred stock and 13,271,454 shares of
our Series C convertible preferred stock,
- the 132.7145 outstanding shares of our Series B redeemable preferred stock
will be redeemed for $100,000 per share plus an 8% annual premium,
- the 13,271,454 outstanding shares of our Series C convertible preferred
stock will automatically convert into 13,271,454 shares of our common
stock, and
- the warrants issued to CRL and the Morgan Stanley entities will be
exercised to acquire 2,299,889 shares of our common stock.
STOCKHOLDERS' AGREEMENT
Lionbridge, Mr. Cowan, the Advent entities, the Morgan Stanley entities, CRL
and each of the other preferred stockholders of Lionbridge are parties to a
Second Restated Stockholders' Agreement dated as of February 26, 1999. The
stockholders agreement contains arrangements with respect to voting, rights of
first refusal, rights of first offer, as well as other agreements relating to
corporate governance. This agreement will terminate upon the closing of this
offering.
REGISTRATION RIGHTS AGREEMENT
We have entered into a Second Restated Registration Rights Agreement dated
as of February 26, 1999 with Mr. Cowan, the Advent entities, the Morgan Stanley
entities, Capital Resource Lenders III, L.P., CRP Investment Partners III,
L.L.C. and each of our other preferred stockholders. This registration rights
agreement provides these holders with rights with respect to the registration by
Lionbridge of their shares under the Securities Act.
Lionbridge believes that all transactions described above were made on terms
no less favorable to us than would have been obtained from unaffiliated third
parties. All future transactions, if any, with our executive officers, directors
and affiliates will be on terms no less favorable to us than could be obtained
from unrelated third parties and will be approved by a majority of the Board of
Directors and by a majority of the disinterested members of the Board of
Directors.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of June 15, 1999, and as adjusted to reflect
the sale of the shares of common stock offered hereby, by:
- each of Lionbridge's directors and named executive officers,
- all directors and executive officers of Lionbridge as a group, and
- each person who is known by us to own beneficially more than five percent
of the outstanding shares of our common stock.
Except as noted below, the address of each person listed on the table is c/o
Lionbridge Technologies, Inc., 950 Winter Street, Suite 4300, Waltham,
Massachusetts 02451, and each person has sole voting and investment power over
the shares shown as beneficially owned, except to the extent authority is shared
by spouses under applicable law unless otherwise noted below.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. For purposes of calculating the percentage
of shares beneficially owned, the number of shares of our common stock deemed
outstanding as of June 15, 1999 includes (i) 16,829,130 shares outstanding as of
June 15, 1999 and (ii) 2,299,889 shares to be issued pursuant to warrants issued
to the CRL entities and the Morgan Stanley entities which will be exercised upon
the closing of this offering. Except for these warrants, shares of common stock
issuable by Lionbridge to a person or entity named below pursuant to options
which may be exercised within 60 days after June 15, 1999 are deemed to be
beneficially owned and outstanding for purposes of calculating the number of
shares and the percentage beneficially owned by that person or entity. However,
these shares are not deemed to be beneficially owned and outstanding for
purposes of computing the percentage beneficially owned by any other person or
entity. The number of shares of common stock deemed outstanding after this
offering includes an additional shares that are being offered for sale
by us in this offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
---------------------- ------------------------
SHARES
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Rory J. Cowan (1)................................ 3,586,053 18.5%
Marcia J. Hooper (2)............................. 6,000,000 31.4
c/o Advent International Corporation
75 State Street
Boston, MA 02109
Guy L. de Chazal (3)............................. 6,383,315 33.4
c/o Morgan Stanley Dean Witter Venture Capital
1221 Avenue of the Americas, 33(rd) Floor
New York, New York 10020
Paul Kavanagh (4)................................ 102,500 *
"Arcachon"
Strathmore Road
Killiney, Co. Dublin, Ireland
Stephen M. Jenks (5)............................. 1,916,574 10.0
c/o Capital Resource Lenders III, L.P.
85 Merrimac Street, Suite 200
Boston, MA 02114
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
---------------------- ------------------------
SHARES
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Claude P. Sheer.................................. 0 *
240 Main Street
Boxford, MA 01921
Myriam Martin-Kail (6)........................... 314,890 1.6
Stephen J. Lifshatz (7).......................... 263,513 1.4
Peter H. Wright (8).............................. 128,591 *
Morgan Stanley entities (9)...................... 6,383,315 33.4
1221 Avenue of the Americas, 33(rd) Floor
New York, New York 10020
Advent entities (10)............................. 6,000,000 31.4
75 State Street
Boston, MA 02109
CRL entities (11)................................ 1,916,574 10.0
85 Merrimac Street, Suite 200
Boston, MA 02114
All executive officers and directors as a group
(9 persons).................................... 18,695,436 94.3
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares.
(1) Includes an aggregate of 300,000 shares held by affiliated trusts of Mr.
Cowan. Includes 281,537 shares deemed to be beneficially owned by Mr. Cowan
pursuant to options exercisable within 60 days of June 15, 1999.
(2) Includes 491,999 shares held by Advent Euro-Italian Direct Investment
Program Limited Partnership; 132,000 shares held by Advent Partners Limited
Partnership; 3,593,994 shares held by Global Private Equity II Limited
Partnership; 755,999 shares held by Global Private Equity II-- Europe
Limited Partnership; and 1,025,998 shares held by Global Private Equity
II--PGGM Limited Partnership (collectively, the "Advent entities"). Ms.
Hooper is a partner of Advent International Corporation, which is the
general partner of Advent International Limited Partnership, the general
partner of each of the Advent entities. Ms. Hooper may be deemed to
beneficially own the shares held by the Advent entities. Ms. Hooper
disclaims beneficial ownership of all such shares, except to the extent of
her pecuniary interest therein.
(3) Includes 5,615,461 shares, including 337,202 shares deemed to be
beneficially owned pursuant to warrants which will be exercised upon the
closing of this offering, held by Morgan Stanley Venture Capital Fund II
Annex, L.P. and 767,854 shares, including 46,113 shares deemed to be
beneficially owned pursuant to warrants which will be exercised upon the
closing of this offering, held by Morgan Stanley Venture Investors Annex,
L.P. (collectively, the "Morgan Stanley entities"). Mr. de Chazal is a
general partner of Morgan Stanley Venture Partners II, L.P., which is the
managing general partner of each of the Morgan Stanley entities. Mr. de
Chazal may be deemed to beneficially own the shares held by the Morgan
Stanley entities. Mr. de Chazal disclaims beneficial ownership of all such
shares, except to the extent of his pecuniary interest therein.
(4) Includes 2,500 shares deemed to be beneficially owned by Mr. Kavanagh
pursuant to options exercisable within 60 days of June 15, 1999.
52
<PAGE>
(5) Represents an aggregate of 1,916,574 shares held by Capital Resource
Lenders III, L.P. and CRP Investment Partners III, L.L.C. (the "CRL
entities") deemed to be beneficially pursuant to warrants which will be
exercised upon the closing of this offering. Mr. Jenks is a member of
Capital Resource Partners III, L.L.C., which is the general partner of
Capital Resource Lenders III, L.P., and a manager of CRP Investment
Partners III, L.L.C.
(6) Represents 314,890 shares deemed to be beneficially owned by Ms.
Martin-Kail pursuant to options exercisable within 60 days of June 15,
1999.
(7) Includes 55,453 shares deemed to be beneficially owned by Mr. Lifshatz
pursuant to options exercisable within 60 days at June 15, 1999.
(8) Includes 36,968 shares deemed to be beneficially owned by Mr. Wright
pursuant to options exercisable within 60 days of June 15, 1999.
(9) Includes 5,615,461 shares, including 337,202 shares deemed to be
beneficially owned pursuant to warrants which will be exercised upon the
closing of this offering, held by Morgan Stanley Venture Capital Fund II
Annex, L.P. and 767,854 shares, including 46,113 shares deemed to be
beneficially owned pursuant to warrants which will be exercised upon the
closing of this offering, held by Morgan Stanley Venture Investors Annex,
L.P. The managing general partner of each of the Morgan Stanley entities is
Morgan Stanley Venture Partners II, L.P. Morgan Stanley Venture Capital II,
Inc. is the managing general partner of Morgan Stanley Venture Partners II,
L.P. and exercises sole voting and investment power with respect to all
shares held of record by the Morgan Stanley entities; individually, no
stockholder, director or officer of Morgan Stanley Venture Capital II, Inc.
is deemed to have or share such voting or investment power.
(10) Includes 491,999 shares held by Advent Euro-Italian Direct Investment
Program Limited Partnership; 132,000 shares held by Advent Partners Limited
Partnership; 3,593,994 shares held by Global Private Equity II Limited
Partnership; 755,999 shares held by Global Private Equity II-- Europe
Limited Partnership; and 1,025,998 shares held by Global Private Equity
II--PGGM Limited Partnership (collectively, the "Advent entities"). The
general partner of each of the Advent entities is Advent International
Limited Partnership. Advent International Corporation is the general
partner of Advent International Limited Partnership and exercises sole
voting and investment power with respect to all shares held of record by
the Advent entities; individually, no stockholder, director or officer of
Advent International Corporation is deemed to have or share such voting or
investment power.
(11) Represents an aggregate of 1,916,574 shares held by the CRL entities deemed
to be beneficially owned pursuant to warrants which will be exercised upon
the closing of this offering.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Effective upon the closing of this offering and the filing of our Second
Amended and Restated Certificate of Incorporation, the authorized capital stock
of Lionbridge will consist of 100,000,000 shares of common stock, par value $.01
per share, and 5,000,000 shares of preferred stock, par value $.01 per share.
The following summary description of Lionbridge's capital stock, as of the
closing of this offering, is not intended to be complete and is qualified by
reference to the provisions of applicable law and to Lionbridge's Second Amended
and Restated Certificate of Incorporation and Amended and Restated By-laws filed
as exhibits to the registration statement of which this prospectus is a part.
COMMON STOCK
As of June 15, 1999, there were 19,129,019 shares of common stock
outstanding and held of record by 34 stockholders, after giving effect to (1)
the exchange of all of the 13,271,314 outstanding shares of Series A convertible
preferred stock and 140 outstanding shares of Series D nonvoting convertible
preferred stock for an aggregate of 132.7145 shares of Series B redeemable
preferred stock and 13,271,454 shares of Series C convertible preferred stock,
(2) the redemption of all of the 132.7145 outstanding shares of Series B
redeemable preferred stock for $100,000 per share plus an 8% annual premium, (3)
the conversion of all of the 13,271,454 outstanding shares of our Series C
convertible preferred stock into 13,271,454 shares of common stock, and (4) the
exercise of warrants to acquire 2,299,889 shares of our common stock upon the
closing of this offering. Based upon the number of shares outstanding as of June
15, 1999 and giving effect to the issuance of the shares of common stock offered
by Lionbridge hereby, there will be shares of common stock outstanding
upon the closing of this offering. In addition, as of June 15, 1999, there were
outstanding stock options and warrants for the purchase of a total of 4,073,800
shares of common stock.
Holders of common stock are entitled to one vote per share for each share
held of record on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Directors are elected by a plurality of the votes
of the shares present in person or by proxy at the meeting. The holders of
common stock are entitled to receive ratably such lawful dividends as may be
declared by the Board of Directors. However, such dividends are subject to
preferences that may be applicable to the holders of any outstanding shares of
preferred stock. In the event of a liquidation, dissolution or winding up of the
affairs of Lionbridge, whether voluntarily or involuntarily, the holders of
common stock will be entitled to receive pro rata all of the remaining assets of
Lionbridge available for distribution to its stockholders. Any such pro rata
distribution would be subject to the rights of the holders of any outstanding
shares of preferred stock. The common stock has no preemptive, redemption,
conversion or subscription rights. All outstanding shares of common stock are
fully paid and non-assessable. The shares of common stock to be issued by
Lionbridge in this offering, when issued in consideration of payment, will be
fully paid and non-assessable. The rights, powers, preferences and privileges of
holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which
Lionbridge may designate and issue in the future.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by Delaware law, without further stockholder approval, to issue from time to
time up to an aggregate of 5,000,000 shares of preferred stock, in one or more
series. The Board of Directors is also authorized, subject to the limitations
prescribed by Delaware law, to establish the number of shares to be included in
each series and to fix the designations, preferences, rights and any
qualifications, limitation or restrictions of the shares of any series,
including the dividend rights, dividend rates, conversion rights, voting rights,
54
<PAGE>
redemption terms and prices, liquidation preferences and the number of shares
constituting any series. The Board of Directors is authorized to issue preferred
stock with voting, conversion and other rights and preferences that could
adversely affect the voting power or other rights of the holders of common
stock.
Upon the closing of this offering, there will be no shares of preferred
stock outstanding. Lionbridge has no current plans to issue any preferred stock.
However, the issuance of preferred stock or of rights to purchase preferred
stock could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, a majority
of the outstanding common stock of Lionbridge.
REGISTRATION RIGHTS
The Second Restated Registration Rights Agreement dated as of February 26,
1999, provides holders (the "Registration Rights Holders") of 18,323,780 shares
of our common stock (the "Registrable Shares") certain rights with respect to
the registration of the Registrable Shares under the Securities Act. If we
propose to register any of our securities under the Securities Act, either for
our own account or for the account of another securityholder, the Registration
Rights Holders are entitled to notice of such registration and to include the
Registrable Shares in such registration. However, in the event of a registration
pursuant to an underwritten public offering of common stock, the underwriters
shall have the right, subject to certain conditions, to limit the number of
shares included in the registration. The Registration Rights Holders currently
have piggyback registration rights in connection with this offering. These
holders have agreed to waive their piggyback registration rights with respect to
this offering. In addition, a majority of the Registration Rights Holders have
entered into a 180-day lock-up agreement with the underwriters. After expiration
of this lock-up period, these Registration Rights Holders will have the ability
to exercise the registration rights set forth above.
In addition, six months after this offering, the holders of at least 40% of
the then outstanding Registrable Shares issued are entitled to request that we
file a registration statement under the Securities Act covering the sale of some
or all of the shares held by the requesting holder or holders. Upon the receipt
of a request, Lionbridge is required to use its best efforts to effect a
registration, subject to certain conditions and limitations. Lionbridge is not
required to effect more than two such demand registrations for the Registration
Rights Holders, and each such demand registration must cover the sale shares of
common stock representing at least 20% of the Registrable Shares or any lesser
percentage, so long as anticipated offering price for such shares exceeds
$5,000,000.
Once Lionbridge has qualified to use Form S-3 to register securities under
the Securities Act, the Registration Rights Holders have the right to request
that we file a registration statement on Form S-3 or any successor thereto for a
public offering of all or any portion of their Registrable Shares, provided that
the reasonably anticipated aggregate price to the public of such offering would
be at least $1,000,000. Upon the receipt of such a request, Lionbridge is
required to use its best efforts to effect such registration, subject to certain
conditions and limitations.
In general, all fees, costs and expenses of such registrations (other than
underwriting discounts and selling commissions), including the fees and
disbursements of one counsel to the Registration Rights Holders, will be borne
by us. Lionbridge has agreed to indemnify the Registration Rights Holders
against, and provide contribution with respect to, certain liabilities relating
to any registration in which any Registrable Shares of Registration Rights
Holders are sold under the Securities Act.
The previously described registration rights shall terminate for a
Registration Rights Holder upon the earlier to occur of (i) the fifth
anniversary of the closing of this offering, (ii) such time as the particular
holder remains an "affiliate" of Lionbridge pursuant to Rule 144 under the
Securities Act and could sell all of such holder's shares under Rule 144 within
any three month period, or (iii) such
55
<PAGE>
time as the particular holder ceases to be an "affiliate" of Lionbridge pursuant
to Rule 144 and could sell all of such holder's shares under the terms of Rule
144(k) under the Securities Act.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF LIONBRIDGE'S SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED BY-LAWS AND DELAWARE LAW
Lionbridge's Second Amended and Restated Certificate of Incorporation (the
"Charter"), Lionbridge's Amended and Restated By-Laws (the "By-Laws") and
Delaware General Corporation Law contain provisions that could discourage, delay
or prevent a change in control of Lionbridge or an acquisition of Lionbridge at
a price which many stockholders may find attractive. The existence of these
provisions could limit the price that investors might be willing to pay in the
future for shares of common stock.
CHARTER AND BY-LAWS
The Charter provides for the division of the Board of Directors into three
classes as nearly as equal in size as possible with staggered three-year terms.
In addition, the Charter provides that directors may be removed without cause by
the affirmative vote of the holders of 75% of the shares of capital stock of
Lionbridge entitled to vote or with cause by the affirmative vote of the holders
of a majority of the shares. The By-Laws provide that, except as otherwise
provided by law or the Charter, newly created directorships resulting from an
increase in the authorized number of directors or vacancies on the Board may be
filled only by:
- a majority of the directors then in office, even though less than a quorum
may then be in office, or
- the sole remaining director.
These provisions prevent a stockholder from enlarging the Board and filling the
new directorships with this stockholder's own nominees without Board approval.
These provisions of the By-Laws may have the effect of discouraging a third
party from initiating a proxy contest, making a tender offer or otherwise
attempting to gain control of Lionbridge, or attempting to change the
composition or policies of the Board, even though these attempts might be
beneficial to Lionbridge or its stockholders.
The Charter and By-Laws provide that, unless otherwise prescribed by law,
only the Chairman of the Board, a majority of the Board of Directors, or the
President is able to call a special meeting of stockholders. The Charter and the
By-Laws also provide that, unless otherwise prescribed by law, stockholder
action may be taken only at a duly called and convened annual or special meeting
of stockholders and may not be taken by written consent. These provisions, taken
together, prevent stockholders from forcing consideration by the stockholders of
stockholder proposals over the opposition of the Board, except at an annual
meeting.
The By-Laws provide that any action required or permitted to be taken by the
stockholders of Lionbridge at an annual meeting or special meeting of
stockholders may only be taken if Lionbridge is given proper advance notice of
the action (the "Notice Procedure"). The Notice Procedure affords the Board an
opportunity to consider the qualifications of proposed director nominees or the
merit of stockholder proposals, and, to the extent deemed appropriate by the
Board, to inform stockholders about such matters. The Notice Procedure also
provides a more orderly procedure for conducting annual meetings of
stockholders. The By-Laws do not give the Board any power to approve or
disapprove stockholder nominations for the election of directors or proposals
for action. However, the Notice Procedure may prevent a contest for the election
of directors or the consideration of stockholder proposals. This could deter a
third party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal if the proper advance notice procedures
are
56
<PAGE>
not followed, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to Lionbridge and its stockholders.
Lionbridge, without stockholder approval, can issue shares of common stock
and preferred stock up to the number of shares authorized for issuance in its
Charter, except as limited by Nasdaq rules. Lionbridge could use these
additional shares for a variety of corporate purposes. These purposes include
future public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. Lionbridge's ability to issue these shares of common
stock and preferred stock could make it more difficult or discourage an attempt
to obtain control of Lionbridge by means of a proxy contest, tender offer,
merger or otherwise.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares issued and outstanding is required
to amend a corporation's certificate of incorporation or by-laws, unless a
corporation's certificate of incorporation or by-laws, as the case may be,
requires a greater percentage. The Charter requires the affirmative vote of the
holders of at least 75% of the issued and outstanding shares of our capital
stock to amend many Charter provisions, including provisions relating to any
reduction in the number of authorized shares of our capital stock, our staggered
board, and director and officer indemnification. The By-Laws require the
affirmative vote of the holders of at least 75% of the issued and outstanding
shares of capital stock of Lionbridge entitled to vote to amend or repeal any of
the foregoing provisions of the By-Laws. The 75% stockholder vote would be in
addition to any separate class vote that might be required pursuant to the terms
of any series of preferred stock that might be outstanding at the time any
amendments are submitted to stockholders.
DELAWARE LAW
Lionbridge is subject to Section 203 of the Delaware General Corporation Law
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the time that such stockholder became an
interested stockholder.
Section 203 does not apply if:
- prior to such time, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
- upon consummation 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 purposes of determining the
number of shares outstanding those shares owned by persons who are
directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
- at or subsequent to such time, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock which is not owned by the
interested stockholder.
The application of Section 203 may limit the ability of stockholders to approve
a transaction that they may deem to be in their best interests.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
57
<PAGE>
- any sale, lease, transfer, pledge or other disposition of 10% or more of
the assets of the corporation to or with the interested stockholder;
- subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder;
- any transaction involving the corporation which has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an "interested stockholder" as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation or 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 past three years, and any entity or person associated with,
affiliated with or controlling or controlled by such entity or person.
LIMITATION OF LIABILITY
The Charter provides that no director of Lionbridge shall be personally
liable to Lionbridge or to its stockholders for monetary damages for breach of
fiduciary duty as a director, except that the limitation shall not eliminate or
limit liability to the extent that the elimination or limitation of such
liability is not permitted by the Delaware General Corporation Law as the same
exists or may hereafter be amended.
The Charter further provides for the indemnification of Lionbridge's
directors and officers to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary. A principal effect of these
provisions is to limit or eliminate the potential liability of Lionbridge's
directors for monetary damages arising from breaches of their duty of care,
subject to certain exceptions. These provisions may also shield directors from
liability under federal and state securities laws.
STOCK TRANSFER AGENT
The transfer agent and registrar for the common stock is Boston EquiServe,
L.P.
58
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that these sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.
After this offering, shares of common stock will be outstanding. Of
these shares, the shares ( shares if the underwriters exercise
their over-allotment options in full) sold in this offering will be freely
tradeable without restriction under the Securities Act except for any shares
purchased by "affiliates" of Lionbridge as defined in Rule 144 under the
Securities Act. The remaining 19,129,019 shares are "restricted securities"
within the meaning of Rule 144 under the Securities Act. The restricted
securities generally may not be sold unless they are registered under the
Securities Act or are sold pursuant to an exemption from registration, such as
the exemption provided by Rules 144 or 701 under the Securities Act.
We, our officers and directors, and a majority of our stockholders have
entered into lock-up agreements pursuant to which we and they have agreed not to
offer or sell any shares of common stock or securities convertible into or
exchangeable or exercisable for shares of common stock for a period of 180 days
from the date of this prospectus without the prior written consent of Prudential
Securities, on behalf of the underwriters. Transfers or dispositions can be made
in the case of gifts or estate planning transfers where the donee signs a
lock-up agreement. Prudential Securities may, at any time and without notice,
waive any of the terms of these lock-up agreements specified in the underwriting
agreement. Following the lock-up period, these shares will not be eligible for
sale in the public market without registration under the Securities Act unless
these sales meet the conditions and restrictions of Rules 144 or 701 as
described below.
As restrictions on resale end, the market price could drop significantly if
the holders of these restricted shares sell them, or are perceived by the market
as intending to sell them.
<TABLE>
<CAPTION>
DATE OF AVAILABILITY FOR RESALE
NUMBER OF SHARES INTO PUBLIC MARKET
- ------------------ ----------------------------------------------------------------------------------------------
<S> <C>
180 days after the date of this prospectus due to a lock-up agreement these stockholders have
with Prudential Securities. However, Prudential Securities can waive this restriction at any
time and without notice.
Between 180 and 365 days after the date of this prospectus due to the requirements of the
federal securities laws.
</TABLE>
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for a period of at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of
- 1% of the then-outstanding shares of common stock and
- the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which the notice of such
sale on Form 144 is filed with the Securities and Exchange Commission.
Sales under Rule 144 are also subject to certain provisions relating to
notice and manner of sale and the availability of current public information
about Lionbridge.
In addition, a person (or persons whose shares are aggregated) who has not
been an affiliate of Lionbridge at any time during the 90 days immediately
preceding a sale, and who has beneficially owned the shares for at least two
years, would be entitled to sell such shares under Rule 144(k) without regard to
the volume limitation and other conditions described above. Therefore, unless
otherwise restricted, Rule 144(k) shares may be sold immediately upon the
completion of this offering.
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<PAGE>
shares of common stock outstanding after completion of this offering
will be eligible to be sold under Rule 144(k). The foregoing summary of Rule 144
is not intended to be a complete description.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from Lionbridge by its employees,
directors, officers, consultants or advisors prior to the date the issuer
becomes subject to the reporting requirements of the Exchange Act. To be
eligible for resale under Rule 701, shares must have been issued pursuant to
written compensatory benefit plans or written contracts relating to the
compensation of such persons. In addition, the SEC 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 offering). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this prospectus, may be sold by persons
other than affiliates, subject only to the manner of sale provisions of Rule
144, and by affiliates, under Rule 144 without compliance with its one-year
minimum holding period requirements. The foregoing summary of Rule 701 is not
intended to be a complete description.
Ninety days following the consummation of this offering, Lionbridge intends
to file a registration statement under the Securities Act to register the shares
of common stock available for issuance pursuant to its stock option plans as of
the date of this prospectus. Shares issued pursuant to these plans after the
effective date of such registration statement will be available for sale in the
open market subject to the lock-up period and, for affiliates of Lionbridge,
subject to certain conditions and restrictions of Rule 144.
60
<PAGE>
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below, for whom Prudential Securities Incorporated, U.S. Bancorp Piper Jaffray
and Adams, Harkness & Hill, Inc. are acting as representatives. We and the
selling stockholders are obligated to sell, and the underwriters are obligated
to purchase, all of the shares offered on the cover page of this prospectus, if
any are purchased. Subject to conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the shares indicated opposite its
name:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
Prudential Securities Incorporated....................................................................
U.S. Bancorp Piper Jaffray Inc........................................................................
Adams, Harkness & Hill, Inc. .........................................................................
----------
Total.............................................................................................
----------
----------
</TABLE>
The underwriters may sell more shares than the total number of shares
offered on the cover page of this prospectus and they have, for a period of 30
days from the date of this prospectus, over-allotment options to purchase up to
additional shares from the selling stockholders. If any additional shares
are purchased, the underwriters will severally purchase the shares in the same
proportion as per the table above.
The representatives of the underwriters have advised us and the selling
stockholders that the shares will be offered to the public at the offering price
indicated on the cover page of this prospectus. The underwriters may allow to
selected dealers a concession not in excess of $ per share and such
dealers may reallow a concession not in excess of $ per share to certain
other dealers. After the shares are released for sale to the public, the
representatives may change the offering price and the concessions. The
representatives have informed us that the underwriters do not intend to sell
shares to any investor who has granted them discretionary authority.
We and the selling stockholders have agreed to pay to the underwriters the
following fees, assuming both no exercise and full exercise of the underwriters'
over-allotment options to purchase additional shares:
<TABLE>
<CAPTION>
TOTAL FEES
-----------------------------------------------
WITHOUT EXERCISE
OF FULL EXERCISE OF
FEE PER OVER-ALLOTMENT OVER-ALLOTMENT
SHARE OPTIONS OPTIONS
--------- ----------------- -----------------
<S> <C> <C> <C>
Fees paid by us............................ $ $ $
Fees paid by the selling stockholders...... $ $ $
</TABLE>
In addition, we estimate that we will spend approximately $ in
expenses for this offering including those of the selling stockholders. We and
the selling stockholders have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act, or
contribute to payments that the underwriters may be required to make in respect
of these liabilities.
We, our officers and directors, and a majority of our stockholders,
including the selling stockholders, have entered into lock-up agreements
pursuant to which we and they have agreed not to offer or sell any shares of
common stock or securities convertible into or exchangeable or exercisable for
shares of common stock for a period of 180 days from the date of this prospectus
without the prior
61
<PAGE>
written consent of Prudential Securities, on behalf of the underwriters.
Prudential Securities may, at any time and without notice, waive the terms of
these lock-up agreements specified in the underwriting agreement.
Prior to this offering, there has been no public market for the common stock
of Lionbridge. The public offering price, negotiated among Lionbridge and the
representatives, is based upon various factors such as Lionbridge's financial
and operating history and condition, our prospects, the prospects for our
industry, and prevailing market conditions.
Prudential Securities, on behalf of the underwriters, may engage in the
following activities in accordance with applicable securities rules:
- over-allotments involving sales in excess of the offering size, creating a
short position. Prudential Securities may elect to reduce this short
position by exercising some or all of the over-allotment options.
- stabilizing and short covering; stabilizing bids to purchase the shares
are permitted if they do not exceed a specified maximum price. After the
distribution of shares has been completed, short covering purchases in the
open market may also reduce the short position. These activities may cause
the price of the shares to be higher than would otherwise exist in the
open market.
- penalty bids permitting the representatives to reclaim concessions from a
syndicate member for the shares purchased in the stabilizing or short
covering transactions.
Such activities, which may be commenced and discontinued at any time, may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.
Each underwriter has represented that it has complied and will comply with
all applicable laws and regulations in connection with the offer, sale or
delivery of the shares and related offering materials in the United Kingdom,
including:
- the Public Offers of Securities Regulation 1995,
- the Financial Services Act 1986, and
- the Financial Services Act 1986, (Investment Advertisements) (Exemptions)
Order 1986 (as amended).
We have asked the underwriters to reserve shares for sale at the same
offering price directly to our officers, directors, employees, and other
business affiliates or related third parties. The number of shares available for
sale to the general public in the offering will be reduced to the extent such
persons purchase the reserved shares.
62
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Lionbridge by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
George W. Lloyd, a partner at Testa, Hurwitz & Thibeault, LLP, is the beneficial
owner of 25,000 shares of common stock of Lionbridge. Certain legal matters will
be passed upon for the underwriters by Brobeck, Phleger & Harrison LLP,
Washington, District of Columbia.
EXPERTS
The consolidated financial statements of Lionbridge Technologies, Inc. as of
December 31, 1998 and 1997 and for the years then ended, the combined financial
statements of The Localization Businesses of Stream International Holdings, Inc.
in Ireland, The Netherlands and France for the year ended December 31, 1996, and
the financial statements of VeriTest, Inc. as of December 31, 1998 and for the
year then ended, included in this prospectus, have been so included in reliance
on the reports of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
Lionbridge has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 under the Securities Act with
respect to the common stock offered hereby. This prospectus does not contain all
of the information set forth in the registration statement. For further
information with respect to Lionbridge and the common stock, reference is made
to the registration statement. Statements contained in this prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of the contract
or document filed as an exhibit to the registration statement, and each such
statement is qualified in all respects by reference to such exhibit. Copies of
the registration statement may be examined without charge at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of
the Commission at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661
and 7 World Trade Center, Thirteenth Floor, New York, New York 10048. Copies of
all or any portion of the registration statement may be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549, or by calling the Commission at
1-800-SEC-0330, at prescribed rates. The Commission also maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, such as Lionbridge, that make
electronic filings with the Commission.
Lionbridge intends to furnish to its stockholders annual reports containing
financial statements audited by an independent public accounting firm.
63
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
LIONBRIDGE TECHNOLOGIES, INC.
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999 (unaudited)................ F-3
Consolidated Statements of Operations for the years ended December 31, 1997 and 1998 and the three months
ended March 31, 1998 and 1999 (unaudited)................................................................ F-4
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit for the years
ended December 31, 1997 and 1998 and the three months ended March 31, 1999 (unaudited)................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997 and 1998 and the three months
ended March 31, 1998 and 1999 (unaudited)................................................................ F-6
Notes to Consolidated Financial Statements................................................................. F-7
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL HOLDINGS, INC. IN IRELAND,
THE NETHERLANDS AND FRANCE
Report of Independent Accountants.......................................................................... F-26
Combined Statement of Operations for the year ended December 31, 1996...................................... F-27
Combined Statement of Cash Flows for the year ended December 31, 1996...................................... F-28
Notes to Combined Financial Statements..................................................................... F-29
VERITEST, INC.
Report of Independent Accountants.......................................................................... F-33
Balance Sheet as of December 31, 1998...................................................................... F-34
Statement of Operations for the year ended December 31, 1998............................................... F-35
Statement of Shareholders' Equity for the year ended December 31, 1998..................................... F-36
Statement of Cash Flows for the year ended December 31, 1998............................................... F-37
Notes to Financial Statements.............................................................................. F-38
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction to Unaudited Pro Forma Financial Statements................................................... F-42
Unaudited Pro Forma Statement of Operations for the year ended December 31, 1998........................... F-43
Unaudited Pro Forma Statement of Operations for the three months ended March 31, 1999...................... F-44
Notes to Unaudited Pro Forma Financial Statements.......................................................... F-45
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Lionbridge Technologies, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, redeemable convertible preferred stock
and stockholders' deficit and cash flows present fairly, in all material
respects, the financial position of Lionbridge Technologies, Inc. at December
31, 1997 and 1998, and the consolidated results of its operations and its cash
flows for the years then ended 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.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 4, 1999
F-2
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- --------- MARCH 31, PRO FORMA
1999 MARCH 31,
----------- 1999
(UNAUDITED) -----------
(UNAUDITED)
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................. $ 1,098 $ 732 $ 3,802 $ 3,802
Accounts receivable, net of allowances of $366, $573 and $572 at
December 31, 1997 and 1998 and March 31, 1999 (unaudited),
respectively....................................................... 6,902 7,321 6,849 6,849
Work in process...................................................... 2,386 3,929 4,473 4,473
Other current assets................................................. 624 805 1,141 1,141
--------- --------- ----------- -----------
Total current assets............................................. 11,010 12,787 16,265 16,265
Property and equipment, net............................................ 951 1,840 1,785 1,785
Goodwill, net.......................................................... 6,710 7,450 11,057 11,057
Other assets........................................................... 85 404 259 259
--------- --------- ----------- -----------
Total assets..................................................... $ 18,756 $ 22,481 $ 29,366 $ 29,366
--------- --------- ----------- -----------
--------- --------- ----------- -----------
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS'
DEFICIT
Current liabilities:
Amounts owed to banks................................................ 88 416 175 175
Short-term debt...................................................... 2,200 7,693 4,943 32,603
Accounts payable..................................................... 3,118 3,964 4,659 4,659
Accrued compensation and benefits.................................... 2,057 2,356 1,816 1,816
Other accrued expenses............................................... 4,499 5,664 5,344 5,344
Deferred revenue..................................................... 524 412 275 275
--------- --------- ----------- -----------
Total current liabilities........................................ 12,486 20,505 17,212 44,872
--------- --------- ----------- -----------
Long-term debt, net of discount........................................ -- -- 7,155 --
Redeemable convertible preferred stock, $0.01 par value:
Series A convertible preferred stock, 17,271,314 shares authorized;
13,271,314 shares issued and outstanding at December 31, 1997 and
1998 and March 31, 1999 (unaudited); no shares issued and
outstanding on a pro forma basis (unaudited)....................... 14,333 15,395 15,660 --
Series B redeemable preferred stock, 200 shares authorized; no shares
issued and outstanding............................................. -- -- -- --
Series C convertible preferred stock, 17,271,514 shares authorized;
no shares issued and outstanding................................... -- -- -- --
Series D nonvoting convertible preferred stock, 200 shares
authorized; 140 shares issued and outstanding at December 31, 1997
and 1998 and March 31, 1999 (unaudited); no shares issued and
outstanding on a pro forma basis (unaudited)....................... -- -- -- --
Commitments and contingencies (Note 7)
Stockholders' deficit:
Common stock, $0.01 par value; 25,950,867 shares authorized;
2,039,990, 2,945,414 and 3,460,598 shares issued and outstanding at
December 31, 1997 and 1998 and March 31, 1999 (unaudited),
respectively, and 19,031,941 shares issued and outstanding on a pro
forma basis (unaudited)............................................ 20 29 35 190
Additional paid-in capital........................................... 51 370 9,563 9,408
Accumulated deficit.................................................. (8,875) (14,199) (17,879) (22,724)
Deferred compensation................................................ -- -- (2,763) (2,763)
Accumulated other comprehensive income............................... 741 381 383 383
--------- --------- ----------- -----------
Total stockholders' deficit...................................... (8,063) (13,419) (10,661) (15,506)
--------- --------- ----------- -----------
Total liabilities, redeemable convertible preferred stock and
stockholders' deficit........................................ $ 18,756 $ 22,481 $ 29,366 $ 29,366
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- ------------------------
1997 1998 1998 1999
--------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue.............................................. $ 26,462 $ 38,412 $ 7,438 $ 11,690
Cost of revenue...................................... 18,914 25,546 5,344 8,195
--------- --------- ----------- -----------
Gross profit................................... 7,548 12,866 2,094 3,495
--------- --------- ----------- -----------
Operating expenses:
Sales and marketing................................ 1,306 2,735 527 1,172
General and administrative......................... 8,210 10,889 2,387 3,233
Amortization of acquisition-related intangible
assets........................................... 4,400 2,145 561 766
Nonrecurring charges (Note 10)..................... 541 501 451 --
Stock-based compensation........................... -- -- -- 45
--------- --------- ----------- -----------
Total operating expenses....................... 14,457 16,270 3,926 5,216
--------- --------- ----------- -----------
Loss from operations................................. (6,909) (3,404) (1,832) (1,721)
Interest expense..................................... (127) (648) (86) (1,468)
Other income (expense), net.......................... (506) 49 42 (181)
--------- --------- ----------- -----------
Loss before income taxes............................. (7,542) (4,003) (1,876) (3,370)
Provision for income taxes........................... 112 259 36 45
--------- --------- ----------- -----------
Net loss............................................. (7,654) (4,262) (1,912) (3,415)
Accrued dividends on preferred stock................. (1,062) (1,062) (265) (265)
--------- --------- ----------- -----------
Net loss attributable to common stockholders......... $ (8,716) $ (5,324) $ (2,177) $ (3,680)
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Basic and diluted net loss per share attributable to
common stockholders................................ $ (5.90) $ (1.99) $ (0.98) $ (1.17)
Shares used in computing basic and diluted net loss
per share attributable to common stockholders...... 1,477 2,673 2,229 3,140
Unaudited pro forma basic and diluted net loss
per share.......................................... $ $
Shares used in computing unaudited pro forma
basic and diluted net loss per share...............
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE>
\
LIONBRIDGE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
(AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------------- ------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES PAR VALUE CAPITAL DEFICIT
---------- ----------- --------- ------------- ----------- -------------
Balance at December 31, 1996............... 13,673,098 $ 13,673 1,476,913 $ 15 $ (159)
<S> <C> <C> <C> <C> <C> <C>
Stock options exercised.................... 563,077 5 $ 51
Issuance of Series A convertible preferred
stock.................................... 570,010 570
Repurchase of Series A convertible
preferred stock to be retired............ (971,654) (972)
Accrual of dividends on preferred stock.... 1,062 (1,062)
Comprehensive loss:
Net loss................................. (7,654)
Other comprehensive income:
Translation adjustment.................
Comprehensive loss.......................
---------- ----------- --------- --- ----------- -------------
Balance at December 31, 1997............... 13,271,454 14,333 2,039,990 20 51 (8,875)
Issuance of put option on common stock in
connection with the acquisition of
Japanese Language Services, Inc.......... 200
Issuance of common stock in connection with
the acquisition of Japanese Language
Services, Inc............................ 430,435 4 82
Stock options exercised.................... 474,989 5 37
Accrual of dividends on preferred stock.... 1,062 (1,062)
Comprehensive loss:
Net loss................................. (4,262)
Other comprehensive loss:
Translation adjustment.................
Comprehensive loss.......................
---------- ----------- --------- --- ----------- -------------
Balance at December 31, 1998............... 13,271,454 15,395 2,945,414 29 370 (14,199)
Issuance of common stock in connection with
the acquisition of VeriTest, Inc......... 100,000 1 343
Issuance of common stock in connection with
the acquisition of Japanese Language
Services, Inc............................ 36,400 1 34
Issuance of warrants in connection with
debt financing........................... 5,967
Deferred compensation...................... 2,808
Amortization of deferred compensation......
Stock options exercised.................... 378,784 4 41
Accrual of dividends on preferred stock.... 265 (265)
Comprehensive loss:
Net loss................................. (3,415)
Other comprehensive income:
Translation adjustment.................
Comprehensive loss.......................
---------- ----------- --------- --- ----------- -------------
Balance at March 31, 1999 (unaudited)...... 13,271,454 $ 15,660 3,460,598 $ 35 $ 9,563 $ (17,879)
---------- ----------- --------- --- ----------- -------------
---------- ----------- --------- --- ----------- -------------
<CAPTION>
ACCUMULATED
OTHER TOTAL
DEFERRED COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE
COMPENSATION INCOME DEFICIT LOSS
--------------- --------------- ------------- ---------------
Balance at December 31, 1996............... $ (144)
<S> <C> <C> <C> <C>
Stock options exercised.................... 56
Issuance of Series A convertible preferred
stock....................................
Repurchase of Series A convertible
preferred stock to be retired............
Accrual of dividends on preferred stock.... (1,062)
Comprehensive loss:
Net loss................................. (7,654) $ (7,654)
Other comprehensive income:
Translation adjustment................. $ 741 741 741
---------------
Comprehensive loss....................... $ (6,913)
------- ------------- ---------------
---------------
Balance at December 31, 1997............... 741 (8,063)
Issuance of put option on common stock in
connection with the acquisition of
Japanese Language Services, Inc.......... 200
Issuance of common stock in connection with
the acquisition of Japanese Language
Services, Inc............................ 86
Stock options exercised.................... 42
Accrual of dividends on preferred stock.... (1,062)
Comprehensive loss:
Net loss................................. (4,262) $ (4,262)
Other comprehensive loss:
Translation adjustment................. (360) (360) (360)
---------------
Comprehensive loss....................... $ (4,622)
------- ------------- ---------------
---------------
Balance at December 31, 1998............... 381 (13,419)
Issuance of common stock in connection with
the acquisition of VeriTest, Inc......... 344
Issuance of common stock in connection with
the acquisition of Japanese Language
Services, Inc............................ 35
Issuance of warrants in connection with
debt financing........................... 5,967
Deferred compensation...................... $ (2,808) --
Amortization of deferred compensation...... 45 45
Stock options exercised.................... 45
Accrual of dividends on preferred stock.... (265)
Comprehensive loss:
Net loss................................. (3,415) $ (3,415)
Other comprehensive income:
Translation adjustment................. 2 2 2
---------------
Comprehensive loss....................... $ (3,413)
------- ------- ------------- ---------------
---------------
Balance at March 31, 1999 (unaudited)...... $ (2,763) $ 383 $ (10,661)
------- ------- -------------
------- ------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- ------------------------
1997 1998 1998 1999
--------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $ (7,654) $ (4,262) $ (1,912) $ (3,415)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization of acquisition-related intangible
assets......................................... 4,400 2,145 561 766
Compensation expense for stock options granted... -- -- -- 45
Accretion of discount on subordinated notes
payable........................................ -- -- -- 1,122
Depreciation and amortization of property and
equipment...................................... 1,164 1,187 189 360
Provision for doubtful accounts.................. 380 182 19 1
Deferred income taxes............................ 112 206 -- --
Foreign currency (gain) loss on intercompany
transactions................................... 353 (67) -- --
Changes in operating assets and liabilities, net
of effects of acquisitions:
Accounts receivable............................ 187 214 2,082 784
Work in process................................ (592) (828) (1,072) (544)
Other current assets........................... 690 (295) (1) (290)
Other assets................................... (78) (193) (47) 154
Accounts payable............................... (426) (401) (332) 676
Accrued compensation and benefits.............. 781 341 307 (540)
Other accrued expenses......................... 184 478 481 (366)
Deferred revenue............................... (943) (440) 423 (311)
--------- --------- ----------- -----------
Net cash provided by (used in) operating
activities................................. (1,442) (1,733) 698 (1,558)
--------- --------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment................ (923) (1,363) (476) (210)
Payments for businesses acquired, net of cash
acquired......................................... (18) (3,141) (2,233) (3,627)
Payments for Asian asset purchase, net of cash
acquired......................................... (85) -- -- --
Transfer of funds from escrow...................... 600 -- -- --
--------- --------- ----------- -----------
Net cash used in investing activities........ (426) (4,504) (2,709) (3,837)
--------- --------- ----------- -----------
Cash flows from financing activities:
Net increase (decrease) in amounts owed to banks... (522) 328 (97) (241)
Net increase (decrease) in short-term debt......... 1,197 5,551 3,894 (3,324)
Proceeds from long-term debt....................... -- -- -- 12,000
Proceeds from issuance of preferred stock.......... 570 -- -- --
Proceeds from exercise of common stock options..... 56 42 10 45
--------- --------- ----------- -----------
Net cash provided by financing activities.... 1,301 5,921 3,807 8,480
--------- --------- ----------- -----------
Net increase (decrease) in cash...................... (567) (316) 1,796 3,085
Effects of exchange rate changes on cash............. (130) (50) 30 (15)
Cash at beginning of period.......................... 1,795 1,098 1,098 732
--------- --------- ----------- -----------
Cash at end of period................................ $ 1,098 $ 732 $ 2,924 $ 3,802
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
NATURE OF THE BUSINESS
Lionbridge Technologies, Inc. and its subsidiaries (collectively,
"Lionbridge") is a provider of globalization services to software publishers,
computer hardware manufacturers and telecommunications companies. Globalization
services, including localization, internationalization and testing, enable
simultaneous worldwide release and ongoing maintenance of products and
product-related technical support, training materials, and sales and marketing
information in multiple languages. Lionbridge has its head office in the United
States, with operations in France, Ireland, The Netherlands, China, Japan, South
Korea and the United States.
FORMATION OF LIONBRIDGE AND BASIS OF PRESENTATION
Lionbridge was incorporated on September 11, 1996 in order to effect the
acquisition of certain elements of the localization businesses of Stream
International Holdings, Inc. ("Stream"). Funding for the acquisition was
provided through the issuance of common and preferred stock in Lionbridge and in
a majority-owned subsidiary of Lionbridge.
On December 23, 1996, Lionbridge entered into an agreement with Stream to
acquire its localization businesses in Ireland, The Netherlands and France (see
Note 4). The purchase accounting for the acquisition of the businesses was
recorded as though the purchase had occurred on December 31, 1996, as the
results of operations and changes in financial position between December 23,
1996 and this date were immaterial.
The December 23, 1996 agreement with Stream also contemplated the
acquisition of certain businesses in Asia. However, Lionbridge did not acquire
such businesses as planned, and renegotiated the agreement in July 1997. As a
result, a note payable for $840,000 issued to Stream in contemplation of the
December 23, 1996 agreement was canceled, and restricted cash of $600,000, which
was held in escrow at December 31, 1996 and was to be paid to Stream on
completion of the Asian acquisition, was returned to Lionbridge, net of certain
payments otherwise due.
On July 3, 1997, Lionbridge entered into a new agreement with Stream to
purchase work in process and certain other assets of Stream's Japanese, Chinese
and Taiwanese localization businesses as of April 1, 1997, and of the South
Korean business as of July 3, 1997, in exchange for approximately $100,000 of
cash plus the assumption of liabilities of $317,000 for the completion of work
under existing customer contracts. The assets acquired were recorded at cost as
they did not comprise businesses.
2. SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements of Lionbridge reflect the
application of certain significant accounting policies as described below:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Lionbridge and its wholly owned subsidiaries from the effective date of their
acquisition or formation. All significant intercompany accounts and transactions
have been eliminated in the consolidated financial statements.
F-7
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
UNAUDITED INTERIM FINANCIAL STATEMENTS
The consolidated financial statements and related notes of Lionbridge for
the three months ended March 31, 1998 and 1999 are unaudited. Management
believes the unaudited consolidated financial statements have been prepared on
the same basis as the audited consolidated financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations in such
periods. Results of operations for the three months ended March 31, 1998 and
1999 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1999, or for any other future period.
UNAUDITED PRO FORMA BALANCE SHEET
Upon the closing of Lionbridge's anticipated initial public offering of
securities, certain transactions will occur automatically. The unaudited pro
forma information included on the balance sheet at March 31, 1999 reflects these
transactions as if they had occurred on March 31, 1999, as follows (see Notes 6
and 8):
- the exchange of an aggregate of 13,271,454 shares of Series A convertible
preferred stock and Series D nonvoting convertible preferred stock
outstanding as of March 31, 1999 for 132.7145 shares of Series B
redeemable preferred stock and 13,271,454 shares of Series C convertible
preferred stock;
- the redemption of the 132.7145 shares of Series B redeemable preferred
stock for $15,660,000, including accrued and unpaid dividends, presented
as a reclassification of long-term debt, net of discount to short-term
debt;
- the conversion of the 13,271,454 shares of Series C convertible preferred
stock into the same number of shares of common stock;
- the repayment of subordinated notes payable for $12,000,000, presented as
a reclassification of long-term debt, net of discount to short-term debt,
and the associated impact on accumulated deficit of the write-off of the
unamortized discount on these notes of $4,845,000 as of March 31, 1999;
and
- the exercise of warrants to acquire 2,299,889 shares of common stock for
nominal consideration.
REVENUE RECOGNITION
Lionbridge recognizes revenue from the provision of services to its
customers on the percentage-of-completion method of accounting, based on costs
incurred as a percentage of management's estimates of total costs of individual
contracts. Anticipated losses by project, if any, are recognized in the period
in which determined.
ADVERTISING COSTS
Advertising costs are included in sales and marketing expenses and are
expensed as incurred.
F-8
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
FOREIGN CURRENCY TRANSLATION
The functional currency for each of Lionbridge's foreign operations is the
local currency of the country in which those operations are based. Revenues and
expenses of foreign operations are translated into U.S. dollars at the average
rates of exchange during the period. Assets and liabilities of foreign
operations are translated into U.S. dollars at period-end rates of exchange.
Resulting cumulative translation adjustments are reflected as a separate
component of accumulated other comprehensive income (loss) in stockholders'
deficit. Foreign currency transaction gains or losses, arising from exchange
rate fluctuations on transactions denominated in currencies other than the
functional currencies, are included in other income (expense), net in the
consolidated statements of operations and were $(472,000) and $49,000 in 1997
and 1998, respectively.
For the purpose of the disclosure of comprehensive loss, Lionbridge does not
record tax provisions or benefits for the net changes in foreign currency
translation adjustments, as Lionbridge intends to permanently reinvest
undistributed earnings in its foreign subsidiaries.
WORK IN PROCESS
Work in process represents the value of work performed but not billed. Work
in process is calculated using the percentage-of-completion method based on
total anticipated costs and is stated at cost plus estimated profit, but not in
excess of net realizable value.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated over the estimated
useful lives of the assets using the straight-line method, based upon the
following asset lives:
<TABLE>
<S> <C>
Computer software and equipment 1 to 5 years
Furniture and office equipment 3 to 5 years
Leasehold improvements Shorter of lease term or useful life of
asset
</TABLE>
Upon retirement or other disposition, the cost and related accumulated
depreciation of the assets are removed from the accounts and the resulting gain
or loss is reflected in the determination of net income or loss. Expenditures
for maintenance and repairs are expensed as incurred.
INTANGIBLE ASSETS
Goodwill represents the excess of cost over the fair value of the net assets
of businesses acquired. Goodwill is amortized using the straight-line method
over five years.
LONG-LIVED ASSETS
Lionbridge periodically evaluates the net realizable value of long-lived
assets, including goodwill and property and equipment, relying on a number of
factors including operating results, business plans, economic projections and
anticipated future cash flows. An impairment in the carrying value of an asset
is assessed when the undiscounted, expected future operating cash flows derived
from the asset are less than its carrying value.
F-9
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES
Deferred income taxes are recognized based on the temporary differences
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the temporary differences are
expected to reverse. Valuation allowances are provided if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS AND PRO FORMA NET
LOSS PER SHARE
Basic and diluted earnings per share are computed in accordance with SFAS
No. 128, "Earnings per Share." Basic net loss per share attributable to common
stockholders is computed by dividing net loss attributable to common
stockholders by the weighted average number of shares of common stock
outstanding. There is no difference between basic and diluted earnings per share
since potential common shares from the conversion of preferred stock and
exercises of stock options and warrants are anti-dilutive for all periods
presented.
Unaudited pro forma basic and diluted net loss per share for the year ended
December 31, 1998 and the quarter ended March 31, 1999 is computed using the
weighted average number of common shares outstanding, adjusted to include the
impact of certain transactions that will occur automatically or are deemed to
occur for pro forma purposes upon the closing of Lionbridge's anticipated
initial public offering of securities, as follows:
- the addition of 13,271,454 shares of common stock for each of the year
ended December 31, 1998 and the three months ended March 31, 1999,
resulting from the exchange of an aggregate of 13,271,454 shares of Series
A and Series D convertible preferred stock for 13,271,454 shares of Series
C convertible preferred stock, and the conversion of these shares into
13,271,454 shares of common stock;
- the addition of 0 and 796,443 shares of common stock for the year ended
December 31, 1998 and the three months ended March 31, 1999, respectively,
resulting from the exercise of warrants to acquire 2,299,889 shares of
common stock for nominal consideration, weighted from the warrant issuance
dates; and
- the addition of and shares of common stock for the year ended
December 31, 1998 and the three months ended March 31, 1999, respectively,
to reflect the number of shares of common stock from the anticipated
initial public offering from which proceeds are deemed to be used to repay
the subordinated notes of $12,000,000 and to redeem the 132.7145 shares of
Series B redeemable preferred stock with accrued dividends for
$15,660,000, based on an assumed net offering price of $ per share,
weighted from the beginning of the periods for the preferred stock and
from the date of issuance for the subordinated notes.
ACCOUNTING FOR STOCK-BASED COMPENSATION
Lionbridge accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair
market value of Lionbridge's common stock at the date of grant. When the
exercise price of stock options
F-10
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
granted to employees is less than the fair market value of common stock at the
date of grant, Lionbridge records that difference multiplied by the number of
shares under option as deferred compensation, which is then amortized over the
vesting period of the options. Lionbridge has adopted the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," through disclosure only (see
Note 8). All stock-based awards to non-employees are accounted for at their fair
value in accordance with SFAS No. 123.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates. Estimates are used when accounting for the collectibility of
receivables, calculating revenue using the percentage-of-completion method, and
valuing intangible assets, deferred tax assets and net assets of businesses
acquired.
CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments which potentially subject Lionbridge to concentrations
of credit risk consist principally of trade accounts receivables. Concentrations
of credit risk with respect to trade accounts receivable are limited due to the
dispersion of customers across different geographic regions, although globally
some customers constitute a significant percentage of total revenue (see Note
11). Lionbridge does not require collateral or other security against trade
receivable balances; however, it maintains reserves for potential credit losses
and such losses have been within management's expectations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments, including cash, accounts receivable, accounts
payable, redeemable preferred stock and debt, are carried in the consolidated
financial statements at amounts that approximate fair values at December 31,
1997 and 1998 and March 31, 1999 (unaudited). Fair values are based on quoted
market prices and assumptions concerning the amount and timing of estimated
future cash flows and assumed discount rates, reflecting varying degrees of
perceived risk.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The standard requires that all derivative
instruments be recorded on the balance sheet at their fair values. Changes in
the fair values of derivatives are recorded each period in current earnings or
other comprehensive income (loss), depending on whether or not a derivative is
designated as part of a hedge transaction and, if it is, depending on the type
of hedge transaction. SFAS No. 133 is expected to be effective for Lionbridge's
fiscal quarter beginning January 1, 2001 and its adoption is not expected to
have a material impact on Lionbridge's financial position or results of
operations.
In April 1998, AcSEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SOP 98-5, the cost of
F-11
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
start-up activities should be expensed as incurred. SOP 98-5 is effective for
Lionbridge's fiscal 1999 financial statements, and Lionbridge does not expect
its adoption to have a material effect on its financial position or results of
operations.
3. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Computer software and equipment................................. $ 1,400,000 $ 2,035,000
Furniture and office equipment.................................. 527,000 708,000
Leasehold improvements.......................................... 138,000 327,000
------------- -------------
2,065,000 3,070,000
Less: Accumulated depreciation and amortization................. (1,114,000) (1,230,000)
------------- -------------
$ 951,000 $ 1,840,000
------------- -------------
------------- -------------
</TABLE>
4. BUSINESS COMBINATIONS:
LOCALIZATION BUSINESS OF STREAM
On December 23, 1996, Lionbridge acquired the localization businesses of
Stream in Ireland, The Netherlands and France (see Note 1). In accordance with
the acquisition agreement, Lionbridge paid Stream aggregate cash consideration
of $11,300,000 in exchange for all of the outstanding common stock of R.R.
Donnelley Language Solutions International B.V. and Stream International
Language Solutions as well as the assumption of tax liabilities of $100,000
incurred in connection with the transaction.
The business combination was accounted for using the purchase method of
accounting, and the results of the acquired localization business have been
included in Lionbridge's financial statements as of December 31, 1996 (see Note
1). As part of the fair valuation of assets and liabilities acquired, $2,559,000
of the purchase price was allocated to a non-compete agreement with Stream and
$438,000 was allocated to previously unrecorded application software licenses.
The net difference between the total purchase price of $12,034,000 (including
direct costs of the acquisition) and the fair value of assets and liabilities
acquired was recognized as goodwill, totaling $9,224,000 at the acquisition
date. In 1997, Lionbridge submitted a claim to Stream for the reimbursement of a
portion of the purchase consideration under the indemnity terms of the December
23, 1996 agreement. This claim was ultimately resolved through a settlement
agreement with Stream, effective December 31, 1997 (see Note 6). Under the terms
of this agreement, the purchase price for the European businesses was reduced by
$531,000. This amount was deducted from goodwill at December 31, 1997.
During 1997 and 1998, acquired net operating loss carryforwards of
$1,120,000 and $1,291,000, respectively, were utilized to offset taxable income
in Ireland and The Netherlands. As the deferred tax assets associated with these
losses had been fully reserved at the time of the Stream acquisition, the
benefits were recorded as reductions to goodwill of $112,000 and $207,000 in
1997 and 1998, respectively.
F-12
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BUSINESS COMBINATIONS: (CONTINUED)
JAPANESE LANGUAGE SERVICES
On February 27, 1998, Lionbridge entered into an agreement to acquire all of
the outstanding stock of Japanese Language Services, Inc., a company based in
Massachusetts with additional operations in Japan, for total initial
consideration of $2,523,000 consisting of cash of $2,237,000, 430,435 shares of
common stock valued at $86,000, and a common stock put option valued at
$200,000. This put option gives the holder the right to require Lionbridge to
repurchase all of the 430,435 shares of common stock at a price of $0.90 per
share at any time from July 2001 to September 2001. The agreement also requires
certain contingent stock issuances, limited to 36,400 shares of common stock,
and cash payments, limited to $625,000, dependent on future operating results of
Japanese Language Services, Inc. through December 31, 1999. This agreement was
effective January 2, 1998, when operating control of Japanese Language Services,
Inc. was assumed by Lionbridge. The acquisition was accounted for using the
purchase method of accounting, and the results of Japanese Language Services,
Inc. have been included in Lionbridge's financial statements as of the effective
date. The net difference between the total purchase price of $2,592,000 at the
date of acquisition (including direct costs of the acquisition) and the fair
value of assets and liabilities acquired was recognized as goodwill, totaling
$2,199,000. The initial calculation of goodwill did not include any anticipated
contingent consideration. Additional goodwill of $375,000 was recorded at
December 31, 1998 in connection with an incremental payment being due under the
contingent payment arrangement. Future payments under the contingent payment
arrangement, if any, will similarly increase goodwill. Pro forma statements of
operations would not differ materially from reported results.
ILT SOLUTIONS GROUP
On April 1, 1998, Lionbridge acquired certain assets and operations of the
ILT Solutions Group of Lucent Technologies, Inc. for cash of $1,000,000. The
acquisition was accounted for using the purchase method of accounting. The net
difference between the total purchase price of $1,013,000 (including direct
costs of the acquisition) and the fair value of assets and liabilities acquired
was recognized as goodwill, totaling $470,000 at the acquisition date. The
results of the ILT Solutions Group are included in these financial statements
from the date of the acquisition. Pro forma statements of operations would not
differ materially from reported results.
VERITEST, INC. (UNAUDITED)
On January 11, 1999, Lionbridge entered into an agreement to acquire all of
the stock of VeriTest, Inc., a company based in California, for total initial
consideration of $4,354,000 consisting of cash of $3,260,000, 100,000 shares of
common stock valued at $344,000, and a note payable for $750,000. The agreement
also requires certain contingent cash payments, limited to $1,000,000, dependent
on future operating performance through December 31, 2000. This acquisition was
accounted for using the purchase method of accounting. The net difference
between the total purchase price of $4,419,000 at the date of acquisition
(including direct costs of the acquisition) and the fair value of assets and
liabilities acquired was recognized as goodwill, totaling $4,338,000. The
initial calculation of goodwill did not include any contingent consideration.
Future payments, if any, under the contingent payment arrangement will increase
goodwill. The results of VeriTest, Inc. are included in these financial
statements from the date of acquisition.
F-13
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BUSINESS COMBINATIONS: (CONTINUED)
The following unaudited pro forma consolidated results of operations for the
year ended December 31, 1998 and the three-month period ended March 31, 1999
assume that the acquisition of VeriTest, Inc. occurred as of January 1, 1998:
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C> <C>
Revenue......................................................... $ 42,147 $ 11,690
Net loss........................................................ (6,615) (3,632)
Basic and diluted net loss per share attributable to common
stockholders.................................................. (2.77) (1.24)
</TABLE>
For each period presented, the pro forma results include estimates of the
interest expense on debt used to finance the purchase and the depreciation and
amortization of intangible and other fixed assets based on the purchase price
allocation. These pro forma amounts do not purport to be indicative of the
results that would have actually been obtained if the acquisition had occurred
on January 1, 1998 or that may be obtained in the future.
The expense of amortizing goodwill from all acquisitions prior to December
31, 1998 was $1,841,000 and $2,145,000 in 1997 and 1998, respectively.
Additionally, amortization of $2,559,000 was recorded in 1997 in connection with
a noncompete agreement between Lionbridge and Stream.
5. AMOUNTS OWED TO BANKS:
Amounts owed to banks represent temporary, unsecured overdraft facilities
utilized by Lionbridge's operations in Ireland, France, Holland and the United
States.
6. DEBT:
SETTLEMENT AGREEMENT
On June 10, 1998, Lionbridge entered into an agreement with certain
companies that had previously been part of the Stream organization to settle
various outstanding amounts due between Lionbridge and Stream, including the
indemnity claim submitted by Lionbridge (see Note 4); a note payable to Stream
of $569,000, together with accrued interest of $39,000; and the amount due to
Stream on the exercise of its put option to sell 971,654 shares of Series A
convertible preferred stock to Lionbridge (see Note 8). The effective date of
this agreement was December 31, 1997, and its impact was reflected in the
consolidated financial statements as of that date.
In settlement of all amounts due to and from Stream (or successor
companies), Lionbridge agreed to pay an interest-free amount of $700,000 in
seven equal monthly installments beginning February 1998. This note was recorded
in current liabilities at December 31, 1997 and was paid during 1998.
LINE OF CREDIT
On September 26, 1997, Lionbridge entered into a line of credit agreement
with a commercial bank. The agreement was subsequently amended on May 21, 1998
and May 20, 1999 (unaudited) and expires on August 20, 1999. At the time of the
May 1998 amendment, Lionbridge issued a warrant for the purchase of 125,000
shares of common stock at an exercise price of $1.60 per share. This warrant was
exercisable immediately and expires on May 21, 2003. The value ascribed to this
warrant was
F-14
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. DEBT: (CONTINUED)
immaterial. Under the amended terms of the agreement, Lionbridge may borrow up
to $8,000,000, based on the value of certain eligible current assets worldwide.
The interest rate payable on any outstanding borrowings is prime plus 1% per
year (9.5 % and 8.8 % at December 31, 1997 and 1998, respectively), and
Lionbridge was required to pay a facility fee of $50,000 on the signing of the
agreement. This fee and other direct arrangement expenses were amortized over
the initial term of the agreement, which expired on May 22, 1998. Borrowings
outstanding under the line of credit agreement are collateralized by certain
assets of Lionbridge. The amount outstanding on the line of credit at December
31, 1997 and 1998 was $1,500,000 and $7,693,000, respectively, and $4,193,000 as
of March 31, 1999 (unaudited).
The agreement requires Lionbridge to maintain certain financial ratios and
restricts the payment of dividends. As of December 31, 1997 and 1998, Lionbridge
was in compliance with the financial covenants as subsequently amended by the
bank.
ADDITIONAL FINANCING (UNAUDITED)
On January 8, 1999, Lionbridge entered into a bridge loan agreement with a
third party. Under the terms of the agreement, Lionbridge issued a $4,000,000,
12% senior subordinated note. On February 26, 1999, Lionbridge entered into a
new subordinated debt agreement with the same party and terminated the bridge
loan agreement. Under the terms of the new agreement, Lionbridge issued
$10,000,000, 12% senior subordinated convertible notes. The notes are repayable
in quarterly installments beginning in March 2003, with final settlement of the
principal and interest due in February 2006. The notes are subject to certain
covenant restrictions, including the maintenance of a defined minimum current
asset to current liability ratio and a minimum profitability measure, and are
collateralized by certain assets of Lionbridge. In connection with the issuance
of these notes, Lionbridge issued detachable warrants to purchase 1,916,574
shares of common stock at a price of $0.01 per share, valued at $4,972,000.
On March 9, 1999, Lionbridge entered into a subordinated debt agreement with
a stockholder. Under the terms of the agreement, Lionbridge issued $2,000,000,
12% senior subordinated convertible notes. The notes are repayable in quarterly
installments beginning in March 2003, with final settlement of the principal and
interest due in March 2006. The notes are collateralized by certain assets of
Lionbridge and are subject to certain covenant restrictions, including the
maintenance of a defined minimum current asset to current liability ratio and a
minimum profitability measure. In connection with the issuance of these notes,
Lionbridge issued detachable warrants to purchase 383,315 shares of common stock
at a price $0.01 per share, valued at $995,000.
Lionbridge is required to repay each of the above notes, together with all
accrued and unpaid interest, upon the closing of certain defined liquidity
events, including the initial public offering of securities with aggregate
proceeds of at least $25,000,000. The detachable warrants issued in connection
with these financings expire on the later of (i) the seventh anniversary of the
issuance of the warrant and (ii) the date when each related note is paid in
full. If not otherwise exercised, the warrants will be automatically exercised
in accordance with their terms immediately prior to any expiration. The
aggregate value of these warrants was recorded as a discount on subordinated
notes payable and is being amortized as additional interest expense using the
straight-line method over the period from issuance until August 1999, based on
the expected repayment of the debt upon the initial public offering of
securities by Lionbridge.
F-15
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. DEBT: (CONTINUED)
As of March 31, 1999, Lionbridge was not in compliance with one of the
covenants common to each of the above notes. Lionbridge subsequently obtained
waivers from the debtholders which release it from the requirement to comply
with that covenant for the quarter ended March 31, 1999 and for the quarters
ending June 30 and September 30, 1999.
7. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
The Company leases certain equipment and office space under noncancelable
agreements and leases which expire at various dates through 2003. Future minimum
lease payments under noncancelable operating leases at December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- --------------------------------------------------------------------------------
<S> <C>
1999............................................................................ $ 746,000
2000............................................................................ 564,000
2001............................................................................ 334,000
2002............................................................................ 229,000
2003............................................................................ 298,000
Thereafter...................................................................... 2,019,000
------------
$ 4,190,000
------------
------------
</TABLE>
Total rental expenses charged to operations were $697,000 and $952,000 in
1997 and 1998, respectively.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT:
SERIES A AND SERIES D CONVERTIBLE PREFERRED STOCK
VOTING
The holders of Series A preferred stock are entitled to one vote for each
whole share of common stock issuable upon conversion to Series C preferred stock
and thereon to common stock. The holders of Series A preferred stock vote with
the holders of common stock, and certain other outstanding preferred stock, as a
single class. The holders of Series D preferred stock have no voting rights.
DIVIDENDS
Holders of Series A and Series D preferred stock are entitled to receive
dividends or other distributions in an amount based upon, and in advance of, the
planned dividend or other distribution to holders of common stock.
LIQUIDATION
In the event of any liquidation, dissolution or winding up of Lionbridge,
the holders of Series A and Series D preferred stock are entitled to be paid out
of the assets available for distribution, in preference to any payment to the
holders of common or more junior preferred stock, but subordinated
F-16
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
to payments to the holders of more senior preferred stock, an amount of $1.00
per share, plus any dividends declared but unpaid, plus a premium of $0.08 per
year from the date of issue, plus an amount per share that would have been
payable had each share of Series A and Series D preferred stock been converted
into shares of common stock immediately prior to liquidation, dissolution or
winding up.
In the event of a merger or consolidation of Lionbridge with another
corporation, with certain exemptions, or the sale of substantially all the
assets of Lionbridge, holders of 66 2/3% or more of the Series A or Series D
preferred stock may elect to consider the event to be a liquidation of
Lionbridge.
EXCHANGE
Each share of Series A and Series D preferred stock is exchangeable, at the
option of the holder, into 1/100,000 of a share of Series B preferred stock and
a specified number of shares of Series C preferred stock based on an exchange
price of $1.00 per share, subject to adjustment under specified terms and
conditions (one-for-one at December 31, 1998). Certain terms exist to protect
the exchange rights of the holders of Series A and Series D preferred stock in
the event of further issuances of common stock or a merger or reorganization of
Lionbridge.
In the event of a public offering satisfying certain specified monetary
criteria, all shares of Series A and Series D preferred stock will automatically
be exchanged for shares of Series B and C preferred stock at the effective
exchange rates.
SERIES B REDEEMABLE PREFERRED STOCK
VOTING
The holders of Series B preferred stock are not entitled to vote, except in
certain specified circumstances.
DIVIDENDS
Holders of Series B preferred stock are not entitled to receive dividends.
LIQUIDATION
In the event of any liquidation, dissolution or winding up of Lionbridge,
the holders of Series B preferred stock are entitled to be paid out of the
assets available for distribution, in preference to any payment to the holders
of common or more junior preferred stock, but subordinated to payments to the
holders of more senior preferred stock, an amount of $100,000 per share, plus
any dividends declared but unpaid, plus a premium of $8,000 per share per year.
REDEMPTION
On December 23, 2001, the Series B preferred stock becomes redeemable at the
request of 66 2/3% or more of the holders and to the extent permitted by legally
available funds. The redemption price is equal to $100,000 per share, plus any
unpaid dividends, plus a premium of $8,000 per share per year, for all shares of
Series B preferred stock issued or issuable upon conversion of the outstanding
Series A preferred stock and Series D preferred stock. In any event, to the
extent permitted by legally
F-17
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
available funds, all outstanding shares of Series B preferred stock become
redeemable on December 23, 2003.
In the event of a public offering satisfying certain specified monetary
criteria, the merger or consolidation of Lionbridge with another corporation,
with certain exemptions, or the sale of substantially all the assets of
Lionbridge, all shares of Series B preferred stock become redeemable at a price
equal to $100,000 per share, plus any unpaid dividends, plus a premium of $8,000
per share per year, up to a maximum payment equal to 50% of the Lionbridge's
consolidated net income before taxes for the preceding fiscal year.
SERIES C CONVERTIBLE PREFERRED STOCK
VOTING
The holders of Series C preferred stock are entitled to one vote for each
whole share of common stock issuable upon conversion. The holders of Series C
preferred stock vote with the holders of common stock, and any other outstanding
preferred stock, as a single class.
DIVIDENDS
Holders of Series C preferred stock are entitled to receive dividends or
other distributions in an amount based upon, and in advance of, the planned
dividend or other distribution to holders of common stock.
LIQUIDATION
In the event of any liquidation, dissolution or winding up of Lionbridge,
the holders of Series C preferred stock are entitled to be paid out of the
assets available for distribution, in preference to any payment to the holders
of common or more junior preferred stock, but subordinated to payments to the
holders of more senior preferred stock, an amount per share that would have been
payable had each share of Series C preferred stock been converted into shares of
common stock.
In the event of a merger or consolidation of Lionbridge with another
corporation, with certain exemptions, or the sale of substantially all the
assets of Lionbridge, holders of 66 2/3% or more of the Series C preferred stock
may elect to consider the event to be a liquidation of Lionbridge.
CONVERSION
Each share of Series C preferred stock is convertible, at the option of the
holder, into a specified number of shares of common stock based on a conversion
price of $1.00 per share, subject to adjustment under specified terms and
conditions (one-for-one at December 31, 1998). Certain terms exist to protect
the conversion rights of the holders of Series C preferred stock in the event of
further issuances of common stock or a merger or reorganization of Lionbridge.
In the event of a public offering satisfying certain specified monetary
criteria, all shares of Series C preferred stock will automatically be converted
into shares of common stock at the effective conversion rate.
F-18
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
TREASURY STOCK
In connection with the December 23, 1996 financing of Lionbridge, Stream was
granted a put option to sell 971,654 shares of Series A preferred stock to
Lionbridge.
On September 25, 1997, Stream exercised its put option and Lionbridge
acquired 971,654 shares of its Series A preferred stock at a cost of $971,654.
Settlement of this amount due to Stream was resolved through a subsequent
agreement (see Note 6). In 1998, Lionbridge retired all of the shares acquired.
STOCK OPTION PLANS
Lionbridge maintains a stock option plan (the "Plan") for the issuance of
incentive and nonqualified stock options. The number of shares of common stock
available for issuance under the Plan was 4,283,048 shares, an amount which
increased to 5,283,048 shares on April 23, 1998. Options to purchase common
stock are granted at the discretion of the Board of Directors.
Generally, stock options vest over a four-year period as follows: 25% on the
first anniversary of the date of grant and semi-annually thereafter in equal
installments over the remaining three-year period. Stock options generally
expire ten years (five years in certain cases) from the date of grant.
Under the terms of the Plan, the exercise price of incentive stock options
granted must not be less than 100% (110% in certain cases) of the fair market
value of the common stock on the date of grant, as determined by the Board of
Directors. The exercise price of nonqualified stock options may be less than the
fair market value of the common stock on the date of grant, as determined by the
Board of Directors, but in no case may the exercise price be less than the
statutory minimum. The Board of Directors, in assessing the fair market value of
Lionbridge's common stock, considers factors relevant at the time, including
recent third-party transactions, significant new customers, composition of the
management team, recent hiring results, Lionbridge's financial condition and
operating results and the lack of a public market for Lionbridge's common stock.
Transactions involving the Plan for the period from January 1, 1997 to
December 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
---------- -----------
<S> <C> <C>
Outstanding at January 1, 1997........................................ 2,252,293 $ 0.11
Granted............................................................... 2,208,833 0.10
Exercised............................................................. (563,077) 0.10
Canceled.............................................................. (573,544) 0.10
----------
Outstanding at December 31, 1997...................................... 3,324,505 0.11
Granted............................................................... 610,234 0.35
Exercised............................................................. (474,989) 0.09
Canceled.............................................................. (171,563) 0.13
----------
Outstanding at December 31, 1998...................................... 3,288,187 0.15
----------
----------
</TABLE>
F-19
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT: (CONTINUED)
Options for 0 and 631,893 shares were exercisable at December 31, 1997 and
1998, respectively.
There were 395,466 and 956,795 shares available for future grant under the
Plan at December 31, 1997 and 1998, respectively.
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------- ------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
RANGE OF EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------------ ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$0.10 - $0.11 8.09
2,700,528 years $ 0.11 631,893 $ 0.11
0.20 - 0.30 9.13
428,695 years 0.20 -- 0.20
0.60 9.58
104,725 years 0.60 -- 0.60
1.00 9.83
54,239 years 1.00 -- 1.00
----------- -----------
3,288,187 631,893
----------- -----------
----------- -----------
</TABLE>
Had compensation cost for stock options granted to employees been determined
based on the fair value at the date of grant for awards in the period from
inception (September 11, 1996) to December 31, 1998, consistent with the
provisions of SFAS No. 123, Lionbridge's net loss for 1997 and 1998 would have
been increased to $7,668,000 and $4,283,000, and the net loss per common share
attributable to common stockholders for 1997 and 1998 would have been increased
to $5.91 and $2.00, respectively. The fair value of options granted during 1997
and 1998 was $0.02 and $0.06, respectively.
For these pro forma calculations, the fair value of each option granted was
estimated on the date of grant using the minimum value option pricing model,
utilizing the following weighted-average assumptions: (1) weighted-average risk
free interest rates of 6.11% and 5.40% for 1997 and 1998, respectively, (2)
weighted-average expected option life of 4.0 years, and (3) expected dividend
yield of 0.
The effects of applying the fair value method may be material to the pro
forma results of operations in future years because the determination of the
fair value of all options granted after Lionbridge becomes a public entity will
include an expected volatility factor, additional option grants are expected to
be made subsequent to December 31, 1998, and most options vest over several
years.
DEFERRED COMPENSATION (UNAUDITED)
During the three months ended March 31, 1999, Lionbridge granted stock
options to purchase 708,500 shares of its common stock with an exercise price of
$1.00 per share. Lionbridge recorded deferred compensation relating to these
options totaling $2,808,000, representing the aggregate difference between the
estimated fair market value of Lionbridge's common stock on the date of grant
and the exercise price of each option. This deferred compensation is being
amortized over the four-year vesting period of the related options, resulting in
amortization of $45,000 in the three months ended March 31, 1999.
F-20
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES:
The provisions for income taxes for the years ended December 31, 1997 and
1998 are due to taxable income generated in foreign jurisdictions for which US
tax credit utilization is currently uncertain. The benefit from the utilization
of net operating loss carryforwards in Europe during the years ended December
31, 1997 and 1998 was recorded as a reduction of goodwill of $112,000 and
$207,000, respectively, rather than a tax provision benefit, since the deferred
tax assets associated with these carryforwards had been fully reserved at the
time of the acquisition of the businesses from Stream (see Note 4). Lionbridge
recorded no tax benefit for losses generated during these periods due to the
uncertainty of realizing such benefits.
The consolidated deferred tax assets of the Company were as follows at
December 31:
<TABLE>
<CAPTION>
1997 1998
------------- ------------
<S> <C> <C>
U.S. net operating loss carryforwards................................................ $ 564,000 $ 1,309,000
Foreign net operating loss carryforwards............................................. 1,623,000 1,696,000
Difference in accounting for amortization and depreciation........................... 1,136,000 1,113,000
Other................................................................................ 77,000 32,000
Valuation allowance.................................................................. (3,400,000) (4,150,000)
------------- ------------
Net deferred tax asset............................................................... -- --
------------- ------------
------------- ------------
</TABLE>
Management of Lionbridge has evaluated the positive and negative evidence
bearing upon the realizability of its deferred tax assets. Under the applicable
accounting standards, management has considered Lionbridge's history of losses
and concluded that it is more likely than not that Lionbridge will not generate
future taxable income prior to the expiration of these net operating losses.
Accordingly, the deferred tax assets have been fully reserved. Management
reevaluates the positive and negative evidence periodically.
At December 31, 1998, Lionbridge had net operating loss carryforwards for
U.S. Federal and state income tax purposes of approximately $3,252,000 which may
be used to offset future taxable income, beginning to expire in 2011.
Additionally, Lionbridge has net operating loss carryforwards in France of
approximately $4,218,000 which may be used to offset future taxable income,
beginning to expire in 1999; net operating loss carryforwards in Japan of
approximately $247,000 which expire in 2003; and net operating loss
carryforwards in The Netherlands of approximately $483,000 which may be carried
forward indefinitely.
Tax benefits recognized for the utilization of foreign net operating loss
carryforwards acquired in the December 23, 1996 acquisition of businesses from
Stream (see Note 4) are recorded as a reduction to goodwill, rather than as a
tax provision benefit.
Under the provisions of the Internal Revenue Code, certain substantial
changes in Lionbridge's ownership may limit in the future the amount of net
operating loss carryforwards which could be used annually to offset future
taxable income and income tax liability.
F-21
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. NONRECURRING CHARGES:
During the fourth quarter of 1997, the first quarter of 1998 and the fourth
quarter of 1998, Lionbridge recorded nonrecurring charges of $541,000, $451,000
and $50,000, respectively, in operating expenses. These charges related to
workforce reductions in France, consisting of nine technical staff in 1997 and
five technical and administrative staff in 1998. All employees had been informed
of their termination and related benefits in the period that the corresponding
charge was recorded. Lionbridge had balances of $541,000, $0 and $0 (unaudited)
remaining at December 31, 1997 and 1998 and at March 31, 1999, respectively, in
other accrued expenses in relation to these charges. As of March 31, 1999
(unaudited), none of these employees remained with Lionbridge and management
does not anticipate any future expenditures related to these actions.
11. SIGNIFICANT CUSTOMERS:
Lionbridge's two largest customers accounted for the following percentages
of total revenues for the periods ended:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- --------------------
1997 1998 1998 1999
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Customer A......................................... 19% 14% 16% 14%
Customer B......................................... 10% 6% 10% 2%
</TABLE>
12. OPERATING SEGMENT AND GEOGRAPHICAL INFORMATION:
In June 1998, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 requires that public
business enterprises report certain information about operating segments in
annual and interim financial statements filed with the SEC and issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Operating segments
are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker, or decision making group, in deciding how to allocate resources
and in assessing their performance.
Lionbridge provides localization services to the information technology
industry, including language translation, cultural reformatting and testing of
applications. Lionbridge provides a full service offering to its clients on a
global basis and, although customers may utilize the results of Lionbridge's
services in a number of different formats, for example, through software manuals
or the Internet, management does not allocate resources or assess performance on
the basis of this end-use. As a result, management considers Lionbridge to have
only one operating segment.
F-22
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. OPERATING SEGMENT AND GEOGRAPHICAL INFORMATION: (CONTINUED)
A summary of Lionbridge's operations and other financial information by
geographical region follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS ENDED
31, MARCH 31,
---------------------- ---------------------
1997 1998 1998 1999
---------- ---------- --------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues:
United States............................ $ -- $4,683,000 $ 752,000 $2,709,000
Asia..................................... 1,510,000 4,801,000 674,000 1,411,000
France................................... 11,070,000 9,094,000 2,211,000 2,787,000
Ireland.................................. 11,157,000 14,296,000 2,548,000 3,992,000
The Netherlands.......................... 3,724,000 6,799,000 1,406,000 1,398,000
Eliminations............................. (999,000) (1,261,000) (153,000) (607,000)
---------- ---------- --------- ----------
$26,462,000 $38,412,000 $7,438,000 $11,690,000
---------- ---------- --------- ----------
---------- ---------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Long-lived assets:
United States....................................... $ 6,776,000 $ 8,069,000 $ 11,852,000
Asia................................................ 146,000 320,000 365,000
France.............................................. 121,000 207,000 55,000
Ireland............................................. 595,000 989,000 742,000
The Netherlands..................................... 108,000 109,000 87,000
------------- ------------- -------------
$ 7,746,000 $ 9,694,000 $ 13,101,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Foreign revenue is presented based on the country in which projects are
managed. Long-lived assets in the United States as of December 31, 1997 and 1998
and March 31, 1999 include goodwill from acquisitions of $6,710,000, $7,450,000
and $11,057,000, respectively.
F-23
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------------- ------------------------
1997 1998 1998 1999
--------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest paid.................................................... $ 127,000 $ 648,000 $ 83,000 $ 332,000
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
Noncash investing and financing activities:
Cancellation of note payable (Note 1).......................... $ 840,000 -- -- --
Issuance of warrants for common stock in connection with debt
(Note 6)..................................................... -- -- -- $5,967,000
Lionbridge entered into an agreement to settle various
outstanding amounts due between Lionbridge and Stream (Note
6) which reduced goodwill as follows:
Cancellation of note payable, including interest............. $ 608,000 -- -- --
Repurchase of Series A preferred stock from Stream 972,000 -- -- --
Settlement of operating accounts............................. (349,000) -- -- --
Amount payable by Lionbridge under agreement................. (700,000) -- -- --
--------- ---------- ----------- -----------
Reduction to goodwill...................................... $ 531,000 -- -- --
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
Lionbridge purchased all of the outstanding capital stock of
Japanese Language Services, Inc. for $2,523,000, effective
January 2, 1998. In conjunction with the acquisition,
liabilities were assumed as follows:
Fair value of assets acquired................................ -- $3,495,000 $3,495,000 --
Cash paid for capital stock.................................. -- (2,237,000) (2,237,000) --
Common stock and put options issued.......................... -- (286,000) (286,000) --
--------- ---------- ----------- -----------
Liabilities assumed........................................ -- $ 972,000 $ 972,000 --
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
Lionbridge purchased all of the outstanding capital stock of
VeriTest, Inc. for $4,354,000, effective January 11, 1999. In
conjunction with the acquisition, liabilities were assumed as
follows:
Fair value of assets acquired................................ -- -- -- $4,419,000
Cash paid for capital stock.................................. -- -- -- (3,260,000)
Common stock issued.......................................... -- -- -- (344,000)
Note issued.................................................. -- -- -- (750,000)
--------- ---------- ----------- -----------
Liabilities assumed........................................ -- -- -- $ 65,000
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
</TABLE>
14. VALUATION AND QUALIFYING ACCOUNTS:
The following table sets forth activity in Lionbridge's accounts receivable
reserve:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CHARGES TO END OF
OF PERIOD OPERATIONS DEDUCTIONS PERIOD
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended:
- --------------------------------------------
December 31, 1997 $ -- $ 450,000 $ (84,000) $ 366,000
December 31, 1998 $ 366,000 $ 220,000 $ (13,000) $ 573,000
</TABLE>
F-24
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:
Diluted loss per share attributable to common stockholders does not differ
from basic loss per share attributable to common stockholders since potential
common shares from the conversion of preferred stock and the exercise of stock
options and warrants are anti-dilutive for all periods presented and are
therefore excluded from the calculation. Preferred stock convertible into
13,271,454 shares of common stock, options to purchase 3,324,505, 3,288,187 and
3,581,353 shares of common stock, and warrants to purchase 0, 125,000 and
2,424,889 shares of common stock, were outstanding as of December 31, 1997 and
1998 and March 31, 1999 (unaudited), respectively, but were not included in the
calculation of diluted net loss per share attributable to common shareholders
because the effect of their inclusion would have been anti-dilutive.
16. EMPLOYEE BENEFIT PLANS:
As of December 31, 1998, the Company maintained defined benefit pension
plans for employees in The Netherlands and France, and a defined contribution
scheme for employees in Ireland. Total pension contributions charged to
operations were $154,000 and $350,000 in 1997 and 1998, respectively.
17. SUBSEQUENT EVENTS (UNAUDITED):
On June 15, 1999, the Board of Directors of Lionbridge approved the
following matters, among other items:
- the adoption, effective upon the closing of the anticipated initial public
offering, of the Second Amended and Restated Certificate of Incorporation,
which among other matters (a) increases the number of authorized shares of
common stock of Lionbridge to 100,000,000 and (b) decreases the number of
authorized shares of preferred stock of Lionbridge to 5,000,000 and
authorizes the Board of Directors to issue up to that amount of shares of
undesignated preferred stock, for which the Board of Directors will have
the power to determine designations and preferences;
- an amendment to Lionbridge's stock option plan to increase the number of
shares of common stock issuable under the plan by 3,000,000 to 8,283,048;
and
- the adoption, effective upon the closing of the anticipated initial public
offering, of an employee stock purchase plan, under which employees may
purchase shares of common stock in semi-annual offerings at a price equal
to the lower of 85% of the average market price on the beginning or ending
date of each offering period.
F-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Stockholders of
Lionbridge Technologies, Inc.:
We have audited the accompanying combined statements of operations and cash
flows of the Localization Businesses of Stream International Holdings, Inc. in
Ireland, The Netherlands and France (together, the "Entities") for the year
ended December 31, 1996. These financial statements are the responsibility of
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 combined results of operations and cash flows of
the Entities for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 7, 1997
F-26
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE
COMBINED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Revenue............................................................................................. $ 28,134
Cost of revenue..................................................................................... 24,977
------------
Gross profit.................................................................................. 3,157
Selling, general and administrative expenses........................................................ 3,144
------------
Income from operations.............................................................................. 13
Interest expense.................................................................................... (154)
Other income (expense), net......................................................................... (72)
------------
Net loss............................................................................................ $ (213)
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE COMBINED FINANCIAL
STATEMENTS.
F-27
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE
COMBINED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Cash flows from operating activities:
Net loss.......................................................................................... $ (213)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of property and equipment......................................... 571
Provision for doubtful accounts................................................................. 62
Loss on disposal of equipment................................................................... 16
Changes in operating assets and liabilities:
Accounts receivable........................................................................... 1,603
Work in process............................................................................... (709)
Other current assets.......................................................................... 169
Accounts payable.............................................................................. 2,394
Accrued expenses.............................................................................. (1,457)
Deferred revenue.............................................................................. 445
------------
Net cash provided by operating activities................................................... 2,881
------------
Cash flows from investing activities:
Purchases of property and equipment............................................................... (444)
------------
Net cash used in investing activities....................................................... (444)
------------
Cash flows from financing activities:
Increase in short-term debt, net.................................................................. 890
Payment of notes payable.......................................................................... (554)
Net decrease in amounts owed to banks............................................................. (3,239)
------------
Net cash used in financing activities....................................................... (2,903)
------------
Net decrease in cash................................................................................ (466)
Effects of exchange rate changes on cash............................................................ (41)
Cash at beginning of year........................................................................... 715
------------
Cash at end of year................................................................................. $ 208
------------
------------
Supplemental disclosure of cash flow information:
Interest paid..................................................................................... $ 154
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE COMBINED FINANCIAL
STATEMENTS.
F-28
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
NATURE OF THE BUSINESS
The Localization Businesses of Stream International Holdings, Inc. in
Ireland, The Netherlands and France (together, the "Entities") are providers of
outsourced localization services to the information technology industry. Their
customer base includes software publishers, hardware manufacturers and
telecommunications companies that must render versions of their software and
manuals in different languages and culturally appropriate formats.
ACQUISITION OF THE ENTITIES
Lionbridge Technologies, Inc. ("Lionbridge") was incorporated on September
11, 1996 in order to effect the acquisition of certain elements of the
localization businesses of Stream International Holdings, Inc. ("Stream").
Funding for the acquisition was provided through the issuance of common and
preferred stock in Lionbridge and in a majority-owned subsidiary of Lionbridge.
On December 23, 1996, Lionbridge entered into an agreement with Stream to
acquire its localization businesses in Ireland, The Netherlands and France for
total consideration of $11,400,000, principally consisting of cash. These
businesses consisted of legal entities in Ireland and Holland, a legal entity
and divisional operation in France, and a divisional operation in Belgium.
These combined financial statements have been prepared using Stream's
historical basis in the assets and liabilities and historical results of
operations related to the Entities, since the Entities were under the common
control of Stream. These combined financial statements generally reflect the
results of operations and cash flows of the Entities as if they were separate
entities for the period presented.
Certain costs and expenses presented in the combined financial statements
were allocated by the management of Stream, based on their estimates of the cost
of services provided to the Entities by Stream. Stream management believes that
these allocations and allocation methods are reasonable. However, the financial
information included herein may not necessarily reflect the combined results of
operations and cash flows of the Entities in the future, or what they would have
been had the Entities been separate from Stream during the period presented.
2. SIGNIFICANT ACCOUNTING POLICIES:
The accompanying combined financial statements of the Entities reflect the
application of certain significant accounting policies as described below:
BASIS OF PRESENTATION
The combined financial statements present the statements of operations and
cash flows as if the Entities had operated as separate entities for the year
ended December 31, 1996. All significant inter-entity transactions have been
eliminated on combination.
Transactions with other members of the Stream group have been treated as
dealings with third-parties. Management does not believe that the cost of such
transactions would differ materially if conducted with unrelated parties.
F-29
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
REVENUE RECOGNITION
The Entities recognize revenue from the provision of localization services
to their customers on the percentage-of-completion method of accounting, based
on management's estimates of project progress. Anticipated losses by project, if
any, are recognized in the period in which determined.
ADVERTISING COSTS
Advertising costs are included in selling, general and administrative
expenses and are expensed as incurred.
ALLOCATED COSTS
Corporate expenses incurred by Stream on behalf of the Entities were
generally charged directly to these entities during the year ended December 31,
1996. These charges were allocated using a variety of methods depending on the
nature of the expense, including specified percentages of revenue measures and
management estimates.
When corporate expenses had not been previously charged, an amount has been
allocated in these financial statements based upon estimates made by management
of Stream of the cost attributable to the entity. Methods used to make
allocations were similar to those used to determine direct charges, with the
addition of headcount equivalents.
FOREIGN CURRENCY TRANSLATION
The functional currency for each of the Entities is the local currency of
the country in which operations are based. Revenues and expenses of foreign
operations are translated into U.S. dollars at the average rates of exchange for
the period. Resulting cumulative translation adjustments are reflected as a
separate component of accumulated comprehensive income in equity. Foreign
currency transaction losses arising from exchange rate fluctuations on
transactions denominated in currencies other than the functional currencies are
included in other income (expense), net in results of operations and were
$32,000 in 1996.
INCOME TAXES
Historically, the operations of the Entities have been included in the
consolidated U.S. Federal and certain state and foreign income tax returns filed
by Stream and its subsidiaries (see Note 1). Income tax expense has been
calculated on a separate-return basis for the purpose of these financial
statements. Deferred taxes arise primarily from unutilized net operating losses,
using enacted tax rates in effect in the years in which net operating losses are
expected to be utilized or differences are expected to reverse. Valuation
allowances are provided if, based on the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be
realized.
F-30
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is depreciated over the estimated useful lives of the
assets using the straight-line method, based upon the following asset lives:
<TABLE>
<S> <C>
Computer software and equipment..... 1 to 3 years
Furniture and office equipment...... 3 to 5 years
Leasehold improvements.............. Shorter of lease term or useful life
of asset
</TABLE>
Upon retirement or other disposition, the cost and related accumulated
depreciation of the assets are removed from the accounts and the resulting gain
or loss is reflected in the determination of net income or net loss.
Expenditures for maintenance and repairs are expensed as incurred.
LONG-LIVED ASSETS
The Entities periodically evaluate the net realizable value of long-lived
assets relying on a number of factors including operating results, business
plans, economic projections and anticipated future cash flows. An impairment in
the carrying value of an asset is assessed when the undiscounted, expected
future operating cash flows derived from the asset are less than its carrying
value.
NET LOSS PER COMMON SHARE
As these financial statements have been prepared by combining the operating
results and cash flows of several legal entities and divisional operations,
there is no historical basis of common shares outstanding. As a result, earnings
per share information is not presented.
USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and expenses during
the period presented. Actual results could differ from these estimates.
Estimates are used when accounting for the calculation of work in process,
depreciation and tax asset valuation allowances, and for the allocation of
corporate expenses from Stream.
3. RELATIONSHIP WITH STREAM:
Where corporate expenses incurred by Stream on behalf of the Entities were
not charged to the Entities during the year ended December 31, 1996, an
allocation of corporate expense has been included in operating expenses in the
combined statement of operations. The aggregate of amounts allocated to the
Entities for the year was $717,000, all relating to selling, general and
administrative expenses. No interest has been charged related to these
transactions.
4. LEASES:
The Entities leased certain equipment and office space. Total rental expense
charged to operations during the year ended December 31, 1996 was $90,000.
F-31
<PAGE>
THE LOCALIZATION BUSINESSES OF STREAM INTERNATIONAL
HOLDINGS, INC. IN IRELAND, THE NETHERLANDS AND FRANCE
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. EMPLOYEE BENEFIT PLANS:
During the year ended December 31, 1996, certain of the employees of the
Entities were members of defined benefit pension plans ultimately administered
by Stream. The pension contributions charged to operations during the year were
$324,000.
6. INCOME TAXES:
The Entities had no income tax expense for the year ended December 31, 1996,
as a result of incurred losses. A full valuation allowance was recorded against
the deferred tax assets generated by the 1996 losses, due to management's
uncertainty of realizing such benefits.
7. GEOGRAPHICAL INFORMATION:
Net revenue in 1996 arose entirely from activities in Europe, as follows:
<TABLE>
<S> <C>
France......................................................... $11,136,000
Ireland........................................................ 13,796,000
The Netherlands................................................ 2,514,000
Belgium........................................................ 688,000
----------
$28,134,000
----------
----------
</TABLE>
Foreign revenue is presented based on the country in which projects are
managed.
8. DONATED CAPITAL:
Immediately prior to the acquisition of the Entities by Lionbridge (see Note
1), a capital donation of $1,974,000 was made to the Dutch entities by Stream.
This donation was effected by the waiver of certain amounts payable to Stream.
9. VALUATION AND QUALIFYING ACCOUNTS:
The following table sets forth activity in the Entities' accounts receivable
reserve:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF CHARGES TO END OF
YEAR OPERATIONS DEDUCTIONS YEAR
------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
December 31, 1996.............................................. $ 202,000 $ 55,000 -- $ 257,000
</TABLE>
F-32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of VeriTest, Inc.:
In our opinion, the accompanying balance sheet and the related statements of
operations, shareholders' equity and cash flows present fairly, in all material
respects, the financial position of VeriTest, Inc. (the "Company") at December
31, 1998, and the results of its operations and its cash flows for the year
ended December 31, 1998 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 audit. We conducted our audit 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 audit provides a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Woodland Hills, California
June 16, 1999
F-33
<PAGE>
VERITEST, INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 144,288
Accounts receivable, net of allowance for doubtful accounts of $15,000.......... 317,258
Prepaid expenses and other current assets....................................... 52,117
---------
Total current assets.......................................................... 513,663
Property and equipment, net....................................................... 174,515
Other assets...................................................................... 8,728
---------
Total assets.................................................................. $ 696,906
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........................................... 300,459
Deferred revenue................................................................ 173,122
---------
Total current liabilities..................................................... 473,581
---------
Commitments (Note 6)
Shareholders' equity:
Common stock, no par value; 100,000 shares authorized; 10,000 shares issued and
outstanding................................................................... 10,000
Retained earnings............................................................... 213,325
---------
Total shareholders' equity.................................................... 223,325
---------
Total liabilities and shareholders' equity.................................... $ 696,906
---------
---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-34
<PAGE>
VERITEST, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
Net revenues.................................................................... $3,735,496
Operating expenses:
Cost of services.............................................................. 1,969,810
Selling and marketing......................................................... 190,590
General and administrative.................................................... 1,566,714
---------
Total operating expenses.................................................... 3,727,114
---------
Income before income taxes.................................................. 8,382
Provision for income taxes...................................................... 130
---------
Net income.................................................................. $ 8,252
---------
---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-35
<PAGE>
VERITEST, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK
----------------------
SHARES RETAINED
OUTSTANDING AMOUNT EARNINGS TOTAL
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1997....................................... 10,000 $ 10,000 $ 350,073 $ 360,073
Net income..................................................... 8,252 8,252
Cash distributions, $14.50 per share........................... -- -- (145,000) (145,000)
----------- --------- ---------- ----------
Balance, December 31, 1998....................................... 10,000 $ 10,000 $ 213,325 $ 223,325
----------- --------- ---------- ----------
----------- --------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-36
<PAGE>
VERITEST, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income..................................................................... $ 8,252
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation................................................................. 77,632
Provision for bad debts...................................................... 6,419
Changes in assets and liabilities:
Accounts receivable........................................................ 142,583
Prepaid expenses and other current assets.................................. (22,030)
Other assets............................................................... (2,086)
Accounts payable and accrued expenses...................................... 88,619
Deferred revenue........................................................... 53,329
---------
Net cash provided by operating activities................................ 352,718
---------
Cash flows from investing activities:
Purchases of property and equipment............................................ (93,018)
---------
Net cash used in investing activities.................................... (93,018)
---------
Cash flows from financing activities:
Cash distributions............................................................. (145,000)
---------
Net cash used in financing activities.................................... (145,000)
---------
Net increase in cash and cash equivalents................................ 114,700
Cash and cash equivalents, beginning of year..................................... 29,588
---------
Cash and cash equivalents, end of year........................................... $ 144,288
---------
---------
Supplemental disclosure of cash flow information:
Income taxes paid.............................................................. $ 1,660
Interest paid.................................................................. $ 490
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-37
<PAGE>
VERITEST, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS:
GENERAL
VeriTest, Inc. ("VeriTest") was incorporated in California on December 21,
1987 and began operations in that month.
VeriTest offers specialized lab test verification for computer hardware and
software OEMS as well as other customers who want their product tested or
logo-certified. The areas of testing include hardware platform and peripherals,
client/server and Internet, mobile computing, software quality assurance, game
and multimedia software, logo compliance and Year 2000 compliance.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
In the normal course of preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
VeriTest considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities approximates their carrying amounts
because of the short-term maturity of these instruments.
REVENUE RECOGNITION
VeriTest's revenues are derived principally from the performance of lab
testing on computer hardware, software and software logo certification services
performed for customers under a variety of contracts, some of which provide for
reimbursement on a fixed-price basis and others on a time and materials basis.
Generally, revenues and fees on VeriTest's long-term contracts are recognized as
services are performed, using the percentage-of-completion method of accounting.
Revenues on short-term contracts (typically three months or less) are generally
recognized under the completed-contract method upon completion of the lab
testing and delivery of the final report.
Billings and customer collections received prior to the completion of the
lab tests are recorded as deferred revenue until the completion of the tests and
services under the terms of the contracts.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method based upon the estimated
useful lives of the assets, ranging from four to seven years. Leasehold
improvements are amortized over the shorter of their estimated useful life or
the term of the lease. Useful lives are evaluated regularly by management in
order to
F-38
<PAGE>
VERITEST, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
determine recoverability in light of current technological conditions.
Maintenance and repairs are charged to expense as incurred, while renewals and
improvements are capitalized. Upon the sale or retirement of property and
equipment, the accounts are relieved of the cost and the related accumulated
depreciation, with any resulting gain or loss included in the Statement of
Operations.
INCOME TAXES
VeriTest elected to be taxed under Section 1361 of the Internal Revenue Code
as an S Corporation. Under these provisions, VeriTest does not pay federal
corporate income taxes on its taxable income. Instead, the shareholders are
individually liable for federal income taxes based on VeriTest's taxable income.
This election is also valid for state income tax reporting. However, a provision
for state income taxes is required based on a 1.5% state income tax rate, and
this state tax provision is included in the provision for income taxes in the
accompanying Statement of Operations.
COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement established standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income generally represents all changes in
shareholders' equity during the period except those resulting from investments
by, or distributions to, shareholders. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997 and requires restatement of earlier
periods presented. SFAS No. 130 defines comprehensive income as net income plus
all other changes in equity from non-owner sources. VeriTest has no other
comprehensive income items, and accordingly net income equals comprehensive
income.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the AICPA issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This statement provides guidance on accounting for the costs of
computer software developed or obtained for internal use. This SOP is effective
for fiscal periods commencing after December 15, 1998. Management does not
believe that the implementation of SOP 98-1 will have a material effect on the
financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement established accounting and
reporting standards for derivative instruments and hedging activities and
requires companies to recognize all derivatives as either assets or liabilities
in the statement of financial position and measures those instruments at fair
value. This statement is expected to be effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. Management does not believe that the
implementation of SFAS No. 133 will have any impact on the financial statements
since VeriTest does not engage in derivative or hedging activities.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments which subject VeriTest to concentrations of credit
risk consist primarily of cash and cash equivalents, and trade accounts
receivable. VeriTest maintains cash and cash equivalents with various domestic
financial institutions. VeriTest performs periodic evaluations of the relative
credit
F-39
<PAGE>
VERITEST, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS (CONTINUED)
standing of these institutions. From time to time, VeriTest's cash balances with
any one financial institution may exceed Federal Deposit Insurance Corporation
insurance limits.
VeriTest's customers are primarily concentrated in the United States.
VeriTest performs ongoing credit evaluations and generally requires a deposit on
its larger customer contracts prior to commencing work. Historically, VeriTest
has not experienced any significant losses related to credit risk.
For the year ended December 31, 1998, two customers accounted for
approximately 21% and 15%, respectively, of all revenues generated by VeriTest,
and three customers accounted for approximately 33%, 16% and 12%, respectively,
of accounts receivable at December 31, 1998.
4. PROPERTY AND EQUIPMENT
Property and equipment, net is comprised of the following at December 31,
1998:
<TABLE>
<CAPTION>
USEFUL LIFE
-----------
<S> <C> <C>
Equipment............................................................ 4 years $ 412,826
Furniture and fixtures............................................... 7 years 38,256
Leasehold improvements............................................... 5 years 27,955
Automobiles.......................................................... 5 years 55,588
----------
534,625
Less: accumulated depreciation (360,110)
----------
$ 174,515
----------
----------
</TABLE>
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses is comprised of the following at
December 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
Accounts payable.................................................................. $ 8,631
Accrued payroll................................................................... 85,820
Accrued vacation.................................................................. 51,520
Accrued profit sharing............................................................ 80,000
Accrued professional fees......................................................... 30,000
Other accrued expenses............................................................ 44,488
----------
$ 300,459
----------
----------
</TABLE>
F-40
<PAGE>
VERITEST, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS
VeriTest leases its facility under a noncancelable operating lease. The
following are the minimum lease obligations under the noncancelable operating
lease at December 31, 1998:
<TABLE>
<S> <C>
1999.............................................................. $ 224,724
2000.............................................................. 226,476
2001.............................................................. 228,427
2002.............................................................. 143,884
---------
Minimum lease payments............................................ $ 823,511
---------
---------
</TABLE>
Rent expense for the year ended December 31, 1998 amounted to $180,710.
7. PROFIT SHARING PLAN
VeriTest has a profit sharing plan covering employees with more than two
years of service. All contributions are made by VeriTest, are based on
VeriTest's performance, and are at the discretion of the Board of Directors.
Total VeriTest contributions for the year ended December 31, 1998 were $80,000.
8. CAPITALIZATION
As discussed in Note 2, VeriTest is a subchapter S Corporation with two
shareholders. During 1998, VeriTest made cash distributions to its shareholders
of $145,000 in the aggregate.
9. BANK LINES OF CREDIT
VeriTest has lines of credit available totaling $350,000 at December 31,
1998. There were no borrowings outstanding on these lines of credit at December
31, 1998. The lines of credit bear interest at rates ranging from a prime rate
plus 0.5% to a prime rate plus 0.75% (8.25% to 8.50% at December 31, 1998) and
are secured primarily by VeriTest's accounts receivable and/or property and
equipment. In addition, VeriTest's president and vice-president act as
guarantors for all indebtedness under the agreements.
10. SUBSEQUENT EVENT
Effective January 11, 1999, VeriTest's owners sold all their outstanding
shares of common stock to Lionbridge in exchange for consideration of
$4,354,000, consisting of cash of $3,260,000, 100,000 shares of common stock of
Lionbridge valued at $344,000, and a note payable for $750,000. The agreement
also requires certain contingent cash payments dependent on future operating
performance through December 31, 2000. Concurrent with the sale, VeriTest
converted its tax status from an S Corporation to a C Corporation.
F-41
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On January 11, 1999, Lionbridge Technologies, Inc. ("Lionbridge") entered
into an agreement to acquire all of the stock of VeriTest, Inc. for
consideration of $4,354,000, consisting of cash of $3,260,000, 100,000 shares of
common stock valued at $344,000, and a note payable for $750,000. The agreement
also required certain contingent cash payments, limited to $1,000,000, dependent
on future operating performance through December 31, 2000. This acquisition was
accounted for using the purchase method of accounting. The net difference
between the total purchase price of $4,419,000 at the date of acquisition
(including direct costs of the acquisition) and the fair value of assets and
liabilities acquired was recognized as goodwill, totaling $4,338,000. The
initial calculation of goodwill does not include any contingent consideration.
Future payments, if any, under the contingent payment arrangement will increase
goodwill. The results of VeriTest, Inc. are included in the Lionbridge
consolidated financial statements from January 11, 1999.
The following unaudited pro forma combined statements of operations give
effect to this acquisition as if it had occurred on January 1, 1998 and include
all material pro forma adjustments necessary for this purpose. The pro forma
statement of operations for the three months ended March 31, 1999 combines the
results of VeriTest, Inc. from January 1, 1999 to the date of acquisition with
the consolidated results of Lionbridge for the three months ended March 31,
1999. The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results that would have actually
occurred if the acquisition had been consummated on January 1, 1998, nor is it
necessarily indicative of future operating results. This unaudited pro forma
information should be read in conjunction with the Lionbridge consolidated
financial statements and notes thereto, included elsewhere in this prospectus.
The combined financial position of Lionbridge and VeriTest, Inc. is presented in
the Lionbridge consolidated balance sheet as of March 31, 1999, included
elsewhere in this prospectus, and is therefore not presented on a pro forma
basis.
F-42
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
LIONBRIDGE
TECHNOLOGIES, VERITEST, PRO FORMA PRO FORMA
INC. INC. ADJUSTMENTS COMBINED
---------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenue............................................. $ 38,412 $ 3,735 $ 42,147
Cost of revenue..................................... 25,546 1,970 27,516
------- ------------ -----------
Gross profit.................................. 12,866 1,765 14,631
------- ------------ -----------
Operating expenses:
Sales and marketing............................... 2,735 191 2,926
General and administrative........................ 10,889 1,567 12,456
Amortization of acquisition-releated intangible
assets.......................................... 2,145 -- $ 868(a) 3,013
Nonrecurring charges.............................. 501 -- -- 501
------- ------------ ----------- -----------
Total operating expenses...................... 16,270 1,758 868 18,896
------- ------------ ----------- -----------
(Loss) income from operations....................... (3,404) 7 (868) (4,265)
(451)
Interest expense.................................... (648) -- (b)
(1,041)
(c) (2,140)
Other income (expense), net......................... 49 -- -- 49
------- ------------ ----------- -----------
(Loss) income before income taxes................... (4,003) 7 (2,360) (6,356)
Provision for income taxes.......................... 259 -- -- 259
------- ------------ ----------- -----------
Net (loss) income................................... (4,262) $ 7 $ (2,360) (6,615)
------------ -----------
------------ -----------
Accrued dividends on preferred stock................ (1,062) (1,062)
------- -----------
Net loss attributable to common stockholders........ $ (5,324) $ (7,677)
------- -----------
------- -----------
Basic and diluted net loss per share attributable to
common stockholders............................... $ (1.99) $ (2.77)
Shares used in computing basic and diluted net loss
per share attributable to common stockholders..... 2,673 100(d) 2,773
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE COMBINED FINANCIAL
STATEMENTS.
F-43
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
LIONBRIDGE
TECHNOLOGIES, PRO FORMA PRO FORMA
INC. VERITEST, INC. ADJUSTMENTS COMBINED
---------------- ----------------- ------------- -----------
<S> <C> <C> <C> <C>
Revenue........................................... $ 11,690 $ -- $ 11,690
Cost of revenue................................... 8,195 68 8,263
------- ----- -----------
Gross profit (loss)......................... 3,495 (68) 3,427
------- ----- -----------
Operating expenses:
Sales and marketing............................. 1,172 5 1,177
General and administrative...................... 3,233 80 3,313
Amortization of acquisition-releated intangible
assets........................................ 766 -- $ 24(e) 790
Stock-based compensation........................ 45 -- -- 45
------- ----- ----- -----------
Total operating expenses.................... 5,216 85 24 5,325
------- ----- ----- -----------
Loss from operations.............................. (1,721) (153) (24) (1,898)
(12)
Interest expense.................................. (1,468) -- (f)
(28)
(g) (1,508)
Other income (expense), net....................... (181) -- -- (181)
------- ----- ----- -----------
Loss before income taxes.......................... (3,370) (153) (64) (3,587)
Provision for income taxes........................ 45 -- -- 45
------- ----- ----- -----------
Net loss.......................................... (3,415) $ (153) $ (64) (3,632)
----- -----
----- -----
Accrued dividends on preferred stock.............. (265) (265)
------- -----------
Net loss attributable to common stockholders...... $ (3,680) $ (3,897)
------- -----------
------- -----------
Basic and diluted net loss per share attributable
to common stockholders.......................... $ (1.17) $ (1.24)
Shares used in computing basic and diluted net
loss per share attributable to common
stockholders.................................... 3,140 11(h) 3,151
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE COMBINED FINANCIAL
STATEMENTS.
F-44
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Adjustments to reflect the acquisition of VeriTest, Inc. as if it had
occurred as of January 1, 1998 are as follows:
a) To increase amortization expense due to $4,338,000 of goodwill generated
from the acquisition of VeriTest, Inc., assuming one year of a five-year
amortization period.
b) To record interest expense for one year of interest on debt of
$4,010,000, used to finance the acquisition, at rates of 8% and 12%.
c) To record accretion of discount on notes payable for the value of
warrants issued in connection with debt used to finance the acquisition,
assuming one year of a twenty-month amortization period.
d) To adjust shares used in computing basic and diluted net loss per share
attributable to common stockholders for common shares issued upon the
acquisition that would have been outstanding for the entire year had the
acquisition occurred on January 1, 1998.
e) To increase amortization expense due to $4,338,000 of goodwill generated
from the acquisition of VeriTest, Inc., assuming ten days of a five-year
amortization period.
f) To record interest expense for ten days of interest on debt of
$4,010,000, used to finance the acquisition, at rates of 8% and 12%.
g) To record accretion of discount on notes payable for the value of
warrants issued in connection with debt used to finance the acquisition,
assuming ten days of a twenty-month amortization period.
h) To adjust shares used in computing basic and diluted net loss per share
attributable to common stockholders for common shares issued that would
have been outstanding for ten days had the acquisition occurred on
January 1, 1999.
F-45
<PAGE>
- --------------------------------------------------------------------------------
Until , 1999, all dealers that effect transactions in these securities,
whether or not participating in this offering, 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.
- --------------------------------------------------------------------------------
[GRAPHIC SHOWING COMPANY LOGO]
PRUDENTIAL SECURITIES
U.S. BANCORP PIPER JAFFRAY
ADAMS, HARKNESS & HILL, INC.
USA IRELAND FRANCE THE NETHERLANDS JAPAN CHINA KOREA
- ------------------------------------------------------------
<PAGE>
INSIDE BACK COVER
Representative Clients
Lionbridge has provided globalization and multilingual Internet services for
the following companies:
@Home
3Com
Adobe
America Online
Apple
Autodesk
Avid
Baan
Banyan
Bay Networks
Bentley Systems
Bull
Candle
Checkpoint
Cisco
Cognos
Compaq
Corel
Data General
Dragon Systems
Exchange Applications
Gateway
Hewlett-Packard
IBM
Informix
JavaSoft (Sun)
JD Edwards
Kodak
Lucent Technologies
Macromedia
Marcam
Microsoft
Motorola
Netscape
Network Associates
Nokia
Nortel Networks
Novell
Oce
Oracle
Qualcomm
Parametric Technology
Palm Computing (3Com)
PictureTel
Platinum Technology
Portal
Powerquest
Real Networks
SDRC
SPSS
Schneider Automation
Sonic Foundry
Silicon Graphics
Sun Microsystems
Sybase
Symantec
Texas Instruments
Trados
Visio
Yamagata
Language Diversity
Lionbridge has delivered multilingual versions in the following languages:
Arabic
Bulgarian
Chinese Simplified
Chinese Traditional
Czech
Danish
Dutch
English American
English UK
Finnish
French
French - Canadian
German
Greek
Hebrew
Hungarian
Italian
Japanese
Korean
Norweigan
Polish
Portuguese - Iberian
Portuguese - Brazilian
Romanian
Russian
Spanish Iberian
Spanish Latin American
Swedish
Thai
Turkish
Worldwide Locations
Lionbridge Globalization Centers
Japan
China
Korea
Silicon Valley
Boston
Ireland
France
The Netherlands
Graphic showing world map with the locations of Lionbridge globalization
centers and VeriTest Testing Labs indicated
VeriTest Testing Labs
Los Angeles
Silicon Valley
France
Ireland
Japan
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the common stock offered hereby are as
follows:
<TABLE>
<S> <C>
SEC registration fee.............................................. $
NASD filing fee...................................................
Nasdaq National Market listing fee................................
Printing and engraving expenses...................................
Legal fees and expenses...........................................
Accounting fees and expenses......................................
Blue Sky fees and expenses (including legal fees).................
Transfer agent and registrar fees and expenses....................
Miscellaneous.....................................................
Total......................................................... $
</TABLE>
Lionbridge will bear all expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and Lionbridge's second amended and
restated charter and amended and restated by-laws provide for indemnification of
Lionbridge's directors and officers for liabilities and expenses that they may
incur in such capacities. In general directors and officers are indemnified with
respect to actions taken in good faith in a manner reasonably believed to be in,
or not opposed to, the best interests of Lionbridge and, with respect to any
criminal action or proceeding, actions that the indemnitee had no reasonable
cause to believe were unlawful. Reference is made to Lionbridge's second amended
and restated charter and amended and restated by-laws filed as Exhibits 3.2 and
3.4 hereto, respectively.
The Underwriting Agreement provides that the Underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of Lionbridge against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). Reference is made
to the form of Underwriting Agreement filed as Exhibit 1.1 hereto.
In addition, Lionbridge has an existing directors and officers liability
insurance policy.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Lionbridge Technologies, Inc. was originally incorporated in Delaware in
1996. In 1998, Lionbridge Technologies, Inc. became a wholly owned subsidiary of
the Registrant, Lionbridge Technologies Holdings, Inc. In June 1999, Lionbridge
Technologies, Inc. changed its name to Lionbridge America, Inc. and Lionbridge
Technologies Holdings, Inc. changed its name to Lionbridge Technologies.
In the three fiscal years preceding the filing of this registration
statement, Lionbridge and Lionbridge America have issued the following
securities that were not registered under the Securities Act:
(a) Issuances of Capital Stock.
In September 1996, Lionbridge America issued 3,000 shares of its common
stock, par value $0.01 per share, to Rory J. Cowan at a purchase price of $.01
per share, for an aggregate of $30.
II-1
<PAGE>
In December 1996, Lionbridge America issued 1,473,913 shares of its common
stock to Rory J. Cowan pursuant to a 491.3043 to 1 stock dividend and issued to
Mr. Cowan an option to purchase 2,252,293 shares of its common stock.
In December 1996, Lionbridge America issued (i) an aggregate of 1,000 shares
of its Series AA preferred stock, par value $0.01 per share , to five affiliated
limited partnerships (collectively, the "Advent entities") of Advent
International Corporation, at a purchase price of $.01 per share, for an
aggregate of $10.00 and (ii) an aggregate of 7,673,108 shares of its Series A
convertible preferred stock, par value $0.01 per share, to Rory J. Cowan, Morgan
Stanley Venture Capital Fund II Annex, L.P. and Morgan Stanley Venture Investors
Annex, L.P. (collectively, the "Morgan Stanley entities") and Stream
International Holdings, Inc. at purchase price of $1.00 per share, for an
aggregate of $7,673,108.
In March 1997, Lionbridge America issued an aggregate of 395,000 shares of
its Series A convertible preferred stock to investors at purchase price of $1.00
per share, for an aggregate of $395,000.
In July 1997, Lionbridge America issued an aggregate of 175,000 shares of
its Series A convertible preferred stock to Paul Kavanagh and Kenneth Coleman at
purchase price of $1.00 per share, for an aggregate of $175,000.
In February 1998, Lionbridge issued an aggregate of 2,039,990 shares of its
common stock to the holders of common stock of Lionbridge America in exchange
for all of the 2,039,990 outstanding shares of common stock of Lionbridge
America held by these holders in connection with the creation of our holding
company corporate structure. Lionbridge also issued an aggregate of 13,271,314
shares of its Series A convertible preferred stock, par value $0.01 per share,
and an aggregate of 140 shares of its Series D nonvoting convertible preferred
stock, par value $0.01 per share, to Mr. Cowan, the Advent entities, the Morgan
Stanley entities and other stockholders of Lionbridge America in exchange for
all outstanding shares of Series A convertible preferred stock of Lionbridge
America and ordinary shares of Lionbridge Technologies Holdings, B.V.
In February 1998, Lionbridge issued 389,285 shares of its common stock to
Carl J. Kay at an agreed upon value of $.20 per share as partial consideration
for all of the 97,500 outstanding shares of common stock of Japanese Language
Services, Inc. held by Carl J. Kay and Yoko I. Kay in connection with
Lionbridge's acquisition of Japanese Language Services, Inc., a Massachusetts
corporation. Lionbridge also issued an aggregate of 41,150 shares of its common
stock to Elizabeth Draper, Coleman Yeaw and Daniel Schneider in February 1998
and an additional 36,400 shares to Ms. Draper and Mr. Yeaw in February 1999 in
satisfaction of certain obligations of Japanese Language Services to Ms. Draper,
Mr. Yeaw and Mr. Schneider.
In January 1999, Lionbridge issued an aggregate of 100,000 shares of its
common stock to Steven Nezmer and Marc Porter Zasada as partial consideration
for all of the 10,000 outstanding shares of common stock of VeriTest, Inc. held
by Messrs. Nezmer and Zasada in connection with Lionbridge's acquisition of
VeriTest, Inc., a California corporation.
In January 1999, Lionbridge entered into a Senior Subordinated Note Purchase
Agreement with Capital Resource Lenders III, L.P. ("CRL") pursuant to which
Lionbridge borrowed $4,000,000 from CRL under a 12% senior subordinated
convertible note due January 8, 2000. In February 1999, Lionbridge entered into
a First Amended and Restated Senior Subordinated Note Purchase Agreement with
CRL pursuant to which Lionbridge borrowed an additional $2,000,000 from CRL
under an amended and restated 12% senior subordinated note due February 26, 2006
in the aggregate principal amount of $6,000,000 and issued to CRL and an
affiliated entity of CRL common stock purchase warrants exercisable for an
aggregate of 1,916,574 shares of common stock of Lionbridge at an exercise price
of $.01 per share.
II-2
<PAGE>
In February 1999, Lionbridge Technologies Holdings, B.V. entered into a
Senior Subordinated Note Purchase Agreement with CRL pursuant to which it
borrowed $4,000,000 from CRL under a 12% senior subordinated note due February
26, 2006.
In March 1999, Lionbridge and Lionbridge Technologies Holdings, B.V. entered
into Senior Subordinated Note Purchase Agreements with the Morgan Stanley
entities pursuant to which we borrowed an aggregate of $2,000,000 from the
Morgan Stanley entities under 12% senior subordinated notes due March 9, 2006
and issued to the Morgan Stanley entities common stock purchase warrants
exercisable for an aggregate of 383,315 shares of common stock of Lionbridge at
an exercise price of $.01 per share.
(b) Grants and Exercises of Stock Options
As of May 31, 1999, Lionbridge has granted options to purchase an aggregate
of 3,948,800 shares of its common stock under its 1998 Stock Plan exercisable at
a weighted average exercise price of $1.14 per share. From December 1996 to June
15, 1999, Lionbridge issued 1,513,928 shares of its common stock for an
aggregate purchase price of $159,445 pursuant to exercise of employee options.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder, or, in the case of options to purchase Common Stock, Rule 701 under
the Securities Act. All of the foregoing securities are deemed restricted
securities for purposes of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of Lionbridge.
3.2, 4.1* Form of Second Amended and Restated Certificate of Incorporation of Lionbridge.
3.3 By-laws of Lionbridge.
3.4, 4.2* Form of Amended and Restated By-laws of Lionbridge.
4.3* Specimen Certificate for shares of Lionbridge's Common Stock.
5.1* Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
10.1 1998 Stock Plan.
10.2 1999 Employee Stock Purchase Plan.
10.3 Lease dated as of February 13, 1997 between Shorenstein Management, Inc., as Trustee of SRI Two
Realty Trust, and Lionbridge Technologies, Inc.
10.4 Employment Agreement dated as of December 23, 1996 between Lionbridge Technologies, Inc. and Rory J.
Cowan.
10.5* Employment Agreement dated as of January 1, 1997 between Lionbridge Technologies, Inc. and Myriam
Martin-Kail.
10.6 Employment Agreement dated as of February 11, 1997 between Lionbridge Technologies, Inc. and Stephen
J. Lifshatz.
10.7 Employment Agreement dated as of February 28, 1997 between Lionbridge Technologies, Inc. and Peter
Wright.
10.8 Second Restated Registration Rights Agreement dated as of February 26, 1999 by and among Lionbridge.
Capital Resource Lenders III, L.P., Morgan Stanley Venture Capital Fund II Annex, L.P., Morgan
Stanley Venture Investors Annex, L.P and each of the other parties listed on the signature pages
thereto.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.9 Loan Agreement dated as of September 26, 1997 by and between Silicon Valley Bank and Lionbridge
Technologies Holdings B.V. and Lionbridge Technologies B.V.
10.10 Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies, Inc. of Shares in the
Capital of Lionbridge Technologies Holdings B.V. in favor of Silicon Valley Bank.
10.11 Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies Holdings B.V. of Shares in
the Capital of Lionbridge Technologies B.V. in favor of Silicon Valley Bank.
10.12 Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies B.V. of Accounts Receivable
of Lionbridge Technologies B.V. in favor of Silicon Valley Bank.
10.13 Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies Holdings B.V. of Accounts
Receivable of Lionbridge Technologies Holdings B.V. in favor of Silicon Valley Bank.
10.14 Letter of Deposit dated as of September 26, 1997 of Lionbridge Technologies Holdings B.V. and Rory
Cowan to Silicon Valley Bank.
10.15 Security Agreement dated as of September 26, 1997 between Lionbridge Technologies, Inc. and Silicon
Valley Bank.
10.16 Guarantee dated as of September 26, 1997 made by Lionbridge Technologies Ireland in favor of Silicon
Valley Bank.
10.17 Debenture dated as of September 26, 1997 between Lionbridge Technologies Ireland and Silicon Valley
Bank.
10.18 Loan Document Modification Agreement Number 1 dated as of May 21, 1998 by and among Lionbridge
Technologies Holdings B.V., Lionbridge Technologies B.V. and Silicon Valley Bank.
10.19 Pledge Agreement dated as of May 21, 1998 between Lionbridge Technologies Holdings B.V. and Silicon
Valley Bank regarding capital stock of Lionbridge Technologies (France).
10.20 Warrant to Purchase Common Stock of Lionbridge dated as of May 21, 1998 issued to Silicon Valley
Bancshares.
10.21 Pledge Agreement dated as of May 21, 1998 between Lionbridge and Silicon Valley Bank regarding
capital stock of Lionbridge Technologies California, Inc.
10.22 Pledge Agreement dated as of May 21, 1998 between Lionbridge and Silicon Valley Bank regarding
capital stock of Japanese Language Services, Inc.
10.23 Amended and Restated Guarantee dated as of May 21, 1998 made by Lionbridge Technologies, Inc. in
favor of Silicon Valley Bank.
10.24 Guarantee dated as of May 21, 1998 made by Japanese Language Services, Inc. in favor of Silicon
Valley Bank.
10.25 Pledge Agreement dated as of May 21, 1998 between Japanese Language Services, Inc. and Silicon Valley
Bank regarding capital stock of Lionbridge Japan K.K.
10.26 Security Agreement dated as of May 21, 1998 between Japanese Language Services, Inc. and Silicon
Valley Bank.
10.27 Guarantee dated as of May 21, 1998 made by Lionbridge Japan K.K. in favor of Silicon Valley Bank.
10.28 Guarantee dated as of May 21, 1998 made by Lionbridge Technologies California, Inc. in favor of
Silicon Valley Bank.
10.29 Security Agreement dated as of May 21, 1998 between Lionbridge Technologies California, Inc. and
Silicon Valley Bank.
10.30 First Demand Guarantee dated as of May 21, 1998 made by Lionbridge Technologies (France) in favor of
Silicon Valley Bank.
10.31 Loan Document Modification Agreement Number 2 dated as of February 25, 1999 by and among Lionbridge
Technologies Holdings B.V., Lionbridge Technologies B.V., Lionbridge Technologies, Inc. and Silicon
Valley Bank.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.32 Common Stock Purchase Warrant of Lionbridge dated as of February 27, 1999 issued to Capital Resource
Partners III, L.P.
10.33 Common Stock Purchase Warrant of Lionbridge dated as of February 27, 1999 issued to CRP Investment
Partners III, L.L.C.
10.34 Common Stock Purchase Warrant of Lionbridge dated as of March 9, 1999 issued to Morgan Stanley
Venture Capital Fund II Annex, L.P.
10.35 Common Stock Purchase Warrant of Lionbridge dated as of March 9, 1999 issued to Morgan Stanley
Venture Investors Annex, L.P.
10.36 Lease dated as of January 1, 1998 between Corke Abbey Investments Limited and Lionbridge Technologies
Ireland.
10.37 Lease dated as of March 1, 1991 between Corke Abbey Investments and Andrews Travel Consultants
Limited; Assignment to European Language Translations Limited as of March 12, 1993.
10.38 Lease dated as of September 14, 1990 between Corke Abbey Investments Limited and European Language
Translations Limited.
10.39 Agreement dated as of December 4, 1998 between the Industrial Development Agency (Ireland) and
Lionbridge.
10.40 Loan Document Modification Agreement Number 3 dated as of May 20, 1999 by and among Lionbridge
Technologies Holdings B.V., Lionbridge Technologies B.V. and Silicon Valley Bank.
10.41 Form of Non-Competition Agreement as entered into between Lionbridge and each of Rory J. Cowan,
Stephen J. Lifshatz, and Peter Wright.
21.1 Subsidiaries of Lionbridge.
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney (contained on page II-7).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
All other schedules have been intentionally omitted because they are
either not required or the information has been included in the Notes to the
consolidated financial statements included as part of this Registration
Statement.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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.
II-5
<PAGE>
The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective; and (3) that for the purpose of determining any liability
under the 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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Waltham, Massachusetts
on June 21, 1999.
LIONBRIDGE TECHNOLOGIES, INC.
By: /s/ RORY J. COWAN
-----------------------------------------
Rory J. Cowan
CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Lionbridge Technologies, Inc.,
hereby severally constitute and appoint Rory J. Cowan and Stephen J. Lifshatz,
and each of them singly, our true and lawful attorneys, with full power to them
and each of them singly, to sign for us in our names in the capacities indicated
below, any registration statement related to the offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933
(a "462(b) Registration Statement"), any and all amendments and exhibits to this
registration statement or any 462(b) Registration Statement, and any and all
applications and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby or
thereby, and generally to do all things in our names and on our behalf in such
capacities to enable Lionbridge Technologies, Inc. to comply with the provisions
of the Securities Act of 1933 and all requirements of the Securities and
Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ RORY J. COWAN Officer and Chairman of
- ------------------------------ the Board (Principal June 21, 1999
Rory J. Cowan Executive Officer)
Chief Financial Officer,
/s/ STEPHEN J. LIFSHATZ Treasurer and Secretary
- ------------------------------ (Principal Financial and June 21, 1999
Stephen J. Lifshatz Accounting Officer)
/s/ GUY L. DE CHAZAL Director
- ------------------------------ June 21, 1999
Guy L. de Chazal
/s/ MARCIA J. HOOPER Director
- ------------------------------ June 21, 1999
Marcia J. Hooper
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ STEPHEN M. JENKS Director
- ------------------------------ June 21, 1999
Stephen M. Jenks
/s/ PAUL KAVANAGH Director
- ------------------------------ June 21, 1999
Paul Kavanagh
/s/ CLAUDE P. SHEER Director
- ------------------------------ June 21, 1999
Claude P. Sheer
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT INDEX
- ----------- -------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of Lionbridge.
3.2, 4.1* Form of Second Amended and Restated Certificate of Incorporation of Lionbridge.
3.3 By-laws of Lionbridge.
3.4, 4.2* Form of Amended and Restated By-laws of Lionbridge.
4.3* Specimen Certificate for shares of Lionbridge's Common Stock.
5.1* Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
10.1 1998 Stock Plan.
10.2 1999 Employee Stock Purchase Plan.
10.3 Lease dated as of February 13, 1997 between Shorenstein Management, Inc., as
Trustee of SRI Two Realty Trust, and Lionbridge Technologies, Inc.
10.4 Employment Agreement dated as of December 23, 1996 between Lionbridge
Technologies, Inc. and Rory J. Cowan.
10.5* Employment Agreement dated as of January 1, 1997 between Lionbridge
Technologies, Inc. and Myriam Martin-Kail.
10.6 Employment Agreement dated as of February 11, 1997 between Lionbridge
Technologies, Inc. and Stephen J. Lifshatz.
10.7 Employment Agreement dated as of February 28, 1997 between Lionbridge
Technologies, Inc. and Peter Wright.
10.8 Second Restated Registration Rights Agreement dated as of February 26, 1999 by
and among Lionbridge, Capital Resource Lenders III, L.P., Morgan Stanley
Venture Capital Fund II Annex, L.P., Morgan Stanley Venture Investors Annex,
L.P., and each of the other parties listed on the signature pages thereto.
10.9 Loan Agreement dated as of September 26, 1997 by and between Silicon Valley
Bank and Lionbridge Technologies Holdings B.V. and Lionbridge Technologies B.V.
10.10 Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies, Inc.
of Shares in the Capital of Lionbridge Technologies Holdings B.V. in favor of
Silicon Valley Bank.
10.11 Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies
Holdings B.V. of Shares in the Capital of Lionbridge Technologies B.V. in favor
of Silicon Valley Bank.
10.12 Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies B.V.
of Accounts Receivable of Lionbridge Technologies B.V. in favor of Silicon
Valley Bank.
10.13 Deed of Pledge dated as of September 26, 1997 by Lionbridge Technologies
Holdings B.V. of Accounts Receivable of Lionbridge Technologies Holdings B.V.
in favor of Silicon Valley Bank.
10.14 Letter of Deposit dated as of September 26, 1997 of Lionbridge Technologies
Holdings B.V. and Rory Cowan to Silicon Valley Bank.
10.15 Security Agreement dated as of September 26, 1997 between Lionbridge
Technologies, Inc. and Silicon Valley Bank.
10.16 Guarantee dated as of September 26, 1997 made by Lionbridge Technologies
Ireland in favor of Silicon Valley Bank.
10.17 Debenture dated as of September 26, 1997 between Lionbridge Technologies
Ireland and Silicon Valley Bank.
10.18 Loan Document Modification Agreement Number 1 dated as of May 21, 1998 by and
among Lionbridge Technologies Holdings, B.V., Lionbridge Technologies, B.V. and
Silicon Valley Bank.
10.19 Pledge Agreement dated as of May 21, 1998 between Lionbridge Technologies
Holdings, B.V. and Silicon Valley Bank regarding capital stock of Lionbridge
Technologies (France).
10.20 Warrant to Purchase Common Stock of Lionbridge dated as of May 21, 1998 issued
to Silicon Valley Bancshares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT INDEX
- ----------- -------------------------------------------------------------------------------
<S> <C>
10.21 Pledge Agreement dated as of May 21, 1998 between Lionbridge and Silicon Valley
Bank regarding capital stock of Lionbridge Technologies California, Inc.
10.22 Pledge Agreement dated as of May 21, 1998 between Lionbridge and Silicon Valley
Bank regarding capital stock of Japanese Language Services, Inc.
10.23 Amended and Restated Guarantee dated as of May 21, 1998 made by Lionbridge
Technologies, Inc. in favor of Silicon Valley Bank.
10.24 Guarantee dated as of May 21, 1998 made by Japanese Language Services, Inc. in
favor of Silicon Valley Bank.
10.25 Pledge Agreement dated as of May 21, 1998 between Japanese Language Services,
Inc. and Silicon Valley Bank regarding capital stock of Lionbridge Japan K.K.
10.26 Security Agreement dated as of May 21, 1998 between Japanese Language Services,
Inc. and Silicon Valley Bank.
10.27 Guarantee dated as of May 21, 1998 made by Lionbridge Japan K.K. in favor of
Silicon Valley Bank.
10.28 Guarantee dated as of May 21, 1998 made by Lionbridge Technologies California,
Inc. in favor of Silicon Valley Bank.
10.29 Security Agreement dated as of May 21, 1998 between Lionbridge Technologies
California, Inc. and Silicon Valley Bank.
10.30 First Demand Guarantee dated as of May 21, 1998 made by Lionbridge Technologies
(France) in favor of Silicon Valley Bank.
10.31 Loan Document Modification Agreement Number 2 dated as of February 25, 1999 by
and among Lionbridge Technologies Holdings, B.V., Lionbridge Technologies,
B.V., Lionbridge Technologies, Inc. and Silicon Valley Bank.
10.32 Common Stock Purchase Warrant of Lionbridge dated as of February 27, 1999
issued to Capital Resource Partners III, L.P.
10.33 Common Stock Purchase Warrant of Lionbridge dated as of February 27, 1999
issued to CRP Investment Partners III, L.L.C.
10.34 Common Stock Purchase Warrant of Lionbridge dated as of March 9, 1999 issued to
Morgan Stanley Venture Capital Fund II Annex, L.P.
10.35 Common Stock Purchase Warrant of Lionbridge dated as of March 9, 1999 issued to
Morgan Stanley Venture Investors Annex, L.P.
10.36 Lease dated as of January 1, 1998 between Corke Abbey Investments Limited and
Lionbridge Technologies Ireland.
10.37 Lease dated as of March 1, 1991 between Corke Abbey Investments and Andrews
Travel Consultants Limited; Assignment to European Language Translations
Limited as of March 12, 1993.
10.38 Lease dated as of September 14, 1990 between Corke Abbey Investments Limited
and European Language Translations Limited.
10.39 Agreement dated as of December 4, 1998 between the Industrial Development
Agency (Ireland) and Lionbridge.
10.40 Loan Document Modification Agreement Number 3 dated as of May 20, 1999 by and
among Lionbridge Technologies Holdings B.V., Lionbridge Technologies B.V. and
Silicon Valley Bank.
10.41 Form of Non-Competition Agreement as entered into between Lionbridge and each
of Rory J. Cowan, Stephen J. Lifshatz, and Peter Wright.
21.1 Subsidiaries of Lionbridge.
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney (contained on page II-7).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
Exhibit 3.1
EXHIBIT B
RESTATED CERTIFICATE OF INCORPORATION
OF
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
* * * * * *
Lionbridge Technologies Holdings, Inc., a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
A. The name of this corporation is Lionbridge Technologies Holdings,
Inc. The original Certificate of Incorporation was filed with the Secretary of
the State of Delaware on October 10, 1997.
B. In accordance with the provisions of Sections 228, 242, and 245 of
the General Corporation Law of the State of Delaware, this Amended and Restated
Certificate of Incorporation restates and amends the provisions of the
Certificate of Incorporation of this corporation.
C. The text of the Certificate of Incorporation is hereby amended and
restated in full as follows:
FIRST. The name of the corporation is Lionbridge Technologies Holdings,
Inc.
SECOND. The address of its registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of
New Castle, Zip Code 19801. The name of its registered agent at such address is
The Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is (i) 25,950,867 shares of Common
Stock, $.01 par value per
<PAGE>
-2-
share ("Common Stock") and (ii) 34,543,228 shares of Preferred Stock, $.01 par
value per share ("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
1. GENERAL. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. VOTING. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased
or decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote, irrespective of the provisions of Section
242(b)(2) of the General Corporation Law of Delaware.
3. DIVIDENDS. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. LIQUIDATION. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
<PAGE>
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Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, special voting rights, conversion rights,
redemption privileges and liquidation preferences, as shall be stated and
expressed in such resolutions, all to the full extent now or hereafter permitted
by the General Corporation Law of Delaware. Without limiting the generality of
the foregoing, the resolutions providing for issuance of any series of Preferred
Stock may provide that such series shall be superior or rank equally or be
junior to the Preferred Stock of any other series to the extent permitted by
law. Except as otherwise specifically provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the issuance of any shares of any series of the
Preferred Stock authorized by and complying with the conditions of this
Certificate of Incorporation, the right to have such vote being expressly waived
by all present and future holders of the capital stock of the Corporation.
C. SERIES A CONVERTIBLE PREFERRED STOCK.
Seventeen million two hundred seventy-one thousand three hundred and
fourteen (17,271,314) shares of the authorized and unissued Preferred Stock of
the Corporation are hereby designated "Series A Convertible Preferred Stock"
(the "Series A Preferred Stock") with the following rights, preferences, powers,
privileges and restrictions, qualifications and limitations.
1. DIVIDENDS.
(a) The Corporation shall not declare or pay any dividends or
other distributions (as defined below) on shares of Common Stock until the
holders of the Series A Preferred Stock then outstanding shall have first
received, or simultaneously receive, a cash dividend on each outstanding share
of Series A Preferred Stock in an amount at least equal to the product of (i)
the per share amount, if any, of the dividends or other distributions to be
declared, paid or set aside for the Common Stock, multiplied by (ii) the number
of whole shares of Common Stock issued or issuable upon conversion of the Series
C Convertible Preferred Stock (the "Series C Preferred Stock") into which such
share of Series A Preferred Stock is then convertible.
(b) For purposes of this Section 1, unless the context
requires otherwise, "distribution" shall mean the transfer of cash or property
without consideration, whether by way of dividend or otherwise, payable other
than in Common Stock or other securities of the Corporation, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common Stock
held by employees or directors of, or consultants to, the Corporation upon
termination of their employment or services pursuant to agreements providing for
such repurchase at a price equal to the original issue price of such shares and
<PAGE>
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other than redemptions in liquidation or dissolution of the Corporation) for
cash or property, including any such transfer, purchase or redemption by a
subsidiary of this Corporation.
2. LIQUIDATION, DISSOLUTION OR WINDING UP; CERTAIN MERGERS,
CONSOLIDATIONS AND ASSET SALES.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series A Preferred Stock (for
purposes of this Section C.2., collectively referred to as "Senior Preferred
Stock"), but before any payment shall be made to the holders of Common Stock or
any other class or series of stock ranking on liquidation junior to the Series A
Preferred Stock (for purposes of this Section C.2., such Common Stock and other
stock being collectively referred to as "Junior Stock") by reason of their
ownership thereof, an amount equal to the sum of (a) and (b) where (a) equals
$1.00 per share (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares), plus any dividends declared but unpaid thereon, plus a premium
equal to 8% per year of the original purchase price per share of the Series A
Preferred Stock calculated from (i) December 23, 1996 in the case of each such
share issued prior to February 24, 1998 and (ii) the date of issue in the case
of each such share issued on or after February 24, 1998 (in either case, the
"Series A Primary Amount"), and (b) equals such amount per share as would have
been payable had each such share of Series A Preferred Stock been converted into
shares of Common Stock issued or issuable upon conversion of the shares of
Series C Preferred Stock into which the Series A Preferred Stock is then
convertible immediately prior to such liquidation, dissolution or winding up
(the "Series A Secondary Amount"). The right of the holders of Series A
Preferred Stock to receive the Series A Primary Amount in respect of their
Series A Preferred Stock on any liquidation of the Company shall be pari passu
with the right of the holders of Series B Preferred Stock to receive the amounts
due to such holders in respect of their Series B Preferred Stock on any
liquidation of the Company and with the right of the holders of Series D
Preferred Stock to receive their Series D Primary Amounts (as defined below) on
any liquidation of the Company and shall be senior to the right of the holders
specified in the next sentence to receive the amounts specified in the next
sentence. The right of the holders of Series A Preferred Stock to receive Series
A Secondary Amounts in respect of their Series A Preferred Stock on any
liquidation of the Company shall be pari passu with the right of the holders of
any outstanding Series C Preferred Stock and Common Stock to receive the amounts
due to such holders in respect of their Series C Preferred Stock and Common
Stock, respectively, on any liquidation of the Company and with the right of the
holders of Series D Preferred Stock to receive their Series D Secondary Amounts
(as defined below) on any liquidation of the Company and shall be junior to the
right of the holders specified in the preceding sentence to receive the amounts
specified in the preceding sentence. If upon any such liquidation, dissolution
or winding up of the Corporation the remaining assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
holders
<PAGE>
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of shares of Series A Preferred Stock the full amount to which they shall be
entitled, the holders of shares of Series A Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the Series A Preferred
Stock shall share ratably in any distribution of the remaining assets and funds
of the Corporation in proportion to the respective amounts which would otherwise
be payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
(b) After the payment of all preferential amounts required to
be paid to the holders of Senior Preferred Stock, Series A Preferred Stock and
any other class or series of stock of the Corporation ranking on liquidation on
a parity with the Series A Preferred Stock, upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) In the event of any merger or consolidation of the
Corporation into or with another corporation (except one in which the holders of
capital stock of the Corporation immediately prior to such merger or
consolidation continue to hold at least 50% by voting power of the capital stock
of the surviving corporation), or the sale of all or substantially all the
assets of the Corporation, if the holders of at least 66 2/3% of the then
outstanding shares of Series A Preferred Stock so elect by giving written notice
thereof to the Corporation at least three days before the effective date of such
event, then such merger, consolidation or asset sale shall be deemed to be a
liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation), or
all consideration payable to the Corporation, together with all other available
assets of the Corporation (in the case of an asset sale), shall be distributed
to the holders of capital stock of the Corporation in accordance with
Subsections 2(a) and 2(b) above. The Corporation shall promptly provide to the
holders of shares of Series A Preferred Stock such information concerning the
terms of such merger, consolidation or asset sale and the value of the assets of
the Corporation as may reasonably be requested by the holders of Series A
Preferred Stock in order to assist them in determining whether to make such an
election. If the holders of the Series A Preferred Stock make such an election,
the Corporation shall use its best efforts to amend the agreement or plan of
merger or consolidation to adjust the rate at which the shares of capital stock
of the Corporation are converted into or exchanged for cash, new securities or
other property to give effect to such election. The amount deemed distributed to
the holders of Series A Preferred Stock upon any such merger or consolidation
shall be the cash or the value of the property, rights or securities distributed
to such holders by the acquiring person, firm or other entity. The value of such
property, rights or other securities shall be determined in good faith by the
Board of Directors of the Corporation. If no notice of the election permitted by
this Subsection (c) is given, the provisions of Subsection 4(i) shall apply.
3. VOTING.
(a) Each holder of outstanding shares of Series A Preferred
Stock shall be entitled to the number of votes equal to the number of whole
shares of Common Stock issuable upon conversion of the Series C Preferred Stock
into which the shares of the Series A
<PAGE>
-6-
Preferred Stock held by such holder are then convertible (as adjusted from time
to time pursuant to Section F.4 and Section 4 hereof), at each meeting of
stockholders of the Corporation (and written actions of stockholders in lieu of
meetings) with respect to any and all matters presented to the stockholders of
the Corporation for their action or consideration. Except as provided by law, by
the provisions of Subsection 3(b) below or by the provisions establishing any
other series of Series Preferred Stock, holders of Series A Preferred Stock and
of any other outstanding series of Series Preferred Stock shall vote together
with the holders of Common Stock as a single class.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock so
as to affect adversely the Series A Preferred Stock, without the written consent
or affirmative vote of the holders of a majority of the then outstanding shares
of Series A Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class. For this
purpose, without limiting the generality of the foregoing, the authorization of
any shares of capital stock with preference or priority over the Series A
Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall be deemed to affect adversely the Series A Preferred Stock, and the
authorization of any shares of capital stock on a parity with Series A Preferred
Stock as to the right to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of the Corporation shall not be deemed to
affect adversely the Series A Preferred Stock. The number of authorized shares
of Series A Preferred Stock may be increased or decreased (but not below the
number of shares then outstanding) by the directors of the Corporation pursuant
to Section 151 of the General Corporation Law of Delaware or by the affirmative
vote of the holders of a majority of the then outstanding shares of the Common
Stock, Series A Preferred Stock and all other classes or series of stock of the
Corporation entitled to vote thereon, voting as a single class, irrespective of
the provisions of Section 242(b)(2) of the General Corporation Law of Delaware.
4. OPTIONAL CONVERSION. The holders of the Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and from
time to time, and without the payment of additional consideration by the holder
thereof, into (i) 1/100,000 of a fully paid and nonassessable share of Series B
Preferred Stock and (ii) a number of fully paid and nonassessable shares Series
C Preferred Stock, with such number determined by dividing $1.00 by the
Conversion Price (as defined below) in effect at the time of conversion. The
"Conversion Price" shall initially be $1.00. Such initial Conversion Price, and
the rate at which shares of Series A Preferred Stock may be converted into
shares of Series C Preferred Stock, shall be subject to adjustment as provided
below.
(b) FRACTIONAL SHARES. Fractional shares of Series B Preferred
Stock shall be permitted. No fractional shares of Series C Preferred Stock shall
be issued upon conversion of the Series A Preferred Stock. In lieu of any
fractional shares of Series C Preferred Stock to
<PAGE>
-7-
which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the then effective Conversion Price.
(c) MECHANICS OF CONVERSION.
(i) In order for a holder of Series A Preferred Stock
to convert shares of Series A Preferred Stock into shares of Series B Preferred
Stock and Series C Preferred Stock, such holder shall surrender the certificate
or certificates for such shares of Series A Preferred Stock, at the office of
the transfer agent for the Series A Preferred Stock (or at the principal office
of the Corporation if the Corporation serves as its own transfer agent),
together with written notice that such holder elects to convert all or any
number of the shares of the Series A Preferred Stock represented by such
certificate or certificates. Such notice shall state such holder's name or the
names of the nominees in which such holder wishes the certificate or
certificates for shares of Series B Preferred Stock and Series C Preferred Stock
to be issued. If required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. The
date of receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date ("Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of Series A Preferred Stock, or to his or its nominees, a certificate or
certificates for the number of shares of Series B Preferred Stock and Series C
Preferred Stock to which such holder shall be entitled, together with cash in
lieu of any fraction of a share.
(ii) The Corporation shall at all times when the
Series A Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting the conversion
of the Series A Preferred Stock, such number of its duly authorized shares of
Series B Preferred Stock and Series C Preferred Stock as shall from time to time
be sufficient to effect the conversion of all outstanding Series A Preferred
Stock. Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value of the shares of Series B Preferred
Stock and Series C Preferred Stock issuable upon conversion of the Series A
Preferred Stock, the Corporation will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of Series B
Preferred Stock and Series C Preferred Stock at such adjusted Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any declared but unpaid dividends on the
Series A Preferred Stock surrendered for conversion or on the Series B Preferred
Stock and Series C Preferred Stock delivered upon conversion.
(iv) All shares of Series A Preferred Stock which
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to
<PAGE>
-8-
vote, shall immediately cease and terminate on the Conversion Date, and from
such date the holders thereof shall be deemed to be the owners of shares of
Series B Preferred Stock and Series C Preferred Stock. Any shares of Series A
Preferred Stock so converted shall be retired and canceled and shall not be
reissued, and the Corporation (without the need for stockholder action) may from
time to time take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issuance or delivery of shares
of Series B Preferred Stock and Series C Preferred Stock upon conversion of
shares of Series A Preferred Stock pursuant to this Section 4. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of shares of Series B
Preferred Stock and Series C Preferred Stock in a name other than that in which
the shares of Series A Preferred Stock so converted were registered, and no such
issuance or delivery shall be made unless and until the person or entity
requesting such issuance has paid to the Corporation the amount of any such tax
or has established, to the satisfaction of the Corporation, that such tax has
been paid.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES:
(i) SPECIAL DEFINITIONS. For purposes of this
Subsection 4(d), the following definitions shall apply:
(A) "OPTION" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, excluding options described in subsection 4(d)(i)(D)(V)
below.
(B) "ORIGINAL ISSUE DATE" shall mean the
date on which a share of Series A Preferred Stock was first issued.
(C) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(D) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean all shares of Common Stock issued (or, pursuant to Subsection
4(d)(iii) below, deemed to be issued) by the Corporation after the Original
Issue Date, other than shares of Common Stock issued or issuable:
(I) upon conversion of any
Convertible Securities
outstanding on the Original
Issue Date, or upon
exercise of any Options
outstanding on the Original
Issue Date;
<PAGE>
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(II) upon conversion of shares
of Series C Preferred Stock
issued or issuable upon
conversion of the Series A
Preferred Stock;
(III) as a dividend or
distribution on Series A
Preferred Stock;
(IV) by reason of a dividend,
stock split, split-up or
other distribution on
shares of Common Stock that
is covered by Subsection
4(e) or 4(f) below;
(V) to employees or directors
of, or consultants to, the
Corporation pursuant to a
plan adopted or a grant
approved by the Board of
Directors of the
Corporation.
(VI) up to 466,835 shares of
Common Stock to the
stockholders and former
employees of Japanese
Language Services, Inc.
("JLS") in exchange for
acquisition by the
Corporation or a subsidiary
of the Corporation of all
of the outstanding stock of
JLS; or
(VII) warrants issued on or about
February 24, 1998 to
certain funds controlled by
Advent International
Corporation and Morgan
Stanley Venture Capital II,
Inc. to purchase Common
Stock in connection with
the extension of $4,000,000
in financing, and any
shares of Common Stock
issued upon the exercise of
such warrants.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment
in the number of shares of Series C Preferred Stock issuable upon conversion of
the Series A Preferred Stock shall be made by adjustment in the applicable
Conversion Price thereof if (a) the consideration per share (determined pursuant
to Subsection 4(d)(v)) for an Additional Share of Common Stock issued or deemed
to be issued by the Corporation is more than or equal to the applicable
Conversion Price in effect on the date of, and immediately prior to, the issue
of such Additional Shares, or (b) prior to such issuance, the Corporation
receives written notice from the holders of at least 66 2/3% of the then
outstanding shares of Series A Preferred Stock agreeing that no such adjustment
shall be made as the result of the issuance of Additional Shares of Common
Stock.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL
SHARES OF COMMON STOCK.
<PAGE>
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If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 4(d)(v) hereof)
of such Additional Shares of Common Stock would be less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) If such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, upon the exercise,
conversion or exchange thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase
becoming effective, be recomputed to reflect such increase insofar as it affects
such Options or the rights of conversion or exchange under such Convertible
Securities;
(C) Upon the expiration or termination of
any unexercised Option, the Conversion Price shall not be readjusted, but the
Additional Shares of Common Stock deemed issued as the result of the original
issue of such Option shall not be deemed issued for the purposes of any
subsequent adjustment of the Conversion Price;
(D) In the event of any change in the number
of shares of Common Stock issuable upon the exercise, conversion or exchange of
any Option or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Conversion Price then
in effect shall forthwith be readjusted to such Conversion Price as would have
obtained had the adjustment which was made upon the issuance of such Option or
Convertible Security not exercised or converted prior to such change been made
upon the basis of such change; and
(E) No readjustment pursuant to clause (B)
or (D) above shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (i) the Conversion Price on the original
adjustment date, or (ii) the Conversion Price that
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would have resulted from any issuances of Additional Shares of Common Stock
between the original adjustment date and such readjustment date.
In the event the Corporation, after the Original Issue Date, amends the
terms of any Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the Original Issue Date or were
issued after the Original Issue Date), then such Options or Convertible
Securities, as so amended, shall be deemed to have been issued after the
Original Issue Date and the provisions of this Subsection 4(d)(iii) shall apply.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE
OF ADDITIONAL SHARES OF COMMON STOCK.
In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Subsection 4(d)(iii), but excluding
shares issued as a stock split or combination as provided in Subsection 4(e) or
upon a dividend or distribution as provided in Subsection 4(f)), without
consideration or for a consideration per share less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
then and in such event, such Conversion Price shall be reduced, concurrently
with such issue, to a price (calculated to the nearest cent) determined by
multiplying such Conversion Price by a fraction, (A) the numerator of which
shall be (1) the number of shares of Common Stock outstanding immediately prior
to such issue plus (2) the number of shares of Common Stock which the aggregate
consideration received or to be received by the Corporation for the total number
of Additional Shares of Common Stock so issued would purchase at such Conversion
Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; PROVIDED THAT, (i) for the purpose
of this Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) the number of shares
of Common Stock deemed issuable upon exercise or conversion of such outstanding
Options and Convertible Securities shall not give effect to any adjustments to
the conversion price or conversion rate of such Options or Convertible
Securities resulting from the issuance of Additional Shares of Common Stock that
is the subject of this calculation.
(v) DETERMINATION OF CONSIDERATION. For purposes of
this Subsection 4(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration
shall:
(I) insofar as it consists of cash,
be computed at the aggregate of cash received by the Corporation, excluding
amounts paid or payable for accrued interest;
<PAGE>
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(II) insofar as it consists of
property other than cash, be computed at the fair market value thereof at the
time of such issue, as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares
of Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the proportion
of such consideration so received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board of Directors.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Subsection 4(d)(iii),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) MULTIPLE CLOSING DATES. In the event the
Corporation shall issue on more than one date Additional Shares of Common Stock
which are comprised of shares of the same series or class of Preferred Stock,
and such issuance dates occur within a period of no more than 120 days, then the
Conversion Price shall be adjusted only once on account of such issuances, with
such adjustment to occur upon the final such issuance and to give effect to all
such issuances as if they occurred on the date of the final such issuance.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
<PAGE>
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(f) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time, or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for the Series A Preferred Stock then in effect shall be decreased as of
the time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Conversion Price for the Series A Preferred Stock then in effect by a fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on
such record date, and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of
Common Stock issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for the Series A Preferred Stock shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Conversion Price for the Series A Preferred Stock shall be
adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions; and provided further, however, that no such
adjustment shall be made if the holders of Series A Preferred Stock
simultaneously receive a dividend or other distribution of shares of Common
Stock in a number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series A Preferred Stock had been
converted into Series C Preferred Stock, and such Series C Preferred Stock had
been converted into Common Stock on the date of such event.
(g) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original Issue
Date for the Series A Preferred Stock shall make or issue, or fix a record date
for the determination of holders of Common Stock entitled to receive, a dividend
or other distribution payable in securities of the Corporation other than shares
of Common Stock, then and in each such event provision shall be made so that the
holders of the Series A Preferred Stock shall receive upon conversion thereof in
addition to the number of shares of Common Stock receivable upon conversion of
the Series C Preferred Stock into which the Series A Preferred Stock is then
convertible, the amount of securities of the Corporation that they would have
received if all outstanding shares of Series A Preferred Stock had been
converted into Series C Preferred Stock, and such Series C Preferred Stock had
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of the Series A
Preferred Stock; and provided further,
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however, that no such adjustment shall be made if the holders of Series A
Preferred Stock simultaneously receive a dividend or other distribution of such
securities in an amount equal to the amount of such securities as they would
have received if all outstanding shares of Series A Preferred Stock had been
converted into Series C Preferred Stock, and such Series C Preferred Stock had
been converted into Common Stock on the date of such event.
(h) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR
SUBSTITUTION. If the Common Stock issuable upon the conversion of the Series C
Preferred Stock into which the Series A Preferred Stock is then convertible
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for below), then and in each such event the holder of each such
share of Series A Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification, or other change,
by holders of the number of shares of Common Stock into which such shares of
Series C Preferred Stock issuable upon conversion of the Series A Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
(i) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of
any consolidation or merger of the Corporation with or into another corporation
or the sale of all or substantially all of the assets of the Corporation to
another corporation (other than a consolidation, merger or sale which is covered
by Subsection 2(c)), each share of Series A Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of the Series C Preferred Stock into which the
Series A Preferred Stock is then convertible would have been entitled upon such
consolidation, merger or sale; and, in such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made in the
application of the provisions in this Section 4 set forth with respect to the
rights and interest thereafter of the holders of the Series A Preferred Stock,
to the end that the provisions set forth in this Section 4 (including provisions
with respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Series A Preferred Stock and the conversion of the Series C Preferred Stock
issuable upon conversion of the Series A Preferred Stock.
(j) NO IMPAIRMENT. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
<PAGE>
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appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.
(k) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of the Series C Preferred Stock issuable
upon conversion of the Series A Preferred Stock.
(l) NOTICE OF RECORD DATE. In the event:
(i) that the Corporation declares a dividend (or
any other distribution) on its Common Stock
payable in Common Stock or other securities
of the Corporation;
(ii) that the Corporation subdivides or combines
its outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock
of the Corporation (other than a subdivision
or combination of its outstanding shares of
Common Stock or a stock dividend or stock
distribution thereon), or of any
consolidation or merger of the Corporation
into or with another corporation, or of the
sale of all or substantially all of the
assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the
Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, and shall cause to
be mailed to the holders of the Series A Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least ten
days prior to the date specified in (A) below or twenty days before the date
specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
subdivision or combination, 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, subdivision or combination are to be
determined, or
<PAGE>
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(B) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation
or winding up is expected to become effective, and
the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other
property deliverable upon such reclassification,
consolidation, merger, sale, dissolution or winding
up.
5. MANDATORY CONVERSION.
(a) Upon the closing of the sale of shares of Common Stock, at
a price of at least $4.00 per share (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other similar recapitalizations
affecting such shares), in a public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, resulting
in at least $15 million of gross proceeds to the Corporation (the "Mandatory
Conversion Date"), (i) all outstanding shares of Series A Preferred Stock shall
automatically be converted into shares of Series B Preferred Stock and Series C
Preferred Stock, at the then effective conversion rate and (ii) the number of
authorized shares of Preferred Stock shall be automatically reduced by the
number of shares of Preferred Stock that had been designated as Series A
Preferred Stock, and all provisions included under the caption "Series A
Convertible Preferred Stock", and all references to the Series A Preferred
Stock, shall be deleted and shall be of no further force or effect.
(b) All holders of record of shares of Series A Preferred
Stock shall be given written notice of the Mandatory Conversion Date and the
place designated for mandatory conversion of all such shares of Series A
Preferred Stock pursuant to this Section 5. Such notice need not be given in
advance of the occurrence of the Mandatory Conversion Date. Such notice shall be
sent by first class or registered mail, postage prepaid, to each record holder
of Series A Preferred Stock at such holder's address last shown on the records
of the transfer agent for the Series A Preferred Stock (or the records of the
Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each holder of shares of Series A Preferred Stock shall surrender his or
its certificate or certificates for all such shares to the Corporation at the
place designated in such notice, and shall thereafter receive certificates for
the number of shares of Series B Preferred Stock and Series C Preferred Stock to
which such holder is entitled pursuant to this Section 5. On the Mandatory
Conversion Date, all rights with respect to the Series A Preferred Stock so
converted, including the rights, if any, to receive notices and vote will
terminate, and from such date the holders thereof shall be deemed to be the
owners of shares of Series B Preferred Stock and Series C Preferred Stock. If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the Mandatory Conversion Date and the surrender of the certificate or
certificates for Series A Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Series B Preferred
Stock and Series C Preferred Stock issuable on such conversion in accordance
with the provisions hereof and cash as provided in
<PAGE>
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Subsection 4(b) in respect of any fraction of a share of Series B Preferred
Stock and Series C Preferred Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred
Stock which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the Mandatory Conversion Date, be deemed
to have been retired and canceled and the shares of Series A Preferred Stock
represented thereby converted into Series B Preferred Stock and Series C
Preferred Stock for all purposes, notwithstanding the failure of the holder or
holders thereof to surrender such certificates on or prior to such date. The
Corporation may thereafter take such appropriate action (without the need for
stockholder action) as may be necessary to reduce the authorized Series A
Preferred Stock accordingly.
D. SERIES B REDEEMABLE PREFERRED STOCK.
Two hundred (200) shares of the authorized and unissued Preferred Stock
of the Corporation are hereby designated "Series B Redeemable Preferred Stock"
(the "Series B Preferred Stock") with the following rights, preferences, powers,
privileges and restrictions, qualifications and limitations.
1. DIVIDENDS. Dividends shall not be declared or paid on the Series B
Preferred Stock.
2. LIQUIDATION, DISSOLUTION OR WINDING UP; CERTAIN MERGERS,
CONSOLIDATIONS AND ASSET SALES.
(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 out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series B Preferred Stock (for
purposes of this Section D.2., referred to as "Senior Preferred Stock"), but
before any payment shall be made to the holders of Common Stock or any other
class or series of stock ranking on liquidation junior to the Series B Preferred
Stock (for purposes of this Section D.2., such Common Stock and other stock
being collectively referred to as "Junior Stock") by reason of their ownership
thereof, an amount equal to $100,000 per share (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares), plus any dividends declared but
unpaid thereon, plus a premium equal to 8% per year on $100,000 calculated from
(i) December 23, 1996 in the case of shares of Series B Preferred Stock
converted from shares of Series A Preferred Stock issued prior to February 24,
1998 and (ii) the date of issue of the Series A Preferred Stock from which such
shares Series B Preferred Stock are converted in the case of shares of Series A
Preferred Stock issued on or after February 24, 1998. The right of the holders
of Series B Preferred Stock to receive the amounts due to such holders in
respect of their Series B Preferred Stock on any liquidation of the Company
shall be pari passu with the rights of the holders of Series A Preferred Stock
to
<PAGE>
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receive the Series A Primary Amount in respect of their Series A Preferred
Stock on any liquidation of the Company and with the right of the holders of
Series D Preferred Stock to receive their Series D Primary Amounts (as defined
below) on any liquidation of the Company and shall be senior to the rights of
the holders specified in the next sentence to receive the amounts specified in
the next sentence. The right of the holders of any outstanding Series C
Preferred Stock and Common Stock to receive the amounts due to such holders in
respect of their Series C Preferred Stock and Common Stock, respectively, on any
liquidation of the Company shall be pari passu with the right of the holders of
Series D Preferred Stock to receive their Series D Secondary Amounts (as defined
below) on any liquidation of the Company and shall be junior to the rights of
the holders specified in the preceding sentence to receive the amounts specified
in the preceding sentence. If upon any such liquidation, dissolution or winding
up of the Corporation the remaining assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series B Preferred Stock the full amount to which they shall be
entitled, the holders of shares of Series B Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the Series B Preferred
Stock shall share ratably in any distribution of the remaining assets and funds
of the Corporation in proportion to the respective amounts which would otherwise
be payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
(b) After the payment of all preferential amounts required to
be paid to the holders of Senior Preferred Stock, Series B Preferred Stock and
any other class or series of stock of the Corporation ranking on liquidation on
a parity with the Series B Preferred Stock, upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) In the event of any merger or consolidation of the
Corporation into or with another corporation (except one in which the holders of
capital stock of the Corporation immediately prior to such merger or
consolidation continue to hold at least 50% by voting power of the capital stock
of the surviving corporation), or the sale of all or substantially all the
assets of the Corporation, the provisions of Subsection 5 below shall apply.
3. VOTING. The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series B Preferred Stock
so as to affect adversely the Series B Preferred Stock, without the written
consent or affirmative vote of the holders of a majority of the then
outstanding shares of Series B Preferred Stock, given in writing or by vote
at a meeting, consenting or voting (as the case may be) separately as a
class. For this purpose, without limiting the generality of the foregoing,
the authorization of any shares of capital stock with preference or priority
over the Series B Preferred Stock as to the right to receive either dividends
or amounts distributable upon liquidation, dissolution or winding up of the
Corporation shall be deemed to affect adversely the Series B Preferred Stock,
and the authorization of any shares of capital stock on a parity with Series
B Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall not be deemed to affect adversely the Series B Preferred
<PAGE>
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Stock. The number of authorized shares of Series B Preferred Stock may be
increased or decreased (but not below the number of shares then outstanding) by
the directors of the Corporation pursuant to Section 151 of the General
Corporation Law of Delaware or by the affirmative vote of the holders of a
majority of the then outstanding shares of the Common Stock, Series B Preferred
Stock and all other classes or series of stock of the Corporation entitled to
vote thereon, voting as a single class, irrespective of the provisions of
Section 242(b)(2) of the General Corporation Law of Delaware. Except as set
forth above, the holders of the Series B Preferred Stock shall have no voting
rights.
4. OPTIONAL REDEMPTION.
(a) On the fifth anniversary of the date on which a share of
Series A Preferred Stock was first issued (the "Optional Redemption Date"), the
Corporation shall, upon the request of the holders of not less than 66 2/3% of
the outstanding shares of Series B Preferred Stock, redeem from each holder of
the Series B Preferred Stock, at a price equal to $100,000 per share (subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), plus any
dividends declared or accrued but unpaid thereon, plus a premium equal to 8% per
year on $100,000 (the "Optional Redemption Price") calculated from (i) December
23, 1996 in the case of shares of Series B Preferred Stock converted from shares
of Series A Preferred Stock issued prior to February 24, 1998 and (ii) the date
of issue of the Series A Preferred Stock from which such shares of Series B
Preferred Stock are converted in the case of shares of Series A Preferred Stock
issued on or after February 24, 1998, all shares of Series B Preferred Stock
issued or issuable upon conversion of the Series A Preferred Stock and Series D
Preferred Stock held by all holders on the Optional Redemption Date.
(b) In the event of any redemption of less than all shares of
Series B Preferred Stock, the Corporation shall effect such redemption pro rata
among the holders thereof based on the number of shares of Series B Preferred
Stock held by such holders on the Optional Redemption Date.
(c) At least 30 days prior to the Optional Redemption Date,
written notice shall be mailed, by first class or registered mail, postage
prepaid, to each holder of record of Series B Preferred Stock to be redeemed, at
his or its address last shown on the records of the transfer agent of the Series
B Preferred Stock (or the records of the Corporation, if it serves as its own
transfer agent), notifying such holder of the election of the Corporation to
redeem such shares, calling upon such holder to surrender to the Corporation, in
the manner and at the place designated, his or its certificate or certificates
representing the shares to be redeemed (such notice is hereinafter referred to
as the "Redemption Notice"). On or prior to the Optional Redemption Date, each
holder of Series B Preferred Stock to be redeemed shall surrender his or its
certificate or certificates representing such shares to the Corporation, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. In the event less than all the
shares represented by any such certificate are
<PAGE>
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redeemed, a new certificate shall be issued representing the unredeemed shares.
From and after each Optional Redemption Date, unless there shall have been a
default in payment of the Redemption Price, all rights of the holders of the
Series B Preferred Stock designated for redemption in the Redemption Notice as
holders of Series B Preferred Stock of the Corporation (except the right to
receive the Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever.
(d) On or prior to the Optional Redemption Date, the
Corporation shall deposit the Redemption Price of all shares of Series B
Preferred Stock designated for redemption in the Redemption Notice and not yet
redeemed with a bank or trust company having aggregate capital and surplus in
excess of $25,000,000 as a trust fund for the benefit of the respective holders
of the shares designated for redemption and not yet redeemed, with irrevocable
instructions and authority to the bank or trust company to pay the Redemption
Price for such shares to their respective holders on or after the Redemption
Date upon receipt of notification from the Corporation that such holder has
surrendered his or its share certificate to the Corporation. The balance of any
monies deposited by the Corporation pursuant to this Subsection 4(d) remaining
unclaimed at the expiration of one year following the Redemption Date shall
thereafter be returned to the Corporation upon its request expressed in a
resolution of its Board of Directors.
(e) If the funds of the Corporation legally available for
redemption of Series B Preferred Stock on any Optional Redemption Date are
insufficient to redeem the number of shares of Series B Preferred Stock required
under this Section 4 to be redeemed on such date, or such redemption would
violate the terms of any loan agreement to which the Corporation is a party on
such date, those funds which are legally available will be used to redeem the
maximum possible number of such shares of Series B Preferred Stock ratably on
the basis of the number of shares of Series B Preferred Stock which would be
redeemed on such date if the funds of the Corporation legally available therefor
had been sufficient to redeem all shares of Series B Preferred Stock required to
be redeemed on such date. At any time thereafter when additional funds of the
Corporation become legally available for the redemption of Series B Preferred
Stock, such funds will be used, at the end of the next succeeding fiscal
quarter, to redeem the balance of the shares which the Corporation was
theretofore obligated to redeem, ratably on the basis set forth in the preceding
sentence.
(f) The Corporation shall be entitled, at its option, to
credit against the number of shares of Series B Preferred Stock required to be
redeemed from any holder on the Optional Redemption Date any shares of Series B
Preferred Stock previously redeemed from such holder pursuant to Section 4 and
not previously so credited.
(g) Subject to the provisions hereof, the Board of Directors
of the Corporation shall have authority to prescribe the manner in which Series
B Preferred Stock shall be redeemed. Any shares of Series B Preferred Stock so
redeemed shall permanently be retired, shall no longer be deemed outstanding and
shall not under any circumstances be
<PAGE>
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reissued, and the Corporation may from time to time take such appropriate action
as may be necessary to reduce the authorized Series B Preferred Stock
accordingly. Nothing herein contained shall prevent or restrict the purchase by
the Corporation, from time to time either at public or private sale, of the
whole or any part of the Series B Preferred Stock at such price or prices as the
Corporation may determine, subject to the provisions of applicable law.
5. MANDATORY REDEMPTION
(a) Irrespective of the provisions of Section 4, the
Corporation shall, subject to the conditions set forth in Subsection 5(b) below,
upon (i) the closing of the sale of shares of Common Stock, at a price of at
least $4.00 per share (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other similar recapitalizations affecting such
shares), in a public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, resulting in at least $15 million
of gross proceeds to the Corporation, (ii) in the event of any merger or
consolidation of the Corporation into or with another corporation (except one in
which the holders of capital stock of the Corporation immediately prior to such
merger or consolidation continue to hold at least 50% by voting power of the
capital stock of the surviving corporation), or (iii) in the event of the sale
of all or substantially all the assets of the Corporation (in the case of each
of (i), (ii) and (iii) above, a "Mandatory Redemption Event"), redeem from each
holder of shares of Series B Preferred Stock, at a price equal to $100,000 per
share (subject to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization affecting such
shares), plus any dividends declared or accrued but unpaid thereon, plus a
premium equal to 8% per year on $100,000 (the "Mandatory Redemption Price")
calculated from (i) December 23, 1996 in the case of shares of Series B
Preferred Stock converted from shares of Series A Preferred Stock issued prior
to February 24, 1998 and (ii) the date of issue of the Series A Preferred Stock
from which such shares of Series B Preferred Stock are converted in the case of
shares of Series A Preferred Stock issued on or after February 24, 1998, all
shares of Series B Preferred Stock held by such holder on the date of the
Mandatory Redemption Event (the "Mandatory Redemption Date").
(b) The Corporation shall not, on the Mandatory Redemption
Date, be required to pay more than 50% of its consolidated net income, before
taxes, for the immediately preceding fiscal year to redeem shares of the Series
B Preferred Stock pursuant to Subsection 5(a) above. If the Corporation cannot
as a result of the application of this Subsection 5(b) redeem all of the shares
subject to mandatory redemption on the Mandatory Redemption Date, it shall
redeem the maximum possible number of whole shares of Series B Preferred Stock
ratably on the basis of the number of shares of Series B Preferred Stock which
would be redeemed on such date if the Corporation were not prevented by this
Subsection 5(b) from redeeming any shares. Notwithstanding the foregoing, the
Corporation shall, subject to Subsection 5(c) below, be obligated to redeem 100%
of the then outstanding shares of Series B Preferred Stock on the seventh
anniversary of the date on which a share of Series A Preferred Stock was first
issued.
<PAGE>
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(c) If the funds of the Corporation legally available for
redemption of Series B Preferred Stock on any Mandatory Redemption Date are
insufficient to redeem the number of shares of Series B Preferred Stock required
under this Section 5 to be redeemed on such date, or such redemption would
violate the terms of any loan agreement to which the Corporation is a party on
such date, those funds which are legally available will be used to redeem the
maximum possible number of such shares of Series B Preferred Stock ratably on
the basis of the number of shares of Series B Preferred Stock which would be
redeemed on such date if the funds of the Corporation legally available therefor
had been sufficient to redeem all shares of Series B Preferred Stock required to
be redeemed on such date. At any time thereafter when additional funds of the
Corporation become legally available for the redemption of Series B Preferred
Stock, such funds will be used, at the end of the next succeeding fiscal
quarter, to redeem the balance of the shares which the Corporation was
theretofore obligated to redeem, ratably on the basis set forth in the preceding
sentence.
(d) The Corporation shall be entitled, at its option, to
credit against the number of shares of Series B Preferred Stock required to be
redeemed from any holder on the Mandatory Redemption Date any shares of Series B
Preferred Stock previously redeemed from such holder pursuant to Section 5 and
not previously so credited.
(e) The Corporation shall provide notice of redemption of
Series B Preferred Stock pursuant to this Section 5 specifying the time and
place of redemption and the Mandatory Redemption Price, by first class or
registered mail, postage prepaid, to each holder of record of Series B Preferred
Stock at the address for such holder last shown on the records of the transfer
agent therefor (or the records of the Corporation, if it serves as its own
transfer agent), not more than 60 nor less than 30 days prior to the date on
which such redemption is to be made. If less than all Series B Preferred Stock
owned by such holder is then to be redeemed, the notice will also specify the
number of shares which are to be redeemed. Upon mailing any such notice of
redemption, the Corporation will become obligated to redeem at the time of
redemption specified therein all Series B Preferred Stock specified therein. In
case less than all Series B Preferred Stock represented by any certificate is
redeemed in any redemption pursuant to this Section 5, a new certificate will be
issued representing the unredeemed Series B Preferred Stock without cost to the
holder thereof.
(f) On the Mandatory Redemption Date, all rights of the holder
of such share as a stockholder of the Corporation by reason of the ownership of
such share will cease, except the right to receive the Mandatory Redemption
Price of such share, without interest, upon presentation and surrender of the
certificate representing such share and, from and after such Mandatory
Redemption Date, such share will not be deemed to be outstanding.
(g) Any Series B Preferred Stock redeemed pursuant to this
Section 5 will be canceled and will not under any circumstances be reissued,
sold or transferred and the Corporation may from time to time take such
appropriate action as may be necessary to reduce the authorized Series B
Preferred Stock accordingly.
E. SERIES C CONVERTIBLE PREFERRED STOCK.
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Seventeen million two hundred seventy-one thousand five hundred and
fourteen (17,271,514)shares of the authorized and unissued Preferred Stock of
the Corporation are hereby designated "Series C Convertible Preferred Stock"
(the "Series C Preferred Stock") with the following rights, preferences, powers,
privileges and restrictions, qualifications and limitations.
1. DIVIDENDS.
(a) The Corporation shall not declare or pay any dividends or
other distributions (as defined below) on shares of Common Stock until the
holders of the Series C Preferred Stock then outstanding shall have first
received, or simultaneously receive, a cash dividend on each outstanding share
of Series C Preferred Stock in an amount at least equal to the product of (i)
the per share amount, if any, of the dividends or other distributions to be
declared, paid or set aside for the Common Stock, multiplied by (ii) the number
of whole shares of Common Stock into which such share of Series C Preferred
Stock is then convertible.
(b) For purposes of this Section 1, unless the context
requires otherwise, "distribution" shall mean the transfer of cash or property
without consideration, whether by way of dividend or otherwise, payable other
than in Common Stock or other securities of the Corporation, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common Stock
held by employees or directors of, or consultants to, the Corporation upon
termination of their employment or services pursuant to agreements providing for
such repurchase at a price equal to the original issue price of such shares and
other than redemptions in liquidation or dissolution of the Corporation) for
cash or property, including any such transfer, purchase or redemption by a
subsidiary of this Corporation.
2. LIQUIDATION, DISSOLUTION OR WINDING UP; CERTAIN MERGERS,
CONSOLIDATIONS AND ASSET SALES.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series C
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series C Preferred Stock (for
purposes of this Section E.2., collectively referred to as "Senior Preferred
Stock"), but before any payment shall be made to the holders of Common Stock or
any other class or series of stock ranking on liquidation junior to the Series C
Preferred Stock (for purposes of this Section E.2., such Common Stock and other
stock being collectively referred to as "Junior Stock") by reason of their
ownership thereof, an amount per share as would have been payable had each such
share of Series C Preferred Stock been converted into shares of Common Stock
pursuant to Section 4 immediately prior to such liquidation, dissolution or
winding up. The right of the holders of any outstanding Series C Preferred Stock
to receive the amounts due to such holders in respect
<PAGE>
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of their Series C Preferred Stock shall be pari passu with the right of the
holders of Series A Preferred Stock to receive Series A Secondary Amounts in
respect of their Series A Preferred Stock on any liquidation of the Company and
with the right of the holders of Common Stock to receive the amounts due to such
holders in respect of their Common Stock on any liquidation of the Company and
with the right of the holders of Series D Preferred Stock to receive their
Series D Secondary Amounts (as defined below) on any liquidation of the Company
and shall be junior to the rights of the holders specified in the next sentence
to receive the amounts specified in the next sentence. The right of the holders
of Series A Preferred Stock to receive the Series A Primary Amount in respect of
their Series A Preferred Stock on any liquidation of the Company shall be pari
passu with the rights of the holders of Series B Preferred Stock to receive the
amounts due to such holders in respect of their Series B Preferred Stock on any
liquidation of the Company and with the right of the holders of Series D
Preferred Stock to receive their Series D Primary Amounts (as defined below) on
any liquidation of the Company and shall be senior to the rights of the holders
specified in the preceding sentence to receive the amounts specified in the
preceding sentence. If upon any such liquidation, dissolution or winding up of
the Corporation the remaining assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series C Preferred Stock the full amount to which they shall be
entitled, the holders of shares of Series C Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the Series C Preferred
Stock shall share ratably in any distribution of the remaining assets and funds
of the Corporation in proportion to the respective amounts which would otherwise
be payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
(b) After the payment of all preferential amounts required to
be paid to the holders of Senior Preferred Stock and any other class or series
of stock of the Corporation ranking on liquidation on a parity with the Series C
Preferred Stock, upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of Junior Stock then outstanding shall be
entitled to receive the remaining assets and funds of the Corporation available
for distribution to its stockholders.
(c) In the event of any merger or consolidation of the
Corporation into or with another corporation (except one in which the holders of
capital stock of the Corporation immediately prior to such merger or
consolidation continue to hold at least 50% by voting power of the capital stock
of the surviving corporation), or the sale of all or substantially all the
assets of the Corporation, if the holders of at least 66 2/3% of the then
outstanding shares of Series C Preferred Stock so elect by giving written notice
thereof to the Corporation at least three days before the effective date of such
event, then such merger, consolidation or asset sale shall be deemed to be a
liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation), or
all consideration payable to the Corporation, together with all other available
assets of the Corporation (in the case of an asset sale), shall be distributed
to the holders of capital stock of the Corporation in accordance with
Subsections 2(a) and 2(b) above. The Corporation shall promptly provide to the
holders of shares of Series C Preferred Stock such information concerning the
terms of such merger, consolidation or asset sale and the value of the assets of
the Corporation as may
<PAGE>
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reasonably be requested by the holders of Series C Preferred Stock in order to
assist them in determining whether to make such an election. If the holders of
the Series C Preferred Stock make such an election, the Corporation shall use
its best efforts to amend the agreement or plan of merger or consolidation to
adjust the rate at which the shares of capital stock of the Corporation are
converted into or exchanged for cash, new securities or other property to give
effect to such election. The amount deemed distributed to the holders of Series
C Preferred Stock upon any such merger or consolidation shall be the cash or the
value of the property, rights or securities distributed to such holders by the
acquiring person, firm or other entity. The value of such property, rights or
other securities shall be determined in good faith by the Board of Directors of
the Corporation. If no notice of the election permitted by this Subsection (c)
is given, the provisions of Subsection 4(i) shall apply.
3. VOTING.
(a) Each holder of outstanding shares of Series C Preferred
Stock shall be entitled to the number of votes equal to the number of whole
shares of Common Stock into which the shares of Series C Preferred Stock held by
such holder are then convertible (as adjusted from time to time pursuant to
Section 3 hereof), at each meeting of stockholders of the Corporation (and
written actions of stockholders in lieu of meetings) with respect to any and all
matters presented to the stockholders of the Corporation for their action or
consideration. Except as provided by law, by the provisions of Subsection 3(b)
below or by the provisions establishing any other series of Series Preferred
Stock, holders of Series C Preferred Stock and of any other outstanding series
of Series Preferred Stock shall vote together with the holders of Common Stock
as a single class.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series C Preferred Stock so
as to affect adversely the Series C Preferred Stock, without the written consent
or affirmative vote of the holders of a majority of the then outstanding shares
of Series C Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class. For this
purpose, without limiting the generality of the foregoing, the authorization of
any shares of capital stock with preference or priority over the Series C
Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall be deemed to affect adversely the Series C Preferred Stock, and the
authorization of any shares of capital stock on a parity with Series C Preferred
Stock as to the right to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of the Corporation shall not be deemed to
affect adversely the Series C Preferred Stock. The number of authorized shares
of Series C Preferred Stock may be increased or decreased (but not below the
number of shares then outstanding) by the directors of the Corporation pursuant
to Section 151 of the General Corporation Law of Delaware or by the affirmative
vote of the holders of a majority of the then outstanding shares of the Common
Stock, Series C Preferred Stock and all other classes or series of stock of the
Corporation entitled to vote thereon, voting as a single class, irrespective of
the provisions of Section 242(b)(2) of the General Corporation Law of Delaware.
<PAGE>
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4. OPTIONAL CONVERSION. The holders of the Series C Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series C Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and from
time to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing the Conversion Price for the Series A Preferred
Stock in effect at the time the Series A Preferred Stock was converted into
Series C Preferred Stock by the Series C Conversion Price (as defined below) in
effect at the time of conversion. The "Series C Conversion Price" shall
initially be equal to the Conversion Price for the Series A Preferred Stock in
effect at the time the Series A Preferred Stock was converted into Series C
Preferred Stock. Such initial Series C Conversion Price, and the rate at which
shares of Series C Preferred Stock may be converted into shares of Common Stock,
shall be subject to adjustment as provided below.
(b) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Series C Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series C Conversion Price.
(c) MECHANICS OF CONVERSION.
(i) In order for a holder of Series C Preferred Stock
to convert shares of Series C Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of Series
C Preferred Stock, at the office of the transfer agent for the Series C
Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the Series C
Preferred Stock represented by such certificate or certificates. Such notice
shall state such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
If required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to such holder of Series C
Preferred Stock, or to his or its nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the
Series C Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting the conversion
of the Series C Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the
<PAGE>
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conversion of all outstanding Series C Preferred Stock. Before taking any action
which would cause an adjustment reducing the Series C Conversion Price below the
then par value of the shares of Common Stock issuable upon conversion of the
Series C Preferred Stock, the Corporation will take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Corporation
may validly and legally issue fully paid and nonassessable shares of Common
Stock at such adjusted Series C Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Series C Conversion Price shall be made for any declared but unpaid dividends on
the Series C Preferred Stock surrendered for conversion or on the Common Stock
delivered upon conversion.
(iv) All shares of Series C Preferred Stock which
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, and from such date the holders thereof shall
be deemed to be owners of shares of Common Stock. Any shares of Series C
Preferred Stock so converted shall be retired and canceled and shall not be
reissued, and the Corporation (without the need for stockholder action) may from
time to time take such appropriate action as may be necessary to reduce the
authorized Series C Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock upon conversion of shares of Series C Preferred Stock pursuant
to this Section 4. The Corporation shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock in a name other than that in which the shares
of Series C Preferred Stock so converted were registered, and no such issuance
or delivery shall be made unless and until the person or entity requesting such
issuance has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(d) ADJUSTMENTS TO SERIES C CONVERSION PRICE FOR DILUTING
ISSUES:
(i) SPECIAL DEFINITIONS. For purposes of this
Subsection 4(d), the following definitions shall apply:
(A) "OPTION" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, excluding options described in subsection 4(d)(i)(D)(V)
below.
(B) "ORIGINAL ISSUE DATE" shall mean the
date on which a share of Series C Preferred Stock was first issued.
<PAGE>
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(C) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(D) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean all shares of Common Stock issued (or, pursuant to Subsection
4(d)(iii) below, deemed to be issued) by the Corporation after the Original
Issue Date, other than shares of Common Stock issued or issuable:
(I) upon conversion of any
Convertible Securities
outstanding on the Original
Issue Date, or upon
exercise of any Options
outstanding on the Original
Issue Date;
(II) upon conversion of shares
of Series C Preferred Stock
issued or issuable upon
conversion of the Series A
Preferred Stock;
(III) as a dividend or
distribution on Series C
Preferred Stock;
(IV) by reason of a dividend,
stock split, split-up or
other distribution on
shares of Common Stock that
is covered by Subsection
4(e) or 4(f) below;
(V) to employees or directors
of, or consultants to, the
Corporation pursuant to a
plan adopted or a grant
approved by the Board of
Directors of the
Corporation;
(VI) up to 466,835 shares of
Common Stock to the
stockholders and former
employees of Japanese
Language Services, Inc.
("JLS") in exchange for
acquisition by the
Corporation or a subsidiary
of the Corporation of all
of the outstanding stock of
JLS; or
(VII) warrants issued on or about
February 24, 1998 to
certain funds controlled by
Advent International
Corporation and Morgan
Stanley Venture Capital II,
Inc. to purchase Common
Stock in connection with
the extension of $4,000,000
in financing, and any
shares of Common Stock
issued upon the exercise of
such warrants.
<PAGE>
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(ii) NO ADJUSTMENT OF SERIES C CONVERSION PRICE. No
adjustment in the number of shares of Common Stock into which the Series C
Preferred Stock is convertible shall be made, by adjustment in the applicable
Series C Conversion Price thereof if (a) the consideration per share (determined
pursuant to Subsection 4(d)(v)) for an Additional Share of Common Stock issued
or deemed to be issued by the Corporation is more than or equal to the
applicable Series C Conversion Price in effect on the date of, and immediately
prior to, the issue of such Additional Shares, or (b) prior to such issuance,
the Corporation receives written notice from the holders of at least 66 2/3% of
the then outstanding shares of Series C Preferred Stock agreeing that no such
adjustment shall be made as the result of the issuance of Additional Shares of
Common Stock.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL
SHARES OF COMMON STOCK.
If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 4(d)(v) hereof)
of such Additional Shares of Common Stock would be less than the applicable
Series C Conversion Price in effect on the date of and immediately prior to such
issue, or such record date, as the case may be, and provided further that in any
such case in which Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Series C
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) If such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, upon the exercise,
conversion or exchange thereof, the Series C Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase becoming effective, be recomputed to reflect such increase insofar as
it affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(C) Upon the expiration or termination of
any unexercised Option, the Series C Conversion Price shall not be readjusted,
but the Additional Shares of Common Stock deemed issued as the result of the
original issue of such Option shall not be
<PAGE>
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deemed issued for the purposes of any subsequent adjustment of the Series C
Conversion Price;
(D) In the event of any change in the number
of shares of Common Stock issuable upon the exercise, conversion or exchange of
any Option or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Series C Conversion
Price then in effect shall forthwith be readjusted to such Series C Conversion
Price as would have obtained had the adjustment which was made upon the issuance
of such Option or Convertible Security not exercised or converted prior to such
change been made upon the basis of such change; and
(E) No readjustment pursuant to clause (B)
or (D) above shall have the effect of increasing the Series C Conversion Price
to an amount which exceeds the lower of (i) the Series C Conversion Price on the
original adjustment date, or (ii) the Series C Conversion Price that would have
resulted from any issuances of Additional Shares of Common Stock between the
original adjustment date and such readjustment date.
In the event the Corporation, after the Original Issue Date, amends the
terms of any Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the Original Issue Date or were
issued after the Original Issue Date), then such Options or Convertible
Securities, as so amended, shall be deemed to have been issued after the
Original Issue Date and the provisions of this Subsection 4(d)(iii) shall apply.
(iv) ADJUSTMENT OF SERIES C CONVERSION PRICE UPON
ISSUANCE OF ADDITIONAL SHARES OF COMMON
STOCK.
In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Subsection 4(d)(iii), but excluding
shares issued as a stock split or combination as provided in Subsection 4(e) or
upon a dividend or distribution as provided in Subsection 4(f)), without
consideration or for a consideration per share less than the applicable Series C
Conversion Price in effect on the date of and immediately prior to such issue,
then and in such event, such Series C Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Series C Conversion Price by a fraction, (A) the
numerator of which shall be (1) the number of shares of Common Stock outstanding
immediately prior to such issue plus (2) the number of shares of Common Stock
which the aggregate consideration received or to be received by the Corporation
for the total number of Additional Shares of Common Stock so issued would
purchase at such Series C Conversion Price; and (B) the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of such Additional Shares of Common Stock so issued;
PROVIDED THAT, (i) for the purpose of this Subsection 4(d)(iv), all shares of
Common Stock issuable upon exercise or conversion of Options or Convertible
Securities outstanding immediately prior to such issue shall be deemed to be
outstanding, and (ii) the number of shares of Common Stock deemed issuable upon
exercise or conversion of such outstanding Options and Convertible Securities
<PAGE>
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shall not give effect to any adjustments to the conversion price or conversion
rate of such Options or Convertible Securities resulting from the issuance of
Additional Shares of Common Stock that is the subject of this calculation.
(v) DETERMINATION OF CONSIDERATION. For purposes of
this Subsection 4(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration
shall:
(I) insofar as it consists of cash,
be computed at the aggregate of cash received by the Corporation, excluding
amounts paid or payable for accrued interest;
(II) insofar as it consists of
property other than cash, be computed at the fair market value thereof at the
time of such issue, as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares
of Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the proportion
of such consideration so received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board of Directors.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Subsection 4(d)(iii),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) MULTIPLE CLOSING DATES. In the event the
Corporation shall issue on more than one date Additional Shares of Common Stock
which are comprised of shares of
<PAGE>
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the same series or class of Preferred Stock, and such issuance dates occur
within a period of no more than 120 days, then the Series C Conversion Price
shall be adjusted only once on account of such issuances, with such adjustment
to occur upon the final such issuance and to give effect to all such issuances
as if they occurred on the date of the final such issuance.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Series C Conversion
Price then in effect immediately before that subdivision shall be
proportionately decreased. If the Corporation shall at any time or from time to
time after the Original Issue Date combine the outstanding shares of Common
Stock, the Series C Conversion Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(f) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time, or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series C
Conversion Price for the Series C Preferred Stock then in effect shall be
decreased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date, by
multiplying the Series C Conversion Price for the Series C Preferred Stock then
in effect by a fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on
such record date, and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of
Common Stock issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Series C Conversion Price for the Series C Preferred Stock shall
be recomputed accordingly as of the close of business on such record date and
thereafter the Series C Conversion Price for the Series C Preferred Stock shall
be adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions; and provided further, however, that no such
adjustment shall be made if the holders of Series C Preferred Stock
simultaneously receive a dividend or other distribution of shares of Common
Stock in a number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series C Preferred Stock had been
converted into Common Stock on the date of such event.
(g) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original Issue
Date for the Series C
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Preferred Stock shall make or issue, or fix a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation other than shares of Common Stock, then
and in each such event provision shall be made so that the holders of the Series
C Preferred Stock shall receive upon conversion thereof in addition to the
number of shares of Common Stock receivable thereupon, the amount of securities
of the Corporation that they would have received had the Series C Preferred
Stock been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of the Series C
Preferred Stock; and provided further, however, that no such adjustment shall be
made if the holders of Series C Preferred Stock simultaneously receive a
dividend or other distribution of such securities in an amount equal to the
amount of such securities as they would have received if all outstanding shares
of Series C Preferred Stock had been converted into Common Stock on the date of
such event.
(h) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR
SUBSTITUTION. If the Common Stock issuable upon the conversion of the Series C
Preferred Stock shall be changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for below), then and in each such
event the holder of each such share of Series C Preferred Stock shall have the
right thereafter to convert such share into the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the number of shares of Common
Stock into which such shares of Series C Preferred Stock might have been
converted immediately prior to such reorganization, reclassification, or change,
all subject to further adjustment as provided herein.
(i) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of
any consolidation or merger of the Corporation with or into another corporation
or the sale of all or substantially all of the assets of the Corporation to
another corporation, each share of Series C Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Series C Preferred Stock would have been
entitled upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions in this Section 4 set forth with respect to
the rights and interest thereafter of the holders of the Series C Preferred
Stock, to the end that the provisions set forth in this Section 4 (including
provisions with respect to changes in and other adjustments of the Series C
Conversion Price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter deliverable
upon the conversion of the Series C Preferred Stock.
<PAGE>
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(j) NO IMPAIRMENT. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series C Preferred Stock against impairment.
(k) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series C Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series C Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series C Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Series C Conversion Price then in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
then would be received upon the conversion of Series C Preferred Stock.
(l) NOTICE OF RECORD DATE. In the event:
(i) that the Corporation declares a dividend (or
any other distribution) on its Common Stock
payable in Common Stock or other securities
of the Corporation;
(ii) that the Corporation subdivides or combines
its outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock
of the Corporation (other than a subdivision
or combination of its outstanding shares of
Common Stock or a stock dividend or stock
distribution thereon), or of any
consolidation or merger of the Corporation
into or with another corporation, or of the
sale of all or substantially all of the
assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the
Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series C Preferred Stock, and shall cause to
be mailed to the holders of the Series C Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least ten
days prior to the date specified in (A) below or twenty days before the date
specified in (B) below, a notice stating
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(A) the record date of such dividend, distribution,
subdivision or combination, 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, subdivision or combination are to be
determined, or
(B) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation
or winding up is expected to become effective, and
the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other
property deliverable upon such reclassification,
consolidation, merger, sale, dissolution or winding
up.
4. MANDATORY CONVERSION.
(a) Upon the closing of the sale of shares of Common Stock, at
a price of at least $4.00 per share (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other similar recapitalizations
affecting such shares), in a public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, resulting
in at least $15 million of gross proceeds to the Corporation (the "Mandatory
Conversion Date"), (i) all outstanding shares of Series C Preferred Stock shall
automatically be converted into shares of Common Stock, at the then effective
conversion rate and (ii) the number of authorized shares of Preferred Stock
shall be automatically reduced by the number of shares of Preferred Stock that
had been designated as Series C Preferred Stock, and all provisions included
under the caption "Series C Convertible Preferred Stock", and all references to
the Series C Preferred Stock, shall be deleted and shall be of no further force
or effect.
(b) All holders of record of shares of Series C Preferred
Stock shall be given written notice of the Mandatory Conversion Date and the
place designated for mandatory conversion of all such shares of Series C
Preferred Stock pursuant to this Section 4. Such notice need not be given in
advance of the occurrence of the Mandatory Conversion Date. Such notice shall be
sent by first class or registered mail, postage prepaid, to each record holder
of Series C Preferred Stock at such holder's address last shown on the records
of the transfer agent for the Series C Preferred Stock (or the records of the
Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each holder of shares of Series C Preferred Stock shall surrender his or
its certificate or certificates for all such shares to the Corporation at the
place designated in such notice, and shall thereafter receive certificates for
the number of shares of Common Stock to which such holder is entitled pursuant
to this Section 4. On the Mandatory Conversion Date, all rights with respect to
the Series C Preferred Stock so converted, including the rights, if any, to
receive notices and vote (other than as a holder of Common Stock) will
terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Series C Preferred Stock has
been converted, and payment of any declared but unpaid dividends thereon, and
from such date the
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holders thereof shall be deemed to be owners of shares of Common Stock. If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the Mandatory Conversion Date and the surrender of the certificate or
certificates for Series C Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series C Preferred
Stock which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the Mandatory Conversion Date, be deemed
to have been retired and canceled and the shares of Series C Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Series C Preferred Stock accordingly.
F. SERIES D NONVOTING PREFERRED STOCK.
Two hundred (200) shares of the authorized and unissued Preferred Stock
of the Corporation are hereby designated "Series D Nonvoting Preferred Stock"
(the "Series D Preferred Stock") with the following rights, preferences, powers,
privileges and restrictions, qualifications and limitations.
1. DIVIDENDS.
(a) The Corporation shall not declare or pay any dividends or
other distributions (as defined below) on shares of Common Stock until the
holders of the Series D Preferred Stock then outstanding shall have first
received, or simultaneously receive, a cash dividend on each outstanding share
of Series D Preferred Stock in an amount at least equal to the product of (i)
the per share amount, if any, of the dividends or other distributions to be
declared, paid or set aside for the Common Stock, multiplied by (ii) the number
of whole shares of Common Stock issued or issuable upon conversion of the Series
C Convertible Preferred Stock (the "Series C Preferred Stock") into which such
share of Series D Preferred Stock is then convertible.
(b) For purposes of this Section 1, unless the context
requires otherwise, "distribution" shall mean the transfer of cash or property
without consideration, whether by way of dividend or otherwise, payable other
than in Common Stock or other securities of the Corporation, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common Stock
held by employees or directors of, or consultants to, the Corporation upon
termination of their employment or services pursuant to agreements
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providing for such repurchase at a price equal to the original issue price of
such shares and other than redemptions in liquidation or dissolution of the
Corporation) for cash or property, including any such transfer, purchase or
redemption by a subsidiary of this Corporation.
2. LIQUIDATION, DISSOLUTION OR WINDING UP; CERTAIN MERGERS,
CONSOLIDATIONS AND ASSET SALES.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series D
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation ranking on
liquidation prior and in preference to the Series D Preferred Stock (for
purposes of this Section F.2., collectively referred to as "Senior Preferred
Stock"), but before any payment shall be made to the holders of Common Stock or
any other class or series of stock ranking on liquidation junior to the Series D
Preferred Stock (for purposes of this Section F.2., such Common Stock and other
stock being collectively referred to as "Junior Stock") by reason of their
ownership thereof, an amount equal to the sum of (a) and (b) where (a) equals
$1.00 per share (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting
such shares), plus any dividends declared but unpaid thereon, plus a premium
equal to 8% per year of the original purchase price per share of the Series A
Preferred Stock calculated from (i) December 23, 1996 in the case of each such
share issued prior to February 24, 1998 and (ii) the date of issue in the case
of each such share issued on or after February 24, 1998 (in either case, the
"Series D Primary Amount"), and (b) equals such amount per share as would have
been payable had each such share of Series D Preferred Stock been converted into
shares of Common Stock issued or issuable upon conversion of the shares of
Series C Preferred Stock into which the Series D Preferred Stock is then
convertible immediately prior to such liquidation, dissolution or winding up
(the "Series D Secondary Amount"). The right of the holders of Series D
Preferred Stock to receive the Series D Primary Amount in respect of their
Series D Preferred Stock on any liquidation of the Company shall be pari passu
with the right of the holders of Series A Preferred Stock to receive their
Series A Primary Amounts and with the right of the holders of Series B Preferred
Stock to receive the amounts due to such holders in respect of their Series B
Preferred Stock on any liquidation of the Company on any liquidation of the
Company and shall be senior to the right of the holders specified in the next
sentence to receive the amounts specified in the next sentence. The right of the
holders of Series D Preferred Stock to receive Series D Secondary Amounts in
respect of their Series D Preferred Stock on any liquidation of the Company
shall be pari passu with the right of the holders of Series A Preferred Stock to
receive their Series A Secondary Amounts and with the right of the holders of
any outstanding Series C Preferred Stock and Common Stock to receive the amounts
due to such holders in respect of their Series C Preferred Stock and Common
Stock, respectively, on any liquidation of the Company on any liquidation of the
Company and shall be junior to the right of the holders specified in the
preceding sentence to receive the amounts specified in the preceding sentence.
If upon any such liquidation, dissolution or winding up of the Corporation the
remaining assets of the Corporation available for distribution to its
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stockholders shall be insufficient to pay the holders of shares of Series D
Preferred Stock the full amount to which they shall be entitled, the holders of
shares of Series D Preferred Stock and any class or series of stock ranking on
liquidation on a parity with the Series D Preferred Stock shall share ratably in
any distribution of the remaining assets and funds of the Corporation in
proportion to the respective amounts which would otherwise be payable in respect
of the shares held by them upon such distribution if all amounts payable on or
with respect to such shares were paid in full.
(b) After the payment of all preferential amounts required to
be paid to the holders of Senior Preferred Stock, Series D Preferred Stock and
any other class or series of stock of the Corporation ranking on liquidation on
a parity with the Series D Preferred Stock, upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) In the event of any merger or consolidation of the
Corporation into or with another corporation (except one in which the holders of
capital stock of the Corporation immediately prior to such merger or
consolidation continue to hold at least 50% by voting power of the capital stock
of the surviving corporation), or the sale of all or substantially all the
assets of the Corporation, if the holders of at least 66 2/3% of the then
outstanding shares of Series D Preferred Stock so elect by giving written notice
thereof to the Corporation at least three days before the effective date of such
event, then such merger, consolidation or asset sale shall be deemed to be a
liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation), or
all consideration payable to the Corporation, together with all other available
assets of the Corporation (in the case of an asset sale), shall be distributed
to the holders of capital stock of the Corporation in accordance with
Subsections 2(a) and 2(b) above. The Corporation shall promptly provide to the
holders of shares of Series D Preferred Stock such information concerning the
terms of such merger, consolidation or asset sale and the value of the assets of
the Corporation as may reasonably be requested by the holders of Series D
Preferred Stock in order to assist them in determining whether to make such an
election. If the holders of the Series D Preferred Stock make such an election,
the Corporation shall use its best efforts to amend the agreement or plan of
merger or consolidation to adjust the rate at which the shares of capital stock
of the Corporation are converted into or exchanged for cash, new securities or
other property to give effect to such election. The amount deemed distributed to
the holders of Series D Preferred Stock upon any such merger or consolidation
shall be the cash or the value of the property, rights or securities distributed
to such holders by the acquiring person, firm or other entity. The value of such
property, rights or other securities shall be determined in good faith by the
Board of Directors of the Corporation. If no notice of the election permitted by
this Subsection (c) is given, the provisions of Subsection 4(i) shall apply.
3. VOTING. The holders of the Series D Preferred Stock shall have no
voting rights.
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4. OPTIONAL CONVERSION. The holders of the Series D Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series D Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and from
time to time, and without the payment of additional consideration by the holder
thereof, into (i) 1/100,000 of a fully paid and nonassessable share of Series B
Preferred Stock and (ii) a number of fully paid and nonassessable shares Series
C Preferred Stock, with such number determined by dividing $1.00 by the
Conversion Price (as defined below) in effect at the time of conversion. The
"Series D Conversion Price" shall initially be equal to the Series A Conversion
Price in effect at the time of the issuance of the Series D Preferred Stock.
Such initial Series D Conversion Price, and the rate at which shares of Series D
Preferred Stock may be converted into shares of Series C Preferred Stock, shall
be subject to adjustment as provided below.
(b) FRACTIONAL SHARES. Fractional shares of Series B Preferred
Stock shall be permitted. No fractional shares of Series C Preferred Stock shall
be issued upon conversion of the Series D Preferred Stock. In lieu of any
fractional shares of Series C Preferred Stock to which the holder would
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the then effective Series D Conversion Price.
(c) MECHANICS OF CONVERSION.
(i) In order for a holder of Series D Preferred Stock
to convert shares of Series D Preferred Stock into shares of Series B Preferred
Stock and Series C Preferred Stock, such holder shall surrender the certificate
or certificates for such shares of Series D Preferred Stock, at the office of
the transfer agent for the Series D Preferred Stock (or at the principal office
of the Corporation if the Corporation serves as its own transfer agent),
together with written notice that such holder elects to convert all or any
number of the shares of the Series D Preferred Stock represented by such
certificate or certificates. Such notice shall state such holder's name or the
names of the nominees in which such holder wishes the certificate or
certificates for shares of Series B Preferred Stock and Series C Preferred Stock
to be issued. If required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. The
date of receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date ("Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of Series D Preferred Stock, or to his or its nominees, a certificate or
certificates for the number of shares of Series B Preferred Stock and Series C
Preferred Stock to which such holder shall be entitled, together with cash in
lieu of any fraction of a share.
(ii) The Corporation shall at all times when the
Series D Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting the conversion
of the Series D Preferred Stock, such number of its
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duly authorized shares of Series B Preferred Stock and Series C Preferred Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding Series D Preferred Stock. Before taking any action which would cause
an adjustment reducing the Conversion Price below the then par value of the
shares of Series B Preferred Stock and Series C Preferred Stock issuable upon
conversion of the Series D Preferred Stock, the Corporation will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and nonassessable
shares of Series B Preferred Stock and Series C Preferred Stock at such adjusted
Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any declared but unpaid dividends on the
Series D Preferred Stock surrendered for conversion or on the Series B Preferred
Stock and Series C Preferred Stock delivered upon conversion.
(iv) All shares of Series D Preferred Stock which
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, and from such date the holders thereof shall
be deemed to be the owners of shares of Series B Preferred Stock and Series C
Preferred Stock. Any shares of Series D Preferred Stock so converted shall be
retired and canceled and shall not be reissued, and the Corporation (without the
need for stockholder action) may from time to time take such appropriate action
as may be necessary to reduce the authorized Series D Preferred Stock
accordingly.
(v) The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issuance or delivery of shares
of Series B Preferred Stock and Series C Preferred Stock upon conversion of
shares of Series D Preferred Stock pursuant to this Section 4. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of shares of Series B
Preferred Stock and Series C Preferred Stock in a name other than that in which
the shares of Series D Preferred Stock so converted were registered, and no such
issuance or delivery shall be made unless and until the person or entity
requesting such issuance has paid to the Corporation the amount of any such tax
or has established, to the satisfaction of the Corporation, that such tax has
been paid.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES:
(i) SPECIAL DEFINITIONS. For purposes of this
Subsection 4(d), the following definitions shall apply:
(A) "OPTION" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, excluding options described in subsection 4(d)(i)(D)(V)
below.
<PAGE>
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(B) "ORIGINAL ISSUE DATE" shall mean the
date on which a share of Series D Preferred Stock was first issued.
(C) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(D) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean all shares of Common Stock issued (or, pursuant to Subsection
4(d)(iii) below, deemed to be issued) by the Corporation after the Original
Issue Date, other than shares of Common Stock issued or issuable:
(I) upon conversion of any
Convertible Securities
outstanding on the Original
Issue Date, or upon
exercise of any Options
outstanding on the Original
Issue Date;
(II) upon conversion of shares
of Series C Preferred Stock
issued or issuable upon
conversion of the Series D
Preferred Stock;
(III) as a dividend or
distribution on Series D
Preferred Stock;
(IV) by reason of a dividend,
stock split, split-up or
other distribution on
shares of Common Stock that
is covered by Subsection
4(e) or 4(f) below;
(V) to employees or directors
of, or consultants to, the
Corporation pursuant to a
plan adopted or a grant
approved by the Board of
Directors of the
Corporation;
(VI) up to 466,835 shares of
Common Stock to the
stockholders and former
employees of Japanese
Language Services, Inc.
("JLS") in exchange for
acquisition by the
Corporation or a subsidiary
of the Corporation of all
of the outstanding stock of
JLS; or
(VII) warrants issued on or about
February 24, 1998 to
certain funds controlled by
Advent International
Corporation and Morgan
Stanley Venture Capital II,
Inc. to purchase Common
Stock in connection with
the extension of $4,000,000
in
<PAGE>
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financing, and any shares
of Common Stock issued upon
the exercise of
such warrants.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment
in the number of shares of Series C Preferred Stock issuable upon conversion of
the Series D Preferred Stock shall be made by adjustment in the applicable
Conversion Price thereof if (a) the consideration per share (determined pursuant
to Subsection 4(d)(v)) for an Additional Share of Common Stock issued or deemed
to be issued by the Corporation is more than or equal to the applicable
Conversion Price in effect on the date of, and immediately prior to, the issue
of such Additional Shares, or (b) prior to such issuance, the Corporation
receives written notice from the holders of at least 66 2/3% of the then
outstanding shares of Series D Preferred Stock agreeing that no such adjustment
shall be made as the result of the issuance of Additional Shares of Common
Stock.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF
ADDITIONAL SHARES OF COMMON STOCK.
If the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 4(d)(v) hereof)
of such Additional Shares of Common Stock would be less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) If such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, upon the exercise,
conversion or exchange thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase
becoming effective, be recomputed to reflect such increase insofar as it affects
such Options or the rights of conversion or exchange under such Convertible
Securities;
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(C) Upon the expiration or termination of
any unexercised Option, the Conversion Price shall not be readjusted, but the
Additional Shares of Common Stock deemed issued as the result of the original
issue of such Option shall not be deemed issued for the purposes of any
subsequent adjustment of the Conversion Price;
(D) In the event of any change in the number
of shares of Common Stock issuable upon the exercise, conversion or exchange of
any Option or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Conversion Price then
in effect shall forthwith be readjusted to such Conversion Price as would have
obtained had the adjustment which was made upon the issuance of such Option or
Convertible Security not exercised or converted prior to such change been made
upon the basis of such change; and
(E) No readjustment pursuant to clause (B)
or (D) above shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (i) the Conversion Price on the original
adjustment date, or (ii) the Conversion Price that would have resulted from any
issuances of Additional Shares of Common Stock between the original adjustment
date and such readjustment date.
In the event the Corporation, after the Original Issue Date, amends the
terms of any Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the Original Issue Date or were
issued after the Original Issue Date), then such Options or Convertible
Securities, as so amended, shall be deemed to have been issued after the
Original Issue Date and the provisions of this Subsection 4(d)(iii) shall apply.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE
OF ADDITIONAL SHARES OF COMMON STOCK.
In the event the Corporation shall at any time after the Original Issue
Date issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Subsection 4(d)(iii), but excluding
shares issued as a stock split or combination as provided in Subsection 4(e) or
upon a dividend or distribution as provided in Subsection 4(f)), without
consideration or for a consideration per share less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
then and in such event, such Conversion Price shall be reduced, concurrently
with such issue, to a price (calculated to the nearest cent) determined by
multiplying such Conversion Price by a fraction, (A) the numerator of which
shall be (1) the number of shares of Common Stock outstanding immediately prior
to such issue plus (2) the number of shares of Common Stock which the aggregate
consideration received or to be received by the Corporation for the total number
of Additional Shares of Common Stock so issued would purchase at such Conversion
Price; and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; PROVIDED THAT, (i) for the purpose
of this Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise
or conversion of Options or Convertible Securities outstanding immediately prior
to such issue shall be deemed to be outstanding, and (ii) the number of
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shares of Common Stock deemed issuable upon exercise or conversion of such
outstanding Options and Convertible Securities shall not give effect to any
adjustments to the conversion price or conversion rate of such Options or
Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation.
(v) DETERMINATION OF CONSIDERATION. For purposes of
this Subsection 4(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration
shall:
(I) insofar as it consists of cash,
be computed at the aggregate of cash received by the Corporation, excluding
amounts paid or payable for accrued interest;
(II) insofar as it consists of
property other than cash, be computed at the fair market value thereof at the
time of such issue, as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares
of Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the proportion
of such consideration so received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board of Directors.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Subsection 4(d)(iii),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
<PAGE>
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(vi) MULTIPLE CLOSING DATES. In the event the
Corporation shall issue on more than one date Additional Shares of Common Stock
which are comprised of shares of the same series or class of Preferred Stock,
and such issuance dates occur within a period of no more than 120 days, then the
Conversion Price shall be adjusted only once on account of such issuances, with
such adjustment to occur upon the final such issuance and to give effect to all
such issuances as if they occurred on the date of the final such issuance.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(f) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time, or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for the Series D Preferred Stock then in effect shall be decreased as of
the time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Conversion Price for the Series D Preferred Stock then in effect by a fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on
such record date, and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of
Common Stock issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for the Series D Preferred Stock shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Conversion Price for the Series D Preferred Stock shall be
adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions; and provided further, however, that no such
adjustment shall be made if the holders of Series D Preferred Stock
simultaneously receive a dividend or other distribution of shares of Common
Stock in a number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series D Preferred Stock had been
converted into Series C Preferred Stock, and such Series C Preferred Stock had
been converted into Common Stock on the date of such event.
<PAGE>
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(g) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original Issue
Date for the Series D Preferred Stock shall make or issue, or fix a record date
for the determination of holders of Common Stock entitled to receive, a dividend
or other distribution payable in securities of the Corporation other than shares
of Common Stock, then and in each such event provision shall be made so that the
holders of the Series D Preferred Stock shall receive upon conversion thereof in
addition to the number of shares of Common Stock receivable upon conversion of
the Series C Preferred Stock into which the Series D Preferred Stock is then
convertible, the amount of securities of the Corporation that they would have
received if all outstanding shares of Series D Preferred Stock had been
converted into Series C Preferred Stock, and such Series C Preferred Stock had
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of the Series D
Preferred Stock; and provided further, however, that no such adjustment shall be
made if the holders of Series D Preferred Stock simultaneously receive a
dividend or other distribution of such securities in an amount equal to the
amount of such securities as they would have received if all outstanding shares
of Series D Preferred Stock had been converted into Series C Preferred Stock,
and such Series C Preferred Stock had been converted into Common Stock on the
date of such event.
(h) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR
SUBSTITUTION. If the Common Stock issuable upon the conversion of the Series C
Preferred Stock into which the Series D Preferred Stock is then convertible
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for below), then and in each such event the holder of each such
share of Series D Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification, or other change,
by holders of the number of shares of Common Stock into which such shares of
Series C Preferred Stock issuable upon conversion of the Series D Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
(i) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of
any consolidation or merger of the Corporation with or into another corporation
or the sale of all or substantially all of the assets of the Corporation to
another corporation (other than a consolidation, merger or sale which is covered
by Subsection 2(c)), each share of Series D Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of the Series C Preferred Stock into which the
Series D Preferred Stock is then convertible would have been entitled upon such
consolidation, merger or sale; and, in
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such case, appropriate adjustment (as determined in good faith by the Board of
Directors) shall be made in the application of the provisions in this Section 4
set forth with respect to the rights and interest thereafter of the holders of
the Series D Preferred Stock, to the end that the provisions set forth in this
Section 4 (including provisions with respect to changes in and other adjustments
of the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series D Preferred Stock and the
conversion of the Series C Preferred Stock issuable upon conversion of the
Series D Preferred Stock.
(j) NO IMPAIRMENT. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series D Preferred Stock against impairment.
(k) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series D Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series D Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of the Series C Preferred Stock issuable
upon conversion of the Series D Preferred Stock.
(l) NOTICE OF RECORD DATE. In the event:
(i) that the Corporation declares a dividend (or
any other distribution) on its Common Stock
payable in Common Stock or other securities
of the Corporation;
(ii) that the Corporation subdivides or combines
its outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock
of the Corporation (other than a subdivision
or combination of its outstanding shares of
Common Stock or a stock dividend or stock
distribution thereon), or of any
consolidation or merger of the Corporation
into or with another corporation, or of the
sale of all or substantially all of the
assets of the Corporation; or
<PAGE>
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(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the
Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series D Preferred Stock, and shall cause to
be mailed to the holders of the Series D Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least ten
days prior to the date specified in (A) below or twenty days before the date
specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
subdivision or combination, 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, subdivision or combination are to be
determined, or
(B) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation
or winding up is expected to become effective, and
the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other
property deliverable upon such reclassification,
consolidation, merger, sale, dissolution or winding
up.
5. MANDATORY CONVERSION.
(a) Upon the closing of the sale of shares of Common Stock, at
a price of at least $4.00 per share (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other similar recapitalizations
affecting such shares), in a public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, resulting
in at least $15 million of gross proceeds to the Corporation (the "Mandatory
Conversion Date"), (i) all outstanding shares of Series D Preferred Stock shall
automatically be converted into shares of Series B Preferred Stock and Series C
Preferred Stock, at the then effective conversion rate and (ii) the number of
authorized shares of Preferred Stock shall be automatically reduced by the
number of shares of Preferred Stock that had been designated as Series D
Preferred Stock, and all provisions included under the caption "Series D
Nonvoting Preferred Stock", and all references to the Series D Preferred Stock,
shall be deleted and shall be of no further force or effect.
(b) All holders of record of shares of Series D Preferred
Stock shall be given written notice of the Mandatory Conversion Date and the
place designated for mandatory conversion of all such shares of Series D
Preferred Stock pursuant to this Section 5. Such notice need not be given in
advance of the occurrence of the Mandatory Conversion Date. Such notice shall be
sent by first class or registered mail, postage prepaid, to each record holder
of Series D Preferred Stock at such holder's address last shown on the records
of the transfer agent for the Series D Preferred Stock (or the records of the
Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each holder of shares of Series D
<PAGE>
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Preferred Stock shall surrender his or its certificate or certificates for all
such shares to the Corporation at the place designated in such notice, and shall
thereafter receive certificates for the number of shares of Series B Preferred
Stock and Series C Preferred Stock to which such holder is entitled pursuant to
this Section 5. On the Mandatory Conversion Date, all rights with respect to the
Series D Preferred Stock so converted, including the rights, if any, to receive
notices and vote will terminate, and from such date the holders thereof shall be
deemed to be the owners of shares of Series B Preferred Stock and Series C
Preferred Stock. If so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
of transfer, in form satisfactory to the Corporation, duly executed by the
registered holder or by his or its attorney duly authorized in writing. As soon
as practicable after the Mandatory Conversion Date and the surrender of the
certificate or certificates for Series D Preferred Stock, the Corporation shall
cause to be issued and delivered to such holder, or on his or its written order,
a certificate or certificates for the number of full shares of Series B
Preferred Stock and Series C Preferred Stock issuable on such conversion in
accordance with the provisions hereof and cash as provided in Subsection 5(b) in
respect of any fraction of a share of Series B Preferred Stock and Series C
Preferred Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series D Preferred
Stock which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the Mandatory Conversion Date, be deemed
to have been retired and canceled and the shares of Series D Preferred Stock
represented thereby converted into Series B Preferred Stock and Series C
Preferred Stock for all purposes, notwithstanding the failure of the holder or
holders thereof to surrender such certificates on or prior to such date. The
Corporation may thereafter take such appropriate action (without the need for
stockholder action) as may be necessary to reduce the authorized Series D
Preferred Stock accordingly.
FIFTH. The name and mailing address of the sole incorporator is as
follows:
George W. Lloyd, Esq.
Testa, Hurwitz & Thibeault, LLP
125 High Street
High Street Tower
Boston, MA 02110
SIXTH. The corporation is to have perpetual existence.
SEVENTH. In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware:
A. The board of directors of the corporation is expressly
authorized to adopt, amend or repeal the by-laws of the corporation.
<PAGE>
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B. Elections of directors need not be by written ballot unless
the by-laws of the corporation shall so provide.
C. The books of the corporation may be kept at such place
within or without the State of Delaware as the by-laws of the
corporation may provide or as may be designated from time to time by
the board of directors of the corporation.
EIGHTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
NINTH. The corporation eliminates the personal liability of each member
of its board of directors to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that the foregoing
shall not eliminate the liability of a director (i) for any breach of such
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing
<PAGE>
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violation of law, (iii) under Section 174 of Title 8 of the Delaware Code or
(iv) for any transaction from which such director derived an improper personal
benefit.
TENTH. The corporation reserves the right to amend or repeal any
provision contained in this certificate of incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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IN WITNESS WHEREOF, Lionbridge Technologies Holdings, Inc. has caused
this Restated Certificate of Incorporation to be signed and attested to by Rory
J. Cowan, its President and Chief Executive Officer, this ___ day of _________,
1998.
------------------------------
Rory J. Cowan
President and Chief Executive Officer
<PAGE>
EXHIBIT 3.3
-----------
By-Laws of
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
A Delaware Corporation
Dated: October 10, 1997
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Article I. Meetings of Stockholders
Section 1. Place of Meetings .............................................. 1
Section 2. Annual Meeting ................................................. 1
Section 3. Special Meetings................................................ 1
Section 4. Notice of Meetings.............................................. 1
Section 5. Voting List..................................................... 1
Section 6. Quorum.......................................................... 2
Section 7. Adjournments.................................................... 2
Section 8. Action at Meetings.............................................. 2
Section 9. Voting and Proxies.............................................. 3
Section 10. Action Without Meeting.......................................... 3
Article II. Directors
Section 1. Number, Election, Tenure and Qualification ..................... 3
Section 2. Enlargement .................................................... 3
Section 3. Vacancies ...................................................... 3
Section 4. Resignation and Removal ........................................ 4
Section 5. General Powers ................................................. 4
Section 6. Chairman of the Board .......................................... 4
Section 7. Place of Meetings .............................................. 4
Section 8. Regular Meetings ............................................... 4
Section 9. Special Meetings ............................................... 4
Section 10. Quorum, Action at Meeting, Adjournment ......................... 5
Section 11. Action by Consent .............................................. 5
Section 12. Telephonic Meetings ............................................ 5
Section 13. Committees ..................................................... 5
Section 14. Compensation ................................................... 6
Article III. Officers
Section 1. Enumeration .................................................... 6
Section 2. Election ....................................................... 6
Section 3. Tenure ......................................................... 6
Section 4. President ...................................................... 7
Section 5. Vice-Presidents ................................................ 7
Section 6. Secretary ...................................................... 7
Section 7. Assistant Secretaries .......................................... 8
Section 8. Treasurer ...................................................... 8
Section 9. Assistant Treasurers ........................................... 8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 10. Bond .......................................................... 8
Article IV. Notices
Section 1. Delivery ...................................................... 9
Section 2. Waiver of Notice .............................................. 9
Article V. Indemnification
Section 1. Actions other than by or in the Right of the Corporation ...... 9
Section 2. Actions by or in the Right of the Corporation ................. 10
Section 3. Success on the Merits ......................................... 10
Section 4. Specific Authorization ........................................ 10
Section 5. Advance Payment ............................................... 10
Section 6. Non-Exclusivity ............................................... 11
Section 7. Insurance ..................................................... 11
Section 8. Continuation of Indemnification and Advancement of Expenses ... 11
Section 9. Severability .................................................. 11
Section 10. Intent of Article ............................................. 11
Article VI. Capital Stock
Section 1. Certificates of Stock ......................................... 11
Section 2. Lost Certificates ............................................. 12
Section 3. Transfer of Stock ............................................. 12
Section 4. Record Date ................................................... 12
Section 5. Registered Stockholders ....................................... 13
Article VII. Certain Transactions
Section 1. Transactions with Interested Parties .......................... 13
Section 2. Quorum ........................................................ 14
Article VIII. General Provisions
Section 1. Dividends ..................................................... 14
Section 2. Reserves ...................................................... 14
Section 3. Checks ........................................................ 14
Section 4. Fiscal Year ................................................... 14
Section 5. Seal .......................................................... 14
Article IX. Amendments ........................................................... 15
Addendum
Register of Amendments to the By-laws
</TABLE>
<PAGE>
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
* * * * *
BY-LAWS
* * * * *
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of the stockholders shall be
held at such place within or without the State of Delaware as may be fixed from
time to time by the board of directors or the chief executive officer, or if not
so designated, at the registered office of the corporation.
Section 2. ANNUAL MEETING. Unless directors are elected by written consent
in lieu of an annual meeting as permitted by law and these by-laws, annual
meetings of stockholders shall be held on the third Tuesday of May in each year
if not a legal holiday, and if a legal holiday, then on the next secular day
following, at 10:00 a.m., or at such other date and time as shall be designated
from time to time by the board of directors or the chief executive officer, at
which meeting the stockholders shall elect by a plurality vote a board of
directors and shall transact such other business as may properly be brought
before the meeting. If no annual meeting is held in accordance with the
foregoing provisions, the board of directors shall cause the meeting to be held
as soon thereafter as convenient, which meeting shall be designated a special
meeting in lieu of annual meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes, may, unless otherwise prescribed by statute or by the
certificate of incorporation, be called by the board of directors or the chief
executive officer and shall be called by the chief executive officer or
secretary at the request in writing of a majority of the board of directors, or
at the request in writing of stockholders owning a MAJORITY IN amount of the
entire capital stock of the corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at any special meeting shall be limited to matters relating
to the purpose or purposes stated in the notice of meeting.
Section 4. NOTICE OF MEETINGS. Except as otherwise provided by law,
written notice of each meeting of stockholders, annual or special, 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, shall be given not less
than ten or more than sixty days before the date of the meeting, to each
stockholder entitled to vote at such meeting.
Section 5. VOTING LIST. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the
<PAGE>
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address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city or town 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.
Section 6. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute, the
certificate of incorporation or these by-laws. Where a separate vote by a class
or classes is required, a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter. If no quorum
shall be present or represented at any meeting of the stockholders, such meeting
may be adjourned in accordance with Section 7 hereof, until a quorum shall be
present or represented.
Section 7. ADJOURNMENTS. Any meeting of stockholders may be adjourned from
time to time to any other time and to any other place at which a meeting of
stockholders may be held under these by-laws, which time and place shall be
announced at the meeting, by a majority of the stockholders present in person or
represented by proxy at the meeting and entitled to vote, though less than a
quorum, or, if no stockholder is present or represented by proxy, by any officer
entitled to preside at or to act as secretary of such meeting, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the original meeting. If 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.
Section 8. ACTION AT MEETINGS. When a quorum is present at any meeting,
the vote of the holders of a majority of the stock present in person or
represented by proxy and entitled to vote on the matter (or where a separate
vote by a class or classes is required, the vote of the majority of shares of
such class or classes present in person or represented by proxy at the meeting)
shall decide any matter (other than the election of directors) brought before
such meeting, unless the matter is one upon which by express provision of law,
the certificate of incorporation or these by-laws, a different vote is required,
in which case such express provision shall govern and control the decision of
such matter. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors.
Section 9. VOTING AND PROXIES. Unless otherwise provided in the
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote for each share of capital stock having
voting power held of record by such stockholder. Each
<PAGE>
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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 him by proxy, but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period.
Section 10. ACTION WITHOUT MEETING. Any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be (1) signed and dated 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 (2) delivered to
the corporation within sixty days of the earliest dated consent by delivery to
its registered office in the State of Delaware (in which case delivery shall be
by hand or by certified or registered mail, return receipt requested), 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. 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 II
DIRECTORS
Section 1. NUMBER, ELECTION, TENURE AND QUALIFICATION. The number of
directors which shall constitute the whole board shall be not less than one.
Within such limit, the number of directors shall be determined by resolution of
the board of directors or by the stockholders at the annual meeting or at any
special meeting of stockholders. The directors shall be elected at an annual
meeting of stockholders, or by written consent in lieu of an annual meeting of
the stockholders, except as provided in Section 3 of this Article and each
director elected shall hold office until his successor is elected and qualified,
unless sooner replaced. Directors need not be stockholders.
Section 2. ENLARGEMENT. The number of the board of directors may be
increased at any time by vote of a majority of the directors then in office.
Section 3. VACANCIES. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. In the
event of a vacancy in the board of directors, the remaining directors, except as
otherwise provided by law or these by-laws, may exercise the powers of the full
board until the vacancy is filled.
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Section 4. RESIGNATION AND REMOVAL. Any director may resign at any time
upon written notice to the corporation at its principal place of business or to
the chief executive officer or secretary. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event. Any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors, unless otherwise
specified by law or the certificate of incorporation.
Section 5. GENERAL POWERS. The business and affairs of the corporation
shall be managed by its board of directors, which may exercise all powers of the
corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.
Section 6. CHAIRMAN OF THE BOARD. If the board of directors appoints a
chairman of the board, he shall, when present, preside at all meetings of the
stockholders and the board of directors. He shall perform such duties and
possess such powers as are customarily vested in the office of the chairman of
the board or as may be vested in him by the board of directors.
Section 7. PLACE OF MEETINGS. The board of directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 8. REGULAR MEETINGS. Regular meetings of the board of directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board; provided that any director who is absent when
such a determination is made shall be given prompt notice of such determination.
A regular meeting of the board of directors may be held without notice
immediately after and at the same place as the annual meeting of stockholders.
Section 9. SPECIAL MEETINGS. Special meetings of the board may be called
by (i) the chief executive officer, secretary, or on the written request of two
or more directors, (ii) by one director in the event that there is only one
director in office or (iii) by at least twenty-five percent (25%) of the
aggregate voting power of the corporation's Series A Convertible Preferred
Stock. Two days' notice to each director, either personally or by telegram,
cable, telecopy, commercial delivery service, telex or similar means sent to his
business or home address, or three days' notice by written notice deposited in
the mail, shall be given to each director by the secretary or by the officer or
one of the directors calling the meeting. A notice or waiver of notice of a
meeting of the board of directors need not specify the purposes of the meeting.
Section 10. QUORUM, ACTION AT MEETING, ADJOURNMENTS. At all meetings of
the board a majority of directors then in office, but in no event less than one
third of the entire board, shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by law or by the certificate of
incorporation. For purposes of this section, the term "entire
board" shall mean the number of directors last fixed by the stockholders or
directors, as the case may be, in accordance with law and these by-laws;
provided, however, that if less than all the number so fixed of directors were
elected, the "entire
<PAGE>
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board" shall mean the greatest number of directors so elected to hold office
at any one time pursuant to such authorization. If a quorum shall not be
present at any meeting of the board of directors, a majority of the directors
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present.
Section 11. ACTION BY CONSENT. 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 of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
Section 12. TELEPHONIC MEETINGS. Unless otherwise restricted by the
certificate of incorporation or these by-laws, members of the board of directors
or of any committee thereof may participate in a meeting of the board of
directors or of any committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 13. COMMITTEES. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution designating such committee or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and make such reports to the board of
directors as the board of directors may request. Except as the board of
directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the directors or in such
rules, its business shall be conducted as nearly as possible in the same manner
as is provided in these by-laws for the conduct of its business by the board of
directors.
Section 14. COMPENSATION. Unless otherwise restricted by the certificate
of incorporation or these by-laws, the board of directors shall have the
authority to fix from time to time the compensation of directors. The directors
may be paid their expenses, if any, of attendance at each meeting of the board
of directors and the performance of their responsibilities as directors
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and may be paid a fixed sum for attendance at each meeting of the board of
directors and/or a stated salary as director. No such payment shall preclude any
director from serving the corporation or its parent or subsidiary corporations
in any other capacity and receiving compensation therefor. The board of
directors may also allow compensation for members of special or standing
committees for service on such committees.
ARTICLE III
OFFICERS
Section 1. ENUMERATION. The officers of the corporation shall be chosen by
the board of directors and shall be a president, a secretary and a treasurer and
such other officers with such titles, terms of office and duties as the board of
directors may from time to time determine, including a chairman of the board,
one or more vice-presidents, and one or more assistant secretaries and assistant
treasurers. If authorized by resolution of the board of directors, the chief
executive officer may be empowered to appoint from time to time assistant
secretaries and assistant treasurers. Any number of offices may be held by the
same person, unless the certificate of incorporation or these by-laws otherwise
provide.
Section 2. ELECTION. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a president, a secretary and a
treasurer. Other officers may be appointed by the board of directors at such
meeting, at any other meeting, or by written consent.
Section 3. TENURE. The officers of the corporation shall hold office until
their successors are chosen and qualify, unless a different term is specified in
the vote choosing or appointing him, or until his earlier death, resignation or
removal. Any officer elected or appointed by the board of directors or by the
chief executive officer may be removed at any time by the affirmative vote of a
majority of the board of directors or a committee duly authorized to do so,
except that any officer appointed by the chief executive officer may also be
removed at any time by the chief executive officer. Any vacancy occurring in any
office of the corporation may be filled by the board of directors, at its
discretion. Any officer may resign by delivering his written resignation to the
corporation at its principal place of business or to the chief executive officer
or the secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
Section 4. PRESIDENT. The president shall be the chief operating officer
of the corporation. He shall also be the chief executive officer unless the
board of directors otherwise provides. The president shall, unless the board of
directors provides otherwise in a specific instance or generally, preside at all
meetings of the stockholders and the board of directors, have general and active
management of the business of the corporation and see that all orders and
resolutions of the board of directors are carried into effect. The president
shall execute bonds, mortgages, and other contracts requiring a seal, under the
seal of the corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
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execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
Section 5. VICE-PRESIDENTS. In the absence of the president or in the
event of his inability or refusal to act, the vice-president, or if there be
more than one vice-president, the vice-presidents in the order designated by the
board of directors or the chief executive officer (or in the absence of any
designation, then in the order determined by their tenure in office) shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The
vice-presidents shall perform such other duties and have such other powers as
the board of directors or the chief executive officer may from time to time
prescribe.
Section 6. SECRETARY. The secretary shall have such powers and perform
such duties as are incident to the office of secretary. He shall maintain a
stock ledger and prepare lists of stockholders and their addresses as required
and shall be the custodian of corporate records. The secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and of the board
of directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be from time to time
prescribed by the board of directors or chief executive officer, under whose
supervision he shall be. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
his signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
Section 7. ASSISTANT SECRETARIES. The assistant secretary, or if there be
more than one, the assistant secretaries in the order determined by the board of
directors, the chief executive officer or the secretary (or if there be no such
determination, then in the order determined by their tenure in office), shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors,
the chief executive officer or the secretary may from time to time prescribe. In
the absence of the secretary or any assistant secretary at any meeting of
stockholders or directors, the person presiding at the meeting shall designate a
temporary or acting secretary to keep a record of the meeting.
Section 8. TREASURER. The treasurer shall perform such duties and shall
have such powers as may be assigned to him by the board of directors or the
chief executive officer. In addition, the treasurer shall perform such duties
and have such powers as are incident to the office of treasurer. The treasurer
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, taking proper
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vouchers for such disbursements, and shall render to the chief executive officer
and the board of directors, when the chief executive officer or board of
directors so requires, an account of all his transactions as treasurer and of
the financial condition of the corporation.
Section 9. ASSISTANT TREASURERS. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order determined by the
board of directors, the chief executive officer or the treasurer (or if there be
no such determination, then in the order determined by their tenure in office),
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors, the chief executive officer or the treasurer may from time to time
prescribe.
Section 10. BOND. If required by the board of directors, any officer shall
give the corporation a bond in such sum and with such surety or sureties and
upon such terms and conditions as shall be satisfactory to the board of
directors, including without limitation a bond for the faithful performance of
the duties of his office and for the restoration to the corporation of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control and belonging to the corporation.
ARTICLE IV
NOTICES
Section 1. DELIVERY. Whenever, under the provisions of law, or of the
certificate of incorporation or these by-laws, written notice is required to be
given to any director or stockholder, such notice may be given by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Unless written notice by mail is required by law, written notice
may also be given by telegram, cable, telecopy, commercial delivery service,
telex or similar means, addressed to such director or stockholder at his address
as it appears on the records of the corporation, in which case such notice shall
be deemed to be given when delivered into the control of the persons charged
with effecting such transmission, the transmission charge to be paid by the
corporation or the person sending such notice and not by the addressee. Oral
notice or other in-hand delivery (in person or by telephone) shall be deemed
given at the time it is actually given.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of law or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
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ARTICLE V
INDEMNIFICATION
Section 1. ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery of the State of Delaware or such other court shall
deem proper.
Section 3. SUCCESS ON THE MERITS. To the extent that any person described
in Section 1 or 2 of this Article V has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in said
Sections, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
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Section 4. SPECIFIC AUTHORIZATION. Any indemnification under Section 1 or
2 of this Article V (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of any person described in said Sections is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Sections. Such determination shall be made (1) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders of the
corporation.
Section 5. ADVANCE PAYMENT. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of any person described in said Section to repay
such amount if it shall ultimately be determined that he is not entitled to
indemnification by the corporation as authorized in this Article V.
Section 6. NON-EXCLUSIVITY. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other Sections of this Article
V shall not be deemed exclusive of any other rights to which those provided
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
Section 7. INSURANCE. The board of directors may authorize, by a vote of
the majority of the full board, the corporation 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 another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article V.
Section 8. CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article V shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 9. SEVERABILITY. If any word, clause or provision of this Article
V or any award made hereunder shall for any reason be determined to be invalid,
the provisions hereof shall not otherwise be affected thereby but shall remain
in full force and effect.
Section 10. INTENT OF ARTICLE. The intent of this Article V is to provide
for indemnification and advancement of expenses to the fullest extent permitted
by Section 145 of the General Corporation Law of Delaware. To the extent that
such Section or any successor section may be amended or supplemented from time
to time, this Article V shall be amended automatically and
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construed so as to permit indemnification and advancement of expenses to the
fullest extent from time to time permitted by law.
ARTICLE VI
CAPITAL STOCK
Section 1. CERTIFICATES OF STOCK. Every holder of stock in the corporation
shall be entitled to have a certificate, signed by, or in the name of the
corporation by, the chairman or vice-chairman of the board of directors, or the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation. Any or all of the signatures
on the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue. Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
Section 2. LOST CERTIFICATES. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give
reasonable evidence of such loss, theft or destruction, to advertise the same in
such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed or the issuance of such new certificate.
Section 3. TRANSFER OF STOCK. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares, duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and proper evidence of compliance with other conditions to rightful
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. RECORD DATE. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the board of directors may fix a record date, which
shall not precede the date upon which the resolution fixing the record date is
adopted by the board of directors, and which shall not be more than sixty days
nor less then ten days before the date of such meeting. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new
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record date for the adjourned meeting. If no record date is fixed, 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 before the day on
which notice is given, or, if notice is waived, at the close of business on the
day before the day on which the meeting is held. In order that the corporation
may determine the stockholders entitled to consent to corporate action in
writing without a meeting, the board of directors may fix a record date, which
shall not precede the date upon which the resolution fixing the record date is
adopted by the board of directors, and which shall not be more than ten days
after the date upon which the resolution fixing the record date is adopted by
the board of directors. If no record date is fixed, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation as
provided in Section 10 of Article I. If no record date is fixed and prior action
by the board of directors is required, 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 of
directors adopts the resolution taking such prior action. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action, the board of directors
may fix a record date, which shall not precede the date upon which the
resolution fixing the record date is adopted, and which shall be not more than
sixty days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the board of directors adopts the resolution relating to
such purpose.
Section 5. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII
CERTAIN TRANSACTIONS
Section 1. TRANSACTIONS WITH INTERESTED PARTIES. No contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction or solely because his or their
votes are counted for such purpose, if:
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(a) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the board of
directors or the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified, by the board of
directors, a committee thereof, or the stockholders.
Section 2. QUORUM. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of directors or
of a committee which authorizes the contract or transaction.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the corporation,
if any, may be declared by the board of directors at any regular or special
meeting or by written consent, pursuant to law. Dividends may be paid in cash,
in property, or in shares of the capital stock, subject to the provisions of the
certificate of incorporation.
Section 2. RESERVES. The directors may set apart out of any funds of the
corporation available for dividends a reserve or reserves for any proper purpose
and may abolish any such reserve.
Section 3. CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 5. SEAL. The board of directors may, by resolution, adopt a
corporate seal. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the word "Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. The seal may be altered from time to time by the board
of directors.
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ARTICLE IX
AMENDMENTS
These by-laws may be altered, amended or repealed or new by-laws may be
adopted by the stockholders or by the board of directors, when such power is
conferred upon the board of directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors provided,
however, that in the case of a regular or special meeting of stockholders,
notice of such alteration, amendment, repeal or adoption of new by-laws be
contained in the notice of such meeting.
[Remainder of Page Intentionally Left Blank]
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Register of Amendments to the By-laws
Date Section Affected Change
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<PAGE>
EXHIBIT 10.1
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LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
1998 STOCK PLAN
1. PURPOSE. The purpose of the Lionbridge Technologies Holdings, Inc.
1998 Stock Plan (the "Plan") is to encourage key employees of Lionbridge
Technologies Holdings, Inc. (the "Company") and of any present or future parent
or subsidiary of the Company (collectively, "Related Corporations") and other
individuals who render services to the Company or a Related Corporation, by
providing opportunities to participate in the ownership of the Company and its
future growth through (a) the grant of options which qualify as "incentive stock
options" ("ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"); (b) the grant of options which do not qualify as ISOs
("Non-Qualified Options"); (c) awards of stock in the Company ("Awards"); and
(d) opportunities to make direct purchases of stock in the Company
("Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter
individually as an "Option" and collectively as "Options." Options, Awards and
authorizations to make Purchases are referred to hereafter collectively as
"Stock Rights." As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall (be
administered by the Board of Directors of the Company (the "Board") or,
subject to paragraph 2(D) (relating to compliance with Section 162(m)
of the Code), by a committee appointed by the Board (the "Committee").
Hereinafter, all references in this Plan to the "Committee" shall mean
the Board if no Committee has been appointed. Subject to ratification
of the grant or authorization of each Stock Right by the Board (if so
required by applicable state law), and subject to the terms of the
Plan, the Committee shall have the authority to (i) determine to whom
(from among the class of employees eligible under paragraph 3 to
receive ISOs) ISOs shall be granted, and to whom (from among the class
of individuals and entities eligible under paragraph 3 to receive
Non-Qualified Options and Awards and to make Purchases) Non-Qualified
Options, Awards and authorizations to make Purchases may be granted;
(ii) determine the time or times at which Options or Awards shall be
granted or Purchases made; (iii) determine the purchase price of shares
subject to each Option or Purchase, which prices shall not be less than
the minimum price specified in paragraph 6; (iv) determine whether each
Option granted shall be an ISO or a Non-Qualified Option; (v) determine
(subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend
the period during which outstanding Options may be exercised; (vii)
determine whether restrictions such as repurchase options are to be
imposed on shares subject to Options, Awards and Purchases and the
nature of such restrictions, if any, and (viii) interpret the Plan and
prescribe and rescind rules and regulations relating to it. If the
Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code and
the regulations promulgated thereunder, to
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ensure that such Option is not treated as an ISO. The interpretation
and construction by the Committee of any provisions of the Plan or of
any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such
rules and regulations for carrying out the Plan as it may deem
advisable. No member of the Board or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan
or any Stock Right granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its
members as its chairman, and shall hold meetings at such time and
places as it may determine. A majority of the Committee shall
constitute a quorum and acts of a majority of the members of the
Committee at a meeting at which a quorum is present, or acts reduced to
or approved in writing by all the members of the Committee (if
consistent with applicable state law), shall be the valid acts of the
Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefor,
fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be
granted to members of the Board. All grants of Stock Rights to members
of the Board shall in all respects be made in accordance with the
provisions of this Plan applicable to other eligible persons. Members
of the Board who either (i) are eligible to receive grants of Stock
Rights pursuant to the Plan or (ii) have been granted Stock Rights may
vote on any matters affecting the administration of the Plan or the
grant of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of Stock
Rights, but any such member may be counted in determining the existence
of a quorum at any meeting of the Board during which action is taken
with respect to the granting to such member of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its
discretion, may take such action as may be necessary to ensure that
Stock Rights granted under the Plan qualify as "qualified
performance-based compensation" within the meaning of Section 162(m) of
the Code and applicable regulations promulgated thereunder
("Performance-Based Compensation"). Such action may include, in the
Board's discretion, some or all of the following (i) if the Board
determines that Stock Rights granted under the Plan generally shall
constitute Performance-Based Compensation, the Plan shall be
administered, to the extent required for such Stock Rights to
constitute Performance-Based Compensation, by a Committee consisting
solely of two or more "outside directors" (as defined in applicable
regulations promulgated under Section 162(m) of the Code), (ii) if any
Non-Qualified Options with an exercise price less than the fair market
value per share of Common Stock are granted under the Plan and the
Board determines that such Options should constitute Performance-Based
Compensation, such options shall be made exercisable only upon the
attainment of a pre-established, objective performance goal established
by the Committee, and such grant shall be submitted for, and shall be
<PAGE>
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contingent upon shareholder approval and (iii) Stock Rights granted
under the Plan may be subject to such other terms and conditions as are
necessary for compensation recognized in connection with the exercise
or disposition of such Stock Right or the disposition of Common Stock
acquired pursuant to such Stock Right, to constitute Performance-Based
Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to
employees of the Company or any Related Corporation. Non-Qualified Options,
Awards and authorizations to make Purchases may be granted to any employee,
officer or director (whether or not also an employee) or consultant of the
Company or any Related Corporation. The Committee may take into consideration a
recipient's individual circumstances in determining whether to grant a Stock
Right. The granting of any Stock Right to any individual or entity shall neither
entitle that individual or entity to, nor disqualify such individual or entity
from, participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 5,283,048, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option shall again be available for grants of Stock
Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 3,500,000 shares of Common Stock
under the Plan during any fiscal year of the Company. If any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part or shall be repurchased by the Company, the shares subject to such Option
shall be included in the determination of the aggregate number of shares of
Common Stock deemed to have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the
Plan at any time on or after January 27, 1998 and prior to January 26, 2008. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND PURCHASES.
Subject to paragraph 2(D) (relating to compliance with Section 162(m)
of the Code), the exercise price per share specified in the agreement
relating to each Non-Qualified Option granted, and the purchase price
per share of stock granted in any Award or authorized as a Purchase,
under the Plan may be less than the fair market value of the Common
Stock of
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the Company on the date of grant; provided that, in no event shall such
exercise price or such purchase price be less than the minimum legal
consideration required therefor under the laws of any jurisdiction in
which the Company or its successors in interest may be organized.
B. PRICE FOR ISOS. The exercise price per share specified in
the agreement relating to each ISO granted under the Plan shall not be
less than the fair market value per share of Common Stock on the date
of such grant. In the case of an ISO to be granted to an employee
owning stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any
Related Corporation, the price per share specified in the agreement
relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date
of grant. For purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible
employee may be granted Options treated as ISOs only to the extent
that, in the aggregate under this Plan and all incentive stock option
plans of the Company and any Related Corporation, ISOs do not become
exercisable for the first time by such employee during any calendar
year with respect to stock having a fair market value (determined at
the time the ISOs were granted) in excess of $100,000. The Company
intends to designate any Options granted in excess of such limitation
as Non-Qualified Options, and the Company shall issue separate
certificates to the optionee with respect to Options that are
Non-Qualified Options and Options that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an
Option is granted under the Plan, the Company's Common Stock is
publicly traded, "fair market value" shall be determined as of the date
of grant or, if the prices or quotes discussed in this sentence are
unavailable for such date, the last business day for which such prices
or quotes are available prior to the date of grant and shall mean (i)
the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq National Market, if the Common
Stock is not then traded on a national securities exchange; or (iii)
the closing bid price (or average of bid prices) last quoted (on that
date) by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the Nasdaq National
Market. If the Common Stock is not publicly traded at the time an
Option is granted under the Plan, "fair market value" shall mean the
fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the
Common Stock in private transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by
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the Committee, but not more than (i) ten years from the date of grant in the
case of Options generally and (ii) five years from the date of grant in the case
of ISOs granted to an employee owning stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Related Corporation, as determined under paragraph 6(B). Subject to
earlier termination as provided in paragraphs 9 and 10, the term of each ISO
shall be the term set forth in the original instrument granting such ISO, except
with respect to any part of such ISO that is converted into a Non-Qualified
Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on
the date of grant or shall become exercisable thereafter in such
installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable, it shall remain exercisable until expiration or
termination of the Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be
exercised at any time or from time to time, in whole or in part, for up
to the total number of shares with respect to which it is then
exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right
to accelerate the date that any installment of any Option becomes
exercisable; provided that the Committee shall not, without the consent
of an optionee, accelerate the permitted exercise date of any
installment of any Option granted to any employee as an ISO (and not
previously converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting limitation
contained in Section 422(d) of the Code, as described in paragraph
6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
three months after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute or by contract. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
<PAGE>
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employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Stock Right the right to be retained in
employment or other service by the Company or any Related Corporation for any
period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her death, any
ISO owned by such optionee may be exercised, to the extent otherwise
exercisable on the date of death, by the estate, personal
representative or beneficiary who has acquired the ISO by will or by
the laws of descent and distribution, until the earlier of (i) the
specified expiration date of the ISO or (ii) 180 days from the date of
the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her
disability, such optionee shall have the right to exercise any ISO held
by him or her on the date of termination of employment, for the number
of shares for which he or she could have exercised it on that date,
until the earlier of (i) the specified expiration date of the ISO or
(ii) 180 days from the date of the termination of the optionee's
employment. For the purposes of the Plan, the term "disability" shall
mean "permanent and total disability" as defined in Section 22(e)(3) of
the Code or any successor statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events,
an optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter
<PAGE>
-7-
provided, unless otherwise specifically provided in the written agreement
between the optionee and the Company relating to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller number
of shares or if the Company shall issue any shares of Common Stock as a
stock dividend on its outstanding Common Stock, the number of shares of
Common Stock deliverable upon the exercise of Options shall be
appropriately increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to reflect
such subdivision, combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger or other
reorganization in which the holders of the outstanding voting stock of
the Company immediately preceding the consummation of such event,
shall, immediately following such event, hold, as a group, less than a
majority of the voting securities of the surviving or successor entity,
or in the event of a sale of all or substantially all of the Company's
assets or otherwise (each, an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the
Company hereunder (the "Successor Board"), shall, as to outstanding
Options, either (i) make appropriate provision for the continuation of
such Options by substituting on an equitable basis for the shares then
subject to such Options either (a) the consideration payable with
respect to the outstanding shares of Common Stock in connection with
the Acquisition, (b) shares of stock of the surviving or successor
corporation or (c) such other securities as the Successor Board deems
appropriate, the fair market value of which shall not materially exceed
the fair market value of the shares of Common Stock subject to such
Options immediately preceding the Acquisition; or (ii) upon written
notice to the optionees, provide that all Options must be exercised, to
the extent then exercisable or to be exercisable as a result of the
Acquisition, within a specified number of days of the date of such
notice, at the end of which period the Options shall terminate; or
(iii) terminate all Options in exchange for a cash payment equal to the
excess of the fair market value of the shares subject to such Options
(to the extent then exercisable or to be exercisable as a result of the
Acquisition) over the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a
transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, an optionee upon
exercising an Option shall be entitled to receive for the purchase
price paid upon such exercise the securities he or she would have
received if he or she had exercised such Option prior to such
recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to
ISOs shall be made only after the Committee, after consulting with
counsel for the Company, determines whether such
<PAGE>
-8-
adjustments would constitute a "modification" of such ISOs (as that
term is defined in Section 424 of the Code) or would cause any adverse
tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs or would cause adverse tax
consequences to the holders, it may refrain from making such
adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at
such other time and subject to such other conditions as shall be
determined by the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect,
and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to Options. No adjustments shall be
made for dividends paid in cash or in property other than securities of
the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued
under the Plan and the optionee shall receive from the Company cash in
lieu of such fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the events
described in subparagraphs A, B or C above, the class and aggregate
number of shares set forth in paragraph 4 hereof that are subject to
Stock Rights which previously have been or subsequently may be granted
under the Plan shall also be appropriately adjusted to reflect the
events described in such subparagraphs. The Committee or the Successor
Board shall determine the specific adjustments to be made under this
paragraph 13 and, subject to paragraph 2, its determination shall be
conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion
of the Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be
<PAGE>
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exercised in writing at the time of the grant of the ISO in question. The holder
of an Option shall not have the rights of a shareholder with respect to the
shares covered by such Option until the date of issuance of a stock certificate
to such holder for such shares. Except as expressly provided above in paragraph
13 with respect to changes in capitalization and stock dividends, no adjustment
shall be made for dividends or similar rights for which the record date is
before the date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
January 27, 1998, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to January 27, 1999, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on January 26, 2008 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (c)
the provisions of paragraph 6(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to paragraph 13); and (d) the expiration date of the Plan may not be
extended. Except as otherwise provided in this paragraph 15, in no event may
action of the Board or stockholders alter or impair the rights of a grantee,
without such grantee's consent, under any Stock Right previously granted to such
grantee.
16. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO (including
the means of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any optionee the right to have
such optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate action.
Upon the taking of such action, the Company shall issue
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separate certificates to the optionee with respect to Options that are
Non-Qualified Options and Options that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from
the sale of shares pursuant to Options granted and Purchases authorized under
the Plan shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an
ISO granted under the Plan, each optionee agrees to notify the Company in
writing immediately after such optionee makes a Disqualifying Disposition (as
described in Sections 421, 422 and 424 of the Code and regulations thereunder)
of any stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the transfer of a Non-Qualified
Stock Option, (iii) the grant of an Award, (iv) the making of a Purchase of
Common Stock for less than its fair market value, or (v) the vesting or
transferability of restricted stock or securities acquired by exercising an
Option, on the grantee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the grantee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of the State
of Delaware, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
<PAGE>
Exhibit 10.2
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1 - PURPOSE.
This 1999 Employee Stock Purchase Plan (the "Plan") is intended to
encourage stock ownership by all eligible employees of Lionbridge Technologies
Holdings, Inc. (the "Company"), a Delaware corporation, and its participating
subsidiaries (as defined in Article 17) so that they may share in the growth of
the Company by acquiring or increasing their proprietary interest in the
Company. The Plan is designed to encourage eligible employees to remain in the
employ of the Company and its participating subsidiaries. The Plan is intended
to constitute an "employee stock purchase plan" within the meaning of Section
423(b) of the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2 - ADMINISTRATION OF THE PLAN.
The Plan may be administered by a committee appointed by the Board of
Directors of the Company (the "Committee"). The Committee shall consist of not
less than two members of the Company's Board of Directors. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board of Directors. The Committee may select one of its members as Chairman, and
shall hold meetings at such times and places as it may determine. Acts by a
majority of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final, unless otherwise
determined by the Board of Directors. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best,
provided that any such rules and regulations shall be applied on a uniform basis
to all employees under the Plan. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
In the event the Board of Directors fails to appoint or refrains from
appointing a Committee, the Board of Directors shall have all power and
authority to administer the Plan. In such event, the word "Committee" wherever
used herein shall be deemed to mean the Board of Directors.
ARTICLE 3 - ELIGIBLE EMPLOYEES.
All employees of the Company or any of its participating subsidiaries
whose customary employment is more than 20 hours per week and for more than
three months in any calendar year shall be eligible to receive options under the
Plan to purchase common stock of the Company,
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and all eligible employees shall have the same rights and privileges hereunder.
Persons who are eligible employees on the first business day of any Payment
Period (as defined in Article 5) shall receive their options as of such day.
Persons who become eligible employees after any date on which options are
granted under the Plan shall be granted options on the first day of the next
succeeding Payment Period on which options are granted to eligible employees
under the Plan. In no event, however, may an employee be granted an option if
such employee, immediately after the option was granted, would be treated as
owning stock possessing five percent or more of the total combined voting power
or value of all classes of stock of the Company or of any parent corporation or
subsidiary corporation, as the terms "parent corporation" and "subsidiary
corporation" are defined in Section 424(e) and (f) of the Code. For purposes of
determining stock ownership under this paragraph, the rules of Section 424(d) of
the Code shall apply, and stock which the employee may purchase under
outstanding options shall be treated as stock owned by the employee.
ARTICLE 4 - STOCK SUBJECT TO THE PLAN.
The stock subject to the options under the Plan shall be shares of the
Company's authorized but unissued common stock, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company, including
shares purchased in the open market. The aggregate number of shares which may be
issued pursuant to the Plan is 1,000,000, subject to adjustment as provided in
Article 12. If any option granted under the Plan shall expire or terminate for
any reason without having been exercised in full or shall cease for any reason
to be exercisable in whole or in part, the unpurchased shares subject thereto
shall again be available under the Plan.
ARTICLE 5 - PAYMENT PERIOD AND STOCK OPTIONS.
The first Payment Period during which payroll deductions will be
accumulated under the Plan shall commence on the later to occur of November 1,
1999 and the first day of the first calendar month following effectiveness of
the Form S-8 registration statement filed with the Securities and Exchange
Commission covering the shares to be issued pursuant to the Plan and shall end
on April 30, 2000. For the remainder of the duration of the Plan, Payment
Periods shall consist of the six-month periods commencing on May 1 and November
1, and ending on October 31 and April 30, respectively, of each calendar year.
Twice each year, on the first business day of each Payment Period, the
Company will grant to each eligible employee who is then a participant in the
Plan an option to purchase on the last day of such Payment Period, at the Option
Price hereinafter provided for, a maximum of 500 shares, on condition that such
employee remains eligible to participate in the Plan throughout the remainder of
such Payment Period. The participant shall be entitled to exercise the option so
granted only to the extent of the participant's accumulated payroll deductions
on the last day of such Payment Period. If the participant's accumulated payroll
deductions on the last day of the Payment Period would enable the participant to
purchase more than 500 shares except for the 500-share limitation, the excess of
the amount of the accumulated payroll deductions over the aggregate purchase
price of the 500 shares shall be promptly refunded to the participant by the
<PAGE>
-3-
Company, without interest. The Option Price per share for each Payment Period
shall be the lesser of (i) 85% of the average market price of the Common Stock
on the first business day of the Payment Period and (ii) 85% of the average
market price of the Common Stock on the last business day of the Payment Period,
in either event rounded up to the nearest cent. The foregoing limitation on the
number of shares subject to option and the Option Price shall be subject to
adjustment as provided in Article 12.
For purposes of the Plan, the term "average market price" on any date
means (i) the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock on the
Nasdaq National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the average of the closing bid and asked prices
last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market; or (iv) if the Common Stock is not publicly traded, the fair
market value of the Common Stock as determined by the Committee after taking
into consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
For purposes of the Plan, the term "business day" means a day on which
there is trading on the Nasdaq National Market or the aforementioned national
securities exchange, whichever is applicable pursuant to the preceding
paragraph; and if neither is applicable, a day that is not a Saturday, Sunday or
legal holiday in Massachusetts.
No employee shall be granted an option which permits the employee's right
to purchase stock under the Plan, and under all other Section 423(b) employee
stock purchase plans of the Company and any parent or subsidiary corporations,
to accrue at a rate which exceeds $25,000 of fair market value of such stock
(determined on the date or dates that options on such stock were granted) for
each calendar year in which such option is outstanding at any time. The purpose
of the limitation in the preceding sentence is to comply with Section 423(b)(8)
of the Code. If the participant's accumulated payroll deductions on the last day
of the Payment Period would otherwise enable the participant to purchase Common
Stock in excess of the Section 423(b)(8) limitation described in this paragraph,
the excess of the amount of the accumulated payroll deductions over the
aggregate purchase price of the shares actually purchased shall be promptly
refunded to the participant by the Company, without interest.
ARTICLE 6 - EXERCISE OF OPTION.
Each eligible employee who continues to be a participant in the Plan on
the last day of a Payment Period shall be deemed to have exercised his or her
option on such date and shall be deemed to have purchased from the Company such
number of full shares of Common Stock reserved for the purpose of the Plan as
the participant's accumulated payroll deductions on such date will pay for at
the Option Price, subject to the 500-share limit of the option and the Section
423(b)(8) limitation described in Article 5. If the individual is not a
participant on the last day of a Payment Period, the he or she shall not be
entitled to exercise his or her option.
<PAGE>
-4-
Only full shares of Common Stock may be purchased under the Plan. Unused payroll
deductions remaining in a participant's account at the end of a Payment Period
by reason of the inability to purchase a fractional share shall be carried
forward to the next Payment Period.
ARTICLE 7 - AUTHORIZATION FOR ENTERING THE PLAN.
An employee may elect to enter the Plan by filling out, signing and
delivering to the Company an authorization:
A. Stating the percentage to be deducted regularly from the
employee's pay;
B. Authorizing the purchase of stock for the employee in each
Payment Period in accordance with the terms of the Plan; and
C. Specifying the exact name or names in which stock purchased for
the employee is to be issued as provided under Article 11 hereof.
Such authorization must be received by the Company at least ten days before the
first day of the next succeeding Payment Period and shall take effect only if
the employee is an eligible employee on the first business day of such Payment
Period.
Unless a participant files a new authorization or withdraws from the Plan,
the deductions and purchases under the authorization the participant has on file
under the Plan will continue from one Payment Period to succeeding Payment
Periods as long as the Plan remains in effect.
The Company will accumulate and hold for each participant's account the
amounts deducted from his or her pay. No interest will be paid on these amounts.
ARTICLE 8 - MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS.
An employee may authorize payroll deductions in an amount (expressed as a
whole percentage) not less than one percent (1%) but not more than ten percent
(10%) of the employee's total compensation, including base pay or salary and any
overtime, bonuses or commissions.
ARTICLE 9 - CHANGE IN PAYROLL DEDUCTIONS.
Deductions may not be increased or decreased during a Payment Period.
However, a participant may withdraw in full from the Plan.
ARTICLE 10 - WITHDRAWAL FROM THE PLAN.
A participant may withdraw from the Plan (in whole but not in part) at any
time prior to the last day of a Payment Period by delivering a withdrawal notice
to the Company.
<PAGE>
-5-
To re-enter the Plan, an employee who has previously withdrawn must file a
new authorization at least ten days before the first day of the next Payment
Period in which he or she wishes to participate. The employee's re-entry into
the Plan becomes effective at the beginning of such Payment Period, provided
that he or she is an eligible employee on the first business day of the Payment
Period.
ARTICLE 11 - ISSUANCE OF STOCK.
Certificates for stock issued to participants shall be delivered as soon
as practicable after each Payment Period by the Company's transfer agent.
Stock purchased under the Plan shall be issued only in the name of the
participant, or if the participant's authorization so specifies, in the name of
the participant and another person of legal age as joint tenants with rights of
survivorship.
ARTICLE 12 - ADJUSTMENTS.
Upon the happening of any of the following described events, a
participant's rights under options granted under the Plan shall be adjusted as
hereinafter provided:
A. In the event that the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if,
upon a reorganization, split-up, liquidation, recapitalization or the like
of the Company, the shares of Common Stock shall be exchanged for other
securities of the Company, each participant shall be entitled, subject to
the conditions herein stated, to purchase such number of shares of Common
Stock or amount of other securities of the Company as were exchangeable
for the number of shares of Common Stock that such participant would have
been entitled to purchase except for such action, and appropriate
adjustments shall be made in the purchase price per share to reflect such
subdivision, combination or exchange; and
B. In the event the Company shall issue any of its shares as a
stock dividend upon or with respect to the shares of stock of the class
which shall at the time be subject to option hereunder, each participant
upon exercising such an option shall be entitled to receive (for the
purchase price paid upon such exercise) the shares as to which the
participant is exercising his or her option and, in addition thereto (at
no additional cost), such number of shares of the class or classes in
which such stock dividend or dividends were declared or paid, and such
amount of cash in lieu of fractional shares, as is equal to the number of
shares thereof and the amount of cash in lieu of fractional shares,
respectively, which the participant would have received if the participant
had been the holder of the shares as to which the participant is
exercising his or her option at all times between the date of the granting
of such option and the date of its exercise.
Upon the happening of any of the foregoing events, the class and aggregate
number of shares set forth in Article 4 hereof which are subject to options
which have been or may be granted under the Plan and the limitations set forth
in the second paragraph of Article 5 shall also
<PAGE>
-6-
be appropriately adjusted to reflect the events specified in paragraphs A and B
above. Notwithstanding the foregoing, any adjustments made pursuant to
paragraphs A or B shall be made only after the Committee, based on advice of
counsel for the Company, determines whether such adjustments would constitute a
"modification" (as that term is defined in Section 424 of the Code). If the
Committee determines that such adjustments would constitute a modification, it
may refrain from making such adjustments.
If the Company is to be consolidated with or acquired by another entity in
a merger, a sale of all or substantially all of the Company's assets or
otherwise (an "Acquisition"), the Committee or the board of directors of any
entity assuming the obligations of the Company hereunder (the "Successor Board")
shall, with respect to options then outstanding under the Plan, either (i) make
appropriate provision for the continuation of such options by arranging for the
substitution on an equitable basis for the shares then subject to such options
either (a) the consideration payable with respect to the outstanding shares of
the Common Stock in connection with the Acquisition, (b) shares of stock of the
successor corporation, or a parent or subsidiary of such corporation, or (c)
such other securities as the Successor Board deems appropriate, the fair market
value of which shall not materially exceed the fair market value of the shares
of Common Stock subject to such options immediately preceding the Acquisition;
or (ii) terminate each participant's options in exchange for a cash payment
equal to the excess of (a) the fair market value on the date of the Acquisition,
of the number of shares of Common Stock that the participant's accumulated
payroll deductions as of the date of the Acquisition could purchase, at an
option price determined with reference only to the first business day of the
applicable Payment Period and subject to the 500-share, Code Section 423(b)(8)
and fractional-share limitations on the amount of stock a participant would be
entitled to purchase, over (b) the result of multiplying such number of shares
by such option price.
The Committee or Successor Board shall determine the adjustments to be
made under this Article 12, and its determination shall be conclusive.
ARTICLE 13 - NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS.
An option granted under the Plan may not be transferred or assigned and
may be exercised only by the participant.
ARTICLE 14 - TERMINATION OF EMPLOYEE'S RIGHTS.
Whenever a participant ceases to be an eligible employee because of
retirement, voluntary or involuntary termination, resignation, layoff,
discharge, death or for any other reason, his or her rights under the Plan shall
immediately terminate, and the Company shall promptly refund, without interest,
the entire balance of his or her payroll deduction account under the Plan.
Notwithstanding the foregoing, eligible employment shall be treated as
continuing intact while a participant is on military leave, sick leave or other
bona fide leave of absence, for up to 90 days, or for so long as the
participant's right to re-employment is guaranteed either by statute or by
contract, if longer than 90 days.
<PAGE>
-7-
ARTICLE 15 - TERMINATION AND AMENDMENTS TO PLAN.
The Plan may be terminated at any time by the Company's Board of Directors
but such termination shall not affect options then outstanding under the Plan.
It will terminate in any case when all or substantially all of the unissued
shares of stock reserved for the purposes of the Plan have been purchased. If at
any time shares of stock reserved for the purpose of the Plan remain available
for purchase but not in sufficient number to satisfy all then unfilled purchase
requirements, the available shares shall be apportioned among participants in
proportion to the amount of payroll deductions accumulated on behalf of each
participant that would otherwise be used to purchase stock, and the Plan shall
terminate. Upon such termination or any other termination of the Plan, all
payroll deductions not used to purchase stock will be refunded, without
interest.
The Committee or the Board of Directors may from time to time adopt
amendments to the Plan provided that, without the approval of the stockholders
of the Company, no amendment may (i) increase the number of shares that may be
issued under the Plan; (ii) change the class of employees eligible to receive
options under the Plan, if such action would be treated as the adoption of a new
plan for purposes of Section 423(b) of the Code; or (iii) cause Rule 16b-3 under
the Securities Exchange Act of 1934 to become inapplicable to the Plan.
ARTICLE 16 - LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN.
The Plan is intended to provide shares of Common Stock for investment and
not for resale. The Company does not, however, intend to restrict or influence
any employee in the conduct of his or her own affairs. An employee may,
therefore, sell stock purchased under the Plan at any time the employee chooses,
subject to compliance with any applicable federal or state securities laws and
subject to any restrictions imposed under Article 21 to ensure that tax
withholding obligations are satisfied. THE EMPLOYEE ASSUMES THE RISK OF ANY
MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.
ARTICLE 17 - PARTICIPATING SUBSIDIARIES.
The term "participating subsidiary" shall mean any present or future
subsidiary of the Company, as that term is defined in Section 424(f) of the
Code, which is designated from time to time by the Board of Directors to
participate in the Plan. The Board of Directors shall have the power to make
such designation before or after the Plan is approved by the stockholders.
ARTICLE 18 - OPTIONEES NOT STOCKHOLDERS.
Neither the granting of an option to an employee nor the deductions from
his or her pay shall constitute such employee a stockholder of the shares
covered by an option until such shares have been actually purchased by the
employee.
<PAGE>
-8-
ARTICLE 19 - APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
pursuant to options granted under the Plan will be used for general corporate
purposes.
ARTICLE 20 - NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
By electing to participate in the Plan, each participant agrees to notify
the Company in writing immediately after the participant transfers Common Stock
acquired under the Plan, if such transfer occurs within two years after the
first business day of the Payment Period in which such Common Stock was
acquired. Each participant further agrees to provide any information about such
a transfer as may be requested by the Company or any subsidiary corporation in
order to assist it in complying with the tax laws. Such dispositions generally
are treated as "disqualifying dispositions" under Sections 421 and 424 of the
Code, which have certain tax consequences to participants and to the Company and
its participating subsidiaries.
ARTICLE 21 - WITHHOLDING OF ADDITIONAL INCOME TAXES.
By electing to participate in the Plan, each participant acknowledges that
the Company and its participating subsidiaries are required to withhold taxes
with respect to the amounts deducted from the participant's compensation and
accumulated for the benefit of the participant under the Plan, and each
participant agrees that the Company and its participating subsidiaries may
deduct additional amounts from the participant's compensation, when amounts are
added to the participant's account, used to purchase Common Stock or refunded,
in order to satisfy such withholding obligations. Each participant further
acknowledges that when Common Stock is purchased under the Plan the Company and
its participating subsidiaries may be required to withhold taxes with respect to
all or a portion of the difference between the fair market value of the Common
Stock purchased and its purchase price, and each participant agrees that such
taxes may be withheld from compensation otherwise payable to such participant.
It is intended that tax withholding will be accomplished in such a manner that
the full amount of payroll deductions elected by the participant under Article 7
will be used to purchase Common Stock. However, if amounts sufficient to satisfy
applicable tax withholding obligations have not been withheld from compensation
otherwise payable to any participant, then, notwithstanding any other provision
of the Plan, the Company may withhold such taxes from the participant's
accumulated payroll deductions and apply the net amount to the purchase of
Common Stock, unless the participant pays to the Company, prior to the exercise
date, an amount sufficient to satisfy such withholding obligations. Each
participant further acknowledges that the Company and its participating
subsidiaries may be required to withhold taxes in connection with the
disposition of stock acquired under the Plan and agrees that the Company or any
participating subsidiary may take whatever action it considers appropriate to
satisfy such withholding requirements, including deducting from compensation
otherwise payable to such participant an amount sufficient to satisfy such
withholding requirements or conditioning any disposition of Common Stock by the
participant upon the payment to the Company or such subsidiary of an amount
sufficient to satisfy such withholding requirements.
<PAGE>
-9-
ARTICLE 22 - GOVERNMENTAL REGULATIONS.
The Company's obligation to sell and deliver shares of Common Stock under
the Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
identify shares of Common Stock issued under the Plan on its stock ownership
records and send tax information statements to employees and former employees
who transfer title to such shares.
ARTICLE 23 - GOVERNING LAW.
The validity and construction of the Plan shall be governed by the laws of
Delaware, without giving effect to the principles of conflicts of law thereof.
ARTICLE 24 - APPROVAL OF BOARD OF DIRECTORS AND STOCKHOLDERS OF THE COMPANY.
The Plan was adopted by the Board of Directors on June 15, 1999 and was
approved by the stockholders of the Company on June 15, 1999.
<PAGE>
BAY COLONY CORPORATE CENTER
WALTHAM, MASSACHUSETTS
OFFICE LEASE
SHORENSTEIN MANAGEMENT, INC.,
as Trustee of SRI Two Realty Trust,
Landlord
and
LIONBRIDGE TECHNOLOGIES, INC.,
Tenant
DATED AS OF: February 13, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPH PAGE
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<S> <C>
1. Premises................................................................3
2. Certain Basic Lease Terms...............................................3
3. Term; Delivery of Possession of Premises................................4
4. Condition of Premises...................................................4
5. Monthly Rent............................................................6
6. Security Deposit........................................................8
7. Additional Rent: Operating Expenses and Tax Expenses....................8
8. Use of Premises; Compliance with Law...................................12
9. Alterations and Restoration............................................14
10. Repair.................................................................15
11. Abandonment............................................................16
12. Liens..................................................................16
13. Assignment and Subletting..............................................16
14. Indemnification of Landlord............................................21
15. Insurance..............................................................22
16. Mutual Waiver of Subrogation Rights....................................23
17. Utilities..............................................................24
18. Personal Property and Other Taxes......................................26
19. Rules and Regulations..................................................26
20. Surrender; Holding Over................................................26
21. Subordination and Attornment...........................................27
22. Financing Condition....................................................28
23. Entry by Landlord......................................................28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
24. Insolvency or Bankruptcy...............................................29
25. Defaults and Remedies..................................................29
26. Damage or Destruction..................................................32
27. Eminent Domain.........................................................33
28. Landlord's Liability; Sale of Building.................................34
29. Estoppel Certificates..................................................35
30. Right of Landlord to Perform...........................................35
31. Late Charge............................................................36
32. Attorneys'Fees'Waiver of Jury Trial....................................36
33. Waiver.................................................................37
34. Notices................................................................37
35. Deleted................................................................37
36. Defined Terms and Marginal Headings....................................37
37. Time and Applicable Law................................................38
38. Successors.............................................................38
39. Entire Agreement; Modifications........................................38
40. Light and Air..........................................................38
41. Name of Building.......................................................38
42. Severability...........................................................38
43. Authority..............................................................38
44. No Offer...............................................................39
45. Real Estate Brokers....................................................39
46. Consents and Approvals.................................................39
47. Reserved Rights........................................................39
48. Financial Statements...................................................40
49. Substitution of Premises...............................................40
50. Nondisclosure of Lease Terms...........................................40
</TABLE>
Exhibits:
A - Outline of Premises
B - Rules and Regulations
<PAGE>
LEASE
THIS LEASE is made as of the 13th day of February, 1997 (the "Execution
Date"), between SHORENSTEIN MANAGEMENT, INC., as Trustee of SRI Two Realty Trust
("Landlord"), and LIONBRIDGE TECHNOLOGIES, INC., a Delaware corporation
("Tenant").
1. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, on the terms and conditions set forth herein, the space outlined
on the attached EXHIBIT A (the "Premises"). The Premises are located on the
floor specified in Paragraph 2 below of the building located at 950 Winter
Street, Waltham, Massachusetts (the "Building"). The parcel(s) of land (the
"Land") on which the Building is located and the other improvements on the Land
(including the Building, driveways, and landscaping) are referred to herein as
the "Real Property." The Real Property is situated within Bay Colony Corporate
Center (the "Office Park").
Tenant's lease of the Premises shall include the right to use, in common
with others and subject to the other provisions of this Lease, the public
lobbies, entrances, stairs, elevators and other public portions of the Building.
All of the windows and outside walls of the Premises and any space in the
Premises used for shafts, stacks, pipes, conduits, ducts, electrical equipment
or other utilities or Building facilities are reserved solely to Landlord and
Landlord shall have rights of access through the Premises for the purpose of
operating, maintaining and repairing the same.
2. CERTAIN BASIC LEASE TERMS. As used herein, the following terms shall
have the meaning specified below:
a. Floor on which the Premises are located: Fourth
(4th) floor.
b. Lease term: Approximately four (4) years, commencing
on Substantial Completion (as defined in Paragraph
4.b. below) of the Tenant Improvements to be
constructed in the Premises as provided in Paragraph
4 (the "Commencement Date"), and ending on the last
day of the forty-eighth (48th) full calendar month
thereafter (the "Expiration Date").
c. Monthly Rent: Nine Thousand Thirty-Nine Dollars
($9,039.00).
Rent Commencement Date: The date that is the earlier
of (i) the Commencement Date, or (ii) the date that
is thirty (30) days after the Execution Date set
forth in the preamble to this Lease, which Execution
Date has been completed by Landlord to set forth the
date on which this Lease was executed by Landlord and
Tenant.
d. Security Deposit: Eighteen Thousand Seventy-Eight
Dollars ($18,078.00).
<PAGE>
e. Tenant's Share: 1.27%.
f. Base Year: The calendar year 1997.
Base Tax Year: The fiscal tax year ending June 30,
1997.
g. Business of Tenant: Software localization and
related business services.
h. Real estate broker(s): Shorenstein Management, Inc.
and Fallon Hines & O'Connor.
i. Tenant's Electrical Charge: Two Hundred Seventy-
Seven Dollars ($277.00) per month.
3. TERM; DELIVERY OF POSSESSION OF PREMISES.
a. Term. The term of this Lease shall commence on the
Commencement Date (as defined in Paragraph 2.b.) and, unless sooner terminated
pursuant to the terms hereof or at law, shall expire on the Expiration Date
(defined in Paragraph 2.b.). The Commencement Date shall be confirmed by the
parties following Substantial Completion of the Tenant Improvements, as provided
in Paragraph 4.
b. Delivery of Premises. The Premises shall be delivered
to Tenant upon Substantial Completion (as that term is defined in Paragraph
4.b.) of the Tenant Improvements (as that term is defined in Paragraph 4.a.) to
be constructed in the Premises by Landlord pursuant to Paragraph 4. If
Substantial Completion of the Tenant Improvements and delivery of possession of
the Premises is delayed for any reason whatsoever, this Lease shall not be void
or voidable. Except as otherwise provided herein, no delay in delivery of
possession of the Premises to Tenant shall operate to extend the term of this
Lease or amend Tenant's obligations under this Lease. In no event shall Landlord
be liable to Tenant for any delay in completion of the Tenant Improvements
caused or occasioned by strikes, lockout, labor disputes, shortages of material
or labor, fire or other casualty, acts of God or any other cause beyond the
control of Landlord.
c. Early Occupancy. If Tenant commences its occupancy of
the Premises prior to the Substantial Completion of the Tenant Improvements,
then, notwithstanding anything to the contrary in Paragraph 2.b. above, the
Commencement Date of the Lease shall be the date Tenant commenced its occupancy
of the Premises.
4. CONDITION OF PREMISES.
a. Tenant Improvements. Landlord shall have no
obligation to make or pay for any improvements or renovations in or to the
Premises or otherwise prepare the Premises for Tenant's occupancy, except as
specifically provided in this Paragraph 4. Promptly upon execution of this
Lease, Tenant shall provide to Landlord, or Landlord's architect, information
for the improvements Tenant desires Landlord to construct in the Premises in
sufficient detail to
<PAGE>
permit Landlord's architect to prepare construction documents for such
improvements sufficient for Landlord's contractor to obtain all necessary
governmental permits for construction of the improvements shown thereon and to
secure complete bids from qualified contractors to perform the work for such
improvements. Landlord's architect shall then promptly prepare the necessary
architectural and construction drawings (the "Plans") for such improvements.
Upon completion of the Plans, Landlord shall submit the same to Tenant for
Tenant's approval and Tenant shall approve the Plans in writing (or disapprove
citing the specific items so disapproved) within two (2) Business Days (as
defined in Paragraph 17.a. below) after receipt thereof from Landlord. Tenant
shall not disapprove any aspect of the Plans except to the extent that such
aspect does not properly reflect the information originally provided by Tenant
to Landlord. Any changes in the Plans other than changes to conform to Legal
Requirements (as defined in Paragraph 7.a.(16) below) shall be subject to
Landlord's prior written approval. The Plans finally approved by Landlord and
Tenant shall be referred to as the "Final Plans" and the work called for therein
shall be the "Tenant Improvements".
b. Construction. Landlord shall cause the work described
in the Final Plans to be commenced as soon as is reasonably possible after the
approval of the Final Plans. Landlord shall provide and cause to be installed
only those wall terminal boxes and/or floor monuments required for Tenant's
telephone or computer systems as are shown on the Final Plans. Landlord will
provide ordinary power wiring to locations shown on the Final Plans and shall
provide and cause to be installed conduits and pull strings in partition walls,
if shown on the Final Plans, as required for Tenant's telephone and computer
systems, but shall in no event provide, install, pull or hook up any other
conduits or wires, supply jacks or plugs, or provide wiring necessary for
special conditioned power to the Premises. Further, notwithstanding anything to
the contrary herein, Landlord and Tenant shall cooperate with each other to
resolve any space plan issues raised by applicable local building codes. The
Tenant Improvements shall be deemed to be "Substantially Completed" when they
have, in Landlord's reasonable judgment, been completed in accordance with the
Final Plans, subject only to correction or completion of "Punch List" items,
which items shall be limited to minor items of incomplete or defective work or
materials or mechanical maladjustments that are of such a nature that they do
not materially interfere with or impair Tenant's use of the Premises for
Tenant's business. The definition of "Substantially Completed" shall also apply
to the terms "Substantial Completion" and "Substantially Complete".
c. Changes. If Tenant requests any change, addition or
alteration in or to the Plans, whether at the layout plan stage or at any
subsequent working drawing stage ("Changes"), Landlord shall cause Landlord's
architect to prepare additional plans implementing such Change and Tenant shall
be responsible for Landlord's reasonable architectural charges in connection
therewith. As soon as practicable after the completion of such additional plans,
Landlord shall notify Tenant of the estimated cost of the Change. Within three
(3) days after receipt of such cost estimate, Tenant shall notify Landlord in
writing whether Tenant approves the Change. If Tenant approves the Change,
Landlord shall proceed with the Change. If the Change increases the cost of the
Tenant Improvements and the funds from Landlord's Allowance (as defined in
Paragraph 4.e. below) are not sufficient to pay for the Change, then Tenant
shall be liable for the additional cost, which cost shall be payable, at
Landlord's option, either prior to commencement of work on the Change or during
the course of construction. Landlord will use reasonable care in
<PAGE>
preparing the estimates, but they shall be good faith estimates only and will
not limit Tenant's obligation to pay for the actual increase in the cost of the
Tenant Improvements. If Tenant fails to approve the Change within such three (3)
day period, construction of the Tenant Improvements shall proceed as provided in
accordance with the Plans as they existed prior to the requested Change.
d. Tenant Delays. Tenant shall be responsible for, and
shall pay to Landlord, any and all costs and expenses incurred by Landlord in
connection with any delay in the commencement or completion of any Tenant
Improvements and any increase in the cost of Tenant Improvements caused by (i)
any Changes requested by Tenant in the Tenant Improvements shown on the Plans
(including any cost or delay resulting from proposed changes that are not
ultimately made), (ii) any failure by Tenant to timely pay any amounts due from
Tenant hereunder, including any additional costs resulting from any Change (it
being acknowledged that if Tenant fails to make or otherwise delays making such
payments, Landlord may stop work on the Tenant Improvements rather than incur
costs which Tenant is obligated to fund but has not yet done so and any delay
from such a work stoppage will be a Tenant Delay), (iii) the inclusion in the
Tenant Improvements of any so-called `long lead' materials (such as fabrics,
panellings, carpeting or other items that must be imported or are of unusual
character or limited availability), (iv) any delay by Tenant in providing
information required for preparation of the Plans, responding to inquiries
regarding the construction of the Tenant Improvements or in granting Tenant's
approval of materials or finishes for the Tenant Improvements or of the Plans,
or (v) any other delay requested or caused by Tenant. Each of the foregoing is
referred to herein as a "Tenant Delay".
e. Cost of Construction. Landlord shall, through a
contractor selected by Landlord, construct the Tenant Improvements as shown on
the Final Plans in compliance with this Paragraph 4 on a cost basis plus the
contractor's fee and Landlord's construction management fee. Landlord shall bear
the cost of the construction of the Tenant Improvements, limited however to a
maximum expenditure by Landlord therefor of Fifteen Thousand Eleven Dollars
($15,011.00) ("Landlord's Allowance"). Tenant shall pay to Landlord immediately
upon written demand the cost of the construction of the Tenant Improvements
(including architectural Costs and Landlord's Contractor's Charge) that exceeds
Landlord's Allowance, which demand may be for payment in advance or in
course-of-construction installments.
Tenant acknowledges that Landlord's Allowance is to be applied to Tenant
Improvements covering the entire Premises outlined in EXHIBIT A. If Tenant does
not elect to improve the entire Premises, then Landlord's Allowance shall be
adjusted on a pro-rata per rentable square foot basis to reflect the number of
square feet actually being improved. In no event may any portions of Landlord's
Allowance be applied towards the costs of Tenant's personal property or movable
furniture, signage or rental obligations.
5. MONTHLY RENT.
a. On the Rent Commencement Date (as defined in
Paragraph 4.c. above) and on or before the first day of each calendar month
thereafter through the expiration of the Lease term, Tenant shall pay to
Landlord, as monthly rent for the Premises, the Monthly Rent and Tenant's
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Electrical Charge specified in Paragraph 2 above. If the term of this Lease
commences on a day other than the first day of a calendar month, or terminates
on a day other than the last day of a calendar month, then the Monthly Rent and
Tenant's Electrical Charge payable for such partial month shall be appropriately
prorated on the basis of a thirty (30)-day month. Monthly Rent, Tenant's
Electrical Charge and the Additional Rent specified in Paragraph 7 shall be paid
by Tenant to Landlord, in advance, without deduction, offset, prior notice or
demand, in immediately available funds of lawful money of the United States of
America, or by good check as described below, at the office of Shorenstein
Company, L.P., at 555 California Street, 14th floor, San Francisco, California
94104, or the lockbox location designated by Landlord, or to such other person
or at such other place as Landlord may from time to time designate in writing.
Payments made by check must be drawn either on a California financial
institution or on a financial institution that is a member of the federal
reserve system. Notwithstanding the foregoing, if the date of Substantial
Completion of the Tenant Improvements is delayed as a result of a Tenant Delay,
then Tenant's obligation to pay rent for the Premises shall be accelerated by
the number of days of such delay. Further, notwithstanding the foregoing, Tenant
shall pay to Landlord with execution of this Lease an amount equal to one (1)
month's Monthly Rent hereunder, which amount shall be applied to the Monthly
Rent first due and payable hereunder.
b. All amounts payable by Tenant to Landlord under this
Lease, or otherwise payable in connection with Tenant's occupancy of the
Premises, in addition to the Monthly Rent and Tenant's Electrical Charge
hereunder and Additional Rent under Paragraph 7, shall constitute rent owed by
Tenant to Landlord hereunder.
c. Any rent not paid by Tenant to Landlord when due
(provided that the first occurrence of such a delinquency in any twelve
(12)-month period shall cause the delinquent amount to bear interest only if
Tenant fails to cure such delinquency within five (5) days of written notice
from Landlord thereof) shall bear interest from the date due to the date of
payment by Tenant at an annual rate of interest (the "Interest Rate") equal to
the lesser of (i) the maximum annual interest rate allowed by law on such due
date for business loans (not primarily for personal, family or household
purposes) not exempt from the usury law, or (ii) a rate equal to the sum of six
(6) percentage points over the six-month United States Treasury bill rate (the
"Treasury Rate") in effect from time to time during such delinquency (or if
there is no such publicly announced rate, the rate quoted by the San Francisco
Main Office of Bank of America, NT&SA, or any successor bank thereto, in pricing
ninety (90)-day commercial loans to substantial commercial borrowers. Failure by
Tenant to pay rent when due, including any interest accrued under this
subparagraph, shall constitute an Event of Default (as defined in Paragraph 25
below) giving rise to all the remedies afforded Landlord under this Lease and at
law for nonpayment of rent.
d. No security or guaranty which may now or hereafter be
furnished to Landlord for the payment of rent due hereunder or for the
performance by Tenant of the other terms of this Lease shall in any way be a bar
or defense to any of Landlord's remedies under this Lease or at law.
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6. SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall
pay to Landlord the Security Deposit specified in Paragraph 2.d. above as
security for Tenant's performance of all of Tenant's covenants and obligations
under this Lease; provided, however, that the security Deposit is not an advance
rent deposit or an advance payment of any other kind, nor a measure of
Landlord's damages upon Tenant's default. Landlord shall not be required to
segregate the Security Deposit from its other funds and no interest shall accrue
or be payable to Tenant with respect thereto. Landlord may (but shall not be
required to) use the Security Deposit or any portion thereof to cure any Event
of Default or to compensate Landlord for any damage Landlord incurs as a result
of Tenant's failure to perform any of its covenants or obligations hereunder, it
being understood that any use of the Security Deposit shall not constitute a bar
or defense to any of Landlord's remedies under this Lease or at law. In such
event and upon written notice from Landlord to Tenant specifying the amount of
the Security Deposit so utilized by Landlord and the particular purpose for
which such amount was applied, Tenant shall immediately deposit with Landlord an
amount sufficient to return the Security Deposit to an amount equal to one
hundred percent (100%) of the amount specified in Paragraph 2.d. as the same may
have been increased by prior applications of this Paragraph 6. Tenant's failure
to make such payment to Landlord within five (5) days of Landlord's notice shall
constitute an Event of Default. If no Event of Default (or default under this
Lease that subsequently matures into an Event of Default) is outstanding at, the
expiration or termination of this Lease, Landlord shall return to Tenant the
Security Deposit or the balance thereof then hold by Landlord; provided,
however, that in no event shall any such return be construed as an admission by
Landlord that Tenant has performed all of its covenants and obligations
hereunder. No holder of a Superior Interest (as defined in Paragraph 21 below),
nor any purchaser at any judicial or private foreclosure sale of the Real
Property or any portion thereof, shall be responsible to Tenant for the Security
Deposit unless and only to the extent such holder or purchaser shall have
actually received the same.
Notwithstanding the foregoing, provided no default under this Lease by
Tenant has occurred prior thereto, Landlord shall return Nine Thousand
Thirty-Nine Dollars ($9,039.00) of the Security Deposit to Tenant upon Tenant's
written request to Landlord given any time after the first (1st) anniversary of
the Commencement Date; provided, however, if any default under this Lease
subsequently occurs, the amount required to be deposited by Landlord pursuant to
the immediately preceding paragraph shall be based on the amount originally
specified in Paragraph 2.d. and not the amount reduced by the amount so returned
by Landlord.
7. ADDITIONAL RENT: OPERATING EXPENSES AND TAX EXPENSES.
a. OPERATING EXPENSES. Tenant shall pay to Landlord at
the times hereinafter set forth, Tenant's Share, as specified in Paragraph 2.e
above, of any increase in the Operating Expenses (as defined below) incurred by
Landlord in each calendar year subsequent to the Base Year specified in
Paragraph 2.f. above, over the Operating Expenses incurred by Landlord during
the Base Year. The amounts payable under this Paragraph 7.a. and Paragraph 7.b.
below are termed "Additional Rent" herein.
The term "Operating Expenses" shall mean the total costs and expenses
incurred by Landlord in connection with the management, operation, maintenance,
repair and ownership of the Real Property (including, without limitation, costs
and expenses incurred in connection with
<PAGE>
the management, operation, maintenance, repair and ownership of other portions
of the Office Park, to the extent allocable to the Real Property), including,
without limitation, the following costs: (1) salaries, wages, bonuses and other
compensation (including hospitalization, medical, surgical, retirement plan,
pension plan, union dues, life insurance, including group life insurance,
welfare and other fringe benefits, and vacation, holidays and other paid absence
benefits) relating to employees of Landlord or its agents engaged in the
operation, repair, or maintenance of the Real Property; (2) payroll, social
security, workers' compensation, unemployment and similar taxes with respect to
such employees of Landlord or its agents, and the cost of providing disability
or other benefits imposed by law or otherwise, with respect to such employees;
(3) the cost of uniforms (including the cleaning, replacement and pressing
thereof) provided to such employees; (4) premiums and other charges incurred by
Landlord with respect to fire, other casualty, rent and liability insurance, any
other insurance as is deemed necessary or advisable in the reasonable judgment
of Landlord, or any insurance required by the holder of any Superior Interest
(as defined in Paragraph 21 below), and, after the Base Year, costs of repairing
an insured casualty to the extent of the deductible amount under the applicable
insurance policy; (5) water charges and sewer rents or fees; (6) license, permit
and inspection fees; (7) sales, use and excise taxes on goods and services
purchased by Landlord in connection with the operation, maintenance or repair of
the Real Property and Building systems and equipment; (8) telephone, telegraph,
postage, stationary supplies and other expenses incurred in connection with the
operation, maintenance, or repair of the Real Property; (9) management fees and
expenses; (10) costs of repairs to and maintenance of the Real Property,
including building systems and appurtenances thereto and normal repair and
replacement of worn-out equipment, facilities and installations, but excluding
the replacement of major building systems (except to the extent provided in (16)
and (17) below); (11) fees and expenses for janitorial, window cleaning, guard,
extermination, water treatment, rubbish removal, plumbing and other services and
inspection or service contracts for elevator, electrical, mechanical and other
building equipment and systems or as may otherwise be necessary or proper for
the operation, repair or maintenance of the Real Property; (12) costs of
supplies, tools, materials, and equipment used in connection with the operation,
maintenance or repair of the Real Property; (13) accounting, legal and other
professional fees and expenses incurred in connection with management,
operation, maintenance, repair and ownership; (14) fees and expenses for
painting the exterior or the public or common areas of the Building and the cost
of maintaining the sidewalks, landscaping and other common areas of the Real
Property; (15) costs and expenses for electricity, chilled water, air
conditioning, water for heating, gas, fuel, steam, heat, lights, power and other
energy related utilities required in connection with the operation, maintenance
and repair of the Real Property; (16) the cost of any capital improvements made
by Landlord to the Real Property or capital assets acquired by Landlord after
the Base Year in order to comply with any local, state or federal law,
ordinance, rule, regulation, code or order of any governmental entity or
insurance requirement (collectively, "Legal Requirement") with which the Real
Property was not required to comply during the Base Year, or to comply with any
amendment or other change to the enactment or interpretation of any Legal
Requirement from its enactment or interpretation during the Base Year; (17) the
Cost of any capital improvements made by Landlord to the Building or capital
assets acquired by Landlord after the Base Year for the protection of the health
and safety of the occupants of the Real Property or that are designed to reduce
other Operating Expenses; (18) the cost of furniture, draperies, carpeting,
landscaping and other customary and ordinary items of personal property
(excluding paintings, sculptures and other works of art) provided by Landlord
for use in common
<PAGE>
areas of the Building or in the Building office (to the extent that such
Building office is dedicated to the operation and management of the Real
Property); (19) any expenses and costs resulting from substitution of work,
labor, material or services in lieu of any of the above itemizations, or for any
additional work, labor, services or material resulting from compliance with any
Legal Requirement applicable to the Real Property or any parts thereof; and (20)
Building office rent or rental value. With respect to the costs of items
included in Operating Expenses under (16) and (17), such costs shall be
amortized over a reasonable period, as determined by Landlord, together with
interest on the unamortized balance at a rate per annum equal to three (3)
percentage points over the Treasury Rate charged at the time such item is
constructed or acquired, or at such higher rate as may have been paid by
Landlord on funds borrowed for the purpose of constructing or acquiring such
item, but in either case not more than the maximum rate permitted by law at the
time such item is constructed or acquired.
Operating Expenses shall not include the following: (i) depreciation on the
Building or equipment or Systems therein; (ii) debt service; (iii) rental under
any ground or underlying lease; (iv) interest (except as expressly provided in
this Paragraph 7.a.); (v) Tax Expenses (as defined in Paragraph 7.b. below);
(vi) attorneys' fees and expenses incurred in connection with lease negotiations
with prospective Building tenants; (vii) the Cost (including any amortization
thereof) of any improvements or alterations which would be properly classified
as capital expenditures according to generally accepted property management
practices (except to the extent expressly included in Operating Expenses
pursuant to this Paragraph 7.a.); (viii) the cost of decorating, improving for
tenant occupancy, painting or redecorating portions of the Building to be
demised to tenants; (ix) executive salaries; (x) advertising; or (xi) real
estate broker's or other leasing commissions.
b. TAX EXPENSES. Tenant shall pay to Landlord as
Additional Rent under this Lease, at the times hereinafter set forth, Tenant's
Share, as specified in Paragraph 2.e. above, of any increase in Tax Expenses (as
defined below) incurred by Landlord in each calendar year subsequent to the Base
Tax Year specified in Paragraph 2.f. above, over Tax Expenses incurred by
Landlord during the Base Tax Year. Notwithstanding the foregoing, if any
reassessment, reduction or recalculation of any item included in Tax Expenses
during the term results in a reduction of Tax Expenses, then for purposes of
calculating Tenant's Share of increases in Tax Expenses from and after the
calendar year in which such adjustment occurs, Tax Expenses for the Base Tax
Year shall be adjusted to reflect such reduction.
The term "Tax Expenses" shall mean all taxes, assessments (whether general
or special), excises, transit charges, housing fund assessments or other housing
charges, improvement districts, levies or fees, ordinary or extraordinary,
unforeseen as well as foreseen, of any kind, which are assessed, levied,
charged, confirmed or imposed on the Real Property, on Landlord with respect to
the Real Property, on the act of entering into leases of space in the Real
Property, on the use or occupancy of the Real Property or any part thereof, with
respect to services or utilities consumed in the use, occupancy or operation of
the Real Property, on any improvements, fixtures and equipment and other
personal property of Landlord located in the Real Property and used in
connection with the operation of the Real Property, or on or measured by the
rent payable under this Lease or in connection with the business of renting
space in the Real Property, including, without limitation, any gross income tax
or excise tax levied with respect to the receipt
<PAGE>
of such rent, by the United States of America, the Commonwealth of
Massachusetts, Middlesex County, the City of Waltham, or any political
subdivision, public corporation, district or other political or public entity or
public authority, and shall also include any other tax, fee or other excise,
however described, which may be levied or assessed in lieu of, as a substitute
(in whole or in part) for, or as an addition to, any other Tax Expense. Tax
Expenses shall also include any of the foregoing which are assessed with respect
to other portions of the Office Park, to the extent allocable to the Real
Property. Tax Expenses shall include reasonable attorneys' fees, costs and
disbursements incurred in connection with proceedings to contest, determine or
reduce Tax Expenses. If it shall not be lawful for Tenant to reimburse Landlord
for any increase in Tax Expenses as defined herein, the Monthly Rent payable to
Landlord prior to the imposition of such increases in Tax Expenses shall be
increased to net Landlord the same net Monthly Rent after imposition of such
increases in Tax Expenses as would have been received by Landlord prior to the
imposition of such increases in Tax Expenses.
Tax Expenses shall not include income, franchise, transfer, inheritance or
capital stock taxes, unless, due to a change in the method of taxation, any of
such taxes is levied or assessed against Landlord in lieu of, as a substitute
(in whole or in part) for, or as an addition to, any other charge which would
otherwise constitute a Tax Expense.
c. ADJUSTMENT FOR OCCUPANCY FACTOR. Notwithstanding any
other provision herein to the contrary, in the event the Building is not fully
occupied during any calendar year during the term after the Base Year, an
adjustment shall be made by Landlord in computing Operating Expenses for such
year so that the Operating Expenses shall be computed for such year as though
the Building had been fully occupied during such year. In addition, if any
particular work or service includible in Operating Expenses is not furnished to
a tenant who has undertaken to perform such work or service itself, Operating
Expenses shall be deemed to be increased by an amount equal to the additional
Operating Expenses which would have been incurred if Landlord had furnished such
work or service to such tenant. The parties agree that statements in this Lease
to the effect that Landlord is to perform certain of its obligations hereunder
at its own or sole cost and expense shall not be interpreted as excluding any
cost from Operating Expenses or Tax Expenses if such cost is an Operating
Expense or Tax Expense pursuant to the terms of this Lease.
d. INTENTION REGARDING EXPENSE PASS-THROUGH. It is the
intention of Landlord and Tenant that the Monthly Rent paid to Landlord
throughout the term of this Lease shall be absolutely net of all increases,
respectively, in Tax Expenses and Operating Expenses over, respectively, Tax
Expenses for the Base Tax Year and Operating Expenses for the Base Year, and the
foregoing provisions of this Paragraph 7 are intended to so provide.
e. NOTICE AND PAYMENT. On or before the first day of
each calendar year during the term hereof subsequent to the Base Year, or as
soon as practicable thereafter, Landlord shall give to Tenant notice of
Landlord's estimate of the Additional Rent, if any, payable by Tenant pursuant
to Paragraphs 7.a. and 7.b. for such calendar year subsequent to the Base Year.
On or before the first day of each month during each such subsequent calendar
year, Tenant shall pay to Landlord one-twelfth (1/12th) of the estimated
Additional Rent; provided, however, that if Landlord's notice is not given prior
to the first day of any calendar year Tenant shall continue to
<PAGE>
pay Additional Rent on the basis of the prior year's estimate until the month
after Landlord's notice is given. If at any time it appears to Landlord that the
Additional Rent payable under Paragraphs 7.a. and/or 7.b. will vary from
Landlord's estimate by more than five percent (5%), Landlord may, by written
notice to Tenant, revise its estimate for such year, and subsequent payments by
Tenant for such year shall be based upon the revised estimate. On the first
monthly payment date after any new estimate is delivered to Tenant, Tenant shall
also pay any accrued cost increases, based on such new estimate.
f. ANNUAL ACCOUNTING. Within ninety (90) days after the
close of each calendar year subsequent to the Base Year, or as soon after such
ninety (90) day period as practicable, Landlord shall deliver to Tenant a
statement of the Additional Rent payable under Paragraphs 7.a. and 7.b. for such
year and such statement shall be final and binding upon Landlord and Tenant
(except that the Tax Expenses included in such statement may be modified by any
subsequent adjustment or retroactive application of Tax Expenses affecting the
calculation of such Tax Expenses). If the annual statement shows that Tenant's
payments of Additional Rent for such calendar year pursuant to Paragraph 7.e.
above exceeded Tenant's obligations for the calendar year, Landlord shall at its
option either (1) credit the excess to the next succeeding installments of
estimated Additional Rent or (2) pay the excess to Tenant within thirty (30)
days after delivery of such statement. If the annual statement shows that
Tenant's payments of Additional Rent for such calendar year pursuant to
Paragraph 7.e. above were less than Tenant's obligation for the calendar year,
Tenant shall pay the deficiency to Landlord within ten (10) days after delivery
of such statement.
g. PRORATION FOR PARTIAL LEASE YEAR. If this Lease
terminates on a day other than the last day of a calendar year, or if Tenant's
Share changes on a day other than the first day of a calendar year, the
Additional Rent payable by Tenant pursuant to this Paragraph 7 applicable to the
calendar year in which this Lease terminates, or Tenant's Share is adjusted,
shall be prorated on the basis that the number of days from the commencement of
such calendar year to and including such termination or adjustment date bears to
three hundred sixty-five (365).
8. USE OF PREMISES; COMPLIANCE WITH LAW.
a. USE OF PREMISES. The Premises shall be used solely
for general office purposes for the business of Tenant as described in Paragraph
2.g. above and for no other use or purpose.
Tenant shall not do or suffer or permit anything to be done in or about the
Premises or the Real Property, nor bring or keep anything therein, which would
in any way subject Landlord, Landlord's agents or the holder of any Superior
Interest (as defined in Paragraph 21) to any liability, increase the premium
rate of or affect any fire, casualty, liability, rent or other insurance
relating to the Real Property or any of the contents of the Building, or cause a
cancellation of, or give rise to any defense by the insurer to any claim under,
or conflict with, any policies for such insurance. If any act or omission of
Tenant results in any such increase in premium rates, Tenant shall pay to
Landlord upon demand the amount of such increase. Tenant shall not do or suffer
or permit anything to be done in or about the Premises or the Real Property
which will in any way obstruct or interfere with the rights of other tenants or
occupants of the Building or injure or
<PAGE>
annoy them, or use or suffer or permit the Premises to be used for any immoral,
unlawful or objectionable purpose, nor shall Tenant cause, maintain, suffer or
permit any nuisance in, on or about the Premises or the Real Property. Without
limiting the foregoing, no loudspeakers or other similar device which can be
heard outside the Premises shall, without the prior written approval of
Landlord, be used in or about the Premises. Tenant shall not commit or suffer to
be committed any waste in, to or about the Premises.
Tenant agrees not to employ any person, entity or contractor for any work
in the Premises (including moving Tenant's equipment and furnishings in, out or
around the Premises) whose presence may give rise to a labor or other
disturbance in the Building and, if necessary to prevent such a disturbance in a
particular situation, Landlord may require Tenant to employ union labor for the
work.
b. COMPLIANCE WITH LAW. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way conflict with
any Legal Requirement (as defined in Paragraph 7.a.(16) above) now in force or
which may hereafter be enacted. Tenant, at its sole cost and expense, shall
promptly comply with all such present and future Legal Requirements relating to
the condition, use or occupancy of the Premises, and shall perform all work to
the Premises or other portions of the Real Property required to effect such
compliance (or, at Landlord's election, Landlord may perform such work at
Tenant's cost). Notwithstanding the foregoing, however, Tenant shall not be
required to perform any structural changes to the Premises or other portions of
the Real Property unless such changes are related to or affected or triggered by
(i) Tenant's Alterations (as defined in Paragraph 9 below), (ii) Tenant's
particular use of the Premises (as opposed to Tenant's use of the Premises for
general office purposes in a normal and customary manner), (iii) Tenant's
particular employees or employment practices, or (iv) the construction of
initial improvements to the Premises, if any. The judgment of any court of
competent jurisdiction or the admission of Tenant in an action against Tenant,
whether or not Landlord is a party thereto, that Tenant has violated any Legal
Requirement shall be conclusive of that fact as between Landlord and Tenant.
Tenant shall immediately furnish Landlord with any notices received from any
insurance company or governmental agency or inspection bureau regarding any
unsafe or unlawful conditions within the Premises or the violation of any Legal
Requirement.
c. HAZARDOUS MATERIALS. Tenant shall not cause or permit
the storage, use, generation, release, handling or disposal (collectively,
"Handling") of any Hazardous Materials (as defined below), in, on, or about the
Premises or the Real Property by Tenant or any agents, employees, contractors,
licensees, subtenants, customers, guests or invitees of Tenant (collectively
with Tenant, "Tenant Parties"), except that Tenant shall be permitted to use
normal quantities of office supplies or products (such as copier fluids or
cleaning supplies) customarily used in the conduct of general business office
activities ("Common Office Chemicals"), provided that the Handling of such
Common Office Chemicals shall comply at all times with all Legal Requirements,
including Hazardous Materials Laws (as defined below). Notwithstanding anything
to the contrary contained herein, however, in no event shall Tenant permit any
usage of Common Office Chemicals in a manner that may cause the Premises or the
Real Property to be contaminated by any Hazardous Materials or in violation of
any Hazardous Materials Laws. Tenant shall immediately advise Landlord in
writing of (a) any and all enforcement, cleanup,
<PAGE>
remedial, removal, or other governmental or regulatory actions instituted,
completed, or threatened pursuant to any Hazardous Materials Laws relating to
any Hazardous Materials affecting the Premises; and (b) all claims made or
threatened by any third party against Tenant, Landlord, the Premises or the Real
Property relating to damage, contribution, cost recovery, compensation, loss, or
injury resulting from any Hazardous Materials on or about the Premises. Without
Landlord's prior written consent, Tenant shall not take any remedial action or
enter into any agreements or settlements in response to the presence of any
Hazardous Materials in, on, or about the Premises. Tenant shall be solely
responsible for and shall indemnify, defend and hold Landlord and all other
Indemnitees (as defined in Paragraph 14.b. below), harmless from and against all
Claims (as defined in Paragraph 14.b. below), arising out of or in connection
with, or otherwise relating to (i), any Handling of Hazardous Materials by any
Tenant Party or Tenant's breach of its obligations hereunder, or (ii) any
removal, cleanup, or restoration work and materials necessary to return the Real
Property or any other property of whatever nature located on the Real Property
to their condition existing prior to the Handling of Hazardous Materials in, on
or about the Premises. Tenant's obligations under this paragraph shall survive
the expiration or other termination of this Lease.
For purposes of this Lease, "Hazardous Materials" means any explosive,
radioactive materials, hazardous wastes, or hazardous substances, including
without limitation asbestos containing materials, PCB's, CFC's, or substances
defined as "hazardous substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601-9657;
the Hazardous Materials Transportation Act of 1975, 49 U.S.C. Section 1801-1812;
the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901-6987;
or any other Legal Requirement regulating, relating to, or imposing liability or
standards of conduct concerning any such materials or substances now or at any
time hereafter in effect (collectively, "Hazardous Materials Laws").
d. APPLICABILITY OF PARAGRAPH. The provisions of this
Paragraph 8 are for the benefit of Landlord, the holder of any Superior Interest
(as defined in Paragraph 21 below), and the other Indemnitees only and are not
nor shall they be construed to be for the benefit of any tenant or occupant of
the Building.
9. ALTERATIONS AND RESTORATION.
a. Tenant shall not make or permit to be made any
alterations, modifications, additions, decorations or improvements to the
Premises, or any other work whatsoever that would directly or indirectly involve
the penetration or removal (whether permanent or temporary) of, or require
access through, in, under, or above any floor, wall or ceiling, or surface or
covering thereof in the Premises (collectively, "Alterations"), except as
expressly provided in this Paragraph 9. If Tenant desires any Alteration, Tenant
must obtain Landlord's prior written approval of such Alteration.
All Alterations shall be made at Tenant's sole cost and expense (including
the expense of complying with all present and future Legal Requirements,
including those regarding asbestos, if applicable, and any other work required
to be performed in other areas within or outside the Premises by reason of the
Alterations). Landlord may elect to cause its contractor to perform the
<PAGE>
Alterations, in which case Landlord's contractor shall be entitled to receive a
fee for such work of fifteen percent (15%) of the first $100,000 of the
construction costs of such work, and the fee for any construction costs over
such amount shall be as negotiated by Tenant and Landlord. If Landlord does not
perform the work pursuant to the above, Tenant shall pay Landlord on demand
prior to or during the course of such construction an amount (the "Alteration
Operations Fee") equal to ten percent (10%) of the total hard cost of the
Alteration (and for purposes of calculating the Alteration Operations Fee, such
hard cost shall not include permit fees) as compensation to Landlord for
electrical energy consumed in connection with the work, freight elevator
operation, additional cleaning expenses, additional security services, and for
other miscellaneous costs incurred by Landlord as result of the work.
All such work shall be performed diligently and in a first-class
workmanlike manner and in accordance with plans and specifications approved by
Landlord, and shall comply with all Legal Requirements and Landlord's
construction procedures and requirements for the Building (including Landlord's
requirements relating to insurance and contractor qualifications). In no event
shall Tenant employ any person, entity or contractor to perform work in the
Premises whose presence may give rise to a labor or other disturbance in the
Building. Default by Tenant in the payment of any sums agreed to be paid by
Tenant for or in connection with an Alteration (regardless of whether such
agreement is pursuant to this Paragraph 9 or separate instrument) shall entitle
Landlord to all the same remedies as for non-payment of rent hereunder. Any
Alterations, including, without limitation, moveable partitions that are affixed
to the Premises (but excluding moveable, free standing partitions) and all
carpeting, shall at once become part of the Building and the property of
Landlord. Tenant shall give Landlord not less than five (5) days prior written
notice of the date the construction of the Alteration is to commence. Landlord
may post and record an appropriate notice of nonresponsibility with respect to
any Alteration and Tenant shall maintain any such notices posted by Landlord in
or on the Premises.
b. Landlord shall advise Tenant at the time of
Landlord's approval of any Alteration requested by Tenant whether Landlord will
require that the Alteration be removed by Tenant from the Premises at the
expiration or sooner termination of this Lease and the Premises restored by
Tenant to their condition prior to the making of the Alteration, ordinary wear
and tear excepted. The removal of the Alterations so required to be removed from
the Premises and the restoration of the Premises shall be performed by a general
contractor selected by Tenant and approved by Landlord, and Tenant shall pay the
general contractors fees and costs in connection with such work. Any separate
work letter or other agreement which is hereafter entered into between Landlord
and Tenant pertaining to Alterations shall be deemed to automatically
incorporate the terms of this Lease without the necessity for further reference
thereto.
10. REPAIR. By taking possession of the Premises, Tenant agrees
that the Premises are in good condition and repair. Tenant, at Tenant's sole
cost and expense, shall keep the Premises and every part thereof (including the
interior walls and ceilings of the Premises, those portions of the Building
systems located within and exclusively serving the Premises, and improvements
and Alterations) in good condition and repair. Tenant waives all rights to make
repairs at the expense of Landlord as provided by any Legal Requirement now or
hereafter in effect. It is specifically understood and agreed that, except as
specifically set forth in this Lease, Landlord has no obligation and has made no
promises to alter, remodel, improve, repair, decorate or paint the
<PAGE>
Premises or any part thereof, and that no representations respecting the
condition of the Premises or the Building have been made by Landlord to Tenant.
11. ABANDONMENT. Tenant shall not vacate or abandon the Premises
or any part thereof at any time during the term hereof. Tenant understands that
if Tenant leaves the Premises or any part thereof vacant, the risk of fire,
other casualty and vandalism to the Premises and the Building will be increased.
Accordingly, such action by Tenant shall constitute an Event of Default
hereunder regardless of whether Tenant continues to pay Monthly Rent, Tenant's
Electrical Charge and Additional Rent under this Lease. Upon the expiration or
earlier termination of this Lease, or if Tenant abandons, vacates or surrenders
all or any part of the Premises or is dispossessed of the Premises by process of
law, or otherwise, any movable furniture, equipment, trade fixtures, or other
personal property belonging to Tenant and left on the Premises shall at the
option of Landlord be deemed to be abandoned and, whether or not the property is
deemed abandoned, Landlord shall have the right to remove such property from the
Premises and charge Tenant for the removal and any restoration of the Premises
as provided in Paragraph 9. Landlord may charge Tenant for the storage of
Tenant's property left on the Premises at such rates as Landlord may from time
to time reasonably determine, or, Landlord may, at its option, store Tenant's
property in a public warehouse at Tenant's expense. Notwithstanding the
foregoing, neither the provisions of this Paragraph 11 nor any other provision
of this Lease shall impose upon Landlord any obligation to care for or preserve
any of Tenant's property left upon the Premises, and Tenant hereby waives and
releases Landlord from any claim or liability in connection with the removal of
such property from the Premises and the storage thereof. Landlord's action or
inaction with regard to the provisions of this Paragraph 11 shall not be
construed as a waiver of Landlord's right to require Tenant to remove its
property, restore any damage to the Premises and the Building caused by such
removal, and make any restoration required pursuant to Paragraph 9 above.
12. LIENS. Tenant shall not permit any mechanic's, materialman's
or other liens arising out of work performed at the Premises by or on behalf of
Tenant to be filed against the fee of the Real Property nor against Tenant's
interest in the Premises. Landlord shall have the right to post and keep posted
on the Premises any notices which it deems necessary for protection from such
liens. If any such liens are filed, Landlord may, upon ten (10) days' written
notice to Tenant, without waiving its rights based on such breach by Tenant and
without releasing Tenant from any obligations hereunder, pay and satisfy the
same and in such event the sums so paid by Landlord shall be due and payable by
Tenant immediately without notice of demand, with interest from the date paid by
Landlord through the date Tenant pays Landlord, at the Interest Rate. Tenant
agrees to indemnify, defend and hold Landlord and the other Indemnitees (as
defined in Paragraph 14.b. below) harmless from and against any Claims (as
defined in Paragraph 14.b. below) for mechanics', materialmen's or other liens
in connection with any Alterations, repairs or any work performed, materials
furnished or obligations incurred by or for Tenant.
13. ASSIGNMENT AND SUBLETTING.
a. LANDLORD'S CONSENT. Landlord's and Tenant's agreement
with regard to Tenant's right to transfer all or part of its interest in the
Premises is as expressly set forth in this Paragraph
<PAGE>
13. Tenant agrees that, except upon Landlord's prior written consent, which
consent shall not (subject to Landlord's rights under Paragraph 13.d. below) be
unreasonably withheld, neither this Lease nor all or any part of the leasehold
interest created hereby shall, directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, be assigned, mortgaged,
pledged, encumbered or otherwise transferred by Tenant or Tenant's legal
representatives or successors in interest (collectively an "assignment") and
neither the Premises nor any part thereof shall be sublet or be used or occupied
for any purpose by anyone other than Tenant (collectively, a "sublease"). Any
assignment or subletting without Landlord's prior written consent shall, at
Landlord's option, be voice and shall constitute an Event of Default entitling
Landlord to terminate this Lease and to exercise all other remedies available to
Landlord under this Lease and at law.
The parties hereto agree and acknowledge that, among other circumstances
for which Landlord may reasonably withhold its consent to an assignment or
sublease, it shall be reasonable for Landlord to withhold its Consent where: (i)
the assignment or subletting would increase the operating costs for the Building
or the burden on the Building services, or generate additional foot traffic,
elevator usage or security concerns in the Building, or create an increased
probability of the comfort and/or safety of Landlord and other tenants in the
Building being compromised or reduced, (ii) the space will be used for a school
or training facility, an entertainment, sports or recreation facility, retail
sales to the public (unless Tenant's permitted use is retail sales), a personnel
or employment agency, an office or facility of any governmental or
quasi-governmental agency or authority, a place of public assembly (including
without limitation a meeting center, theater or public forum), any use by or
affiliation with a foreign government (including without limitation an embassy
or consulate or similar office, or a facility for the provision of social,
welfare or clinical health services or sleeping accommodations (whether
temporary, daytime or overnight); (iii) the proposed assignee or subtenant is a
current tenant of the Office Park or a prospective tenant of the Office Park;
(iv) Landlord in good faith disapproves of the opposed assignee or subtenant's
reputation or creditworthiness, (v) Landlord determines that the character of
the business that would be conducted by the proposed assignee or subtenant at
the Premises, or the manner of conducting such business, would be inconsistent
with the character of the Building as a first-class office building; (vi) the
proposed assignee or subtenant is an entity or related to an entity who has
instituted litigation or asserted a claim against Landlord or any affiliate of
Landlord, or against whom Landlord or any affiliate of Landlord has instituted
litigation or asserted a claim; (vii) the assignment or subletting may conflict
with any exclusive uses granted to other tenants of the Real Property or the
Office Park, or with the terms of any easement, covenant, condition or
restriction, or other agreement affecting the Real Property or the Office Park;
(viii) the assignment or subletting would involve a change in use from that
expressly permitted under this Lease; or (ix) Landlord in good faith determines
that the proposed assignee may be unable to perform all of Tenant's obligations
under this Lease or the proposed subtenant may be unable to perform all of its
obligations under the Proposed Sublease. Landlord's foregoing rights and options
shall continue throughout the entire term of this Lease.
For purposes of this Paragraph 13, the following events shall be deemed an
assignment or sublease, as appropriate: (i) the issuance of equity interests
(whether stock, partnership interests or otherwise) in Tenant or any subtenant
or assignee, or any entity controlling any of them, to
<PAGE>
any person or group of related persons, in a single transaction or a series of
related or unrelated transactions, such that, following such issuance, such
person or group shall have Control (as defined below) of Tenant or any subtenant
or assignee; (ii) a transfer of Control of Tenant or any subtenant or assignee,
or any entity controlling any of them, in a single transaction or a series of
related or unrelated transactions (including, without limitation, by
consolidation, merger, acquisition or reorganization), except that the transfer
of outstanding capital stock or other listed equity interests by persons or
parties other than "insiders" within the meaning of the Securities Exchange Act
of 1934, as amended, through the "over-the-counter" market or any recognized
national or international securities exchange, shall not be included in
determining whether Control has been transferred; (iii) a reduction of Tenant's
assets to the point that this Lease is substantially Tenant's only asset; (iv)
change or conversion in the form of entity of Tenant, any subtenant or assignee,
or any entity controlling any of them, which has the effect of limiting the
liability of any of the partners, members or other owners of such entity; or (v)
the agreement by a third party to assume, take over, or reimburse Tenant for,
any or all of Tenant's obligations under this Lease, in order to induce Tenant
to lease space with such third party. "Control" shall mean direct or indirect
ownership of 50% or more of all of the voting stock of a corporation or 50% or
more of the legal or equitable interest in any other business entity, or the
power to direct the operations of any entity (by equity ownership, contract or
otherwise).
If this Lease is assigned, whether or not in violation of the terms of this
Lease, Landlord may collect rent from the assignee. If the Premises or any part
thereof is sublet, Landlord may, upon an Event of Default by Tenant hereunder,
collect rent from the subtenant. In either event, Landlord may apply the amount
collected from the assignee or subtenant to Tenant's monetary obligations
hereunder.
The consent by Landlord to an assignment or subletting hereunder shall not
relieve Tenant or any assignee or subtenant from obtaining Landlord's express
prior written consent to any other or further assignment or subletting. Neither
an assignment or subletting nor the collection of rent by Landlord from any
person other than Tenant, nor the application of any such rent as provided in
this Paragraph 13.a. shall be deemed a waiver of any of the provisions of this
Paragraph 13.a. or release Tenant from its obligation to comply with the
provisions of this Lease and Tenant shall remain fully and primarily liable for
all of Tenant's obligations under this Lease. If Landlord approves of an
assignment or subletting hereunder and this Lease contains any renewal options,
expansion options, rights of first refusal, rights of first negotiation or any
other rights or options pertaining to additional specs in the Building, such
rights and/or options shall not run to the subtenant or assignee, it being
agreed by the parties hereto that any such rights and options are personal to
the Tenant originally named herein and may not be transferred.
b. PROCESSING EXPENSES. Tenant shall pay to Landlord, as
Landlord's cost of processing each proposed assignment or subletting, an amount
equal to the sum of (i) Landlord's reasonable attorneys' and other professional
fees, plus (ii) the sum of $750.00 for the cost of Landlord's administrative,
accounting and clerical time (collectively, "Processing Costs"), and the amount
of all direct and indirect costs and expenses reasonably incurred by Landlord
arising from the assignee or subleases taking occupancy of the subject space
(including, without limitation, costs of freight elevator operation for moving
of furnishings and trade fixtures, security service, janitorial and cleaning,
service, and rubbish removal service). Notwithstanding
<PAGE>
anything to the contrary herein, Landlord shall not be required to process any
request for Landlord's consent to an assignment or subletting until Tenant has
paid to Landlord the amount of Landlord's estimate of the Processing Costs and
all other direct and indirect costs and expenses of Landlord and its agents
arising from the assignee or subtenant taking occupancy.
c. CONSIDERATION TO LANDLORD. In the event of any
assignment or sublease, whether or not requiring Landlord's consent, Landlord
shall be entitled to receive, as additional rent hereunder, fifty percent (50%)
of any consideration (including, without limitation, payment for leasehold
improvements and any "Leasehold Profit" as defined below) paid by the assignee
or subtenant for the assignment or sublease and, in the case of a sublease,
fifty percent (50%) of the excess of the amount of rent paid for the sublet
space by the subtenant over the amount of Monthly Rent and Tenant's Electrical
Charge under Paragraph 5 above and Additional Rent under Paragraph 7 above
attributable to the sublet space for the corresponding month. To effect the
foregoing, Tenant shall deduct from the monthly amounts received by Tenant from
the subtenant or assignee as rent or consideration the Monthly Rent, Tenant's
Electrical Charge and Additional Rent payable by Tenant to Landlord for the
subject space, and fifty percent (50%) of the then remaining sum shall be paid
promptly to Landlord. Upon Landlord's request, Tenant shall assign to Landlord
all amounts to be paid to Tenant by any such subtenant or assignee and that
belong to Landlord and shall direct such subtenant or assignee to pay the same
directly to Landlord. "Leasehold Profit" shall be the value allocated to the
leasehold. between the parties to the assignment or sublease, but in no event
less than the excess of the present value of the fair market rent of the
Premises for the remaining term of this Lease after such assignment or sublease,
over the Monthly Rent, Tenant's Electrical Charge and Additional Rent payable
hereunder for such remaining term, as reasonably determined by Landlord.
d. PROCEDURES. If Tenant desires to assign this Lease or
any interest therein or sublet all or part of the Premises, Tenant shall give
Landlord written notice thereof and the terms Proposed (the "Sublease Notice"),
which Sublease Notice, in the case of a proposed sublease, shall designate the
space proposed to be sublet. Landlord shall have the prior right and option (to
be exercised by written notice to Tenant given within thirty (30) days after
receipt of Tenant's notice) (i) to sublet from Tenant any portion of the
Premises proposed by Tenant to be sublet, for the term for which such portion is
proposed to be sublet, but at the lesser of the proposed sublease rent or the
same rent (including Additional Rent as provided for in Paragraph 7 above) as
Tenant is required to pay to Landlord under this Lease for the same space,
Computed on a pro rata square footage basis, and during the term of such
sublease Tenant shall be released of its obligations under this Lease with
regard to the subject space, (ii) to terminate this Lease as it pertains to the
portion of the Premises so proposed by Tenant to be Sublet, or (iii) to approve
Tenant's proposal to sublet conditional upon Landlord's subsequent written
approval of the Specific sublease obtained by Tenant and the specific subtenant
named therein. If Landlord exercises its option in (i) above, then Landlord may,
at Landlord's sole cost, construct improvements in the subject space and, long
as the improvements are suitable for general office purposes, Landlord shall
have no obligation to restore the subject space to its original condition
following the termination of the sublease. If Landlord exercises its option
described in (iii) above, then Tenant shall have three (3) months thereafter to
submit to Landlord, for Landlord's written approval Tenant's proposed sublease
agreement (in which the proposed subtenant shall be named, and which agreement
shall otherwise meet the requirements of Paragraph 13.e.
<PAGE>
below), together with a current financial statement of such proposed subtenant
and any other information reasonably requested by Landlord. If Tenant fails to
submit the specific sublease and other required information within such time, or
if the terms of the specific sublease submitted by Tenant vary from the terms
set forth in the Sublease Notice approved by Landlord pursuant to (iii) above,
then Tenant shall be required to submit a new Sublease Notice for Landlord's
evaluation pursuant to the procedures set forth in this paragraph. If Landlord
fails to exercise any such option to sublet or to terminate, this shall not be
construed as or constitute a waiver of any of the provisions of Paragraphs
13.a., b., c. or d. herein. If Landlord exercises any option to sublet or to
terminate, any costs of demising the portion of the Premises affected by such
subleasing or termination shall be borne by Tenant. In addition, Landlord shall
have no liability for any real estate brokerage commission(s) or with respect to
any of the costs and expenses that Tenant may have incurred in connection with
its proposed subletting, and Tenant agrees to indemnify, defend and hold
Landlord and all other Indemnitees harmless from and against any and all Claims
(as defined in Paragraph 14.b. below), including, without limitation, claims for
commissions, arising from such proposed subletting. Landlord's foregoing rights
and options shall continue throughout the entire term of this Lease. For
purposes of this Paragraph 13.d., a proposed assignment of this Lease in whole
or in part shall be deemed a proposed subletting of such space.
e. DOCUMENTATION. No permitted assignment or subletting
by Tenant shall be effective until there has been delivered to Landlord a fully
executed counterpart of the assignment or sublease which expressly provides that
(i) the assignee or subtenant may not further assign or sublet the assigned or
sublet space without Landlord's prior written consent (which, in the case of a
further assignment proposed by an assignee, shall not be unreasonably withheld,
subject to Landlord's rights under the provisions of this Paragraph 13), (ii)
the assignee or subtenant will comply with all of the provisions of this Lease,
and Landlord may enforce the Lease provisions directly against such assignee or
subtenant, (iii) in the case of an assignment, the assignee assumes all of
Tenant's obligations under this Lease arising on or after the date of the
assignment, and (iv) in the case of a sublease, the subtenant agrees to be and
remain jointly and severally liable with Tenant for the payment of rent
pertaining to the sublet space in the amount set forth in the sublease, and for
the performance of all of the terms and provisions of this Lease. In addition to
the foregoing, no sublease by Tenant shall be effective until there has been
delivered to Landlord a fully executed counterpart of Landlord's consent to
sublease form. The failure or refusal of a subtenant or assignee to execute any
such instrument shall not release or discharge the subtenant or assignee from
its liability as set forth above. Notwithstanding the foregoing, however, no
subtenant or assignee shall be permitted to occupy the Premises unless and until
such subtenant or assignee provides Landlord with certificates evidencing that
such subtenant or assignee is carrying all insurance coverage required of such
subtenant or assignee under this Lease.
f. NO MERGER. Without limiting any of the provisions of
this Paragraph 13, if Tenant has entered into any subleases of any portion of
the Premises, the voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation by Landlord and Tenant, shall not work a merger, and shall,
at the option of Landlord, terminate all or any existing subleases or
subtenancies or, at the option of Landlord, operate as an assignment to Landlord
of any or all such subleases or subtenancies. If Landlord does elect that such
surrender or cancellation operate
<PAGE>
as an assignment of such subleases or subtenancies, Landlord shall in no way be
liable for any previous act or omission by Tenant under the subleases or for the
return of any deposit(s) under the subleases that have not been actually
delivered to Landlord, nor shall Landlord be bound by any sublease
modifications) executed without Landlord's consent or for any advance rental
payment by the subtenant in excess of one month's rent.
g. AFFILIATES. Notwithstanding anything to the contrary
in Paragraphs 13.a. and 13.d., but subject to Paragraphs 13.e. and 13.f., Tenant
may assign this Lease or sublet the Premises or any portion thereof, without
Landlord's consent, to any partnership, corporation or other entity which
controls, is controlled by, or is under common control with Tenant or Tenant's
parent (control being defined for such purposes as ownership of at least 50% of
the equity interests in, or the power to direct the management of, the relevant
entity) or to any partnership, corporation or other entity resulting from a
merger or consolidation with Tenant or Tenant's parent, or to any person or
entity which acquires substantially all the assets of Tenant as a going concern
(collectively, an "Affiliate"), provided that (i) Landlord receives prior
written notice of an assignment or subletting, (ii) the Affiliate's net worth is
not less than Tenant's net worth immediately prior to the assignment or
subletting, (iii) the Affiliate has proven experience in the operation of a
first-class business of a type consistent with the use of the Building as a
first-class office Building, (iv) the Affiliate remains an Affiliate for the
duration of the subletting or the balance of the term in the event of an
assignment, (v) the Affiliate assumes (in the event of an assignment) in writing
all of Tenant's obligations under this Lease and (vi) Landlord receives a fully
executed copy of an assignment or sublease agreement between Tenant and the
Affiliate.
14. INDEMNIFICATION OF LANDLORD.
a. Landlord and the holders of any Superior Interests
(as defined in Paragraph 21 below) shall not be liable to Tenant and Tenant
hereby waives all claims against such parties for any loss, injury or other
damage to person or property in or about the Premises, the Real Property or the
Office Park from any cause whatsoever, including without limitation, water
leakage of any character from the roof, walls, basement, fire sprinklers,
appliances, air conditioning, plumbing or other portion of the Premises, the
Real Property or the Office Park, or gas, fire, explosion, falling plaster,
steam, electricity, or any malfunction within the Premises, the Real Property or
the Office Park, or acts of other tenants of the Building; provided, however,
that the foregoing waiver shall be inapplicable to any loss, injury or damage
resulting directly from Landlord's gross negligence or willful misconduct.
Tenant acknowledges that from time to time throughout the term of this Lease,
construction work may be performed in and about the Building, the Real Property
or the Office Park by Landlord, contractors of Landlord, or other tenants or
their contractors, and that such construction work may result in noise and
disruption to Tenant's business. In addition to and without limiting the
foregoing waiver or any other provision of this Lease, Tenant agrees that
Landlord shall not be liable for, and Tenant expressly waives and releases
Landlord and the other Indemnitees (as defined in Paragraph 14.b. below) from
any Claims (as defined in Paragraph 14.b. below), including without limitation,
any and all consequential damages or interruption or loss of business, income or
profits, or claims of constructive eviction, arising or alleged to be arising as
a result of any such construction activity.
<PAGE>
b. Tenant shall hold Landlord and the holders of any
Superior Interest, and the constituent shareholders, partners or other owners
thereof, and all of their agents, contractors, servants, officers, directors,
employees and licensees (collectively with Landlord, the "Indemnitees") harmless
from and indemnify the Indemnitees against any and all claims, liabilities,
damages, costs and expenses, including reasonable attorneys' fees and costs
incurred in defending against the same (collectively, "Claims"), to the extent
arising from (a) the acts or omissions of Tenant or any other Tenant Parties (as
defined in Paragraph 8.C. above) in, on or about the Real Property or Office
Park, or (b) any construction or other work undertaken by or on behalf of Tenant
in, on or about the Premises, whether prior to or during the term of this Lease,
or (c) any breach or Event of Default under this Lease by Tenant, or (d) any
accident, injury or damage, howsoever and by whomsoever caused, to any person or
property, occurring in, on or about the Premises; except to the extent such
Claims are caused directly by the gross negligence or willful Misconduct of
Landlord or its authorized representatives. In case any action or proceeding be
brought against any of the Indemnitees by reason of any such Claim, Tenant, upon
notice from Landlord, covenants to resist and defend at Tenant's sole expense
such action or proceeding by counsel reasonably satisfactory to Landlord. The
provisions of this Paragraph 14.b. shall survive the expiration or earlier
termination of this Lease with respect to any injury, illness, death or damage
occurring prior to such expiration or termination.
15. INSURANCE.
a. TENANT'S INSURANCE. Tenant shall, at Tenant's
expense, maintain during the terms of this Lease (and, if Tenant occupies or
conducts activities in or about the Premises prior to or after the term hereof,
then also during such pre-tem or post-term period); (i) commercial general
liability insurance including contractual liability coverage, with minimum
coverages of $3,000,000 per occurrence combined single limit for bodily injury
and property damage, $1,000,000 for products-completed operations coverage,
100,000 fire legal liability, $1,000,000 for personal and advertising injury
(which coverage shall not be subject to the contractual liability exclusion),
with a $3,000,000 general aggregate limit, for injuries to, or illness or death
of, persons and damage to property occurring in or about the Premises or
otherwise resulting from Tenant's operations in the Building, (ii) property
insurance protecting Tenant against loss or damage by fire and such other risks
are insurable under the available standard forms of "all risk" insurance
policies (excluding earthquake and flood but including water damage), covering
Tenant's personal property and trade fixtures in or about the Premises or the
Real Property, and any improvements and/or Alterations in the Premises, for the
full replacement value thereof without deduction for depreciation; (iii)
workers' compensation insurance in statutory limits; (iv) at least three months'
coverage for loss of business income and continuing expenses, providing
protection against any peril included within the classification "all risk,"
excluding earthquake and flood but including water damage; and (v) if Tenant
operates owned, leased or non-owned vehicles on the Real Property, comprehensive
automobile liability insurance with a minimum coverage of $1,000,000 per
occurrence, combined single limit. The above described policies shall protect
Tenant, as named insured, and Landlord and all the other Indemnitees and any
other parties designated by Landlord, as additional insureds; shall insure
Landlord's and such other parties' contingent liability with regard to acts or
omissions of Tenant; shall specifically include all liability assumed by Tenant
under this Lease (provided, however, that such contractual liability coverage
shall not limit or be deemed to satisfy Tenant's indemnity
<PAGE>
obligations under this Lease); and, if subject to deductibles, shall provide for
deductible amounts not in excess of those approved in advance in writing by
Landlord, which approval shall not be unreasonably withhold. Landlord reserves
the right to increase the foregoing amount of liability coverage from time to
time as Landlord determines is required to adequately protect Landlord and the
other parties designated by Landlord from the matters insured thereby (provided,
however, that Landlord makes no representation that the limits of liability
required hereunder from time to time shall be adequate to protect Tenant), and
to require that Tenant cause any of its contractors, vendors, movers or other
parties conducting activities in or about or occupying the Premises to obtain
and maintain insurance as determined by Landlord and as to which Landlord and
such other parties designated by Landlord shall be additional insureds.
b. POLICY FORM. Each insurance policy required pursuant
to Paragraph 15.a. above shall be issued by an insurance company licensed in the
Commonwealth of Massachusetts and with a general policyholders' rating of "A" or
better and a financial size ranking of "Class VIII" or higher in the most recent
edition of Best's Insurance Guide. Each insurance policy, other than Tenant's
workers' compensation insurance, shall (i) provide that it may not be materially
changed, cancelled or allowed to lapse unless thirty (30) days' prior written
notice to Landlord and any other insureds designated by Landlord is first given,
(ii) provide that no act or omission of Tenant shall affect or limit the
obligations of the insurer with respect to any other insured, (iii) include all
waiver of subrogation rights endorsements necessary to effect the provisions of
Paragraph 16 below, and (iv) provide that the policy and the coverage provided
shall be primary, that Landlord, although an additional insured, shall
nevertheless be entitled to recovery under such policy for any damage to
Landlord or the other Indemnitees by reason of acts or Omissions of Tenant, and
that any coverage carried by Landlord shall be noncontributory with respect to
policies carried by Tenant. Each such insurance policy or a certificate thereof
shall be delivered to Landlord by Tenant on or before the effective date of such
policy and thereafter Tenant shall deliver to Landlord renewal policies or
certificates at least thirty (30) days prior to the expiration dates of expiring
policies. If Tenant fails to procure such insurance or to deliver such policies
or certificates as required by the preceding sentence, Landlord may, at its
option, procure the same for Tenant's account, and the cost thereof shall be
paid to Landlord by Tenant upon demand. Landlord may at any time, and from time
to time, upon reasonable prior notice to Tenant, inspect and/or copy any and all
Insurance policies required by this Lease.
c. Nothing in this Paragraph 15 shall be construed as
creating or implying the existence of (i) any ownership by Tenant of any
fixtures, additions, Alterations, or improvements in or to the Premises or (ii)
any right on Tenant's part to make any addition, Alteration or improvement in or
to the Premises.
16. MUTUAL WAIVER OF SUBROGATION RIGHTS. Each party hereto hereby
releases the other respective party and, in the case of Tenant as the releasing
party, the other Indemnities, and the respective partners, shareholders, agents,
employees, officers, directors and authorized representatives of such released
party, from any claims such releasing party may have for damage to the Building,
the Premises or any of such releasing party's fixtures, personal property,
improvements and alterations in or about the Premises, the Building or the Real
Property that is caused by or results from risks insured against under any fire
and extended coverage insurance policies actually carried by such releasing
party or deemed to be carried by such releasing party;
<PAGE>
provided, however, that such waiver shall be limited to the extent of the net
insurance proceeds payable by the relevant insurance company with respect to
such loss or damage (or in the case of deemed coverage, the net proceeds that
would have been payable). For purposes of this Paragraph 16, Tenant shall be
deemed to be carrying any of the insurance policies required pursuant to
Paragraph 15 but not actually carried by Tenant, and Landlord shall be deemed to
carry standard fire and extended coverage policies on the Real Property. Each
party hereto shall cause each such fire and extended coverage insurance policy
obtained by it to provide that the insurance company waives all rights of
recovery by way of subrogation against the other respective party and the other
released parties in connection with any matter covered by such policy.
17. UTILITIES.
a. BASIC SERVICES. Landlord shall furnish the following
utilities and services ("Basic Services") for the Premises: (i) during the hours
of 8 A.M. to 6 P.M. ("Business Hours") Monday through Friday (except public
holidays) ("Business Days"), electricity for Building standard lighting and
power suitable for the use of the Premises for ordinary general office purposes,
(ii) during Business Hours on Business Days, heat and air conditioning required
in Landlord's judgment for the comfortable use and occupancy of the Premises for
ordinary general office purposes, (iii) unheated water for the restroom(s) and
drinking fountain(s) in the public areas serving the Premises, (iv) elevator
service to the floor(s) of the Premises by nonattended automatic elevators for
general office pedestrian usage, and (v) on Business Days, janitorial services
limited to emptying and removal of general office refuse, light vacuuming as
needed and window washing as determined by Landlord. Notwithstanding the
foregoing, however, Tenant may use water, heat, air conditioning, electric
current, elevator and janitorial service in excess of that provided in Basic
Services ("Excess Services," which shall include without limitation any power
usage other than through existing standard 110 volt AC outlets; electricity
and/or water consumed by Tenant in connection with any dedicated or supplemental
heating, ventilating and/or air conditioning, computer power, telecommunications
and/or other special units or systems of Tenant, chilled, heated or condenser
water; or water used for any purpose other than ordinary drinking and lavatory
purposes), provided that the Excess Services desired by Tenant are reasonably
available to Landlord and to the Premises (it being understood that In no event
shall Landlord be obligated to make available to the Premises more than the pro
rate share of the capacity of any Excess Service available to the Building or
the applicable floor of the Building, as the case may be), and provided further
that Tenant complies with the procedures established by Landlord from time to
time for requesting and paying for such Excess Services and with all other
provisions of this Paragraph 17. Landlord reserves the right to install in the
Premises or the Real Property electric current and/or water meters (including,
without limitation, any additional wiring, conduit or panel required therefor)
to measure the electric current or water consumed by Tenant or to cause the
usage to be measured by other reasonable methods (e.g. by temporary "check"
meters or by survey).
b. PAYMENT FOR UTILITIES AND SERVICES.The cost of Basic
Services shall be included in Operating Expenses. In addition, Tenant shall pay
to Landlord upon demand (i) the cost, at Landlord's prevailing rate, of any
Excess Services used by Tenant, (ii) the cost of installing, operating,
maintaining or repairing any meter or other device used to measure
<PAGE>
Tenant's consumption of utilities, (iii) the cost of installing, operating,
maintaining or repairing any Temperature Balance Equipment (as defined in
Paragraph 17.c. below) for the Premises and/or any equipment required in
connection with any Excess Services requested by Tenant, and (iv) any Cost
otherwise incurred by Landlord in keeping account of or determining any Excess
Services used by Tenant. Landlord's failure to bill Tenant for any of the
foregoing shall not waive Landlord's right to bill Tenant for the same at a
later time.
c. TEMPERATURE BALANCE. If the temperature otherwise
maintained in any portion of the Premises by the heating, air conditioning or
ventilation system is affected as a result of (i) the type or quantity of any
lights, machines or equipment (including without limitation typical office
equipment) used by Tenant in the Premises, (ii) the occupancy of such portion of
the Premises by more than one person per two hundred (200) square feet of
rentable area therein, (iii) an electrical load for lighting or power in excess
of the limits specified in Paragraph 17.d. below, or (iv) any rearrangement of
partitioning or other improvements, then at Tenant's sole cost, Landlord may
install any equipment, or modify any existing equipment (including the standard
air conditioning equipment) Landlord deems necessary to restore the temperature
balance (such new equipment or modifications to existing equipment termed herein
"Temperature Balance Equipment"). Tenant agrees to keep closed, when necessary,
draperies which, because of the sun's position, must be closed to provide for
the efficient operation of the air conditioning system, and Tenant agrees to
cooperate with Landlord and to abide by the regulations and requirements which
Landlord may prescribe for the proper functioning and protection of the heating,
ventilating and air conditioning system. Landlord makes no representation to
Tenant regarding the adequacy or fitness of the heating, air conditioning or
ventilation equipment in the Building to maintain temperatures that may be
required for, or because of, any computer or communications rooms, machine
rooms, conference rooms or other areas of high concentration of personnel or
electrical usage, or any other uses other than or in excess of the fractional
horsepower normally required for office equipment, and Landlord shall have no
liability for loss or damage suffered by Tenant or others in connection
therewith.
d. UTILITY CONNECTIONS. Tenant shall not connect or use
any apparatus or device in the Premises (i) using current in excess of 110
volts, or (ii) which would cause Tenant's electrical demand load to exceed 1.0
watts per rentable square foot for overhead lighting or 2.0 watts per rentable
square foot for convenience outlets, or (iii) which would exceed the capacity of
the existing panel or transformer serving the Premises. Tenant shall not connect
with electric current (except through existing outlets in the Premises or such
additional outlets as may be installed in the Premises as part of initial
improvements or Alterations approved by Landlord), or water pipes, any apparatus
or device for the purpose of using electrical current or water.
Landlord will not permit additional coring of the floor of the Premises in
order to install now electric outlets in the Premises unless Landlord is
satisfied, on the basis of such information to be supplied by Tenant at Tenant's
expense, that coring of the floor in order to install such additional outlets
will not weaken the structure of the floor.
e. INTERRUPTION OF SERVICES. Landlord's obligation to
provide utilities and services for the Premises are subject to the Rules and
Regulations of the Building, applicable Legal Requirements (including the rules
or actions of the public utility company furnishing
<PAGE>
the utility or service), and shutdowns for maintenance and repairs, for security
purposes, or due to strikes, lockouts, labor disputes, fire or other casualty,
acts of God, or other causes beyond the control of Landlord. In the event of an
interruption in, or failure or inability to provide any service or utility for
the Premises for any reason, such interruption, failure or inability shall not
constitute an eviction of Tenant, constructive or otherwise, or impose upon
Landlord any liability whatsoever, including, but not limited to, liability for
consequential damages or loss of business by Tenant. Tenant hereby waives the
provisions of any applicable existing or future Legal Requirement permitting the
termination of this Lease due to such interruption, failure or inability.
f. GOVERNMENTAL CONTROLS. In the event any governmental
authority having jurisdiction over the Office Park, the Real Property or the
Building promulgates or revises any Legal Requirement or building, fire or other
code or imposes mandatory or voluntary controls or guidelines on Landlord or the
Office Park, the Real Property or the Building relating to the use or
conservation of energy or utilities or the reduction of automobile or other
emissions (collectively "Controls") or in the event Landlord is required or
elects to make alterations to the Office Park, the Real Property or the Building
in order to comply with such mandatory or voluntary Controls, Landlord may, in
its sole discretion, comply with such Controls or make such alterations to the
Office Park, the Real Property or the Building related thereto. Such compliance
and the making of such alterations shall not Constitute an eviction of Tenant,
constructive or otherwise, or impose upon Landlord any liability whatsoever,
including, but not limited to, liability for consequential damages or loss of
business by Tenant.
18. PERSONAL PROPERTY AND OTHER TAXES. Tenant shall pay, at least
ten (10) days before delinquency, any and all taxes, fees, charges or other
governmental impositions levied or assessed against Landlord or Tenant (a) upon
Tenant's equipment, furniture, fixtures, improvements and other personal
property (including carpeting installed by Tenant) located in the Premises, (b)
by virtue of any Alterations made by Tenant to the Premises, (c) which is an
occupancy tax or tax in lieu thereof related to Tenant's occupancy of the
Premises, and (d) upon this transaction or any document to which Tenant is a
party creating or transferring an interest or an estate in the Premises. If any
such fee, charge or other governmental imposition is paid by Landlord, Tenant
shall reimburse Landlord for Landlord's payment upon demand.
19. RULES AND REGULATIONS. Tenant shall comply with the rules and
regulations set forth on Exhibit B attached hereto, as such rules and
regulations may be modified or amended by Landlord from time to time (the "Rules
and Regulations"). Landlord shall not be responsible to Tenant for the
nonperformance or noncompliance by any other tenant or occupant of the Building
of or with any of the Rules and Regulations.
20. SURRENDER; HOLDING OVER.
a. SURRENDER. Upon the expiration or other termination
of this Lease, Tenant shall surrender the Premises to Landlord vacant and
broom-clean, with all improvements and Alterations (except as provided below) in
their original condition, except for reasonable wear and tear, damage from
casualty or condemnation and any changes resulting from approved Alterations;
provided, however, that prior to the expiration or termination of this Lease
Tenant
<PAGE>
shall remove from the Premises any Alterations that Tenant is required by
Landlord to remove under the provisions of this Lease, and all of Tenant's
personal property and trade fixtures, and, at Landlord's sole election, any
other improvements, whether installed by Landlord or Tenant, that are of a type
or quantity that would not be installed by or for a typical tenant using space
for general office purposes, or are otherwise nonstandard. If such removal is
not completed at the expiration or other termination of this Lease, Landlord may
remove the same at Tenant's expense. Any damage to the Premises or the Building
caused by such removal shall be repaired promptly by Tenant (including the
patching or repairing of ceilings and walls) or, if Tenant fails to do so,
Landlord may do so at Tenant's expense. The removal of Alterations from the
Premises shall be governed by Paragraph 9 above. Tenant's obligations under this
paragraph shall survive the expiration or other termination of this Lease. Upon
expiration or termination of this Lease or of Tenant's Possession, Tenant shall
surrender all keys to the Premises or any other part of the Building and shall
make known to Landlord the combination of locks on all safes, cabinets and
vaults that may be located in the Premises.
b. HOLDING OVER. If Tenant remains in possession of the
Premises after the expiration or earlier termination of this Lease with the
express written consent of Landlord, Tenant's occupancy shall be a
month-to-month tenancy at a rent agreed upon by Landlord and Tenant, but in no
event less than the greater of (i) one hundred fifty percent (150%) of the
Monthly Rent, Tenant's Electrical Charge and Additional Rent payable under this
Lease during the last full month prior to the date of the expiration of this
Lease or (ii) the fair market rental (as reasonably determined by Landlord) for
the Premises. Except as provided in the preceding sentence, the month-to-month
tenancy shall be on the terms and conditions of this Lease, except that any
renewal options, expansion options, rights of first refusal, rights of first
negotiation or any other rights or options pertaining to additional space in the
Building contained in this Lease shall be deemed to have terminated and shall be
inapplicable thereto. Landlord's acceptance of rent after such holding over with
Landlord's written consent shall not result in any other tenancy or in a renewal
of the original term of this Lease. If Tenant remains in possession of the
Premises after the expiration or earlier termination of this Lease without
Landlord's consent, Tenant's continued possession shall be on the basis of a
tenancy at sufferance and Tenant shall pay as Monthly Rent during the holdover
period an amount equal to the greater of (i) one hundred fifty percent (150%) of
the fair market rental (as reasonably determined by Landlord) for the Premises
or (ii) two hundred percent (200%) of the Monthly Rent, Tenant's Electrical
Charge and Additional Rent payable under this Lease for the last full month
prior to the date of such expiration or termination.
c. INDEMNIFICATION. Tenant shall indemnify, defend and
hold Landlord harmless from and against all Claims incurred by or asserted
against Landlord and arising directly or indirectly from Tenant's failure to
timely surrender the Premises, including but not limited to (i) any rent payable
by or any loss, cost, or damages, including lost profits, claimed by any
prospective tenant of the Premises or any portion thereof, and (ii) Landlord's
damages as a result of such prospective tenant rescinding or refusing to enter
into the prospective lease of the Premises or any portion thereof by reason of
such failure to timely surrender the Premises.
21. SUBORDINATION AND ATTORNMENT. This Lease is expressly made
subject to and subordinate to any mortgage, deed of trust, ground lease,
underlying lease or like encumbrance
<PAGE>
affecting any part of the Real Property or any interest of Landlord therein
which is now existing or hereafter executed or recorded, any present or future
modification, amendment or supplement to any of the foregoing, and to any
advances made thereunder (any of the foregoing being a "Superior Interest")
without the necessity of any further documentation evidencing such
subordination. Notwithstanding the foregoing, Tenant shall, within ten (10) days
after Landlord's request, execute and deliver to Landlord a document evidencing
the subordination of this Lease to a particular Superior Interest. Tenant hereby
irrevocably appoints Landlord as Tenant's attorney-in-fact to execute and
deliver any such instrument in the name of Tenant if Tenant fails to do so
within such time. If the interest of Landlord in the Real Property or the
Building is transferred to any person ("Purchaser") pursuant to or in lieu of
proceedings for enforcement of any Superior Interest, then, at the option of the
Purchaser, Tenant shall immediately and automatically attorn to the Purchaser,
and this Lease shall continue in full force and effect as a direct lease between
the Purchaser and Tenant on the terms and conditions set forth herein.
22. FINANCING CONDITION. If any lender or ground lessor that intends to
acquire an interest in, or holds a mortgage, ground lease or deed of trust
encumbering any portion of the Real Property should require either the execution
by Tenant of an agreement requiring Tenant to send such lender written notice of
any default by Landlord under this Lease, giving such lender the right to cure
such default until such lender has completed foreclosure, and preventing Tenant
from terminating this Lease unless such default remains uncured after
foreclosure has been completed, and/or any modification of the agreements,
covenants, conditions or provisions of this Lease, then Tenant agrees that it
shall, within ten (10) days after Landlord's request, execute and deliver such
agreement and modify this Lease as required by such lender or ground lessor,
provided, however, that no such modification shall affect the length of the term
or increase the rent payable by Tenant under Paragraphs 5 and 7. Tenant
acknowledges and agrees that its failure to timely execute any such agreement or
modification required by such lender or ground lessor may cause Landlord serious
financial damage by causing the failure of a financing transaction and giving
Landlord all of its rights and remedies under Paragraph 25 below, including its
right to damages caused by the loss of such financing.
23. ENTRY BY LANDLORD. Landlord may, at any and all reasonable times,
and upon reasonable advance notice (provided that no advance notice need be
given if an emergency necessitates an immediate entry or prior to entry to
provide routine janitorial services), enter the Premises to (a) inspect the same
and to determine whether Tenant is in compliance with its obligations hereunder,
(b) supply janitorial and any other service Landlord is required to provide
hereunder, (c) show the Premises to prospective lenders, purchasers or tenants,
(d) post notices of nonresponsibility, and (e) alter, improve or repair the
Premises or any other portion of the Real Property or the Office Park. In
connection with any such alteration, improvement or repair, Landlord may erect
in the Premises or elsewhere in the Real Property or the Office Park scaffolding
and other structures reasonably required for the work to be performed. In no
event shall such entry or work entitle Tenant to an abatement of rent,
constitute an eviction of Tenant, constructive or otherwise, or impose upon
Landlord any liability whatsoever, including but not limited to liability for
consequential damages or loss of business or profits by Tenant; provided,
however, that Landlord shall use good faith efforts to cause all such work to be
done in such a manner as to cause as little interference to Tenant as reasonably
possible without incurring
<PAGE>
additional expense. Landlord shall at all times retain a key with which to
unlock all of the doors in the Premises, except Tenant's vaults and safes. If an
emergency necessitates immediate access to the Premises, Landlord may use
whatever force is necessary to enter the Premises and any such entry to the
Premises shall not constitute a forcible or unlawful entry into the Premises, a
detainer of the Premises, or an eviction of Tenant from the Premises, or any
portion thereof.
24. INSOLVENCY OR BANKRUPTCY. The occurrence of any of the following
shall Constitute an Event of Default under Paragraph 25 below:
1. Tenant ceases doing business as a going concern,
makes an assignment for the benefit of creditors, is adjudicated an insolvent,
files a petition (or files an answer admitting the material allegations of such
petition) seeking for Tenant any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar arrangement under any state or
federal bankruptcy or other law, or Tenant consents to or acquiesces in the
appointment, pursuant to any state or federal bankruptcy or other law, of a
trustee, receiver or liquidator for the Premises, for Tenant or for all or any
substantial part of Tenant's assets; or
2. Tenant fails within sixty (60) days after the
commencement of any proceedings against Tenant seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any state or federal bankruptcy or other Legal Requirement, to have
such proceedings dismissed, or Tenant fails, within sixty (60) days after an
appointment pursuant to any state or federal bankruptcy or other Legal
Requirement without Tenant's consent or acquiescence, of any trustee, receiver
or liquidator for the Premises, for Tenant or for all or any substantial part of
Tenant's assets, to have such appointment vacated; or
3. Tenant is unable, or admits in writing its inability,
to pay its debts as they mature; or
4. Tenant gives notice to any governmental body of its
insolvency or pending insolvency, or of its suspension or pending suspension of
operations.
In no event shall this Lease be assigned or assignable by reason of any
voluntary or involuntary bankruptcy, insolvency or reorganization proceedings,
nor shall any rights or privileges hereunder be an asset of Tenant, the trustee,
debtor-in-possession, or the debtor's estate in any bankruptcy, insolvency or
reorganization proceedings.
25. DEFAULT AND REMEDIES.
a. EVENTS OF DEFAULT. The occurrence of any of the
following shall constitute an "Event of Default" by Tenant:
1. Tenant fails to pay when due Monthly Rent,
Tenant's Electrical Charge, Additional Rent or any other rent due hereunder
(provided that the first occurrence of such a delinquency in any twelve
(12)-month period shall be an Event of Default only if Tenant fails to cure such
delinquency within five (5) days of written notice from Landlord thereof; or
<PAGE>
2. Tenant fails to occupy and use the Premises
for fifteen (15) consecutive days, which failure shall be deemed an abandonment
of the Premises by Tenant; or
3. Tenant fails to deliver any estoppel
certificate pursuant to Paragraph 29 below, subordination agreement pursuant to
Paragraph 21 above, or document required pursuant to Paragraph 22 above, within
the applicable period set forth therein; or
4. Tenant violates the bankruptcy and
insolvency provisions of Paragraph 24 above; or
5. Tenant makes or has made or furnishes or has
furnished any warranty, representation or statement to Landlord in connection
with this Lease, or any other agreement made by Tenant for the benefit of
Landlord, which is or was false or misleading in any material respect when made
or furnished; or
6. Tenant assigns this Lease or subleases any
portion of the Premises in violation of Paragraph 13 above; or
7. A default by Tenant occurs under any other
lease between Tenant and Landlord or any affiliate of Landlord, and Tenant fails
to cure such default within the applicable period set forth therein; or
8. Tenant fails to comply with any other
provision of this Lease in the manner and within the time required.
b. REMEDIES. Upon the occurrence of an Event of Default
Landlord shall have the following remedies, which shall not be exclusive but
shall be cumulative and shall be in addition to any other remedies now or
hereafter allowed by law:
1. Landlord may terminate this Lease at any
time by written notice to Tenant, and this Lease shall come to an end on the
date of such notice, as fully and completely as if such date were the date
herein originally fixed for the expiration of the term; and Tenant will then
quit and surrender the Premises to Landlord, but Tenant shall remain liable as
hereinafter provided. Tenant expressly acknowledges that in the absence of such
written notice from Landlord, no other act of Landlord, including, but not
limited to, its re-entry into the Premises, its efforts to relet the Premises,
its reletting of the Premises for Tenant's account, its storage of Tenant's
personal property and trade fixtures, its acceptance of keys to the Premises
from Tenant, its appointment of a receiver, or its exercise of any other rights
and remedies under this Paragraph 25 or otherwise at law, shall constitute an
acceptance of Tenant's surrender of the Premises or constitute a termination of
this Lease. Upon such termination of the Lease, Landlord may, without notice,
re-enter the Premises, either by force, summary proceedings, ejectment or
otherwise, and remove and dispossess Tenant and all other persons and any and
all property from the same, as if this Lease had not been made, and Tenant
hereby waives the service of notice of intention to re-enter or to institute
legal proceedings to that end
<PAGE>
Upon such termination of the Lease, Landlord shall be entitled to recover
damages from Tenant as provided in any applicable existing or future Legal
Requirement providing for recovery of damages for such breach, including but not
limited to the following:
(i) The reasonable cost of recovering the
Premises; plus
(ii) The reasonable cost of removing Tenant's
Alterations, trade fixtures and improvements; plus
(iii) All unpaid rent due or earned hereunder
prior to the date of termination, less the proceeds of any reletting or any
rental received from subtenants prior to the date of termination applied as
provided in Paragraph 25.b.2. below, together with interest at the Interest
Rate, on such sums from the date such rent is due and payable until the date of
the award of damages; plus
(iv) The amount of the rent payable by Tenant
hereunder, including Tenant's Electrical Charge under Paragraph 5 above and
Additional Rent under Paragraph I above, as reasonably estimated by Landlord,
from the date of termination until the date of the award of damages, together
with interest at the Interest Rate on such sums from the date such rent is due
and payable until the date of the award of damages; plus
(v) The amount of the rent payable by Tenant
hereunder, including Additional Rent under Paragraph 7 above, as reasonably
estimated by Landlord, for the remainder of the then term, after the date of the
award of damages, discounted at the discount rate published by the Federal
Reserve Bank of San Francisco for member banks at the time of the award Plus one
percent (1%); plus
(vi) Such other amounts in addition to or in lieu
of the foregoing as may be permitted from time to time by applicable law,
including without limitation 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 would be
likely to result therefrom.
2. Landlord may continue this Lease in full force and
effect and may enforce all of its rights and remedies under this Lease,
including, but not limited to, the right to recover rent as it becomes due.
After the occurrence of an Event of Default, Landlord may enter the Premises
without terminating this Lease and sublet all or any part of the Premises for
Tenant's account to any person, for such term (which may be a period beyond the
remaining term of this Lease), at such rents and on such other terms and
conditions as Landlord deems advisable. In the event of any such subletting,
rents received by Landlord from such subletting shall be applied (i) first, to
the payment of the costs of maintaining, preserving, altering and preparing the
Premises for subletting, the other costs of subletting, including but not
limited to brokers' commissions, attorneys' fees and expenses of removal of
Tenant's personal property, trade fixtures and Alterations; (ii) second, to the
payment of rent then due and payable hereunder; (iii) third, to the payment of
future rent as the same may become due and payable hereunder; (iv) fourth, the
balance, if any, shall be paid to Tenant upon (but not before) expiration of the
term of this Lease.
<PAGE>
If the rents received by Landlord from such subletting, after application, as
provided above, are insufficient in any month to pay the rent due and payable
hereunder for such month, Tenant shall Pay such deficiency to Landlord monthly
upon demand. Notwithstanding any such subletting for Tenant's account without
termination, Landlord may at any time thereafter, by written notice to Tenant,
elect to terminate this Lease by virtue of a previous Event of Default.
3. During the continuance of an Event of Default,
Landlord may enter the Premises without terminating this Lease and remove all
Tenant's personal property, Alterations and trade fixtures from the Premises and
store them at Tenant's risk and expense. If Landlord removes such property from
the Premises and stores it at Tenant's risk and expense, and if Tenant fails to
pay the cost of such removal and storage after written demand therefor and/or to
pay any rent then due, then after the property has been stored for a period of
thirty (30) days or more Landlord may sell such property at public or private
sale, in the manner and at such times and places as Landlord deems commercially
reasonable following reasonable notice to Tenant of the time and place of such
sale. The proceeds of any such sale shall be applied first to the payment of the
expenses for removal and storage of the property, the preparation for and the
conducting of such sale, and for attorneys' fees and other legal expenses
incurred by Landlord in connection therewith, and the balance shall be applied
as provided in Paragraph 25.b.2. above.
Tenant hereby waives all claims for damages that may be caused by
Landlord's reentering and taking possession of the Premises or removing and
storing Tenant's personal property pursuant to this Paragraph 25, and Tenant
shall indemnify, defend and hold Landlord harmless from and against any and all
claims resulting from any such act. No reentry by Landlord shall constitute or
be construed as a forcible entry by Landlord.
4. Landlord may require Tenant to remove any and all
Alterations from the Premises or, if Tenant fails to do so within ten (10) days
after Landlord's request, Landlord may do so at Tenant's expense.
5. Landlord may cure the Event of Default at Tenant's
expense, it being understood that such performance shall not waive or cure the
subject Event of Default. If Landlord Pays any sum or incurs any expense in
curing the Event of Default, Tenant shall reimburse Landlord upon demand for the
amount of such payment or expense with interest at the Interest Rate from the
date the sum is paid or the expense is incurred until Landlord is reimbursed by
Tenant. Any amount due Landlord under this subsection shall constitute
additional rent hereunder.
c. WAIVER OF REDEMPTION. Tenant hereby waives, for itself and all
persons claiming by and under Tenant, all rights and privileges which it might
have under any present or future Legal Requirement to redeem the Premises or to
continue this Lease after being dispossessed or ejected from the Premises.
26. DAMAGE OR DESTRUCTION. If all or a part of the Premises or the Real
Property are damaged by fire or other casualty, and the damage can, in
Landlord's reasonable opinion, be repaired within sixty (60) days of the damage,
then Landlord shall repair the damage and this Lease shall remain in full force
and effect. If the repairs cannot, in Landlord's opinion, be made
<PAGE>
within the sixty (60)-day period, Landlord at its option exercised by written
notice to Tenant within the sixty (60)-day period, shall either (a) repair the
damage, in which event this Lease Shall continue in full force and effect, or
(b) terminate this Lease as of the date specified by Landlord in the notice,
which date shall be not less than thirty (30) days nor more than sixty (60) days
after the date such notice is given, and this Lease shall terminate on the date
specified in the notice.
If the fire or other casualty damages the Premises or the common areas of
the Real Property necessary for Tenant's use and occupancy of the Premises,
Tenant ceases to use any portion of the Premises as a result of such damage, and
the damage does not result from the negligence or willful Misconduct of Tenant
or any other Tenant Parties, then during the period the Premises or portion
thereof are rendered unusable by such damage and repair, Tenant's Monthly Rent,
Tenant's Electrical Charge and Additional Rent under Paragraphs 5 and 7 above
shall be proportionately reduced based upon the extent to which the damage and
repair prevents Tenant from conducting, and Tenant does not conduct, its
business at the Premises. Landlord shall not be obligated to repair or replace
any of Tenant's movable furniture, equipment, trade fixtures, and other personal
property, nor any Alterations installed in the Premises by Tenant, and no damage
to any of the foregoing shall entitle Tenant to any abatement, and Tenant shall,
at Tenant's sole cost and expense, repair and replace such items. All such
repair and replacement of Alterations shall be constructed in accordance with
Paragraph 9 above regarding Alterations.
A total destruction of the Building shall automatically from terminate this
Lease. In no event shall Tenant be entitled to any compensation or damages from
Landlord for loss of use of the whole or any part of the Premises or for any
inconvenience occasioned by any such destruction, rebuilding or restoration of
the Premises, the Building or access thereto, except for the rent abatement
expressly provided above. Tenant hereby waives any existing or future law
providing for termination of hiring upon destruction of the thing hired and/or
providing for repairs to and of premises.
27. EMINENT DOMAIN.
a. If all or any part of the Premises are taken by any
public or quasi-public authority under the power of eminent domain, or any
agreement in lieu thereof (a "taking"), this Lease shall terminate as to the
portion of the Premises taken effective as of the date of taking. If only a
portion of the Premises is taken, Landlord or Tenant may terminate this Lease as
to the remainder of the Premises upon written notice to the other party within
ninety (90) days after the taking; provided, however, that Tenant's right to
terminate this Lease is conditioned upon the remaining portion of the Premises
being of such size or configuration that such remaining portion of the Premises
is unusable or uneconomical for Tenant's business. Landlord shall be entitled to
all compensation, damages, income, rent awards and interest thereon whatsoever
which may be paid or made in connection with any taking and Tenant shall have no
claim against Landlord or any governmental authority for the value of any
unexpired term of this Lease or of any of the improvements or Alterations in the
Premises; provided, however, that the foregoing shall not prohibit Tenant from
prosecuting a separate claim against the taking authority for an amount
separately designated for Tenant's relocation expenses or the interruption of or
damage to Tenant's business or as compensation for Tenant's personal property,
trade fixtures,
<PAGE>
Alterations or other improvements paid for by Tenant so long as any award to
Tenant will not reduce the award to Landlord.
In the event of a partial taking of the Premises which does not result in a
termination of this Lease, the Monthly Rent, Tenant's Electrical Charge and
Additional Rent under Paragraphs 5 and 7 hereunder shall be equitably reduced.
If all or any part of the Real Property other than the Premises is taken,
Landlord may terminate this Lease upon written notice to Tenant given within
ninety (90) days after the date of taking.
b. Notwithstanding the foregoing, if all or any portion
of the Premises is taken for a period of time ending prior to the end of the
term of this Lease, this Lease shall remain in full force and effect and Tenant
shall continue to pay all rent and to perform all of its obligations under this
Lease; provided, however, that Tenant shall be entitled to all compensation,
damages, income, rent awards and interest thereon that is paid or made in
connection with such temporary taking of the Premises (or portion thereof),
except that any such compensation in excess of the rent or other amounts payable
to Landlord hereunder shall be promptly paid over to Landlord as received.
Landlord and Tenant each hereby waive the provisions of any applicable existing
or future Legal Requirement providing for, or allowing either party to petition
the courts of the state in which the Real Property is located for, a termination
of this Lease upon a partial taking of the Premises and/or the Building.
28. LANDLORD'S LIABILITY; SALE OF BUILDING. The term "Landlord," as
used in this Lease, shall mean only the owner or owners of the Real Property at
the time in question. Notwithstanding any other provision of this Lease, the
liability of Landlord for its obligations under this Lease is limited solely to
Landlord's interest in the Real Property as the same may from time to time be
encumbered, and no personal liability shall at any time be asserted or
enforceable against any other assets of Landlord or against the constituent
shareholders, partners or other owners of Landlord, or the directors, officers,
employees and agents of Landlord or such constituent shareholder, partner or
other owner, on account of any of Landlord's obligations or actions under this
Lease. In addition, in the event of any conveyance of title to the Real
Property, then the grantor or transferee shall be relieved of all liability with
respect to Landlord's obligations to be performed under this Lease after the
date of such conveyance. In no event shall Landlord be deemed to be in default
under this Lease unless Landlord fails to perform its obligations under this
Lease, Tenant delivers to Landlord written notice specifying the nature of
Landlord's alleged default, and Landlord fails to cure such default within
thirty (30) days following receipt of such notice (or, if the default cannot
reasonably be cured within such period, to commence action within such thirty
(30)-day period and proceed diligently thereafter to cure such default). Upon
any conveyance of title to the Real Property, the grantee or transferee shall be
deemed to have assumed Landlord's obligations to be performed under this Lease
from and after the date of such conveyance, subject to the limitations on
liability set forth above in this Paragraph 28. If Tenant provides Landlord with
any security for Tenant's performance of its obligations hereunder, and Landlord
transfers such security to the grantee or transferee of Landlord's interest in
the Real Property, Landlord shall be released from any further responsibility or
liability for such security. Any claim, defense or other right of Tenant arising
in connection with this Lease shall be barred unless Tenant files an action or
interposes a defense based thereon within one hundred eighty (180) days after
the date of the alleged event on which
<PAGE>
Tenant is bringing its claim, defense or right. Notwithstanding any other
provision of this Lease, but not in limitation of the provisions of Paragraph
14.a. above, Landlord shall not be liable for any consequential damages or
interruption or loss of business, income or profits, or claims of constructive
eviction, nor shall Landlord be liable for loss of or damage to artwork,
currency, jewelry, bullion, unique or valuable documents, securities or other
valuables, or for other property not in the nature of ordinary fixtures,
furnishings and equipment used in general administrative and executive office
activities and functions. Wherever in this Lease Tenant (a) releases Landlord
from any claim or liability, (b) waives or limits any right of Tenant to assert
any claim against Landlord or to seek recourse against any property of Landlord
or (c) agrees to indemnify Landlord against any matters, the relevant release,
waiver, limitation or indemnity shall run in favor of and apply to Landlord, the
constituent shareholders, partners or other owners of Landlord, and the
directors, officers, employees and agents of Landlord and each such constituent
shareholder, partner or other owner.
29. ESTOPPEL CERTIFICATES. At any time and from time to time, upon not
less than ten (10) days' prior notice from Landlord, Tenant shall execute,
acknowledge and deliver to Landlord a statement certifying the commencement date
of this Lease, stating 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 as modified and the date and nature of each such modification), that
Landlord is not in default under this Lease (or, if Landlord is in default,
specifying the nature of such default), that Tenant is not in default under this
Lease or if Tenant is in default, specifying the nature of such default), the
current amounts of and the dates to which the Monthly Rent, Tenant's Electrical
Charge and Additional Rent has been paid, and setting forth such other matters
as may be reasonably requested by Landlord. Any such statement may be
conclusively relied upon by a prospective purchaser of the Real Property or by a
lender obtaining a lien on the Real Property as security. If Tenant fails to
deliver such statement within the time required hereunder, such failure shall be
conclusive upon Tenant that (i) this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) there are no uncured
defaults in Landlord's performance of its obligations hereunder, (iii) not more
than one month's installment of Monthly Rent has been paid in advance, and (iv)
any other statements of fact included by Landlord in such statement are correct.
Tenant acknowledges and agrees that its failure to execute, such certificate may
cause Landlord serious financial damage by causing the failure of a sale or
financing transaction and giving Landlord all of its rights and remedies under
Paragraph 25 above, including its right to damages caused by the loss of such
sale or financing.
30. RIGHT OF LANDLORD TO PERFORM. If Tenant fails to make any payment
required hereunder (other than Monthly Rent, Tenant's Electrical Charge and
Additional Rent) or fails to perform any other of its obligations hereunder,
Landlord may, but shall not be obliged to, and without waiving any default of
Tenant or releasing Tenant from any obligations to Landlord hereunder, make any
such payment or perform any other such obligation on Tenant's behalf. All sums
so paid by Landlord and all necessary incidental costs in connection with the
performance by Landlord of an obligation of Tenant (together with interest
thereon from the date of such payment by Landlord until paid at the Interest
Rate) shall be payable by Tenant to Landlord upon demand, and Tenant's failure
to make such payment upon demand shall entitle Landlord to the same rights and
remedies provided Landlord in the event of non-payment of rent.
<PAGE>
31. LATE CHARGE. Tenant acknowledges that late payment of any
installment of Monthly Rent, Tenant's Electrical Charge or Additional Rent or
any other amount required under this Lease will cause Landlord to incur costs
not contemplated by this Lease and that the exact amount of such costs would be
extremely difficult and impracticable to fix. Such costs include, without
limitation, processing and accounting charges, late charges that may be imposed
on Landlord by the terms of any encumbrance or note secured by the Real Property
and the loss of the use of the delinquent funds. Therefore, if any installment
of Monthly Rent, Tenant's Electrical Charge or Additional Rent or any other
amount due from Tenant is not received when due, Tenant shall pay to Landlord on
demand, on account of the delinquent payment, an additional sum equal to the
greater of (i) five percent (5t) of the overdue amount, or (ii) $100.00, which
additional sum represents a fair and reasonable estimate of the costs that
Landlord will incur by reason of late payment by Tenant. Acceptance of any late
charge shall not constitute a waiver of Tenant's default with respect to the
overdue amount, nor prevent Landlord from exercising its right to collect
interest as provided above, rent, or any other damages, or from exercising any
of the other rights and remedies available to Landlord.
32. ATTORNEYS' FEES; WAIVER OF JURY TRIAL. In the event of any action
or proceeding between Landlord and Tenant (including an action or proceeding
between Landlord and the trustee or debtor in possession while Tenant is a
debtor in a proceeding under any bankruptcy law) to enforce any provision of
this Lease, the losing party shall pay to the prevailing party all costs and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred in such action and in any appeal in connection therewith by
such prevailing party. The "prevailing party" will be determined by the court
before whom the action was brought based upon an assessment of which party's
major arguments or positions taken in the suit or proceeding could fairly be
said to have prevailed over the other party's major arguments or positions on
major disputed issues in the court's decision. Notwithstanding the foregoing,
however, Landlord shall be deemed the prevailing party in any unlawful detainer
or other action or proceeding instituted by Landlord based upon any default or
alleged default of Tenant hereunder if (i) judgment is entered in favor of
Landlord, or (ii) prior to trial or judgment Tenant pays all or any portion of
the rent claimed by Landlord, vacates the Premises, or otherwise cures the
default claimed by Landlord.
If Landlord becomes involved in any litigation or dispute, threatened or
actual, by or against anyone not a party to this Lease, but arising by reason of
or related to any act or omission of Tenant or any Tenant Party, Tenant agrees
to pay Landlord's reasonable attorneys' fees and other costs incurred in
connection with the litigation or dispute, regardless of whether a lawsuit is
actually filed.
IF ANY ACTION OR PROCEEDING BETWEEN LANDLORD AND TENANT TO ENFORCE THE
PROVISIONS OF THIS LEASE (INCLUDING AN ACTION OR PROCEEDING BETWEEN LANDLORD AND
THE TRUSTEE OR DEBTOR IN POSSESSION WHILE TENANT IS A DEBTOR IN A PROCEEDING
UNDER ANY BANKRUPTCY LAW) PROCEEDS TO TRIAL, LANDLORD AND TENANT HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY IN SUCH TRIAL.
<PAGE>
33. WAIVER. No provisions of this Lease shall be deemed waived by
Landlord unless such waiver is in a writing signed by Landlord. The waiver by
Landlord of any breach of any provision of this Lease shall not be deemed a
waiver of any subsequent breach of the same or any other provision of this
Lease. No delay or omission in the exercise of any right or remedy of Landlord
upon any default by Tenant shall impair such right or remedy or be construed as
a waiver. Landlord's acceptance of any payments of rent due under this Lease
shall not be deemed a waiver of any default by Tenant under this Lease
(including Tenant's recurrent failure to timely pay rent) other than Tenant's
nonpayment of the accepted sums, and no endorsement or statement on any check or
accompanying any check or payment shall be deemed an accord and satisfaction.
Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to waive or render unnecessary
Landlord's consent to or approval of any subsequent act by Tenant.
34. NOTICES. All notices and demands which may or are required to be
given by either party to the other hereunder shall be in writing. All notices
and demands by Landlord to Tenant shall be delivered personally or sent by
United States mail, postage prepaid, or by any reputable overnight or same-day
courier, addressed to Tenant at the Premises, or to such other place as Tenant
may from time to time designate by notice to Landlord hereunder. All notices and
demands by Tenant to Landlord shall be sent by United States mail, postage
prepaid, or by any reputable overnight or same-day courier, addressed to
Landlord in care of Shorenstain Company, L.P., 200 Park Avenue, New York, New
York 10166, Attention: Glenn A. Shannon, Executive Vice President, with a copy
to 555 California Street, 49th floor, San Francisco, California 94104,
Attention: Legal Department, or to such other place as Landlord may from time to
time designate by notice to Tenant hereunder. Notices delivered personally or
sent same-day courier will be effective immediately upon delivery to the
addressee at the designated address; notices sent by overnight courier will be
effective one (1) Business Day after acceptance by the service for delivery;
notices sent by mail will be effective two (2) Business Days after mailing. In
the event Tenant requests multiple notices hereunder, Tenant will be bound by
such notice from the earlier of the effective times of the multiple notices.
35. DELETED.
36. DEFINED TERMS AND MARGINAL HEADINGS. When required by the context
of this Lease, the singular includes the plural. If more than one person or
entity signs this Lease as Tenant, the obligations hereunder imposed upon Tenant
shall be joint and several, and the act of, written notice to or from, refund
to, or signature of, any Tenant signatory to this Lease (including without
limitation modifications of this Lease made by fewer than all such Tenant
signatories) shall bind every other Tenant signatory as though every other
Tenant signatory had so acted, or received or given the written notice or
refund, or signed. The headings and titles to the paragraphs of this Lease are
for convenience only and are not to be used to interpret or construe this Lease.
Wherever the term "including" or "includes" is used in this Lease it shall be
construed as if followed by the phrase "without limitation." The language in all
parts of this Lease shall in all cases be construed as a whole and in accordance
with its fair meaning and not construed for or against any party simply because
one party was the drafter thereof.
<PAGE>
37. TIME AND APPLICABLE LAW. Time is of the essence of this Lease and
of each and all of its provisions, except as to the conditions relating to the
delivery of possession of the Premises to Tenant. This Lease shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
38. SUCCESSORS. Subject to the provisions of Paragraphs 13 and 28
above, the covenants and conditions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors, executors, administrators and assigns.
39. ENTIRE AGREEMENT; MODIFICATIONS. This Lease (including any exhibit,
rider or attachment hereto) constitutes the entire agreement between Landlord
and Tenant with respect to Tenant's lease of the Premises. No provision of this
Lease may be amended or otherwise modified except by an agreement in writing
signed by the parties hereto. Neither Landlord nor Landlord's agents have made
any representations or warranties with respect to the Premises, the Building,
the Real Property, the Office Park or this Lease except as expressly set forth
herein, including without limitation any representations or warranties as to the
suitability or fitness of the Premises for the conduct of Tenant's business or
for any other purpose, nor has Landlord or its agents agreed to undertake any
alterations or construct any improvements to the Premises except those, if any,
expressly provided in this Lease, and no rights, easements or licenses shall be
acquired by Tenant by implication or otherwise unless expressly set forth
herein. Neither this Lease nor any memorandum hereof shall be recorded by
Tenant.
40. LIGHT AND AIR. Tenant agrees that no diminution of light, air or
view by any structure which may hereafter be erected (whether or not by
Landlord) shall entitle Tenant to any reduction of rent hereunder, result in any
liability of Landlord to Tenant, or in any other way affect this Lease.
41. NAME OF BUILDING. Tenant shall not use the name of the Building for
any purpose other than as the address of the business conducted by Tenant in the
Premises without the written consent of Landlord. Landlord reserves the right to
change the name of the Building at any time in its sole discretion by written
notice to Tenant and Landlord shall not be liable to Tenant for any loss, cost
or expense on account of any such change of name.
42. SEVERABILITY. If any provision of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
43. AUTHORITY. If Tenant is a corporation, partnership, trust,
association or other entity, Tenant and each person executing this Lease on
behalf of Tenant, hereby covenants and warrants that (a) Tenant is duly
incorporated or otherwise established or formed and validly existing under the
laws of its state of incorporation, establishment or formation, (b) Tenant has
and is duly qualified to do business in the state in which the Real Property is
located, (c) Tenant has full corporate, partnership, trust, association or other
appropriate power and authority to enter into this Lease and to perform all
Tenant's obligations hereunder, and (d) each person (and all of
<PAGE>
the persons if more than one signs) signing this Lease on behalf of Tenant is
duly and validly authorized to do so.
44. NO OFFER. Submission of this instrument for examination and
signature by Tenant does not constitute an offer to lease or a reservation of or
option for lease, and is not effective as a lease or otherwise until execution
and delivery by both Landlord and Tenant.
45. REAL ESTATE BROKERS. Tenant represents and warrants that it has
negotiated this Lease directly with the real estate broker(s) identified in
Paragraph 2 and has not authorized or employed, or acted by implication to
authorize or to employ, any other real estate broker or salesman to act for
Tenant in connection with this Lease. Tenant shall indemnify, defend and hold
Landlord harmless from and against any and all Claims by any real estate broker
or salesman other than the real estate broker(s) identified in Paragraph 2 for a
commission, finder's fee or other compensation as a result of Tenant's entering
into this Lease.
46. CONSENTS AND APPROVALS. Wherever the consent, approval, judgment or
determination of Landlord is required or permitted under this Lease, Landlord
may exercise its sole discretion in granting or withholding such consent or
approval or in making such judgment or determination without reference to any
extrinsic standard of reasonableness, unless the provision providing for such
consent, approval, judgment or determination specifies that Landlord's consent
or approval is not to be unreasonably withheld, or that the standard for such
consent, approval, judgment or determination is to be reasonable, or otherwise
specifies the standards under which Landlord may withhold its consent. Whenever
Tenant requests Landlord to take any action or give any consent or approval,
Tenant shall reimburse Landlord for all of Landlord's costs incurred in
reviewing the proposed action or consent (whether or not Landlord consents to
any such proposed action), including without limitation reasonable attorneys' or
consultants' fees and expenses, within ten (10) days after Landlord's delivery
to Tenant of a statement of such costs. If it is determined that Landlord failed
to give its consent or approval where it was required to do so under this Lease,
Tenant's sole remedy will be an order of specific performance or mandatory
injunction of the Landlord's agreement to give its consent or approval. The
review and/or approval by Landlord of any item shall not impose upon Landlord
any liability for accuracy or sufficiency of any such item or the quality or
suitability of such item for its intended use. Any such review or approval is
for the sole purpose of protecting Landlord's interest in the Real Property, and
neither Tenant nor any Tenant Party nor any person or entity claiming by,
through or under Tenant, nor any other third party shall have any rights
hereunder by virtue of such review and/or approval by Landlord.
47. RESERVED RIGHTS. Landlord retains and shall have the rights set
forth below, exercisable without notice and without liability to Tenant for
damage or injury to property, person or business and without affecting an
eviction, constructive or actual, or disturbance of Tenant's use or possession
of the Premises or giving rise to any claim for rent abatement:
(a) To grant to anyone the exclusive right to conduct any business or
render any service in or to the Building and its tenants, provided that such
exclusive right shall not operate to require Tenant to use or patronize such
business or service or to exclude Tenant from its use of the Premises expressly
permitted herein.
<PAGE>
(b) To perform, or cause or permit to be performed, at any time and
from time to time, including during Business Hours, construction in the common
areas and facilities or other leased areas in the Real Property or the Office
Park.
(c) To reduce, increase, enclose or otherwise change at any time and
from time to time the size, number, location, lay-out and nature of the common
areas and facilities and other tenancies and Premises in the Real Property or
the Office Park, to create additional rentable areas through use or enclosure of
common areas, and to dedicate the roads within the Office Park for public use.
48. FINANCIAL STATEMENTS. Upon submission of this Lease to Landlord and
at any time thereafter within thirty (30) days after Landlord's request
therefor, Tenant shall furnish to Landlord copies of true and accurate financial
statements reflecting Tenant's then current financial situation (including
without limitation balance sheets, statements of profit and loss, and changes in
financial condition), Tenant's most recent audited or certified annual financial
statements, and Tenant's federal income tax returns pertaining to Tenant's
business, and in addition shall cause to be furnished to Landlord similar
financial statements and tax returns for any guarantors) of this Lease. Tenant
agrees to deliver to any lender, prospective lender, purchaser or prospective
purchaser designated by Landlord such financial statements of Tenant as may be
reasonably requested by such lender or purchaser.
49. SUBSTITUTION OF PREMISES. Landlord reserves the right from time to
time to relocate Tenant to another part of the Building prior to or during the
term. From and after the date of any such relocation, the term "Premises" as
used herein shall mean the Substituted space in the Building, and Landlord and
Tenant shall execute an appropriate amendment to this Lease describing the new
Premises. If a relocation occurs after Tenant has occupied the Premises (or any
previously substituted Premises) then Landlord shall bear Tenant's reasonable
out-of-pocket expenses in moving Tenant's furnishings and equipment from the
occupied Premises to the Substituted Premises (including the cost of
installation in the substitute Premises of Tenant's then-existing telephone
system, but expressly excluding the cost of any new, additional or replacement
equipment).
50. NONDISCLOSURE OF LEASE TERMS. Tenant agrees that the terms of this
Lease are confidential and constitute proprietary information of Landlord, and
that disclosure of the terms hereof could adversely affect the ability of
Landlord to negotiate with other tenants. Tenant hereby agrees that Tenant and
its partners, officers, directors, employees, agents, real estate brokers and
sales persons and attorneys shall not disclose the terms of this Lease to any
other person without Landlord's prior written consent, except to any Accountants
of Tenant in connection with the preparation of Tenant's financial statements or
tax returns, to an Assignee of this Lease or subleases of the Premises, to an
entity or person to whom disclosure is required by applicable law or in
connection with any action brought to enforce this Lease, or as necessary in
connection with any financing or securities offering of Tenant.
<PAGE>
THIS LEASE IS EXECUTED by Landlord and Tenant as of the date set forth at
the top of page 1 hereof.
SHORENSTEIN MANAGEMENT, INC., LIONBRIDGE TECHNOLOGIES , INC.,
As Trustee of SRI Two Realty Trust a Delaware corporation
By By
-------------------------------- -----------------------------------
Glenn A. Shannon
Executive Vice President Name:
--------------------------------
Landlord Title:
Tenant
<PAGE>
EXHIBIT A
[site map]
950 Winter Street
<PAGE>
EXHIBIT B
RULES AND REGULATIONS
Bay Colony Corporate Center
Waltham, Massachusetts
1. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside or
inside of the Building or any part of the Premises visible from the exterior of
the Premises without the prior written consent of Landlord, which consent may be
withheld in Landlord's sole discretion. Landlord shall have the right to remove,
at Tenant's expense and without notice to Tenant, any such sign, placard,
picture, advertisement, name or notice that has not been approved by Landlord.
All approved signs or lettering on doors and Walls shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person approved of
by Landlord.
If Landlord notifies Tenant in writing that Landlord objects to any
curtains, blinds, shades or screens attached to or hung in or used in connection
with any window or door of the Premises, such use of such curtains, blinds,
shades or screens shall be removed immediately by Tenant. No awning shall be
permitted on any part of the Premises.
2. No ice, drinking water, towel, barbering or bootblacking, shoeshining
or repair services, or other similar services shall be provided to the Premises,
except from persons authorized by Landlord and at the hours and under
regulations fixed by Landlord.
3. The bulletin board or directory of the Building 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.
4. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by any of the Tenant Parties or used by Tenant
for any purpose other than for ingress to and egress from its Premises.
The halls, passages, exits, entrances, elevators, stairways, balconies
and roof are not for the use of the general public and Landlord shall in all
cases retain the right to control and prevent access thereto by all persons
whose presence in the judgment of Landlord shall be prejudicial to the safety,
character, reputation and interests of the Building and its tenants. No tenant
and no employees or invitees of any tenant shall go upon the roof of the
Building.
5. Tenant shall not alter any lock or install any new or additional locks
or any bolts on any interior or exterior door of the Premises without the prior
written consent of Landlord.
6. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any
<PAGE>
kind whatsoever shall be thrown therein and the expense of any breakage,
stoppage or damage resulting from the violation of this rule shall be borne by
the tenant who, or whose employees or invitees, shall have caused it.
7. Tenant shall not overload the floor of the Premises or mark, drive
nails, screw or drill into the partitions, woodwork or plaster or in any way
deface the Premises or any part thereof.
8. No furniture, freight or equipment of any kind shall be brought into
the Building without the consent of Landlord and all moving of the same into or
out of the Building shall be done at such time and in such manner as Landlord
shall designate. Landlord shall have the right to prescribe the right size and
position of all safes and other heavy equipment brought into the Building and
also the times and manner of moving the same in and out of the Building. Sofas
or other heavy objects shall, if considered necessary by Landlord, stand on a
platform of such thickness as is necessary to properly distribute the weight.
Landlord will not be responsible for loss of or damage to any such safe or
property from any cause, and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
Tenant. The elevator designated for freight by Landlord shall be available for
use by all tenants in the Building during the hours and pursuant to such
procedures as Landlord may determine from time to time. The persons employed to
move Tenant's equipment, material, furniture or other property in or out of the
Building must be acceptable to Landlord. The moving company must be a locally
recognized professional mover, whose primary business is the performing of
relocation services, and must be bonded and fully insured. In no event shall
Tenant employ any person or company whose presence may give rise to a labor or
other disturbance in the Real Property or the Office Park. A certificate or
other verification of such insurance must be received and approved by Landlord
prior to the start of any moving operations. insurance must be sufficient in
Landlord's sole opinion, to cover all personal liability, theft or damage to the
Real Property and the Office Park, including, but not limited to, floor
coverings, doors, halls, elevators, stairs, foliage and landscaping. Special
care must be taken to prevent damage to foliage and landscaping during adverse
weather. All moving operations shall be conducted at such times and in such a
manner as Landlord shall direct, and all moving shall take place during
non-business hours unless Landlord agrees in writing otherwise.
9. Tenant shall not employ any person or persons other than the janitor of
Landlord for the purpose of cleaning the Premises, unless otherwise agreed to by
Landlord. Except with the written consent of Landlord, no person or persons
other than those approved by Landlord shall be permitted to enter the Building
for the purpose of cleaning the Building or the Premises. Tenant shall not cause
any unnecessary labor by reason of Tenant's carelessness or indifference in the
preservation of good order and cleanliness.
10. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer 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 and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises or the
<PAGE>
Building. In no event shall Tenant keep, use, or permit to be used in the
Premises or the Building any guns, firearm, explosive devices or ammunition.
11. No cooking shall be done or permitted by Tenant in the Premises,
nor shall the Premises be used for the storage of merchandise, for washing
clothes, for lodging, or for any improper, objectionable or immoral purposes.
12. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline, or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Landlord.
13. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced into the Premises and the Building. No
boring or cutting for wires will be allowed without the prior consent of
Landlord. The location of telephones, call boxes and other office equipment
affixed to the Premises shall be subject to the prior approval of Landlord.
14. Upon the expiration or earlier termination of the Lease, Tenant shall
deliver to Landlord the keys of offices, rooms and toilet rooms which have been
furnished by Landlord to Tenant and any copies of such keys which Tenant has
made. In the event Tenant has lost any keys furnished by Landlord, Tenant shall
pay Landlord for such keys.
15. Tenant shall not lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Premises, except
to the extent and in the manner approved in advance by Landlord. The expense of
repairing any damage resulting from a violation of this rule or removal of any
floor covering shall be borne by the tenant by whom or by whose contractors,
employees or invitees, the damage shall have been caused.
16. No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the elevators, except between
such hours and in such elevators as shall be designated by Landlord, which
elevator usage shall be subject to the Building's customary charge therefor as
established from time to time by Landlord.
17. On Saturdays, Sundays and legal holidays, and on other days between
the hours of 6:00 P.M. and 8:00 A.M., access to the Building, or to the halls,
corridors, elevators or stairways in the Building, or to the Premises may be
refused unless the person seeking access is known to the person or employee of
the Building in charge and has a pass or is properly identified. Landlord shall
in no case be liable for damages for any error with regard to the admission to
or exclusion from the Building of any person. In case of invasion, mob, riot,
public excitement, or other commotion, Landlord reserves the right to prevent
access to the Building during the continuance of the same by closing the doors
or otherwise, for the safety of the tenants and protection of property in the
Building.
18. Tenant shall be responsible for insuring that the doors of the
Premises are closed and securely locked before leaving the Building and must
observe strict care and caution that all water faucets or water apparatus are
entirely shut off before Tenant or Tenant's employees leave the Building, and
that all electricity, gas or air shall likewise be carefully shut off, so as to
<PAGE>
prevent waste or damage, and for any default or carelessness Tenant shall make
good all injuries sustained by other tenants or occupants of the Building or
Landlord. Landlord shall not be responsible to Tenant for loss of property on
the Premises, however occurring, or for any damage to the property of Tenant
caused by the employees or independent contractors of Landlord or by any other
person.
19. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.
20. The requirements of any tenant will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties unless under
special instructions from Landlord, and no employee will admit any person
(tenant or otherwise to any office without specific instructions from Landlord.
21. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises without the prior written consent of
Landlord.
22. Subject to Tenant's right of access to the Premises in accordance with
Building security procedures, Landlord reserves the right to close and keep
locked all entrance and exit doors of the Building on Saturdays, Sundays and
legal holidays and on other days between the hours of 6:00 P.M. and 8:00 A.M.,
and during such further hours as Landlord may deem advisable for the adequate
protection of the Building and the property of its tenants.
23. Neither Landlord nor any operator of the parking areas within the Real
Property and the Office Park, as the same are designated and modified by
Landlord, in its sole discretion, from time to time (the "Parking Areas") shall
be liable for loss of or damage to any vehicle or any contents of such vehicle
or accessories to any such vehicle, or any property left in any of the Parking
Areas, resulting from fire, theft, vandalism, accident, conduct or other users
of the Parking Areas and other persons, or any other casualty or cause. Further,
tenants understand and agree that: (a) Landlord shall not be obligated to
provide any traffic control, security protection or operator for the Parking
Areas; (b) tenants use the Parking Areas at their own risk; and (c) Landlord
shall not be liable for personal injury or death, or theft, loss of or damage to
property sustained in the Parking Areas.
24. Tenants (including the employees, agents, invitees, and visitors of
tenants) shall use the Parking Areas solely for the purpose of parking passenger
model cars, small vans and small trucks and shall comply in all respects with
any rules and regulations that may be promulgated by Landlord from time to time
with respect to the Parking Areas. The Parking Areas may be used by Tenants, or
their agents or employees, for occasional overnight parking of vehicles. Tenants
shall ensure that any vehicle parked in any of the parking spaces shall be kept
in proper repair and shall not leak excessive amounts of oil or grease or any
amount of gasoline.
25. Tenant's right to use the Parking Areas shall be in common with other
tenants of the Real Property and the Office Park and with other parties
permitted by Landlord to use the
<PAGE>
Parking Areas. Landlord reserves the right to assign and reassign, from time to
time, particular parking spaces within the Parking Areas for use by persons
selected by Landlord provided that each tenant's rights under its respective
lease are preserved. Landlord shall not be liable to any tenant for any
unavailability of such tenant's designated spaces, if any, nor shall any
unavailability entitle tenants to any refund, deduction, or allowance. Tenants
shall not park in any numbered space or any space designated as: RESERVED,
HANDICAPPED, VISITORS ONLY, or LIMITED TIME PARKING (or similarly designated).
26. If the Parking Areas are damaged or destroyed, or if the use of the
Parking Areas is limited or prohibited by any governmental authority, or the use
or operation of the Parking Areas is limited or prevented by strikes or other
labor difficulties or other causes beyond Landlord's control, the tenants'
inability to use their parking spaces shall not subject Landlord or any operator
of the Parking Areas to any liability to such tenants and shall not relieve the
tenants of any of their obligations under their respective leases.
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of December 23, 1996 by and among
Lionbridge Technologies, Inc., a Delaware corporation (the "Company"), and Rory
J. Cowan (the "Executive").
RECITALS
1. It is currently contemplated that the Company will acquire (the
"Acquisition") the international localization service business currently
conducted by Stream International Holdings, Inc. pursuant to a Stock and Asset
Purchase Agreement (the "Purchase Agreement") dated November 27, 1996, as
amended.
2. The operations of the Company following the Acquisition will be a
complex matter requiring direction and leadership in a variety of areas.
3. The Executive has certain experience and expertise that qualify him
to provide the direction and leadership required by the Company and its
subsidiaries.
4. Subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Chairman and the
Executive wishes to accept such employment.
AGREEMENT
Now, therefore, the parties hereto hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive hereby accepts employment,
effective as of the closing date (or, if applicable, the first closing date) of
the Acquisition (such date being referred to herein as the "Effective Date").
2. TERM. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending on a date two (2) years from the date first set forth
above, which term shall be automatically extended thereafter for successive
terms of one year each, unless either party provides notice to the other at
least three months prior to the expiration of the original or any extension term
that this Agreement is not to be extended. The term of this Agreement, as from
time to time modified and in effect is hereafter referred to as "the term of
this Agreement" or "the term hereof." If the Purchase Agreement is terminated
prior to the closing, this Agreement shall automatically terminate and be
without further force or effect.
<PAGE>
3. CAPACITY AND PERFORMANCE.
3.1. OFFICES. During the term hereof, the Executive shall
serve the Company as President and Chief Executive Officer of the Company. In
such capacity, the Executive will be responsible for day to day operations of
the Company. In such capacity, the Executive will be responsible for day to day
operations of the Company as well as the Company's strategic direction. In
addition, for so long as the Executive is employed by the Company and without
further compensation, if so elected or appointed from time to time, the
Executive shall serve as Chairman of the Company's Board of Directors (the
"Board") and as a director of one or more of the Company's subsidiaries. The
Executive shall be subject to the direction of, and shall have such other
powers, duties and responsibilities consistent with the Executive's position as
President and Chief Executive Officer as may from time to time be prescribed by,
the Board.
3.2. PERFORMANCE. During the term hereof, the Executive shall
be employed by the Company and shall perform and discharge (faithfully,
diligently and to the best of his ability) such duties and responsibilities on
behalf of the Company and its subsidiaries as may be designated from time to
time by the Board which are consistent with the Executive's position as
President and Chief Executive Officer. The Executive shall devote substantially
all of his time, attention and energies to the business of the Company and shall
not engage in any other business activity or activities, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage,
that, in the judgment of the Board may conflict with the proper performance of
the Executive's duties under this Agreement.
4. COMPENSATION AND BENEFITS. As compensation for all services
performed by the Executive under this Agreement and subject to Section 5 hereof
and performance of the Executive's duties and of the obligations of the
Executive to the Company and its subsidiaries, pursuant to this Agreement or
otherwise:
4.1. BASE SALARY. During the term hereof the Company shall pay
the Executive a base salary at the rate of $225,000 per year, payable in
accordance with the payroll practices of the Company for its executives and
subject to increase from time to time (based on an annual review) by the Board
in its sole discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary." The Base Salary payable to the
Executive in 1996 shall be prorated for the period from the Effective Date
through December 31, 1996 and for any subsequent period of service less than one
full year.
4.2. BONUS COMPENSATION. During the term hereof, the Company
from time to time shall pay the Executive an annual bonus (the "Bonus") of up to
100% of Base Salary per year. The annual bonus in respect of 1997 operations
will be calculated and payable in accordance with the incentive bonus plan to be
determined and approved by the Board of Directors.
<PAGE>
4.3. STOCK/OPTIONS.
4.3.1. Simultaneously herewith, the Executive is
purchasing 701,454 shares of Series A Preferred Stock of the Company at
a purchase price of $ 1.00 per share pursuant to a Preferred Stock
Purchase Agreement dated as of the date hereof.
4.3.2. The Company shall establish the 1996 Stock
Plan (the "PLAN") for management/employees of the Company. The Company
shall grant to the Executive, pursuant to the Plan, options to purchase
a total of 2,252,293 shares of Common Stock at an exercise price of
$.10 per share. The options granted to the Executive as contemplated
hereby will become exercisable (a) 25% on the first anniversary of the
date hereof and (b) thereafter six semi-annual installments on the
18-month (12.5%), two year (12.5%), 30-month (12.5%), three year
(12.5%), 42-month (12.5%) and four year (12.5%) anniversaries of the
date hereof, subject to acceleration of vesting in accordance with the
terms of the Plan as in effect on the date of this Agreement. In the
event of (i) a merger or sale of all or substantially all of the assets
or stock of the Company following which the Executive is not the Chief
Executive Officer of the parent of the surviving entity or, if none,
the surviving entity or (ii) Advent International Corp. and/or Morgan
Stanley Venture Partners, and/or each of their respective affiliated
entities, dispose of more than 50% of the aggregate amount of capital
stock owned by all them as the date the Acquisition is consummated,
then 50% of the unvested options held by the Executive at that time
shall vest and become exercisable.
4.3.3. Prior to issuing any shares or options to the
Executive, the Company may require that the Executive provide such
representations regarding the Executive's sophistication and investment
intent and other matters as the Company may reasonably request. None of
the Company's securities will be registered under applicable securities
laws for the indefinite future and there will be substantial
restrictions on resale imposed by the Company's corporate charter, the
stockholders agreement and applicable law.
4.3.4. (a) Upon any termination of the Executive's
employment or after expiration of this Agreement, the Company may, but
shall have no obligation to, repurchase at a price equal to the Fair
Market Value (as defined and determined pursuant to the Plan) up to all
of the shares issued or issuable by the Company to the Executive upon
his exercise of any vested options granted to the Executive pursuant to
Section 4.3.2. or granted by the Company to the Executive after the
date hereof.
(b) The Company shall exercise any repurchase
election pursuant to subsection (a) by notice to the Executive within
90 days of termination of the Executive's employment. Notwithstanding
anything to the contrary contained herein, the repurchase right of the
Company set forth in this Section 4.3.4 shall
<PAGE>
terminate upon the completion of a firm commitment underwritten initial
public offering of the Company's Common Stock.
4.4. VACATIONS. During the term hereof, the Executive shall be
entitled to five (5) weeks of vacation per annum, to be taken at such times and
intervals as shall be determined by the Executive in his reasonable discretion.
The Executive may not accumulate or carry over from one calendar year to another
any unused, accrued vacation time. The Executive shall not be entitled to
compensation for vacation time not taken.
4.5. OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of executives of the Company, the
Executive shall be entitled to participate in all employee benefits plans (other
than any profit sharing or bonus compensation programs) from time to time
adopted by the Board and in effect for executives of the Company generally,
except to the extent such plans are in a category of benefit otherwise provided
to the Executive. Such participation shall be subject (i) the terms of the
applicable plan documents, (ii) generally applicable Company policies and (iii)
the discretion of the Board or any administrative or other committee provided
for in or contemplated by such plan. The Company may alter, modify, add to or
delete its employee benefits plans at any time as the Board, in its sole
judgment, determines to be appropriate.
4.6. BUSINESS EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable business expenses incurred or paid by the Executive
in the performance of his duties and responsibilities hereunder, subject to (i)
any expense policy of the Company set by the Board from time to time, and (ii)
such reasonable substantiation and documentation requirements as may be
specified by the Board from time to time. The Company shall also reimburse the
Executive for all out of pocket expenses incurred by the Executive in connection
with the formation of the Company and the Acquisition (including travel and
administrative expenses) up to a maximum of $35,000.
4.7. MINIMUM GUARANTEED SEVERANCE. In the event Executive's
employment: with the Company terminates other than by the Company for Cause,
Executive will be entitled to twelve (12) monthly severance payments, each in an
amount equal to the Executive's monthly base compensation at the time of such
termination (i.e. 1/12th of the Base Salary).
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1. RETIREMENT OR DEATH. In the event of the Executive's
retirement or death during the term hereof, the Executive's employment hereunder
shall immediately and automatically terminate. In the event of the Executive's
retirement after the age of sixty-five with the prior consent of the Board or
death during the term hereof, the Company shall pay to the Executive (or in the
case of death, the Executive's designated beneficiary or, if no beneficiary has
been designated by the Executive, to his estate) any Base Salary earned but
<PAGE>
unpaid through the date of such retirement or death, any Bonus for the fiscal
year preceding the year in which such retirement or death occurs that was
earned but has not yet been paid and, at the times the Company pays it
executives bonuses in accordance with its general payroll policies, an amount
equal to that portion of any Bonus earned but unpaid during the fiscal year
of such retirement or death (pro-rated based on a formula, the denominator of
which shall be 365 and the numerator of which shall be the number of days
during the fiscal year of such retirement or death in which the Executive was
employed by the Company).
5.2. DISABILITY.
5.2.1. The Company may terminate the Executive's
employment hereunder, upon notice to the Executive, in the event that
the Executive becomes disabled during his employment hereunder through
illness, injury, accident or condition of either as physical or
psychological nature and, as a result, is unable to perform
substantially all of his duties and responsibilities hereunder for an
aggregate of ninety (90) days, whether or not consecutive, during any
period of three hundred and sixty-five (365) consecutive calendar days.
5.2.2. The Board may designate another employee to
act in the Executive's place during any period of the Executive's
disability. Notwithstanding any such designation, the Executive shall
continue to receive the Base Salary in accordance with Section 4.1 and
to receive benefits in accordance with Section 4.5, to the extent
permitted by the then-current terms of the applicable benefit plans,
until the Executive becomes eligible for disability income benefits
under any disability income plan maintained by the Executive.
5.3. BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. Upon the
giving of notice of termination of the Executive's employment hereunder for
Cause, the Company shall have no further obligation or liability to the
Executive relating to the Executive's employment hereunder, or the termination
thereof, other than for Base Salary earned but unpaid through the date of
termination. Without limiting the generality of the foregoing, the Company shall
have no further obligation to pay any Bonus amounts for any year(s) in the event
of termination of employment pursuant to this Section 5.3, whether or not earned
but unpaid in respect of a fiscal year preceding the year in which such
termination occurs.
5.4. BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, then the Company
shall pay the Executive (i) Base Salary earned but unpaid through the date of
termination plus (ii) the amounts specified in Section 4.7 plus (iii) any unpaid
portion of any Bonus for the fiscal year preceding the year in which such
termination occurs that was earned but has not been paid.
<PAGE>
5.5. POST-AGREEMENT EMPLOYMENT. In the event the Executive
remains in the employ of the Company or any of its Affiliates following
termination of this Agreement, by the expiration of the term hereof or
otherwise, then such employment shall be at will, unless otherwise agreed in
writing.
6. EFFECT OF TERMINATION. The provisions of this Section 6 shall apply
in the event of termination due to the expiration of the term, pursuant to
Section 5 or otherwise.
6.1. PAYMENT IN FULL. Payment by the Company of any Base
Salary, Bonus and other amounts and contributions to the cost of the Executive's
continued participation in the Company's benefits plans that may be due the
Executive under the applicable termination provision of Section 5 shall
constitute the entire obligation of the Company to the Executive, except that
nothing in this Section 6.1 is intended or shall be construed to affect the
rights and obligations of the Company and its Affiliates, on the one hand, and
the Executive, on the other, with respect to any loans, stock pledge
arrangements, option plans or other agreements to the extent said rights or
obligations survive termination of employment under the provision of documents
relating thereto. Acceptance by the Executive of performance by the Company
shall constitute full settlement of any claim that the Executive might otherwise
assert against the Company, its Affiliates or any of their respective
shareholders, partners, directors, officers, employees or agents relating to
such termination.
6.2. TERMINATION OF BENEFITS. Except for medical and dental
insurance coverage continued pursuant to Section 5.2 hereof and any right of
continuation of health coverage to the extent provided by Sections 601 through
608 of ERISA, benefits shall terminate pursuant to the terms of the applicable
benefit plans based on the date of termination of the Executive's employment
without regard to any continuation of Base Salary or other payments to the
Executive following such date of termination pursuant to Section 5.
6.3. SURVIVAL OF CERTAIN PROVISIONS. Provisions of this
Agreement shall survive any termination if so provided herein or if necessary or
desirable fully to accomplish the purposes of such provision, including, without
limitation, the obligations of the Executive under the terms of the
Non-Competition Agreement (the "Non-Competition Agreement") and the Employee
Non-Disclosure and Developments Agreement (the "Non-Disclosure Agreement"), of
even date herewith, by and between the Executive and the Company. The obligation
of the Company to make payments to or on behalf of the Executive under Sections
4.7 or 5.4 hereof is expressly conditioned upon the Executive's continued full
performance of obligations under the terms of the Non-Competition Agreement and
the Non-Disclsoure Agreement. The Executive recognizes that, except as expressly
provided in Section 4.7 or 5.4, no compensation is earned after termination of
employment.
7. CONFLICTING AGREEMENTS. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which or
by which the Executive is a party or is bound and that the Executive is not now
subject to any covenants against competition or
<PAGE>
similar covenants that would affect the performance of his obligations
hereunder. The Executive will not disclose to or use on behalf of the Company or
any of its Affiliates any proprietary information of a third party without such
party's consent.
8. DEFINITIONS. Capitalized terms not defined herein shall have the
meanings assigned to them in the Purchase Agreement; and the following terms
shall have the following meanings:
8.1. AFFILIATES. "Affiliates" means all persons and entities
directly or indirectly controlling, controlled by or under common control with
the Company.
8.2. CAUSE. The following events or conditions shall
constitute "Cause" for termination: (i) fraud, embezzlement or other act of
dishonesty by the Executive that causes material injury to the Company or any of
its Affiliates, (ii) conviction of, or plea of nolo contendere to, any felony
involving dishonesty or moral turpitude, or (iii) a failure by the Executive to
take or refrain from taking any corporate action consistent with his duties as
the President and Chief Executive Officer as specified in written directions of
the Board following receipt by the Executive of such written directions which
such failure is not cured within 30 days after written notice that failure to
take or refrain from taking such action shall constitute "Cause" for purposes
hereof.
8.3. ERISA. "ERISA" means the federal Employee Retirement
Income Security Act of 1974 or any successor statute, and the rules and
regulations thereunder, and in the case of any referenced section thereof any
successor section thereto, collectively and as from time to time amended and in
effect.
8.4. PERSON. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
9. WITHHOLDING. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law. In addition, the Company shall be entitled to
reduce any payments by the Company of Base Salary or Bonus under this Agreement
by the amount of any tax or other amounts required to be withheld by the Company
under applicable law with respect to deemed compensation arising out of or
related to imputed interest on any loans by the Company to the Executive.
10. MISCELLANEOUS.
10.1. ASSIGNMENT. Neither the Company nor the Executive may
make any assignment of this Agreement or any interest herein (provided, however,
that nothing contained herein shall be construed to place any limitation or
restriction on the transfer of the Company' s Common Stock in addition to any
restrictions set forth in the Company's Restated Certificate of Incorporation or
any stockholder agreement applicable to the holders of such
<PAGE>
shares), by operation of law or otherwise, without the prior written consent of
the other; provided, however, that the Company may assign its rights and
obligations under this Agreement without the consent of the Executive in the
event that the Company shall hereafter affect a reorganization, consolidate
with, or merge into, any other Person or transfer all or substantially all of
its properties or assets to any other Person, in which event such other person
shall be deemed the "Company" hereunder for all purposes. This agreement shall
inure to the benefit of and be binding upon the Company and the Executive, and
their respective successors, executors, administrators, heirs and permitted
assigns.
10.2. SEVERABILITY. If any portion or provision of this
Agreement shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the application of such provision in such
circumstances shall be deemed modified to permit its enforcement to the maximum
extent permitted by law, and both the application of such portion or provision
in circumstances other than those as to which it is so declared illegal or
unenforceable and the remainder of this Agreement shall not be affected thereby,
and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.
10.3. WAIVER; AMENDMENT. No waiver or any provision hereof
shall be effective unless made in writing and signed by the waiving party. The
failure of either party to require the performance of any term or obligation of
this Agreement, or the waiver by either party of any breach of this Agreement,
shall not prevent any subsequent enforcement of such term or obligation or be
deemed a waiver of any subsequent breach. This Agreement may be amended or
modified only by a written instrument signed by the Executive and the Company.
10.4. NOTICES. Any and all notices, requests, demands and
other communications provided for by this Agreement shall be in writing and
shall be effective when delivered in person or two business days after being
deposited in the United States mail, postage prepaid, registered or certified,
and addressed (a) in the case of the Executive, to:
Mr. Rory J. Cowan
President
Lionbridge Technologies, Inc.
281 Fairhaven Hill Road
Concord, Massachusetts 01742
or, (b) in the case of the Company, at its principal place of business and to
the attention of Board of Directors; or to such other address as either party
may specify by notice to the other.
10.5. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the terms and conditions of the
Executive's employment and, except as otherwise provided herein, supersedes all
prior communications, agreements
<PAGE>
and understandings, written or oral, with the Company or any of its Affiliates
or predecessors with respect to the terms and conditions of the Executive's
employment.
10.6. HEADINGS. The headings and captions in this Agreement
are for convenience only and in no way define or describe the scope or content
of any provision of this Agreement.
10.7. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be original and both of which together shall
constitute one and the same instrument.
10.8. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of The Commonwealth
of Massachusetts without giving effect to any choice or conflict of laws
provision or rule that would cause the application of the domestic substantive
laws of any other jurisdiction.
10.9. CONSENT TO JURISDICTION. Each of the Company and the
Executive, by its or his execution hereof, (i) hereby irrevocably submits to the
exclusive jurisdiction of the state courts of The Commonwealth of Massachusetts
for the purpose of any claim or action arising out of or based upon this
Agreement or relating to the subject matter hereof, (ii) hereby waives, to the
extent not prohibited by applicable law, and agrees not to assert by way of
motion, as a defense or otherwise, in any such claim or action, any claim that
it is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named courts is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court, and (iii)
hereby agrees not to commence any claim or action arising out of or based upon
this Agreement or relating to the subject matter hereof other than before the
above-named courts nor to make any motion or take any other action seeking or
intending to cause the transfer or removal of any such claim or action to any
court other than the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each of the Company and the Executive hereby consents to
service of process in any such proceeding in any manner permitted by
Massachusetts law, and agrees that service of process by registered or certified
mail, return receipt requested, at its address specified pursuant to Section
10.4 hereof is reasonably calculated to give actual notice.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized representative, and by the Executive, as of the date first
above written.
THE COMPANY
LIONBRIDGE TECHNOLOGIES, INC.
By:
-----------------------------
Name:
----------------------------
Title: President
THE EXECUTIVE
---------------------------------
Rory J. Cowan
<PAGE>
Exhibit 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of February 11, 1997 by and among
Lionbridge Technologies, Inc., a Delaware corporation (the "Company"), and
Stephen J. Lifshatz (the "Executive").
RECITALS
1. The Company conducts an international localization service business.
2. The operations of the Company are a complex matter requiring skilled
management in a variety of areas.
3. The Executive has certain experience and expertise that qualify him
to provide the skilled management required by the Company and its subsidiaries.
4. Subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Vice President and Chief
Financial Officer and the Executive wishes to accept such employment.
AGREEMENT
Now, therefore, the parties hereto hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive hereby accepts employment,
effective as of January 13, 1997 (such date being referred to herein as the
"Effective Date").
2. TERM. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending on the date one (1) year from the Effective Date first
set forth above, which term shall be automatically extended thereafter for
successive terms of one (1) year each, unless either party provides notice to
the other at least three months prior to the expiration of the original or any
extension term that this Agreement is not to be extended. The term of this
Agreement, as from time to time modified and in effect, is hereafter referred to
as "the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
3.1. OFFICES. During the term hereof, the Executive shall
serve the Company as Vice President and Chief Financial Officer of the Company.
In such capacity, the Executive will be responsible for financial controls and
reporting of the Company. In addition, the Executive will be expected to take
primary responsibility for implementing financing transactions, acquisition
transactions and other extraordinary corporate transactions. The Executive shall
be subject to the direction of, and shall have such other powers, duties and
responsibilities
<PAGE>
consistent with the Executive's position as Vice President and Chief Financial
Officer as may from time to time be prescribed by, the President and Chief
Executive Officer of the Company.
3.2. PERFORMANCE. During the term hereof, the Executive shall
be employed by the Company and shall perform and discharge (faithfully,
diligently and to the best of his ability) such duties and responsibilities on
behalf of the Company and its subsidiaries as may be designated from time to
time by the President and Chief Executive Officer which are consistent with the
Executive's position as Vice President and Chief Financial Officer. The
Executive shall devote substantially all of his time, attention and energies to
the business of the Company and shall not engage in any other business activity
or activities, whether or not such business activity is pursued for gain, profit
or other pecuniary advantage, that, in the judgment of the President and Chief
Executive Officer, may conflict with the proper performance of the Executive's
duties under this Agreement.
4. COMPENSATION AND BENEFITS. As compensation for the satisfactory
performance by the Executive of his duties and obligations to the Company and
its subsidiaries, pursuant to this Agreement and otherwise, and subject to
Section 5 hereof, the Executive shall receive, as appropriate:
4.1. BASE SALARY. During the term hereof the Company shall pay
the Executive a base salary at the rate of $165,000 per year, payable in
accordance with the payroll practices of the Company for its executives and
subject to increase from time to time (based on an annual review) by the Board
in its sole discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary." The Base Salary payable to the
Executive in 1997 shall be prorated for the period from the Effective Date
through December 31, 1997 and for any subsequent period of service of less than
one full year.
4.2. BONUS COMPENSATION. During the term hereof, the Company
from time to time shall pay the Executive an annual bonus (the "Bonus") of up to
50% of Base Salary per year. The annual bonus in respect of 1997 operations will
be calculated and payable in accordance with the incentive bonus plan to be
determined and approved by the President and Chief Executive Officer of the
Company in consultation with the Board of Directors.
4.3. STOCK/OPTIONS.
4.3.1. The Company shall grant to the Executive,
pursuant to the 1996 Stock Plan (the "Plan"), options to purchase
shares of Common Stock of the Company at an exercise price of $.10 per
share. The number of such options shall be determined by the Board of
Directors of the Company. The options granted to the Executive as
contemplated hereby will become exercisable according to the following
schedule: 25% on the first anniversary of the date hereof; and 12.5% on
each subsequent semi-annual date, up to and including the fourth year
anniversary of the date hereof. If, during the six-month period
following a Change of Control, (i) the Executive shall cease to be the
Chief Financial Officer of the parent of the surviving entity or, if
none, the surviving entity (other than as a result of any action taken
by the Executive) or (ii) the Executive shall
<PAGE>
remain the Chief Financial Officer of the Company but suffer a
substantial diminution in his responsibilities, then 50% of the
unvested options then held by the Executive shall vest and become
exercisable. In addition, all of the Executive's unvested options shall
vest if the Executive is terminated by the Company other than for Cause
during the six-month period following a Change of Control. "Change in
Control" means any merger, recapitalization, sale of all or
substantially all of the assets of the Company or other extraordinary
corporate transaction involving the Company (other than an underwritten
public offering of the Company's Common Stock for cash), or any sale of
the capital stock of the Company by any stockholder of the Company, in
each case following which the holders of the voting capital stock of
the Company immediately prior to the extraordinary transaction or sale
do not own at least a majority of the voting capital stock of the
Company after such transaction or sale. The Executive's options also
are subject to acceleration of vesting in accordance with the terms set
forth in the Plan as in effect on the date hereof.
4.3.2. Prior to issuing any shares or options to the
Executive, the Company may require that the Executive provide such
representations regarding the Executive's sophistication and investment
intent and other matters as the Company may reasonably request. None of
the Company's securities will be registered under applicable securities
laws for the indefinite future and there will be substantial
restrictions on resale imposed by the Company's corporate charter, the
Stockholders' Agreement, and applicable law.
4.3.3. (a) Upon any termination of the Executive's
employment or after expiration of this Agreement, the Company may, but
shall have no obligation to, repurchase at a price equal to the Fair
Market Value (as defined and determined pursuant to the Plan) up to all
of the shares issued or issuable by the Company to the Executive upon
his exercise of any vested options granted to the Executive pursuant to
Section 4.3.1. or granted by the Company to the Executive after the
date hereof.
(b) The Company shall exercise any repurchase
election pursuant to subsection (a) by notice to the Executive within
90 days of termination of the Executive's employment. Notwithstanding
anything to the contrary contained herein, the repurchase right of the
Company set forth in this Section 4.3.3 shall terminate upon the
completion of a firm commitment underwritten initial public offering of
the Company's Common Stock.
4.4. VACATIONS. During the term hereof, the Executive shall be
entitled to four (4) weeks of vacation per annum, to be taken at such times and
intervals as shall be determined by the Executive in his reasonable discretion.
The Executive may not accumulate or carry over from one calendar year to another
any unused, accrued vacation time. The Executive shall not be entitled to
compensation for vacation time not taken.
4.5. OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of executives of the Company, the
Executive shall be entitled to
<PAGE>
participate in all employee benefits plans (other than any profit sharing or
bonus compensation programs) from time to time adopted by the Board and in
effect for executives of the Company generally, except to the extent such plans
are in a category of benefit otherwise provided to the Executive. Such
participation shall be subject to (i) the terms of the applicable plan
documents, (ii) generally applicable Company policies, and (iii) the discretion
of the Board or any administrative or other committee provided for in or
contemplated by such plan. The Company may alter, modify, add to, or delete its
employee benefits plans at any time, as the Board, in its sole judgment,
determines to be appropriate.
4.6. BUSINESS EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable business expenses incurred or paid by the Executive
in the performance of his duties and responsibilities hereunder, subject to (i)
any expense policy of the Company set by the Board or the President and Chief
Executive Officer from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Board or the President and
Chief Executive Officer from time to time.
4.7. MINIMUM GUARANTEED SEVERANCE. In the event the
Executive's employment with the Company terminates other than as a result of a
termination by the Company for Cause, as defined in Section 8.2 hereof, the
Executive will be entitled to six monthly severance payments, each in an amount
equal to the Executive's monthly base compensation at the time of such
termination (I.E., 1/12th of the Base Salary).
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding
the provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1. RETIREMENT OR DEATH. In the event of the Executive's
retirement or death during the term hereof, the Executive's employment hereunder
shall immediately and automatically terminate. In the event of the Executive's
retirement after the age of sixty-five with the prior consent of the Board or
death during the term hereof, the Company shall pay to the Executive (or in the
case of death, the Executive's designated beneficiary or, if no beneficiary has
been designated by the Executive, to his estate) any Base Salary earned but
unpaid through the date of such retirement or death, any Bonus for the fiscal
year preceding the year in which such retirement or death occurs that was earned
but has not yet been paid and, at the times the Company pays it executives
bonuses in accordance with its general payroll policies, an amount equal to that
portion of any Bonus earned but unpaid during the fiscal year of such retirement
or death (pro-rated based on a formula, the denominator of which shall be 365
and the numerator of which shall be the number of days during the fiscal year of
such retirement or death in which the Executive was employed by the Company).
5.2. DISABILITY.
5.2.1. The Company may terminate the Executive's
employment hereunder, upon notice to the Executive, in the event that
the Executive becomes disabled during his employment hereunder through
illness, injury, accident or condition of either a
<PAGE>
physical or psychological nature and, as a result, is unable to perform
substantially all of his duties and responsibilities hereunder for an
aggregate of ninety (90) days, whether or not consecutive, during any
period of three hundred and sixty-five (365) consecutive calendar days.
5.2.2. The Board may designate another employee to
act in the Executive's place during any period of the Executive's
disability. Notwithstanding any such designation, the Executive shall
continue to receive the Base Salary in accordance with Section 4.1 and
to receive benefits in accordance with Section 4.5, to the extent
permitted by the then-current terms of the applicable benefit plans,
until the Executive becomes eligible for disability income benefits
under any disability income plan maintained by the Executive.
5.3. RELOCATION. If the Company requires the Executive to
relocate more than 50 miles from metropolitan Boston, Massachusetts, the
Executive may terminate his employment with the Company and such termination
shall be deemed to be a termination by the Company other than for Cause for all
purposes under this Agreement.
5.4. BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. Upon the
giving of notice of termination of the Executive's employment hereunder for
Cause, the Company shall have no further obligation or liability to the
Executive relating to the Executive's employment hereunder, or the termination
thereof, other than for Base Salary earned but unpaid through the date of
termination. Without limiting the generality of the foregoing, the Company shall
have no further obligation to pay any Bonus amounts for any year(s) in the event
of termination of employment pursuant to this Section 5.4, whether or not earned
but unpaid in respect of a fiscal year preceding the year in which such
termination occurs.
5.5. BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, then the Company
shall pay the Executive (i) Base Salary earned but unpaid through the date of
termination plus (ii) the amounts specified in Section 4.7 plus (iii) any unpaid
portion of any Bonus for the fiscal year preceding the year in which such
termination occurs that was earned but has not been paid.
5.6. POST-AGREEMENT EMPLOYMENT. In the event the Executive
remains in the employ of the Company or any of its Affiliates following
termination of this Agreement, by the expiration of the term hereof or
otherwise, then such employment shall be at will, unless otherwise agreed in
writing.
6. EFFECT OF TERMINATION. The provisions of this Section 6 shall apply
in the event of termination due to the expiration of the term, pursuant to
Section 5 or otherwise.
<PAGE>
6.1. PAYMENT IN FULL. Payment by the Company of any Base
Salary, Bonus and other amounts and contributions to the cost of the Executive's
continued participation in the Company's benefits plans that may be due the
Executive under the applicable termination provision of Section 5 shall
constitute the entire obligation of the Company to the Executive, except that
nothing in this Section 6.1 is intended or shall be construed to affect the
rights and obligations of the Company and its Affiliates, on the one hand, and
the Executive, on the other, with respect to any loans, stock pledge
arrangements, option plans or other agreements to the extent said rights or
obligations survive termination of employment. Acceptance by the Executive of
payment by the Company shall constitute full settlement of any claim that the
Executive might otherwise assert against the Company, its Affiliates, or any of
their respective shareholders, partners, directors, officers, employees or
agents relating to such termination.
6.2. TERMINATION OF BENEFITS. Except for medical and dental
insurance coverage continued pursuant to Section 5.2 hereof and any right of
continuation of health coverage to the extent provided by Sections 601 through
608 of ERISA, the Executive's benefits shall terminate pursuant to the terms of
the applicable benefit plans based on the date of termination of the Executive's
employment without regard to any continuation of Base Salary or other payments
to the Executive following such date of termination pursuant to Section 5.
6.3. SURVIVAL OF CERTAIN PROVISIONS. Provisions of this
Agreement shall survive any termination if so provided herein or if necessary or
desirable fully to accomplish the purposes of such provision, including, without
limitation, the obligations of the Executive under the terms of the
Non-Competition Agreement (the "Non-Competition Agreement") and the Employee
Non-Disclosure and Developments Agreement (the "Non-Disclosure Agreement"), of
even date herewith, by and between the Executive and the Company. The obligation
of the Company to make payments to or on behalf of the Executive under Sections
4.7 or 5.5 hereof is expressly conditioned upon the Executive's continued full
performance of obligations under the terms of the Non-Competition Agreement and
the Non-Disclosure Agreement. The Executive recognizes that, except as expressly
provided in Section 4.7 or 5.5, no compensation is earned after termination of
employment.
7. CONFLICTING AGREEMENTS. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which or
by which the Executive is a party or is bound and that the Executive is not now
subject to any covenants against competition or similar covenants that would
affect the performance of his obligations hereunder. The Executive will not
disclose to or use on behalf of the Company or any of its Affiliates any
proprietary information of a third party without such party's consent.
8. DEFINITIONS. The following terms shall have the following meanings:
8.1. AFFILIATES. "Affiliates" means all persons and entities
directly or indirectly controlling, controlled by or under common control with
the Company.
<PAGE>
8.2. CAUSE. The following events or conditions shall
constitute "Cause" for termination: (i) fraud, embezzlement, or other act of
dishonesty by the Executive that causes material injury to the Company or any of
its Affiliates; (ii) conviction of, or plea of nolo contendere to, any felony
involving dishonesty or moral turpitude; or (iii) a failure by the Executive to
take or refrain from taking any corporate action consistent with his duties as
Vice President and Chief Financial Officer as specified in written directions of
the Board or the President and Chief Executive Officer following receipt by the
Executive of such written directions, which failure is not cured within 30 days
after written notice that failure to take or refrain from taking such action
shall constitute "Cause" for purposes hereof.
8.3. ERISA. "ERISA" means the federal Employee Retirement
Income Security Act of 1974 or any successor statute, and the rules and
regulations thereunder, and in the case of any referenced section thereof any
successor section thereto, collectively and as from time to time amended and in
effect.
8.4. PERSON. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
9. WITHHOLDING. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law. In addition, the Company shall be entitled to
reduce any payments by the Company of Base Salary or Bonus under this Agreement
by the amount of any tax or other amounts required to be withheld by the Company
under applicable law with respect to deemed compensation arising out of or
related to options granted to the Executive, imputed interest on any loans by
the Company to the Executive, or other arrangements deemed to be compensatory.
10. MISCELLANEOUS.
10.1. ASSIGNMENT. Neither the Company nor the Executive may
make any assignment of this Agreement or any interest herein (provided, however,
that nothing contained herein shall be construed to place any limitation or
restriction on the transfer of the Company's Common Stock in addition to any
restrictions set forth in the Company's Restated Certificate of Incorporation or
any stockholder agreement applicable to the holders of such shares), by
operation of law or otherwise, without the prior written consent of the other;
provided, however, that the Company may assign its rights and obligations under
this Agreement without the consent of the Executive in the event that the
Company shall hereafter effect a reorganization, consolidate with, or merge
into, any other Person or transfer all or substantially all of its properties or
assets to any other Person, in which event such other person shall be deemed the
"Company" hereunder for all purposes. This agreement shall inure to the benefit
of and be binding upon the Company and the Executive, and their respective
successors, executors, administrators, heirs and permitted assigns.
10.2. SEVERABILITY. If any portion or provision of this
Agreement shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the application of such provision in such
circumstances shall be deemed modified to permit its
<PAGE>
enforcement to the maximum extent permitted by law, and both the application of
such portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable and the remainder of this Agreement shall not
be affected thereby, and each portion and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
10.3. WAIVER; AMENDMENT. No waiver of any provision hereof
shall be effective unless made in writing and signed by the waiving party. The
failure of either party to require the performance of any term or obligation of
this Agreement, or the waiver by either party of any breach of this Agreement,
shall not prevent any subsequent enforcement of such term or obligation or be
deemed a waiver of any subsequent breach. This Agreement may be amended or
modified only by a written instrument signed by the Executive and the Company.
10.4. NOTICES. Any and all notices, requests, demands and
other communications provided for by this Agreement shall be in writing and
shall be deemed effective when delivered in person or two business days after
being deposited in the United States mail, postage prepaid, registered or
certified, and addressed (a) in the case of the Executive, to:
Stephen J. Lifshatz
146 Buckskin Drive
Weston, Massachusetts 02193
or, (b) in the case of the Company, at its principal place of business and to
the attention of the Board of Directors. Alternatively, such communications may
be directed to any other address as either party may specify by notice to the
other.
10.5. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the terms and conditions of the
Executive's employment and, except as otherwise provided herein, supersedes all
prior communications, agreements and understandings, written or oral, with the
Company or any of its Affiliates or predecessors with respect to the terms and
conditions of the Executive's employment.
10.6. HEADINGS. The headings and captions in this Agreement
are for convenience only and in no way define or describe the scope or content
of any provision of this Agreement.
10.7. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be original and both of which together shall
constitute one and the same instrument.
10.8. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the Commonwealth
of Massachusetts without giving effect to any choice or conflicts of law
provision or rule that would cause the application of the domestic substantive
laws of any other jurisdiction.
<PAGE>
10.9. CONSENT TO JURISDICTION. Each of the Company and the
Executive, by its or his execution hereof, (i) hereby irrevocably submits to the
exclusive jurisdiction of the state courts of the Commonwealth of Massachusetts
for the purpose of any claim or action arising out of or based upon this
Agreement or relating to the subject matter hereof, (ii) hereby waives, to the
extent not prohibited by applicable law, and agrees not to assert by way of
motion, as a defense or otherwise, in any such claim or action, any claim that
it or he is not subject personally to the jurisdiction of the above-named
courts, that its or his property is exempt or immune from attachment or
execution, that any such proceeding brought in the above-named courts is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court, and (iii) hereby agrees not to commence any claim
or action arising out of or based upon this Agreement or relating to the subject
matter hereof other than before the above-named courts nor to make any motion or
take any other action seeking or intending to cause the transfer or removal of
any such claim or action to any court other than the above-named courts whether
on the grounds of inconvenient forum or otherwise. Each of the Company and the
Executive hereby consents to service of process in any such proceeding in any
manner permitted by Massachusetts law, and agrees that service of process by
registered or certified mail, return receipt requested, at the addresses
specified pursuant to Section 10.4 hereof is reasonably calculated to give
actual notice.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized representative, and by the Executive, as of the date first
above written.
THE COMPANY
LIONBRIDGE TECHNOLOGIES, INC.
By:
-----------------------------
Name: Rory J. Cowan
Title: President
THE EXECUTIVE
---------------------------------
Stephen J. Lifshatz
<PAGE>
EXHIBIT 10.7
------------
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of February 28, 1997 by and among
Lionbridge Technologies, Inc., a Delaware corporation (the "Company"), and Peter
Wright (the "Executive").
RECITALS
1. The Company conducts an international localization service business.
2. The operations of the Company are a complex matter requiring skilled
management in a variety of areas.
3. The Executive has certain experience and expertise that qualify him to
provide the skilled management required by the Company and its subsidiaries.
4. Subject to the terms and conditions hereinafter set forth, the Company
therefore wishes to employ the Executive as its U.S. Sales Manager and the
Executive wishes to accept such employment.
AGREEMENT
Now, therefore, the parties hereto hereby agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive hereby accepts employment,
effective as of __________ __, 1997 (such date being referred to herein as the
"Effective Date").
2. TERM. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending on the date one (1) year from the Effective Date first
set forth above, which term shall be automatically extended thereafter for
successive terms of one (1) year each, unless either party provides notice to
the other at least three months prior to the expiration of the original or any
extension term that this Agreement is not to be extended. The term of this
Agreement, as from time to time modified and in effect, is hereafter referred to
as "the term of this Agreement" or "the term hereof."
3. CAPACITY AND PERFORMANCE.
3.1. OFFICES. During the term hereof, the Executive shall serve the
Company as U.S. Sales Manager of the Company. In such capacity, the Executive
will be responsible for financial controls and reporting of the Company. In
addition, the Executive will be expected to take primary responsibility for
implementing financing transactions, acquisition transactions and other
extraordinary corporate transactions. The Executive shall be subject to the
direction of, and shall have such other powers, duties and responsibilities
consistent with the Executive's position
<PAGE>
-2-
as U.S. Sales Manager as may from time to time be prescribed by, the President
and Chief Executive Officer of the Company.
3.2. PERFORMANCE. During the term hereof, the Executive shall be
employed by the Company and shall perform and discharge (faithfully, diligently
and to the best of his ability) such duties and responsibilities on behalf of
the Company and its subsidiaries as may be designated from time to time by the
President and Chief Executive Officer which are consistent with the Executive's
position as U.S. Sales Manager. The Executive shall devote substantially all of
his time, attention and energies to the business of the Company and shall not
engage in any other business activity or activities, whether or not such
business activity is pursued for gain, profit or other pecuniary advantage,
that, in the judgment of the President and Chief Executive Officer, may conflict
with the proper performance of the Executive's duties under this Agreement.
4. COMPENSATION AND BENEFITS. As compensation for the satisfactory
performance by the Executive of his duties and obligations to the Company and
its subsidiaries, pursuant to this Agreement and otherwise, and subject to
Section 5 hereof, the Executive shall receive, as appropriate:
4.1. BASE SALARY. During the term hereof the Company shall pay
the Executive a base salary at the rate of $125,000 per year, payable in
accordance with the payroll practices of the Company for its executives and
subject to increase from time to time (based on an annual review) by the Board
in its sole discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary." The Base Salary payable to the
Executive in 1997 shall be prorated for the period from the Effective Date
through December 31, 1997 and for any subsequent period of service of less than
one full year.
4.2. BONUS COMPENSATION. During the term hereof, the Company from
time to time shall pay the Executive an annual bonus (the "Bonus") of up to 50%
of Base Salary per year. The annual bonus in respect of 1997 operations will be
calculated and payable in accordance with the incentive bonus plan to be
determined and approved by the President and Chief Executive Officer of the
Company in consultation with the Board of Directors.
4.3. STOCK/OPTIONS.
4.3.1. The Company shall grant to the Executive, pursuant to
the 1996 Stock Plan (the "Plan"), options to purchase shares of Common
Stock of the Company at an exercise price of $.10 per share. The
number of such options shall be determined by the Board of Directors
of the Company. The options granted to the Executive as contemplated
hereby will become exercisable according to the following schedule:
25% on the first anniversary of the date hereof; and 12.5% on each
subsequent semi-annual date, up to and including the fourth year
anniversary of the date hereof.
4.3.2. Prior to issuing any shares or options to the
Executive, the Company may require that the Executive provide such
representations regarding the
<PAGE>
-3-
Executive's sophistication and investment intent and other matters as
the Company may reasonably request. None of the Company's securities
will be registered under applicable securities laws for the indefinite
future and there will be substantial restrictions on resale imposed by
the Company's corporate charter, the Stockholders' Agreement, and
applicable law.
4.3.3. (a) Upon any termination of the Executive's
employment or after expiration of this Agreement, the Company may, but
shall have no obligation to, repurchase at a price equal to the Fair
Market Value (as defined and determined pursuant to the Plan) up to
all of the shares issued or issuable by the Company to the Executive
upon his exercise of any vested options granted to the Executive
pursuant to Section 4.3.1. or granted by the Company to the Executive
after the date hereof.
(b) The Company shall exercise any repurchase
election pursuant to subsection (a) by notice to the Executive within
90 days of termination of the Executive's employment. Notwithstanding
anything to the contrary contained herein, the repurchase right of the
Company set forth in this Section 4.3.3 shall terminate upon the
completion of a firm commitment underwritten initial public offering
of the Company's Common Stock.
4.4. VACATIONS. During the term hereof, the Executive shall be
entitled to four (4) weeks of vacation per annum, to be taken at such times
and intervals as shall be determined by the Executive in his reasonable
discretion. The Executive may not accumulate or carry over from one calendar
year to another any unused, accrued vacation time. The Executive shall not be
entitled to compensation for vacation time not taken.
4.5. OTHER BENEFITS. During the term hereof and subject to any
contribution therefor generally required of executives of the Company, the
Executive shall be entitled to participate in all employee benefits plans
(other than any profit sharing or bonus compensation programs) from time to
time adopted by the Board and in effect for executives of the Company
generally, except to the extent such plans are in a category of benefit
otherwise provided to the Executive. Such participation shall be subject to
(i) the terms of the applicable plan documents, (ii) generally applicable
Company policies, and (iii) the discretion of the Board or any administrative
or other committee provided for in or contemplated by such plan. The Company
may alter, modify, add to, or delete its employee benefits plans at any time,
as the Board, in its sole judgment, determines to be appropriate.
4.6. BUSINESS EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable business expenses incurred or paid by the
Executive in the performance of his duties and responsibilities hereunder,
subject to (i) any expense policy of the Company set by the Board or the
President and Chief Executive Officer from time to time, and (ii) such
reasonable substantiation and documentation requirements as may be specified
by the Board or the President and Chief Executive Officer from time to time.
<PAGE>
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4.7. MINIMUM GUARANTEED SEVERANCE. In the event the
Executive's employment with the Company terminates other than as a result of a
termination by the Company for Cause, as defined in Section 8.2 hereof, the
Executive will be entitled to six monthly severance payments, each in an amount
equal to the Executive's monthly base compensation at the time of such
termination (I.E., 1/12th of the Base Salary).
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding the
provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1. RETIREMENT OR DEATH. In the event of the Executive's
retirement or death during the term hereof, the Executive's employment hereunder
shall immediately and automatically terminate. In the event of the Executive's
retirement after the age of sixty-five with the prior consent of the Board or
death during the term hereof, the Company shall pay to the Executive (or in the
case of death, the Executive's designated beneficiary or, if no beneficiary has
been designated by the Executive, to his estate) any Base Salary earned but
unpaid through the date of such retirement or death, any Bonus for the fiscal
year preceding the year in which such retirement or death occurs that was earned
but has not yet been paid and, at the times the Company pays it executives
bonuses in accordance with its general payroll policies, an amount equal to that
portion of any Bonus earned but unpaid during the fiscal year of such retirement
or death (pro-rated based on a formula, the denominator of which shall be 365
and the numerator of which shall be the number of days during the fiscal year of
such retirement or death in which the Executive was employed by the Company).
5.2. DISABILITY.
5.2.1. The Company may terminate the Executive's
employment hereunder, upon notice to the Executive, in the event that
the Executive becomes disabled during his employment hereunder through
illness, injury, accident or condition of either a physical or
psychological nature and, as a result, is unable to perform
substantially all of his duties and responsibilities hereunder for an
aggregate of ninety (90) days, whether or not consecutive, during any
period of three hundred and sixty-five (365) consecutive calendar
days.
5.2.2. The Board may designate another employee to act
in the Executive's place during any period of the Executive's
disability. Notwithstanding any such designation, the Executive shall
continue to receive the Base Salary in accordance with Section 4.1 and
to receive benefits in accordance with Section 4.5, to the extent
permitted by the then-current terms of the applicable benefit plans,
until the Executive becomes eligible for disability income benefits
under any disability income plan maintained by the Executive.
5.3. BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment hereunder for Cause at any time upon notice to the
Executive setting forth in reasonable detail the nature of such Cause. Upon the
giving of notice of termination of the
<PAGE>
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Executive's employment hereunder for Cause, the Company shall have no further
obligation or liability to the Executive relating to the Executive's employment
hereunder, or the termination thereof, other than for Base Salary earned but
unpaid through the date of termination. Without limiting the generality of the
foregoing, the Company shall have no further obligation to pay any Bonus amounts
for any year(s) in the event of termination of employment pursuant to this
Section 5.3, whether or not earned but unpaid in respect of a fiscal year
preceding the year in which such termination occurs.
5.4. BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, then the Company
shall pay the Executive (i) Base Salary earned but unpaid through the date of
termination plus (ii) the amounts specified in Section 4.7 plus (iii) any unpaid
portion of any Bonus for the fiscal year preceding the year in which such
termination occurs that was earned but has not been paid.
5.5. POST-AGREEMENT EMPLOYMENT. In the event the Executive
remains in the employ of the Company or any of its Affiliates following
termination of this Agreement, by the expiration of the term hereof or
otherwise, then such employment shall be at will, unless otherwise agreed in
writing.
6. EFFECT OF TERMINATION. The provisions of this Section 6
shall apply in the event of termination due to the expiration of the term,
pursuant to Section 5 or otherwise.
6.1. PAYMENT IN FULL. Payment by the Company of any Base
Salary, Bonus and other amounts and contributions to the cost of the Executive's
continued participation in the Company's benefits plans that may be due the
Executive under the applicable termination provision of Section 5 shall
constitute the entire obligation of the Company to the Executive, except that
nothing in this Section 6.1 is intended or shall be construed to affect the
rights and obligations of the Company and its Affiliates, on the one hand, and
the Executive, on the other, with respect to any loans, stock pledge
arrangements, option plans or other agreements to the extent said rights or
obligations survive termination of employment. Acceptance by the Executive of
payment by the Company shall constitute full settlement of any claim that the
Executive might otherwise assert against the Company, its Affiliates, or any of
their respective shareholders, partners, directors, officers, employees or
agents relating to such termination.
6.2. TERMINATION OF BENEFITS. Except for medical and dental
insurance coverage continued pursuant to Section 5.2 hereof and any right of
continuation of health coverage to the extent provided by Sections 601 through
608 of ERISA, the Executive's benefits shall terminate pursuant to the terms of
the applicable benefit plans based on the date of termination of the Executive's
employment without regard to any continuation of Base Salary or other payments
to the Executive following such date of termination pursuant to Section 5.
6.3. SURVIVAL OF CERTAIN PROVISIONS. Provisions of this
Agreement shall survive any termination if so provided herein or if necessary or
desirable fully to accomplish the purposes of such provision, including, without
limitation, the obligations of the Executive under
<PAGE>
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the terms of the Non-Competition Agreement (the "Non-Competition Agreement") and
the Employee Non-Disclosure and Developments Agreement (the "Non-Disclosure
Agreement"), of even date herewith, by and between the Executive and the
Company. The obligation of the Company to make payments to or on behalf of the
Executive under Sections 4.7 or 5.5 hereof is expressly conditioned upon the
Executive's continued full performance of obligations under the terms of the
Non-Competition Agreement and the Non-Disclosure Agreement. The Executive
recognizes that, except as expressly provided in Section 4.7 or 5.4, no
compensation is earned after termination of employment.
7. CONFLICTING AGREEMENTS. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which or
by which the Executive is a party or is bound and that the Executive is not now
subject to any covenants against competition or similar covenants that would
affect the performance of his obligations hereunder. The Executive will not
disclose to or use on behalf of the Company or any of its Affiliates any
proprietary information of a third party without such party's consent.
8. DEFINITIONS. The following terms shall have the following meanings:
8.1. AFFILIATES. "Affiliates" means all persons and entities directly
or indirectly controlling, controlled by or under common control with the
Company.
8.2. CAUSE. The following events or conditions shall constitute
"Cause" for termination: (i) fraud, embezzlement, or other act of dishonesty by
the Executive that causes material injury to the Company or any of its
Affiliates; (ii) conviction of, or plea of nolo contendere to, any felony
involving dishonesty or moral turpitude; or (iii) a failure by the Executive to
take or refrain from taking any corporate action consistent with his duties as
U.S. Sales Manager as specified in written directions of the Board or the
President and Chief Executive Officer following receipt by the Executive of such
written directions, which failure is not cured within 30 days after written
notice that failure to take or refrain from taking such action shall constitute
"Cause" for purposes hereof.
8.3. ERISA. "ERISA" means the federal Employee Retirement Income
Security Act of 1974 or any successor statute, and the rules and regulations
thereunder, and in the case of any referenced section thereof any successor
section thereto, collectively and as from time to time amended and in effect.
8.4. PERSON. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
9. WITHHOLDING. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law. In addition, the Company shall be entitled to
reduce any payments by the Company of Base Salary or Bonus under this Agreement
by the amount of any tax or other amounts required to be withheld by the Company
under applicable law with respect to deemed compensation arising out
<PAGE>
-7-
of or related to options granted to the Executive, imputed interest on any loans
by the Company to the Executive, or other arrangements deemed to be
compensatory.
10. MISCELLANEOUS.
10.1. ASSIGNMENT. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein (provided, however, that
nothing contained herein shall be construed to place any limitation or
restriction on the transfer of the Company's Common Stock in addition to any
restrictions set forth in the Company's Restated Certificate of Incorporation or
any stockholder agreement applicable to the holders of such shares), by
operation of law or otherwise, without the prior written consent of the other;
provided, however, that the Company may assign its rights and obligations under
this Agreement without the consent of the Executive in the event that the
Company shall hereafter effect a reorganization, consolidate with, or merge
into, any other Person or transfer all or substantially all of its properties or
assets to any other Person, in which event such other person shall be deemed the
"Company" hereunder for all purposes. This agreement shall inure to the benefit
of and be binding upon the Company and the Executive, and their respective
successors, executors, administrators, heirs and permitted assigns.
10.2. SEVERABILITY. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the application of such provision in such circumstances shall
be deemed modified to permit its enforcement to the maximum extent permitted by
law, and both the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable and the
remainder of this Agreement shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
10.3. WAIVER; AMENDMENT. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party. The failure of
either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach. This Agreement may be amended or modified only
by a written instrument signed by the Executive and the Company.
10.4. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
deemed effective when delivered in person or two business days after being
deposited in the United States mail, postage prepaid, registered or certified,
and addressed (a) in the case of the Executive, to:
Peter Wright
320 Bradwyck Ct.
Matthews, NC 28105
<PAGE>
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or, (b) in the case of the Company, at its principal place of business and to
the attention of the Board of Directors. Alternatively, such communications may
be directed to any other address as either party may specify by notice to the
other.
10.5. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the terms and conditions of the
Executive's employment and, except as otherwise provided herein, supersedes all
prior communications, agreements and understandings, written or oral, with the
Company or any of its Affiliates or predecessors with respect to the terms and
conditions of the Executive's employment.
10.6. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
10.7. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be original and both of which together shall
constitute one and the same instrument.
10.8. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic substantive laws of the Commonwealth of
Massachusetts without giving effect to any choice or conflicts of law provision
or rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
10.9. CONSENT TO JURISDICTION. Each of the Company and the Executive,
by its or his execution hereof, (i) hereby irrevocably submits to the exclusive
jurisdiction of the state courts of the Commonwealth of Massachusetts for the
purpose of any claim or action arising out of or based upon this Agreement or
relating to the subject matter hereof, (ii) hereby waives, to the extent not
prohibited by applicable law, and agrees not to assert by way of motion, as a
defense or otherwise, in any such claim or action, any claim that it or he is
not subject personally to the jurisdiction of the above-named courts, that its
or his property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named courts is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court, and (iii)
hereby agrees not to commence any claim or action arising out of or based upon
this Agreement or relating to the subject matter hereof other than before the
above-named courts nor to make any motion or take any other action seeking or
intending to cause the transfer or removal of any such claim or action to any
court other than the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each of the Company and the Executive hereby consents to
service of process in any such proceeding in any manner permitted by
Massachusetts law, and agrees that service of process by registered or certified
mail, return receipt requested, at the addresses specified pursuant to Section
10.4 hereof is reasonably calculated to give actual notice.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized representative, and by the Executive, as of the date first
above written.
THE COMPANY
LIONBRIDGE TECHNOLOGIES, INC.
By:
------------------------------
Name: Rory J. Cowan
Title: President
THE EXECUTIVE
---------------------------------
Peter Wright
<PAGE>
Exhibit 10.8
SECOND RESTATED REGISTRATION RIGHTS AGREEMENT
Agreement dated as of the 26th day of February, 1999 by and among
Lionbridge Technologies Holdings, Inc., a Delaware corporation (the "COMPANY"),
each of the other parties listed on the signature pages hereto (the "PRIOR
INVESTORS"), Capital Resource Lenders III, L.P. ("CRL") and Morgan Stanley
Venture Capital Fund II Annex, L.P. and Morgan Stanley Venture Investors Annex,
L.P. (collectively, "MORGAN STANLEY").
WHEREAS, Lionbridge Technologies, Inc. ("LTI"), the Company and the
Prior Investors entered into a Restated Registration Rights Agreement dated as
of February 9, 1998 (the "PRIOR REGISTRATION RIGHTS AGREEMENT") in connection
with the issuance of equity interests in the Company to the Prior Investors in
exchange for all of the shares of capital stock in LTI and Lionbridge
Technologies Holdings B.V. ("LTHBV") then held by such Prior Investors;
WHEREAS, The Company and CRL are entering into a First Amended and
Restated Senior Subordinated Note and Warrant Purchase Agreement, dated as of
February 26, 1999, (the "CRL NOTE AND WARRANT PURCHASE AGREEMENT") pursuant to
which CRL will purchase from the Company a First Amended and Restated Senior
Subordinated Note and warrants to purchase up to 2,051,818 shares of Common
Stock (as defined below) of the Company; and
WHEREAS, LTHBV and CRL are entering into a Senior Subordinated Note
Purchase Agreement, dated as of February 26, 1999, (the "CRL/LTHBV Note Purchase
Agreement") pursuant to which CRL will purchase from LTHBV a Senior Subordinated
Note; and
WHEREAS, LTHI and Morgan Stanley will enter into a Senior Subordinated
Note and Warrant Purchase Agreement (the "MORGAN STANLEY NOTE AND WARRANT
PURCHASE AGREEMENT") pursuant to which Morgan Stanley will purchase from LTHI a
Senior Subordinated Note and warrants to purchase shares of Common Stock (as
defined below) of LTHI; and
WHEREAS, Lionbridge Technologies Holdings B.V. ("LTHBV") and Morgan
Stanley are entering into a Senior Subordinated Note Purchase Agreement (the
"MORGAN STANLEY/LTHBV NOTE PURCHASE AGREEMENT") pursuant to which Morgan Stanley
will purchase from LTHBV a Senior Subordinated Note; and
WHEREAS, LTI, the Company, and the Prior Investors desire to terminate
the Prior Registration Rights Agreement and enter into a Second Restated
Registration Rights Agreement with the Company, CRL and Morgan Stanley in order
to induce CRL and Morgan Stanley to enter into the CRL Note and Warrant Purchase
Agreement, the CRL/LTHBV Note Purchase Agreement, the Morgan Stanley Note and
Warrant Purchase Agreement and the Morgan Stanley/LTHBV Note Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements
herein contained, and intending to be bound hereby, the parties hereby agree as
follows:
1. DEFINITIONS.
<PAGE>
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"AFFILIATE" means, with respect to any Prior Investor, CRL or Morgan
Stanley, any Person directly or indirectly controlling, controlled by, or under
common control with such Person.
"COMMISSION" means the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act (as defined
below).
"COMMON STOCK" means the common stock, $.01 par value per share, of
the Company.
"COMMON STOCKHOLDERS" means the holders of Common Stock issued and
outstanding on the date hereof and any persons or entities to whom the rights
granted under this Agreement are transferred by any Common Stockholders, their
successors or assigns pursuant to this Agreement.
"COMPANY" means Lionbridge Technologies Holdings, Inc.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"PERSON" means an individual, corporation, partnership, association,
trust or other entity or organization.
"PREFERRED STOCKHOLDERS" means the Prior Investors and any persons
or entities to whom the rights granted under this Agreement are transferred by
any Prior Investors, their successors or assigns pursuant to Section 2 hereof.
"REGISTRATION STATEMENT" means a registration statement filed by the
Company with the Commission for a public offering and sale of Common Stock
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"REGISTRATION EXPENSES" means the expenses described in Section 2.5.
"REGISTRABLE COMMON SHARES" means the shares of Common Stock of the
Company issued and outstanding on the date hereof, any other shares of Common
Stock of the Company issued in respect of the Registrable Common Shares (because
of stock splits, stock dividends, reclassifications, recapitalizations, or
similar events), and any shares of Common Stock issued upon the exercise of
stock options granted pursuant to option agreements that
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<PAGE>
expressly provide that the option recipient shall be entitled to demand
registration rights with respect to the shares of Common Stock issuable upon
exercise of such options.
"REGISTRABLE SHARES" means (i) the shares of Common Stock issued or
issuable upon conversion of the shares of Series C Convertible Preferred Stock,
$.01 par value per share (the "SERIES C PREFERRED") into which the Series A
Preferred are then convertible, (ii) any other shares of Common Stock of the
Company issued in respect of the Series A Preferred (because of stock splits,
stock dividends, reclassifications, recapitalizations, or similar events), and
(iii) any shares of Common Stock issued or issuable upon exercise of the
Warrants. Wherever reference is made in this Agreement to a request or consent
of holders of a certain percentage of Registrable Shares, or to a number or
percentage of Registrable Shares held by a Stockholder (as defined below), such
reference shall include shares of Common Stock (a) issuable upon conversion of
the Series C Preferred issued; (b) issuable upon conversion of the Series A
Preferred; or (c) issuable upon exercise of the Warrants even though such
conversion or exercise has not yet been effected.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"SERIES A PREFERRED" shall mean all shares of Series A Convertible
Preferred Stock, $.01 par value per share, of the Company.
"STOCKHOLDERS" means the Common Stockholders, the Preferred
Stockholders, CRL and Morgan Stanley.
"WARRANTS" shall mean the Common Stock Purchase Warrants to purchase
Common Stock issued to CRL pursuant to the CRL Note and Warrant Purchase
Agreement and to be issued to Morgan Stanley pursuant to the Morgan Stanley Note
and Warrant Purchase Agreement.
2. REGISTRATION RIGHTS.
2.1 SALE OR TRANSFER OF SHARES; LEGEND.
(a) The Registrable Shares and the Registrable Common Shares
shall not be sold or transferred unless either (i) they first shall have been
registered under the Securities Act, or (ii) the Company first shall have been
furnished with an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act.
(b) Each certificate representing the Registrable Shares and the
Registrable Common Shares shall bear a legend substantially in the following
form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "ACT"), or
applicable state securities laws
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<PAGE>
and may not be transferred or otherwise disposed of unless and until
such shares are registered under the Act and such laws or (1)
registration under applicable state securities laws is not required
and (2) an opinion of counsel satisfactory to the Company is
furnished to the Company to the effect that registration under the
Act is not required."
The foregoing legend shall be removed from the certificates
representing any Registrable Shares and the Registrable Common Shares at the
request of the holder thereof at such time as they become registered under the
Securities Act or eligible for resale pursuant to Rule 144(k) under the
Securities Act.
2.2 REQUIRED REGISTRATIONS.
(a) If, at any time after the date two (2) years after the purchase
of the Series A Preferred (but in no event within six (6) months after the
effective date of any prior Company registration statement), within 90 days
following receipt by the Company of written notice from a Preferred Stockholder,
Preferred Stockholders, CRL, or Morgan Stanley holding (or intending to convert
Series A Preferred or Warrants into) not less than forty percent (40%) of the
then outstanding Registrable Shares, which written notice requests the Company
to register at least twenty percent (20%) of the shares of Common Stock issued
or issuable upon conversion of the Series C Preferred (issued or issuable upon
conversion of the Series A Preferred) or upon exercise of the Warrants, or any
lesser percentage, so long as the anticipated aggregate offering price for such
shares exceeds $5,000,000, the Company shall use its best efforts to effect the
registration of such Registrable Shares on Form S-1 or Form S-2 (or any
successor forms) or other appropriate Registration Statement designated by such
Preferred Stockholder, Preferred Stockholders, CRL or Morgan Stanley.
(b) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), a Preferred Stockholder, Preferred Stockholders, CRL or Morgan
Stanley may request the Company, in writing, to effect the registration on Form
S-3 (or such successor form), of the Registrable Shares of such Preferred
Stockholder, Preferred Stockholders, CRL or Morgan Stanley having an aggregate
offering price of at least $1,000,000 (based on the then current public market
price). Thereupon, the Company shall, as expeditiously as possible, use its best
efforts to effect the registration on Form S-3, or such successor form, of all
Registrable Shares which the Company has been requested to register.
(c) The Preferred Stockholders, CRL and Morgan Stanley shall have
the right to require the Company to effect two demand registrations on Form S-1
or Form S-2 and an unlimited number of registrations on Form S-3 (or any
successor forms) pursuant to this Section 2.2; however, a registration on Form
S-1 or Form S-2 will not count for this purpose unless it becomes effective and
holders are able to sell at least 50% of the Registrable Shares sought to be
included in such registration. The Company shall not, however, register any
additional shares of stock of the Company at the same time as a demand
registration without the prior written consent of the holders of a majority of
the Registrable Shares to be included in the demand registration.
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<PAGE>
(d) If at the time of any request to register Registrable Shares
pursuant to this Section 2.2, the Company is engaged or has fixed plans to
engage within 30 days of the time of the request in a registered public offering
as to which the Preferred Stockholders, CRL and Morgan Stanley may include
Registrable Shares pursuant to Section 2.3 or is engaged in any other activity
which, in the good faith determination of the Company's 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 period not in excess of six (6) months from the
effective date of such offering or the date of commencement 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.
2.3 INCIDENTAL REGISTRATION.
(a) Whenever the Company proposes to file a Registration Statement,
prior to such filing it shall give written notice to all Stockholders of its
intention to do so, and upon the written request of a Stockholder or
Stockholders given within 30 days after the Company provides such notice (which
request shall state the intended method of disposition of such Registrable
Shares or Registrable Common Shares), the Company shall cause all Registrable
Shares and Registrable Common Shares which the Company has been requested to
register to be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the intended methods
of distribution specified in the request of such Stockholder(s).
(b) In connection with any offering under this Section 2.3
involving an underwriting, the Company shall not be required to include any
Registrable Shares or Registrable Common Shares in such underwriting unless the
holders thereof accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it, and then only in such quantity as
will not, in the opinion of the underwriters, jeopardize the success of the
offering by the Company. If in the opinion of the managing underwriter the
registration of all, or part of, the Registrable Shares and Registrable Common
Shares which the Stockholders have requested to be included would materially and
adversely affect such public offering, then the Company shall be required to
include in the underwriting only that number of Registrable Shares and
Registrable Common Shares, if any, which the managing underwriter believes may
be sold without causing such adverse effect. In the event of such a reduction in
the number of shares to be included in the underwriting, all Stockholders of
Registrable Shares and Registrable Common Shares who have requested registration
shall participate in the underwriting pro rata based upon their total ownership
of Registrable Shares and Registrable Common Shares (or in any other proportion
as agreed upon by such Stockholders) and if any such Stockholders would thus be
entitled to include more shares than such Stockholders requested to be
registered, the excess shall be allocated among such other requesting holders
pro rata based on their ownership of Registrable Shares and Registrable Common
Shares. No other securities requested to be included in a registration for the
account of anyone other than the Company or the Stockholders shall be included
in a registration unless all Registrable Shares and Registrable Common Shares
requested to be included in such registration are also included.
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<PAGE>
(c) Holders of not less than fifty-one percent (51%) of the
Registrable Common Shares may waive the rights contained in this Section 2.3 on
behalf of all holders of Registrable Common Shares.
2.4 REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares and the Registrable Common Shares
under the Securities Act, the Company shall:
(a) file with the Commission a Registration Statement with respect
to such Registrable Shares and Registrable Common Shares and use its best
efforts to cause that Registration Statement to become and remain effective;
(b) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective for a period of not less than 90 days from
the effective date;
(c) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the prospectus, including the
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the selling Stockholder may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Shares and the Registrable Common Shares owned by the selling Stockholder; and
(d) as expeditiously as possible use its best efforts to register
or qualify the Registrable Shares and the Registrable Common Shares covered by
the Registration Statement under the securities or Blue Sky laws of such states
as the selling Stockholder shall reasonably request, and do any and all other
acts and things that may be necessary or desirable to enable the selling
Stockholder to consummate the public sale or other disposition of the
Registrable Shares and the Registrable Common Shares owned by the selling
Stockholder in such jurisdictions; PROVIDED, HOWEVER, that the Company shall not
be required in connection with this paragraph (d) to qualify as a foreign
corporation in any jurisdiction.
If the Company has delivered preliminary or final prospectuses to
selling Stockholders and after having done so the prospectus has been or is
required to be amended to comply with the requirements of the Securities Act, or
the Commission has issued a stop order or other suspension of effectiveness of a
registration statement, the Company shall promptly notify the selling
Stockholders and, if requested, the selling Stockholders shall immediately cease
making offers of Registrable Shares and Registrable Common Shares and shall
return all prospectuses to the Company. The Company shall promptly provide the
selling Stockholders with revised prospectuses and, following receipt of the
revised prospectuses, the selling Stockholder shall be free to resume making
offers of the Registrable Shares and the Registrable Common Shares.
2.5 ALLOCATION OF EXPENSES. The Company shall pay the Registration
Expenses for (i) the demand registration on Form S-1 or Form S-2 (or any
successor forms) and
-6-
<PAGE>
(ii) all demand registrations on Form S-3. If a registration on a Registration
Statement other than Form S-3 (or any successor form) requested by the
Stockholders pursuant to paragraph (a) of Section 2.2 is withdrawn at the
request of the Stockholders requesting it (other than as a result of information
concerning the business or financial condition of the Company that is made known
to the Stockholders after the date on which such registration was requested) and
if the requesting Stockholders holding a majority of the Registrable Shares and
the Registrable Common Shares requested to be included in such registration
elect not to have such registration counted as a registration requested under
paragraph (a) of Section 2.2, the requesting Stockholders shall pay the
Registration Expenses of such registration pro rata in accordance with the
number of their Registrable Shares and Registrable Common Shares included in
such registration. For purposes of this Section, the term "REGISTRATION
EXPENSES" shall mean all expenses incurred by the Company in complying with this
Section 2, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and disbursements of counsel for
the Company and one counsel for the selling Stockholders, out-of-pocket expenses
of the Company and the underwriters, state Blue Sky fees and expenses, and the
expense of any special audits incident to or required by any such registration,
but excluding underwriting discounts and selling commissions and fees of more
than one counsel for the selling Stockholders. Such underwriting discounts and
selling commissions shall be borne pro rata by the selling Stockholders in
accordance with the number of their Registrable Shares and Registrable Common
Shares included in such registration.
2.6 INDEMNIFICATION. In the event of any registration of any of the
Registrable Shares and the Registrable Common Shares under the Securities Act
pursuant to this Agreement, then to the extent permitted by law the Company
shall indemnify and hold harmless the seller of such Registrable Shares and
Registrable Common Shares, each underwriter of such Registrable Shares and
Registrable Common Shares and each other person, if any, who controls such
seller or underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages or liabilities, joint or several, to
which such seller, underwriter or controlling person may become subject under
the Securities Act, the Exchange Act, state securities laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement under
which such Registrable Shares and Registrable Common Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or supplement to such
Registration Statement, or arise out of or are based upon the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company shall
reimburse each such seller, underwriter and controlling person for reasonable
legal or any other expenses incurred by such seller, underwriter or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or omission made
in such Registration Statement, preliminary prospectus or final prospectus, or
any such amendment or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by or on behalf of such
seller, underwriter or controlling person specifically for use in the
preparation thereof.
-7-
<PAGE>
In the event of any registration of any of the Registrable Shares and
the Registrable Common Shares under the Securities Act pursuant to this
Agreement, then to the extent permitted by law, each seller of Registrable
Shares and Registrable Common Shares, severally and not jointly, shall indemnify
and hold harmless the Company, each of its directors and officers and each
underwriter (if any) and each person, if any, who controls the Company or any
such underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Company, such directors and officers, underwriter or controlling person may
become subject under the Securities Act, Exchange Act, state securities laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such Registrable Shares and Registrable Common Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based upon any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if the
statement or omission was made solely in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such seller,
specifically for use in connection with the preparation of such Registration
Statement, prospectus, amendment or supplement; and such seller shall reimburse
the Company for reasonable legal or other expenses incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action.
An underwriter shall not be entitled to indemnification pursuant to
this subsection in the event that it fails to deliver to any selling Stockholder
any preliminary or final or revised prospectus, as required by the rules and
regulations of the Commission. Finally, no indemnification shall be provided
pursuant to this subsection in the event that any error in a preliminary
prospectus of the Company is subsequently corrected in the final prospectus of
the Company for a particular offering, and such final prospectus is delivered to
all purchasers in the offering prior to the date of purchase of the securities.
Each party entitled to indemnification under this Section 2.6 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; PROVIDED, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, PROVIDED, FURTHER, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 2.6. The Indemnified Party may participate in
such defense at such party's expense; PROVIDED, HOWEVER, that the Indemnifying
Party shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such
-8-
<PAGE>
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
2.7 INDEMNIFICATION WITH RESPECT TO UNDERWRITTEN OFFERINGS. In the
event that Registrable Shares and Registrable Common Shares are sold pursuant to
a Registration Statement in an underwritten offering, the Company and the
Stockholders whose shares are being registered agree to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of the securities being
registered and customary covenants and agreements to be performed by such
issuer, including without limitation customary provisions with respect to
indemnification by the Company and such Stockholders of the underwriters of such
offering.
2.8 INFORMATION BY HOLDER. Each holder of Registrable Shares and
Registrable Common Shares included in any registration shall furnish to the
Company such information regarding such holder and the distribution proposed by
such holder as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 2.
2.9 RULE 144 REQUIREMENTS. With a view to making available to the
Stockholders the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the Commission that may at any time permit a
Stockholder to sell securities of the Company to the public without
registration, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act (at any time after
it has become subject to the reporting requirements of the Exchange Act);
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) furnish to any holder of Registrable Shares and Registrable
Common Shares upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the closing of the first sale of securities by the Company
pursuant to a Registration Statement), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company as such holder may
reasonably request to avail itself of any similar rule or regulation of the
Commission allowing it to sell any such securities without registration.
2.10 SELECTION OF UNDERWRITER. In the case of any registration effected
pursuant to Section 2.2, the Company shall have the right to designate the
managing underwriter, subject to the approval of the requesting Stockholders,
which approval shall not be unreasonably withheld or delayed.
-9-
<PAGE>
2.11 RESTRICTIONS ON OTHER AGREEMENTS. The Company will not enter into
any agreement with any party which by its terms grants any right superior to
those of the Prior Investors, CRL and Morgan Stanley, relating to the
registration of the Company's Common Stock without the consent of the holders of
not less than fifty-one percent (51%) of the Registrable Shares then
outstanding.
2.12 TERMINATION. The provisions of this Section 2 shall terminate on
the earlier to occur of (i) the fifth (5th) anniversary of the date of the
Company's Initial Public Offering; (ii) such time as a Prior Investor, CRL or
Morgan Stanley remains an "affiliate" of the Company pursuant to Rule 144 and
can sell all of his remaining Registrable Shares under Rule 144 within any three
(3) month period; or (iii) such time as a Prior Investor, CRL or Morgan Stanley
ceases to be an affiliate of the Company pursuant to Rule 144 and all of the
Prior Investor's, CRL's or Morgan Stanley's Registrable Shares may be sold
pursuant to Rule 144(k).
2.13 "STAND-OFF" AGREEMENT. Each Stockholder, if requested by the
Company and the managing underwriter of an offering by the Company of Common
Stock or other securities of the Company pursuant to a Registration Statement,
shall agree not to sell publicly or otherwise transfer or dispose of any
Registrable Shares, Registrable Common Shares or other securities of the Company
held by such Stockholder for a specified period of time (not to exceed 180 days)
following the effective date of such Registration Statement; PROVIDED, that:
(a) such agreement shall only apply to the first Registration
Statement covering Common Stock to be sold on its behalf to the public in an
underwritten offering; and
(b) all Stockholders holding not less than the number of shares of
Common Stock held by such Stockholder (including shares of Common Stock issuable
upon the conversion of Shares, or other convertible securities, or upon the
exercise of options, warrants (including the Warrants) or rights) and all
officers and directors of the Company enter into similar agreements.
3. TRANSFERS OF CERTAIN RIGHTS.
3.1 PERMITTED TRANSFER. Subject to the provisions of Section 2.1 of
this Agreement and the rights granted to each Stockholder pursuant to this
Agreement may be transferred by such Stockholder to any person or entity who (i)
acquires at least 20% of the Registrable Shares and Registrable Common Shares
held by such Stockholder and (ii) holds, as a result of such acquisition, at
least 10% of the outstanding Registrable Shares and Registrable Common Shares;
PROVIDED, HOWEVER, that the Company is given written notice by the transferee at
the time of such transfer stating the name and address of the transferee and
identifying the securities with respect to which such rights are being assigned;
and PROVIDED FURTHER, that no such transferee may further transfer such rights
to any person or entity unless such person or entity is acquiring 100% of the
aggregate number of Registrable Shares and Registrable Common Shares purchased
or otherwise acquired by such transferee at the time such transferee obtained
such rights from such Stockholder. In the event of a transfer of the rights by a
Stockholder, such Stockholder shall continue to be entitled to such rights with
respect to the Registrable Shares and
-10-
<PAGE>
Registrable Common Shares still held by such Stockholder, but shall not be
entitled to transfer such rights to any person or entity unless such person or
entity is acquiring 100% of the aggregate number of Registrable Shares and
Registrable Common Shares then held by such Stockholder.
3.2 TRANSFEREES. Any transferee (other than a Stockholder who is a
party to this Agreement) to whom rights hereunder are transferred shall, as a
condition to such transfer, deliver to the Company a written instrument by which
such transferee agrees to be bound by the obligations imposed upon holders of
Registrable Shares and Registrable Common Shares under this Agreement to the
same extent as if such transferee were a party hereto.
3.3 AFFILIATES. Notwithstanding anything to the contrary herein, any
Stockholder may transfer rights granted to it hereunder to any Affiliate of such
Stockholder to whom Registrable Shares and Registrable Common Shares are
transferred and who delivers to the Company a written instrument in accordance
with Section 3.2 above and containing the representation that the transfer is
exempt from registration under the Securities Act. In the event of such
transfer, such Affiliate shall be deemed a Stockholder and may only again
transfer such rights to any other person or entity if such person or entity is
acquiring 100% of the aggregate number of Registrable Shares and Registrable
Common Shares purchased or otherwise acquired by such Affiliate at the time such
Affiliate obtained such rights from the Stockholder in accordance with, and
subject to, the provisions of this Section 3.
4. GENERAL.
4.1 NOTICES. All notices, requests, consents and other
communications under this Agreement shall be in writing and shall be delivered
by hand, by telecopier, by overnight mail or mailed by first class certified or
registered mail, return receipt requested, postage prepaid:
If to the Company:
Rory J. Cowan
President & Chief Executive Officer
950 Winter Street, Suite 4300
Waltham, Massachusetts 02154
(or at such other address as may have been furnished in writing to the Prior
Investors, CRL and Morgan Stanley by the Company)
with a copy to:
George W. Lloyd, Esq.
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
-11-
<PAGE>
If to a Prior Investor, CRL or Morgan Stanley, at its address set forth
beneath its signature to this Agreement (or at such other address as may have
been furnished in writing to the Company by such Purchaser).
Notices provided in accordance with this Section 4 shall be deemed
delivered upon personal delivery, receipt by telecopy or overnight mail, or 48
hours after deposit in the mail in accordance with the above.
4.2 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
4.3 AMENDMENTS AND WAIVERS. Except as otherwise expressly set
forth in this Agreement, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of not less than fifty-one percent (51%)
of the Registrable Shares and the Registrable Common Shares; PROVIDED that this
Agreement may be amended or modified with the consent of the holders of less
than all of the shares of Series A Preferred and Series C Preferred and Warrants
only in a manner which affects all shares of the Series A Preferred and Series C
Preferred and Warrants in the same manner. No waivers of or exceptions to any
term, condition or provision of this Agreement in any one or more instances
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
4.4 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.5 CAPTIONS. The captions of the sections, subsections and
paragraphs of this Agreement have been added for convenience only and shall not
be deemed to be a part of this Agreement.
4.6 SEVERABILITY. Each provision of this Agreement shall be
interpreted in such manner as to validate and give effect thereto to the fullest
lawful extent, but if any provision of this Agreement is determined by a court
of competent jurisdiction to be invalid or unenforceable under applicable law,
such provision shall be ineffective only to the extent so determined and such
invalidity or unenforceability shall not affect the remainder of such provision
or the remaining provisions of this Agreement.
4.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
5. TERMINATION OF PRIOR REGISTRATION RIGHTS AGREEMENT. By their
execution of this Agreement, LTI and the Prior Investors who were parties to the
Prior Registration Rights Agreement hereby terminate the Prior Registration
Rights Agreement and the Company and the
-12-
<PAGE>
Prior Investors who were parties to the Prior Registration Rights Agreement
hereby enter into this Restated Registration Rights Agreement.
6. SUBSEQUENT MORGAN STANLEY PURCHASE. The Company and Morgan Stanley
will subsequently enter into the Morgan Stanley Note and Warrant Purchase
Agreement and LTHBV and Morgan Stanley will subsequently enter into the Morgan
Stanley/LTHBV Note Purchase Agreement at such location, date and time as may be
agreed upon by Morgan Stanley, the Company (the "MORGAN STANLEY CLOSING"). At
the Morgan Stanley Closing, Morgan Stanley shall execute a counterpart of this
Agreement countersigned by the Company and shall become entitled to the rights
and benefits conferred hereby and shall be bound by the terms hereof as Warrant
holder (in addition to being a holder of Preferred Stock). Each original
signatory acknowledges and agrees that Morgan Stanley may become a party to this
Agreement as a Warrant holder pursuant to this Section 6.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second Restated
Registration Rights Agreement to be executed by their respective officers or
representatives thereunto duly authorized, as of the date first above written.
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
By:
--------------------------------------------------
Title:
CAPITAL RESOURCE LENDERS III, L.P.
By: Capital Resource Partners III, L.C., its General
Partner
By:
----------------------------------------------
Member
<PAGE>
PRIOR INVESTORS:
GLOBAL PRIVATE EQUITY II LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation,
General Partner
By:
--------------------------------------
GLOBAL PRIVATE EQUITY II LIMITED -
EUROPE LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation,
General Partner
By:
----------------------------------------
GLOBAL PRIVATE EQUITY II - PGGM LIMITED
PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation,
General Partner
By:
----------------------------------------
<PAGE>
ADVENT EURO-ITALIAN DIRECT INVESTMENT
PROGRAM LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation,
General Partner
By:
----------------------------------
ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By:
-----------------------------------------
MORGAN STANLEY VENTURE CAPITAL
FUND II ANNEX, L.P.
By: Morgan Stanley Venture Partners II, L.P.,
its General Partner
By: Morgan Stanley Venture Capital II, Inc.,
Managing General Partner
By:
---------------------------------------
Name:
Title:
c/o Morgan Stanley Venture
Partners II, L.P.
1221 Avenue of the Americas
New York, NY 10020
<PAGE>
MORGAN STANLEY VENTURE INVESTORS ANNEX, L.P.
By: Morgan Stanley Venture Partners II, L.P., its
General Partner
By: Morgan Stanley Venture Capital II, Inc.,
Managing General Partner
By:
--------------------------------------
Name:
Title:
c/o Morgan Stanley Venture
Partners II, L.P.
1221 Avenue of the Americas
New York, NY 10020
---------------------------------------------------
Rory J. Cowan
281 Fairhaven Road
Concord, MA 01742
---------------------------------------------------
Milton Bordwin
87 Hillside Road
Newton, MA 02161
---------------------------------------------------
Marilyn Brady
105 Lexington Road
Concord, MA 01742
---------------------------------------------------
Barton L. Faber
4339 East Rose Lane
Paradise Valley, AZ 85238
---------------------------------------------------
Jeffrey M. Fitzgerald
37 Wedgewood Drive
Hopkinton, MA 01748
<PAGE>
FRANKENBERG FAMILY TRUST,
ROBERT J. FRANKENBERG TTE,
LINDA L. FRANKENBERG, TTE
---------------------------------------------------
c/o Robert J. Frankenberg
701 East Sunburst Lane
Alpine, UT 84004
FLEET BANK, TRUSTEE FOR THE TH&T, LLP,
DEFERRED EARNINGS TRUST, F/B/O
GEORGE W. LLOYD
---------------------------------------------------
c/o George W. Lloyd
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
---------------------------------------------------
Stephen C. Morris
40 Coolidge Road
Concord, MA 01742
---------------------------------------------------
IEA Private Investments Ltd
c/o China Access Ltd.
Attn: Mr. Mark Pu
25th Floor Penthouse
Prince's Building, Central
Hong Kong, China
---------------------------------------------------
Charles M. Sincerbeaux
15 Perry Lane
Weston, MA 02193
<PAGE>
---------------------------------------------------
Paul Kavanagh
c/o Archachon
Strathmore Road
Killiney, Co. Dublin
Ireland
---------------------------------------------------
Kenneth Coleman
133 Shaw Road
Chestnut Hill, MA 02167
COWAN MANCHESTER TRUST DATED
9/22/94
By:
------------------------------------------------
Milton Bordwin, Trustee
COWAN STREAM TRUST DATED
4/21/95
By:
------------------------------------------------
Milton Bordwin, Trustee
AS TO SECTION 5 ONLY OF THIS
AGREEMENT:
LIONBRIDGE TECHNOLOGIES, INC.
By:
--------------------------
Title:
<PAGE>
SECOND RESTATED
REGISTRATION RIGHTS AGREEMENT
MORGAN STANLEY SIGNATURE PAGE
The undersigned hereby executes the Second Restated Registration Rights
Agreement (the "AGREEMENT") by and among Lionbridge Technologies Holdings, Inc.
(the "COMPANY") and certain other parties which executed the same, and hereby
agrees to all of the provisions of the Agreement and hereby authorizes this
signature page to be attached, together with signature pages of the original
signatories, to a counterpart of the Agreement.
MORGAN STANLEY VENTURE CAPITAL
FUND II ANNEX, L.P.
By: Morgan Stanley Venture Partners II, L.P.
its General Partner
By: Morgan Stanley Venture Capital II, Inc.,
Managing General Partner
By:
-------------------------------------
Name:
Title:
c/o Morgan Stanley Venture
Partners II, L.P.
1221 Avenue of the Americas
New York, NY 10020
MORGAN STANLEY VENTURE INVESTORS
ANNEX, L.P.
By: Morgan Stanley Venture Partners II, L.P., its
General Partner
By: Morgan Stanley Venture Capital II, Inc.
Managing General Partner
By:
-------------------------------------
Name:
Title:
c/o Morgan Stanley Venture
Partners II, L.P.
1221 Avenue of the Americas
New York, NY 10020
<PAGE>
ACCEPTED AND AGREED:
LIONBRIDGE TECHNOLOGIES
HOLDINGS, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
<PAGE>
SECOND RESTATED REGISTRATION RIGHTS AGREEMENT
CRP INVESTMENT PARTNERS III, LLC
WHEREAS, pursuant to that certain Participation Agreement (the
"Participation Agreement") dated as of February 27, 1999, by and between Capital
Resource Lenders III, L.P. ("CRL") and CRP Investment Partners III, LLC
("CRIP"), CRL has (i) sold to CRIP a participation interest in the obligations
of Lionbridge Technologies Holdings, Inc. (the "Company") to CRL under the First
Amended and Restated Senior Subordinated Note Purchase Agreement, dated as of
February 26, 1999, between CRL and the Company and (ii) assigned to CRIP the
right to purchase 5,271 shares (the "Warrants") of common stock of the Company
pursuant to Section 14 of that certain Common Stock Purchase Warrant purchased
by CRL from the Company on February 26, 1999;
WHEREAS, CRL, the Company, and various other third parties entered into
a Second Restated Registration Rights Agreement (the "Registration Rights
Agreement"), dated as of February 26, 1999, pursuant to which CRL obtained
certain rights and assumed certain obligations with regard to the Warrants;
WHEREAS, pursuant to Section 3.3 of the Registration Rights Agreement,
CRIP hereby represents that the transfer of the Warrants is exempt from
registration or any other filing under the Securities Act of 1933, as amended;
WHEREAS, CRIP is an Affiliate (as defined in the Registration Rights
Agreement) of CRL, and therefore the transfer to CRIP of the Warrants is a
permitted transfer pursuant to Section 3.3 of the Registration Rights Agreement;
NOW, THEREFORE, the undersigned hereby (i) executes the Registration
Rights Agreement, (ii) agrees to be bound by all of the terms and conditions of
the Registration Rights Agreement, (iii) agrees to be included in the definition
of "Stockholders" (as such term is defined in the Registration Rights Agreement)
for all purposes of the Registration Rights Agreement, (iv) agrees that the
Warrants shall be included in the definition of "Warrants" in the Registration
Rights Agreement; and (v) hereby authorizes this signature page to be attached,
together with signature pages of the original signatories, to a counterpart of
the Registration Rights Agreement.
CRP INVESTMENT PARTNERS III, LLC
By:
------------------------------------
Member
ACCEPTED AND AGREED:
LIONBRIDGE TECHNOLOGIES
HOLDINGS, INC.
By:
---------------------------
Stephen J. Lifshatz
Treasurer
<PAGE>
Exhibit 10.9
LOAN AGREEMENT
By and Between
SILICON VALLEY BANK
and
LIONBRIDGE TECHNOLOGIES HOLDINGS B.V.
LIONBRIDGE TECHNOLOGIES B.V.
September 26, 1997
<PAGE>
This LOAN AGREEMENT is entered into as of September 26, 1997, by and
between SILICON VALLEY BANK ("Bank"), a California-chartered bank with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
with a loan production office located at 40 William Street, Wellesley,
Massachusetts 02181 doing business under the name "Silicon Valley East,"
LIONBRIDGE TECHNOLOGIES HOLDINGS B.V. ("Holdings"), a company with limited
liability, incorporated in the Netherlands and having a principal place of
business located at The Sinus Building, Overschiestraat 55, 1062 HN, Amsterdam,
The Netherlands and LIONBRIDGE TECHNOLOGIES B.V. ("Operating Company"), a
company with limited liability, incorporated in Netherlands and having a
principal place of business located at The Sinus Building, Overschiestraat 55,
1062 HN, Amsterdam, The Netherlands (each, a "Borrower" and, collectively, the
"Borrowers").
RECITALS
Borrowers wish to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrowers. This Agreement sets forth the terms on
which Bank will advance credit to Borrowers, and Borrowers will repay the
amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrowers
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrowers, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrowers and Borrowers' Books relating to any of
the foregoing.
"Advance" or "Advances" means a loan advance under the
Committed Revolving Line.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) reasonably incurred in
connection with the preparation, negotiation, administration, and enforcement of
the Loan Documents; and Bank's reasonable attorneys' fees and expenses
reasonably incurred in amending, enforcing or defending the Loan Documents,
(including fees and expenses of appeal or review, or those incurred in any
Insolvency Proceeding) whether or not suit is brought.
"Borrowers' Books" means all of books and records of
Lionbridge - U.S., the Borrowers and the Designated Subsidiaries including,
without limitation: ledgers; records concerning Borrowers' assets or
liabilities, the Collateral, business operations or financial condition; and all
computer programs, or tape files, and the equipment, containing such
information.
"Borrowing Base" means an amount equal to (a) seventy percent
(70%) of Eligible
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Trade Accounts and (b) eighty percent (80%) of Eligible Credit-Backed Accounts,
each as reasonably determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrowers.
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California or The Commonwealth of
Massachusetts are authorized or required to close.
"Cash Transfer Restriction" has the meaning set forth in
Section 5.15.
"Closing Date" means the date of this Agreement.
"Code" means the Massachusetts Uniform Commercial Code.
"Collateral" means the property described on Exhibit A
attached hereto.
"Committed Revolving Line" means a credit extension of up to
Five Million Dollars ($5,000,000).
"Consolidated Group" means the Borrowers, Lionbridge-U.S. and
their respective Subsidiaries, including the Designated Subsidiaries.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Credit Extension" means each Advance and any other extension
of credit by Bank for the benefit of a Borrower hereunder.
"Credit Party" means each of the Borrowers, each Designated
Subsidiary and Lionbridge - U.S.
"Designated Subsidiaries" means Lionbridge Technologies
Ireland, an unlimited company duly incorporated under the laws of Ireland
("Lionbridge - Ireland") and such other entities as may be designated by the
Borrowers and accepted as such by the Bank from time to time.
"Designated Subsidiary Guarantee" means the Guarantee of
Lionbridge - Ireland furnished to the Bank in connection herewith.
"Eligible Credit-Backed Accounts" means Accounts that meet the
requirements for Eligible Trade Accounts under the definition thereof and that
are: (i) covered by credit insurance in form and amount, and by an insurer
satisfactory to Bank in accordance with its customary
<PAGE>
-3-
commercial practices less the amount of any deductible(s) which may be or become
owing thereon; or (ii) supported by one or more letters of credit in favor of
Bank as beneficiary, in an amount and of a tenor, and issued by a financial
institution, acceptable to Bank in accordance with its customary commercial
practices; or (iii) approved by Bank on a case-by-case basis in its sole
discretion.
"Eligible Trade Accounts" means those Accounts that arise in
the ordinary course of the business of the Borrowers or a Designated Subsidiary
are payable to a Borrower or a Designated Subsidiary that comply with all
representations and warranties to Bank set forth in Section 5. Unless otherwise
agreed to by Bank in writing, Eligible Trade Accounts shall not include the
following:
(a) Accounts that the account debtor has failed to pay within
one hundred twenty (120) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within one hundred
twenty (120) days of invoice date, provided, upon request of the Borrowers, the
Bank in its sole discretion shall consider modifying the foregoing requirement
for highly creditworthy account debtors
(c) Accounts with respect to an account debtor, including
Affiliates, whose total obligations to Borrowers and the Designated Subsidiaries
exceed thirty percent (30%) of all Accounts, to the extent such obligations
exceed the aforementioned percentage, except as approved in writing by Bank;
(d) Accounts either not invoiced from or with respect to which
no billing, invoicing and receivables records are maintained in the United
States, the Netherlands or, in the case of Accounts of Lionbridge - Ireland,
Ireland, unless approved in writing by the Bank;
(e) Accounts with respect to which the account debtor is a
national, federal, state, provincial or local governmental entity or any
department, agency, or instrumentality thereof, except for (i) those Accounts of
the United States or any department, agency or instrumentality thereof as to
which the payee has assigned its rights to payment thereof to the Bank and the
assignment has been acknowledged, pursuant to the Assignment of Claims Act of
1940, as amended (31 U.S.C. 3727) and (ii) those Accounts of any other
governmental entity or unit only to the extent that the Borrowers are able to
demonstrate to the reasonable satisfaction of the Bank and its counsel that in
order to assure that the Bank has valid first priority Lien in such Accounts
either (A) no further action or filing with a governmental authority is
necessary, or (B) whatever further action or filing is necessary has been taken
or accomplished.;
(f) Accounts with respect to which a Borrower, Lionbridge -
U.S. or a direct or indirect Subsidiary of Lionbridge - U.S. or a Borrower is
liable to the account debtor, but only to the extent of any amounts owing to the
account debtor (sometimes referred to as "contra" accounts, e.g. accounts
payable, customer deposits, credit accounts etc.);
(g) Accounts generated by demonstration or promotional
equipment, or with respect to which goods are placed on consignment, guaranteed
sale, sale or return, sale on approval, bill and hold, or other terms by reason
of which the payment by the account debtor may be conditional;
(h) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of a member of the Consolidated Group;
<PAGE>
-4-
(i) unbilled Accounts;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank reasonably
determines in accordance with its customary commercial practices that there may
be a basis for dispute (but only to the extent of the amount subject to such
dispute or claim), or is subject to any Insolvency Proceeding, or becomes
insolvent, or goes out of business; and
(k) Accounts the collection of which Bank reasonably
determines in accordance with its customary commercial practices to be doubtful.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder or any law addressing the same
or similar subject matter promulgated under the laws of a jurisdiction in which
the Borrowers or any Subsidiary is organized or has a place of business.
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time, provided, however, the Bank
acknowledges that with respect to interim non-audited financial statements of
the Consolidated Group to be furnished by Lionbridge-U.S. pursuant to the Parent
Guaranty there may be inconsistencies with GAAP which in the aggregate shall not
be material.
"Holdings Pledge Agreements" means those certain agreements
(including a certain deed of pledge and a certain letter of deposit) entered
into by Holdings in favor of Bank pledging all the outstanding capital stock of
the Operating Company and the Designated Subsidiaries, together with stock
certificates representing such shares and stock powers or other appropriate
instruments of transfer;
"Indebtedness" means (i) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (ii) all obligations evidenced by notes, bonds, debentures or
similar instruments, (iii) all capital lease obligations and (iv) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which a
Borrower or a Designated Subsidiary has any interest, including merchandise, raw
materials, parts, supplies, packing and shipping materials, work in process and
finished products intended for sale or lease or to be furnished under a contract
of service, of every kind and description now or at any time hereafter owned by
or in the custody or possession, actual or constructive, of either Borrower or a
Designated Subsidiary, including such inventory as is temporarily out of its
custody or possession or in transit and including any returns upon any accounts
or other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing and any documents of title representing any
of the above.
"Investment" means any beneficial ownership of (including
stock, partnership
<PAGE>
-5-
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person, or any guaranty of a loan or advance by another
Person.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Lionbridge-U.S." means Lionbridge Technologies, Inc., a
Delaware corporation with a principal place of business at 950 Winter Street
#4300, Waltham, Massachusetts 02154.
"Loan Documents" means, collectively, this Agreement, the
Note, the Security Documents, and any other instrument executed by either
Borrower or any present or future agreement entered into between Borrowers,
Lionbridge - U.S. and any Designated Subsidiary and/or for the benefit of Bank
in connection with this Agreement, all as amended, extended or restated from
time to time.
"Material Adverse Effect" means a material adverse effect on
(i) the business operations or condition (financial or otherwise) of a
Significant Credit Party, a Designated Subsidiary which is a Significant
Subsidiary or the Consolidated Group taken as a whole; (ii) the ability of a
Borrower which is a Significant Credit Party to repay the Obligations or
otherwise perform its obligations under the Loan Documents; or (iii) the ability
of Lionbridge - U.S. or any Designated Subsidiary which is a Significant
Subsidiary to satisfy their obligations under their respective guaranties in
favor of the Bank.
"Negotiable Collateral" means all present and future letters
of credit of which a Borrower or a Designated Subsidiary is a beneficiary and
all notes, drafts, instruments, securities, documents of title, and chattel
paper of a Borrower or any Designated Subsidiary, and Borrowers' Books relating
to any of the foregoing.
"Note" means that certain promissory note of the Borrowers,
payable to the order of the Bank, the form of which is attached hereto as
Exhibit E.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrowers pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrowers to others for borrowed money or the deferred
purchase that Bank may have obtained by assignment or otherwise.
"Parent Guarantee" means the Guarantee of Lionbridge - U.S.
furnished to the Bank in connection herewith;
"Parent Pledge Agreement" means that certain deed of pledge of
shares entered into by Lionbridge-U.S. in favor of the Bank pledging all the
outstanding capital stock held by Lionbridge - U.S. in Holdings, together with
stock certificates representing such shares and stock powers or other
appropriate instruments of transfer.
"Parent Security Agreement" means that certain security
agreement entered into by Lionbridge - U.S. in favor of the Bank.
"Payment Date" means the twenty-fifth calendar day of each
month commencing on the first such date after the Closing Date and ending on the
Revolving Maturity Date.
"Periodic Payments" means all installments or similar
recurring payments that Borrowers may now or hereafter become obligated to pay
to Bank pursuant to the terms and provisions of any instrument, or agreement now
or hereafter in existence between Borrowers and Bank.
<PAGE>
"Permitted Indebtedness" means:
(a) Indebtedness of Borrowers or a Designated Subsidiary in
favor of Bank arising under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
Schedule A;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Indebtedness secured by Permitted Liens;
(f) Guaranties by Lionbridge-U.S. of Indebtedness of
Lionbridge Technologies (France) to the extent the principal amount of such
Indebtedness does not exceed U.S. $1,500,000;
(g) Indebtedness of Lionbridge-U.S. in favor of the Bank or
any other financial institution (i) in an amount not to exceed U.S. $4,000,000
in connection with the financing of the acquisition of Japanese Language
Services , Inc. and (ii) in an amount not to exceed U.S. $568,000 in connection
with the financing of the repayment of Indebtedness owed to Stream International
Holdings, Inc. pursuant to a promissory note dated December 23, 1996; and
(h) Indebtedness in respect of obligations under capital
leases, provided that the aggregate amount of such obligations incurred during
the term of this Agreement shall not exceed $500,000 at any time; and
(i) Guaranties by any Credit Party or Credit Parties of
performance obligations to customers or other Indebtedness which otherwise
constitutes Permitted Indebtedness (in each case incurred in the ordinary course
of business) by any other Credit Party or Credit Parties.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in
Schedule A; and
(b) Investments in compliance with the investment policy of
Lionbridge-U.S. as set forth on attached Schedule B;
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in
Schedule A or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and as to which adequate reserves are maintained on
Borrowers' Books in accordance with GAAP, PROVIDED the same have no priority
over any of Bank's security interests; --------
(c) Liens (i) upon or in any Equipment acquired or held by any
Borrower or any of the Designated Subsidiaries to secure the purchase price of
such Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment,
<PAGE>
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or (ii) existing on such Equipment at the time of its acquisition, PROVIDED that
the Lien is confined solely to the property so acquired and improvements
thereon, and the proceeds of such Equipment;
(d) Leases or subleases and licenses or sublicenses granted to
others in the ordinary course of the business of the Borrowers or the
Designated Subsidiaries not interfering in any material respect with
the business of Borrowers and the Designated Subsidiaries taken as a
whole, and any interest or title of a lessor, licensor or under any
lease or license to a Borrower or a Designated Subsidiary provided that
such leases, subleases, licenses and sublicenses do not prohibit the
grant of the security interest granted hereunder; and
(e) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, PROVIDED that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Responsible Officer" means each of the President, the Chief
Financial Officer and the Controller of Lionbridge - U.S..
"Revolving Maturity Date" means September 25, 1998.
"Schedule A" means the schedule of exceptions attached hereto.
"Security Documents" means the Parent Pledge Agreement, the
Holdings Pledge Agreements, the Parent Guarantee, the Parent Security Agreement,
the Designated Subsidiary Guarantee, the Debenture entered into by Lionbridge
Ireland in favor of the Bank, Deed of Pledge of Accounts Receivable and
Supplementary Deed of Pledge of Accounts Receivable by Holdings, Deed of Pledge
of Accounts Receivable and Supplementary Deed of Pledge of Accounts Receivable
by the Operating Company, Deed of Pledge of Shares in the Capital of Holdings by
Lionbridge -U.S., Deed of Pledge of Shares in the Capital of the Operating
Company by Holdings.
"Significant Credit Party" shall mean each of the Credit
Parties other than the Operating Company.
"Significant Subsidiary" means Lionbridge Ireland and any
Subsidiary the gross revenues or assets of which comprise twenty percent (20%)
or more of the gross revenues or assets of the Consolidated Group.
"Subordinated Debt" means any debt incurred by a Borrower or a
Designated Subsidiary that is subordinated to the debt owing by Borrowers to
Bank on terms acceptable to Bank (and identified as being such by Borrowers and
Bank).
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business entity of
which more than fifty percent (50%) of the voting stock or other equity
interests is owned or controlled, directly or indirectly, by such
<PAGE>
-8-
Person or one of more Affiliates of such Person.
1.2 ACCOUNTING AND OTHER TERMS. All accounting terms not
specifically defined herein or any other Loan Document shall be construed in all
the Loan Documents in accordance with GAAP and all calculations and
determinations made hereunder shall be made in accordance with GAAP. When used
herein, the term "financial statements" shall include the notes and schedules
thereto. The terms "including"/"includes" shall always be read as meaning
"including (or includes) without limitation," when used herein or in any other
Loan Document.
2. LOANS AND TERMS OF PAYMENT
2.1 ADVANCES. Borrowers promise to pay to the order of Bank,
in lawful money of the United States of America, the aggregate unpaid principal
amount of all Advances made by Bank to Borrowers hereunder. Borrowers shall also
pay interest on the unpaid principal amount of such Advances at rates in
accordance with the terms hereof.
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrowers in an aggregate
outstanding amount not to exceed the Committed Revolving Line or the
Borrowing Base, whichever is less. Subject to the terms and conditions
of this Agreement, amounts borrowed pursuant to this Section 2.1 may be
repaid and reborrowed at any time during the term of this Agreement.
All Advances shall be made in U.S. dollars.
(b) Whenever a Borrower desires an Advance, such Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00
p.m., California time on the Business Day on which the Advance is to be
made. Each such notification shall be promptly confirmed by a
Payment/Advance Form in substantially the form of EXHIBIT B hereto.
Bank is authorized to make Advances under this Agreement, based upon
instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion
such Advances are necessary to meet Obligations which have become due
and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a
Responsible Officer or a designee thereof, and Borrowers shall
indemnify and hold Bank harmless for any damages or loss suffered by
Bank as a result of such reliance. Bank will credit the amount of
Advances made under this Section 2.1 to the deposit account of the
Borrower making such request.
(c) The Borrowers expressly acknowledge that no borrowings may
be requested by Borrowers at any time when Lionbridge-U.S. is not in
compliance with the financial covenants set forth in the Parent
Guarantee.
(d) The Committed Revolving Line shall terminate on the
Revolving Maturity Date, at which time all Advances under this Section
2.1 and other amounts due under this Agreement (except as otherwise
expressly specified herein) shall be immediately due and payable.
2.2 OVERADVANCES. If, at any time or for any reason, the
amount of Obligations owed by Borrowers to Bank pursuant to Section 2.1 of this
Agreement is greater than the lesser of (i) the Committed Revolving Line or (ii)
the Borrowing Base, Borrowers shall immediately pay to Bank, in cash, the amount
of such excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in Section 2.3(b), any
Advances shall bear interest, on the average daily balance, at a rate
per annum equal to one (1) percentage point above the Prime Rate.
<PAGE>
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(b) DEFAULT RATE. All Obligations shall bear interest, from
and after the occurrence of an Event of Default, at a rate per annum
equal to four (4) percentage points above the interest rate applicable
immediately prior to the occurrence of the Event of Default.
(c) PAYMENTS. Interest hereunder shall be due and payable on
each Payment Date. Borrowers hereby authorize Bank to debit any
accounts with Bank, including, without limitation, Account Number
3300095832 of Holdings and Account Number 3300095870 of the Operating
Company, for payments of principal and interest due on the Obligations
and any other amounts owing by Borrowers to Bank. Bank will notify
Borrowers of all debits that Bank has made against Borrowers' accounts.
Any such debits against Borrowers accounts in no way shall be deemed a
set-off. Any interest not paid when due shall be compounded by becoming
a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) COMPUTATION. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall
be increased or decreased effective as of 12:01 a.m., California time,
on the day the Prime Rate is changed, by an amount equal to such change
in the Prime Rate. All interest chargeable under the Loan Documents
shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.
2.4 CREDITING PAYMENTS. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrowers specify. After the
occurrence and during the continuation of an Event of Default, the receipt by
Bank of any wire transfer of funds, check, or other item of payment, whether
directed to the deposit account of the appropriate Borrower with Bank or to the
Obligations or otherwise, shall be immediately applied to conditionally reduce
Obligations, but shall not be considered a payment in respect of the Obligations
unless such payment is of immediately available federal funds or unless and
until such check or other item of payment is honored when presented for payment.
Notwithstanding anything to the contrary contained herein, any wire transfer or
payment received by Bank after 12:00 noon California time shall be deemed to
have been received by Bank as of the opening of business on the immediately
following Business Day. Whenever any payment to Bank under the Loan Documents
would otherwise be due (except by reason of acceleration) on a date that is not
a Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
2.5 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. Bank acknowledges receipt of the Facility
Fee equal to Fifty Thousand Dollars ($50,000). Borrowers agree that
such fee is fully earned and non-refundable;
(b) FINANCIAL EXAMINATION AND APPRAISAL FEES. Bank's customary
fees and out-of-pocket expenses for Bank's audits of Borrowers'
Accounts, and for each appraisal of Collateral and financial analysis
and examination of Borrowers performed from time to time by Bank or its
agents, provided, however, as long as no Event of Default has occurred
and is continuing, the Bank shall not perform more than two such audits
and appraisals per Borrower in any year;
(c) BANK EXPENSES. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through
the date hereof, including reasonable attorneys' fees and expenses,
and, after the date hereof, all Bank Expenses, including
<PAGE>
-10-
reasonable attorneys' fees and expenses, as and when they become due.
2.6 ADDITIONAL COSTS. In case any law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by
Borrowers or otherwise with respect to the transactions contemplated
hereby (except for taxes on the overall net income of Bank imposed by
the United States of America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by,
Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any Advances, Bank shall notify Borrowers thereof. Borrowers agree to pay to
Bank the amount of such increase in cost, reduction in income or additional
expense as and when such cost, reduction or expense is incurred or determined,
upon presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error, provided, however, in no event shall the
Borrowers be responsible for any such cost, reduction or expense incurred or
experienced by the Bank more than ninety (90) days prior to the date any such
statement is given to the Borrowers.
2.7 TAX MATTERS.
(a) Any and all payments made by the Borrowers hereunder or
under the Note or any other Loan Document shall be made free and clear
of and without deduction for any present or future taxes, levies,
imposts, deductions, charges, or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on income and all income and
franchise taxes of the United States and any political subdivisions
thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes"). In no event shall the term "Taxes" include taxes imposed upon
income of the Bank by the Netherlands or any governmental entity
outside the United States. If a Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or
under such instrument, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this paragraph
2.7) the Bank receives an amount equal to the sum it would have
received had no such deductions been made,(ii) such Borrower shall make
such deductions and (iii) such Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrowers agree to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made
hereunder or under any instrument delivered hereunder or from the
execution, delivery or registration of, or otherwise with respect to,
this Agreement, the Note or any other Loan Document (hereinafter
referred to as "Other Taxes").
(c) The Borrowers will indemnify the Bank for the full amount
of Taxes or Other
<PAGE>
-11-
Taxes (including, without limitation, any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this paragraph 2.7) paid
by the Bank and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 15 days from the date the Bank
makes written demand therefor.
(d) Within 15 days after the date of any payment of Taxes the
Borrowers will upon request of Bank therefor furnish to the Bank the
original or a certified copy of a receipt evidencing payment thereof.
If no Taxes are payable in respect of any payment, the Borrowers will
upon request of Bank therefor furnish to the Bank a certificate from
each appropriate taxing authority, or an opinion of counsel acceptable
to the Bank, in either case stating that such payment is exempt from or
not subject to Taxes.
(e) Without prejudice to the survival of any other agreement
of the Borrowers hereunder, the agreements and obligations of the
Borrowers contained in subparagraphs (a) through (d) above shall
survive the payment in full of principal and interest hereunder and
under the Note.
2.8 TERM. Except as otherwise set forth herein, this Agreement
shall become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Revolving Maturity
Date. Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's Lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of
Bank to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement and the Note;
(b) the Security Documents;
(c) a notarial certificate (or certificate of Managing
Director) with respect to each Borrowers' Articles of Association,
extract from the Trade Register of The Chamber of Commerce, the
identity of the Managing Directors, and resolutions authorizing the
execution and delivery of this Agreement and a notarial certificate
certifying that each Borrower is duly registered, legally existing and
duly incorporated;
(d) opinions of Borrowers' counsel and Bank's special Dutch
and Irish counsel;
(e) financing statements (Forms UCC-1) duly executed by
Lionbridge-U.S.;
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due specified
in Section 2.5(c) hereof;
(h) a certificate or certificates of the appropriate
governmental authority of the jurisdiction of organization of each
Designated Subsidiary, dated as of a recent date, certifying that such
Designated Subsidiary is duly organized and legally existing under the
law of such jurisdiction;
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(i) financial statements with respect to the Consolidated
Group as previously requested by the Bank; and
(j) such other documents, and completion of such other
matters, as Bank may reasonably request.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of
Bank to make each Advance, including the initial Advance, is further subject to
the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each
Advance as though made at and as of each such date, and no Event of
Default shall have occurred and be continuing, or would result from
such Advance. The making of each Advance shall be deemed to be a
representation and warranty by Borrowers on the date of such Advance as
to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrowers agree to enter into
such documentation as is necessary in order to grant and pledge to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt payment of any and all Obligations
and in order to secure prompt performance by Borrowers of each of their
covenants and duties under the Loan Documents. Except as set forth in Schedule
A, such security interests shall constitute a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
Notwithstanding termination of this Agreement, Bank's Lien on the Collateral
shall remain in effect for so long as any Obligations are outstanding.
4.2 RIGHT TO INSPECT. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrowers' Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrowers' financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Each Borrower and each
Designated Subsidiary is a corporation duly registered, legally existing and
duly incorporated under the laws of its jurisdiction of organization and
qualified or licensed to do business in any jurisdiction in which the conduct of
its business or its ownership of property requires that it be so qualified or
licensed. The Borrowers and the Designated Subsidiaries have no Subsidiaries
except as set forth on Schedule A.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery,
and performance of the Loan Documents to which they are a party are within
Borrower's powers, have been duly authorized, and are not in conflict with nor
constitute a breach of any provision contained in Borrowers' organizational
documents, nor will they constitute an event of default under any material
agreement to which any Borrower is a party or by which any Borrower is bound
which
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default could have a Material Adverse Effect. No Borrower is in default under
any agreement to which it is a party or by which it is bound, which default
could have a Material Adverse Effect.
5.3 NO PRIOR ENCUMBRANCES. Each Borrower has good and
indefeasible title to each item of the Collateral free and clear of Liens,
except for Permitted Liens.
5.4 BONA FIDE ELIGIBLE ACCOUNTS. The Eligible Trade Accounts
and the Eligible Credit-Backed Accounts are bona fide existing obligations. The
property or services giving rise to such Eligible Trade Accounts and the
Eligible Credit-Backed Accounts has been delivered to the account debtor or to
the account debtor's agent for immediate shipment to and unconditional
acceptance by the account debtor. Neither Borrowers nor the Designated
Subsidiaries have received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Trade Account or an Eligible Credit-Backed Account.
5.5 MERCHANTABLE INVENTORY. All Inventory is in all material
respects of good and has marketable quality, free from all material defects.
5.6 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as
disclosed in Schedule A, Borrowers have not done business and will not without
at least thirty (30) days prior written notice to Bank do business under any
name other than that specified on the signature page hereof. The chief executive
offices of each Borrower is located at The Sinus Building, Overschiestraat 55,
10 62 HN, Amsterdam, The Netherlands.
5.7 LITIGATION. Except as set forth in Schedule A, there are
no actions or proceedings pending, or, to Borrowers' knowledge, threatened by or
against either Borrower or any Designated Subsidiary before any court or
administrative agency in which an adverse decision could have a Material Adverse
Effect or a material adverse effect on Borrowers' interest or Bank's security
interest in any material portion of the Collateral. Borrowers do not have
knowledge of any such pending or threatened actions or proceedings.
5.8 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All
consolidated financial statements related to the Consolidated Group that have
been delivered by Lionbridge-U.S. to Bank fairly present in all material
respects the consolidated financial condition of the Consolidated Group as of
the date thereof and consolidated results of operations of the Consolidated
Group for the period then ended. There has not been a material adverse change in
the consolidated financial condition of the Consolidated Group since the date of
the most recent of such financial statements submitted to Bank on or about the
Closing Date which change has had or could reasonably be expected to have a
Material Adverse Effect.
5.9 SOLVENCY. The fair saleable value of Borrowers' assets
(including goodwill minus disposition costs) exceeds the fair value of their
liabilities; the Borrowers are not left with unreasonably small capital after
the transactions contemplated by this Agreement; and Borrowers are able to pay
their debts (including trade debts) as they mature.
5.10 REGULATORY COMPLIANCE. Borrowers are not subject to any
applicable law that restricts or limits their ability to enter into this
Agreement or carry out the transactions contemplated hereby. No Borrower and no
Designated Subsidiary has violated any statutes, laws, ordinances or rules
applicable to it, violation of which could reasonably be expected to have a
Material Adverse Effect.
5.11 ENVIRONMENTAL CONDITION. None of Borrowers' or any
Designated Subsidiary's properties or assets has ever been used by Borrowers or
any Designated Subsidiary or, to the best of Borrowers' knowledge, by previous
owners or operators, in the disposal of, or to produce, store, handle, treat,
release, or transport, any hazardous waste or hazardous substance
<PAGE>
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other than in accordance with applicable law; to the best of Borrowers'
knowledge, no properties or assets of a Borrower or a Designated Subsidiary has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by a Borrower or any
Designated Subsidiary; and no Borrower and no Designated Subsidiary has received
a summons, citation, notice, or directive from the Environmental Protection
Agency or any other federal, state or other governmental agency concerning any
action or omission by a Borrower or any Designated Subsidiary resulting in the
release, or other disposition of hazardous waste or hazardous substances into
the environment.
5.12 TAXES. Except as disclosed in SCHEDULE A, each member of
the Consolidated Group has filed or caused to be filed all tax returns required
to be filed on a timely basis, and has paid, or has made adequate provision for
the payment of, all taxes reflected therein, except those being contested in
good faith by proper proceedings with adequate reserves under GAAP.
5.13 SUBSIDIARIES. No Borrower and no Designated Subsidiary
owns any stock, partnership interest or other equity securities of any Person,
except for Permitted Investments.
5.14 GOVERNMENT CONSENTS. Except as disclosed in Schedule A,
Borrowers and each Designated Subsidiary have obtained all consents, approvals
and authorizations of, made all declarations or filings with, and given all
notices to, all governmental authorities that are necessary for the continued
operation of their businesses as currently conducted.
5.15 ABSENCE OF CASH TRANSFER RESTRICTIONS. Neither Lionbridge
Technologies (France) ("Lionbridge-France") nor Lionbridge-Ireland is subject to
any restriction or constraint under any agreement, contract or arrangement to
which it is a party (including without limitation in connection with any
financing), or, except as described on SCHEDULE A, under applicable law, that
would impede or interfere with its ability to declare and pay cash dividends to
Holdings or to borrow funds from or advance funds to any member of the
Consolidated Group (collectively, a "Cash Transfer Restriction").
5.16 FULL DISCLOSURE. No representation, warranty or other
statement made by Borrowers in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements, in the light of the circumstances under which they
are made, not misleading.
6. AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrowers shall do all of the following:
6.1 LEGAL EXISTENCE. Borrowers shall maintain their and cause
each of the Designated Subsidiaries to maintain their legal existence in its
jurisdiction of incorporation and maintain qualification or licensure in each
jurisdiction in which the failure to so qualify or be licensed could reasonably
be expected to have a Material Adverse Effect. Borrowers shall maintain, and
shall cause each of the Designated Subsidiaries to maintain, to the extent
consistent with prudent management of Borrowers' businesses, in force all
licenses, approvals and agreements, the loss of which could reasonably be
expected to have a Material Adverse Effect.
6.2 GOVERNMENT COMPLIANCE. Borrowers shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to
<PAGE>
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which it is subject, noncompliance with which could reasonably be expected to
have a Material Adverse Effect or a material adverse effect on any material
portion on the Collateral or the priority of Bank's Lien on any material portion
of the Collateral.
6.3 REPORTS. Within thirty (30) days after the last day of
each month, the Borrowers shall deliver to Bank a Borrowing Base Certificate
signed by a Responsible Officer in substantially the form of EXHIBIT C hereto,
together with aged listings of accounts receivable and accounts payable. Upon
request of the Bank from time to time, the Borrower will provide the Bank
back-up information and records regarding any particular Account, including the
exact name, billing address, contact party and phone number of the account
debtor and the invoice number and purchase order number of the Account in
question, provided, however, nothing herein shall permit the Bank to contact any
account debtor except in accordance with the provisions of Section 9.3.
Bank shall have a right from time to time hereafter to audit Borrowers'
Accounts at Borrowers' expense, provided that such audits will be conducted no
more often than every six (6) months unless an Event of Default has occurred and
is continuing.
6.4 INVENTORY; RETURNS. Borrowers shall keep, and shall cause
each Designated Subsidiary to keep, all Inventory in good and marketable
condition, free from all material defects. Allowances, if any, as between a
Borrower or a Designated Subsidiary and its account debtors shall be on the same
basis and in accordance with the usual customary practices of such Borrower or
Designated Subsidiary, as they exist at the time of the execution and delivery
of this Agreement. Borrowers shall promptly notify Bank of all disputes and
claims involving a Borrower or a Designated Subsidiary, where the dispute or
claim involves more than One Hundred Fifty Thousand Dollars ($150,000).
6.5 TAXES. Borrowers shall make, and shall cause each
Designated Subsidiary to make, due and timely payment or deposit of all material
federal, state, and local taxes, assessments, or contributions required of it by
law, and will execute and deliver to Bank, on demand, appropriate certificates
attesting to the payment or deposit thereof; and Borrowers will make, and will
cause each Designated Subsidiary to make, timely payment or deposit of all
material tax payments and withholding taxes required of it by applicable laws,
including, but not limited to, those laws concerning social welfare, state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Bank with proof satisfactory to Bank indicating that each Borrower and
Designated Subsidiary has made such payments or deposits; provided that a
Borrower or a Designated Subsidiary need not make any payment if the amount or
validity of such payment is (i) contested in good faith by appropriate
proceedings, (ii) is reserved against (to the extent required by GAAP) by such
Borrower or such Designated Subsidiary and (iii) no lien other than a Permitted
Lien results.
6.6 INSURANCE.
(a) Borrowers, at their expense, shall keep and shall cause
each Designated Subsidiary to keep the Collateral insured against loss
or damage by fire, theft, explosion, sprinklers, and all other hazards
and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where the
businesses of the Borrowers and such Designated Subsidiaries are
conducted on the date hereof. Borrowers shall also maintain insurance
relating to the ownership and use of the Collateral by the Borrowers
and the Designated Subsidiaries in amounts and of a type that are
customary to similar businesses.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank
in accordance with its standard commercial practices. To the extent
commercially available in the jurisdiction in question, all such
policies of property insurance shall contain a lender's loss payable
endorsement, in
<PAGE>
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a form satisfactory to Bank, showing Bank as an additional loss payee
thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at
least twenty (20) days' notice to Bank before canceling its policy or
diminishing coverage thereunder for any reason. At Bank's request,
Borrowers shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All
proceeds payable under any such policy shall, at the option of Bank, be
payable to Bank to be applied on account of the Obligations.
6.7 DEPOSITORY. Borrowers and the Designated Subsidiaries
shall maintain a depository account with Bank.
6.8 FURTHER ASSURANCES. At any time and from time to time
Borrowers shall, and shall cause each Designated Subsidiary to, execute and
deliver such further instruments and take such further action as may reasonably
be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Each Borrower covenants and agrees that, so long as any Credit
Extension hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Advances, neither Borrower nor any Designated Subsidiary will do any of the
following:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Designated
Subsidiaries to Transfer, all or any part of its business or property, other
than Transfers: (i) of Inventory in the ordinary course of business; (ii) of
non-exclusive licenses and similar arrangements for the use of the property of a
Borrower or a Designated Subsidiary in the ordinary course of business; (iii)
that constitute payment of normal and usual operating expenses in the ordinary
course of business; or (iv) of worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, OR MANAGEMENT, BUSINESS
LOCATIONS. Engage in any business, or permit any of its Designated Subsidiaries
to engage in any business, other than the businesses in which they are currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer any decrease in the percentage of capital
stock of Holdings which is owned by Lionbridge - U.S. to less than a majority of
all capital stock of Holdings on a fully-converted and fully-diluted basis or
suffer any decrease in the percentage of capital stock of Operating Company
which is owned by Holdings. No Borrower and no Designated Subsidiary will,
without at least ten (10) days prior written notification to Bank, relocate its
chief executive office or add any new offices or business locations, provided,
however, the Bank shall consent to shorter advance notice as long as the
Borrowers are able to demonstrate to the reasonable satisfaction of the Bank
that the Bank is not required to take any action in order to preserve its Lien
on the Collateral in connection with such relocation or new office.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, provided
that if no Event of Default has occurred and is continuing or would exist after
giving effect to such action, (a) a Subsidiary may merge into another Subsidiary
or into either Borrower or a Designated Subsidiary, and (b) a Borrower or a
Designated Subsidiary may merge with another entity as long as (i) the Borrower
or such Designated Subsidiary is the surviving party in such merger, and (ii)
the other entity is in the same, a related or a complimentary business.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Designated Subsidiary so to do,
other than Permitted
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Indebtedness.
7.5 LIENS. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Designated Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Designated
Subsidiaries so to do, other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction (other than Permitted
Indebtedness and Permitted Investments) with any Affiliate of either Borrower or
a Designated Subsidiary except for transactions that are in the ordinary course
of Borrowers' businesses, upon fair and reasonable terms that are no less
favorable to Borrower than would be obtained in an arm's length transaction with
a nonaffiliated Person.
7.9 SUBORDINATED DEBT. Make any payment in respect of any
Subordinated Debt, or permit any of its Designated Subsidiaries to make any such
payment, except in compliance with the terms of such Subordinated Debt, or amend
any provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 COMPLIANCE. Violate any law or regulation, which
violation could reasonably be expected to have a Material Adverse Effect or a
material adverse effect on a material portion of the Collateral or the priority
of Bank's Lien on the Collateral; or permit any of its Designated Subsidiaries
to do any of the foregoing.
7.11 NO CASH TRANSFER RESTRICTIONS. The Borrowers shall not
permit Lionbridge-France, Lionbridge-Ireland, any other Designated Subsidiary or
any other of their direct or indirect Subsidiaries to become subject to any Cash
Transfer Restriction.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrowers under this Agreement:
8.1 PAYMENT DEFAULT. If either Borrower fails to pay, when
due, any of the Obligations.
8.2 COVENANT DEFAULT.
(a) If either Borrower fails to perform any obligation under
or violates any of the covenants contained in Section 7 of this
Agreement, or
(b) If any Credit Party fails or neglects to perform, keep, or
observe any other material term, provision, condition, covenant, or
agreement contained in this Agreement, in any of the Loan Documents, or
in any other present or future agreement between a Credit Party and
Bank and as to any default under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure such
default within twenty (20) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the
twenty (20) day period or cannot after diligent attempts by a Credit
Party be cured within such twenty (20) day period, and such default is
likely to be cured within a reasonable time, then such Credit Party
shall have an additional reasonable period (which
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shall not in any case exceed forty-five (45) days) to attempt to cure
such default, and within such reasonable time period the failure to
have cured such default shall not be deemed an Event of Default
(provided that no Advances will be required to be made during such cure
period);
8.3 MATERIAL ADVERSE CHANGE. If there (i) occurs a change in the
business, operations, or condition (financial or otherwise) of a
Significant Credit Party which would have a Material Adverse Effect, or
(ii) is a material impairment of the value or priority of Bank's
security interests in the Collateral;
8.4 ATTACHMENT. If any material portion of the assets of a
Significant Credit Party is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes into the possession of any trustee,
receiver or person acting in a similar capacity and such attachment, seizure,
writ or distress warrant or levy has not been removed, discharged or rescinded
within twenty (20) days, or if a Significant Credit Party is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs, or if a judgment or other
claim becomes a lien or encumbrance upon any material portion of the assets of a
Credit Party, or if a notice of lien, levy, or assessment is filed of record
with respect to any of the assets of a Significant Credit Party by the United
States Government or any foreign government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within twenty (20) days after receipt of notice
thereof by the affected Significant Credit Party, provided that none of the
foregoing shall constitute an Event of Default where such action or event is
stayed or an adequate bond has been posted pending a good faith contest by a
Significant Credit Party(provided that no Credit Extensions will be required to
be made during such cure period);
8.5 INSOLVENCY. If a Significant Credit Party becomes
insolvent, or if an Insolvency Proceeding is commenced either by Borrower, or if
an Insolvency Proceeding is commenced against a Significant Credit Party and is
not dismissed or stayed within sixty (60) days (provided that no Advances will
be made prior to the dismissal of such Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any agreement
to which a Significant Credit Party is a party with a third party or parties
resulting in a right by such third party or parties, whether or not exercised,
to accelerate the maturity of any Indebtedness in an amount in excess of One
Hundred Thousand Dollars ($100,000) or that could have a Material Adverse
Effect;
8.7 SUBORDINATED DEBT. If a Significant Credit Party makes any
payment on account of Subordinated Debt, except to the extent such payment is
allowed under any subordination agreement entered into with Bank;
8.8 JUDGMENTS. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred
Thousand Dollars ($100,000) shall be rendered against a Significant Credit Party
and shall remain unsatisfied and unstayed for a period of twenty (20) days
(provided that no Credit Extensions will be made prior to the satisfaction or
stay of such judgment); or
8.9 MISREPRESENTATIONS. If there exists any material
misrepresentation or material misstatement exists in any warranty or
representation when made and set forth herein or in any certificate or writing
delivered to Bank by a Credit Party or any Person acting on behalf of a Credit
Party pursuant to this Agreement or to induce Bank to enter into this Agreement
or any other Loan Document.
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9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following to the
extent permitted by applicable law, all of which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable (provided that upon the occurrence of an
Event of Default described in Section 8.5 all Obligations shall become
immediately due and payable without any action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrowers under this Agreement or under any other agreement
between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Without notice to or demand upon Borrowers, make such
payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrowers agree to
assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate which is reasonably convenient
to Bank and Borrowers. Borrowers authorize Bank to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or
compromise any encumbrance, charge, or lien which is prior or superior
to its security interest and to pay all expenses incurred in connection
therewith. With respect to any of Borrowers' premises, Borrowers hereby
grant Bank a license to enter such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies
provided herein, at law, in equity, or otherwise;
(e) Without notice to Borrowers set off and apply to the
Obligations then due and payable any and all (i) balances and deposits
of Borrowers held by Bank, or (ii) indebtedness at any time owing to or
for the credit or the account of Borrowers held by Bank;
(f) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrowers'
premises) as Bank determines is commercially reasonable, and apply the
proceeds thereof to the Obligations in whatever manner or order it
deems appropriate;
(g) Bank may credit bid and purchase at any public sale, or
private sale as permitted by law;
(h) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrowers and
any excess; if any, shall, to the extent permitted or required under
applicable law, be returned to Borrowers; and
(i) Bank shall have a non-exclusive, royalty-free license to
use the Intellectual Property Collateral to the extent reasonably
necessary to permit Bank to exercise its rights and remedies upon the
occurrence of an Event of Default.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrowers hereby irrevocably
appoint Bank (and any of Bank's designated officers, or employees) as Borrowers'
true and lawful attorney to: (a) send requests for verification of Accounts or
notify account debtors of Bank's security interest in the Accounts;
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-20-
(b) endorse Borrowers' names on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrowers' names on any invoice
or bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrowers' policies of insurance; and (e) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for
amounts and upon terms which Bank determines to be reasonable. The appointment
of Bank as Borrowers' attorney in fact, and each and every one of Bank's rights
and powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
9.3 ACCOUNTS COLLECTION. Upon the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to
either Borrower of Bank's security interest in such funds and verify the amount
of such Account. Borrowers shall collect all amounts owing to Borrowers for
Bank, receive in trust all payments as Bank's trustee, and if requested or
required by Bank, immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. If either Borrower fails to pay any amounts
or furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Committed Revolving Line as Bank deems necessary to protect
Bank from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type discussed in Section 6.6 of this Agreement, and
take any action with respect to such policies as Bank deems prudent. Any amounts
so paid or deposited by Bank shall constitute Bank Expenses, shall be
immediately due and payable, and shall bear interest at the then applicable rate
hereinabove provided, and shall be secured by the Collateral. Any payments made
by Bank shall not constitute an agreement by Bank to make similar payments in
the future or a waiver by Bank of any Event of Default under this Agreement.
9.5 BANK'S LIABILITY FOR COLLATERAL. To the extent permitted
by applicable law, so long as Bank complies with reasonable banking practices,
Bank shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other person whomsoever. All risk of loss, damage or
destruction of the Collateral shall be borne by Borrowers.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not expressly set forth herein
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Bank of one right or remedy shall be deemed an election, and no
waiver by Bank of any Event of Default on Borrowers' part shall be deemed a
continuing waiver. No delay by Bank shall constitute a waiver, election, or
acquiescence by it. No waiver by Bank shall be effective unless made in a
written document signed on behalf of Bank and then shall be effective only in
the specific instance and for the specific purpose for which it was given.
9.7 DEMAND; PROTEST. Borrowers waive demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrowers may in any way be liable.
<PAGE>
-21-
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a nationally
recognized overnight delivery service, by certified mail, postage prepaid,
return receipt requested, or by telefacsimile to Borrowers or to Bank, as the
case may be, at its addresses set forth below:
If to Borrowers:
c/o Lionbridge Technologies, Inc.
950 Winter Street #4300
Waltham, Massachusetts 02154
Attn: Stephen J. Lifshatz
Fax: (617) 890-3799
With copies to: Testa, Hurwitz & Thibeault LLP
125 High Street
Boston, MA 02110
Attn: Mark D. Smith, Esq.
Fax: (617) 248-7100
If to Bank:
Silicon Valley Bank
3003 Tasman Drive
Santa Clara, California 95054
Attn: Greg Linvill, Vice President
Fax: (408) 496-2429
With copies to:
Silicon Valley East
40 William Street
Wellesley, Massachusetts 02181
Attn: Andrew H. Tsao, Vice President
Fax: (617) 431-9906
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attn: Dennis J. White, Esq.
Fax: (617) 338-2880
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
<PAGE>
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE BORROWERS AND BANK HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN
THE COMMONWEALTH OF MASSACHUSETTS, BUT IF FOR ANY REASON THE BANK IS DENIED
ACCESS TO SUCH COURTS, THEN IN SUCH EVENT THE STATE AND FEDERAL COURTS LOCATED
IN THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA. BORROWERS AND BANK EACH
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; PROVIDED, HOWEVER, that neither this Agreement nor any rights
hereunder may be assigned by Borrowers without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrowers to sell, transfer,
negotiate, or grant participation in a part of or any interest in, Bank's
obligations, rights and benefits hereunder to another financial institution with
the consent of the Borrowers which shall not be unreasonably withheld,
conditioned or delayed, provided that in no event shall the Bank cease to hold a
majority of the outstanding Advances or cease to be the lead or agent bank.
12.2 INDEMNIFICATION. Borrowers shall indemnify, defend,
protect and hold harmless Bank and its officers, employees, and agents against:
(a) all obligations, demands, claims, and liabilities claimed or asserted by any
other party in connection with the transactions contemplated by the Loan
Documents; and (b) all losses or Bank Expenses in any way suffered, incurred, or
paid by Bank as a result of or in any way arising out of, following, or
consequential to transactions between Bank and Borrowers whether under the Loan
Documents, or otherwise (including without limitation reasonable attorneys fees
and expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 TIME OF ESSENCE. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION. This Agreement cannot
be amended or terminated except by a writing signed by Borrowers and Bank. All
prior agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and
<PAGE>
-23-
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.
12.7 SURVIVAL. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrowers to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run;
provided that so long as the obligations referred to in the first sentence of
this Section 12.7 have been satisfied, and Bank has no commitment to make any
Credit Extensions or to make any other loans to Borrowers, Bank shall release
all security interests granted hereunder and redeliver all Collateral held by it
in accordance with applicable law.
12.8 CONFIDENTIALITY. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrowers, (ii) to prospective
permitted transferees or purchasers of any interest in the Loans, provided that
they have entered into a comparable confidentiality agreement in favor of
Borrowers and have delivered a copy to Borrowers, (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order, (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank, and (v) as Bank may deem appropriate in connection with
the exercise of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
12.9 COUNTERSIGNATURE. This agreement shall become effective
only when it shall have been executed by each Borrower and Bank, provided,
however, in no event shall this agreement become effective until signed by an
officer of the Bank in California.
12.10 JOINT AND SEVERAL OBLIGATIONS; LIMITATION OF LIABILITY.
Each and every representation, warranty, covenant and agreement made by any of
the Borrowers, hereunder and under the other Loan Documents shall be joint and
several, whether or not so expressed, and such obligations of any of the
Borrowers shall not be subject to any counterclaim, setoff, recoupment or
defense based upon any claim any Borrower may have against any other Borrower,
or the Bank, and shall remain in full force and effect without regard to, and
shall not be released, discharged or in any way affected by, any circumstance or
condition affecting any other Borrower, including without limitation (a) any
waiver, consent, extension, renewal, indulgence or other action or inaction
under or in respect of this Agreement or any other Loan Document, or any
agreement or other document related thereto with respect to any other Borrower,
or any exercise or nonexercise of any right, remedy, power or privilege under or
in respect of any such agreement or instrument with respect to the other
Borrower, or the failure to give notice of any of the foregoing to the other
Borrower; (b) any invalidity or unenforceability, in whole or in part, of any
such agreement or instrument with respect to any other Borrower; (c) any failure
on the part of any other Borrower for any reason to perform or comply with any
term of any such agreement or instrument; (d) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or similar
proceeding with respect to any other Borrower or its properties or creditors; or
(e) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, with respect to any other Borrower. Each Borrower hereby waives any
requirement of diligence or promptness on the part of the Bank in the
enforcement of their respective rights hereunder or under any other Loan
Document with respect to the obligations of itself or of the other Borrowers.
Without limiting the foregoing, any failure to make any demand upon, to pursue
or exhaust any rights or remedies against a
<PAGE>
-24-
Borrower, or any delay with respect thereto, shall not affect the obligations of
the other Borrowers hereunder or under any other Loan Document. Notwithstanding
anything in this Agreement to the contrary, the liability of the Operating
Company hereunder shall in no event exceed the greater of (i) the Advances and
other Credit Extensions made directly to the Operating Company, and (ii) an
amount equal to the aggregate of (a) the net worth of the Operating Company as
calculated in accordance with GAAP; and (b) the aggregate amount of accounts
receivable of the Company. Each of the Borrowers hereby designates and appoints
the Responsible Officers of Lionbridge U.S. to act on their behalf in request
Advances under this Agreement and otherwise dealing with the Bank in connection
therewith.
<PAGE>
-25-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
LIONBRIDGE TECHNOLOGIES HOLDINGS B.V.
By: ________________________
Name:___________________
Title:__________________
LIONBRIDGE TECHNOLOGIES B.V.
By: ________________________
Name:___________________
Title:__________________
SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: ________________________
Name:___________________
Title:__________________
SILICON VALLEY BANK
By: ________________________
Name:___________________
Title:__________________
(signed in Santa Clara, California)
<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of each
Borrower in and to the following:
(a) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
(b) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
(c) All Borrower's Books relating to the foregoing and any and all
claims, rights and interest in any of the above and all substitutions for,
additions and accessions to and proceeds thereof.
<PAGE>
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: TIME:
Lionbridge Technologies Holdings B.V.
FROM: LIONBRIDGE TECHNOLOGIES B.V.
---------------------------------------------------------------------------
[cross out inapplicable party]
CLIENT NAME (BORROWER)
REQUESTED BY:
-------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
-----------------------------------------------------------
PHONE NUMBER:
-------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
------------------------ -----------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- -------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $
----------------------------------
PRINCIPAL PAYMENT (ONLY) $
----------------------------------
INTEREST PAYMENT (ONLY) $
----------------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
----------------------------------
OTHER INSTRUCTIONS:
-------------------------------------------------------------
- --------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Advance Request;
provided, however, that those representations and warranties expressly referring
to another date shall be true, correct and complete in all material respects as
of such date.
<PAGE>
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
Authorized Requester Phone #
Received By (Bank) Phone #
Authorized Signature (Bank)
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrowers: Lionbridge Technologies B.V. and Lionbridge Technologies
Holdings B.V. and Lionbridge Technologies Ireland
Bank: Silicon Valley Bank
Commitment Amount: $5,000,000
- --------------------------------------------------------------------------------
ACOUNTS RECEIVABLE(1)
<TABLE>
<S> <C> <C>
1. Accounts Receivable Book Value as of $
--------------------
2. Additions (please explain on reverse) $
--------------------
3. TOTAL ACCOUNTS RECEIVABLE $
--------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 120 days due $
--------------------
5. Balance of 50% over 90 day accounts $
--------------------
6. Concentration Limits $
--------------------
7. Foreign Accounts (excl. Ireland & The Netherlands) $
--------------------
8. Governmental Accounts (unless qualified) $
--------------------
9. Contra Accounts $
--------------------
10. Promotion or Demo Accounts $
--------------------
11. Intercompany/Employee Accounts $
--------------------
12. Other (please explain on reverse) $
--------------------
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
--------------------
LOAN VALUE
14. Eligible Trade Accounts (#3 minus #13) $
--------------------
15. Loan Value of Eligible Trade Accounts (70% of #14) $
--------------------
16. Eligible Credit-Backed Accounts $
--------------------
17. Loan Value of Eligible Credit-Backed Accounts (80% of #16) $
--------------------
18. LOAN VALUE OF ACCOUNTS (#15 and #17) $
--------------------
BALANCES
19. Maximum Loan Amount $5,000,000
--------------------
20. Total Funds Available [Lesser of #18 or #19] $
--------------------
21. Present balance owing on Line of Credit $
--------------------
22. Outstanding under Sublimits ( ) $
--------------------
23. RESERVE POSITION (#20 minus #21 and #22) $
--------------------
</TABLE>
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AGREEMENT
BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS:
- ------------------------------------
By:
---------------------------------
Authorized Signer
Includes receivables of the Borrowers and the Designated Subsidiares under the
subject Loan Agreement.
<PAGE>
EXHIBIT D
PROMISSORY NOTE
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
BORROWER: Lionbridge Technologies Holdings B.V.
Lionbridge Technologies B.V. BANK: Silicon Valley Bank
- --------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $5,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Working Capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
<TABLE>
<CAPTION>
REVOLVING LINE
--------------
<S> <C>
Amount paid to Borrower directly $
--------
Undisbursed Funds $
--------
Principal $
--------
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges:
Prepaid Finance Charges Paid in Cash: $
--------
$50,000 Loan Fee
--------
$ Accounts Receivables Audit
--------
Other Charges Paid in Cash: $
--------
$ UCC Search Fees
--------
$ UCC Filing Fees
--------
$ Patent Filing Fees
--------
$ Trademark Filing Fees
--------
$ Copyright Filing Fees
--------
$ Outside Counsel Fees and Expenses (ESTIMATE, DO NOT LEAVE BLANK)
--------
Total Charges Paid in Cash $
-------
</TABLE>
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered *** the amount of any loan payment. If the funds in
the account are insufficient to cover any payment, Bank shall not be obligated
to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF __________________, 19___.
BORROWER:
- -------------------------------
- -------------------------------
Authorized Officer
<PAGE>
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: Lionbridge Technologies Holdings B.V.
Lionbridge Technologies B.V. BANK: Silicon Valley Bank
- --------------------------------------------------------------------------------
INSURANCE REQUIREMENTS. Lionbridge Technologies Holdings B.V. and
Lionbridge Technologies B.V. ("Grantors") understand that insurance coverage is
required in connection with the extending of a loan or the providing of other
financial accommodations to Grantors by Bank. These requirements are set forth
in the Loan Documents. The following minimum insurance coverages must be
provided on the following described collateral (the "Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be canceled or diminished without a
minimum of twenty (20) days' prior written notice to
Bank.
INSURANCE COMPANY. Grantors may obtain insurance from any
insurance company Grantors may choose that is reasonably acceptable to Bank.
Grantors understand that credit may not be denied solely because insurance was
not purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantors agree to deliver to Bank,
on or before closing, evidence of the required insurance as provided above,
with an effective date of for December 31, 19___, or earlier. Grantors
acknowledge and agree that if Grantors fail to provide any required insurance
or fail to continue such insurance in force, Bank may do so at Grantors'
expense as provided in the Loan Agreement. The cost of such insurance, at the
option of Bank, shall be payable on demand or shall be added to the
indebtedness as provided in the security document. GRANTORS ACKNOWLEDGE THAT
IF BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED
PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF
THE LOAN; HOWEVER, GRANTORS' EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the
Collateral, Grantors authorize Bank to provide to any person (including any
insurance agent or company) all information Bank deems appropriate, whether
regarding the Collateral, the loan or other financial accommodations, or both.
GRANTORS ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS
AGREEMENT TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
FOR DECEMBER 31, 19___.
GRANTORS:
- -------------------------------
- -------------------------------
X
- -------------------------------
Authorized Officer
- -------------------------------
<PAGE>
- -------------------------------
X
- -------------------------------
Authorized Officer
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
-------------------------------------- -----------------------------
AGENT'S NAME:
------------------------------------------------------------------
INSURANCE COMPANY:
-------------------------------------------------------------
POLICY NUMBER:
-----------------------------------------------------------------
EFFECTIVE DATES:
---------------------------------------------------------------
COMMENTS:
----------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND CONSTRUCTION.................................................................................1
1.1 Definitions.................................................................................1
1.2 Accounting and Other Terms..................................................................8
2. LOANS AND TERMS OF PAYMENT...................................................................................8
2.1 Advances....................................................................................8
2.2 Overadvances................................................................................8
2.3 Interest Rates, Payments, and Calculations..................................................9
2.4 Crediting Payments..........................................................................9
2.5 Fees........................................................................................9
2.6 Additional Costs...........................................................................10
2.8 Term.......................................................................................11
3. CONDITIONS OF LOANS.........................................................................................11
3.1 Conditions Precedent to Initial Advance....................................................11
3.2 Conditions Precedent to all Advances.......................................................12
4. CREATION OF SECURITY INTEREST...............................................................................12
4.1 Grant of Security Interest.................................................................12
4.2 Right to Inspect...........................................................................12
5. REPRESENTATIONS AND WARRANTIES..............................................................................12
5.1 Due Organization and Qualification.........................................................12
5.2 Due Authorization; No Conflict.............................................................13
5.3 No Prior Encumbrances......................................................................13
5.4 Bona Fide Eligible Accounts................................................................13
5.5 Merchantable Inventory.....................................................................13
5.6 Name; Location of Chief Executive Office...................................................13
5.7 Litigation.................................................................................13
5.8 No Material Adverse Change in Financial Statements.........................................13
5.9 Solvency...................................................................................13
5.10 Regulatory Compliance......................................................................13
5.11 Environmental Condition....................................................................14
5.12 Taxes......................................................................................14
5.13 Subsidiaries...............................................................................14
5.14 Government Consents........................................................................14
5.15 Absence of Cash Transfer Restrictions......................................................14
5.16 Full Disclosure............................................................................14
6. AFFIRMATIVE COVENANTS.......................................................................................14
6.1 Legal Existence. .........................................................................14
6.2 Government Compliance......................................................................15
6.3 Reports. .................................................................................15
6.4 Inventory; Returns.........................................................................15
6.5 Taxes......................................................................................15
6.6 Insurance..................................................................................15
6.7 Depository.................................................................................16
6.8 ...........................................................................................16
Further Assurances...................................................................................................16
7. NEGATIVE COVENANTS..........................................................................................16
7.1 Dispositions...............................................................................16
7.2 Changes in Business, Ownership, or Management, Business Locations..........................16
7.3 Mergers or Acquisitions....................................................................16
7.4 Indebtedness...............................................................................17
7.5 Liens......................................................................................17
7.6 Distributions..............................................................................17
7.7 Investments................................................................................17
</TABLE>
<PAGE>
-ii-
<TABLE>
<S> <C>
7.8 Transactions with Affiliates................................................................................17
7.9 Subordinated Debt..........................................................................17
7.10 Compliance.................................................................................17
7.11 No Cash Transfer Restrictions..............................................................17
8. EVENTS OF DEFAULT...........................................................................................17
8.1 Payment Default............................................................................17
8.2 Covenant Default...........................................................................17
8.3 Material Adverse Change....................................................................18
8.4 Attachment.................................................................................18
8.5 Insolvency.................................................................................18
8.6 Other Agreements...........................................................................18
8.7 Subordinated Debt..........................................................................18
8.8 Judgments..................................................................................18
8.9 Misrepresentations.........................................................................18
9. BANK'S RIGHTS AND REMEDIES..................................................................................19
9.1 Rights and Remedies........................................................................19
9.2 Power of Attorney..........................................................................20
9.3 Accounts Collection........................................................................20
9.4 Bank Expenses..............................................................................20
9.5 Bank's Liability for Collateral............................................................20
9.6 Remedies Cumulative........................................................................20
9.7 Demand; Protest............................................................................20
10. NOTICES.....................................................................................................21
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..................................................................21
12. GENERAL PROVISIONS..........................................................................................22
12.1 Successors and Assigns.....................................................................22
12.2 Indemnification............................................................................22
12.3 Time of Essence............................................................................22
12.4 Severability of Provisions.................................................................22
12.5 Amendments in Writing, Integration.........................................................22
12.6 Counterparts...............................................................................22
12.7 Survival...................................................................................22
12.8 Confidentiality............................................................................23
12.9 Countersignature...........................................................................23
12.10 Joint and Several Obligations; Limitation of Liability.....................................23
</TABLE>
EXHIBITS AND SCHEDULES
EXHIBITS
A - Description of Collateral
B - Loan Payment/Advance Telephone Request Form
C - Borrowing Base Certificate
D - Promissory Note
SCHEDULES
A - Disclosure Schedule
B - Investment Policy
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EXHIBIT 10.10
LOEFF CLAEYS VERBEKE
True copy of the deed of pledge of shares
in the capital of the
private company with limited liability:
Lionbridge Technologies Holdings B.V.
with statutory seat in Amsterdam
executed on 26 September 1997
by a deputy of Anton A. Voorneman,
civil law notary, officiating in Amsterdam.
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DEED OF PLEDGE OF SHARES IN THE CAPITAL OF:
LIONBRIDGE TECHNOLOGIES HOLDINGS B.V.
This twenty-sixth day of September nineteen hundred and ninety-seven, appeared
before me, Diederik Jan Ex, deputy civil law notary, residing in Amstelveen,
deputising for Anton Arnaud Voorneman, civil law notary, officiating in
Amsterdam:----------------------------------------------------------------------
Mr. Edwin Foeke Renes, deputy civil law notary, living at 1075 TE Amsterdam,
Sluisstraat 6-I, born in Amsterdam on the twenty-second day of May nineteen
hundred sixty-nine, single, bearer of passport number N38620506,----------------
acting in his capacity as written proxy holder of:------------------------------
1. Lionbridge Technologies Inc., a company incorporated in the state of
Delaware, the United States of America, with registered office at 950
Winterstreet, Suite 4300, Waltham, Massachusetts, 02154, United States of
America-------------------------------------------------------------------------
- hereinafter referred to as the "Pledgor";-------------------------------
2. Silicon Valley Bank, a California-chartered bank with its chief executive
offices at 3003 Tasman Drive, Santa Clara, California 95054, the United States
of America,-------------------------------------------------------------------
- hereinafter referred to as the "Pledgee"; and----------------------------
3. Lionbridge Technologies Holdings B.V., a private company with limited
liability, incorporated and existing under the laws of The Netherlands with
statutory seat at Amsterdam and with registered office at 1062 HN Amsterdam,
Overschiestraat 55-5, filed with the Trade Register at the Chamber of Commerce
in Amsterdam under number 33.182715---------------------------------------------
- hereinafter referred to as the "Company".--------------------------------
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The existence of the aforementioned proxies, which will be attached to this
deed, is sufficiently known to me, notary.------------------------------------
The appearer, acting in his aforementioned capacity, declared:------------------
WHEREAS:------------------------------------------------------------------------
The Company and the Pledgee are party to the Loan Agreement hereinafter
described. It is a condition to the Pledgee agreeing to make the facilities
available under the Loan Agreement described hereinafter, that the Pledgor
enters into this Pledge.--------------------------------------------------------
NOW THIS DEED WITNESSES as follows:---------------------------------------------
CLAUSE 1 -----------------------------------------------------------------------
DEFINITIONS---------------------------------------------------------------------
1.1 In this Deed of Pledge the following terms have the following meanings:---
"DEED OF PLEDGE" and "PLEDGE" means this deed;----------------------------
"EVENT OF DEFAULT" means the events constituting an Event of Default
pursuant to Article 8 of the Loan Agreement;------------------------------
"LTI GUARANTEE" means the Guarantee dated the twenty-sixth day of
September nineteen hundred ninety-seven, issued by the Pledgor in favour
of the Pledgee;-----------------------------------------------------------
"LOAN AGREEMENT" means the Loan Agreement dated the twenty-sixth day of
September nineteen hundred and ninety-seven, between the Company and
Lionbridge Technologies B.V. as Borrowers and the Pledgee as the Bank
(which term shall include all variations thereof and supplements thereto
from time to time in force);----------------------------------------------
"SECURED LIABILITIES" means all present and future obligations and
liabilities (whether actual or contingent and whether owed jointly or
severally or in any other capacity whatsoever) of the Pledgor under the
LTI Guarantee together with all reasonable costs,
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charges and expenses incurred by the Pledgee in connection with the
protection, preservation or enforcement of its respective rights under the
Guarantee or any other document evidencing or securing any such
liabilities on a full indemnity basis;------------------------------------
"SECURITY ASSETS" means all assets, rights and property of the Pledgor
which are the subject of any security hereby created or purported to be
created, including without limitation, the Shares and all stock, shares,
rights, moneys and property referred to in Clause 2.2 hereof;-------------
"SECURITY PERIOD" means the period beginning on the date hereof and ending
on the date upon which the Pledgee is satisfied and shall have informed
the Pledgor in writing that all the Secured Liabilities which have arisen
have been unconditionally and irrevocably paid and discharged in full or
the right of pledge hereby created has been unconditionally and
irrevocably released and discharged;--------------------------------------
"Shares" means all the shares in the Company owned by the Pledgor which at
the date of this Dead of Pledge are as follows: three hundred and
seventy-nine (379) shares with a nominal value of one hundred Dutch
guilders (NLG 100. --) each, at the date hereof;--------------------------
1.2 (a) References to a person shall include its respective successors
and assigns.--------------------------------------------------------------
(b) Words importing the singular shall include the plural and vice
versa.--------------------------------------------------------------------
(c) Terms not defined in this Deed of Pledge shall have the meaning
given to such terms in the Loan Agreement.--------------------------------
CLAUSE 2 -----------------------------------------------------------------------
SECURITY -----------------------------------------------------------------------
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2.1 As security for the Secured Liabilities the Pledgor hereby grants a first
right of pledge on the Shares ("eerste recht van pand") to the Pledgee, and the
Pledgee hereby accepts such right of pledge in the Shares. -------------------
2.2 To the extent that the aggregate of Shares would be below fifty-one per
cent (51%) of all outstanding shares in the capital of the Company or if the
voting rights attached to the Shares would be less than fifty-one per cent (51%)
of the voting rights attached to the total outstanding shares in the Company,
the Pledgor hereby grants as further security for the Secured Liabilities a
first right of pledge ("eerste recht van pand") to the Pledgee, and the Pledgee
hereby accepts such right, in any and all shares which at any time in the future
will be issued by the Company to the Pledgor, such pledge being established now
for the moment upon which such shares will in the future be issued by the
Company to the Pledgor, without there being any need at the moment of issue of
such shares for the parties hereto to perform any further act in relation to the
pledge hereunder on such shares. The term "Shares" as used in this Deed of
Pledge shall be deemed to include such shares, unless the context requires
otherwise.----------------------------------------------------------------------
2.3 The first right of pledge created pursuant to this Deed hereof encompasses
all rights which the Pledgor now has or may acquire at any time in the future
pertaining to the Shares, including -- inter alia -- dividend rights, rights to
stock bonuses, preemptive rights, rights to distributions out of the reserves
and rights to the remaining balance upon winding-up and any other money or
property accruing or offered at any time by way of redemption, bonus,
preference, option rights or otherwise to or in respect of any of the Shares or
in substitution or exchange for any of the Shares provided that all dividends
paid or payable may, until the occurrence and during the continuance of an Event
of Default, be paid directly to the Pledgor. Upon the occurrence and during the
continuance of an Event of Default, the Pledgee may require
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dividends to be payable to the Pledgee, of which it shall notify the Pledgor and
the Company thereof in writing, and such notification may be given subject to
certain conditions determined by the Pledgee. The Pledgee may at any time
discontinue such requirement, by written notification to the Pledgor and the
Company.------------------------------------------------------------------------
2.4 (a) The security constituted by this Pledge shall be continuing and will
extend to the ultimate balance of the Secured Liabilities, regardless of
any intermediate payment or discharge in whole or in part. ---------------
(b) The obligations of the Pledgor hereunder and this security shall not
be affected by any act, omission or circumstance which but for this
provision might operate to release or otherwise exonerate the Pledgor from
its obligations hereunder or affect such obligations including without
limitation and whether or not known to the Pledgor or the Pledgee:--------
(i) any time or waiver granted to the Pledgor under the LTI
Guarantee or composition with the Pledgee;--------------------------
(ii) the taking, variation, extension, compromise, exchange, renewal
or release of, or refusal or neglect to perfect, take up or enforce,
any rights against, or security over assets of, of the Pledgor;-----
(iii) any illegality, invalidity or unenforceability of any
obligations of the Pledgor under the LTI Guarantee or any present or
future law or order of any government or authority purporting to
reduce or otherwise affect any of such obligations, to the intent
that the Pledgor's obligations under this Pledge shall remain in
full force and this Pledge shall be construed accordingly as if
there were no such illegality, unenforceability or invalidity; and--
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(iv) any legal limitation, disability, incapacity or other
circumstances relating to the Pledgor or any amendment to or
variation of the terms of the LTI Guarantee.------------------------
(c) The Pledgor waives any right it may have of first requiring the
Pledgee to proceed against or claim payment from the Pledgor under the LTI
Guarantee or enforce any other security before enforcing this Pledge.-----
(d) A certificate of the Pledgee setting forth the amount due from the
Pledgor under the LTI Guarantee shall, as against the Pledgor, in the
absence of manifest or proven error, be conclusive evidence of such
amount.-------------------------------------------------------------------
(e) Where any discharge in respect of this Pledge, is made in whole or
in part on the faith of any payment, security or other disposition which
is avoided or must be repaid on bankruptcy, liquidation or otherwise
without limitation, this security and the liability of the Pledgor under
this Pledge shall continue as if there had been no such discharge.--------
CLAUSE 3 -----------------------------------------------------------------------
VOTING RIGHTS ------------------------------------------------------------------
The Pledgor shall retain the right to vote and all other rights of control
pertaining to the Shares, provided however that the Pledgor hereby undertakes to
exercise its voting rights fully consistent with the terms and intents and
purposes of this Deed of Pledge and shall not exercise its voting rights in any
manner so as to prejudice or damage or could reasonably be expected to, in any
material respect, prejudice or damage the interests of the Pledgee hereunder,
and provided further that each time if there can be any reasonable doubt as to
whether such prejudice or damage may arise the Pledgor shall consult with the
Pledgee as to the manner in which the voting rights shall be exercised.---------
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CLAUSE 4------------------------------------------------------------------------
WARRANTY------------------------------------------------------------------------
The Pledgor hereby warrants, represents and undertakes that: -------------------
(a) the Shares represent and, until payment in full of all the Secured
Liabilities will continue to represent at least fifty-one (51) per cent.
of the outstanding shares of the Company;---------------------------------
(b) it will not take or permit the taking of any actions whereby the
rights attaching to the Security Assets and/or any other shares in the
Company pursuant to this Deed of Pledge are altered or diluted; ----------
(c) the Shares are fully paid and nonassessable and are not subject to
any pledge or other encumbrance or any options to purchase or similar
rights of any person;
(d) it has the power and authority to create a first right of pledge in
the Shares in favour of the Pledgee and to grant powers of attorney; and--
(e) all resolutions and approvals which are required on the part of the
Pledgor and the Company in order to create a first right of pledge in the
Shares in favour of the Pledgee, have been adopted and granted
respectively.-------------------------------------------------------------
With respect to the Shares referred to in Article 2.2, the above representations
and warranties shall be deemed to have been repeated by the Pledgor to and in
favour of the Pledgee as at the moment such Shares shall be issued by the
Company to the Pledgor.---------------------------------------------------------
CLAUSE 5 -----------------------------------------------------------------------
ACKNOWLEDGEMENT ----------------------------------------------------------------
By executing this Deed of Pledge the Company acknowledges the first right of
pledge in the Shares established in favour of the Pledgee, and it undertakes (i)
to register in the register of
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shareholders of the Company that the Shares have been encumbered with a first
right of pledge in favour of the Pledgee, and (ii) to maintain the above
registration until the Pledgee have confirmed to the Company that this Pledge is
released or terminated by the Pledgee in accordance with the provisions of
Clause 8.-----------------------------------------------------------------------
CLAUSE 6 -----------------------------------------------------------------------
FURTHER ASSURANCE --------------------------------------------------------------
6.1 The Pledgor undertakes towards the Pledgee as follows:--------------------
(a) Upon any request of the Pledgee, the Pledgor shall immediately
render all reasonable assistance in order to enable the Pledgee to
exercise the rights that the Pledgee has in respect of the Shares under
applicable law, this Deed of Pledge and the LTI Guarantee
(b) The Pledgor shall refrain from exercising voting rights attached to
any Shares without the previous written consent of the Pledgee in favour
of any resolutions, (i) having the effect of changing the rights attached
to any of the Shares, or (ii) which prejudice the security under this
Pledge or impair the value of such security. For the avoidance of doubt,
the declaration and payment of a dividend shall be deemed not to prejudice
such security nor impair such value where such declaration and payment are
permitted under the Loan Agreement.---------------------------------------
6.2 The Pledgor hereby instructs and grants to the Pledgee an irrevocable
power of attorney, with the power of substitution, to do all acts and execute
all documents in order to perfect or in any respect implement this Deed of
Pledge on its behalf, and to take any actions and to draft and execute any
additional documents which in the reasonable opinion of the Pledgee are
necessary or desirable for the purpose of properly performing on its behalf this
Deed of Pledge.-----------------------------------------------------------------
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6.3 The Pledgor undertakes upon request of the Pledgee to take any actions and
to draft and execute any additional documents, including the supplementary deed
of pledge attached hereto as Annex A, which in the reasonable opinion of the
Pledgee are necessary for ensuring that the benefit of this Pledge fully extends
to the Pledgee.-----------------------------------------------------------------
CLAUSE 7 -----------------------------------------------------------------------
ENFORCEMENT OF PLEDGE ----------------------------------------------------------
7.1 Immediately upon the occurrence and during the continuance of a Default,
the Pledgee has the right as the agent to exercise all rights and powers of a
holder of a first right of pledge in the Shares, and more in particular to sell
the Shares or any part thereof or take such other action in accordance with
sections 3:248 through 3:252 of the Netherlands Civil Code.---------------------
7.2 The Pledgor hereby expressly agrees that:
(a) the Pledgee is not obliged to give a notice to the Pledgor pursuant
to Section 3:249 and/or 3:252 of the Netherlands Civil Code prior to or
after a sale of the Shares; and that -------------------------------------
(b) only the Pledgee will be entitled in accordance with Section 3:251
of the Netherlands Civil Code to request the president of the district
court to determine that the Shares will not be sold in public.------------
CLAUSE 8------------------------------------------------------------------------
RELEASE; TERMINATION -----------------------------------------------------------
This Pledge on the Shares shall be released by the Pledgee upon submission of
notice to the Pledgor by the Pledgee that the Secured Liabilities have been paid
in full. In addition, the Pledgee is entitled (but shall not be obligated) to
terminate this Pledge in whole or in part by written notice ("opzegging").------
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CLAUSE 9 -----------------------------------------------------------------------
COSTS; APPLICATION OF PROCEEDS -------------------------------------------------
The Pledgee shall apply any moneys received by it pursuant to this Pledge and/or
under the powers hereby conferred, for the benefit of the Pledgee in or towards
the payment of the Secured Liabilities in such order as the Pledgee sees fit.---
CLAUSE 10 ----------------------------------------------------------------------
DELEGATION ---------------------------------------------------------------------
The Pledgee may at any time delegate to any person all or any of its rights,
powers and discretions hereunder on such terms (including power to subdelegate)
as the Pledgee sees fit, and may employ agents, managers, employees, advisers
and others on such terms as the Pledgee sees fit for any of the purposes set out
herein. ------------------------------------------------------------------------
CLAUSE 11 ----------------------------------------------------------------------
INDEMNITY ----------------------------------------------------------------------
(a) The Pledgee shall not be liable for any losses arising in connection with
the exercise or purported exercise of any of its rights, powers and discretions
hereunder, except only in case of gross negligence or wilful misconduct on the
part of the Pledgee;------------------------------------------------------------
(b) The Pledgor will indemnify the Pledgee and every attorney appointed
pursuant hereto in respect of all liabilities and expenses incurred by it, him
or them in good faith in the execution or purported execution of any rights,
powers or discretions vested in it, him or them pursuant hereto, except only in
case of gross negligence or wilful misconduct on the part of the Pledgee. ------
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CLAUSE 12 ----------------------------------------------------------------------
LIABILITY TO PERFORM -----------------------------------------------------------
(a) The Pledgor shall remain liable to observe and perform all of the
conditions and obligations assumed by it in respect of any of the Security
Assets. -----------------------------------------------------------------------
(b) It is expressly agreed that notwithstanding anything to the contrary
herein contained, the Pledgee shall not be required in any manner to perform or
fulfil any obligations of the Pledgor in respect of the Security Assets, or to
make any payment or to make any enquiry as to the nature or sufficiency of any
payment received by it or them, or to present or file any claim or take any
other action to collect or enforce the payment of any amount to which it may
have been or to which it may be entitled hereunder at any time or times.--------
CLAUSE 13 ----------------------------------------------------------------------
NOTICES-------------------------------------------------------------------------
All notices or other communications under or in connection with this Deed of
Pledge shall be given in accordance with Clause [] (Notices) of the above
described LTI Guarantee, the provisions of which shall apply mutatis mutandis to
this Deed of Pledge as if set out in full herein.-------------------------------
CLAUSE 14 ----------------------------------------------------------------------
GOVERNING LAW ------------------------------------------------------------------
This Deed of Pledge shall be governed by the laws of the Netherlands. Any
disputes shall be brought before the competent court in Amsterdam.--------------
The appearer is known to me, notary. ------------------------------------------
- -------------------------------------------THIS DEED ---------------------------
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drawn up to be kept in the notary's custody was executed in Amsterdam on the
date first above written -------------------------------------------------------
Before reading out, a concise summary of the contents of this instrument was
given to the appearer. He then declared that he had noted the contents and did
not want a full reading thereof. Thereupon, after limited reading, this
instrument was signed by the appearer and by me, notary.------------------------
W.s. E.F. Renes, D.J. Ex.
FOR TRUE COPY
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True copy of the deed of pledge of shares
in the capital of the
private company with limited liability:
Lionbridge Technologies B.V.
with statutory seat in Amsterdam
executed on 26 September 1997
by a deputy of Anton A. Voorneman,
civil law notary,
officiating in Amsterdam.
<PAGE>
DEED OF PLEDGE OF SHARES IN THE CAPITAL OF:
LIONBRIDGE TECHNOLOGIES B.V.
This twenty-sixth day of September nineteen hundred and ninety-seven,
appeared before me, Diederick Jan Ex, deputy civil law notary, residing in
Amstelveen, deputizing for Anton Arnaud Voorneman, civil law notary, officiating
in Amsterdam:
Mr. Edwin Foeke Renes, deputy civil law notary, living at 1075 TE
Amsterdam, Sluisstraat 6-I, born in Amsterdam on the twenty-second day of May
nineteen hundred sixty-nine, single, bearer of passport number N38620506, acting
in his capacity as written proxy holder of:
1. Lionbridge Technologies Holdings B.V., a private company with
limited liability, incorporated and existing under the laws of The Netherlands
with statutory seat at Amsterdam and with registered office at 1062 HN
Amsterdam, Overschiestraat 55-5, filed with the Trade Register at the Chamber of
Commerce in Amsterdam under number 33.182715, hereinafter referred to as the
"Pledgor";
2. Silicon Valley Bank, a California-chartered bank with its chief
executive offices at 3003 Tasman Drive, Santa Clara, California 95054, the
United States of America, hereinafter referred to as the "Pledgee"; and
3. Lionbridge Technologies B.V., a private company with limited
liability, incorporated and existing under the laws of The Netherlands, with
statutory seat at Amsterdam and with registered office at 1062 HN Amsterdam,
Overschiestraat 55-5, filed with the Trade Register at the Chamber of Commerce
in Amsterdam under number 33.171474, hereinafter referred to as the "Company".
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The existence of the aforementioned proxies, which will be attached to this
deed, is sufficiently known to me, notary.
The appearer, acting in his aforementioned capacity, declared:
WHEREAS:
The Pledgor and the Pledgee are party to the Loan Agreement hereinafter
described. It is a condition to the Pledgee agreeing to make the facilities
available under the Loan Agreement described hereinafter, that the Pledgor
enters into this Pledge.
NOW THIS DEED WITNESSES as follows:
CLAUSE 1 - DEFINITIONS
1.1 In this Deed of Pledge the following terms have the following
meanings:
"DEED OF PLEDGE" and "Pledge means this deed;
"EVENT OF DEFAULT" means the events constituting an Event of Default
pursuant to Article 8 of the Loan Agreement;
"LOAN AGREEMENT" means the Loan Agreement dated twenty-sixth day of
September nineteen hundred and ninety-seven between the Pledgor and the Company
as Borrowers and the Pledgee as the lender (which term shall include all
variations thereof and supplements thereto from time to time in force);
"SECURED LIABILITIES" means all present and future obligations and
liabilities (whether actual or contingent and whether owed jointly or severally
or in any other capacity whatsoever) of the Borrowers under the Loan Agreement
together with all costs, charges and expenses incurred by the Pledgee in
connection with the protection, preservation or enforcement of its respective
rights under the Loan Agreement or any other document evidencing or securing any
such liabilities on a full indemnity basis;
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"SECURITY ASSETS" means all assets, rights and property of the Pledgor
which are the subject of any security hereby created or purported to be created,
including without limitation, the Shares and all stock, shares, rights, moneys
and property referred to in Clause 2.2 hereof;
"SECURITY PERIOD" means the period beginning on the date hereof and ending
on the date upon which the Pledgee is satisfied and shall have informed the
Pledgor in writing that all the Secured Liabilities which have arisen have been
unconditionally and irrevocably paid and discharged in full or the right of
pledge hereby created has been unconditionally and irrevocably released and
discharged;
"SHARES" means all the shares in the Company owned by the Pledgor which at
the date of this Deed of Pledge are as follows: thirty-six (36) shares with a
nominal value of one thousand Dutch guilders (NLG 1000.--) each, being the
entire issued and paid-up share capital of the Company at the date hereof;
1.2 (a) References to a person shall include its respective
successors and assigns.
(b) Words importing the singular shall include the plural and vice
versa.
(c) Terms not defined in this Deed of Pledge shall have the
meaning given to such terms in the Loan Agreement.
CLAUSE 2 - SECURITY
2.1 As security for the Secured Liabilities the Pledgor hereby grants a
first right of pledge on the Shares ("eerste recht van pand") to the Pledgee,
and the Pledgee hereby accepts such right of pledge in the Shares.
2.2 As security for the Secured Liabilities the Pledgor hereby grants a
first right of pledge ("eerste recht van pand") to the Pledgee, and the Pledgee
hereby accepts such right, in any and all shares which at any time in the future
will be issued by the Company to the Pledgor,
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such pledge being established now for the moment upon which such shares will in
the future be issued by the Company to the Pledgor, without there being any need
at the moment of issue of such shares for the parties hereto to perform any
further act in relation to the pledge hereunder on such shares. The term
"Shares" as used in this Deed of Pledge shall be deemed to include such shares,
unless the context requires otherwise.
2.3 The first right of pledge created pursuant to this Deed hereof
encompasses all rights which the Pledgor now has or may acquire at any time in
the future pertaining to the Shares, including inter alia--dividend rights,
rights to stock bonuses, preemptive rights, rights to distributions out of the
reserves and rights to the remaining balance upon winding-up and any other money
or property accruing or offered at any time by way of redemption, bonus,
preference, option rights or otherwise to or in respect of any of the Shares or
in substitution exchange for any of the Shares provided that all dividends paid
or payable may until the occurrence and during the continuance of an Event of
Default, be paid directly to the Pledgor. Upon the occurrence and during the
continuance of an Event of Default, the Pledgee may require dividends to be
payable to the Pledgee, of which it shall notify the Pledgor and the Company
thereof in writing, and such notification may be given subject to certain
conditions determined by the Pledgee. The Pledgee may at any time discontinue
such requirement, by written notification to the Pledgor and the Company.
2.4 (a) The security constituted by this Pledge shall be continuing
and will extend to the ultimate balance of the Secured Liabilities, regardless
of any intermediate payment or discharge in whole or in part.
(b) The obligations of the Pledgor hereunder and this security shall not
be affected by any act, omission or circumstance which but for this provision
might operate to release or
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otherwise exonerate the Pledgor from its obligations hereunder of affect such
obligations including without limitation and whether or not known to the Pledgor
or the Pledgee:
(i) any time or waiver granted to any of the Borrowers or
composition with the Pledgee;
(ii) the taking, variation, extension, compromise, exchange,
renewal or release of, or refusal or neglect to perfect, take up or
enforce, any rights against, or security over assets of, any of the
Borrowers;
(iii) any illegality, invalidity or unenforceability of any
obligations of the Pledgor under the Loan Agreement or any present or
future law or order of any government or authority purporting to reduce or
otherwise affect any of such obligations, to the intent that the Pledgor's
obligations under this Pledge shall remain in full force and this Pledge
shall be construed accordingly as if there were no such illegality,
unenforceability or invalidity; and
(iv) any legal limitation, disability, incapacity or other
circumstances relating to the Borrowers or any amendment to or variation
of the terms of the Loan Agreement.
(c) The Pledgor waives any right it may have of first requiring the
Pledgee to proceed against or claim payment from the Borrowers under the loan
Agreement or enforce any other security before enforcing this Pledge.
(d) A certificate of the Pledgee setting forth the amount due from the
Borrowers under the Loan Agreement shall, as against the Pledgor, in the absence
of manifest or proven error, be conclusive evidence of such amount.
(e) Where any discharge in respect of this Pledge, is made in whole or
in part on the faith of any payment, security or other disposition which is
avoided or must be repaid on
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bankruptcy, liquidation or otherwise without limitation, this security and the
liability of the Pledgor under this Pledge shall continue as if there had been
no such discharge.
CLAUSE 3 - VOTING RIGHTS
The Pledgor shall retain the right to vote and all other rights of control
pertaining to the Shares, provided however that the Pledgor hereby undertakes to
exercise its voting rights fully consistent with the terms and intents and
purposes of this Deed of Pledge and shall not exercise its voting rights in any
manner so as to prejudice or damage or could reasonable be expected to, in any
material respect, prejudice or damage the interests of the Pledgee hereunder,
and provided further that each time if there can be any reasonable doubt as to
whether such prejudice or damage may arise the Pledgor shall consult with the
Pledgee as to the manner in which the voting rights shall be exercised.
CLAUSE 4 - WARRANTY
The Pledgor hereby warrants, represents and undertakes that:
(a) the Shares represent and, until payment in full of all the Secured
Liabilities will continue to represent all of the outstanding shares of the
Company;
(b) it will not take or permit the taking of any actions whereby the
rights attaching to the Security Assets and/or any other shares in the Company
are altered or diluted;
(c) the Shares are fully paid and non-assessable and are not subject to
any pledge or other encumbrance or nay options to purchase or similar rights of
any person;
(d) it has the power and authority to create a first right of pledge in
the Shares in favour of the Pledgee and to grant powers of attorney; and
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(e) all resolutions and approvals which are required on the part of the
Pledgor and the Company in order to create a first right of pledge in the Shares
in favour of the Pledgee, have been adopted and granted respectively.
With respect to the Shares referred to in Article 2.2, the above
representations and warranties shall be deemed to have been repeated by the
Pledgor to and in favour of the Pledgee as at the moment such Shares shall be
issued by the Company to the Pledger.
CLAUSE 5 - ACKNOWLEDGMENT
By executing this Deed of Pledge the Company acknowledges the first right
of pledge in the Shares established in favour of the Pledgee, and it forthwith
undertakes (i) to register in the register of shareholder of the Company that
the Shares have been encumbered with a first right of pledge in favour of the
Pledgee, and (ii) to maintain the above registration until the Pledgee have
confirmed to the Company that this Pledge is released or terminated by the
Pledgee in accordance with the provisions of Clause 8.
CLAUSE 6 - FURTHER ASSURANCE
6.1 The Pledgor undertakes towards the Pledgee as follows:
(a) Upon any request of the Pledgee, the Pledgor shall immediately
render all reasonable assistance in order to enable the Pledgee to
exercise the rights that the Pledgee have in respect of the Shares under
applicable law, this Deed of Pledge and the Loan Agreement.
(b) The Pledgor shall refrain from exercising voting rights
attached to any Shares without the previous written consent of the Pledgee
in favour of any resolutions, (i) having the effect of changing the rights
attached to any of the Shares, or (ii) which prejudice the security under
this Pledge or impair the value of such security. For the
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avoidance of doubt, the declaration and payment of a dividend shall be
deemed not to prejudice such security nor impair such value where such
declaration and payment are permitted under the Loan Agreement.
6.2 The Pledgor hereby instructs and grants to the Pledgee an
irrevocable power of attorney, with the power of substitution, to do all acts
and execute all documents in order to perfect or in any respect implement this
Deed of Pledge on its behalf, and to take any actions and to draft and execute
any additional documents which in the reasonable opinion of the Pledgee are
necessary or desirable for the purpose of properly performing on its behalf this
Deed of Pledge.
6.3 The Pledgor undertakes upon request of the Pledgee to take any
actions and to draft and execute any additional documents, including the
supplementary deed of pledge attached hereto as Annex A, which in the reasonable
opinion of the Pledgee are necessary for insuring that the benefit of this
Pledge fully extends to the Pledgee.
CLAUSE 7 - ENFORCEMENT OF PLEDGE
7.1 Immediately upon the occurrence and during the continuance of a
Default, the Pledgee has the right as the agent to exercise all rights and
powers of a holder of a first right of pledge in the Shares, and more in
particular to sell the Shares or any part thereof or take such other action in
accordance with sections 3:248 through 3:252 of the Netherlands Civil code.
7.2 The Pledgor hereby expressly agrees that:
(a) the Pledgee is not obliged to give a notice to the Pledgor
pursuant to Section 3:249 and/or 3:252 of the Netherlands Civil Code prior
to or after a sale of the Shares; and that
<PAGE>
-9-
(b) only the Pledgee will be entitled in accordance with Section
3:251 of the Netherlands Civil Code to request the president of the
district court to determine that the Shares will not be sold in public.
CLAUSE 8 - RELEASE; TERMINATION
This Pledge on the Shares shall be released by the Pledgee upon submission
of notice to the Pledgor by the Pledgee that the Secured Liabilities have been
paid in full. In addition, the Pledgee is entitled (but shall not be obligated)
to terminate this Pledge in whole or in part by written notice ("opzegging").
CLAUSE 9 - COSTS; APPLICATION OF PROCEEDS
The Pledgee shall apply any moneys received by it pursuant to this Pledge
and/or under the powers hereby conferred, for the benefit of the Pledgee in or
towards the payment of the Secured Liabilities in such order as the Pledgee sees
fit.
CLAUSE 10 - DELEGATION
The Pledgee may at any time delegate to any person all or any of its
rights, powers and discretions hereunder on such terms (including power to
sub-delegate) as the Pledgee sees fit, and may employ agents, managers,
employees, advisers and others on such terms as the Pledgee sees fit for any of
the purposes set out herein.
CLAUSE 11 - INDEMNITY
(a) The Pledgee shall not be liable for any losses arising in
connection with the exercise or purported exercise of any of its right,
powers and discretions in good faith hereunder, except only in case of
gross negligence or wilful misconduct on the part of the Pledgee;
<PAGE>
-10-
(b) The Pledgor will indemnify the Pledgee and every attorney
appointed pursuant hereto in respect of all liabilities and expenses
incurred by it, him or them in good faith in the execution or purported
execution of any rights, powers or discretions vested in it, him or them
pursuant thereto, except only in case of gross negligence or wilful
misconduct on the part of the Pledgee.
CLAUSE 12 - LIABILITY TO PERFORM
The Pledgor shall remain liable to observe and perform all of the
conditions and obligations assumed by it in respect of any of the
[Document ends]
<PAGE>
Exhibit 10.12
DEED OF PLEDGE OF ACCOUNTS RECEIVABLE
The Undersigned:
1. Lionbridge Technologies B.V., with its statutory seat at Amsterdam,
hereinafter to be referred to as the "Pledgor";
2. Silicon Valley Bank, a California-chartered bank with its chief executive
offices at 3003 Tasman Drive, Santa Clara, the U.S.A., hereinafter to be
referred to as the "Bank";
have agreed as follows:
ARTICLE 1.
1.1. The Pledgor hereby grants to the Bank as further security for the
payment of all amounts that are now due or which may become due at any
time in the future to the Bank on any account whatsoever both within and
outside of current account and whether or not within the scope of
ordinary banking business, a first right of pledge ("eerste recht van
band"), and the Bank hereby accepts such right, in all accounts
receivable which the Pledgor presently has or at any time hereafter may
acquire vis-a-vis any third party, arising from legal relationships that
presently already exist between the Pledgor and any such third party,
including, without limitation, the accounts receivable specified in
Annex A hereto.
1.2. The Pledgor undertakes furthermore to grant to the Bank as further
security for the payment of all amounts that are now due or may become
due at any time in the future to the Bank on any account whatsoever both
within and outside of current account and whether or not within the
scope of ordinary banking business, subject to the terms of this
Agreement, each time by separate deed in the form of Annex B hereto, a
first right of pledge ("eerste recht van pand") in all accounts
receivable which the Pledgor at any time hereafter may acquire vis-a-vis
any third party and which do not arise from legal relationships that
presently already exist between the Pledgor and any such third party.
ARTICLE 2.
2.1. The Pledgor hereby represents that it hold full and exclusive title of
ownership to the accounts receivable which the Pledgor presently has as
mentioned in Article 1.1. hereof, that it has the power to create a
right of pledge therein, and that those accounts receivable have not
been encumbered with any attachment ("beslag"), any right of pledge, or
any rights in rem ("beperkte rechten") other than those created in favor
of the Bank.
<PAGE>
2.2. The Pledgor hereby further represents that it has neither assigned or
encumbered in advance the future accounts receivable arising from legal
relationships that presently already exist between the Pledgor and any
third party, as mentioned in article 1.1. hereof, with any right of
pledge or an other rights in rem. nor assumed any obligations or will
assume any obligations to grant such right of pledge on or assign the
future accounts receivable as mentioned in article 1.2. to any third
party.
2.3. The first right of pledge which is created under and pursuant to this
Deed include all accessory rights ("afhankelijke rechten") and all
ancillary rights ("nevenrechten") to the pledged accounts receivable.
ARTICLE 3.
3.1. The Pledgor undertakes towards the Bank to report as contemplated by
paragraph 6.3 of the loan Agreement dated __________ 1997 between the
Pledgor, Lionbridge Technologies B.V. as Borrowers and the Bank (the
"Loan Agreement"), specifying all accounts receivable which the Pledgor
may have vis-a-vis any third party as referred to in Article 1.2.
hereof, and which the Pledgor has acquired in the period beginning on
the date of the report made immediately prior thereto and ending on the
date of said report. For this purpose the Pledgor shall use the separate
deed which has been attached hereto as Annex B, and the Pledgor hereby
grants to the Bank an irrevocable power of attorney to effect and/or
perfect those additional pledges pursuant to Article 3.2. hereof on
behalf of the Pledgor.
3.2. The right of pledge referred to in Article 3.1. hereof shall be created
at the option of the Bank, either (a) by authenticated deed
("authentieke akte"), in which the accounts receivable specified in the
separate deed which has been attached hereto as Annex B are
incorporated, or (b) by registration of the said separate deed.
ARTICLE 4.
Upon the occurrence and during the continuance of an Event of Default (as
defined in the Loan Agreement), the bank is entitle at all times to give notice
to the debtor of the account receivable concerned of the first right of pledge
created under or pursuant to this Deed.
ARTICLE 5.
5.1. When the Bank has informed the debtor of the account receivable
concerned of the first right of pledge under or pursuant to Article 4
hereof, the Bank shall, during the continuance of an Event of Default,
have the right to collect that account receivable and to take all
measures which it deems necessary in connection therewith.
<PAGE>
5.2. From the moment that the Bank has informed the debtor of the account
receivable concerned pursuant to Article 4 hereof, the Pledgor shall no
longer have the right to collect that account receivable himself.
The Pledgor hereby expressly waives his right as referred to in
Article 246, Paragraph 4, Book 3 of the civil Code, to petition
the Cantonal Judge to authorize him to collect that account
receivable.
5.3. If and insofar as the debtor of the account receivable concerned makes
full or partial payment to the Pledgor after he has been informed by the
Bank pursuant to Article 4 hereof, the Pledgor shall immediately
transfer to the Bank a sum equal to the amount paid by the debtor to the
Pledgor, without prejudice to any remedy which the Bank may have
vis-a-vis the debtor concerned.
5.4. All reasonable costs incurred by the Bank in connection with the
collection of the accounts receivable as a result of exercising its
power pursuant to Article 5.1. hereof, shall be of the account of the
Pledgor, irrespective whether the measures which the Bank has taken in
connection with the collection of those accounts receivable have
resulted or will result in any payment.
5.5. The Bank shall apply the proceeds of the accounts receivable which it
receives upon exercise of its power as referred to in Article 5.1.
hereof, after deduction of all reasonable costs incurred by the Bank,
including all reasonable fees of legal advisors and costs of litigation,
against the obligations described in Article 1 hereof which are secured
by the first right of pledge created under or pursuant to this deed, by
way of crediting the account of the Pledgor with the Bank in the amount
of such proceeds, and shall set off the remaining balance against any
other amounts due by the Pledgor to the Bank which are not secured by
any such right of pledge.
5.6. The Bank does not accept any liability towards the Pledgor if and
insofar the measures taken for the purpose of the collection of the
accounts receivable concerned pursuant to Article 5.1. hereof, do not
result in payment or payment in full of such accounts receivable.
ARTICLE 6.
6.1 If and insofar pursuant to Article 5.1. hereof the Bank has been
authorised to collect the accounts receivable which have been pledged
under and pursuant to this Deed, it shall, during the continuance of an
Event of Default, also have the right to enter into amicable settlements
or court settlements with respect to such accounts receivable with the
debtor of such accounts receivable, subject to the conditions set forth
in this Article 6.
6.2 If and insofar as the Bank contemplates entering into a settlement as
referred to in Article 6.1. hereof with a debtor in connection with an
amount receivable which
<PAGE>
has been pledged under or pursuant to this Deed, the Bank shall inform
the Pledgor in writing in a timely fashion, but in no event later than
three days prior to the date the settlement concerned is entered into.
6.3 The Pledgor has the authority to prevent the Bank from exercising its
right pursuant to Article 6.1. hereof to enter into a settlement with a
debtor of an account receivable that has been pledged, by making full
payment to the Bank of the amount due under the account receivable.
6.4 If and as soon as pursuant to Article 6.3. hereof the Pledgor has
prevented the Bank from concluding a settlement, the right of pledge
hereby created in the account receivable concerned shall immediately
cease to exist.
ARTICLE 7.
Insofar as accounts receivable are due by foreign debtors the Pledgor shall take
all measures and render full assistance as may be required by any exchange
regulations and/or foreign statutory rules or other rules.
ARTICLE 8.
All reasonable costs incurred in connection with the creation of the first right
of pledge, including reasonable costs of drafting and executing the
authenticated deeds ("authentieke akten"), the filing for the purpose of
registration of those deeds, as well as all costs which may arise from the
implementation of this Deed and from foreclosure, are for the account of the
Pledgor.
Thus made and signed in twofold in Waltham, Massachusetts, U.S.A., on 26
September 1997.
- ----------------------- --------------------------------
The Bank The Pledgor
<PAGE>
ANNEX B
SUPPLEMENTARY DEED OF PLEDGE OF ACCOUNTS RECEIVABLE
The Undersigned:
1. Lionbridge Technologies B.V., with its statutory seat at Amsterdam,
hereinafter to be referred to as the "Pledgor";
2. Silicon Valley Bank, a California-chartered bank with its chief executive
offices at 3003 Tasman Drive, Santa Clara, the U.S.A., hereinafter to be
referred to as the "Bank";
WHEREAS:
(a) by a deed of pledge of accounts as receivable dated , 1997 (the "Deed") the
Pledgor has undertaken towards the Bank to create a first right of pledge
in all accounts receivable that the Pledgor has vis-a-vis any third party;
(b) by executing this supplementary deed of pledge of accounts receivable the
Pledgor wishes to perform its undertaking;
have agreed as follows:
1. Upon the terms and conditions of the Deed which shall be deemed
incorporated herein by reference, the Pledgor hereby grants to the Bank a
first right of pledge ("eerste recht van pand"), and the Bank hereby
accepts such right, in all accounts receivable that the Pledgor has
vis-a-vis any third party or will in the future obtain arising from any
legal relationship that presently already exists insofar as those have not
yet prior to the date hereof been pledged to the Bank, including without
limitation the accounts receivable specified in the enclosed Appendix.
2. The Pledgor represents that it holds full and exclusive title of ownership
to the accounts receivable which the Pledgor presently has as mentioned in
Article 1 hereof, that it has the power to create a right of pledge
therein, and that such accounts receivable have not been encumbered with
any attachment ("beslag"), any right of pledge, or any right in rem
("beperkt recht") other than those created in favour of the Bank.
3. The Pledgor hereby further represents that it has not assigned or
encumbered in advance the future accounts receivable from legal
relationships that presently already exist between the Pledgor and any
third party, as mentioned in article 1.1. hereof, with any right of pledge
or any other rights in rem.
<PAGE>
Thus made and signed in twofold in Waltham, Massachusetts, U.S.A., on 26
September, 1997.
- ----------------------- -----------------------
The Bank The Pledgor
<PAGE>
Exhibit 10.13
DEED OF PLEDGE OF ACCOUNTS RECEIVABLE
The Undersigned:
1. Lionbridge Technologies Holdings B.V., a private company with limited
liability with its statutory seat at Amsterdam, hereinafter to be
referred to as the "Pledgor";
2. Silicon Valley Bank, a California-chartered bank with its chief
executive offices at 3003 Tasman Drive, Santa Clara, the U.S.A.,
hereinafter to be referred to as the "Bank";
have agreed as follows:
ARTICLE 1.
1.1 The Pledgor hereby grants to the Bank as further security for the
payment of all amounts that are now due or which may become due at any
time in the future to the Bank on any account whatsoever both within
and outside of current account and whether or not within the scope of
ordinary banking business, a first right of pledge ("eerste recht van
pand"), and the Bank hereby accepts such right, in all accounts
receivable which the Pledgor presently his or at any time hereafter may
acquire vis-a-vis any third party, arising from legal relationships
that presently already exist between the Pledgor and any such third
party, including, without limitation, the accounts receivable specified
in Annex A hereto.
1.2. The Pledgor undertakes furthermore to grant to the Bank as further
security for the payment or all amounts that are now due or may become
due at any time in the future to the Bank on any account whatsoever
both within and outside of current account and whether or not within
the scope of ordinary banking business, subject to the terms of this
Agreement, each time by separate deed in the form of Annex B hereto, a
first right of pledge ("eerste recht van pand") in all accounts
receivable which the Pledgor at any time hereafter may acquire
vis-a-vis any third party and which do not arise from legal
relationships that presently already exist between the Pledgor and any
such third party.
ARTICLE 2.
2.1. The Pledgor hereby represents that it holds full and exclusive title of
ownership to the accounts receivable which the Pledgor presently has is
mentioned in Article 1.1. hereof, that it has the power to create a
right of pledge therein, and that those accounts receivable have not
been encumbered with any attachment ("beslag"), any right of pledge, or
any rights in rem ("beperkte rechiten") other than those created in
favour of the Bank.
2.2. The Pledgor hereby further represents that it has neither assigned or
encumbered in advance the future accounts receivable arising from legal
relationships that presently already exist between the Pledgor and any
third party, as mentioned in article 1.1 hereof, with any right of
pledge or any other rights in rem, nor assumed any obligations or will
<PAGE>
assume any obligations to grant such right of pledge on or assign the
future accounts receivable as mentioned in article 1.2. to any third
party.
2.3. The first right of pledge which is created under and pursuant to this
Deed include all accessory rights ("afhankelijke rechten") and all
ancillary rights ("nevenrechten") to the pledged accounts receivable.
ARTICLE 3.
3.1. The Pledgor undertakes towards the Bank to report, as contemplated by
paragraph 6.3 of (of the Loan Agreement dated ______________________
1997 between the Pledgor, Lionbridge Technologies B.V. as Borrowers and
the Bank (the "Loan Agreement"), specifying all accounts receivable
which the Pledgor may have vis-a-vis any third party as referred to in
Article 1.2. hereof, and which the Pledgor has acquired in the period
beginning on the date of the report made immediately prior thereto and
ending on the date of said report. For this purpose the Pledgor shall
use the separate deed which has been attached hereto as Annex B, and
the Pledgor hereby grants to the Bank an irrevocable power of attorney
to effect and/or perfect those additional pledges pursuant to Article
3.2. hereof on behalf of the Pledgor.
3.2. The right of pledge referred to in Article 3.1. hereof shall be
created, at the option of the Bank, either (a) by authenticated deed
("authenticke aktc"), in which the accounts receivable specified in the
separate deed which has been attached hereto as Annex B are
incorporated, or (b) by registration of the said separate deed.
ARTICLE 4.
Upon the occurence and during the continuance of an Event of Default (as defined
in the loan Agreement), the Bank is entitled at all times to give notice to the
debtor of the account receivable concerned of the first right of pledge created
under or pursuant to this Deed.
ARTICLE 5.
5.1. When the Bank has informed the debtor of the account receivable
concerned of the first right or pledge under or pursuant to Article 4
hereof, the Bank shall, during the continuance of an Event of Default,
have the right to collect that account receivable and to take all
measures which it deems necessary in connection therewith.
5.2. From the moment that the Bank has informed the debtor of the account
receivable concerned pursuant to Article 4 hereof, the Pledgor shall no
longer have the right to collect that account receivable himself.
The Pledgor hereby expressly waives his right as referred to
in Article 246, Paragraph 4, Book 3 of the Civil Code, to
petition the Cantonal Judge to authorise him to collect that
account receivable.
-2-
<PAGE>
5.3. If and insofar as the debtor of the account receivable concerned makes
full or partial payment to the Pledgor after he has been informed by
the Bank pursuant to Article 4 hereof, the Pledgor shall immediately
transfer to the Bank a sum equal to the amount paid by the debtor to
the Pledgor, without prejudice to any remedy which the Bank may have
vis-a-vis the debtor concerned.
5.4. All reasonable costs incurred by the Bank in connection with the
collection of the accounts receivable as a result of exercising its
power pursuant to Article 5.1. hereof, shall be for the account of the
Pledgor, irrespective whether the measures which the Bank has taken in
connection with the collection of those accounts receivable have
resulted or will result in any payment.
5.5. The Bank shall apply nice proceeds of the accounts receivable which it
receives upon exercise of its power as referred to in Article 5.1.
hereof, after deduction of all reasonable costs incurred by the Bank,
including all reasonable fees of legal advisers and costs of
litigation, against the obligations described in Article 1 hereof which
are secured by the first right of pledge created under or pursuant to
this Deed, by way of crediting the account of the Pledgor with the Bank
in the amount of such proceeds, and shall set off the remaining balance
against any other amounts due by the Pledgor to the Bank which are not
secured by any such right of pledge.
5.6. The Bank does not accept any liability towards the Pledgor if and
insofar the measures taken for the purpose of the collection of the
accounts, receivable concerned pursuant to Article 5.1. hereof, do not
result in payment or payment in full of such accounts receivable.
ARTICLE 6.
6.1. If and insofar pursuant to Article 5.1. hereof the Bank has been
authorised to collect the accounts receivable which have been pledged
under and pursuant to this Deed, it shall, during the continuance of an
Event of Default, also have the right to enter into amicable
settlements or court settlements with respect to such accounts
receivable with the debtor of such accounts receivable, subject to the
conditions set forth in this Article 6.
6.2. If and insofar as the Bank contemplates entering into a settlement as
referred to in Article 6.1. hereof with a debtor in connection with an
account receivable which been pledged under or pursuant to this Deed,
the Bank shall inform the Pledgor in writing in a timely fashion, but
in no event later than three days prior to the date the settlement
concerned is entered into.
6.3. The Pledgor has the authority to prevent the Bank from exercising its
right pursuant to Article 6.1. hereof to enter into a settlement with a
debtor of an account receivable that has been pledged, by making full
payment to the Bank of the amount due under the account receivable.
-3-
<PAGE>
6.4. If and as soon as pursuant to Article 6.3. hereof the Pledgor has
prevented the Bank from concluding a settlement, the right of pledge
hereby created in the account receivable concerned shall immediately
cease to exist.
ARTICLE 7.
Insofar as accounts receivable are due by foreign debtors the Pledgor shall take
all measures and render full assistance as may be required by any exchange
regulations and/or foreign statutory rules or other rules.
ARTICLE 8.
All reasonable costs incurred in connection with the creation of the first right
of pledge, including reasonable costs of drafting and executing the
authenticated deeds ("authentieke akten"), the filing for the purpose of
registration of those deeds, as well as all costs which may arise from the
implementation of this Deed and from foreclosure, are for the account of the
Pledgor.
Thus made and signed in twofold in Waltham, Massachusetts U.S.A. on 26th of
September, 1997.
- ------------------------------------- ----------------------------------
The Bank The Pledgor
-4-
<PAGE>
ANNEX B
SUPPLEMENTARY DEED OF PLEDGE OF ACCOUNTS RECEIVABLE
The Undersigned:
1. Lionbridge Technologies Holdings B.V., with its statutory seat at
Amsterdam, hereinafter, to be referred to as the "Pledgor";
2. Silicon Valley Bank, a California-chartered bank with its chief
executive officers at 3003 Tasman Drive, Santa Clara, the U.S.A.,
hereinafter to be referred to as the "Bank";
WHEREAS:
(a) by a deed of pledge of accounts receivable dated , 1997
(the "Deed") the Pledgor has undertaken towards the Bank to create a
first right of pledge in all accounts receivable that the Pledgor
has vis-a-vis any third party;
(b) by executing this supplementary deed of pledge of accounts receivable
the Pledgor wishes to perform its undertaking;
have agreed as follows:
1. Upon the terms and conditions of the Deed which shall be deemed
incorporated herein by reference, the Pledgor hereby grants to the Bank
a First right of pledge ("eerste recht van pand"), and the Bank hereby
accepts such right, in all accounts receivable that the Pledgor has
vis-a-vis any third party or will in the future obtain arising from any
legal relationship that presently already exists insofar as those have
not yet prior to the date hereof been pledged to the Bank, including
without limitation the accounts receivable specified in the enclosed
Appendix.
2. The Pledgor represents that it holds full and exclusive title of
ownership to the accounts receivable which the Pledgor presently has as
mentioned in Article 1 hereof, that it has the power to create a right
of pledge therein, and that such accounts receivable have not been
encumbered with any attachment ("beslag"), any right of pledge, or any
right in rem ("beperkt recht") other than those created in favour of
the Bank.
3. The Pledgor hereby further represents that it has not assigned or
encumbered in advance the future accounts receivable arising from legal
relationships that presently already exist between the Pledgor and any
third party, as mentioned in article 1.1. hereof, with any right of
pledge or any other rights in rem.
-5-
<PAGE>
Thus made and signed in twofold in Waltham, Massachusetts U.S.A., on September
26th 1997.
- ------------------------------------- ----------------------------------
The Bank The Pledgor
-6-
<PAGE>
Exhibit 10.14
Dated 26 September, 1997
LIONBRIDGE TECHNOLOGIES HOLDINGS B.V.
and
RORY COWAN
TO
SILICON VALLEY BANK
LETTER OF DEPOSIT
A & L Goodbody,
Solicitors,
1 Earlsfort Centre,
Hatch Street,
Dublin 2
CDLT1801.085(OL1)(OL2)
1
<PAGE>
To: Silicon Valley Bank,
3003 Tasman Drive,
Santa Clara,
California 95054
acting through its loan production office located at:
40 William Street,
Wellesley,
Massachusetts 02181
Date: 26 September, 1997
COVENANT TO PAY AND SECURITY
1. In consideration of the Bank providing credit facilities to the
Borrowers' under and pursuant to the Loan Agreement dated as of 26 September,
1997 made between (1) LionBridge Technologies Holdings B.V. and LionBridge
Technologies B.V. as Borrowers and (2) the Bank as lender (as the same may be
supplemented, amended, novated or restated from time to time) ("the Loan
Agreement") and for other good and valuable consideration:
(1) Each of LionBridge Technologies Holdings B.V. and Rory Cowan
(together "the Shareholders" and each a "Shareholder") hereby
covenants with the Bank to pay and discharge to the Bank on
demand any and all sums and liabilities whether actual or
contingent, whether now existing or hereafter arising, whether
or not for the payment of money and including without
limitation any obligation or liability to pay damages which
are or may become payable or owing by the Borrowers' to the
Bank pursuant to, or in connection with the Loan Agreement as
and when the same become due ("the Secured Liabilities");
(2) Each Shareholder has, at the Bank's request, deposited with
the Bank the certificates and documents specified in the
schedule hereto (the "DOCUMENTS") in respect of the shares
held by it in the capital of Lionbridge Technologies Ireland
("the Company") (hereinafter referred to as "the Securities")
and the Documents shall be held by the Bank upon the following
terms and conditions:-
(a) the Documents and the Securities, every accretion
thereto and all interest, dividends, return capital,
bonus, additions and rights appertaining thereto
shall be and remain a collateral and continuing
security for the Secured Liabilities (including legal
costs occasioned by or incidental to the security
referred to in this Letter or to the enforcement of
any such security) and the terms of this Letter shall
continue in full force and effect until final
repayment in full and total satisfaction of the
Secured Liabilities;
2
<PAGE>
(b) if all Secured Liabilities are not fully discharged
following demand each Shareholder hereby authorises
the Bank to sell all or any of the Securities,
accretions, additions and rights as it may think fit
without further notice to it and to apply the net
proceeds of such sales in or towards repayment of the
moneys due by it hereunder crediting it with the
balance (if any) or to transfer the Securities into
its own name and in relation to any transfer of the
Securities contemplated hereby each Shareholder
hereby expressly waives any preemption rights to
which it is entitled pursuant to the Articles of
Association of the Company or otherwise and each
Shareholder shall cooperate with the Bank so as to
assist in any transfer of the Securities;
(c) any dividends paid or payable on the Securities shall
be paid to the Shareholder unless the Secured
Liabilities are not fully discharged following demand
when such dividends shall be applied by the Bank
towards satisfaction of the Secured Liabilities;
(d) upon discharge in full of the Secured Liabilities the
Bank will at the request and expense of the
Shareholders release the Securities and the Documents
to the Shareholders;
(e) Each Shareholder hereby authorises the Bank at its
discretion at any time to vary, exchange, abstain
from perfecting or release any other securities held
now or hereafter by the Bank on account of the moneys
intended to be hereby secured.
REPRESENTATIONS AND WARRANTIES
2. Each Shareholder hereby represents and warrants to the Bank that:
(1) the Securities comprise the entire issued share capital of the
Company;
(2) it or, as the case may be, he is the beneficial owner of the
Securities free from all liens, mortgages, charges or other
encumbrances whatsoever or claims whatsoever;
(3) that the Securities have been duly authorised, validly issued
and are fully paid and nonassessable;
(4) it or, as the case may be, he has full power to enter into and
perform and it will perform its obligations under this Letter
and all necessary actions to enable it to deposit the
Documents and to execute, deliver and perform this Letter have
been taken and it has obtained and will maintain in full force
and effect all necessary consents, licenses and authorities;
3
<PAGE>
(5) the execution and delivery of this Letter will not contravene
any provision of law now in effect;
(6) no consent or approval of or exemption by any governmental or
public body or authority is required.
COVENANTS OF THE SHAREHOLDERS
3. Each Shareholder hereby covenants with the Bank that it and, as the
case may be, he shall:-
(1) (other than Permitted Liens) not create or permit to arise or
exist any lien mortgage charge or other encumbrance whatsoever
over or affecting any of the Securities or transfer or attempt
to transfer the Securities other than pursuant to the terms
hereof or of the Loan Agreement;
(2) pay to the Bank, upon demand, the amount of the Secured
Liabilities;
(3) procure forthwith (if required by the Bank) such amendments to
the Articles of Association of the Company as may be required
to permit, without restriction or delay, the registration of
the Securities in the name of the Bank and/or its nominee or
any transferee to which the Securities are sold pursuant to
clause 1(2)(b) hereof;
(4) procure that the Company shall not issue any shares to any
person other than the Bank without the prior written consent
of the Bank and that in the event that such consent is given
it and, as the case may be, he shall procure such shares shall
be mortgaged in favour of the Bank on terms similar to those
contained in this Letter;
(5) take such action as the Bank may, in its absolute discretion,
direct in the event that it becomes possible (whether under
the terms of issue of the Securities, a reorganisation or
otherwise) to convert or exchange the Securities or have them
repaid or in the event that any offer to purchase is made in
respect of the Securities or any proposal is made for varying
or abrogating any rights attaching to them.
(6) in the event of a rights issue or bonus issue or other issue
of additional shares in the capital of the Company, forthwith
deliver to and deposit with the Bank all certificates and
documents relating to such additional shares together with
executed and undated stock transfer forms relating thereto to
be held by the Bank upon the terms of this Letter to secure
the Secured Liabilities hereunder.
POWER OF ATTORNEY
4. For good and valuable consideration each Shareholder hereby irrevocably
appoints the Bank the attorney for it or him and in its or his name or
otherwise and on its or his behalf
4
<PAGE>
to sign, execute, seal, deliver, complete or otherwise perfect any
deed, assurance, agreement, instrument or to do any act or thing which
may be required or which may be deemed proper for the exercise of the
Bank of any of its or his powers and rights PROVIDED THAT the powers
conferred on the Bank pursuant to this appointment shall not become
exercisable unless and until the Secured Liabilities become due and
payable by the Borrowers and are not paid.
NOTICES
5. The provisions of Clause 10 of the Loan Agreement shall apply mutatis
mutandis to this Letter as if written out in full herein.
MISCELLANEOUS
6. (1) The provisions of Clause 12.1 of the Loan Agreement shall
apply mutatis mutandis to this Letter as if written out in
full herein.
(2) This Letter (including the documents and instruments referred
to herein) supersedes all prior representations, arrangements,
understandings and agreements between the parties hereto
relating to the subject matter hereof and sets forth the
entire complete and exclusive agreement and understanding
between the parties hereto relating to the subject matter
hereof; no party has relied on any representation,
arrangement, understanding or agreement (whether written or
oral) not expressly set out or referred to in this Letter.
(3) The terms of this Letter may not be released, discharged,
supplemented, amended, varied or modified in any manner except
by an instrument in writing signed by a duly authorised
officer or representative of each of the parties hereto.
(4) The rights of any party hereto shall not be prejudiced or
restricted by any indulgence or forbearance extended to
another party or other parties and no waiver by any party in
respect of any breach shall operate as a waiver in respect of
any subsequent breach.
(5) No failure or delay by the Bank in exercising any right or
remedy shall operate as a waiver thereof nor shall any single
or partial exercise or waiver of any right or remedy prejudice
its further exercise or the exercise of any other right or
remedy.
(6) Each party to this Agreement shall pay its own costs of and
incidental to this Letter.
(7) This Letter may be executed in more than one counterpart, each
of which shall be deemed to constitute an original, and shall
become effective when one or more counterparts have been
signed by all of the parties hereto and such a counterpart (so
signed) has been delivered to each of the parties hereto.
5
<PAGE>
(8) Each Shareholder shall from time to time execute such further
assurances and do such things and afford to the Bank such
assistance as the Bank may reasonably require for the purpose
of vesting in the Bank or its nominee the full benefit of any
assets, rights and benefits that have been transferred or are
to be transferred to the Bank under this Letter (including, so
far as consistent with the terms of this Letter, the benefit
of any rights accruing against third parties, whether such
rights have or have not accrued or become enforceable at the
date of signature hereof) and the registration thereof.
(9) If any term or provision in this Agreement shall be held to be
illegal or unenforceable, in whole or in part, such term or
provision or part shall to that extent be deemed not to form
part of this Agreement and the enforceability of the remainder
of this Agreement shall not be affected.
GOVERNING LAW AND JURISDICTION
7. (1) This Letter and any relationship created hereby shall in all
respects be governed by and construed in accordance with Irish
law for the exclusive benefit of the Bank, and each party
agrees to submit to the nonexclusive jurisdiction of the Irish
Courts as regards any claim or matter arising under this
Letter.
(2) Each Shareholder hereby appoints LionBridge Technologies
Ireland of Grattan House, Temple Road, Blackrock, Co. Dublin
for the purpose of service of proceedings in connection with
this Letter. Any writ, judgement or other notice of legal
process issued out of the Irish courts shall be sufficiently
served if delivered to such agent at its address for the time
being. The Shareholder undertakes not to revoke the authority
of the above agent as if such agent ceases to act, the
Shareholder shall promptly appoint another agent and advise
the Bank accordingly.
DEFINITIONS
8. Terms not otherwise defined herein shall bear the meaning given thereto
in the Loan Agreement.
6
<PAGE>
SCHEDULE
DOCUMENTS
1. Share Certificates in respect of 2,001,000 issued Ordinary Shares of
IR(pound)1 each in the capital of the Company.
2. Executed undated Stock Transfer Forms transferring the Securities to
the Bank or its nominee.
3. Share register of the Company.
7
<PAGE>
SIGNED, SEALED and DELIVERED
by
- --------------------------------------------
Rory J. Cowan
duly authorised signatory of
LIONBRIDGE TECHNOLOGIES HOLDINGS B.V.
in the presence of:-
- --------------------------------------------
Name: David M. DiLoreto
Address: c/o Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, MA 02110
Occupation: Corporate Paralegal
SIGNED, SEALED and DELIVERED
by
- --------------------------------------------
Rory J. Cowan
in the presence of:-
- --------------------------------------------
Name: David M. DiLoreto
Address : c/o Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, MA 02110
Occupation: Corporate Paralegal
ACKNOWLEDGED for and on behalf
of SILICON VALLEY BANK:-
- --------------------------------------------
8
<PAGE>
Exhibit 10.15
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of September ____, 1997 between
LIONBRIDGE TECHNOLOGIES, INC., a Delaware corporation with its principal place
of business at 950 Winter Street, #4300, Waltham, Massachusetts 02154 (the
"COMPANY") and SILICON VALLEY BANK, a California chartered bank with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
(the "BANK").
W I T N E S S E T H :
WHEREAS, Lionbridge Technologies Holdings, B.V., Lionbridge
Technologies B.V. (the "BORROWERS") and the Bank, have entered into to a Loan
Agreement of even date herewith (as the same may be amended, supplemented,
extended or restated from time to time, the "LOAN AGREEMENT"), providing for
extensions of credit to be made by the Bank to the Borrowers;
WHEREAS, the Company has entered into to a Guarantee in favor
of the Bank of even date herewith (as the same may be amended, supplemented,
extended or restated from time to time, the "GUARANTEE"), whereby the Company
guarantees all obligations owed to the Bank by the Borrowers arising under the
Loan Agreement including, without limitation, the Borrowers' obligations under
the promissory note issued by the Borrowers to the Bank pursuant to the Loan
Agreement (as the same may be amended, supplemented, extended or restated from
time to time, the "NOTE");
WHEREAS, in order to induce the Bank to enter into the Loan
Agreement and the Guarantee, the Company has agreed to grant a continuing
security interest in and to the Collateral (as defined below) to secure its
obligations under the Guarantee;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS
Except for the terms defined below or elsewhere in this Agreement or
the Exhibits hereto, the terms used herein shall have the respective meanings
provided for in the Loan Agreement and Guarantee:
"COLLATERAL" has the meaning set forth in SCHEDULE C.
"EVENT OF DEFAULT" means any breach or failure to perform by
the Company under the Guarantee.
"PERFECTION CERTIFICATE" means a certificate substantially in
the form of Exhibit A hereto, completed with the schedules and attachments
contemplated thereby to the satisfaction of the Bank, and duly executed by the
chief financial officer of the Company.
"PERMITTED FINANCING STATEMENTS" means any financing
statements naming the Company as Debtor filed (i) solely pursuant to Section
9-408 of the UCC or (ii) with respect to a Permitted Lien.
"PERMITTED LIENS" means the following:
<PAGE>
-2-
(a) Any Liens existing on the Closing Date and disclosed in
Schedule A of the Loan Agreement or arising under the Loan Agreement or
the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrowers' Books in accordance with GAAP, PROVIDED the
same have no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or held by the
Company to secure the purchase price of such Equipment or indebtedness
incurred solely for the purpose of financing the acquisition of such
Equipment, or (ii) existing on such Equipment at the time of its
acquisition, PROVIDED that the Lien is confined solely to the property
so acquired and improvements thereon, and the proceeds of such
Equipment;
(d) Leases or subleases and licenses or sublicenses granted to
others in the ordinary course of the business of the Company not
interfering in any material respect with the business of the Company
and any interest or title of a lessor, licensor or under any lease or
license to the Company provided that such leases, subleases, licenses
and sublicenses do not prohibit the grant of the security interest
granted hereunder; and
(e) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (c) above, PROVIDED that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase.
"SECURED OBLIGATIONS" means any and all obligations of the
Company to the Bank, whether now existing or hereafter incurred or
created, joint or several, direct or indirect, absolute or contingent,
due or to become due, matured or unmatured, liquidated or unliquidated,
arising by contract, operation of law or otherwise, including, without
limitation, the obligations of the Company under the Guarantee.
"SECURITY INTERESTS" means the security interests granted
pursuant to SECTION 3, as well as all other security interests created
or assigned as additional security for the Secured Obligations pursuant
to the provisions of this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants as follows:
(a) The Company has good title to all of the Collateral, free and clear
of any Liens other than the Permitted Liens and the Security Interests.
(b) The Company has not performed any acts which might prevent the Bank
from enforcing any of the terms of this Agreement or which would limit the Bank
in any such enforcement. Other than the Permitted Financing Statements and
financing statements or other similar or equivalent documents or instruments
with respect to the Security Interests, no financing statement, mortgage,
security agreement or similar or equivalent document or instrument covering all
or any part of the Collateral is on file or of record in any jurisdiction in
which such filing or recording would be effective to perfect a Lien on such
Collateral. No Collateral is in the possession of any Person (other than the
Company) asserting any claim thereto or security interest therein, except that
the Bank or its designee may have possession of Collateral as contemplated
hereby.
<PAGE>
-3-
(c) Prior to the first borrowing by the Borrowers under the Loan
Agreement, the Company shall deliver the Perfection Certificate to the Bank. The
information set forth therein shall be correct and complete in all material
respects.
(d) When UCC financing statements in appropriate form have been filed
in the offices specified in the Perfection Certificate to the extent that a
security interest therein may be perfected by filing pursuant to the UCC, the
Security Interests shall constitute valid and perfected security interests in
the Collateral (except Inventory in transit), in each case prior to all other
Liens and rights of others therein.
(e) Except for the filings referred to in paragraph (d) above, no
authorization, approval or other action by, and no notice of filing with, any
Governmental Authority that has not been received, taken or made is required (i)
for the grant by the Company of the Security Interests or for the execution,
delivery or performance of this Agreement by the Company, (ii) for the
perfection and maintenance of the Security Interests as first priority security
interests and liens, or (iii) for the exercise by the Bank of the rights or the
remedies in respect of the Collateral pursuant to this Agreement.
(f) The Inventory and Equipment are insured in accordance with the
requirements set forth in Section 4(i) of this Security Agreement.
SECTION 3. THE SECURITY INTERESTS
(a) In order to secure the full and punctual payment of the Secured
Obligations in accordance with their respective terms, the Company hereby
hypothecates, collaterally assigns, pledges and grants to the Bank a continuing
security interest and lien in and to all right, title and interest of the
Company in the Collateral, whether now owned or existing or hereafter acquired
or arising and regardless of where located
(b) Notwithstanding the foregoing, the Collateral shall not be deemed
to include any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; any patents,
trademarks, servicemarks and applications therefor; any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing.
(c) The Security Interests are granted as security only and shall not
subject the Bank to, or transfer or in any way affect or modify, any obligation
or liability of the Company with respect to any of the Collateral or any related
transaction.
SECTION 4. FURTHER ASSURANCES; COVENANTS
The Company covenants as follows:
(a) The Company will not change (i) the locations of its principal
place of business or its chief executive office, (ii) its federal tax
identification number, (iii) the locations where it keeps or holds any
Collateral or related records from the applicable locations described in the
Perfection Certificate, or (iv) its name, identity or corporate structure in any
manner, without giving the Bank 30 days prior written notice. In the event of
any such change, the Company shall, at its cost and expense, cooperate with the
Bank and cause to be filed or recorded additional financing statements,
amendments or supplements to existing financing statements, continuation
statements or other documents required to be recorded or filed in order to
perfect and protect the Security Interests. The Company shall not, in any event,
make any such change if such change would cause the Security Interests in any
Collateral
<PAGE>
-4-
to lapse or cease to be perfected.
(b) The Company will, from time to time, at its expense, execute,
deliver, file and record any statement, assignment, instrument, document,
agreement or other paper and take any other action (including, without
limitation, any filings of financing or continuation statements under the UCC)
that the Bank may from time to time reasonably determine to be necessary or
desirable in order to create, preserve, upgrade in rank (to the extent required
hereby), perfect, confirm or validate the Security Interests or to enable the
Bank to (i) obtain the full benefits of this Agreement, or (ii) to exercise and
enforce any of its rights, powers and remedies hereunder with respect to any of
the Collateral. At the Bank's request, the Company will use reasonable efforts
to obtain the consent of any Person that is necessary or desirable to effect the
pledge hereunder of any right, title, claims and benefits now owned or hereafter
acquired by the Company in and to any General Intangible. To the extent
permitted by law, the Company hereby authorizes the Bank to execute and file
financing statements or continuation statements without the Company's signature
appearing thereon. The Company agrees that a carbon, photographic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. The Company shall pay the costs of, or incidental to, any
recording or filing of any financing or continuation statements concerning the
Collateral.
(c) If any warehouseman, bailee or any of the Company's agents or
processors possesses or controls any Collateral, the Company shall, upon the
request of the Bank, notify such warehouseman, bailee, agent or processor of the
Security Interests created hereby and to hold all such Collateral for the Bank's
account subject to the Bank's instructions.
(d) The Company shall keep complete and accurate books and records
relating to the Collateral, and stamp or otherwise mark them in such manner as
the Bank may reasonably request in order to reflect the Security Interests.
(e) The Company will promptly deliver and pledge each Instrument to the
Bank, appropriately endorsed to the Bank without recourse, provided that so long
as no Event of Default shall have occurred and be continuing it, the Company may
retain for collection in the ordinary course any Instruments it receives in the
ordinary course of business and the Bank shall, promptly upon request of the
Company, make appropriate arrangements for making any other Instrument pledged
by the Company available to it for purposes of presentation, collection or
renewal (any such arrangement to be effected, to the extent deemed appropriate
by the Bank, against trust receipt or like document).
(f) The Company shall use its best efforts to cause to be collected
from its account debtors, as and when due, any and all amounts owing under or on
account of each Account (including, without limitation, Accounts which are
delinquent, such Accounts to be collected in accordance with lawful collection
procedures and the Company's standard procedures) and apply forthwith upon
receipt all such amounts so collected to the outstanding balance of such
Account, except that, unless an Event of Default has occurred and is continuing
and the Bank is exercising its rights hereunder to collect Accounts, the Company
may allow in the ordinary course of business as adjustments to amounts owing
under its Accounts (i) an extension or renewal of the time of payment, or
settlement for less than the total unpaid balance, which the Company finds
appropriate in accordance with prudent business judgment and (ii) a refund or
credit due as a result of returned or damaged merchandise, all in accordance
with the Company's ordinary course of business consistent with its historical
collection practices. The costs and expenses (including, without limitation,
reasonable attorney's fees) of collection, whether incurred by the Company or
the Bank, shall be borne by the Company.
(g) Upon the occurrence and during the continuance of any Event of
Default, upon the request of the Bank, the Company will promptly notify (and the
Company hereby authorizes the Bank so to notify) each account debtor in respect
of any Account or Instrument that such Collateral has been assigned to the Bank,
and that any payments due or to become due in respect of such Collateral
<PAGE>
-5-
are to be made directly to the Bank or any designee of the Bank. Following such
request of the Bank, the Company shall hold all proceeds from collection of
Accounts as trustee for the Bank (without commingling the same with other funds
of the Company) and shall turn the same over to the Bank immediately upon
receipt in the form received (duly endorsed by the Company to the Bank, if
required). The Bank shall apply the proceeds of such collections it receives to
the Secured Obligations in accordance with SECTION 8 of this Agreement. The
application of the proceeds of such collections shall be conditional upon the
final payment in cash of the items so collected. If any item is not so paid or
the Bank is required for any reason to return any payment made, the Bank may
reverse any credit given in respect of such item.
(h) Without the prior written consent of the Bank, the Company will not
(a) sell, lease, exchange, assign or otherwise dispose of, or grant any option
with respect to, any Collateral except in accordance with the exceptions set
forth in Section 7.1 of the Loan Agreement as if they applied to Company; or (b)
create, incur or suffer to exist any Lien with respect to any Collateral, except
for Permitted Liens and the Security Interests.
(i) The Company will maintain, with financially sound and reputable
companies, insurance policies in accordance with the standards set forth in
Section 6.6 in the Loan Agreement as if they applied to the Company (A) insuring
all Inventory and Equipment against loss by fire, explosion, theft and other
casualties reasonably satisfactory to the Bank and (B) insuring the Company and
the Bank against liability for personal injury and property damage relating to
Inventory and Equipment, such policies to be in such form and amounts and having
such coverage as is reasonably satisfactory to the Bank, with losses payable to
the Bank as sole loss payee. All such insurance shall (A) provide that no
termination, cancellation, material reduction in amount or material change in
coverage thereof shall be effective until at least 30 days after receipt by the
Bank of written notice thereof, (B) in the case of the policies referenced in
clause (ii) above, name the Bank as additional insured and (C) be otherwise
reasonably satisfactory to the Bank.
(j) The Company will keep each item of Equipment in good order and
repair and will not use the same in violation of law or any policy of insurance
thereon.
(k) The Company will, promptly upon request, provide to the Bank all
information and evidence it may reasonably request concerning the Collateral
(including without limitation, the names, addresses, face value, and date of
invoices for each debtor obligated on each Account) to enable the Bank to
enforce the provisions of this Agreement.
SECTION 5. GENERAL AUTHORITY
The Company hereby irrevocably appoints the Bank its true and lawful
attorney, with full power of substitution, in the name of the Company, the Bank,
or otherwise, for the sole use and benefit of the Bank, but at the Company's
expense, to the extent permitted by law to exercise, at any time, and from time
to time, while an Event of Default has occurred and is continuing, all or any of
the following powers with respect to all or any of the Collateral:
(a) to endorse the Company's name on any checks, notes,
acceptances, money orders, drafts, filings or other forms of payment or
security that may come into the Bank's possession,
(b) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due thereon or by virtue
thereof,
(c) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
<PAGE>
-6-
(d) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, as fully and effectively as if
the Bank were the absolute owner, and
(e) to extend the time of payment thereof and to make any
allowance and other adjustments with reference thereto;
PROVIDED that the Bank shall give the Company not less than ten days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral, except any Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market. The Company agrees that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 6. REMEDIES UPON EVENT OF DEFAULT
(a) If any Event of Default has occurred and is continuing, the Bank
may exercise all rights of a secured party under the UCC (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
the Bank may, without being required to give any prior notice, except as herein
provided or as may be required by law, sell any and all of the Collateral at
public or private sale, for cash, upon credit or for future delivery, and at
such prices as the Bank may deem satisfactory. The Bank may be the purchaser of
any or all of the Collateral so sold at any public sale (or, if the Collateral
is of a type customarily sold in a recognized market or is of a type which is
the subject of widely distributed standard price quotations, at any private
sale) and thereafter hold the same, absolutely, free from any right or claim of
whatsoever kind. The Company will execute and deliver such documents and take
such other action as the Bank deems necessary or advisable in order that any
such sale may be made in compliance with law. Upon any such sale the Bank shall
have the right to deliver, assign and transfer to the purchaser the Collateral
so sold. Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely, free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Company. The Company, to the extent
permitted by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale required by SECTION 5 shall (i) in
case of a public sale, state the time and place fixed for such sale, and (ii) in
the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time(s) within ordinary
business hours and at such places as the Bank may fix in the notice of such
sale. At any such sale the Collateral may be sold in one lot as an entirety or
in separate parcels, as the Bank may determine. The Bank shall not be obligated
to make any such sale pursuant to any such notice. The Bank may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Bank until
the selling price is paid by the purchaser thereof, but the Bank shall not incur
any liability in case of the failure of such purchaser to take up and pay for
the Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Bank, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) For the purpose of enforcing its rights and remedies under this
Agreement, the Bank may (i) require the Company to, and the Company agrees that
it will, at its expense and upon the request of the Bank, forthwith assemble all
or any part of the Collateral as directed by the Bank and make it available at a
place designated by the Bank which is reasonably convenient to the Bank and the
Company, (ii) to the extent permitted by law, enter, with or without process of
law and without breach of the peace, any premise where any of the Collateral may
be located, and without charge or liability to it seize and remove such
Collateral from such premises, (iii) have access to and use the
<PAGE>
-7-
Company's books and records relating to the Collateral and (iv) prior to the
disposition of the Collateral, store or transfer it without charge in or by
means of any storage or transportation facility owned or leased by the Company,
process, repair or recondition it or otherwise prepare it for disposition in any
manner and to the extent the Bank deems appropriate to preserve and enhance its
value and, in connection with such preparation and disposition, use, as a
licensee (or if no decline in the value of the Collateral would result,
otherwise) without charge any trademark, trade name, copyright, patent or
technical process used by the Company.
SECTION 7. LIMITATION ON DUTY OF BANK IN RESPECT OF COLLATERAL.
Beyond the safe custody thereof in accordance with law, the Bank shall
have no duty as to any Collateral in the possession or control of the Bank or
any agent or bailee, or any income thereon, or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Bank shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equivalent to that which it accords its own property of like
nature, and shall not be liable or responsible for any loss or damage to any of
the Collateral, or for any diminution in the value thereof, by reason of the act
or omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by the Bank in good faith and in the absence of gross
negligence.
SECTION 8. APPLICATION OF PROCEEDS
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral shall be applied by the Bank in the following order of priorities:
FIRST, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Bank and its
agents and counsel in connection therewith, and all expenses,
liabilities and advances incurred or made by the Bank in connection
therewith, and any other unreimbursed expenses for which the Bank is to
be reimbursed pursuant to the Guarantee, or SECTION 9 hereof and unpaid
fees owing to the Bank under the Loan Agreement;
SECOND, to the payment of accrued but unpaid interest on the
Secured Obligations;
THIRD, to the payment of unpaid principal of the Secured
Obligations;
FOURTH, to the payment of all other Secured Obligations, until
all Secured Obligations shall have been paid in full; and
FINALLY, to payment to the Company or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
The Bank may make distributions hereunder in cash or in kind or in any
combination thereof.
<PAGE>
SECTION 9. EXPENSES
In the event that the Company fails to comply with the provisions of
the Guarantee or this Agreement, such that the value of any Collateral or the
validity, perfection, rank or value of any Security Interest is thereby
diminished or potentially diminished or put at risk, the Bank may effect such
compliance on behalf of the Company, and the Company shall reimburse the Bank
for the costs thereof within two Business Days of demand therefor. All insurance
expenses and all reasonable expenses of protecting, storing, warehousing,
appraising, insuring, handling, maintaining, and shipping the Collateral, any
and all excise, property, sales, and use taxes imposed by any state, federal, or
local authority on any of the Collateral, or in respect of the sale or other
disposition thereof, shall be borne by the Company; and if the Company fails to
promptly pay any portion thereof when due, the Bank may, at its option, but
shall not be required to, pay the same and charge the Company's account
therefor, and the Company agrees to reimburse the Bank therefor on demand. All
sums so paid or incurred by the Bank for any of the foregoing and any and all
other sums for which the Company may become liable hereunder and all reasonable
costs and expenses (including attorneys' fees, legal expenses and court costs)
reasonably incurred by the Bank in enforcing or protecting the Security
Interests or any of their rights or remedies under this Agreement, shall,
together with interest thereon until paid at the rate applicable to advances
made under the Loan Agreement, be additional Secured Obligations hereunder.
SECTION 10. TERMINATION OF SECURITY INTERESTS
Upon the indefeasible payment in full of all Secured Obligations and
the termination of any obligation of the Bank to make Advances or other Credit
Extensions under the Loan Agreement, the Security Interests shall terminate and
all rights to the Collateral shall revert to the Company, and this Security
Agreement shall terminate and no longer be of any force and effect.
SECTION 11. NOTICES
All notices, approvals, requests, demands and other communications
hereunder shall be given in accordance with the Guarantee.
SECTION 12. WAIVERS, NON-EXCLUSIVE REMEDIES
No failure on the part of the Bank to exercise, and no delay in
exercising and no course of dealing with respect to, any right under the Loan
Agreement or this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise by the Bank of any right under the Guarantee preclude
any other or further exercise thereof or the exercise of any other right. The
rights in this Agreement and the Loan Agreement are cumulative and are not
exclusive of any other remedies provided by law.
SECTION 13. SUCCESSORS AND ASSIGNS
This Agreement is for the benefit of the Bank and its successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the indebtedness
so assigned, may be transferred with such indebtedness. This Agreement shall be
binding on the Company and its successors and assigns.
SECTION 14. CHANGES IN WRITING
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Company and
the Bank.
<PAGE>
-9-
SECTION 15. SEVERABILITY
If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Bank in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (b) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 16. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
SECTION 17. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE BORROWERS AND BANK HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN
THE COMMONWEALTH OF MASSACHUSETTS, BUT IF FOR ANY REASON THE BANK IS DENIED
ACCESS TO SUCH COURTS, THEN IN SUCH EVENT THE STATE AND FEDERAL COURTS LOCATED
IN THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA. BORROWERS AND BANK EACH
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
[Page Intentionally Left Blank]
<PAGE>
-10-
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
LIONBRIDGE TECHNOLOGIES, INC.
By:
------------------------------------------
Name: Stephen J. Lifshatz
Title: Chief Financial Officer
SILICON VALLEY BANK
By:
------------------------------------------
Name: Andrew H. Tsao
Title: Vice President
<PAGE>
EXHIBIT A
PERFECTION CERTIFICATE
OF
LIONBRIDGE TECHNOLOGIES, INC.
The undersigned, the chief financial officer of Lionbridge
Technologies, Inc., a Delaware corporation (the "COMPANY"), hereby certifies to
Silicon Valley Bank (the "BANK") with reference to the Security Agreement dated
as of August ___, 1997 between the Company and the Bank (the terms defined
therein being used herein as therein defined) as follows:
1. NAMES. (a) The exact corporate name of the Company as it appears in
its certificate of incorporation is as follows:
Lionbridge Technologies, Inc.
(b) Set forth below is each other corporate name the Company
has had since its organization, together with the date of the relevant change:
(c) Set forth below is a description of each change by the
Company of its identity or corporate structure in any way within the past five
years:
(d) The following is a list of all other names (including
trade names or similar appellations) used by the Company or any of its divisions
or other business units at any time during the past five years:
(e) The Federal tax identification number of the Company is as
follows:
2. CURRENT LOCATIONS. (a) The chief executive office of the Company is
located at the following address:
(b) The following are all the locations where the Company
maintains any books or records relating to any Accounts:
<PAGE>
-2-
<TABLE>
<CAPTION>
Mailing
Name Address City State
---- ------- ---- -----
<S> <C> <C> <C>
</TABLE>
(c) The following are all the locations where Equipment and
Inventory of the Company are located:
<TABLE>
<CAPTION>
Mailing
Name Address City State
---- ------- ---- -----
<S> <C> <C> <C>
</TABLE>
(d) The following are all the places of business of the
Company not identified above:
<TABLE>
<CAPTION>
Mailing
Name Address City State
---- ------- ---- -----
<S> <C> <C> <C>
</TABLE>
3. PRIOR LOCATIONS. Set forth below is the information required by
subparagraphs (a), (b), (c) and (d) of paragraph 2 with respect to each location
or place of business maintained by the Company at any time during the past five
years:
4. UNUSUAL TRANSACTIONS. All Accounts have been originated by the
Company and all Equipment has been acquired by the Company in the ordinary
course of its business.
5. FILE SEARCH REPORTS. Attached hereto as Schedule A is a true copy of
a file search report in each jurisdiction identified in paragraph 2 or 3 above
with respect to each name set forth in paragraph 1 above together with a true
copy of each financing statement or other filing identified in such file search
reports. To the best knowledge of the Company, no other financing statements
have been filed listing the Company as a debtor and no such filings are pending
except in favor of the Bank.
IN WITNESS WHEREOF, I have hereunto set my hand this __ day of
___________, 199_.
<PAGE>
-3-
------------------------------
Name: Stephen J. Lifshatz
Title: Chief Financial Officer
<PAGE>
SCHEDULE A
(Search Reports)
<PAGE>
SCHEDULE B
(Financing Statements on File)
<PAGE>
SCHEDULE C
----------
EXHIBIT A TO FINANCING STATEMENT
--------------------------------
DEBTOR:
-------
Lionbridge Technologies, Inc.
950 Winter Street, #4300
Waltham, MA 02154
SECURED PARTY:
--------------
Silicon Valley Bank
3003 Tasman Drive
Santa Clara, California 95054
PART I: This financing statement (the capitalized terms used herein
having the meaning set forth in PART II hereto) covers all of the following
property of the Debtor, whether now owned or existing or hereafter acquired or
arising, and regardless of where located (the "COLLATERAL"):
(a) All goods and Equipment now owned or hereafter acquired, including,
without limitation, all machinery, Fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All Inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
Inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other Proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
(c) All Contract Rights and General Intangibles now owned or hereafter
acquired, including, without limitation, goodwill, leases, license agreements,
franchise agreements, blueprints, drawings, purchase orders, customer lists,
route lists, claims, literature, reports, catalogs, income tax refunds, payments
of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising Accounts, Contract Rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All Documents, cash, deposit Accounts, securities, letters of
credit, certificates of deposit, Instruments and chattel paper now owned or
hereafter acquired;
(f) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship
<PAGE>
-2-
and derivative work thereof, whether published or unpublished, now owned or
hereafter acquired; any patents, trademarks, servicemarks and applications
therefor; any trade secret rights, including any rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; or any claims for
damages by way of any past, present and future infringement of any of the
foregoing.
PART II: The following terms, as used herein, shall have the following
meanings:
"ACCOUNTS" means all "accounts" (as defined in the UCC) now
owned or hereafter acquired by the Debtor and shall also mean and
include all accounts receivable, contract rights, book debts, notes,
drafts and other obligations or indebtedness owing to the Debtor
arising from the sale, lease or exchange of goods or other property
and/or the performance of services by it (including, any such
obligation which might be characterized as an account, contract right
or general intangible under the UCC) and all the Debtor's rights in, to
and under all purchase orders for goods, services or other property,
and all the Debtor's rights to any goods, services or other property
represented by any of the foregoing (including returned or repossessed
goods and unpaid sellers' rights of rescission, replevin, reclamation
and rights to stoppage in transit) and all monies due to or to become
due to the Debtor under all contracts for the sale, lease or exchange
of goods or other property and/or the performance of services by it
(whether or not yet earned by performance on the part of the Debtor),
in each case whether now in existence or hereafter arising or acquired
including, the right to receive the proceeds of said purchase orders
and contracts and all collateral security and guarantees of any kind
given by any Person with respect to any of the foregoing.
"CONTRACT RIGHTS" means all "contract rights" (as defined in
the UCC) whether now possessed or hereafter acquired.
"DOCUMENTS" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods, now owned or
hereafter acquired, by the Debtor.
"EQUIPMENT" means all "equipment" (as defined in the UCC) now
owned or hereafter acquired by the Debtor, including, without
limitation, all motor vehicles, trucks and trailers.
"FIXTURES" means all "fixtures" (as defined in the UCC)
whether now owned or hereafter acquired.
"GENERAL INTANGIBLES" means all "general intangibles" (as
defined in the UCC) now owned or hereafter acquired by the Company,
including, without limitation, all (a) obligations or indebtedness
owing to the Company (other than Accounts) from whatever source
arising, (b) information, customer lists, identification of suppliers,
data, plans, blueprints, specifications, designs, drawings, recorded
knowledge, surveys, engineering reports, test reports, manuals,
materials standards, catalogs, computer and automatic machinery
software and programs and the like pertaining to the business of the
Company,(c) field repair data, sales data, and other information
relating to sales or service of products now or hereafter manufactured,
(d) accounting information and all media in or on which any of the
information, knowledge, data or records may be recorded or stored and
all computer programs used for the compilation or printout thereof, (e)
causes of action, claims and warranties now or hereafter owned or
acquired by the Company in respect of any of the items listed above and
(f) all tax refunds to which the Company is entitled.
"INSTRUMENTS" means all "instruments", "chattel paper" or
"letters of credit" (each as defined in the UCC) evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including (but not limited to) promissory notes, drafts, bills of
exchange and trade acceptances, now owned or
<PAGE>
-2-
hereafter acquired by the Debtor.
"INVENTORY" means all "inventory" (as defined in the UCC), now
owned or hereafter acquired by the Debtor, wherever located, and shall
also mean and include, without limitation, all raw materials and other
materials and supplies, work-in-process and finished goods and any
products made or processed therefrom and all substances, if any,
commingled therewith or added thereto.
"PROCEEDS" means all proceeds of, and all other profits,
rentals or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of,
or realization upon, Collateral, including, without limitation, all
claims of the Debtor against third parties for loss of, damage to or
destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any Collateral,
and any condemnation or requisition payments with respect to any
Collateral, in each case whether now existing or hereafter arising.
"UCC" means the Uniform Commercial Code in effect on the date
hereof in Massachusetts; provided that if by reason of law, the
perfection or effect of perfection or non-perfection of the Security
Interests in any Collateral is governed by the Uniform Commercial Code
in effect in a jurisdiction other than Massachusetts, "UCC" means the
Uniform Commercial Code in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect
of perfection or non-perfection.
<PAGE>
Exhibit 10.16
GUARANTEE
GUARANTEE dated September , 1997 made by LIONBRIDGE TECHNOLOGIES
IRELAND, an unlimited liability company duly incorporated and validly existing
under the laws of Ireland (the "GUARANTOR"), in favor of SILICON VALLEY BANK
(the "BANK").
W I T N E S S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September , 1997
among LioNBridge Technologies Holdings B.V. ("Holdings") and its wholly owned
subsidiary, LioNBridge Technologies B.V. (the "Company"), each a company with
limited liability incorporated in the Netherlands having its statutory seat in
Amsterdam and registered office in Amsterdam (together, the "BORROWERS") and the
Bank (as the same may be amended, modified, supplemented, extended or restated
from time to time, the "LOAN AGREEMENT"), the Bank has agreed, subject to the
terms and conditions thereof, to make credit extensions to the Borrowers;
WHEREAS, it is a condition precedent to the obligation of the Bank to
make credit extensions to the Borrowers under the Loan Agreement that, among
other things, the Guarantor shall have executed and delivered a guarantee of the
obligations of the Borrowers under the Loan Agreement, including, without
limitation, the Borrowers' obligations under their promissory note to the Bank
issued pursuant to the Loan Agreement (as the same may be amended, modified,
supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, the Guarantor is a wholly owned subsidiary of Holdings and, as
a consequence, the Guarantor will derive significant benefit from the Bank's
agreement to make Credit Extensions to the Holdings and the Company;
NOW, THEREFORE, in consideration of the premises and to induce
the Bank to make advances and other extensions of credit to the Borrowers
thereunder, the Guarantor hereby agrees with the Bank as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms which
are defined in the Loan Agreement and used herein are so used as so defined. In
addition, the following terms shall have the meanings set forth below:
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, property, condition (financial or
otherwise) or prospects of the Guarantor, or of the Guarantor and its
Subsidiaries taken as a whole, (b) the ability of the Guarantor to
perform its obligations under this Guarantee, or (c) the validity or
enforceability of this Guarantee, or the rights of the Bank hereunder.
<PAGE>
-2-
"OBLIGATIONS" shall mean all obligations of the Borrowers to
the Bank, whether such obligations are now existing or hereafter
incurred or created, joint or several, direct or indirect, absolute or
contingent, due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrowers) on any
advance to the Borrowers under the Loan Agreement or the Note; (b) all
other amounts (including, without limitation, any fees or expenses)
payable by the Borrowers under the Loan Agreement, the Note or any
other Loan Document; (c) all amounts payable to the Bank in connection
with the issuance of any letter of credit by the Bank for the account
of the Borrowers or any drawing thereunder, including without
limitation, any reimbursement obligation and letter of credit fees
payable under any letter of credit application or reimbursement
agreement executed by the Borrowers in connection with any such letter
of credit; and (d) any renewals, refinancings or extensions of any of
the foregoing.
2. GUARANTEE. The Guarantor hereby unconditionally and
irrevocably guarantees to the Bank the prompt and complete payment and
performance by the Borrowers when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations. The Guarantor further agrees to
pay any and all expenses (including, without limitation, all reasonable fees and
disbursements of counsel to the Bank) which may be paid or incurred by the Bank
in enforcing, or obtaining advice of counsel in respect of, any of its rights
under this Guarantee. This Guarantee shall remain in full force and effect until
the Obligations are paid in full and the obligations of the Bank to make
Advances or other Credit Extensions under the Loan Agreement is terminated,
notwithstanding that from time to time prior thereto the Borrowers may be free
from any Obligations.
3. SUBROGATION AND CONTRIBUTION. Until payment and performance
in full of all the Obligations, the Guarantor irrevocably and unconditionally
waives any and all rights to which it may be entitled, by operation of law or
otherwise, (a) to be subrogated, with respect to any payment made by the
Guarantor hereunder, to the rights of the Bank against the Borrowers, or
otherwise to be reimbursed, indemnified or exonerated by the Borrowers in
respect thereof or (b) to receive any payment, in the nature of contribution or
for any other reason, from any other guarantor of the Obligations with respect
to any payment made by the Guarantor hereunder.
4. EFFECT OF BANKRUPTCY STAY. If acceleration of the time for
payment or performance of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Borrowers or any other Person or otherwise,
all such amounts otherwise subject to acceleration shall nonetheless be payable
by the Guarantor under this Guarantee forthwith upon demand.
5. RECEIPT OF LOAN DOCUMENTS, ETC. The Guarantor confirms,
represents and warrants to the Bank that (i) it has received true and complete
copies of the Loan Agreement, the Note and the other Loan Documents entered into
as of the date hereof from the
<PAGE>
-3-
Borrowers, has read the contents thereof and reviewed the same with legal
counsel of its choice; (ii) no representations or agreements of any kind have
been made to the Guarantor which would limit or qualify in any way the terms of
this Guarantee; (iii) the Bank has made no representation to the Guarantor as to
the creditworthiness of the Borrowers; and (iv) the Guarantor has established
adequate means of obtaining from the Borrowers on a continuing basis information
regarding the Borrower's financial condition. The Guarantor agrees to keep
adequately informed from such means of any facts, events, or circumstances which
might in any way affect the Guarantor's risks under this Guarantee, and the
Guarantor further agrees that the Bank shall have no obligation to disclose to
the Guarantor any information or documents acquired by the Bank in the course of
its relationship with the Borrowers.
6. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The
obligations of the Guarantor under this Guarantee shall remain in full force and
effect without regard to, and shall not be released, altered, exhausted,
discharged or in any way affected by any circumstance or condition (whether or
not the Borrowers shall have any knowledge or notice thereof), including without
limitation (i) any amendment or modification of or supplement to the Loan
Agreement, the Note, or any other Loan Document, or any obligation, duty or
agreement of the Borrowers or any other Person thereunder or in respect thereof,
(ii) any assignment or transfer in whole or in part of any of the Obligations,
(iii) any furnishing or acceptance of any direct or indirect security or
guaranty, or any release of or non-perfection or invalidity of any direct or
indirect security or guaranty, for any of the Obligations, (iv) any waiver,
consent, extension, renewal, indulgence, settlement, compromise or other action
or inaction under or in respect of the Loan Agreement, the Note, or any other
Loan Document, or any exercise or nonexercise of any right, remedy, power or
privilege under or in respect of any such instrument (whether by operation of
law or otherwise), (v) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to the
Borrowers or any other Person (other than the Guarantor) or any of their
respective properties or creditors or any resulting release or discharge of any
Obligations, (vi) the voluntary or involuntary sale or other disposition of all
or substantially all the assets of the Borrowers or any other Person (other than
the Guarantor), (vii) the voluntary or involuntary liquidation, dissolution or
termination of the Borrowers or any other Person (other than the Guarantor),
(viii) any invalidity or unenforceability, in whole or in part, of any term
hereof or of the Loan Agreement, the Note, or any other Loan Document, or any
obligation, duty or agreement of the Borrowers or any other Person (other than
the Guarantor) thereunder or in respect thereof, or any provision of any
applicable law or regulation purporting to prohibit the payment or performance
by the Borrowers or any other Person (other than the Guarantor) of any
Obligations, (ix) any failure on the part of the Borrowers or any other Person
for any reason to perform or comply with any term of the Loan Agreement, the
Note, or any other Loan Document or any other agreement, or (x) any other act,
omission or occurrence whatsoever, whether similar or dissimilar to the
foregoing. The Guarantor authorizes the Borrowers, each other guarantor in
respect of Obligations and the Bank at any time in its discretion, as the case
may be, to alter any of the terms of Obligations.
7. GUARANTOR AS PRINCIPAL. If for any reason the Borrowers or
any other Person is under no legal obligation to discharge any Obligations, or
if any other moneys included in Obligations have become unrecoverable from the
Borrowers or any other Person
<PAGE>
by operation of law or for any other reason, including, without limitation, the
invalidity or irregularity in whole or in part of any Obligation or of the Loan
Agreement, the Note, or any other Loan Document, the legal disability of the
Borrowers or any other obligor in respect of Obligations, any discharge of or
limitation on the liability of the Borrowers or any other person or any
limitation on the method or terms of payment under any Obligation, or of the
Loan Agreement, the Note, or any other Loan Document, which may now or hereafter
be caused or imposed in any manner whatsoever (whether consensual or arising by
operation of law or otherwise), this Guarantee shall nevertheless remain in full
force and effect and shall be binding upon the Guarantor to the same extent as
if the Guarantor at all times had been the principal obligor on all Obligations.
8. WAIVER OF DEMAND, NOTICE, ETC. The Guarantor hereby waives,
to the extent not prohibited by applicable law, (i) all presentments, demands
for performance, notice of nonperformance, protests, notices of protests and
notices of dishonor in connection with the Obligations or the Loan Agreement,
the Note, or any other Loan Document, including but not limited to notice of
additional indebtedness constituting Obligations or the existence, creation or
incurring of any new or additional indebtedness or obligation or of any action
or non-action on the part of the Borrowers, the Bank, any endorser or creditor
of the Borrowers or any other Person; (ii) any notice of any indulgence,
extensions or renewals granted to any obligor with respect to Obligations; (iii)
any requirement of diligence or promptness in the enforcement of rights under
the Loan Agreement, the Note, or any other Loan Document, or any other agreement
or instrument directly or indirectly relating thereto or to the Obligations;
(iv) any enforcement of any present or future agreement or instrument relating
directly or indirectly thereto or to the Obligations; (v) notice of any of the
matters referred to in PARAGRAPH 8 above, (vi) any defense of any kind which the
Guarantor may now have with respect to his liability under this Guarantee; (vii)
any right to require the Bank, as a condition of enforcement of this Guarantee,
to proceed against the Borrowers or any other Person or to proceed against or
exhaust any security held by the Bank at any time or to pursue any other right
or remedy in the Bank's power before proceeding against the Guarantor; (viii)
any defense that may arise by reason of the incapacity, lack of authority, death
or disability of any other Person or Persons or the failure of the Bank to file
or enforce a claim against the estate (in administration, bankruptcy, or any
other proceeding) of any other Person or Persons; (ix) any defense based upon an
election of remedies by the Bank; (x) any defense arising by reason of any "one
action" or "anti-deficiency" law or any other law which may prevent the Bank
from bringing any action, including a claim for deficiency, against the
Guarantor, before or after the Bank's commencement of completion of any
foreclosure action, either judicially or by exercise of a power of sale; (xi)
any defense based upon any lack of diligence by the Bank in the collection of
any Obligation; (xii) any duty on the part of the Bank to disclose to the
Guarantor any facts the Bank may now or hereafter know about the Borrowers or
any other obligor in respect of Obligations; (xiii) any defense arising because
of an election made by the Bank under Section 1111(b)(2) of the United States
Federal Bankruptcy Code; (xiv) any defense based on any borrowing or grant of a
security interest under Section 364 of the United States Federal Bankruptcy
Code; and (xv) any defense based upon or arising out of any defense which the
Borrowers or any other Person may have to the payment or performance of
Obligations (including but not limited to failure of consideration, breach of
warranty, fraud, payment, accord and satisfaction, strict foreclosure, statute
of frauds, bankruptcy, infancy, statute of
<PAGE>
-8-
limitations, lender liability and usury). Guarantor acknowledges and agrees that
each of the waivers set forth herein on the part of the Guarantor is made with
Guarantor's full knowledge of the significance and consequences thereof and that
under the circumstances the waivers are reasonable. If any such waiver is
determined to be contrary to any applicable law or public policy, such waiver
shall be effective only to the extent permitted by such law or public policy.
9. REINSTATEMENT. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Bank upon the insolvency, bankruptcy, dissolution,
liquidation, examination or reorganization of the Borrowers or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee, examiner or similar officer for, the Borrowers or any substantial part
of its property, or otherwise, all as though such payments had not been made.
10. PAYMENTS. The Guarantor hereby agrees that the Obligations
will be paid to the Bank without set-off or counterclaim in U.S. Dollars at the
office of the Bank located at 3003 Tasman Drive, Santa Clara, California 95054,
or to such other location as the Bank shall notify the Guarantor.
11. REPRESENTATIONS AND WARRANTIES. The Guarantor represents
and warrants that:
(a) CORPORATE EXISTENCE. The Guarantor is an unlimited
liability company duly incorporated and validly existing under the laws
of the jurisdiction of its incorporation, and is duly licensed or
qualified as a foreign corporation in all states wherein the nature of
its property owned or business transacted by it makes such licensing or
qualification necessary.
(b) NO VIOLATION. The execution, delivery and performance of
this Guarantee will not contravene any provision of law, statute, rule
or regulation to which the Guarantor is subject or any judgment,
decree, franchise, order or permit applicable to the Guarantor or will
conflict or will be inconsistent with or will result in any breach of,
any of the terms, covenants, conditions or provisions of, or constitute
a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or
assets of the Guarantor pursuant to the terms of any contractual
obligation of the Guarantor or violate any provision of the Memorandum
of the Articles of Association of the Guarantor.
(c) CORPORATE AUTHORITY AND POWER. The execution, delivery and
performance of this Guarantee is within the corporate powers of the
Guarantor and has been duly authorized by all necessary corporate
action.
(d) ENFORCEABILITY. This Guarantee constitutes a valid and
binding obligation of the Guarantor enforceable against the Guarantor
in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency,
<PAGE>
-6-
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and except as enforceability may be subject
to general principles of equity, whether such principles are applied in
a court of equity or at law.
(e) GOVERNMENTAL APPROVALS. No order, permission, consent,
approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental authority is required to
authorize, or is required in connection with, the execution, delivery
and performance of this Guarantee, or the taking of any action
contemplated hereby or thereby.
(f) FINANCIAL STATEMENTS. Holdings has heretofore furnished
the Bank with complete and correct copies of the audited consolidated
balance sheet of Holdings and its Subsidiaries (including the
Guarantor) as of December 31, 1996, and the related audited
consolidated statements of income and of cash flows for the fiscal year
of Holdings and its Subsidiaries (including the Guarantor) ended on
such date, examined by Coopers & Lybrand. The Guarantor has no material
liabilities, contingent or otherwise, including liabilities for taxes
or any unusual forward or long-term commitments or any Guarantee, which
are not disclosed by or included in the financial statements referred
to above or in the notes thereto, and there are no unrealized or
anticipated losses from any unfavorable commitments of the Guarantor
which may have a Material Adverse Effect. During the period from
December 31, 1996 to the date hereof there has been no sale, transfer
or other disposition by the Guarantor of any material part of its
business or property and no purchase or other acquisition of any
business or property (including any capital stock of any Person)
material in relation to the consolidated financial condition of
Holdings and its Subsidiaries at December 31, 1996.
(g) NO CHANGE. Since December 31, 1996 there has been no
development or event, nor any prospective development or event, which
has had or could have a Material Adverse Effect.
(h) LITIGATION. There are no actions, suits or proceedings
pending or threatened against or affecting the Guarantor before any
Governmental Authority, which in any one case or in the aggregate, if
determined adversely to the interests of the Guarantor, would have a
Material Adverse Effect.
(i) COMPLIANCE WITH OTHER INSTRUMENTS; COMPLIANCE WITH LAW.
The Guarantor is not in default under (i) any contractual obligation,
where such default could have a Material Adverse Effect, or (ii) the
terms of any agreements relating to any Indebtedness of the Guarantor.
(j) The Guarantor is not in default with respect to any
applicable statute, rule, writ, injunction, decree, order or regulation
of any Governmental Authority having jurisdiction over the Guarantor
which could have a Material Adverse Effect.
(k) SUBSIDIARIES. The Guarantor has no Subsidiaries.
<PAGE>
-7-
(l) LIMITS ON ABILITY TO INCUR INDEBTEDNESS. The Guarantor is
not subject to regulation under any statute or regulation which limits
its ability to incur Indebtedness.
(m) TITLE TO PROPERTY. The Guarantor has good and marketable
title to all of its properties and assets, in each case including the
properties and assets reflected in the consolidated balance sheet of
Holdings and its Subsidiaries as of the December 31, 1996 except
properties and assets disposed of since that date in the ordinary
course of business, and none of such properties or assets is subject to
(i) any Lien except for Permitted Liens, or (ii) a defect in title or
other claim other than defects and claims that, in the aggregate, would
have no Material Adverse Effect. The Guarantor enjoys peaceful and
undisturbed possession under all leases necessary in any material
respect for the operation of its properties and assets, none of which
contains any unusual or burdensome provisions could reasonably be
expected to have a Material Adverse Effect. All such leases are valid
and subsisting and are in full force and effect.
(n) TAXES. All tax returns of the Guarantor required to be
filed have been timely filed, all taxes, fees and other governmental
charges (other than those being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate
reserves have been established and, in the case of AD VALOREM taxes or
betterment assessments, no proceedings to foreclose any lien with
respect thereto have been commenced and, in all other cases, no notice
of lien has been filed or other action taken to perfect or enforce such
lien) shown thereon which are payable have been paid. The charges and
reserves on the books of the Guarantor in respect of all income and
other taxes are adequate, and the Guarantor knows of no additional
assessment or any basis therefor. The income tax returns of the
Guarantor have not been audited within the last three years, all prior
audits have been closed, and there are no unpaid assessments, penalties
or other charges arising from such prior audits.
12. AUDITS. Bank shall have a right from time to time
hereafter to audit the books and record of Guarantor at Guarantor's expense,
provided that such audits will be conducted no more often than twice in any year
unless an Event of Default has occurred and is continuing.
13. SUBORDINATION OF CLAIMS AGAINST BORROWERS. Without
limiting the provisions of PARAGRAPH 4 hereof, the Guarantor hereby irrevocably
agrees that any and all claims which the Guarantor may now or hereafter have
against the Borrowers or any other guarantor of the Obligations, including,
without limitation, the benefit of any setoff or counterclaim or proof against
dividend, composition or payment by the Borrowers or such other guarantor, shall
be subject and subordinate to the prior payment in full of all of the
Obligations to the Bank. After the occurrence of a Default, the Guarantor shall
not claim from the Borrowers or such other guarantor, or with respect to any of
their respective properties, any sums which may be owing to the Guarantor, or
have the benefit of any setoff or counterclaim or proof against dividend,
composition or payment by the Borrowers or such other guarantor, until all
Guaranteed Obligations shall have been paid in full. Should any payment or
distribution or security or the benefit of proceeds thereof be received by the
<PAGE>
-8-
Guarantor upon or with respect to amounts due to him from the Borrowers or any
other guarantor of the Obligations after a Default has occurred and prior to the
payment in full of all Obligations, the Guarantor will forthwith deliver the
same to the Bank in precisely the form received (except for endorsement or
assignment where necessary), for application in or towards repayment of the
Obligations and, until so delivered, the same shall be held in trust as property
of the Bank. In the event of the failure of the Guarantor to make any such
endorsement or assignment, the Bank is hereby irrevocably authorized to make the
same on behalf of the Guarantor.
14. SEVERABILITY. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. PARAGRAPH HEADINGS. The paragraph headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. NO WAIVER, CUMULATIVE REMEDIES. The Bank shall not by any
act, delay, indulgence, omission or otherwise, be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or Event of
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Bank, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Bank of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Bank
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
17. MISCELLANEOUS. This Guarantee constitutes the entire
agreement of the Guarantor with respect to the matters set forth herein. None of
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Guarantor
and the Bank, provided that any provision of this Guarantee may be waived by the
Bank in a letter or agreement executed by the Bank or by telecopy from the Bank.
This Guarantee shall be binding upon the successors and assigns of the Guarantor
and shall inure to the benefit of the Bank and its successors and assigns.
18. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; GOVERNING
LAW. THE GUARANTOR AND THE BANK BY ITS ACCEPTANCE HEREOF EACH HEREBY EXPRESSLY
WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO A JURY TRIAL IN ANY SUIT,
ACTION, PROCEEDING OR COUNTERCLAIM WHICH ARISES OUT OF, BASED UPON OR BY REASON
OF THIS GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY. THE
<PAGE>
-9-
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK AND THE
GUARANTOR, AND SHALL BE SUBJECT TO NO EXCEPTIONS.
BY ITS EXECUTION AND DELIVERY OF THIS GUARANTEE, THE GUARANTOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH SUCH
ACTION, SUIT OR PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN
WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED,
AND TO THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING
ANY CLAIMS THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT,
THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE
ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE
THEREOF IS IMPROPER.
THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
19. NOTICES. All notices under this Guarantee shall be in
writing, and shall be delivered by hand, by an internationally recognized
commercial overnight delivery service, or by telecopy, delivered, addressed or
transmitted, if to the Bank, at its address or telecopy number set forth in the
Loan Agreement, and if to the Guarantor, at its address or telecopy number set
out below its signature in this Guarantee. Such notices shall be effective (a)
in the case of hand deliveries, when received, (b) in the case of an overnight
delivery service, on the next Business Day after being placed in the possession
of such delivery service, with delivery charges prepaid and (c) in the case of
telecopy notices, when electronic indication of receipt is received. Either
party may change its address and telecopy number by written notice to the other.
<PAGE>
-10-
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered as of the date first above written.
Given under the Common Seal of
LIONBRIDGE TECHNOLOGIES IRELAND
Address for Notices:
LioNBridge Technologies Ireland
c/o LioNBridge Technologies, Inc.
950 Winter Street, Suite 4300
Waltham, MA 02154
Telecopy No.: (617) 890-3799
Copy to:
LioNBridge Technologies Ireland
Gratton House
Temple Road, Blackrock
County of Dublin, IRELAND
Telecopy No.:_______________
<PAGE>
Exhibit 10.17
Dated 26 September, 1997
(1) LIONBRIDGE TECHNOLOGIES IRELAND
(2) SILICON VALLEY BANK
DEBENTURE
(Fixed and Floating Charge)
A & L Goodbody,
1, Earlsfort Centre,
Hatch Street,
Dublin 2.
cddbl8Ol.O87(OL1)(OL2)
<PAGE>
THIS DEBENTURE made the 26 September, 1997
BETWEEN
(1) LIONBRIDGE TECHNOLOGIES IRELAND an unlimited company duly incorporated
and validly existing under the laws of Ireland having its registered
office at Grattan House, Temple Road, Blackrock, County Dublin
(hereinafter called "the Company"); and
(2) SILICON VALLEY BANK a Californian Chartered Bank having its principal
place of business at 3003 Tasman Drive, Santa Clara, California 95054
with a loan production office located at 40 William Street, Wellesley,
Massachusetts 02181 (hereinafter called "the Bank").
WHEREAS:
A. The Company is indebted or may hereafter become indebted to the Bank as
guarantor pursuant to the Guarantee this area is obscured in original
Borrowers' obligations to the Bank under and pursuant to the Loan
Agreement.
B. It has been agreed between the Company and the Bank that all monies now
owing or which shall hereafter become owing from the Company to the
Bank pursuant to the Guarantee shall be secured in the manner and on
the terms hereinafter appearing.
WITNESSETH and it is hereby AGREED AND DECLARED by and
between the parties hereto as follows:-
DEFINITIONS AND INTERPRETATION
1 1.1 DEFINITIONS
Unless otherwise defined herein, terms which are defined in the
Guarantee or, as the context may require, the Loan Agreement and used
herein are so used as so defined. In addition, the following terms
shall have the meanings set forth below:-
"Book Debts" means the property of the Company charged pursuant to
Clause 3.1 hereof;
"Guarantee" means the guarantee of even date herewith made between (1)
the Company and (2) the Bank pursuant to which the Company guarantees
to the Bank the obligations of each of LioNBridge Technologies Holdings
B.V. and LioNBridge Technologies B.V. to the Bank pursuant to the Loan
Agreement;
2
<PAGE>
"Loan Agreement" means the Loan Agreement dated as of 26 September,
1997 made between (1) LiONBridge Technologies Holdings B.V. and its
wholly owned subsidiary, LioNBridge Technologies B.V. as Borrowers and
the Bank as lender;
"Obligations" means all obligations of the Company to the Bank, whether
such obligations are now existing or hereafter incurred or created,
joint or several, direct or indirect, absolute or contingent, due or to
become due, matured or unmatured, liquidated or unliquidated, arising
by contract, operation of law or otherwise, including, without
limitation, all obligations and liabilities of the Company to the Bank
pursuant to the Guarantee.
1.2 INTERPRETATION
Words and phrases the definition of which is contained or referred to
in Section 2 of the Companies Act, 1963 shall be construed as having
the meaning thereby attributed to them. Words importing the singular
shall include the plural and vice versa and words importing persons
shall include corporations.
References to statutory provisions shall unless the contrary is clearly
stated be a reference to statutory provisions operative in Ireland and
will be construed as references to those provisions as respectively
amended or re-enacted (whether before or after the date hereof) from
time to time and shall include any provisions of which they are
re-enactments (whether with or without modification) and shall also
include any subordinate legislation made from time to time under those
provisions.
Save as otherwise provided herein any reference to a section, clause,
paragraph or a sub-paragraph shall be reference to a section, clause,
paragraph or a subparagraph (as the case may be) of this Agreement.
The headings are inserted for convenience only and shall not affect the
construction of this document.
Reference to any document includes that document as amended, novated,
assigned or supplemented from time to time.
All references in this Agreement to costs or charges or expenses shall
include any value added tax or similar tax charged or chargeable in
respect thereof.
The Schedules hereto form part of this Agreement and shall be construed
herewith.
All warranties, indemnities, covenants, agreements and obligations
given or entered into by more than one person are given or entered into
jointly and severally.
3
<PAGE>
OBLIGATION TO PAY AND DISCHARGE
2 The Company shall pay and discharge to the Bank the Obligations in
accordance with the provisions of the Guarantee.
SECURITY
3 CHARGING PROVISIONS
The Company as beneficial owner to the intent that the mortgage and
charge hereinafter contained shall be a continuing security for the
payment and discharge of all monies and liabilities hereby agreed to be
paid or discharged by it
3.1 HEREBY CHARGES by way of first fixed charge all present and
future book and other debts and monetary claims due or owing
to the Company together with the benefit of all guarantees,
security and indemnities for such debts and all liens,
reservations of title, right of tracing and other rights to
enforce such claims.
3.2 HEREBY CHARGES by way of first floating charge the undertaking
and all assets and property of the Company whatsoever and
wheresoever, both present and future including its uncalled
capital for the time being and goodwill and including, without
limitation, the assets and property charged pursuant to Clause
3.1 above to the extent such charge shall be ineffective as a
fixed charge.
The property and assets referred to in clauses 3.1 and 3.2 inclusive
are hereinafter called the "Charged Property".
4 SUPPLEMENTARY PROVISIONS
4.1 The Company shall at all times during the continuance of the
security hereby constituted from time to time do, execute,
acknowledge and deliver all and every such further deeds,
conveyances, assignments, demises, mortgages, charges,
documents and assurances at law as are necessary or advisable
or as the Bank may reasonably require for the purpose of
giving the Bank a valid first, fixed and specific mortgage,
charge or security upon all property and assets of the Company
of the same nature as the Book Debts and a valid first
floating charge upon the Charged Property referred to in
Clause 3.2 whether already owned or hereafter acquired by the
Company and for the better granting, conveying, assigning,
transfer, demising or charging the same to the Bank for the
purpose hereinbefore set forth and for conferring upon the
Bank such power of sale and other powers over the Charged
Property as are hereby expressed to be conferred.
4.2 The Company HEREBY DECLARES that in respect of all or any
leasehold lands, hereditaments and premises comprised in the
Charged Property it shall stand possessed of the reversion or
respective reversions hereby reserved of the
4
<PAGE>
term or several terms of years for which the same are held IN
TRUST for the Bank (subject to any equity of redemption
subsisting under these presents) and shall dispose of the same
as the Bank may direct and HEREBY AUTHORISES the Bank to
appoint a new trustee or trustees of such reversion or
respective reversions in place of the Company or any trustee
or trustees appointed under this power as if it, he or they
were incapable of acting in the trusts hereby declared and the
Company HEREBY irrevocably APPOINTS the secretary for the time
being of the Bank the attorney of the Company to assign the
said reversion or respective reversions in the name of the
Company and on its behalf to the Bank or as it may direct
subject to such equity of redemption (if any), as may for the
time being be subsisting as aforesaid and to execute and do
all deeds, documents and acts necessary or proper for that
purpose PROVIDED THAT the powers of the Bank hereunder shall
not be exercisable unless and until an Event of Default under
and as specified in Clause 8 of the Loan Agreement has
occurred and is continuing and/or demand has been made upon
the Company under the Guarantee.
4.3 The Company shall not be at liberty to create or permit to
subsist any mortgage or charge (other than in respect of
Permitted Indebtedness) over of in respect of the Charged
Property which ranks in priority to or pari passu with the
charge created hereby.
4.4 This security shall be a continuing security notwithstanding
any settlement of account or other matter or thing whatsoever
and in particular (but without prejudice to the generality of
the foregoing) shall not be considered satisfied by any
intermediate repayment or satisfaction of all or any of the
moneys and liabilities hereby secured and shall continue in
full force and effect until final repayment in full and total
satisfaction of all moneys and liabilities hereby secured; and
if upon such final repayment there shall exist any right on
the part of the Company or any other person to draw funds or
otherwise which, if exercised, would or might cause the
Company to become actually or contingently liable to the Bank
whether as principal debtor or as surety for another person,
then the Bank shall be entitled to retain this security and
all rights, remedies and powers conferred thereby and the
Charged Property for so long as shall or might be necessary to
secure the discharge of such actual or contingent liability as
aforesaid; and in the event that any demand shall have been
made by the Bank under this deed the said moneys shall
forthwith upon the amount thereof being ascertained become due
and shall be paid and discharged to the Bank and all
provisions hereof shall apply accordingly.
4.5 This security shall be in addition to and shall not operate so
as in any way to prejudice or affect any other security which
the Bank may now or at any time hereafter hold for or in
respect of the moneys and liabilities hereby secured or any
part thereof nor shall any such other security or any lien to
which the Bank may be otherwise entitled or the liability of
any person not party hereto for all or any part of the moneys
and liabilities hereby secured by in any way prejudiced or
5
<PAGE>
affected by this security; and further the Bank shall have
full power at its discretion to give time for payment to or
make any other arrangement with any such other person without
prejudice to the liability of the Company hereunder.
4.6 If all monies and liabilities hereinbefore covenanted to be
paid and discharged have been paid and discharged the Bank
shall at the request and cost of the Company as soon as
practicable execute such documents as may be necessary to
release the security hereby created.
4.7 The Bank may at any time (either before or after demand has
been made by the Bank for the payment of the monies hereby
secured) by notice in writing to the Company convert the
floating charge created by Clause 3.2 hereof over the Charged
Property with immediate effect into a fixed charge as regards
any of the assets specified in the notice which the Bank shall
consider to be in danger of being seised or sold under any
form of distress execution diligence or other process levied
or threatened or which may be or become in jeopardy or which
have been made or may become the subject of an injunction or
otherwise attached.
4.8 If the Bank receives notice of any subsequent mortgage charge
or assignment or other disposition affecting the Charged
Property or any part thereof or interest therein the Bank may
open a new account for the Company; if the Bank does not open
a new account then unless the Bank gives express written
notice to the contrary to the Company it shall nevertheless be
treated as if it had done so at the time when it received such
notice and as from that time all payments made by or on behalf
of the Company to the Bank shall be credited or be treated as
having been credited to the new account and shall not operate
to reduce the amount due from the Company to the Bank at the
time when it received notice.
OBLIGATIONS OF THE COMPANY
5 INSURANCE
5.1 The Company acknowledges the provisions of Clause 6.6 of the
Loan Agreement and shall at all times during the continuance
of the security hereby constituted maintain insurance of the
Charged Property in accordance with and as provided for in the
Loan Agreement.
6 GENERAL PROTECTION OF ASSETS
The Company shall also at all times during the continuance of the
security hereby constituted:
6
<PAGE>
6.1 institute and maintain all such proceedings as may be
necessary or expedient to observe or protect the interest of
the Bank and the Company in respect of the Book Debts and
other debts of the Company and will (except as the Bank shall
otherwise have consented to in writing including, without
limitation, in the Loan Agreement):-
6.1.1 duly perform its obligations under each agreement
relating to or constituting a Book Debt or other debt
forming part of the Charged Property and notify the
Bank of any default thereunder;
6.1.2 not agree to any variation of any agreement relating
to any Book Debt or other debt or release any other
party thereto from any of their respective
obligations thereunder, waive any such obligations,
give any consent which may be given thereunder or
submit any dispute to arbitration thereunder;
6.1.3 not exercise any right or power conferred on it by or
available to it under or in respect of the Book Debts
unless and until requested to do so by the Bank and,
upon such request by the Bank, shall exercise such
right or power as the Bank may direct;
6.1.4 not accept or make any claim that any agreement
relating to or constituting a Book Debt or other debt
has been frustrated or has ceased to be in full force
and effect;
6.1.5 not assign or otherwise dispose of all or any of its
rights under any agreement relating to or
constituting a Book Debt or other debt
PROVIDED THAT:
(1) the Company shall remain liable under each agreement
relating to or constituting a Book Debt or other debt
as aforesaid to perform all obligations as seen by it
thereunder; and
(2) the Bank shall not be under any obligation or
liability under any such agreement or liable to make
any payment thereunder; and
(3) the Bank shall not be obliged to enforce against any
other party to any such agreement, any term of any
such agreement or to make any enquiries as to the
nature or sufficiency received by the Bank.
6.2 not, without the previous consent in writing of the Bank,
which consent shall not be unreasonably withheld, remove or
destroy any of the buildings, plant, machinery, fixtures,
fittings, vehicles, computers and office and other equipment
or any structure whatsoever now or hereafter owned by it
unless the same be worn out or rendered unfit for use or
unless such removal or destruction be with a view
7
<PAGE>
immediately to replacing the same by other property of a more
useful or convenient character and of at least equal value or
utility or unless the same is required in the ordinary course
of running the Company's business;
6.3 keep all buildings for the time being comprised in its
undertaking, property and assets and all plant, machinery,
fixtures, fittings, vehicles, computers and office and other
equipment in, upon or about the same and used for the purpose
of or in connection with its business in such state of repair
and in such working order and condition as it shall from time
to time consider proper for the purpose of the efficient and
economic carrying on of its business and, during normal
business hours and upon reasonable prior notice, permit the
Bank or any person as it shall from time to time in writing
for that purpose appoint to enter into and upon the said
buildings to view the state and condition thereof and of all
such plant, machinery and apparatus as aforesaid;
6.4 observe and perform all covenants and stipulations from time
to time materially affecting its patent applications trade
marks trade names registered designs and copyrights and all
other industrial or intangible property or any licence or
ancillary or connected rights from time to time relating to
industrial or intangible property;
6.5 in the event of a notice being served materially adversely
affecting the Charged Property or any part thereof or in the
event of any proceedings being commenced materially adversely
affecting the same in a matter of material importance
immediately give full particulars thereof to the Bank;
6.6 do, observe and perform to the extent that omitting to do,
non-observance or non-performance would have a material
adverse affect on the business of the Company all its
obligations and all matters and things necessary or expedient
to be done, observed and performed under or by virtue of every
lease, licence, fee farm grant, agreement or other instrument
relating to its freehold and leasehold property and every
other lease licence and agreement to which the Company is
party so as to preserve, protect and maintain all of the
rights of the Company thereunder;
6.7 use all freehold and leasehold property comprised in the
Charged Property only for purposes for the time being
authorised as the permitted use or user thereof under or by
virtue of the Planning Acts (as hereinafter defined);
6.8 not carry out any development within the meaning of the
Planning Acts in or upon any such freehold or leasehold
property without first obtaining such permission as may be
required under or by virtue of the Planning Acts;
6.9 within seven days after the receipt of any notice or proposal
for a notice or order or proposal for an order given issued or
made to the Company by a Planning Authority under or by virtue
of the Planning Acts in respect of any such freehold
8
<PAGE>
and leasehold property give full particulars thereof to the
Bank and if so required by the Bank produce the same and
also without delay will take all reasonable or necessary
steps to comply with such notice or order and also will at
the request of the Bank make or join with the Bank in making
such application, appeal or representations against or in
respect of any proposal for such notice or order as the Bank
may deem expedient;
6.10 pay or cause to be paid all rents, taxes, rates, assessments,
impositions, calls and outgoings whether governmental,
municipal or otherwise, imposed upon or payable in respect of
the Charged Property or any part thereof as and when the same
shall become payable and also (save in respect of debts which
are being disputed in good faith) punctually pay and discharge
or cause to be paid and discharged all debts and obligations
to or in respect of persons employed by the Company which by
law may have priority over the security hereby created;
6.11 use its best endeavours not to trade under conditions imposing
reservation of title in favour of creditors and if such
trading shall occur, immediately advise the Bank of the terms
of such trading including details of contract, names of
suppliers and amounts involved;
and so that if the Company shall fail to perform any obligation on its
part herein contained the Bank may itself or by any agents perform any
of the said covenants capable of being performed by it or by such
agents and if any such obligation requires the payment or expenditure
of money the Bank may make such payment or expenditure with its own
funds or with money borrowed by or advanced to it for such purpose but
shall be under no obligation so to do; all sums so expended or advanced
shall be added to the indebtedness hereby secured and shall bear
interest accordingly and shall be repayable to the Bank on demand.
7 RECEIVERS
7.1 At any time after the moneys hereby secured shall have become
due and payable the Bank may from time to time appoint by
writing under the hand of a duly authorised officer of the
Bank any person or persons considered by it to be competent to
be a receiver or manager or receivers or managers (hereinafter
called a "Receiver" which expression shall where the context
so admits include the plural and any substituted receiver and
manager or receivers and managers) of any part of the Charged
Property and may from time to time in writing under the hand
of a duly authorised officer of the Bank remove any Receiver
so appointed and appoint another in his stead.
7.2 A Receiver so appointed shall be the agent of the Company and
the Company shall be solely responsible for his acts and
defaults and the Bank shall have power from time to time to
fix the remuneration of any Receiver appointed by the Bank and
to direct payment thereof out of the Charged Property or any
part thereof but
9
<PAGE>
the Company shall alone be liable for the payment of such
remuneration and the provisions of Section 24 of the
Conveyancing and Law of Property Act 1881 ("the Conveyancing
Act") as modified by the provisions hereof with the
exception of sub-sections 6 and 8 shall apply hereto.
7.3 A Receiver so appointed shall have and be entitled to exercise
all powers conferred by the Conveyancing Act and all other
statutes in the same way as if the Receiver had been duly
appointed thereunder and shall furthermore but without
limiting any powers hereinbefore referred to have power:-
7.3.1 to take possession of, collect and get in the
property in respect of which he is appointed or any
part thereof and for that purpose to take any
proceedings in the name of the Company concerned or
otherwise as may seem expedient;
7.3.2 to carry on or manage or develop or diversify or
concur in carrying on or managing or developing or
diversifying the business of the Company and for that
purpose to raise money on any part of the property in
respect of which he is appointed in priority to this
security or otherwise;
7.3.3 to exercise all or any of the powers which an
absolute owner would have of managing and
superintending the management of the property in
respect of which he is appointed and in particular to
sell or concur in selling, let or concur in letting
to surrender and/or accept surrenders of leases of
any part of such property in such manner and
generally on such terms and conditions as he thinks
fit and to carry any such sale, letting or surrender
into effect by conveying, leasing, letting,
surrendering or accepting surrenders in the name of
or on behalf of the Company concerned or otherwise;
any such sale may be for cash, debentures or other
obligations, shares stock or other valuable
consideration and may be payable in a lump sum or by
installments spread over such period as the Bank or
the Receiver shall think fit and so that any
consideration or part thereof received in a form
other than cash shall ipso facto forthwith on receipt
be and become charged with the payment of all the
moneys hereby secured as though it had been included
in the charge hereby created and form part of the
Charged Property. Plant machinery and other fixtures
may be severed and sold separately from the premises
containing them without the consent of the Company
being obtained thereto;
7.3.4 to make any arrangements or compromise which he or
the Bank may think expedient;
7.3.5 to make and effect any repairs renewals and
improvement of the plant machinery and effects of the
Company which he or the Bank may think necessary and
to maintain or renew all insurance;
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7.3.6 to make calls conditionally or unconditionally on the
members of the Company in respect of the uncalled
capital with such and the same powers for the purpose
of enforcing payment of any calls so made as are by
the Articles of Association conferred on the
directors of the Company in respect of calls
authorised to be made by them in the names of the
directors or in that of the Company or otherwise and
to the exclusion of the directors power in that
behalf;
7.3.7 to appoint managers officers servants workmen and
agents for the aforesaid purposes at such salaries
and for such periods as he may determine;
7.3.8 to enter upon any part of the Charged Property from
time to time with or without workmen and others for
the purpose of making and effecting any repairs,
renewals or alterations to any part thereof including
(without prejudice to the generality of the
foregoing) the completion of any buildings in course
of erection or other works in progress thereon which
the Receiver may think necessary and to appoint
architects, surveyors, contractors, workmen and
agents for the purposes aforesaid on such terms as
the Receiver may determine and (without prejudice to
the power hereinafter conferred) to borrow from the
Bank on the account of the Company all such moneys as
the Receiver shall require for the purposes aforesaid
to the intent that all moneys advanced by the Bank to
the Receiver for the said purposes shall be secured
by this deed;
7.3.9 to do all such other acts and things as may be
incidental or conducive to any of the matters or
powers aforesaid and which the receiver lawfully may
or can do as agent for the Company.
7.4 All moneys received by the Receiver shall be applied by him
for the following purposes (subject to the claims of secured
or unsecured creditors (if any) ranking in priority to this
deed) and in the following order:
7.4.1 in payment of all costs, charges and expenses of and
incidental to the appointment of the Receiver and the
exercise of all or any of the powers aforesaid and of
all outgoings properly paid by him;
7.4.2 in payment of remuneration to the Receiver at such
rate as may be agreed between him and the Bank;
7.4.3 in or towards payment to the Bank of all moneys
payment of which is hereby secured; and
7.4.4 any surplus shall be paid to the Company or any other
person entitled thereto.
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7.5 Neither the Bank nor any Receiver appointed hereunder shall be
liable to account as mortgagee or mortgagees in possession in
respect of any of the Charged Property or be liable for any
loss upon realisation or for any neglect or default of any
nature whatsoever (except to the extent that the same results
from its or his negligence) or willful default in connection
with any of the Charged Property for which a mortgagee in
possession might as such be liable and all costs, charges and
expenses incurred by the Bank or any Receiver appointed
hereunder (including the costs of any proceedings to enforce
the security hereby given) shall be paid by the Company on a
solicitor and own-client basis and be charged on the Charged
Property.
7.6 The foregoing powers of appointment of a Receiver shall be in
addition to and not to the prejudice of all statutory and
other powers of the Bank under the Conveyancing Act (and so
that any statutory power of sale shall be exercisable without
the restrictions contained in Sections 19 and 20 of that Act)
or otherwise and so that such powers shall be and remain
exercisable by the Bank in respect of any part of the Charged
Property in respect of which no appointment of a Receiver by
the Bank shall from time to time be subsisting and that
notwithstanding that an appointment under the powers of clause
7.1. shall have subsisted and been withdrawn in respect of
that part of the Charged Property or shall be subsisting in
respect of any other part of the Charged Property.
7.7 No purchaser or other person shall be bound or concerned to
see or enquire whether the right of the Bank or any Receiver
appointed by it to exercise any of the powers hereby conferred
has arisen or not or be concerned with notice to the contrary
or with the propriety of the exercise or purported exercise of
such powers.
8 LIABILITY OF BANK AND RECEIVER
8.1 In the event that the Bank shall take possession hereunder of
the Charged Property or any part or parts thereof or otherwise
exercises any statutory powers or any additional powers herein
set forth it shall not be accountable as a mortgagee in
possession of the Charged Property as the case may be.
8.2 In the event that the Bank or any Receiver appointed by the
Bank hereby shall enter into possession of any of the Charged
Property or any part thereof the Bank or such Receiver as the
case may be is hereby irrevocably authorised as agent of the
Company to list and to remove, store, sell or otherwise
dispose of all or any furniture or other chattels which shall
not have been removed from the said property at the expiration
of seven days from the date of such entry into possession and
any list so made shall be conclusive evidence as between the
Bank and such Receiver and the Company of the matters therein
contained (save for manifest error) and the Company shall
indemnify the Bank and the Receiver
12
<PAGE>
against all claims and demands in respect of such removal,
storage, sale or other disposition and against all costs and
expenses incurred in connection therewith.
8.3 The Bank shall not be liable for any involuntary losses which
may happen in or about the exercise or execution of the
statutory power of sale or any of the powers or trusts
expressed or implied which may be vested in the Bank by virtue
of these presents save to the extent that the same results
from its own negligence.
9 BANK AS MORTGAGEE IN POSSESSION
In addition to the statutory powers incidental to the estate or
interest of mortgagees contained in Section 19 of the Conveyancing Act
at any time after the Bank shall in accordance with the provisions
hereof have entered into possession of the Charged Property or any part
thereof the Bank shall have power:
9.1 to recover and collect all Book Debts and other debts forming
part of the Charged Property;
9.2 to take over or institute all such proceedings in connection
with all or any part of the Charged Property as the Bank may,
in its absolute discretion, think fit and to discharge,
compound, release or compromise all or any part of the Charged
Property or claims in respect thereof;
9.3 to take possession of the Charged Property;
9.4 to implement any contracts included in the Charged Property,
or to agree with any other party thereto to determine same on
such terms and conditions as the Bank and such other party may
agree;
9.5 to utilise some or all of the Charged Property in discharge of
the Obligations and to perform or cause to be performed all
acts and things requisite or desirable according to the law of
the country in which the Charged Property or any part thereof
of which the Bank is in possession is situate for giving
effect to the exercise of any of its said powers, authorities
and discretions hereby granted;
9.6 to effect and carry out upon any building or erection for the
time being comprised in such part of the Charged Property
which the Bank is in possession any such repairs, amendments,
alterations and additions as the Bank shall reasonably
consider necessary or desirable for the maintenance or
protection of the same or any part thereof;
9.7 to demise or agree to demise any of the Charged Property or
any part thereof of which the Bank is in possession for such
period, at such rent and upon such terms with or without a
premium or fine in all respects as the Bank shall from time to
time think fit; and
13
<PAGE>
9.8 to perform or cause to be performed all acts and things
requisite or desirable according to the law of the country in
which the Charged Property or any part thereof of which the
Bank is in possession is situate for the purpose of giving
effect to the exercise of any of the said powers, authorities
and discretions.
10 STATUTORY POWERS
10.1 At any time after the moneys hereby secured shall become
immediately due and payable the statutory powers of sale and
of appointing a receiver conferred by Section 19 of the
Conveyancing Act shall immediately arise and be exercisable by
the Bank free from the restrictions contained in Section 20 of
the said Act.
10.2 The restrictions on the right of consolidating mortgages
contained in Section 17 of the Conveyancing Act shall not
apply to this security.
11 CURRENCY CLAUSES
11.1 All moneys received or held by the Bank or by a Receiver under
this Debenture may from time to time after demand has been
made be converted into such other currency as the Bank
considers necessary or desirable to cover the obligations and
liabilities of the Company in that currency at the then
prevailing spot rate of exchange (as conclusively determined
by the Bank) for purchasing the currency to be acquired with
the existing currency.
11.2 If and to the extent the Company fails to pay the amount due
on demand the Bank may in its absolute discretion without
notice to the Company purchase at any time thereafter so much
of a currency as the Bank considers necessary or desirable to
cover the obligations and liabilities of the Company in such
currency hereby secured at the then prevailing spot rate of
exchange (as conclusively determined by the Bank) for
purchasing such currency with Irish Pounds and the Company
hereby agrees to indemnify the Bank against the full Irish
Pound price (including all costs, charges and expenses) paid
by the Bank.
11.3 No payment to the Bank (whether under any judgment or court
order or otherwise) shall discharge the obligation or
liability of the Company in respect of which it was made
unless and until the Bank shall have received payment in full
in the currency in which such obligation or liability was
incurred and to the extent the amount of any such payment
shall on actual conversion into such currency fall short of
such obligation or liability expressed in that currency the
Bank shall have a further separate cause of action against the
Company and shall be entitled to enforce the charges hereby
created to recover the amount of the shortfall.
14
<PAGE>
MISCELLANEOUS PROVISIONS
12 All costs, charges and expenses (on a full indemnity basis) properly
occasioned by or incidental to this or any other security held by or
offered to the Bank for the same indebtedness or by or to the
enforcement of any such security and incurred, suffered or paid by the
Bank shall be charged on the Charged Property and shall be treated as
moneys due from the Company to the Bank on current account and shall
bear interest and be secured accordingly provided that the charge
hereby conferred shall be in addition and without prejudice to any and
every other remedy, lien or security which the Bank may or but for the
said charge would have for the moneys and liabilities hereby secured or
any part thereof.
13 Any interest payable under the terms of this deed shall be payable as
well after as before any judgment.
14 The Company hereby irrevocably appoints the Bank and any Receiver
appointed by the Bank hereunder jointly and also severally the attorney
and also the attorneys of it, for it and in its name and on its behalf
and as its act and deed to execute seal or otherwise perfect any deed,
assurance, agreement, instrument or act which may be required or which
may be deemed proper for any of the purposes aforesaid PROVIDED THAT
the powers conferred on the Bank and any Receiver appointed by the Bank
hereunder by this appointment shall not be exercisable unless and until
a demand shall have been made by the Bank under the Guarantee.
15 The provisions of Clause 19 of the Guarantee shall apply mutatis
mutandis hereto as if written out in full herein.
16 The waiver by the Bank of any breach of any term of this Debenture
shall not prevent the subsequent enforcement of that term and shall not
be deemed a waiver of any subsequent breach.
17 Where the context so admits the expression the "Company" shall include
its successors and permitted assigns and the "Bank" shall include its
successors and assigns and the "Planning Acts" shall mean the Local
Government (Planning and Development) Acts 1963 and 1983 and any
reference herein to a person shall if the context so admits apply also
to a company, partnership or unincorporated association and any
reference herein to any legislation shall be deemed to include
reference to such legislation as amended, extended or otherwise
modified by any subsequent legislation and shall also be deemed to
include reference to all regulations made or taking effect as if made
thereunder as from time to time amended or re-enacted by subsequent
legislation and regulations.
LAND REGISTRY AND LAND ACT
18 The address of the Bank in the State for service of notices and its
description are:
15
<PAGE>
19 The Bank hereby certifies that it is a qualified person within the
meaning of Section 45 of the Land Act 1965 or that an appropriate
consent has been obtained under Section 45 of the Land Act 1965 and
that any conditions attached thereto have been complied with (as the
case may be).
IN WITNESS whereof this Debenture has been entered into the day and year first
herein written.
GIVEN under the Common Seal
of LIONBRIDGE TECHNOLOGIES IRELAND
was affixed hereto:
SIGNED for and on behalf of
SILICON VALLEY BANK
in the presence of:
<PAGE>
Exhibit 10.18
LOAN DOCUMENT MODIFICATION AGREEMENT
NUMBER 1; DATED AS OF MAY 21, 1998
LOAN DOCUMENT MODIFICATION AGREEMENT dated as of May 21, 1998 (this
"Agreement") by and among Lionbridge Technologies Holdings, B.V., a company with
limited liability, incorporated in the Netherlands and having a principal place
of business located at The Sinus Building, Overschiestraat 55, 1062 HN,
Amsterdam, The Netherlands and Lionbridge Technologies B.V., a company with
limited liability, incorporated in Netherlands and having a principal place of
business located at the same address (each, a "Borrower" and, collectively, the
"Borrowers") and SILICON VALLEY BANK (the "Bank"), a California chartered bank
with its principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054, and with a loan production office located at Wellesley Office
Park, 40 William Street, Wellesley, MA 02181, doing business under the name
"Silicon Valley East".
1. REFERENCE TO EXISTING LOAN DOCUMENTS.
Reference is hereby made to that Loan Agreement dated September 26,
1997 between the Bank and the Borrowers (with the attached schedules and
exhibits, the "Credit Agreement") and the Loan Documents referred to therein,
including without limitation that certain Promissory Note of the Borrowers dated
September 26, 1997 in the principal amount of $5,000,000 (the "Note"), and the
Security Documents referred to therein. Unless otherwise defined herein,
capitalized terms used in this Agreement shall have the same respective meanings
as set forth in the Credit Agreement.
2. EFFECTIVE DATE.
This Agreement shall become effective as of May 21, 1998 (the
"Effective Date"), provided that the Bank shall have received the following on
or before May 21, 1998 and provided further, however, in no event shall this
Agreement become effective until signed by an officer of the Bank in California:
a. two copies of this Agreement, duly executed by the
Borrowers, with the attached consent of Lionbridge Technologies Ireland duly
executed thereby (the "Guarantor");
b. an amended and restated promissory note in the form
enclosed herewith (the "Amended Note"), duly executed by the Borrowers;
c. evidence of the approval by the Board of Directors of the
Borrowers of this Agreement and the Amended Note;
d. the Amended and Restated Parent Guarantee of Lionbridge
Technologies, Inc.;
e. the Guarantee of Lionbridge Technologies California Inc., a
corporation
<PAGE>
-2-
organized under the laws of Delaware ("Lionbridge California");
f. the Pledge Agreement entered into by Lionbridge
Technologies Holdings, Inc. in favor of the Bank pledging all the outstanding
capital stock held by it in Lionbridge California;
g. the Guarantee of Japanese Language Services, Inc., a
corporation organized under the laws of Massachusetts ("JLS");
h. the Pledge Agreement entered into by Lionbridge
Technologies Holdings, Inc. in favor of the Bank pledging all the outstanding
capital stock held by Lionbridge Technologies Holdings, Inc. in JLS;
i. the Guarantee of Lionbridge Japan K.K., a corporation
organized under the laws of Japan ("Lionbridge K.K.");
j. the Pledge Agreement entered into by JLS in favor of the
Bank pledging 60% of the outstanding stock of Lionbridge K.K.;
k. the Guarantee of Lionbridge Technologies France, a private
company organized under the laws of France ("Lionbridge France");
l. the Pledge Agreement entered into by Lionbridge
Technologies Holdings B.V. in favor of the Bank pledging 60% of the outstanding
capital stock held by Lionbridge Technologies Holdings B.V. in Lionbridge
France;
m. a Stock Purchase Warrant for 125,000 shares of common
stock, $.01 par value per share (the "Common Stock"), of Lionbridge Technologies
Holdings, Inc.;
n. the Security Agreement entered into by JLS and Bank,
securing the obligations under JLS' Guarantee;
o. the Security Agreement entered into by Lionbridge
California and Bank, securing the obligations under Lionbridge California's
Guarantee;
p. payment of the Bank's facility fee specified below; and
q. such other documents, and completion of such other matters,
as the Bank may reasonably request in connection with the amendment of the Loan
Agreement, as contemplated hereunder.
By the signature of its authorized officer below, the Borrowers are
hereby representing that, except as modified in SCHEDULE A attached hereto, the
representations of the Borrowers set forth in the Loan Documents (including
those contained in the Credit Agreement, as amended by this Agreement) are true
and correct as of the Effective Date as if made on and as of such date. In
addition, the Borrowers confirm their authorization as to the debiting of their
account with the Bank in the amount of $27,500 in order to pay the Bank's
facility fee for the
<PAGE>
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period up to and including the extended Revolving Maturity Date. Finally, the
Borrowers (and each guarantor signing below) agree that, as of the Effective
Date, they have no defenses against their obligations to pay any amounts
under the Credit Agreement and the other Loan Documents.
3. DESCRIPTION OF CHANGE IN TERMS.
As of the Effective Date, the Credit Agreement is modified in the
following respects:
a. Section 1.1 shall be amended by restating the definition of
"Borrowing Base" in its entirety as follows:
"'Borrowing Base'" means:
(a) from May 21, 1998 through December 31, 1998 an amount
equal to eighty percent (80%) of: (i) Eligible Trade Accounts
without regard to the requirement set forth in clauses
(a) through (k) of the definition thereof set forth below;
(ii) Unbilled Billable Trade Accounts; and (iii) Completed
Work In Process, provided, however, in no event shall more
than $4,000,000 be advanced in respect of Eligible Trade
Accounts over 120 days plus pursuant to clauses (ii) and
(iii) hereof; and
(b) from and after January 1, 1999 and subject to a
satisfactory receivables audit an amount equal to (i) eighty
percent (80%) of Eligible Trade Accounts (other than those of
Lionbridge France), (ii) thirty-five percent (35%) of
Completed Work in Process, provided, however, in no event
shall more than $2,500,000 be advanced pursuant to clause
(ii) hereof, and (iii) eighty percent (80%) of the Eligible
Trade Accounts owed to Lionbridge France from account debtors
approved by the Bank from time to time, provided, however, in
no event shall more than $3,000,000 be advanced pursuant to
clause (iii) hereof.
b. Section 1.1 shall be further amended by restating the
definition of "Committed Revolving Line" in its entirety as follows:
"'Committed Revolving Line' means a credit extension of up to
Eight Million Dollars ($U.S. 8,000,000)."
c. Section 1.1 shall be further amended by restating the
definition of "Designated Subsidiary" in its entirety as follows:
"'Designated Subsidiaries' means (a) Lionbridge Technologies
Ireland, an unlimited company duly incorporated under the laws
of Ireland ('Lionbridge-Ireland'), Lionbridge Technologies
California, Inc., a Delaware corporation ('Lionbridge
California'), Japanese Language Services, Inc., a
Massachusetts corporation ('JLS'), Lionbridge Japan K.K., a
corporation organized
<PAGE>
-4-
under the laws of Japan ('Lionbridge K.K.'), Lionbridge
Technologies France, a private company organized under the
laws of France ('Lionbridge France') and such other entities
as may be designated by the Borrowers and accepted by the Bank
from to time."
d. Section 1.1(d) shall be amended by restating the definition
of "Eligible Trade Accounts" in its entirety as follows::
"'(d) Accounts either not invoiced from or with respect to
which no billing, invoicing and receivables records are
maintained in the United States, the Netherlands, in the case
of Accounts of Lionbridge-Ireland, Ireland, in the case of
Accounts of Lionbridge-France, France, in the case of accounts
of Lionbridge-Japan, Japan, in the case of Accounts of
Lionbridge-Taiwan, Taiwan, in the case of Accounts of
Lionbridge-China, China, or in the case of Accounts of
Lionbridge Korea, Korea, unless approved in writing by the
Bank;
e. Section 1.1 shall be further amended by restating the
definition of "Revolving Maturity Date" in its entirety as follows:
"'Revolving Maturity Date' means May 20, 1999."
f. Section 1.1 shall be further amended by deleting the
definition of "Eligible Credit-Backed Accounts" and is further amended by
inserting the following new definitions in alphabetical order:
"'Completed Work In Process' means the amount equal to the
portion of work in process of a Borrower and/or Designated
Subsidiaries that is completed, for which such Borrower and/or
Designated Subsidiaries could collect payment in the event the
related agreement for services were cancelled by the customer.
'Unbilled Billable Trade Accounts' means Completed Work In
Process which is fully completed, which the relevant Borrower
or Designated Subsidiary is able and expects to bill the
customer for in the next regular billing cycle, which when
billed will constitute an Eligible Trade Account."
g. Sections 6.4 and 8.6 shall be amended by increasing the
threshold amounts referenced in each section by 65%, to reflect the increase in
the size of the loan hereunder, as follows:
In Section 6.4, the language "One Hundred Fifty
Thousand Dollars ($150,000)" shall be amended to read "Two Hundred Forty-Seven
Thousand Five Hundred Dollars ($247,500)"; and
In Section 8.6, the language "One Hundred Thousand
Dollars ($100,000)" shall be amended to read "One Hundred Sixty-Five Thousand
Dollars
<PAGE>
-5-
($165,000)".
h. The Borrowing Base Certificate attached to the Credit
Agreement as EXHIBIT C is hereby replaced by Exhibits C-1 and C-2 hereto.
i. The Credit Agreement and the other Loan Documents are
hereby amended wherever necessary or appropriate to reflect the foregoing
changes.
4. LIMITED WAIVER.
The Bank hereby waives any Event of Default arising solely as a result
of the failure of Lionbridge U.S. to comply with the financial covenants set
forth in Section 13 of the Parent Guarantee from the fiscal month and quarter
ending December 31, 1997 through the fiscal month ending April 30, 1998.
5. CONTINUING VALIDITY.
Upon the effectiveness hereof, each reference in each Security
Instrument or other Loan Document to "the Credit Agreement", "thereunder",
"thereof", "therein", or words of like import referring to the Credit Agreement,
shall mean and be a reference to the Credit Agreement, as amended hereby. Except
as specifically set forth above, the Credit Agreement shall remain in full force
and effect and is hereby ratified and confirmed.
Each of the other Loan Documents is in full force and effect and is
hereby ratified and confirmed. The amendments and limited waiver set forth above
(i) do not constitute a waiver or modification of any term, condition or
covenant of the Credit Agreement or any other Loan Document, other than as
expressly set forth herein, and (ii) shall not prejudice any rights which the
Bank may now or hereafter have under or in connection with the Credit Agreement,
as modified hereby, or the other Loan Documents and shall not obligate the Bank
to assent to any further modifications.
6. MISCELLANEOUS.
a. This Agreement may be signed in one or more counterparts
each of which taken together shall constitute one and the same document.
b. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
c. THE BORROWERS ACCEPT FOR THEMSELVES AND IN CONNECTION WITH
THEIR PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE
OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS
IN ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND AGAINST THEM WHICH ARISES OUT OF
OR BY REASON OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON THE
BANK CANNOT AVAIL ITSELF OF THE COURTS OF THE
<PAGE>
-6-
COMMONWEALTH OF MASSACHUSETTS, THEN VENUE SHALL LIE IN SANTA CLARA COUNTY,
CALIFORNIA.
d. The Borrowers agree to promptly pay on demand all costs and
expenses of the Bank in connection with the preparation, reproduction, execution
and delivery of this Agreement and the other instruments and documents to be
delivered hereunder, including the reasonable fees and out-of-pocket expenses of
Sullivan & Worcester LLP, special counsel for the Bank with respect thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Bank and the Borrowers have caused this
Agreement to be signed under seal by their respective duly authorized officers
as of the date set forth above.
Sincerely,
SILICON VALLEY EAST, a Division
of Silicon Valley Bank
By:
-----------------------------
Name: Andrew H. Tsao
Title: Vice President
SILICON VALLEY BANK
By:
-----------------------------
Name:
Title:
(signed in Santa Clara, CA)
LIONBRIDGE TECHNOLOGIES HOLDINGS B.V.
By:
-----------------------------
Name: Rory J. Cowan
Title: Managing Director
LIONBRIDGE TECHNOLOGIES B.V.
By:
-----------------------------
Name: Rory J. Cowan
Title: Managing Director
<PAGE>
SCHEDULE A
BORROWERS' EXCEPTIONS TO LOAN DOCUMENT REPRESENTATIONS
[To come.]
<PAGE>
CONSENT
The undersigned, as Guarantor under the Guarantee dated as of September
26, 1997 (the "Guarantee") in favor of Silicon Valley Bank, hereby consents to
the foregoing Loan Document Modification Agreement and hereby confirms and
agrees that the Guarantee is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects, except that, upon the
effectiveness of, and on and after the date of, said amendment, each reference
in the Guarantee and in each other Loan Document (as defined in the Loan
Agreement) to which the undersigned is a party, including, to "the Credit
Agreement", the "Loan Agreement," "thereunder", "thereof", "therein", or words
of like import referring to the Loan Agreement, shall mean and be a reference to
the Loan Agreement, as amended hereby, and each reference in the Guarantee and
in each such other Loan Document to "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Promissory Note dated
September 26, 199 , shall mean and be a reference to such Promissory Note, as
amended and restated by the Amended Note.
LIONBRIDGE TECHNOLOGIES IRELAND
By:
---------------------------
Name:
Title:
<PAGE>
EXHIBIT C-1
BORROWING BASE CERTIFICATE
FOR USE THROUGH 12/31/98
Borrower: Lionbridge Technologies B.V. and Lionbridge Technologies
Holdings B.V.
Bank: Silicon Valley Bank
Commitment Amount: $8,000,000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ACCOUNTS RECEIVABLE(1)
1. Accounts Receivable Book Value as of --------- $
----------------------
2. Additions (please explain on reverse) $
----------------------
3. TOTAL ACCOUNTS RECEIVABLE $
----------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Other (please explain on reverse) $
----------------------
5. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
----------------------
LOAN VALUE
6. Eligible Trade Accounts (#3 minus #5) $
----------------------
7. Preliminary Loan Value of Eligible Trade
Accounts (80%of #6) $
----------------------
8. Amount of Item 6 that constitutes Eligible Trade
Accounts over 120 days $
----------------------
9. Preliminary Loan Value of Item 8 (80% of #8) $
----------------------
10. Unbilled Billable Trade Accounts(2) $
----------------------
11. Preliminary Loan Value of Unbilled Billable Trade
Accounts (80% of #10) $
----------------------
12. Completed Work In Process(3) $
----------------------
13. Preliminary Loan Value of Percentage Completed
Work In Process (80% of #12) $
----------------------
14. Final Loan Value of Unbilled Trade Accounts,
Completed Work In Process and Eligible Trade
Accounts over 120 days (the lower of the sum of
#9, #11 and #13 or $4,000,000) $
----------------------
15. FINAL AGGREGATE LOAN VALUE
(#14 and #7 minus #9) $
----------------------
BALANCES
16. Maximum Loan Amount $ 8,000,000
----------------------
</TABLE>
- -----------------------
(1) Includes receivables of the Borrowers and the Designated Subsidiaries
under the subject Loan Agreement.
(2) "Unbilled Billable Trade Accounts" means Completed Work In Process
which is fully completed, which the relevant Borrower or Designated
Subsidiary is able and expects to bill the customer for in the next regular
billing cycle, which when billed will constitute an Eligible Trade Account.
(3) "Completed Work In Process" means the amount equal to the portion of
work in process of a Borrower and/or Designated Subsidiaries that is
completed, for which such Borrower and/or Designated Subsidiaries could
collect payment in the event the related agreement for services were
cancelled by the customer.
<PAGE>
<TABLE>
<S> <C> <C>
17. Total Funds Available [Lesser of #14 or #15] $
----------------------
18. Present balance owing on Line of Credit $
----------------------
19. RESERVE POSITION (#16 minus #17) $
----------------------
</TABLE>
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AND
SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS:
- -----------------------------------
By:
-------------------------------
Authorized Signer
<PAGE>
EXHIBIT C-2
BORROWING BASE CERTIFICATE
FOR USE FROM AND AFTER 1/1/99
Borrower: Lionbridge Technologies B.V. and Lionbridge Technologies
Holdings B.V.
Bank: Silicon Valley Bank
Commitment Amount: $8,000,000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ACCOUNTS RECEIVABLE (4)
1. Accounts Receivable Book Value as of $
----------------------
2. Additions (please explain on reverse) $
----------------------
3. TOTAL ACCOUNTS RECEIVABLE $
----------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 120 days due $
----------------------
5. Balance of 50% over 120 day accounts $
----------------------
6. Concentration Limits $
----------------------
7. Foreign Accounts (excl. accounts billed from
U.S., Ireland, The Netherlands, France, Japan,
Taiwan, China & Korea) $
----------------------
8. Governmental Accounts (unless qualified) $
----------------------
9. Contra Accounts $
----------------------
10. Promotion or Demo Accounts $
----------------------
11. Intercompany/Employee Accounts $
----------------------
12. Other (please explain on reverse) $
----------------------
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
----------------------
LOAN VALUE
14. Eligible Trade Accounts (other than those of Lionbridge
France) (#3 minus #13) $
----------------------
15. Loan Value of Eligible Trade Accounts (80%of #14) $
----------------------
16. Eligible Trade Accounts owing Lionbridge France $
----------------------
17. Deductions from Lionbridge France Accounts of the type
described in Items 4-6 and 7-12 above (attach
worksheet) $
----------------------
18. Eligible Lionbridge France Trade Accounts
</TABLE>
(4) Includes receivables of the Borrowers and the Designated Subsidiaries
under the subject Loan Agreement but does not include receivables of Lionbridge
France.
<PAGE>
<TABLE>
<S> <C> <C>
(#16 minus #17) $
----------------------
19. Loan Value of Lionbridge France Accounts: Enter the
lower of 80% of #18 ($______) or $3,000,000
20. Completed Work In Process(5) $
----------------------
21. Loan Value of Completed Work In Process: Enter the
lower of 35% of #22 ($______) or $2,500,000 $
----------------------
22. LOAN VALUE OF ACCOUNTS, LIONBRIDGE FRANCE
ACCOUNTS AND COMPLETED WORK IN PROCESS
(#15, #19, and #21) $
----------------------
BALANCES
23. Maximum Loan Amount $ 8,000,000
----------------------
24. Total Funds Available [Lesser of #22 or #23] $
----------------------
25. Present balance owing on Line of Credit $
----------------------
26. RESERVE POSITION (#24 minus #25) $
----------------------
</TABLE>
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AND
SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS:
- -------------------------------
By:
---------------------------
Authorized Signer
(5) "Completed Work In Process" means the amount equal to the portion of
work in process of a Borrower and/or Designated Subsidiaries that is
completed, for which such Borrower and/or Designated Subsidiaries could
collect payment in the event the related agreement for services were
cancelled by the customer.
<PAGE>
Exhibit 10.19
1
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of May 21, 1998 between LIONBRIDGE
TECHNOLOGIES HOLDINGS B.V., a Netherlands company with limited liability (the
"COMPANY") and SILICON VALLEY BANK (the "BANK").
W I T N E S S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September
26, 1997 among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies
B.V., each a Netherlands company with limited liability (together, the
"BORROWERS") and the Bank (the "ORIGINAL LOAN AGREEMENT"), the Bank agreed,
subject to the terms and conditions thereof, to make credit extensions to the
Borrowers to be evidenced by their promissory note payable to the order of the
Bank, also dated September 26, 1997 (the " ORIGINAL NOTE");
WHEREAS, the Borrowers wish to enter into a Loan Document
Modification Agreement of even date amending the Original Loan Agreement (the
Original Loan Agreement as so amended, and as the same may hereafter be further
amended, modified, supplemented, extended or restated from time to time, the
"LOAN AGREEMENT") pursuant to which they will issue to the Bank an Amended and
Restated Note of even date herewith in the original principal amount of
$8,000,000 (as the same may hereafter be amended, modified, increased,
supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, the Company is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) issued by Lionbridge
Technologies France, a French limited liability company (the "ISSUER");
WHEREAS, in order to induce the Bank to enter into the Loan
Document Modification Agreement, the Company has agreed to grant a continuing
security interest in and to the Collateral (which is hereafter defined and which
includes the Pledged Stock) to secure obligations under the Loan Agreement,
including, without limitation, obligations under the promissory note by the
Borrowers to the Bank issued pursuant to the Loan Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Terms defined in the Loan Agreement and not
otherwise defined herein (including, without limitation, the terms "Event of
Default", "Governmental Authority", "Lien" and "Loan Documents") have, as used
herein, the respective meanings provided for therein. The following additional
terms, as used herein, have the following respective meanings:
"COLLATERAL" means the Pledged Stock and all Proceeds.
<PAGE>
2
"PLEDGE AGREEMENT" means this Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
"PLEDGED STOCK" means 1,920 shares of capital stock of the
Issuer, together with all stock certificates, options or rights of any
nature whatsoever which may be issued or granted by the Issuer to the
Company in respect of the Pledged Stock while this Pledge Agreement is
in effect.
"PROCEEDS" means all "proceeds" as such term is defined in
Section 9-306 of the UCC and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
"SECURED OBLIGATIONS" means all obligations of the Borrowers
to the Bank, whether such obligations are now existing or hereafter
incurred or created, joint or several, direct or indirect, absolute or
contingent, due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrowers) on any
advance to the Borrowers under the Loan Agreement or the Note; (b) all
other amounts (including, without limitation, any fees or expenses)
payable by the Borrowers under the Loan Agreement, the Note or any
other Loan Document; (c) all amounts payable to the Bank in connection
with the issuance of any letter of credit by the Bank for the account
of the Borrowers or any drawing thereunder, including without
limitation, any reimbursement obligation and letter of credit fees
payable under any letter of credit application or reimbursement
agreement executed by the Borrowers in connection with any such letter
of credit; (d) all amounts payable by the Borrowers hereunder; and (e)
any renewals, refinancings or extensions of any of the foregoing.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in The Commonwealth of Massachusetts.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Company hereby
pledges the Pledged Stock in favor of the Bank and hereby grants to the Bank a
first ranking security interest in the Collateral, as collateral security for
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of the Secured Obligations.
3. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants that:
a. the Company has the corporate power and authority and the
legal right to execute and deliver, to perform its obligations under,
and to grant the Lien on the Collateral pursuant to, this Pledge
Agreement and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the Lien on the
Collateral pursuant to, this Pledge Agreement;
<PAGE>
3
b. this Pledge Agreement constitutes a legal, valid and
binding obligation of the Company enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally;
c. the execution, delivery and performance of this Pledge
Agreement will not violate any provision of any Requirement of Law or
Contractual Obligation of the Company and will not result in the
creation or imposition of any Lien on any of the properties or revenues
of the Company pursuant to any Requirement of Law or Contractual
Obligation of the Company, except as contemplated hereby;
d. no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any
stockholder or creditor of the Company or the Issuer), is required in
connection with the execution, delivery, performance, validity or
enforceability of this Pledge Agreement;
e. no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
the Company, threatened by or against the Company or against any of its
properties or revenues with respect to this Pledge Agreement or any of
the transactions contemplated hereby;
f. the shares of Pledged Stock constitute 60% of the issued
and outstanding shares of the capital stock of the Issuer;
g. all the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable;
h. the Company is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock, free of any and all
Liens or options in favor of, or claims of, any other Person, except
the Lien created by this Pledge Agreement; and
i. upon signature of the Pledge Agreement and completion of
the acts described in Article 19 hereof, the Lien granted pursuant to
this Pledge Agreement will constitute a valid, perfected first priority
Lien on the Collateral, enforceable as such against all creditors of
the Company and any Persons purporting to purchase any Collateral from
the Company.
4. COVENANTS. The Company covenants and agrees with the Bank
that, from and after the date of this Pledge Agreement until the Secured
Obligations are paid in full and the Commitment is terminated:
a. The Company expressly agrees that if it shall, as a result
of its ownership of the Pledged Stock, become entitled to receive or
shall receive any stock (including, without limitation, any stock
dividend or distribution in connection with any reclassification,
increase or reduction of capital or any stock issued in connection with
any
<PAGE>
4
reorganization), option or rights, whether in addition to, in
substitution of, as a conversion of, or in exchange for any shares of
the Pledged Stock, or otherwise in respect thereof, all such stock,
options and rights shall automatically fall within the scope of this
Pledged Agreement. The Company further agrees to take any and all
steps requested by the Bank in order to perfect such extension or
modification of the pledge. Any sums paid upon or in respect of the
Pledged Stock upon the liquidation or dissolution of the Issuer shall
be paid over to the Bank to be held by it hereunder as additional
collateral security for the Secured Obligations, and in case
any distribution of capital shall be made on or in respect of the
Pledged Stock or any property shall be distributed upon or with respect
to the Pledged Stock pursuant to the recapitalization or
reclassification of the capital of the Issuer or pursuant to the
reorganization thereof, the property so distributed shall be delivered
to the Bank to be held by it, subject to the terms hereof, as
additional collateral security for the Secured Obligations. If any sums
of money or property so paid or distributed in respect of the Pledged
Stock shall be received by the Company, the Company shall, until such
money or property is paid or delivered to the Bank, hold such money or
property in trust for the Bank, segregated from other funds of the
Company, as additional collateral security for the Secured Obligations.
b. Without the prior written consent of the Bank, the Company
will not (i) vote to enable, or take any other action to permit, the
Issuer to issue any stock or other equity securities of any nature or
to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of the
Issuer, or (ii) sell, assign, transfer, exchange or otherwise dispose
of, or grant any option with respect to, the Collateral, or (iii)
create, incur or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any of the Collateral, or any
interest therein, except for the Lien provided for by this Pledge
Agreement. The Company will defend the right, title and interest of the
Bank in and to the Collateral against the claims and demands of all
Persons whomsoever.
c. At any time and from time to time, upon the written request
of the Bank, and at the sole expense of the Company, the Company will
promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Bank may reasonably
request for the purposes of obtaining or preserving the full benefits
of this Pledge Agreement and of the rights and powers herein granted.
If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any promissory note, other instrument
or chattel paper, such note, instrument or chattel paper shall be
immediately delivered to the Bank, duly endorsed in a manner
satisfactory to the Bank, to be held as Collateral pursuant to this
Pledge Agreement.
d. The Company agrees to pay, and to save the Bank harmless
from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated
by this Pledge Agreement.
<PAGE>
5
5. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default
shall have occurred and be continuing and the Bank shall have given notice to
the Company of the Bank's intent to exercise its corresponding rights pursuant
to PARAGRAPH 6 below, the Company shall be permitted to receive all cash
dividends paid in the normal course of business of the Issuer and consistent
with past practice, to the extent permitted in the Loan Agreement, in respect of
the Pledged Stock and to exercise all voting and corporate rights with respect
to the Pledged Stock, PROVIDED, HOWEVER, that no vote shall be cast or corporate
right exercised or other action taken which, in the Bank's reasonable judgment,
would impair the Collateral or which would be inconsistent with or result in any
violation of any provision of this Pledge Agreement, the Loan Agreement, the
Note or any other Loan Document.
6. RIGHTS OF THE BANK. If an Event of Default shall occur and
be continuing and the Bank shall give notice of its intent to exercise such
rights to the Company: (i) the Bank shall have the right to receive any and all
cash dividends paid in respect of the Pledged Stock and make application thereof
to the Secured Obligations in such order as it may determine, and (ii) all
shares of the Pledged Stock shall be registered in the name of the Bank or its
nominee, and the Bank or its nominee may thereafter exercise (A) all voting,
corporate and other rights pertaining to such shares of the Pledged Stock at any
meeting of shareholders of the Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of the
Issuer, or upon the exercise by the Company or the Bank of any right, privilege
or option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it, but the Bank
shall have no duty to exercise any such right, privilege or option and shall not
be responsible for any failure to do so or delay in so doing.
a. The rights of the Bank hereunder shall not be conditioned
or contingent upon the pursuit by the Bank of any right or remedy
against the Issuer or against any other Person which may be or become
liable in respect of all or any part of the Secured Obligations or
against any other collateral security therefor, guarantee thereof or
right of offset with respect thereto. The Bank shall not be liable for
any failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so, nor shall it be under any
obligation to sell or otherwise dispose of any Collateral upon the
request of the Company or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
7. REMEDIES. If an Event of Default shall occur and be
continuing, the Bank may exercise, in addition to all other rights and remedies
granted in this Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the UCC. Without limiting the generality of
<PAGE>
6
the foregoing, the Bank, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Company, the Issuer or any
other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales, in the over-the-counter market, at any exchange, broker's board or office
of the Bank or elsewhere upon such terms and conditions as it may deem advisable
and at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Bank shall have the right
upon any such public sale or sales, and to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in the Company, which right
or equity is hereby waived or released. The Bank shall apply any Proceeds from
time to time held by it and the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Bank hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Secured Obligations, in such order as the Bank may elect, and only after such
application and after the payment by the Bank of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
UCC, need the Bank account for the surplus, if any, to the Company. To the
extent permitted by applicable law, the Company waives all claims, damages and
demands it may acquire against the Bank arising out of the exercise by the Bank
of any of its rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. The Company shall remain liable for any deficiency if the proceeds
of any sale or other disposition of Collateral are insufficient to pay the
Secured Obligations and the fees and disbursements of any attorneys employed by
the Bank to collect such deficiency. The Company further waives and agrees not
to assert any rights or privileges which it may acquire under Section 9-112 of
the UCC.
8. PRIVATE SALES.
a. The Company recognizes that the Bank may be unable to
effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable
state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers
which will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view to
the distribution or resale thereof. The Company acknowledges and agrees
that any such private sale may result in prices and other terms less
favorable to the Bank than if such sale were a public sale. The Bank
shall be under no obligation to delay a sale of any of the Pledged
Stock for the period of time necessary to permit the Issuer to register
such securities for public sale under the Securities Act, or under
applicable state securities laws, even if the Issuer would
<PAGE>
7
agree to do so.
b. The Company further agrees to do or cause to be done all
such other acts as may be necessary to make any sale or sales of all or
any portion of the Pledged Stock pursuant to this PARAGRAPH 8 valid and
binding and in compliance with any and all other applicable
Requirements of Law. The Company further agrees that a breach of any of
the covenants contained in this PARAGRAPH 8 will cause irreparable
injury to the Bank, that the Bank has no adequate remedy at law in
respect of such breach and, as a consequence, that each and every
covenant contained in this PARAGRAPH 8 shall be specifically
enforceable against the Company, and the Company hereby waives and
agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of
Default has occurred or is continuing under the Loan Agreement.
9. NO SUBROGATION. Notwithstanding any payment or payments
made by the Company hereunder, or any setoff or application of funds of the
Company by the Bank, or the receipt of any amounts by the Bank with respect to
any of the Collateral, the Company shall not be entitled to be subrogated to any
of the rights of the Bank against the Issuer or against any other collateral
security held by the Bank for the payment of the Secured Obligations, nor shall
the Company seek any reimbursement from the Issuer in respect of payments made
by the Company in connection with the Collateral, or amounts realized by the
Bank in connection with the Collateral, until all amounts owing to the Bank by
the Issuer on account of the Secured Obligations are paid in full and the
Commitment is terminated. If any amount shall be paid to the Company on account
of such subrogation rights at any time when all of the Secured Obligations shall
not have been paid in full, such amount shall be held by the Company in trust
for the Bank, segregated from other funds of the Company, and shall, forthwith
upon receipt by the Company, be turned over to the Bank in the exact form
received by the Company (duly endorsed by the Company to the Bank, if required),
to be applied against the Secured Obligations, whether matured or unmatured, in
such order as the Bank may determine.
10. AMENDMENTS, ETC. WITH RESPECT TO THE SECURED OBLIGATIONS.
The Company shall remain obligated hereunder, and the Collateral shall remain
subject to the Lien granted hereby, notwithstanding that, without any
reservation of rights against the Company, and without notice to or further
assent by the Company, any demand for payment of any of the Secured Obligations
made by the Bank may be rescinded by the Bank, and any of the Secured
Obligations continued, and the Secured Obligations, or the liability of the
Issuer or any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Bank, and the
Loan Agreement, the Note and any other Loan Document may be amended, modified,
supplemented or terminated, in whole or in part, as the Bank may deem advisable
from time to time, and any guarantee, right of offset or other collateral at any
time held by the Bank for the payment of the Secured Obligations may be sold,
exchanged, waived, surrendered or released. The Bank shall have no obligation to
protect, secure, perfect or insure any other Lien at any time held by it as
security for the Secured Obligations or any property subject thereto. The
Company waives any and all notice of the creation, renewal, extension or accrual
of any of the
<PAGE>
8
Secured Obligations and notice of or proof of reliance by the Bank upon this
Pledge Agreement; the Secured Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred in reliance upon this
Pledge Agreement; and all dealings between the Issuer, the Company and the Bank
shall likewise be conclusively presumed to have been had or consummated in
reliance upon this Pledge Agreement. The Company waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Issuer or the Company with respect to the Secured Obligations.
11. LIMITATION ON DUTIES REGARDING COLLATERAL. The Bank's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the UCC or otherwise, shall
be to deal with it in the same manner as the Bank deals with similar securities
and property for its own account. Neither the Bank nor any of its directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Company or otherwise.
12. POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
13. SEVERABILITY. Any provision of this Pledge Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
14. PARAGRAPH HEADINGS. The paragraph headings used in this
Pledge Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
15. NO WAIVER; CUMULATIVE REMEDIES. The Bank shall not by any
act (except by a written instrument pursuant to PARAGRAPH 16 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Bank, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Bank of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Bank would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights or remedies provided by law.
16. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING
LAW. None of the terms or provisions of this Pledge Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Company and the Bank, PROVIDED that any provision of this Pledge
Agreement may be waived by the Bank in a letter or
<PAGE>
9
agreement executed by the Bank or by facsimile transmission from the Bank. This
Pledge Agreement shall be binding upon the successors and assigns of the Company
and shall inure to the benefit of the Bank and its successors and assigns. This
Pledge Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of France.
17. NOTICES. Notices by the Bank to the Company or the Issuer
may be given by mail or by facsimile transmission, addressed or transmitted to
the Company or the Issuer at its address or transmission number set forth under
its signature below and shall be effective (a) in the case of mail, two days
after deposit in the postal system, first class postage pre-paid and (b) in the
case of facsimile notices, when electronic confirmation of receipt is received.
The Company and the Issuer may change their respective address and transmission
numbers by written notice to the Bank.
18. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. The
Company hereby authorizes and instructs the Issuer to comply with any
instruction received by it from the Bank in writing that (a) states that an
Event of Default has occurred and (b) is otherwise in accordance with the terms
of this Pledge Agreement, without any other or further instructions from the
Company, and the Company agrees that the Issuer shall be fully protected in so
complying.
19. PERFECTION. The Parties shall sign on even date herewith
four originals of the French-language version of this Pledge Agreement that is
set forth in Schedule 1 hereto. The Company shall then (i) promptly register one
of the originals with the French tax authorities and (ii) serve another of the
originals on the Company by "HUISSIER". Finally, the Company shall deliver to
the Bank a certified copy of the by-laws of the Issuer in order to evidence the
pledge of the Pledged Stock. In the event of a conflict between the terms in the
French-language document set forth in Schedule 1 and those in the present Pledge
Agreement, the terms in the present Pledge Agreement shall prevail.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
LIONBRIDGE TECHNOLOGIES
HOLDINGS B.V.
By:
--------------------------
Name: Rory J. Cowan
Title: President and Chief Executive Officer
Address for Notices:
950 Winter Street, Suite 4300
Waltham, MA 02154
Telecopy: (781) 890-3122
SILICON VALLEY BANK
By:
--------------------------
Name: Andrew H. Tsao
Title: Vice President
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The Issuer referred to in the foregoing Pledge Agreement
hereby acknowledges receipt of a copy thereof and agrees to be bound thereby and
to comply with the terms thereof insofar as such terms are applicable to it. The
Issuer agrees to notify the Bank promptly in writing of the occurrence of any of
the events described in PARAGRAPH 5(A) of the Pledge Agreement. The Issuer
further agrees that the terms of PARAGRAPH 9(B) of the Pledge Agreement shall
apply to it, MUTATIS MUTANDIS, with respect to all actions that may be required
of it under or pursuant to or arising out of PARAGRAPH 9 of the Pledge
Agreement.
LIONBRIDGE TECHNOLOGIES
FRANCE
By:
--------------------------
Name:
Title:
Address for Notices:
<PAGE>
SCHEDULE 1
To Pledge
Agreement
FRENCH-LANGUAGE VERSION OF PLEDGE AGREEMENT
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRES
WARRANT TO PURCHASE COMMON STOCK
OF
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
THIS WARRANT dated as of May 21, 1998 certifies that, for the agreed
upon value of $1.00 and for other good and valuable consideration, SILICON
VALLEY BANCSHARES ("Holder") is entitled to purchase 125,000 shares (the
"Shares") of fully paid and nonassessable shares of common stock, $.01 par value
per share (the "Common Stock"), of Lionbridge Technologies Holdings, Inc., a
Delaware corporation (the "Company"), at the initial exercise price per Share of
$1.60 (the "Warrant Price"), as adjusted pursuant to Article 2 of this Warrant,
subject to the provisions and upon the terms and conditions set forth of this
Warrant.
ARTICLE 1 EXERCISE
1.1. METHOD OF EXERCISE. Holder may exercise this Warrant by delivering
a duly executed Notice of Exercise in substantially the form attached as
APPENDIX 1 to the principal office of the Company. Unless Holder is exercising
the conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2. CONVERSION RIGHT. In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant into a number
of Shares determined by dividing (a) the aggregate fair market value at the time
of such conversion of the Shares or other securities otherwise issuable upon
exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b)
the fair market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.4.
1.3. FAIR MARKET VALUE. If the Shares are traded in a public market,
the fair market value of the Shares shall be the closing price of the Shares (or
the closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair
<PAGE>
-2-
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation. If
the valuation of such investment banking firm is greater than that determined by
the Board of Directors, then all fees and expenses of such investment banking
firm accrued in connection with such valuation shall be paid by the Company. In
all other circumstances, such fees and expenses shall be paid by Holder.
1.4. DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.5. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.6. REPURCHASE ON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.
(a) "ACQUISITION". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities immediately before the transaction own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
(b) ASSUMPTION OF WARRANT. If upon the closing of any
Acquisition the successor entity assumes the obligations of this Warrant, then
this Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
(c) NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the Acquisition on the
same terms as other holders of the same class of securities of the Company.
<PAGE>
-3-
ARTICLE 2 ADJUSTMENTS TO THE SHARES
2.1. STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its Common Stock payable in Common Stock, or other securities, or
subdivides the outstanding Common Stock into a greater amount of Common Stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and class of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2.2. RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and class of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3. ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4. NO IMPAIRMENT. The Company shall not, by amendment of its Restated
Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the Company
takes any action affecting the Shares or its Common Stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.5. RESERVATION OF SHARES. The Company will at all times reserve
and keep available out of its authorized but unissued Common Stock, solely
for issuance, sale and delivery upon the exercise or conversion of this
Warrant, a number of shares of Common Stock equal to the number of shares of
Common Stock issuable upon the exercise of this Warrant.
2.6. FRACTIONAL SHARES. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of
<PAGE>
-4-
the Warrant, the Company shall eliminate such fractional share interest by
paying to Holder the amount computed by multiplying the factional interest by
the fair market value of a full Share.
2.7. CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its President or Chief
Financial Officer setting forth such adjustment and the facts upon which such
adjustment is based. The Company shall, upon written request, furnish Holder
a certificate setting forth the Warrant Price in effect upon the date thereof
and the series of adjustments leading to such Warrant Price.
ARTICLE 3 REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1. REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(b) The authorized and issued and outstanding capital stock of
the Company is as set forth on EXHIBIT A. All the outstanding shares of capital
stock of the Company have been duly authorized, are validly issued and are fully
paid and nonassessable. Except as set forth in EXHIBIT A, (i) there are no
options, warrants or rights to purchase shares of capital stock or other
securities of Company authorized, issued or outstanding, nor is the Company
obligated in any other manner to issue shares of its capital stock or other
securities; (ii) there are no restrictions on the transfer of shares of capital
stock of the Company other than those imposed by federal and relevant state
securities laws; and (iii) no holder of any security of the Company is entitled
to preemptive or similar statutory or contractual rights, either arising
pursuant to any agreement or instrument to which the Company is a party, or
which are otherwise binding upon the Company. Neither the issuance of this
Warrant nor the shares of Common Stock issued upon any exercise or conversion of
this Warrant will result in an adjustment under the antidilution or exercise
rights of any holders of any outstanding shares of capital stock of the Company.
3.2. INFORMATION RIGHTS. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company.
3.3. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
3.3.1 DEFINITIONS. For purposes of this Section 3.3:
(a) The term "Registrable Shares" means (i) the Common Stock
<PAGE>
-5-
issuable or issued upon exercise of this Warrant, and (ii) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Common Stock or the Shares;
(b) The term "Stockholder" means any person owning or having
the right to acquire the Registrable Shares; and
(c) The term "Registration Rights Agreement" means the
Restated Registration Rights Agreement dated as of February 9, 1998, by and
among the Company and the parties thereto.
3.3.2 GRANT OF RIGHTS. The Company hereby grants to the
Stockholder, with respect to the Registrable Shares, all of the rights set forth
in Section 2.3 of the Registration Rights Agreement that are conferred on
"Common Stockholders," with respect to the "Registrable Common Shares." A true
and complete copy of the Registration Rights Agreement is attached hereto as
EXHIBIT B. The Company represents and warrants to the Stockholder that the
Company has obtained all required consents of parties to the Registration Rights
Agreement and of any other persons that are required in order for the
Registrable Shares to be granted the rights described in the Registration Rights
Agreement.
3.3.3 RIGHTS AND OBLIGATIONS SURVIVE EXERCISE AND EXPIRATION
OF WARRANT. The rights and obligations of the Company and the Holder contained
in the Registration Rights Agreement and this Section 3.3 shall survive
exercise, conversion and expiration of this Warrant.
ARTICLE 4 MISCELLANEOUS.
4.1. TERM; NOTICE OF EXPIRATION. This Warrant is exercisable, in whole
or in part, at any time and from time to time on or before May 21, 2003.
4.2. LEGENDS. This Warrant and the Shares issuable upon exercise of
this Warrant shall be imprinted with a legend in substantially the following
form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3. COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and
the Shares issuable upon exercise this Warrant may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws by the transferor and the transferee (including,
without limitation, the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company).
<PAGE>
-6-
4.4. TRANSFER PROCEDURE. Subject to the provisions of Section 4.3,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant by giving the Company notice of the portion of the
Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). The
Holder shall not transfer any portion of this Warrant to any person who
directly competes with the Company without the Company's written consent.
4.5. NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, to the Company at 950 Winter Street, Suite 4300, Waltham, Massachusetts
02154, Attn: Rory J. Cowan, President, with a copy to George Lloyd, Testa
Hurwitz & Thibeault LLP, High Street Tower, 125 High Street, Boston,
Massachusetts 02110; or to the Holder at: Silicon Valley Bank, 40 William
Street, Wellesley, Massachusetts 02181, Attn: Andrew N. Tsao, with a copy to
David Jaques, Chief Financial Officer, Silicon Valley Bancshares, 3003 Tasman
Drive, Santa Clara, California 95054 or at such other address as may have been
furnished to the Company or the Holder, as the case may be, in writing by the
Company or such holder from time to time.
4.6. WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7. ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts, without giving
effect to its principles regarding conflicts of law.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
under seal by its duly authorized officer as of the day and year first above
written.
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
By
-------------------------------------
Rory J. Cowan
President and Chief Executive Officer
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase __________ shares of the
Common Stock of Lionbridge Technologies Holdings, Inc. pursuant to the terms of
the attached warrant dated May __, 1998, and tenders herewith payment of the
purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to ______________________________ of the Shares
covered by the Warrant.
[STRIKE PARAGRAPH THAT DOES NOT APPLY.]
2. Please issue a certificate or certificates representing the Shares in
the name of the undersigned or in such other name as is specified below:
------------------------------
(Name)
------------------------------
------------------------------
(Address)
3. The undersigned represents it is acquiring the Shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
------------------------------
(Signature)
- ------------------------------------
(Date)
<PAGE>
EXHIBIT A
CAPITALIZATION
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
<TABLE>
<CAPTION>
Common Preferred A Preferred B Preferred C Preferred D
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Authorized 25,950,867 17,271,314 200 17,271,514 200
Capital
Stock
- ------------------------------------------------------------------------------------------------
Outstanding 2,572,576 13,271,314 0 0 140
Capital
Stock
- ------------------------------------------------------------------------------------------------
</TABLE>
As of April 30, 1998, there were outstanding options to purchase up to
3,608,045 shares of Common Stock pursuant to the Company's 1998 Stock Plan.
Pursuant to a Stock Purchase Agreement dated as of February 27, 1998,
the Company is obligated to issue 36,400 shares of Common Stock to certain
employees of Japanese Language Services, Inc., a wholly-owned subsidiary of the
Company.
Pursuant to certain common stock purchase warrants dated February 24,
1998, the Company is obligated to issue warrants to certain existing investors
in the event that sums borrowed by the Company from such investors are not
repaid by certain dates.
Pursuant to a Restated Stockholders Agreement dated February 9, 1998,
(1) the Company's capital stock is subject to certain restrictions on transfer,
including right of first refusal in favor of certain existing Company
stockholders, and (2) the parties thereto hold certain preemptive rights with
respect to certain issuances of capital stock by the Company.
<PAGE>
Exhibit 10.21
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of May 21, 1998 between LIONBRIDGE
TECHNOLOGIES HOLDINGS, INC., a Delaware corporation (the "COMPANY") and SILICON
VALLEY BANK (the "BANK").
W I T N E S S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September
26, 1997 among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies
B.V., each a Netherlands company with limited liability (together, the
"BORROWERS") and the Bank (the "ORIGINAL LOAN AGREEMENT"), the Bank agreed,
subject to the terms and conditions thereof, to make credit extensions to the
Borrowers to be evidenced by their promissory note payable to the order of the
Bank, also dated September 26, 1997 (the " ORIGINAL NOTE");
WHEREAS, the Borrowers wish to enter into a Loan Document
Modification Agreement of even date amending the Original Loan Agreement (the
Original Loan Agreement as so amended, and as the same may hereafter be further
amended, modified, supplemented, extended or restated from time to time, the
"LOAN AGREEMENT") pursuant to which they will issue to the Bank an Amended and
Restated Note of even date herewith in the original principal amount of
$8,000,000 (as the same may hereafter be amended, modified, increased,
supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, the Company is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) issued by Lionbridge
Technologies California, Inc., a Delaware corporation (the "ISSUER");
WHEREAS, in order to induce the Bank to enter into the Loan
Document Modification Agreement, the Company has agreed to grant a continuing
security interest in and to the Collateral (which is hereafter defined and which
includes the Pledged Stock) to secure obligations under the Loan Agreement,
including, without limitation, obligations under the promissory note by the
Borrowers to the Bank issued pursuant to the Loan Agreement;
WHEREAS, the Company is the registered and beneficial owner of
approximately 39.6% of the outstanding capital stock of Lionbridge Technologies
Holdings B.V. which in turn is the registered owner of all the outstanding
capital stock of Lionbridge Technologies B.V. and as a consequence the Company
and the Issuer will derive benefit from the Bank's agreement to make credit
extensions to the Borrowers;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Terms defined in the Loan Agreement and not
otherwise defined herein (including, without limitation, the terms "Event of
Default", "Governmental
<PAGE>
2
Authority", "Lien" and "Loan Documents") have, as used herein, the respective
meanings provided for therein. The following additional terms, as used herein,
have the following respective meanings:
"COLLATERAL" means the Pledged Stock and all Proceeds.
"PLEDGE AGREEMENT" means this Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
"PLEDGED STOCK" means the shares of capital stock of the
Issuer listed on Schedule I hereto, together with all stock
certificates, options or rights of any nature whatsoever which may
be issued or granted by the Issuer to the Company in respect of the
Pledged Stock while this Pledge Agreement is in effect.
"PROCEEDS" means all "proceeds" as such term is defined in
Section 9-306 of the UCC and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
"SECURED OBLIGATIONS" means all obligations of the Borrowers
to the Bank, whether such obligations are now existing or hereafter
incurred or created, joint or several, direct or indirect, absolute or
contingent, due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrowers) on any
advance to the Borrowers under the Loan Agreement or the Note; (b) all
other amounts (including, without limitation, any fees or expenses)
payable by the Borrowers under the Loan Agreement, the Note or any
other Loan Document; (c) all amounts payable to the Bank in connection
with the issuance of any letter of credit by the Bank for the account
of the Borrowers or any drawing thereunder, including without
limitation, any reimbursement obligation and letter of credit fees
payable under any letter of credit application or reimbursement
agreement executed by the Borrowers in connection with any such letter
of credit; (d) all amounts payable by the Borrowers hereunder; and (e)
any renewals, refinancings or extensions of any of the foregoing.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in The Commonwealth of Massachusetts.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Company hereby delivers to
the Bank all the Pledged Stock and hereby grants to the Bank a first security
interest in the Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations.
3. STOCK POWERS. Concurrently with the delivery to the Bank of each
certificate representing one or more shares of the Pledged Stock, the Company
shall deliver an undated stock power covering such certificate, duly executed in
blank with, if the Bank so requests,
<PAGE>
3
signature guaranteed.
4. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
that:
a. the Company has the corporate power and authority and the legal
right to execute and deliver, to perform its obligations under, and to
grant the Lien on the Collateral pursuant to, this Pledge Agreement and
has taken all necessary corporate action to authorize its execution,
delivery and performance of, and grant of the Lien on the Collateral
pursuant to, this Pledge Agreement;
b. this Pledge Agreement constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally;
c. the execution, delivery and performance of this Pledge Agreement
will not violate any provision of any Requirement of Law or Contractual
Obligation of the Company and will not result in the creation or
imposition of any Lien on any of the properties or revenues of the
Company pursuant to any Requirement of Law or Contractual Obligation of
the Company, except as contemplated hereby;
d. no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or
creditor of the Company or the Issuer), is required in connection with
the execution, delivery, performance, validity or enforceability of
this Pledge Agreement;
e. no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
the Company, threatened by or against the Company or against any of its
properties or revenues with respect to this Pledge Agreement or any of
the transactions contemplated hereby;
f. the shares of Pledged Stock listed on SCHEDULE I constitute all the
issued and outstanding shares of all classes of the capital stock of
the Issuer;
g. all the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable;
h. the Company is the record and beneficial owner of, and has good and
marketable title to, the Pledged Stock listed on SCHEDULE I, free of
any and all Liens or options in favor of, or claims of, any other
Person, except the Lien created by this Pledge Agreement; and
i. upon delivery to the Bank of the stock certificates evidencing the
Pledged Stock, the Lien granted pursuant to this Pledge Agreement will
constitute a valid, perfected first priority Lien on the Collateral,
enforceable as such against all creditors of the Company and any
Persons purporting to purchase any Collateral from the Company.
<PAGE>
4
5. COVENANTS. The Company covenants and agrees with the Bank that, from
and after the date of this Pledge Agreement until the Secured Obligations are
paid in full and the Commitment is terminated:
a. If the Company shall, as a result of its ownership of the Pledged
Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in
exchange for any shares of the Pledged Stock, or otherwise in respect
thereof, the Company shall accept the same as the Bank's agent, hold
the same in trust for the Bank and deliver the same forthwith to the
Bank in the exact form received, duly indorsed by the Company to the
Bank, if required, together with an undated stock power covering such
certificate duly executed in blank and with, if the Bank so requests,
signature guaranteed, to be held by the Bank hereunder as additional
collateral security for the Secured Obligations. Any sums paid upon or
in respect of the Pledged Stock upon the liquidation or dissolution of
the Issuer shall be paid over to the Bank to be held by it hereunder as
additional collateral security for the Secured Obligations, and in case
any distribution of capital shall be made on or in respect of the
Pledged Stock or any property shall be distributed upon or with respect
to the Pledged Stock pursuant to the recapitalization or
reclassification of the capital of the Issuer or pursuant to the
reorganization thereof, the property so distributed shall be delivered
to the Bank to be held by it, subject to the terms hereof, as
additional collateral security for the Secured Obligations. If any sums
of money or property so paid or distributed in respect of the Pledged
Stock shall be received by the Company, the Company shall, until such
money or property is paid or delivered to the Bank, hold such money or
property in trust for the Bank, segregated from other funds of the
Company, as additional collateral security for the Secured Obligations.
b. Without the prior written consent of the Bank, the Company will not
(i) vote to enable, or take any other action to permit, the Issuer to
issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase
or exchange for any stock or other equity securities of the Issuer, or
(ii) sell, assign, transfer, exchange or otherwise dispose of, or grant
any option with respect to, the Collateral, or (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any
Person with respect to, any of the Collateral, or any interest therein,
except for the Lien provided for by this Pledge Agreement. The Company
will defend the right, title and interest of the Bank in and to the
Collateral against the claims and demands of all Persons whomsoever.
c. At any time and from time to time, upon the written request of the
Bank, and at the sole expense of the Company, the Company will promptly
and duly execute and deliver such further instruments and documents and
take such further actions as the Bank may reasonably request for the
purposes of obtaining or preserving the full benefits of this Pledge
Agreement and of the rights and powers herein granted. If any amount
payable under or in connection with any of the Collateral shall be or
become
<PAGE>
5
evidenced by any promissory note, other instrument or chattel paper,
such note, instrument or chattel paper shall be immediately delivered
to the Bank, duly endorsed in a manner satisfactory to the Bank, to be
held as Collateral pursuant to this Pledge Agreement.
d. The Company agrees to pay, and to save the Bank harmless from, any
and all liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated
by this Pledge Agreement.
6. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default shall have
occurred and be continuing and the Bank shall have given notice to the Company
of the Bank's intent to exercise its corresponding rights pursuant to PARAGRAPH
7 below, the Company shall be permitted to receive all cash dividends paid in
the normal course of business of the Issuer and consistent with past practice,
to the extent permitted in the Loan Agreement, in respect of the Pledged Stock
and to exercise all voting and corporate rights with respect to the Pledged
Stock, PROVIDED, HOWEVER, that no vote shall be cast or corporate right
exercised or other action taken which, in the Bank's reasonable judgment, would
impair the Collateral or which would be inconsistent with or result in any
violation of any provision of this Pledge Agreement, the Loan Agreement, the
Note or any other Loan Document.
7. RIGHTS OF THE BANK. If an Event of Default shall occur and be
continuing and the Bank shall give notice of its intent to exercise such rights
to the Company: (i) the Bank shall have the right to receive any and all cash
dividends paid in respect of the Pledged Stock and make application thereof to
the Secured Obligations in such order as it may determine, and (ii) all shares
of the Pledged Stock shall be registered in the name of the Bank or its nominee,
and the Bank or its nominee may thereafter exercise (A) all voting, corporate
and other rights pertaining to such shares of the Pledged Stock at any meeting
of shareholders of the Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of the
Issuer, or upon the exercise by the Company or the Bank of any right, privilege
or option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it, but the Bank
shall have no duty to exercise any such right, privilege or option and shall not
be responsible for any failure to do so or delay in so doing.
a. The rights of the Bank hereunder shall not be conditioned or
contingent upon the pursuit by the Bank of any right or remedy against
the Issuer or against any other Person which may be or become liable in
respect of all or any part of the Secured Obligations or against any
other collateral security therefor, guarantee thereof or right of
offset with respect thereto. The Bank shall not be liable for any
failure to demand,
<PAGE>
6
collect or realize upon all or any part of the Collateral or for any
delay in doing so, nor shall it be under any obligation to sell or
otherwise dispose of any Collateral upon the request of the Company or
any other Person or to take any other action whatsoever with regard to
the Collateral or any part thereof.
8. REMEDIES. If an Event of Default shall occur and be continuing, the
Bank may exercise, in addition to all other rights and remedies granted in this
Pledge Agreement and in any other instrument or agreement securing, evidencing
or relating to the Secured Obligations, all rights and remedies of a secured
party under the UCC. Without limiting the generality of the foregoing, the Bank,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Company, the Issuer or any other Person (all and each
of which demands, defenses, advertisements and notices are hereby waived), may
in such circumstances forthwith collect, receive, appropriate and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, assign, give
option or options to purchase or otherwise dispose of and deliver the Collateral
or any part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, in the over-the-counter market, at
any exchange, broker's board or office of the Bank or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Bank shall have the right upon any such public sale or sales, and to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Company, which right or equity is hereby waived or released.
The Bank shall apply any Proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Bank
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as the Bank may elect, and only after such application and after the
payment by the Bank of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the UCC, need the Bank
account for the surplus, if any, to the Company. To the extent permitted by
applicable law, the Company waives all claims, damages and demands it may
acquire against the Bank arising out of the exercise by the Bank of any of its
rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition. The
Company shall remain liable for any deficiency if the proceeds of any sale or
other disposition of Collateral are insufficient to pay the Secured Obligations
and the fees and disbursements of any attorneys employed by the Bank to collect
such deficiency. The Company further waives and agrees not to assert any rights
or privileges which it may acquire under Section 9-112 of the UCC.
9. PRIVATE SALES.
a. The Company recognizes that the Bank may be unable to effect a
public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled
<PAGE>
7
to resort to one or more private sales thereof to a restricted group of
purchasers which will be obliged to agree, among other things, to
acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. The Company
acknowledges and agrees that any such private sale may result in prices
and other terms less favorable to the Bank than if such sale were a
public sale. The Bank shall be under no obligation to delay a sale of
any of the Pledged Stock for the period of time necessary to permit the
Issuer to register such securities for public sale under the Securities
Act, or under applicable state securities laws, even if the Issuer
would agree to do so.
b. The Company further agrees to do or cause to be done all such other
acts as may be necessary to make any sale or sales of all or any
portion of the Pledged Stock pursuant to this PARAGRAPH 9 valid and
binding and in compliance with any and all other applicable
Requirements of Law. The Company further agrees that a breach of any of
the covenants contained in this PARAGRAPH 9 will cause irreparable
injury to the Bank, that the Bank has no adequate remedy at law in
respect of such breach and, as a consequence, that each and every
covenant contained in this PARAGRAPH 9 shall be specifically
enforceable against the Company, and the Company hereby waives and
agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of
Default has occurred or is continuing under the Loan Agreement.
10. NO SUBROGATION. Notwithstanding any payment or payments made by the
Company hereunder, or any setoff or application of funds of the Company by the
Bank, or the receipt of any amounts by the Bank with respect to any of the
Collateral, the Company shall not be entitled to be subrogated to any of the
rights of the Bank against the Issuer or against any other collateral security
held by the Bank for the payment of the Secured Obligations, nor shall the
Company seek any reimbursement from the Issuer in respect of payments made by
the Company in connection with the Collateral, or amounts realized by the Bank
in connection with the Collateral, until all amounts owing to the Bank by the
Issuer on account of the Secured Obligations are paid in full and the Commitment
is terminated. If any amount shall be paid to the Company on account of such
subrogation rights at any time when all of the Secured Obligations shall not
have been paid in full, such amount shall be held by the Company in trust for
the Bank, segregated from other funds of the Company, and shall, forthwith upon
receipt by the Company, be turned over to the Bank in the exact form received by
the Company (duly indorsed by the Company to the Bank, if required), to be
applied against the Secured Obligations, whether matured or unmatured, in such
order as the Bank may determine.
11. AMENDMENTS, ETC. WITH RESPECT TO THE SECURED OBLIGATIONS. The
Company shall remain obligated hereunder, and the Collateral shall remain
subject to the Lien granted hereby, notwithstanding that, without any
reservation of rights against the Company, and without notice to or further
assent by the Company, any demand for payment of any of the Secured Obligations
made by the Bank may be rescinded by the Bank, and any of the Secured
Obligations continued, and the Secured Obligations, or the liability of the
Issuer or any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Bank,
<PAGE>
8
and the Loan Agreement, the Note and any other Loan Document may be amended,
modified, supplemented or terminated, in whole or in part, as the Bank may deem
advisable from time to time, and any guarantee, right of offset or other
collateral at any time held by the Bank for the payment of the Secured
Obligations may be sold, exchanged, waived, surrendered or released. The Bank
shall have no obligation to protect, secure, perfect or insure any other Lien at
any time held by it as security for the Secured Obligations or any property
subject thereto. The Company waives any and all notice of the creation, renewal,
extension or accrual of any of the Secured Obligations and notice of or proof of
reliance by the Bank upon this Pledge Agreement; the Secured Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Pledge Agreement; and all dealings between the
Issuer, the Company and the Bank shall likewise be conclusively presumed to have
been had or consummated in reliance upon this Pledge Agreement. The Company
waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon the Issuer or the Company with respect to the Secured
Obligations.
12. LIMITATION ON DUTIES REGARDING COLLATERAL. The Bank's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the UCC or otherwise, shall
be to deal with it in the same manner as the Bank deals with similar securities
and property for its own account. Neither the Bank nor any of its directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Company or otherwise.
13. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
14. SEVERABILITY. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. PARAGRAPH HEADINGS. The paragraph headings used in this Pledge
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. NO WAIVER; CUMULATIVE REMEDIES. The Bank shall not by any act
(except by a written instrument pursuant to PARAGRAPH 17 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Bank, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Bank of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Bank would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights or
<PAGE>
9
remedies provided by law.
17. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None
of the terms or provisions of this Pledge Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Company and the Bank, PROVIDED that any provision of this Pledge Agreement
may be waived by the Bank in a letter or agreement executed by the Bank or by
facsimile transmission from the Bank. This Pledge Agreement shall be binding
upon the successors and assigns of the Company and shall inure to the benefit of
the Bank and its successors and assigns. This Pledge Agreement shall be governed
by, and construed and interpreted in accordance with, the laws of The
Commonwealth of Massachusetts.
18. NOTICES. Notices by the Bank to the Company or the Issuer may be
given by mail or by facsimile transmission, addressed or transmitted to the
Company or the Issuer at its address or transmission number set forth under its
signature below and shall be effective (a) in the case of mail, two days after
deposit in the postal system, first class postage pre-paid and (b) in the case
of facsimile notices, when electronic confirmation of receipt is received. The
Company and the Issuer may change their respective address and transmission
numbers by written notice to the Bank.
19. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. The Company
hereby authorizes and instructs the Issuer to comply with any instruction
received by it from the Bank in writing that (a) states that an Event of Default
has occurred and (b) is otherwise in accordance with the terms of this Pledge
Agreement, without any other or further instructions from the Company, and the
Company agrees that the Issuer shall be fully protected in so complying.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
LIONBRIDGE TECHNOLOGIES
HOLDINGS, INC.
By:
----------------------------
Name: Rory J. Cowan
Title: President and Chief Executive Officer
Address for Notices:
950 Winter Street, Suite 4300
Waltham, MA 02154
Telecopy: (781) 890-3122
SILICON VALLEY BANK
By:
----------------------------
Name: Andrew H. Tsao
Title: Vice President
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The Issuer referred to in the foregoing Pledge Agreement
hereby acknowledges receipt of a copy thereof and agrees to be bound thereby and
to comply with the terms thereof insofar as such terms are applicable to it. The
Issuer agrees to notify the Bank promptly in writing of the occurrence of any of
the events described in PARAGRAPH 5(A) of the Pledge Agreement. The Issuer
further agrees that the terms of PARAGRAPH 9(B) of the Pledge Agreement shall
apply to it, MUTATIS MUTANDIS, with respect to all actions that may be required
of it under or pursuant to or arising out of PARAGRAPH 9 of the Pledge
Agreement.
LIONBRIDGE TECHNOLOGIES
CALIFORNIA, INC.
By:
----------------------------
Name:
Title:
Address for Notices:
950 Winter Street, Suite 4300
Waltham, MA 02154
Telecopy: (781) 890-3122
<PAGE>
SCHEDULE 1
To Pledge
Agreement
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Stock
Class of Certificate No. of
Issuer Stock */ No. Shares
- ------ -------- ---------- ------
<S> <C> <C>
Lionbridge Technologies 1 100
California, Inc.
</TABLE>
*/ Common unless otherwise indicated.
<PAGE>
Exhibit 10.22
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of May 21, 1998 between LIONBRIDGE
TECHNOLOGIES HOLDINGS, INC., a Delaware corporation (the "COMPANY") and SILICON
VALLEY BANK (the "BANK").
W I T N E S S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September
26, 1997 among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies
B.V., each a Netherlands corporation (together, the "BORROWERS") and the Bank
(the "ORIGINAL LOAN AGREEMENT"), the Bank agreed, subject to the terms and
conditions thereof, to make credit extensions to the Borrowers to be evidenced
by their promissory note payable to the order of the Bank, also dated September
26, 1997 (the "ORIGINAL NOTE");
WHEREAS, the Borrowers wish to enter into a Loan Document
Modification Agreement of even date amending the Original Loan Agreement (the
Original Loan Agreement as so amended, and as the same may hereafter be further
amended, modified, supplemented, extended or restated from time to time, the
"LOAN AGREEMENT") pursuant to which they will issue to the Bank an Amended and
Restated Note of even date herewith in the original principal amount of
$8,000,000 (as the same may hereafter be amended, modified, increased,
supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, the Company is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) issued by Japanese Language
Services, Inc., a Massachusetts corporation (the "ISSUER");
WHEREAS, in order to induce the Bank to enter into the Loan
Document Modification Agreement, the Company has agreed to grant a continuing
security interest in and to the Collateral (which is hereafter defined and which
includes the Pledged Stock) to secure obligations under the Loan Agreement,
including, without limitation, obligations under the promissory note by the
Borrowers to the Bank issued pursuant to the Loan Agreement;
WHEREAS, the Company is the registered and beneficial owner of
approximately 39.6% of the outstanding capital stock of Lionbridge Technologies
Holdings B.V. which in turn is the registered owner of all the outstanding
capital stock of Lionbridge Technologies, B.V. and as a consequence the Company
and the Issuer will derive benefit from the Bank's agreement to make credit
extensions to the Borrowers;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Terms defined in the Loan Agreement and not
otherwise defined herein (including, without limitation, the terms "Event of
Default", "Governmental Authority", "Lien" and "Loan Documents") have, as used
herein, the respective meanings provided for therein. The following additional
terms, as used herein, have the following
<PAGE>
2
respective meanings:
"COLLATERAL" means the Pledged Stock and all Proceeds.
"PLEDGE AGREEMENT" means this Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
"PLEDGED STOCK" means the shares of capital stock of the
Issuer listed on Schedule I hereto, together with all stock
certificates, options or rights of any nature whatsoever which may be
issued or granted by the Issuer to the Company in respect of the
Pledged Stock while this Pledge Agreement is in effect.
"PROCEEDS" means all "proceeds" as such term is defined in
Section 9-306 of the UCC and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
"SECURED OBLIGATIONS" means all obligations of the Borrowers
to the Bank, whether such obligations are now existing or hereafter
incurred or created, joint or several, direct or indirect, absolute or
contingent, due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrowers) on any
advance to the Borrowers under the Loan Agreement or the Note; (b) all
other amounts (including, without limitation, any fees or expenses)
payable by the Borrowers under the Loan Agreement, the Note or any
other Loan Document; (c) all amounts payable to the Bank in connection
with the issuance of any letter of credit by the Bank for the account
of the Borrowers or any drawing thereunder, including without
limitation, any reimbursement obligation and letter of credit fees
payable under any letter of credit application or reimbursement
agreement executed by the Borrowers in connection with any such letter
of credit; (d) all amounts payable by the Borrowers hereunder; and (e)
any renewals, refinancings or extensions of any of the foregoing.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in The Commonwealth of Massachusetts.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Company hereby
delivers to the Bank all the Pledged Stock and hereby grants to the Bank a first
security interest in the Collateral, as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations.
3. STOCK POWERS. Concurrently with the delivery to the Bank of
each certificate representing one or more shares of the Pledged Stock, the
Company shall deliver an undated stock power covering such certificate, duly
executed in blank with, if the Bank so requests, signature guaranteed.
<PAGE>
3
4. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants that:
a. the Company has the corporate power and authority and the legal right to
execute and deliver, to perform its obligations under, and to grant the Lien on
the Collateral pursuant to, this Pledge Agreement and has taken all necessary
corporate action to authorize its execution, delivery and performance of, and
grant of the Lien on the Collateral pursuant to, this Pledge Agreement;
b. this Pledge Agreement constitutes a legal, valid and binding obligation of
the Company enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally;
c. the execution, delivery and performance of this Pledge Agreement will not
violate any provision of any Requirement of Law or Contractual Obligation of the
Company and will not result in the creation or imposition of any Lien on any of
the properties or revenues of the Company pursuant to any Requirement of Law or
Contractual Obligation of the Company, except as contemplated hereby;
d. no consent or authorization of, filing with, or other act by or in respect
of, any arbitrator or Governmental Authority and no consent of any other Person
(including, without limitation, any stockholder or creditor of the Company or
the Issuer), is required in connection with the execution, delivery,
performance, validity or enforceability of this Pledge Agreement;
e. no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Company,
threatened by or against the Company or against any of its properties or
revenues with respect to this Pledge Agreement or any of the transactions
contemplated hereby;
f. the shares of Pledged Stock listed on SCHEDULE I constitute all the issued
and outstanding shares of all classes of the capital stock of the Issuer;
g. all the shares of the Pledged Stock have been duly and validly issued and are
fully paid and nonassessable;
h. the Company is the record and beneficial owner of, and has good and
marketable title to, the Pledged Stock listed on SCHEDULE I, free of any and all
Liens or options in favor of, or claims of, any other Person, except the Lien
created by this Pledge Agreement; and
i. upon delivery to the Bank of the stock certificates evidencing the Pledged
Stock, the Lien granted pursuant to this Pledge Agreement will constitute a
valid, perfected first priority Lien on the Collateral, enforceable as such
against all creditors of the Company and any Persons purporting to purchase any
Collateral from the Company.
5. COVENANTS. The Company covenants and agrees with the Bank
that, from and
<PAGE>
4
after the date of this Pledge Agreement until the Secured Obligations are paid
in full and the Commitment is terminated:
a. If the Company shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in
exchange for any shares of the Pledged Stock, or otherwise in respect
thereof, the Company shall accept the same as the Bank's agent, hold
the same in trust for the Bank and deliver the same forthwith to the
Bank in the exact form received, duly indorsed by the Company to the
Bank, if required, together with an undated stock power covering such
certificate duly executed in blank and with, if the Bank so requests,
signature guaranteed, to be held by the Bank hereunder as additional
collateral security for the Secured Obligations. Any sums paid upon or
in respect of the Pledged Stock upon the liquidation or dissolution of
the Issuer shall be paid over to the Bank to be held by it hereunder as
additional collateral security for the Secured Obligations, and in case
any distribution of capital shall be made on or in respect of the
Pledged Stock or any property shall be distributed upon or with respect
to the Pledged Stock pursuant to the recapitalization or
reclassification of the capital of the Issuer or pursuant to the
reorganization thereof, the property so distributed shall be delivered
to the Bank to be held by it, subject to the terms hereof, as
additional collateral security for the Secured Obligations. If any sums
of money or property so paid or distributed in respect of the Pledged
Stock shall be received by the Company, the Company shall, until such
money or property is paid or delivered to the Bank, hold such money or
property in trust for the Bank, segregated from other funds of the
Company, as additional collateral security for the Secured Obligations.
b. Without the prior written consent of the Bank, the Company
will not (i) vote to enable, or take any other action to permit, the
Issuer to issue any stock or other equity securities of any nature or
to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of the
Issuer, or (ii) sell, assign, transfer, exchange or otherwise dispose
of, or grant any option with respect to, the Collateral, or (iii)
create, incur or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any of the Collateral, or any
interest therein, except for the Lien provided for by this Pledge
Agreement. The Company will defend the right, title and interest of the
Bank in and to the Collateral against the claims and demands of all
Persons whomsoever.
c. At any time and from time to time, upon the written request
of the Bank, and at the sole expense of the Company, the Company will
promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Bank may reasonably
request for the purposes of obtaining or preserving the full benefits
of this Pledge Agreement and of the rights and powers herein granted.
If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note, other
instrument or chattel paper, such note, instrument or chattel paper
shall be immediately delivered to the Bank, duly endorsed in a
<PAGE>
5
manner satisfactory to the Bank, to be held as Collateral pursuant to
this Pledge Agreement.
d. The Company agrees to pay, and to save the Bank harmless
from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated
by this Pledge Agreement.
6. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default shall have occurred
and be continuing and the Bank shall have given notice to the Company of the
Bank's intent to exercise its corresponding rights pursuant to PARAGRAPH 7
below, the Company shall be permitted to receive all cash dividends paid in the
normal course of business of the Issuer and consistent with past practice, to
the extent permitted in the Loan Agreement, in respect of the Pledged Stock and
to exercise all voting and corporate rights with respect to the Pledged Stock,
PROVIDED, HOWEVER, that no vote shall be cast or corporate right exercised or
other action taken which, in the Bank's reasonable judgment, would impair the
Collateral or which would be inconsistent with or result in any violation of any
provision of this Pledge Agreement, the Loan Agreement, the Note or any other
Loan Document.
7. RIGHTS OF THE BANK. If an Event of Default shall occur and be continuing and
the Bank shall give notice of its intent to exercise such rights to the Company:
(i) the Bank shall have the right to receive any and all cash dividends paid in
respect of the Pledged Stock and make application thereof to the Secured
Obligations in such order as it may determine, and (ii) all shares of the
Pledged Stock shall be registered in the name of the Bank or its nominee, and
the Bank or its nominee may thereafter exercise (A) all voting, corporate and
other rights pertaining to such shares of the Pledged Stock at any meeting of
shareholders of the Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of the
Issuer, or upon the exercise by the Company or the Bank of any right, privilege
or option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it, but the Bank
shall have no duty to exercise any such right, privilege or option and shall not
be responsible for any failure to do so or delay in so doing.
a. The rights of the Bank hereunder shall not be conditioned
or contingent upon the pursuit by the Bank of any right or remedy
against the Issuer or against any other Person which may be or become
liable in respect of all or any part of the Secured Obligations or
against any other collateral security therefor, guarantee thereof or
right of offset with respect thereto. The Bank shall not be liable for
any failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so, nor shall it be under any
obligation to sell or otherwise dispose of any Collateral upon the
<PAGE>
6
request of the Company or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
8. REMEDIES. If an Event of Default shall occur and be continuing, the Bank may
exercise, in addition to all other rights and remedies granted in this Pledge
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a secured party
under the UCC. Without limiting the generality of the foregoing, the Bank,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Company, the Issuer or any other Person (all and each
of which demands, defenses, advertisements and notices are hereby waived), may
in such circumstances forthwith collect, receive, appropriate and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, assign, give
option or options to purchase or otherwise dispose of and deliver the Collateral
or any part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, in the over-the-counter market, at
any exchange, broker's board or office of the Bank or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Bank shall have the right upon any such public sale or sales, and to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Company, which right or equity is hereby waived or released.
The Bank shall apply any Proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Bank
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as the Bank may elect, and only after such application and after the
payment by the Bank of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the UCC, need the Bank
account for the surplus, if any, to the Company. To the extent permitted by
applicable law, the Company waives all claims, damages and demands it may
acquire against the Bank arising out of the exercise by the Bank of any of its
rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition. The
Company shall remain liable for any deficiency if the proceeds of any sale or
other disposition of Collateral are insufficient to pay the Secured Obligations
and the fees and disbursements of any attorneys employed by the Bank to collect
such deficiency. The Company further waives and agrees not to assert any rights
or privileges which it may acquire under Section 9-112 of the UCC.
<PAGE>
7
9. PRIVATE SALES.
a. The Company recognizes that the Bank may be unable to
effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable
state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers
which will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view to
the distribution or resale thereof. The Company acknowledges and agrees
that any such private sale may result in prices and other terms less
favorable to the Bank than if such sale were a public sale. The Bank
shall be under no obligation to delay a sale of any of the Pledged
Stock for the period of time necessary to permit the Issuer to register
such securities for public sale under the Securities Act, or under
applicable state securities laws, even if the Issuer would agree to do
so.
b. The Company further agrees to do or cause to be done all
such other acts as may be necessary to make any sale or sales of all or
any portion of the Pledged Stock pursuant to this PARAGRAPH 9 valid and
binding and in compliance with any and all other applicable
Requirements of Law. The Company further agrees that a breach of any of
the covenants contained in this PARAGRAPH 9 will cause irreparable
injury to the Bank, that the Bank has no adequate remedy at law in
respect of such breach and, as a consequence, that each and every
covenant contained in this PARAGRAPH 9 shall be specifically
enforceable against the Company, and the Company hereby waives and
agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of
Default has occurred or is continuing under the Loan Agreement.
10. NO SUBROGATION. Notwithstanding any payment or payments made by the Company
hereunder, or any setoff or application of funds of the Company by the Bank, or
the receipt of any amounts by the Bank with respect to any of the Collateral,
the Company shall not be entitled to be subrogated to any of the rights of the
Bank against the Issuer or against any other collateral security held by the
Bank for the payment of the Secured Obligations, nor shall the Company seek any
reimbursement from the Issuer in respect of payments made by the Company in
connection with the Collateral, or amounts realized by the Bank in connection
with the Collateral, until all amounts owing to the Bank by the Issuer on
account of the Secured Obligations are paid in full and the Commitment is
terminated. If any amount shall be paid to the Company on account of such
subrogation rights at any time when all of the Secured Obligations shall not
have been paid in full, such amount shall be held by the Company in trust for
the Bank, segregated from other funds of the Company, and shall, forthwith upon
receipt by the Company, be turned over to the Bank in the exact form received by
the Company (duly indorsed by the Company to the Bank, if required), to be
applied against the Secured Obligations, whether matured or unmatured, in such
order as the Bank may determine.
11. AMENDMENTS, ETC. WITH RESPECT TO THE SECURED OBLIGATIONS. The Company shall
remain obligated hereunder, and the Collateral shall remain subject to the Lien
granted hereby, notwithstanding that, without any reservation of rights against
the Company, and without notice to or further assent by the Company, any demand
for payment of any of the Secured
<PAGE>
8
Obligations made by the Bank may be rescinded by the Bank, and any of the
Secured Obligations continued, and the Secured Obligations, or the liability of
the Issuer or any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Bank, and the
Loan Agreement, the Note and any other Loan Document may be amended, modified,
supplemented or terminated, in whole or in part, as the Bank may deem advisable
from time to time, and any guarantee, right of offset or other collateral at any
time held by the Bank for the payment of the Secured Obligations may be sold,
exchanged, waived, surrendered or released. The Bank shall have no obligation to
protect, secure, perfect or insure any other Lien at any time held by it as
security for the Secured Obligations or any property subject thereto. The
Company waives any and all notice of the creation, renewal, extension or accrual
of any of the Secured Obligations and notice of or proof of reliance by the Bank
upon this Pledge Agreement; the Secured Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Pledge Agreement; and all dealings between the Issuer, the Company and
the Bank shall likewise be conclusively presumed to have been had or consummated
in reliance upon this Pledge Agreement. The Company waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Issuer or the Company with respect to the Secured Obligations.
12. LIMITATION ON DUTIES REGARDING COLLATERAL. The Bank's sole duty with respect
to the custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC or otherwise, shall be to deal with
it in the same manner as the Bank deals with similar securities and property for
its own account. Neither the Bank nor any of its directors, officers, employees
or agents shall be liable for failure to demand, collect or realize upon any of
the Collateral or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of the Company or
otherwise.
13. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein
contained with respect to the Collateral are irrevocable and powers coupled with
an interest.
14. SEVERABILITY. Any provision of this Pledge Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
15. PARAGRAPH HEADINGS. The paragraph headings used in this Pledge Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
16. NO WAIVER; CUMULATIVE REMEDIES. The Bank shall not by any act (except by a
written instrument pursuant to PARAGRAPH 17 hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Bank, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power
<PAGE>
9
or privilege. A waiver by the Bank of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Bank
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
17. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the
terms or provisions of this Pledge Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Company and the Bank, PROVIDED that any provision of this Pledge Agreement
may be waived by the Bank in a letter or agreement executed by the Bank or by
facsimile transmission from the Bank. This Pledge Agreement shall be binding
upon the successors and assigns of the Company and shall inure to the benefit of
the Bank and its successors and assigns. This Pledge Agreement shall be governed
by, and construed and interpreted in accordance with, the laws of The
Commonwealth of Massachusetts.
18. NOTICES. Notices by the Bank to the Company or the Issuer may be given by
mail or by facsimile transmission, addressed or transmitted to the Company or
the Issuer at its address or transmission number set forth under its signature
below and shall be effective (a) in the case of mail, two days after deposit in
the postal system, first class postage pre-paid and (b) in the case of facsimile
notices, when electronic confirmation of receipt is received. The Company and
the Issuer may change their respective address and transmission numbers by
written notice to the Bank.
19. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. The Company hereby
authorizes and instructs the Issuer to comply with any instruction received by
it from the Bank in writing that (a) states that an Event of Default has
occurred and (b) is otherwise in accordance with the terms of this Pledge
Agreement, without any other or further instructions from the Company, and the
Company agrees that the Issuer shall be fully protected in so complying.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
10
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
LIONBRIDGE TECHNOLOGIES
HOLDINGS, INC.
By:
------------------------
Name:
Title:
SILICON VALLEY BANK
By:
------------------------
Name: Andrew H. Tsao
Title: Vice President
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The Issuer referred to in the foregoing Pledge Agreement
hereby acknowledges receipt of a copy thereof and agrees to be bound thereby and
to comply with the terms thereof insofar as such terms are applicable to it. The
Issuer agrees to notify the Bank promptly in writing of the occurrence of any of
the events described in PARAGRAPH 5(A) of the Pledge Agreement. The Issuer
further agrees that the terms of PARAGRAPH 9(C) of the Pledge Agreement shall
apply to it, MUTATIS MUTANDIS, with respect to all actions that may be required
of it under or pursuant to or arising out of PARAGRAPH 9 of the Pledge
Agreement.
JAPANESE LANGUAGE SERVICES, INC.
By:
---------------------------
Name:
Title:
Address for Notices:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
<PAGE>
SCHEDULE 1
To Pledge
Agreement
---------
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Stock
Class of Certificate No. of
Issuer Stock */ No. Shares
- ------ -------- --- ------
<S> <C> <C> <C>
Japanese Language 15 97,500
Services, Inc.
</TABLE>
*/ Common unless otherwise indicated.
<PAGE>
Exhibit 10.23
AMENDED AND RESTATED GUARANTEE
GUARANTEE dated as of May 21, 1998 made by LIONBRIDGE
TECHNOLOGIES, INC., a Delaware corporation (the "GUARANTOR") in favor of SILICON
VALLEY BANK (the "BANK").
W I T N E S S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September 26, 1997
among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies B.V.,
each a Netherlands company with limited liability (together, the "BORROWERS")
and the Bank (the "ORIGINAL LOAN AGREEMENT"), the Bank agreed, subject to the
terms and conditions thereof, to make credit extensions to the Borrowers;
WHEREAS, it was a condition precedent to the obligation of the Bank to
make credit extensions to the Borrowers under the Original Loan Agreement that,
among other things, the Guarantor shall have executed and delivered a guarantee
of the obligations of the Borrowers under the Original Loan Agreement,
including, without limitation, the Borrowers' obligations under their promissory
note to the Bank issued pursuant to the Original Loan Agreement (the "ORIGINAL
NOTE");
WHEREAS, the Guarantor is the registered and beneficial owner of
approximately 60.4% of the outstanding capital stock of Lionbridge Technologies
Holdings B.V. which in turn is the registered owner of all the outstanding
capital stock of Lionbridge Technologies, B.V. and as a consequence the
Guarantor will derive benefit from the Bank's agreement to make Credit
Extensions to the Borrowers;
WHEREAS, the Guarantor entered into a Guarantee dated September 26,
1997 in favor of the Bank (the "ORIGINAL GUARANTEE");
WHEREAS, the Borrowers wish to enter into a Loan Document Modification
Agreement of even date amending the Original Loan Agreement (the Original Loan
Agreement as so amended, and as the same may hereafter be further amended,
modified, supplemented, extended or restated from time to time, the "Loan
Agreement") pursuant to which they will issue to the Bank an Amended and
Restated Note of even date herewith in the original principal amount of
$8,000,000 (as the same may hereafter be amended, modified, increased,
supplemented, extended or restated from time to time, the "Note");
WHEREAS, it is a condition to the Bank's entering into the Loan
Modification Agreement that the Guarantor enter into an amended and restated
guarantee on the terms set forth in this guarantee (as the same may be amended,
modified, supplemented, extended or restated from time to time, the
"GUARANTEE");
WHEREAS, the Guarantor now wishes to enter into this Guarantee in order
to induce
<PAGE>
-2-
the Bank to enter into the above referenced Loan Modification Agreement;
NOW, THEREFORE, in consideration of the premises and to induce
the Bank to make advances and other extensions of credit to the Borrowers
thereunder, the Guarantor hereby agrees with the Bank as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms which
are defined in the Loan Agreement and used herein are so used as so defined. In
addition, the following terms shall have the meanings set forth below:
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, property, condition (financial or
otherwise) or prospects of the Guarantor and its Subsidiaries taken as
a whole, (b) the ability of the Guarantor to perform its obligations
under this Guarantee, or (c) the validity or enforceability of this
Guarantee, or the rights of the Bank hereunder.
"OBLIGATIONS" shall mean all obligations of the Borrowers to
the Bank, whether such obligations are now existing or hereafter
incurred or created, joint or several, direct or indirect, absolute or
contingent, due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrowers) on any
advance to the Borrowers under the Loan Agreement or the Note; (b) all
other amounts (including, without limitation, any fees or expenses)
payable by the Borrowers under the Loan Agreement, the Note or any
other Loan Document; (c) all amounts payable to the Bank in connection
with the issuance of any letter of credit by the Bank for the account
of the Borrowers or any drawing thereunder, including without
limitation, any reimbursement obligation and letter of credit fees
payable under any letter of credit application or reimbursement
agreement executed by the Borrowers in connection with any such letter
of credit; and (d) any renewals, refinancings or extensions of any of
the foregoing.
2. GUARANTEE. The Guarantor hereby unconditionally and
irrevocably guarantees to the Bank the prompt and complete payment and
performance by the Borrowers when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations. The Guarantor further agrees to
pay any and all expenses (including, without limitation, all reasonable fees and
disbursements of counsel to the Bank) which may be paid or incurred by the Bank
in enforcing, or obtaining advice of counsel in respect of, any of its rights
under this Guarantee. The Guarantee shall remain in full force and effect until
the Obligations are paid in full and the Bank's obligation to make Advances or
other Credit Extensions under the Loan Agreement is terminated, notwithstanding
that from time to time prior thereto the Borrowers may be free from any
Obligations.
3. RIGHT OF SET-OFF. Regardless of the adequacy of any
collateral or other means of obtaining repayment of the Obligations, any
deposits (general or special, time or demand, provisional or final, including,
but not limited to indebtedness evidenced by a
<PAGE>
-3-
certificate of deposit, whether matured or unmatured) and any other indebtedness
at any time held or owing by the Bank to the Guarantor may, at any time and from
time to time after the occurrence of an Event of Default, without prior notice
to the Guarantor or compliance with any other condition precedent now or
hereafter imposed by statute, rule of law, or otherwise (all of which are hereby
expressly waived to the extent permitted by law) be set off, appropriated, and
applied by the Bank against any and all obligations of the Guarantor to the Bank
then due and payable in such manner as the Bank in its sole discretion may
determine, and the Guarantor hereby grants the Bank a continuing security
interest in such deposits and indebtedness for the payment and performance of
such obligations.
4. SUBROGATION AND CONTRIBUTION. Until payment and performance
in full of all the Obligations, the Guarantor irrevocably and unconditionally
waives any and all rights to which it may be entitled, by operation of law or
otherwise, (a) to be subrogated, with respect to any payment made by the
Guarantor hereunder, to the rights of the Bank against the Borrowers, or
otherwise to be reimbursed, indemnified or exonerated by the Borrowers in
respect thereof or (b) to receive any payment, in the nature of contribution or
for any other reason, from any other guarantor of the Obligations with respect
to any payment made by the Guarantor hereunder.
5. EFFECT OF BANKRUPTCY STAY. If acceleration of the time for
payment or performance of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Borrowers or any other Person or otherwise,
all such amounts otherwise subject to acceleration shall nonetheless be payable
by the Guarantor under this Guarantee forthwith upon demand.
6. RECEIPT OF LOAN DOCUMENTS, ETC. The Guarantor confirms,
represents and warrants to the Bank that (i) it has received true and complete
copies of the Loan Agreement, the Note and the other Loan Documents entered into
as of the date hereof from the Borrowers, has read the contents thereof and
reviewed the same with legal counsel of its choice; (ii) no representations or
agreements of any kind have been made to the Guarantor which would limit or
qualify in any way the terms of this Guarantee; (iii) the Bank has made no
representation to the Guarantor as to the creditworthiness of the Borrowers; and
(iv) the Guarantor has established adequate means of obtaining from the
Borrowers on a continuing basis information regarding the Borrowers' financial
condition. The Guarantor agrees to keep adequately informed from such means of
any facts, events, or circumstances which might in any way affect the
Guarantor's risks under this Guarantee, and the Guarantor further agrees that
the Bank shall have no obligation to disclose to the Guarantor any information
or documents acquired by the Bank in the course of its relationship with the
Borrowers.
7. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The
obligations of the Guarantor under this Guarantee shall remain in full force and
effect without regard to, and shall not be released, altered, exhausted,
discharged or in any way affected by any circumstance or condition (whether or
not the Borrowers shall have any knowledge or notice thereof), including without
limitation (i) any amendment or modification of or supplement to the Loan
Agreement, the Note, or any other Loan Document, or any obligation, duty or
agreement of the Borrowers or any other Person thereunder or in respect thereof,
(ii) any assignment or transfer in whole or in part of any of the Obligations,
(iii) any furnishing or
<PAGE>
-4-
acceptance of any direct or indirect security or guaranty, or any release of or
non-perfection or invalidity of any direct or indirect security or guaranty, for
any of the Obligations, (iv) any waiver, consent, extension, renewal,
indulgence, settlement, compromise or other action or inaction under or in
respect of the Loan Agreement, the Note, or any other Loan Document, or any
exercise or nonexercise of any right, remedy, power or privilege under or in
respect of any such instrument (whether by operation of law or otherwise), (v)
any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or similar proceeding with respect to the Borrowers or
any other Person (other than the Guarantor) or any of their respective
properties or creditors or any resulting release or discharge of any
Obligations, (vi) the voluntary or involuntary sale or other disposition of all
or substantially all the assets of the Borrowers or any other Person, (vii) the
voluntary or involuntary liquidation, dissolution or termination of the
Borrowers or any other Person, (viii) any invalidity or unenforceability, in
whole or in part, of any term hereof or of the Loan Agreement, the Note, or any
other Loan Document, or any obligation, duty or agreement of the Borrowers or
any other Person (other than the Guarantor) thereunder or in respect thereof, or
any provision of any applicable law or regulation purporting to prohibit the
payment or performance by the Borrowers or any other Person (other than the
Guarantor) of any Obligations, (ix) any failure on the part of the Borrowers or
any other Person for any reason to perform or comply with any term of the Loan
Agreement, the Note, or any other Loan Document or any other agreement, or (x)
any other act, omission or occurrence whatsoever, whether similar or dissimilar
to the foregoing. The Guarantor authorizes the Borrowers, each other guarantor
in respect of Obligations and the Bank at any time in its discretion, as the
case may be, to alter any of the terms of Obligations.
8. GUARANTOR AS PRINCIPAL. If for any reason the Borrowers or
any other Person is under no legal obligation to discharge any Obligations, or
if any other moneys included in Obligations have become unrecoverable from the
Borrowers or any other Person by operation of law or for any other reason,
including, without limitation, the invalidity or irregularity in whole or in
part of any Obligation or of the Loan Agreement, the Note, or any other Loan
Document, the legal disability of the Borrowers or any other obligor in respect
of Obligations, any discharge of or limitation on the liability of the Borrowers
or any other person or any limitation on the method or terms of payment under
any Obligation, or of the Loan Agreement, the Note, or any other Loan Document,
which may now or hereafter be caused or imposed in any manner whatsoever
(whether consensual or arising by operation of law or otherwise), this Guarantee
shall nevertheless remain in full force and effect and shall be binding upon the
Guarantor to the same extent as if the Guarantor at all times had been the
principal obligor on all Obligations.
9. WAIVER OF DEMAND, NOTICE, ETC. The Guarantor hereby waives,
to the extent not prohibited by applicable law, (i) all presentments, demands
for performance, notice of nonperformance, protests, notices of protests and
notices of dishonor in connection with the Obligations or the Loan Agreement,
the Note, or any other Loan Document, including but not limited to notice of
additional indebtedness constituting Obligations or the existence, creation or
incurring of any new or additional indebtedness or obligation or of any action
or non-action on the part of the Borrowers, the Bank, any endorser or creditor
of the Borrowers or any other Person; (ii) any notice of any indulgence,
extensions or renewals granted to any obligor with respect to Obligations; (iii)
any requirement of diligence or promptness in the enforcement of
<PAGE>
-5-
rights under the Loan Agreement, the Note, or any other Loan Document, or any
other agreement or instrument directly or indirectly relating thereto or to the
Obligations; (iv) any enforcement of any present or future agreement or
instrument relating directly or indirectly thereto or to the Obligations; (v)
notice of any of the matters referred to in PARAGRAPH 8 above, (vi) any defense
of any kind which the Guarantor may now have with respect to his liability under
this Guarantee; (vii) any right to require the Bank, as a condition of
enforcement of this Guarantee, to proceed against the Borrowers or any other
Person or to proceed against or exhaust any security held by the Bank at any
time or to pursue any other right or remedy in the Bank's power before
proceeding against the Guarantor; (viii) any defense that may arise by reason of
the incapacity, lack of authority, death or disability of any other Person or
Persons or the failure of the Bank to file or enforce a claim against the estate
(in administration, bankruptcy, or any other proceeding) of any other Person or
Persons; (ix) any defense based upon an election of remedies by the Bank; (x)
any defense arising by reason of any "one action" or "anti-deficiency" law or
any other law which may prevent the Bank from bringing any action, including a
claim for deficiency, against the Guarantor, before or after the Bank's
commencement of completion of any foreclosure action, either judicially or by
exercise of a power of sale; (xi) any defense based upon any lack of diligence
by the Bank in the collection of any Obligation; (xii) any duty on the part of
the Bank to disclose to the Guarantor any facts the Bank may now or hereafter
know about the Borrowers or any other obligor in respect of Obligations; (xiii)
any defense arising because of an election made by the Bank under Section
1111(b)(2) of the Federal Bankruptcy Code; (xiv) any defense based on any
borrowing or grant of a security interest under Section 364 of the Federal
Bankruptcy Code; and (xv) any defense based upon or arising out of any defense
which the Borrowers or any other Person may have to the payment or performance
of Obligations (including but not limited to failure of consideration, breach of
warranty, fraud, payment, accord and satisfaction, strict foreclosure, statute
of frauds, bankruptcy, infancy, statute of limitations, lender liability and
usury). Guarantor acknowledges and agrees that each of the waivers set forth
herein on the part of the Guarantor is made with Guarantor's full knowledge of
the significance and consequences thereof and that under the circumstances the
waivers are reasonable. If any such waiver is determined to be contrary to any
applicable law or public policy, such waiver shall be effective only to the
extent permitted by such law or public policy.
10. REINSTATEMENT. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Bank upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrowers or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrowers or any substantial part of its property, or
otherwise, all as though such payments had not been made.
11. PAYMENTS. The Guarantor hereby agrees that the Obligations
will be paid to the Bank without set-off or counterclaim in U.S. Dollars at the
office of the Bank located at 3003 Tasman Drive, Santa Clara, California 95054,
or to such other location as the Bank shall notify the Guarantor.
12. REPRESENTATIONS AND WARRANTIES. The Guarantor represents
and warrants that:
<PAGE>
-6-
(a) CORPORATE EXISTENCE. The Guarantor is a corporation duly
incorporated and validly existing under the laws of the jurisdiction
of its incorporation, and is duly licensed or qualified as a foreign
corporation in all states wherein the nature of its property owned or
business transacted by it makes such licensing or qualification
necessary.
(b) NO VIOLATION. The execution, delivery and performance of
this Guarantee will not contravene any provision of law, statute, rule
or regulation to which the Guarantor or any of its Significant
Subsidiaries is subject or any judgment, decree, franchise, order or
permit applicable to the Guarantor or any of its Significant
Subsidiaries, or will conflict or will be inconsistent with or will
result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation
or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of the Guarantor or any of its
Significant Subsidiaries pursuant to the terms of any contractual
obligation of the Guarantor or any of its Significant Subsidiaries, or
violate any provision of the corporate charter or by-laws of the
Guarantor.
(c) CORPORATE AUTHORITY AND POWER. The execution, delivery and
performance of this Guarantee is within the corporate powers of the
Guarantor and has been duly authorized by all necessary corporate
action.
(d) ENFORCEABILITY. This Guarantee constitutes a valid and
binding obligation of the Guarantor enforceable against the Guarantor
in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
and except as enforceability may be subject to general principles of
equity, whether such principles are applied in a court of equity or at
law.
(e) GOVERNMENTAL APPROVALS. No order, permission, consent,
approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental authority is required
to authorize, or is required in connection with, the execution,
delivery and performance of this Guarantee, or the taking of any
action contemplated hereby or thereby.
(f) FINANCIAL STATEMENTS. The Guarantor has heretofore
furnished the Bank with draft copies of the audited consolidated
balance sheet of the Guarantor and its Subsidiaries as of December 31,
1997, and a draft of the related audited consolidated statements of
income and of cash flows for the fiscal year of the Guarantor and its
Subsidiaries ended on such date, examined by Coopers & Lybrand. Such
financial statements (including in each case the related schedules and
notes) fairly present the consolidated financial condition of the
Guarantor and its Subsidiaries as of December 31, 1997, and the
consolidated results of their operations and their consolidated cash
flows for the fiscal year then ended.
(g) The Guarantor has heretofore furnished the Bank with
complete and
<PAGE>
-7-
correct copies of the unaudited consolidated balance sheet of the
Guarantor and its Subsidiaries as of April 30, 1998, and the related
consolidated statements of income and of cash flows for the four-month
period ended on such date. Such financial statements (including in
each case the related schedules and notes) fairly present the
consolidated financial condition of the Guarantor and its Subsidiaries
as of April 30, 1998, and the consolidated results of their operations
and their consolidated cash flows for the four-month period ended on
such date (subject to year-end audit adjustments).
(h) Neither the Guarantor nor any of its Subsidiaries has any
material liabilities, contingent or otherwise, including liabilities
for taxes or any unusual forward or long-term commitments or any
guarantee, which are not disclosed by or included in the financial
statements referred to above or in the notes thereto, and there has
been no development or event, nor any prospective development or event,
including any unrealized or anticipated losses from any unfavorable
commitments of the Guarantor or any of its Subsidiaries, which could
reasonably be expected to have a Material Adverse Effect. During the
period from December 31, 1996 to the date hereof: (i) there has been no
sale, transfer or other disposition by the Guarantor or any of its
Subsidiaries of any material part of its business or property and no
purchase or other acquisition of any business or property (including
any capital stock of any Person) material in relation to the
consolidated financial condition of the Guarantor and its Subsidiaries
at December 31, 1996; and (ii) neither the Guarantor nor any of its
Subsidiaries has made a Restricted Payment, or agreed or committed
itself to make a Restricted Payment. For purposes hereof, "Restricted
Payment" means, with respect to the Guarantor or any Subsidiary
thereof, (a) any dividend or other distribution on any shares of
capital stock of the Guarantor or such Subsidiary (except dividends
payable solely in shares of capital stock or rights to acquire capital
stock of the Guarantor, and dividends payable solely to the Guarantor
or a Subsidiary of the Guarantor), or (b) any payment on account of the
purchase, redemption, retirement or acquisition of (i) any shares of
the capital stock of the Guarantor or a Subsidiary thereof or (ii) any
option, warrant, convertible security or other right to acquire shares
of the capital stock of the Guarantor or a Subsidiary thereof, other
than, in either case, payments made solely to the Guarantor or a
Subsidiary of the Guarantor, and (c) any required or optional payment
of any principal of, or premium or interest on, or any required or
optional purchase, redemption or other retirement or other acquisition
of any subordination debt issued by Guarantor or a Subsidiary of
Guarantor.
(i) All financial statements (including in each case the
related schedules and notes) referred to above have been prepared in
accordance with GAAP applied consistently throughout the periods
involved (except as approved by the Accountants and as disclosed
therein).
(j) LITIGATION. There are no actions, suits or proceedings
pending or, to the Guarantor's knowledge, threatened against or
affecting the Guarantor or any of its Subsidiaries before any
governmental authority, which in any one case or in the aggregate, if
determined adversely to the interests of the Guarantor or any
Subsidiary thereof, would have a Material Adverse Effect.
<PAGE>
-8-
(k) COMPLIANCE WITH OTHER INSTRUMENTS; COMPLIANCE WITH LAW.
Neither the Guarantor nor any Subsidiary thereof is in default under
(i) any contractual obligation, where such default could have a
Material Adverse Effect, or (ii) the terms of any agreements relating
to any Indebtedness of the Guarantor or such Subsidiary.
(l) Neither the Guarantor nor any Subsidiary thereof is in
default with respect to any applicable statute, rule, writ,
injunction, decree, order or regulation of any Governmental Authority
having jurisdiction over the Guarantor or any Subsidiary thereof which
could reasonably be expected to have a Material Adverse Effect.
(m) SUBSIDIARIES. The Guarantor has no Subsidiaries except as
set forth on attached Schedule A. The Guarantor represents that
Lionbridge Technologies France, a private company organized under the
laws of France ("Lionbridge-France") is a wholly-owned subsidiary of
Lionbridge Technologies Holdings B.V. ("Holdings"). Neither
Lionbridge-France nor Lionbridge-Ireland is subject to any restriction
or constraint under any agreement, contract or arrangement to which it
is a party (including without limitation in connection with any
financing), or, except as described on SCHEDULE A, under applicable law
that would impede or interfere with their ability to declare and pay
cash dividends to Holdings or to borrow funds from or advance funds to
any member of the Consolidated Group (collectively, a "Cash Transfer
Restriction").
(n) INVESTMENT COMPANY STATUS; LIMITS ON ABILITY TO INCUR
INDEBTEDNESS. The Guarantor is not an "investment company" or a
company "controlled by" an investment company within the meaning of
the Investment Company Act of 1940, as amended. The Guarantor is not
subject to regulation under any Federal or State statute or regulation
which limits its ability to incur Indebtedness.
(o) TITLE TO PROPERTY. The Guarantor and each of its
Subsidiaries has good and marketable title to all of its properties and
assets, in each case including the properties and assets reflected in
the consolidated balance sheet of the Guarantor and its Subsidiaries as
December 31, 1996, except properties and assets disposed of since that
date in the ordinary course of business, and none of such properties or
assets is subject to (i) any Lien except for Permitted Liens, or (ii) a
defect in title or other claim other than defects and claims that, in
the aggregate, would have no Material Adverse Effect. The Guarantor
enjoys peaceful and undisturbed possession under all leases necessary
in any material respect for the operation of its properties and assets,
none of which contains any unusual or burdensome provisions which could
reasonably be expected to have a Material Adverse Effect. All such
leases are valid and subsisting and are in full force and effect.
(p) ERISA PLANS. Each "employee benefit plan," "employee
pension benefit plan," "defined benefit plan," or "multiemployer plan,"
which the Guarantor has established or maintained or to which the
Guarantor is required to contribute (collectively, the "PLANS") is in
compliance in all material respects with all applicable provisions of
ERISA and the Internal Revenue Code of 1986 as amended, and the rules
and regulations thereunder, except where failure to so comply would not
have a Material Adverse Effect. There have been no "prohibited
transactions" under ERISA
<PAGE>
-9-
with respect to the Plans which would result in any material liability
to the Guarantor under ERISA or the Code. As used in the Loan
Documents, the terms "employee benefit plan," "employee pension
benefit plan," "defined benefit plan," and "multiemployer plan" shall
have the respective meanings assigned to such terms in Section 3 of
ERISA. The Guarantor thereof has not incurred any material
"accumulated funding deficiency" within the meaning of ERISA or
incurred any material liability to the PBGC in connection with a Plan
(or other class of benefit which the PBGC has elected to insure)
established or maintained by the Guarantor.
(q) TAXES. All tax returns of the Guarantor and its
Subsidiaries required to be filed have been timely filed, all taxes,
fees and other governmental charges (other than those being contested
in good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves have been established and, in the
case of AD VALOREM taxes or betterment assessments, no proceedings to
foreclose any lien with respect thereto have been commenced and, in all
other cases, no notice of lien has been filed or other action taken to
perfect or enforce such lien) shown thereon which are payable have been
paid. The charges and reserves on the books of the Guarantor and its
Subsidiaries in respect of all income and other taxes are adequate, and
the Guarantor knows of no additional assessment or any basis therefor.
The Federal income tax returns of the Guarantor and its Subsidiaries
have not been audited within the last three years, all prior audits
have been closed, and there are no unpaid assessments, penalties or
other charges arising from such prior audits.
(r) REPRESENTATIONS OF BORROWERS. The representations and
warranties of the Borrowers set forth in Section 5 of the Loan
Agreement are true and correct as of the date thereof.
13. COVENANTS. The Guarantor hereby covenants and agrees with
the Bank that, from and after the date of this Guarantee until the Obligations
are paid in full and the obligation of the Bank to make Advances or other Credit
Extensions is terminated:
(a) BORROWERS' COVENANTS. The Guarantor shall cause the
Borrowers to comply with and discharge all of their covenants and
agreements contained in the Loan Agreement.
(b) QUICK RATIO. Commencing with the fiscal quarter ending
March 31, 1999, the Guarantor shall cause the Consolidated Group to
maintain at the end of each such fiscal quarter a ratio of Quick
Assets to Current Liabilities of not less than 0.75 to 1.0.
For purposes of this subparagraph (b), "Quick Assets" shall mean, as of
any applicable date, the consolidated cash, cash equivalents, accounts
receivable and investments with maturities of less than 90 days of the
Consolidated Group determined in accordance with GAAP; and "Current
Liabilities" shall mean, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current liabilities on
the consolidated balance sheet of the Guarantor and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Credit Extensions made under
<PAGE>
-10-
the Loan Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof
unless such Indebtedness is renewable or extendable at the option of
the Guarantor, a Borrower or any Subsidiary to a date more than one
year from the date of determination, but excluding any Indebtedness
incurred by the Guarantor or any Subsidiary that is subordinated to
debt owing by the Guarantor or any Subsidiary to the Bank on terms
acceptable to the Bank and is identified as such by the Bank
("Subordinated Debt").
(c) MINIMUM EBITDA. The Guarantor shall cause the Consolidated
Group to have at the end of each of the following fiscal quarters
minimum EBITDA not less than the respective amounts set forth below
opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Ebitda
-------------- --------------
<S> <C>
Quarter Ending 6/30/98 ($500,000)
Quarter Ending 9/30/98 $500,000
Quarter Ending 12/31/98 $1,000,000
Quarter Ending 3/31/99 and thereafter $750,000
</TABLE>
For purposes of this subparagraph (c) "EBITDA" means, for any
applicable fiscal period, consolidated net income (or loss) after
taxes for such period of the Guarantor and its Subsidiaries as
determined in accordance with GAAP, plus the following to the extent
deducted in computing the foregoing: (i) Interest Expense (as defined
below); (ii) taxes; (iii) depreciation; and (iv) amortization of good
will and other intangibles. "Interest Expense" means, for any
applicable fiscal period, the sum of the aggregate amount of interest
required to be paid in cash during such period on Indebtedness of the
Guarantor and its Subsidiaries (on a consolidated basis).
(d) FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. The Guarantor
shall deliver to Bank: (i) as soon as available, but in any event
within thirty (30) days after the end of each month, a company prepared
consolidated balance sheet and income statement covering the
consolidated operations of the Consolidated Group during such period,
in a form and certified by an officer of the Guarantor reasonably
acceptable to Bank; (ii) as soon as available, but in any event within
ninety (90) days after the end of the fiscal year of the Consolidated
Group, audited consolidated and consolidating financial statements of
the Consolidated Group, prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm
reasonably acceptable to Bank; (iii) within five (5) days of filing,
copies of all statements, reports and notices sent or made available
generally by the Guarantor and the Borrowers to their security holders
or to any holders of Subordinated Debt and all reports on Form 10-K,
10-Q and 8-K or similar reports filed with the Securities and Exchange
Commission or any other public authority; (iv) promptly upon receipt of
notice thereof, a report of any legal actions pending or threatened
against the Guarantors, any Borrower or any Designated
<PAGE>
-11-
Subsidiary that could result in damages or costs of Five Hundred
Thousand Dollars ($500,000) or more; and (v) such budgets, sales
projections, operating plans or other financial information as Bank
may reasonably request from time to time.
Within thirty (30) days after the last day of each month, the
Guarantor shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially
the form of EXHIBIT A hereto.
Bank shall have a right from time to time hereafter to audit
the books and records of Guarantor at Guarantor's expense, provided
that such audits will be conducted no more often than twice in any year
unless an Event of Default has occurred and is continuing.
(e) NO CASH TRANSFER RESTRICTIONS. The Guarantor shall not
permit Lionbridge-France, Lionbridge-Ireland, any other Designated
Subsidiary or any other direct or indirect Subsidiary of the
Guarantors or the Borrowers to become subject to any Cash Transfer
Restriction.
14. SUBORDINATION OF CLAIMS AGAINST BORROWERS. Without
limiting the provisions of PARAGRAPH 4 hereof, the Guarantor hereby irrevocably
agrees that any and all claims which the Guarantor may now or hereafter have
against the Borrowers or any other guarantor of the Obligations, including,
without limitation, the benefit of any setoff or counterclaim or proof against
dividend, composition or payment by the Borrowers or such other guarantor, shall
be subject and subordinate to the prior payment in full of all of the
Obligations to the Bank. After the occurrence and during the continuation of an
Event of Default, the Guarantor shall not claim from the Borrowers or such other
guarantor, or with respect to any of their respective properties, any sums which
may be owing to the Guarantor, or have the benefit of any setoff or counterclaim
or proof against dividend, composition or payment by the Borrowers or such other
guarantor, until all the Obligations shall have been paid in full. Should any
payment or distribution or security or the benefit of proceeds thereof be
received by the Guarantor upon or with respect to amounts due to him from the
Borrowers or any other guarantor of the Obligations after an Event of Default
has occurred and is continuing and prior to the payment in full of all
Obligations, the Guarantor will forthwith deliver the same to the Bank in
precisely the form received (except for endorsement or assignment where
necessary), for application in or towards repayment of the Obligations and,
until so delivered, the same shall be held in trust as property of the Bank. In
the event of the failure of the Guarantor to make any such endorsement or
assignment, the Bank is hereby irrevocably authorized to make the same on behalf
of the Guarantor.
15. SEVERABILITY. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. PARAGRAPH HEADINGS. The paragraph headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into
<PAGE>
-12-
consideration in the interpretation hereof.
17. NO WAIVER, CUMULATIVE REMEDIES. The Bank shall not by any
act (except by a written instrument pursuant to PARAGRAPH 18 hereof), delay,
indulgence, omission or otherwise, be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Bank, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Bank of any right or remedy hereunder on any one occasion shall not be construed
as a bar to any right or remedy which the Bank would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
18. MISCELLANEOUS. This Guarantee constitutes the entire
agreement of the Guarantor with respect to the matters set forth herein. This
Guarantee supersedes and restates in its entirety that certain Guarantee of the
Guarantor dated as of September 26, 1997, in favor of the Bank, which prior
Guarantee shall no longer be of any further force and effect. None of the terms
or provisions of this Guarantee may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Guarantor and
the Bank, provided that any provision of this Guarantee may be waived by the
Bank in a letter or agreement executed by the Bank or by telecopy from the Bank.
This Guarantee shall be binding upon the successors and assigns of the Guarantor
and shall inure to the benefit of the Bank and its successors and assigns.
19. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; GOVERNING
LAW. THE GUARANTOR AND THE BANK BY ITS ACCEPTANCE HEREOF EACH HEREBY EXPRESSLY
WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO A JURY TRIAL IN ANY SUIT,
ACTION, PROCEEDING OR COUNTERCLAIM WHICH ARISES OUT OF, BASED UPON OR BY REASON
OF THIS GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN
FULLY DISCUSSED BY THE BANK AND THE GUARANTOR, AND SHALL BE SUBJECT TO NO
EXCEPTIONS.
BY ITS EXECUTION AND DELIVERY OF THIS GUARANTEE, THE GUARANTOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH SUCH
ACTION, SUIT OR PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED BY ANY SUCH COURT
<PAGE>
-13-
IN ANY SUCH ACTION, SUIT OR PROCEEDING IN WHICH IT SHALL HAVE BEEN SERVED WITH
PROCESS IN THE MANNER HEREINAFTER PROVIDED, AND TO THE EXTENT THAT IT MAY
LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE
OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING ANY CLAIMS THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT ITS PROPERTY IS
EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE ACTION, SUIT OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS
IMPROPER.
THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
20. NOTICES. All notices under this Guarantee shall be in
writing, and shall be delivered by hand, by an internationally recognized
commercial overnight delivery service, by U.S. first class mail or by telecopy,
delivered, addressed or transmitted, if to the Bank, at its address or telecopy
number set forth in the Loan Agreement, and if to the Guarantor, at its address
or telecopy number set out below its signature in this Guarantee. Such notices
shall be effective (a) in the case of hand deliveries, when received, (b) in the
case of an overnight delivery service, on the next Business Day after being
placed in the possession of such delivery service, with delivery charges
prepaid, (c) in the case of mail, three days after deposit in the U.S. postal
system, first class postage prepaid and (d) in the case of telecopy notices,
when electronic indication of receipt is received. Either party may change its
address and telecopy number by written notice to the other.
<PAGE>
-14-
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered as of the date first above written.
LIONBRIDGE TECHNOLOGIES, INC.
By
---------------------------------
Name: Stephen J. Lifshatz
Title: Chief Financial Officer
Address for Notices:
Lionbridge Technologies, Inc.
950 Winter Street, Suite 4300
Waltham, MA 02154
Telecopy No.: (617) 890-3799
Accepted and agreed to:
SILICON VALLEY BANK
By:
-----------------------------------
Andrew H. Tsao
Vice President
<PAGE>
SCHEDULE A
GUARANTOR'S (LIONBRIDGE TECHNOLOGIES, INC.'S) SUBSIDIARIES
Lionbridge Technologies, Inc. owns 60% of Lionbridge Technologies Holdings B.V.
Lionbridge Technologies Holdings B.V. wholly owns Lionbridge Technologies
Ireland, Lionbridge Technologies B.V., and Lionbridge Technologies France.
<PAGE>
EXHIBIT A
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: Lionbridge TECHNOLOGIES, INC.
The undersigned authorized officer of Lionbridge Technologies, Inc.
(the "Guarantor") hereby certifies that in accordance with the terms and
conditions of the Guarantee in favor of Bank (the "Guarantee"), (i) except as
noted below, Consolidated Group is in complete compliance for the period ending
_______ with all required financial covenants set forth herein and the Borrowers
are in complete compliance with their covenants as set forth in the Loan
Agreement to which they are a party and (ii) all representations and warranties
of Guarantor in the Guarantee and Borrowers stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER
"COMPLIES" COLUMN.
<TABLE>
<CAPTION>
Reporting Covenant Required Complies
------------------ -------- --------
<S> <C> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
10Q and 10K Within 5 days after filing Yes No
with the SEC
A/R & A/P Agings Monthly within 30 days Yes No
A/R Audit Initial and Semi-Annual Yes No
</TABLE>
<TABLE>
<CAPTION>
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
<S> <C> <C> <C> <C>
Maintain for the quarters indicated:
Minimum Quarterly Quick Ratio
commencing with the quarter
ending March 31, 1999 0.75 to 1.0 _____:1.0 Yes No
Minimum Profitability
Quarter Ending 6/30/98 ($500,000) $________ Yes No
Quarter Ending 9/30/98 $500,000 $________ Yes No
Quarter Ending 12/31/98 $1,000,000 $________ Yes No
Quarter Ending 3/31/99
and thereafter $750,000 $________ Yes No
</TABLE>
<PAGE>
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
- -----------------------------------
SIGNATURE
TITLE:
-----------------------------
DATE:
------------------------------
<PAGE>
Exhibit 10-24
GUARANTEE
GUARANTEE dated as of May 21, 1998 made by JAPANESE LANGUAGE
SERVICES, INC., a Delaware corporation (the "GUARANTOR") in favor of SILICON
VALLEY BANK (the "BANK").
W I T N E S S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September 26, 1997
among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies B.V.,
each a Netherlands company with limited liability (together, the "BORROWERS")
and the Bank (the "ORIGINAL LOAN AGREEMENT"), the Bank agreed, subject to the
terms and conditions thereof, to make credit extensions to the Borrowers to be
evidenced by their promissory note payable to the order of the Bank, also dated
September 26, 1997 (the "ORIGINAL NOTE);
WHEREAS, the Borrowers wish to enter into a Loan Document Modification
Agreement of even date amending the Original Loan Agreement (the Original Loan
Agreement as so amended, and as the same may hereafter be further amended,
modified, supplemented, extended or restated from time to time, the "LOAN
AGREEMENT") pursuant to which they will issue to the Bank an Amended and
Restated Note of even date herewith in the original principal amount of
$8,000,000 (as the same may hereafter be amended, modified, increased,
supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, it is a condition to the Bank's entering into the Loan
Modification Agreement that the Guarantor enter into a guarantee on the terms
set forth in this guarantee (as the same may be amended, modified, supplemented,
extended or restated from time to time, the "GUARANTEE");
WHEREAS, the Guarantor is a wholly-owned subsidiary of Lionbridge
Technologies Holdings, Inc., which is the registered and beneficial owner of
approximately 39.6% of the outstanding capital stock of Lionbridge Technologies
Holdings B.V. which in turn is the registered owner of all the outstanding
capital stock of Lionbridge Technologies, B.V. and for this reason the Guarantor
will derive the benefit of using the money procured from the Bank's agreement to
make Credit Extensions to the Borrowers;
WHEREAS, the Guarantor now wishes to enter into this Guarantee in order
to induce the Bank to enter into the above referenced Loan Modification
Agreement;
NOW, THEREFORE, in consideration of the premises and to induce
the Bank to make advances and other extensions of credit to the Borrowers
thereunder, the Guarantor hereby agrees with the Bank as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms which
are defined in the Loan Agreement and used herein are so used as so defined. In
addition, the following terms shall have the meanings set forth below:
<PAGE>
2
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, property, condition (financial or
otherwise) or prospects of the Guarantor, (b) the ability of the
Guarantor to perform its obligations under this Guarantee, or (c) the
validity or enforceability of this Guarantee, or the rights of the
Bank hereunder.
"OBLIGATIONS" shall mean all obligations of the Borrowers to
the Bank, whether such obligations are now existing or hereafter
incurred or created, joint or several, direct or indirect, absolute or
contingent, due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrowers) on any
advance to the Borrowers under the Loan Agreement or the Note; (b) all
other amounts (including, without limitation, any fees or expenses)
payable by the Borrowers under the Loan Agreement, the Note or any
other Loan Document; (c) all amounts payable to the Bank in connection
with the issuance of any letter of credit by the Bank for the account
of the Borrowers or any drawing thereunder, including without
limitation, any reimbursement obligation and letter of credit fees
payable under any letter of credit application or reimbursement
agreement executed by the Borrowers in connection with any such letter
of credit; and (d) any renewals, refinancings or extensions of any of
the foregoing.
2. GUARANTEE. The Guarantor hereby unconditionally and
irrevocably guarantees to the Bank the prompt and complete payment and
performance by the Borrowers when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations. The Guarantor further agrees to
pay any and all expenses (including, without limitation, all reasonable fees and
disbursements of counsel to the Bank) which may be paid or incurred by the Bank
in enforcing, or obtaining advice of counsel in respect of, any of its rights
under this Guarantee. The Guarantee shall remain in full force and effect until
the Obligations are paid in full and the Bank's obligation to make Advances or
other Credit Extensions under the Loan Agreement is terminated, notwithstanding
that from time to time prior thereto the Borrowers may be free from any
Obligations.
3. RIGHT OF SET-OFF. Regardless of the adequacy of any
collateral or other means of obtaining repayment of the Obligations, any
deposits (general or special, time or demand, provisional or final, including,
but not limited to indebtedness evidenced by a certificate of deposit, whether
matured or unmatured) and any other indebtedness at any time held or owing by
the Bank to the Guarantor may, at any time and from time to time after the
occurrence of an Event of Default, without prior notice to the Guarantor or
compliance with any other condition precedent now or hereafter imposed by
statute, rule of law, or otherwise (all of which are hereby expressly waived to
the extent permitted by law) be set off, appropriated, and applied by the Bank
against any and all obligations of the Guarantor to the Bank then due and
payable in such manner as the Bank in its sole discretion may determine, and the
Guarantor hereby grants the Bank a continuing security interest in such deposits
and indebtedness for the payment and performance of such obligations.
4. SUBROGATION AND CONTRIBUTION. Until payment and performance
in full of
<PAGE>
3
all the Obligations, the Guarantor irrevocably and unconditionally waives any
and all rights to which it may be entitled, by operation of law or otherwise,
(a) to be subrogated, with respect to any payment made by the Guarantor
hereunder, to the rights of the Bank against the Borrowers, or otherwise to be
reimbursed, indemnified or exonerated by the Borrowers in respect thereof or (b)
to receive any payment, in the nature of contribution or for any other reason,
from any other guarantor of the Obligations with respect to any payment made by
the Guarantor hereunder.
5. EFFECT OF BANKRUPTCY STAY. If acceleration of the time for
payment or performance of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Borrowers or any other Person or otherwise,
all such amounts otherwise subject to acceleration shall nonetheless be payable
by the Guarantor under this Guarantee forthwith upon demand.
6. RECEIPT OF LOAN DOCUMENTS, ETC. The Guarantor confirms,
represents and warrants to the Bank that (i) it has received true and complete
copies of the Loan Agreement, the Note and the other Loan Documents entered into
as of the date hereof from the Borrowers, has read the contents thereof and
reviewed the same with legal counsel of its choice; (ii) no representations or
agreements of any kind have been made to the Guarantor which would limit or
qualify in any way the terms of this Guarantee; (iii) the Bank has made no
representation to the Guarantor as to the creditworthiness of the Borrowers; and
(iv) the Guarantor has established adequate means of obtaining from the
Borrowers on a continuing basis information regarding the Borrowers' financial
condition. The Guarantor agrees to keep adequately informed from such means of
any facts, events, or circumstances which might in any way affect the
Guarantor's risks under this Guarantee, and the Guarantor further agrees that
the Bank shall have no obligation to disclose to the Guarantor any information
or documents acquired by the Bank in the course of its relationship with the
Borrowers.
7. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The
obligations of the Guarantor under this Guarantee shall remain in full force and
effect without regard to, and shall not be released, altered, exhausted,
discharged or in any way affected by any circumstance or condition (whether or
not the Borrowers shall have any knowledge or notice thereof), including without
limitation (i) any amendment or modification of or supplement to the Loan
Agreement, the Note, or any other Loan Document, or any obligation, duty or
agreement of the Borrowers or any other Person thereunder or in respect thereof,
(ii) any assignment or transfer in whole or in part of any of the Obligations,
(iii) any furnishing or acceptance of any direct or indirect security or
guaranty, or any release of or non-perfection or invalidity of any direct or
indirect security or guaranty, for any of the Obligations, (iv) any waiver,
consent, extension, renewal, indulgence, settlement, compromise or other action
or inaction under or in respect of the Loan Agreement, the Note, or any other
Loan Document, or any exercise or nonexercise of any right, remedy, power or
privilege under or in respect of any such instrument (whether by operation of
law or otherwise), (v) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to the
Borrowers or any other Person (other than the Guarantor) or any of their
respective properties or creditors or any resulting release or discharge of any
Obligations, (vi) the voluntary or involuntary sale or other disposition of all
or substantially all the assets of the Borrowers or any other Person, (vii) the
voluntary or involuntary liquidation,
<PAGE>
4
dissolution or termination of the Borrowers or any other Person, (viii) any
invalidity or unenforceability, in whole or in part, of any term hereof or of
the Loan Agreement, the Note, or any other Loan Document, or any obligation,
duty or agreement of the Borrowers or any other Person (other than the
Guarantor) thereunder or in respect thereof, or any provision of any applicable
law or regulation purporting to prohibit the payment or performance by the
Borrowers or any other Person (other than the Guarantor) of any Obligations,
(ix) any failure on the part of the Borrowers or any other Person for any reason
to perform or comply with any term of the Loan Agreement, the Note, or any other
Loan Document or any other agreement, or (x) any other act, omission or
occurrence whatsoever, whether similar or dissimilar to the foregoing. The
Guarantor authorizes the Borrowers, each other guarantor in respect of
Obligations and the Bank at any time in its discretion, as the case may be, to
alter any of the terms of Obligations.
8. GUARANTOR AS PRINCIPAL. If for any reason the Borrowers or
any other Person is under no legal obligation to discharge any Obligations, or
if any other moneys included in Obligations have become unrecoverable from the
Borrowers or any other Person by operation of law or for any other reason,
including, without limitation, the invalidity or irregularity in whole or in
part of any Obligation or of the Loan Agreement, the Note, or any other Loan
Document, the legal disability of the Borrowers or any other obligor in respect
of Obligations, any discharge of or limitation on the liability of the Borrowers
or any other person or any limitation on the method or terms of payment under
any Obligation, or of the Loan Agreement, the Note, or any other Loan Document,
which may now or hereafter be caused or imposed in any manner whatsoever
(whether consensual or arising by operation of law or otherwise), this Guarantee
shall nevertheless remain in full force and effect and shall be binding upon the
Guarantor to the same extent as if the Guarantor at all times had been the
principal obligor on all Obligations.
9. WAIVER OF DEMAND, NOTICE, ETC. The Guarantor hereby waives,
to the extent not prohibited by applicable law, (i) all presentments, demands
for performance, notice of nonperformance, protests, notices of protests and
notices of dishonor in connection with the Obligations or the Loan Agreement,
the Note, or any other Loan Document, including but not limited to notice of
additional indebtedness constituting Obligations or the existence, creation or
incurring of any new or additional indebtedness or obligation or of any action
or non-action on the part of the Borrowers, the Bank, any endorser or creditor
of the Borrowers or any other Person; (ii) any notice of any indulgence,
extensions or renewals granted to any obligor with respect to Obligations; (iii)
any requirement of diligence or promptness in the enforcement of rights under
the Loan Agreement, the Note, or any other Loan Document, or any other agreement
or instrument directly or indirectly relating thereto or to the Obligations;
(iv) any enforcement of any present or future agreement or instrument relating
directly or indirectly thereto or to the Obligations; (v) notice of any of the
matters referred to in PARAGRAPH 8 above, (vi) any defense of any kind which the
Guarantor may now have with respect to his liability under this Guarantee; (vii)
any right to require the Bank, as a condition of enforcement of this Guarantee,
to proceed against the Borrowers or any other Person or to proceed against or
exhaust any security held by the Bank at any time or to pursue any other right
or remedy in the Bank's power before proceeding against the Guarantor; (viii)
any defense that may arise by reason of the incapacity, lack of authority, death
or disability of any other Person or Persons or the failure of the Bank to file
or enforce a claim against the estate (in administration,
<PAGE>
5
bankruptcy, or any other proceeding) of any other Person or Persons; (ix) any
defense based upon an election of remedies by the Bank; (x) any defense arising
by reason of any "one action" or "anti-deficiency" law or any other law which
may prevent the Bank from bringing any action, including a claim for deficiency,
against the Guarantor, before or after the Bank's commencement of completion of
any foreclosure action, either judicially or by exercise of a power of sale;
(xi) any defense based upon any lack of diligence by the Bank in the collection
of any Obligation; (xii) any duty on the part of the Bank to disclose to the
Guarantor any facts the Bank may now or hereafter know about the Borrowers or
any other obligor in respect of Obligations; (xiii) any defense arising because
of an election made by the Bank under Section 1111(b)(2) of the Federal
Bankruptcy Code; (xiv) any defense based on any borrowing or grant of a security
interest under Section 364 of the Federal Bankruptcy Code; and (xv) any defense
based upon or arising out of any defense which the Borrowers or any other Person
may have to the payment or performance of Obligations (including but not limited
to failure of consideration, breach of warranty, fraud, payment, accord and
satisfaction, strict foreclosure, statute of frauds, bankruptcy, infancy,
statute of limitations, lender liability and usury). Guarantor acknowledges and
agrees that each of the waivers set forth herein on the part of the Guarantor is
made with Guarantor's full knowledge of the significance and consequences
thereof and that under the circumstances the waivers are reasonable. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by such law or public
policy.
10. REINSTATEMENT. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Bank upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrowers or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrowers or any substantial part of its property, or
otherwise, all as though such payments had not been made.
11. PAYMENTS. The Guarantor hereby agrees that the Obligations
will be paid to the Bank without set-off or counterclaim in U.S. Dollars at the
office of the Bank located at 3003 Tasman Drive, Santa Clara, California 95054,
or to such other location as the Bank shall notify the Guarantor.
12. REPRESENTATIONS AND WARRANTIES. The Guarantor represents
and warrants that:
(a) CORPORATE EXISTENCE. The Guarantor is a corporation duly
incorporated and validly existing under the laws of the jurisdiction
of its incorporation, and is duly licensed or qualified as a foreign
corporation in all states wherein the nature of its property owned or
business transacted by it makes such licensing or qualification
necessary.
(b) NO VIOLATION. The execution, delivery and performance of
this Guarantee will not contravene any provision of law, statute, rule
or regulation to which the Guarantor is subject or any judgment,
decree, franchise, order or permit applicable to the Guarantor, or will
conflict or will be inconsistent with or will result in any
<PAGE>
6
breach of, any of the terms, covenants, conditions or provisions of,
or constitute a default under, or result in the creation or imposition
of (or the obligation to create or impose) any Lien upon any of the
property or assets of the Guarantor pursuant to the terms of any
contractual obligation of the Guarantor, or violate any provision of
the corporate charter or by-laws of the Guarantor.
(c) CORPORATE AUTHORITY AND POWER. The execution, delivery and
performance of this Guarantee is within the corporate powers of the
Guarantor and has been duly authorized by all necessary corporate
action.
(d) ENFORCEABILITY. This Guarantee constitutes a valid and
binding obligation of the Guarantor enforceable against the Guarantor
in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
and except as enforceability may be subject to general principles of
equity, whether such principles are applied in a court of equity or at
law.
(e) GOVERNMENTAL APPROVALS. No order, permission, consent,
approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental authority is required
to authorize, or is required in connection with, the execution,
delivery and performance of this Guarantee, or the taking of any
action contemplated hereby or thereby.
(f) LITIGATION. There are no actions, suits or proceedings
pending or, to the Guarantor's knowledge, threatened against or
affecting the Guarantor before any governmental authority, which in
any one case or in the aggregate, if determined adversely to the
interests of the Guarantor, would have a Material Adverse Effect.
(g) COMPLIANCE WITH OTHER INSTRUMENTS. The Guarantor is not in
default under (i) any contractual obligation, where such default could
have a Material Adverse Effect, or (ii) the terms of any agreements
relating to any Indebtedness of the Guarantor.
(h) COMPLIANCE WITH LAW. The Guarantor is not in default with
respect to any applicable statute, rule, writ, injunction, decree,
order or regulation of any Governmental Authority having jurisdiction
over the Guarantor which could reasonably be expected to have a
Material Adverse Effect.
(i) INVESTMENT COMPANY STATUS; LIMITS ON ABILITY TO INCUR
INDEBTEDNESS. The Guarantor is not an "investment company" or a
company "controlled by" an investment company within the meaning of
the Investment Company Act of 1940, as amended. The Guarantor is not
subject to regulation under any Federal or State statute or regulation
which limits its ability to incur Indebtedness.
(j) TITLE TO PROPERTY. The Guarantor has good and marketable
title to all of its properties and assets, and none of such properties
or assets is subject to (i) any Lien except for Permitted Liens, or
(ii) a defect in title or other claim other than defects and
<PAGE>
7
claims that, in the aggregate, would have no Material Adverse Effect.
The Guarantor enjoys peaceful and undisturbed possession under all
leases necessary in any material respect for the operation of its
properties and assets, none of which contains any unusual or
burdensome provisions which could reasonably be expected to have a
Material Adverse Effect. All such leases are valid and subsisting and
are in full force and effect.
(k) ERISA PLANS. Each "employee benefit plan," "employee
pension benefit plan," "defined benefit plan," or "multiemployer plan,"
which the Guarantor has established or maintained or to which the
Guarantor is required to contribute (collectively, the "PLANS") is in
compliance in all material respects with all applicable provisions of
ERISA and the Internal Revenue Code of 1986 as amended, and the rules
and regulations thereunder, except where failure to so comply would not
have a Material Adverse Effect. There have been no "prohibited
transactions" under ERISA with respect to the Plans which would result
in any material liability to the Guarantor under ERISA or the Code. As
used in the Loan Documents, the terms "employee benefit plan,"
"employee pension benefit plan," "defined benefit plan," and
"multiemployer plan" shall have the respective meanings assigned to
such terms in Section 3 of ERISA. The Guarantor thereof has not
incurred any material "accumulated funding deficiency" within the
meaning of ERISA or incurred any material liability to the PBGC in
connection with a Plan (or other class of benefit which the PBGC has
elected to insure) established or maintained by the Guarantor.
(l) TAXES. All tax returns of the Guarantor required to be
filed have been timely filed, all taxes, fees and other governmental
charges (other than those being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate
reserves have been established and, in the case of AD VALOREM taxes or
betterment assessments, no proceedings to foreclose any lien with
respect thereto have been commenced and, in all other cases, no notice
of lien has been filed or other action taken to perfect or enforce such
lien) shown thereon which are payable have been paid. The charges and
reserves on the books of the Guarantor in respect of all income and
other taxes are adequate, and the Guarantor knows of no additional
assessment or any basis therefor. The Federal income tax returns of the
Guarantor have not been audited within the last three years, all prior
audits have been closed, and there are no unpaid assessments, penalties
or other charges arising from such prior audits.
13. COVENANTS. The Guarantor hereby covenants and agrees with
the Bank from and after the date of this Guarantee until the Obligations are
paid in full and the obligation of the Bank to make Advances or other Credit
Extensions is terminated to maintain its existence and not to take any action or
refrain from taking any action which would cause the Borrowers to be in default
of any of their covenants or agreements contained in the Loan Agreement.
14. SUBORDINATION OF CLAIMS AGAINST BORROWERS. Without
limiting the provisions of PARAGRAPH 4 hereof, the Guarantor hereby irrevocably
agrees that any and all claims which the Guarantor may now or hereafter have
against the Borrowers or any other
<PAGE>
8
guarantor of the Obligations, including, without limitation, the benefit of
any setoff or counterclaim or proof against dividend, composition or payment
by the Borrowers or such other guarantor, shall be subject and subordinate to
the prior payment in full of all of the Obligations to the Bank. After the
occurrence and during the continuation of an Event of Default, the Guarantor
shall not claim from the Borrowers or such other guarantor, or with respect
to any of their respective properties, any sums which may be owing to the
Guarantor, or have the benefit of any setoff or counterclaim or proof against
dividend, composition or payment by the Borrowers or such other guarantor,
until all the Obligations shall have been paid in full. Should any payment or
distribution or security or the benefit of proceeds thereof be received by
the Guarantor upon or with respect to amounts due to him from the Borrowers
or any other guarantor of the Obligations after an Event of Default has
occurred and is continuing and prior to the payment in full of all
Obligations, the Guarantor will forthwith deliver the same to the Bank in
precisely the form received (except for endorsement or assignment where
necessary), for application in or towards repayment of the Obligations and,
until so delivered, the same shall be held in trust as property of the Bank.
In the event of the failure of the Guarantor to make any such endorsement or
assignment, the Bank is hereby irrevocably authorized to make the same on
behalf of the Guarantor.
15. SEVERABILITY. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. PARAGRAPH HEADINGS. The paragraph headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
17. NO WAIVER, CUMULATIVE REMEDIES. The Bank shall not by any
act (except by a written instrument pursuant to PARAGRAPH 18 hereof), delay,
indulgence, omission or otherwise, be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Bank, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Bank of any right or remedy hereunder on any one occasion shall not be construed
as a bar to any right or remedy which the Bank would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
18. MISCELLANEOUS. This Guarantee constitutes the entire
agreement of the Guarantor with respect to the matters set forth herein. None of
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Guarantor
and the Bank, provided that any provision of this Guarantee may be waived by the
Bank in a letter or agreement executed by the Bank or by telecopy from the Bank.
This Guarantee shall be binding upon the successors and assigns of
<PAGE>
9
the Guarantor and shall inure to the benefit of the Bank and its successors and
assigns.
19. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; GOVERNING
LAW. THE GUARANTOR AND THE BANK BY ITS ACCEPTANCE HEREOF EACH HEREBY EXPRESSLY
WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO A JURY TRIAL IN ANY SUIT,
ACTION, PROCEEDING OR COUNTERCLAIM WHICH ARISES OUT OF, BASED UPON OR BY REASON
OF THIS GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN
FULLY DISCUSSED BY THE BANK AND THE GUARANTOR, AND SHALL BE SUBJECT TO NO
EXCEPTIONS.
BY ITS EXECUTION AND DELIVERY OF THIS GUARANTEE, THE GUARANTOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH SUCH
ACTION, SUIT OR PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN
WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED,
AND TO THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING
ANY CLAIMS THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT,
THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE
ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE
THEREOF IS IMPROPER.
THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
20. NOTICES. All notices under this Guarantee shall be in
writing, and shall be delivered by hand, by an internationally recognized
commercial overnight delivery service, by U.S. first class mail or by telecopy,
delivered, addressed or transmitted, if to the Bank, at its address or telecopy
number set forth in the Loan Agreement, and if to the Guarantor, at its address
or telecopy number set out below its signature in this Guarantee. Such notices
shall be effective (a) in the case of hand deliveries, when received, (b) in the
case of an overnight delivery service, on the next Business Day after being
placed in the possession of such delivery service, with delivery charges
prepaid, (c) in the case of mail, three days after deposit in the U.S. postal
system, first class postage prepaid and (d) in the case of telecopy notices,
when electronic indication of receipt is received. Either party may change its
address and
<PAGE>
10
telecopy number by written notice to the other.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
11
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered as of the date first above written.
JAPANESE LANGUAGE SERVICES, INC.
By
---------------------------------
Name:
Title:
Address for Notices:
Japanese Language Services, Inc.
-----------------------------------
-----------------------------------
Telecopy No.:
Accepted and agreed to:
SILICON VALLEY BANK
By:
--------------------------------
Andrew H. Tsao
Vice President
<PAGE>
SCHEDULE A
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
Section 12(l): Guarantor has filed for an automatic extension with the relevant
state and federal tax authorities with respect to its 1997 tax returns.
<PAGE>
Exhibit 10.25
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of May 21, 1998 between JAPANESE
LANGUAGE SERVICES, INC., a Massachusetts corporation (the "COMPANY") and SILICON
VALLEY BANK (the "BANK").
W I T N E S S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September
26, 1997 among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies
B.V., each a Netherlands corporation (together, the "BORROWERS") and the Bank
(the "ORIGINAL LOAN AGREEMENT"), the Bank agreed, subject to the terms and
conditions thereof, to make credit extensions to the Borrowers to be evidenced
by their promissory note payable to the order of the Bank, also dated September
26, 1997 (the "ORIGINAL NOTE");
WHEREAS, the Borrowers wish to enter into a Loan Document
Modification Agreement of even date amending the Original Loan Agreement (the
Original Loan Agreement as so amended, and as the same may hereafter be further
amended, modified, supplemented, extended or restated from time to time, the
"LOAN AGREEMENT") pursuant to which they will issue to the Bank an Amended and
Restated Note of even date herewith in the original principal amount of
$8,000,000 (as the same may hereafter be amended, modified, increased,
supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, the Company is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) issued by Lionbridge Japan
K.K., a Japanese corporation (the "ISSUER");
WHEREAS, in order to induce the Bank to enter into the Loan
Document Modification Agreement, the Company has agreed to grant a continuing
security interest in and to the Collateral (which is hereafter defined and which
includes the Pledged Stock) to secure obligations under the Loan Agreement,
including, without limitation, obligations under the promissory note by the
Borrowers to the Bank issued pursuant to the Loan Agreement;
WHEREAS, the Company is the registered and beneficial owner of
approximately 39.6% of the outstanding capital stock of Lionbridge Technologies
Holdings B.V., which in turn is the registered owner of all the outstanding
capital stock of Lionbridge Technologies B.V., and as a consequence the Company
and the Issuer will derive benefit from the Bank's agreement to make credit
extensions to the Borrowers;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Terms defined in the Loan Agreement and not
otherwise defined herein (including, without limitation, the terms "Event of
Default", "Governmental Authority", "Lien" and "Loan Documents") have, as used
herein, the respective meanings provided for therein. The following additional
terms, as used herein, have the following
<PAGE>
2
respective meanings:
"COLLATERAL" means the Pledged Stock and all Proceeds.
"PLEDGE AGREEMENT" means this Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
"PLEDGED STOCK" means the shares of capital stock of the
Issuer listed on Schedule I hereto, together with all stock
certificates, options or rights of any nature whatsoever which may be
issued or granted by the Issuer to the Company in respect of the
Pledged Stock while this Pledge Agreement is in effect.
"PROCEEDS" shall include, without limitation, all dividends or
other income from the Pledged Stock, collections thereon or
distributions with respect thereto.
"SECURED OBLIGATIONS" means all obligations of the Borrowers
to the Bank, whether such obligations are now existing or hereafter
incurred or created, joint or several, direct or indirect, absolute or
contingent, due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrowers) on any
advance to the Borrowers under the Loan Agreement or the Note; (b) all
other amounts (including, without limitation, any fees or expenses)
payable by the Borrowers under the Loan Agreement, the Note or any
other Loan Document; (c) all amounts payable to the Bank in connection
with the issuance of any letter of credit by the Bank for the account
of the Borrowers or any drawing thereunder, including without
limitation, any reimbursement obligation and letter of credit fees
payable under any letter of credit application or reimbursement
agreement executed by the Borrowers in connection with any such letter
of credit; (d) all amounts payable by the Borrowers hereunder; and (e)
any renewals, refinancings or extensions of any of the foregoing.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Company hereby
delivers to the Bank all the Pledged Stock and hereby grants to the Bank a first
security interest in the Collateral, as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations.
3. STOCK POWERS. Concurrently with the delivery to the Bank of
each certificate representing one or more shares of the Pledged Stock, the
Company shall deliver an undated stock power covering such certificate, duly
executed in blank with, if the Bank so requests, signature guaranteed.
4. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants that:
a. the Company has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the Lien on the
<PAGE>
3
Collateral pursuant to, this Pledge Agreement and has taken
all necessary corporate action to authorize its execution,
delivery and performance of, and grant of the Lien on the
Collateral pursuant to, this Pledge Agreement;
b. this Pledge Agreement constitutes a legal, valid and
binding obligation of the Company enforceable in accordance
with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally;
c. the execution, delivery and performance of this
Pledge Agreement will not violate any provision of any
Requirement of Law or Contractual Obligation of the Company
and will not result in the creation or imposition of any Lien
on any of the properties or revenues of the Company pursuant
to any Requirement of Law or Contractual Obligation of the
Company, except as contemplated hereby;
d. no consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental
Authority and no consent of any other Person (including,
without limitation, any stockholder or creditor of the Company
or the Issuer), is required in connection with the execution,
delivery, performance, validity or enforceability of this
Pledge Agreement;
e. no litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Company, threatened by or against the
Company or against any of its properties or revenues with
respect to this Pledge Agreement or any of the transactions
contemplated hereby;
f. the shares of Pledged Stock listed on SCHEDULE I
constitute sixty percent (60%) of the issued and outstanding
shares of all classes of the capital stock of the Issuer;
g. all the shares of the Pledged Stock have been duly
and validly issued and are fully paid and nonassessable;
h. the Company is the record and beneficial owner of,
and has good and marketable title to, the Pledged Stock listed
on SCHEDULE I, free of any and all Liens or options in favor
of, or claims of, any other Person, except the Lien created by
this Pledge Agreement; and
i. upon delivery to the Bank of the stock certificates
evidencing the Pledged Stock, the Lien granted pursuant to
this Pledge Agreement will constitute a valid, perfected first
priority Lien on the Collateral, enforceable as such against
all creditors of the Company and any Persons purporting to
purchase any Collateral from the Company.
5. COVENANTS. The Company covenants and agrees with the Bank
that, from and after the date of this Pledge Agreement until the Secured
Obligations are paid in full and the Commitment is terminated:
a. If the Company shall, as a result of its ownership of
the Pledged Stock, become
<PAGE>
4
entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a
stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization),
option or rights, whether in addition to, in substitution of,
as a conversion of, or in exchange for any shares of the
Pledged Stock, or otherwise in respect thereof, the Company
shall accept the same as the Bank's agent, hold the same in
trust for the Bank and deliver the same forthwith to the Bank
in the exact form received, duly indorsed by the Company to
the Bank, if required, together with an undated stock power
covering such certificate duly executed in blank and with, if
the Bank so requests, signature guaranteed, to be held by the
Bank hereunder as additional collateral security for the
Secured Obligations. Any sums paid upon or in respect of the
Pledged Stock upon the liquidation or dissolution of the
Issuer shall be paid over to the Bank to be held by it
hereunder as additional collateral security for the Secured
Obligations, and in case any distribution of capital shall be
made on or in respect of the Pledged Stock or any property
shall be distributed upon or with respect to the Pledged Stock
pursuant to the recapitalization or reclassification of the
capital of the Issuer or pursuant to the reorganization
thereof, the property so distributed shall be delivered to the
Bank to be held by it, subject to the terms hereof, as
additional collateral security for the Secured Obligations. If
any sums of money or property so paid or distributed in
respect of the Pledged Stock shall be received by the Company,
the Company shall, until such money or property is paid or
delivered to the Bank, hold such money or property in trust
for the Bank, segregated from other funds of the Company, as
additional collateral security for the Secured Obligations.
b. Without the prior written consent of the Bank, the
Company will not (i) vote to enable, or take any other action
to permit, the Issuer to issue any stock or other equity
securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange
for any stock or other equity securities of the Issuer, or
(ii) sell, assign, transfer, exchange or otherwise dispose of,
or grant any option with respect to, the Collateral, or (iii)
create, incur or permit to exist any Lien or option in favor
of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the Lien
provided for by this Pledge Agreement. The Company will defend
the right, title and interest of the Bank in and to the
Collateral against the claims and demands of all Persons
whomsoever.
c. At any time and from time to time, upon the written
request of the Bank, and at the sole expense of the Company,
the Company will promptly and duly execute and deliver such
further instruments and documents and take such further
actions as the Bank may reasonably request for the purposes of
obtaining or preserving the full benefits of this Pledge
Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory
note, other instrument or chattel paper, such note, instrument
or chattel paper shall be immediately delivered to the Bank,
duly endorsed in a manner satisfactory to the Bank, to be held
as Collateral pursuant to this Pledge Agreement.
d. The Company agrees to pay, and to save the Bank
harmless from, any and all
<PAGE>
5
liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any
of the Collateral or in connection with any of the
transactions contemplated by this Pledge Agreement.
6. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default
shall have occurred and be continuing and the Bank shall have given notice to
the Company of the Bank's intent to exercise its corresponding rights pursuant
to PARAGRAPH 7 below, the Company shall be permitted to receive all cash
dividends paid in the normal course of business of the Issuer and consistent
with past practice, to the extent permitted in the Loan Agreement, in respect of
the Pledged Stock and to exercise all voting and corporate rights with respect
to the Pledged Stock, PROVIDED, HOWEVER, that no vote shall be cast or corporate
right exercised or other action taken which, in the Bank's reasonable judgment,
would impair the Collateral or which would be inconsistent with or result in any
violation of any provision of this Pledge Agreement, the Loan Agreement, the
Note or any other Loan Document.
7. RIGHTS OF THE BANK. If an Event of Default shall occur and be
continuing and the Bank shall give notice of its intent to exercise such rights
to the Company: (i) the Bank shall have the right to receive any and all cash
dividends paid in respect of the Pledged Stock and make application thereof to
the Secured Obligations in such order as it may determine, and (ii) all shares
of the Pledged Stock shall be registered in the name of the Bank or its nominee,
and the Bank or its nominee may thereafter exercise (A) all voting, corporate
and other rights pertaining to such shares of the Pledged Stock at any meeting
of shareholders of the Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of the
Issuer, or upon the exercise by the Company or the Bank of any right, privilege
or option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it, but the Bank
shall have no duty to exercise any such right, privilege or option and shall not
be responsible for any failure to do so or delay in so doing.
a. The rights of the Bank hereunder shall not be
conditioned or contingent upon the pursuit by the Bank of any
right or remedy against the Issuer or against any other Person
which may be or become liable in respect of all or any part of
the Secured Obligations or against any other collateral
security therefor, guarantee thereof or right of offset with
respect thereto. The Bank shall not be liable for any failure
to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so, nor shall it be under
any obligation to sell or otherwise dispose of any Collateral
upon the request of the Company or any other Person or to take
any other action whatsoever with regard to the Collateral or
any part thereof.
8. REMEDIES. If an Event of Default shall occur and be
continuing, the Bank may
<PAGE>
6
exercise, in addition to all other rights and remedies granted in this Pledge
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a secured party.
Without limiting the generality of the foregoing, the Bank, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Company, the Issuer or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option
or options to purchase or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Bank or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Bank shall have the right upon any such public sale or sales, and to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Company, which right or equity is hereby waived or released.
The Bank shall apply any Proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Bank
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as the Bank may elect, and only after such application and after the
payment by the Bank of any other amount required by any provision of law need
the Bank account for the surplus, if any, to the Company. To the extent
permitted by applicable law, the Company waives all claims, damages and demands
it may acquire against the Bank arising out of the exercise by the Bank of any
of its rights hereunder. If any notice of a proposed sale or other disposition
of Collateral shall be required by law, such notice shall be deemed reasonable
and proper if given at least 10 days before such sale or other disposition. The
Company shall remain liable for any deficiency if the proceeds of any sale or
other disposition of Collateral are insufficient to pay the Secured Obligations
and the fees and disbursements of any attorneys employed by the Bank to collect
such deficiency.
9. PRIVATE SALES.
a. The Company recognizes that the Bank may be unable to
effect a public sale of any or all the Pledged Stock, by
reason of certain prohibitions contained in the Securities
Exchange Law ("SEL")of Japan or otherwise, and may be
compelled to resort to one or more private sales thereof to a
restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own
account for investment and not with a view to the distribution
or resale thereof. The Company acknowledges and agrees that
any such private sale may result in prices and other terms
less favorable to the Bank than if such sale were a public
sale. The Bank shall be under no obligation to delay a sale of
any of the Pledged Stock for the period of time necessary to
permit the Issuer to register such securities for public sale
under the SEL even if the Issuer would agree to do so.
<PAGE>
7
b. The Company further agrees to do or cause to be done
all such other acts as may be necessary to make any sale or
sales of all or any portion of the Pledged Stock pursuant to
this PARAGRAPH 9 valid and binding and in compliance with any
and all other applicable Requirements of Law. The Company
further agrees that a breach of any of the covenants contained
in this PARAGRAPH 9 will cause irreparable injury to the Bank,
that the Bank has no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant
contained in this PARAGRAPH 9 shall be specifically
enforceable against the Company, and the Company hereby waives
and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense
that no Event of Default has occurred or is continuing under
the Loan Agreement.
10. NO SUBROGATION. Notwithstanding any payment or payments made
by the Company hereunder, or any setoff or application of funds of the Company
by the Bank, or the receipt of any amounts by the Bank with respect to any of
the Collateral, the Company shall not be entitled to be subrogated to any of the
rights of the Bank against the Issuer or against any other collateral security
held by the Bank for the payment of the Secured Obligations, nor shall the
Company seek any reimbursement from the Issuer in respect of payments made by
the Company in connection with the Collateral, or amounts realized by the Bank
in connection with the Collateral, until all amounts owing to the Bank by the
Issuer on account of the Secured Obligations are paid in full and the Commitment
is terminated. If any amount shall be paid to the Company on account of such
subrogation rights at any time when all of the Secured Obligations shall not
have been paid in full, such amount shall be held by the Company in trust for
the Bank, segregated from other funds of the Company, and shall, forthwith upon
receipt by the Company, be turned over to the Bank in the exact form received by
the Company (duly indorsed by the Company to the Bank, if required), to be
applied against the Secured Obligations, whether matured or unmatured, in such
order as the Bank may determine.
11. AMENDMENTS, ETC. WITH RESPECT TO THE SECURED OBLIGATIONS. The
Company shall remain obligated hereunder, and the Collateral shall remain
subject to the Lien granted hereby, notwithstanding that, without any
reservation of rights against the Company, and without notice to or further
assent by the Company, any demand for payment of any of the Secured Obligations
made by the Bank may be rescinded by the Bank, and any of the Secured
Obligations continued, and the Secured Obligations, or the liability of the
Issuer or any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Bank, and the
Loan Agreement, the Note and any other Loan Document may be amended, modified,
supplemented or terminated, in whole or in part, as the Bank may deem advisable
from time to time, and any guarantee, right of offset or other collateral at any
time held by the Bank for the payment of the Secured Obligations may be sold,
exchanged, waived, surrendered or released. The Bank shall have no obligation to
protect, secure, perfect or insure any other Lien at any time held by it as
security for the Secured Obligations or any property subject thereto. The
Company waives any and all notice of the creation, renewal, extension or accrual
of any of the Secured Obligations and notice of or proof of reliance by the Bank
upon this Pledge Agreement; the Secured Obligations, and any of them, shall
conclusively be deemed to have
<PAGE>
8
been created, contracted or incurred in reliance upon this Pledge Agreement; and
all dealings between the Issuer, the Company and the Bank shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Pledge Agreement. The Company waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Issuer or the Company
with respect to the Secured Obligations.
12. LIMITATION ON DUTIES REGARDING COLLATERAL. The Bank's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession shall be to deal with it in the same manner as the
Bank deals with similar securities and property for its own account. Neither the
Bank nor any of its directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Company or otherwise.
13. POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
14. SEVERABILITY. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. PARAGRAPH HEADINGS. The paragraph headings used in this
Pledge Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. NO WAIVER; CUMULATIVE REMEDIES. The Bank shall not by any act
(except by a written instrument pursuant to PARAGRAPH 17 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Bank, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Bank of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Bank would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights or remedies provided by law.
17. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW.
None of the terms or provisions of this Pledge Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Company and the Bank, PROVIDED that any provision of this Pledge Agreement
may be waived by the Bank in a letter or agreement executed by the Bank or by
facsimile transmission from the Bank. This Pledge Agreement shall be binding
upon the successors and assigns of the Company and shall inure to the benefit of
the Bank and its successors and assigns. This Pledge Agreement shall be
<PAGE>
9
governed by, and construed and interpreted in accordance with, the laws of
Japan.
18. NOTICES. Notices by the Bank to the Company or the Issuer may
be given by mail or by facsimile transmission, addressed or transmitted to the
Company or the Issuer at its address or transmission number set forth under its
signature below and shall be effective (a) in the case of mail, two days after
deposit in the postal system, first class postage pre-paid and (b) in the case
of facsimile notices, when electronic confirmation of receipt is received. The
Company and the Issuer may change their respective address and transmission
numbers by written notice to the Bank.
19. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. The
Company hereby authorizes and instructs the Issuer to comply with any
instruction received by it from the Bank in writing that (a) states that an
Event of Default has occurred and (b) is otherwise in accordance with the terms
of this Pledge Agreement, without any other or further instructions from the
Company, and the Company agrees that the Issuer shall be fully protected in so
complying.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
JAPANESE LANGUAGE SERVICES, INC.
By:
----------------------------------
Name:
Title:
SILICON VALLEY BANK
By:
----------------------------------
Name: Andrew H. Tsao
Title: Vice President
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The Issuer referred to in the foregoing Pledge Agreement
hereby acknowledges receipt of a copy thereof and agrees to be bound thereby and
to comply with the terms thereof insofar as such terms are applicable to it. The
Issuer agrees to notify the Bank promptly in writing of the occurrence of any of
the events described in PARAGRAPH 5(A) of the Pledge Agreement. The Issuer
further agrees that the terms of PARAGRAPH 9(B) of the Pledge Agreement shall
apply to it, MUTATIS MUTANDIS, with respect to all actions that may be required
of it under or pursuant to or arising out of PARAGRAPH 9 of the Pledge
Agreement.
LIONBRIDGE JAPAN K.K.
By:
-------------------------------------
Name:
Title:
Address for Notices:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE>
SCHEDULE 1
To Pledge
Agreement
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Stock
Class of Certificate No. of
Issuer Stock * No. Shares
- ------ -------- --- ------
<S> <C> <C> <C>
Lionbridge Japan, K.K. ______ 120
</TABLE>
* Common unless otherwise indicated.
<PAGE>
Exhibit 10.26
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of May 21, 1998 between JAPANESE
LANGUAGES SERVICES, INC., a Massachusetts corporation (the "COMPANY") and
SILICON VALLEY BANK (the "BANK"), a California chartered bank.
W I T N E S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September
26, 1997 among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies
B.V., each a Netherlands company with limited liability (together, the
"BORROWERS") and the Bank (the "ORIGINAL LOAN AGREEMENT"), the Bank agreed,
subject to the terms and conditions thereof, to make credit extensions to the
Borrowers to be evidenced by their promissory note payable to the order of the
Bank, also dated September 26, 1997 (the " ORIGINAL NOTE");
WHEREAS, the Borrowers wish to enter into a Loan Document
Modification Agreement of even date herewith amending the Original Loan
Agreement (the Original Loan Agreement as so amended, and as the same may
hereafter be further amended, modified, supplemented, extended or restated from
time to time, the "LOAN AGREEMENT") pursuant to which they will issue to the
Bank an Amended and Restated Note of even date herewith in the original
principal amount of $8,000,000 (as the same may hereafter be amended, modified,
increased, supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, in order to induce the Bank to enter into the Loan
Document Modification Agreement, the Company has agreed to enter into a
guarantee of the obligations of the Borrowers under the Loan Agreement (as the
same may be amended, supplemented, extended, or restated from time to time, the
"GUARANTEE") and to grant a security interest in and to the Collateral (which is
hereafter defined and which includes the assets of the Company set forth in
SECTION 3 hereof) to secure its obligations under the Guarantee;
WHEREAS, the Company is a wholly-owned subsidiary of
Lionbridge Technologies Holdings, Inc. which is the registered and beneficial
owner of approximately 39.6% of the outstanding capital stock of Lionbridge
Technologies Holdings B.V. which in turn is the registered owner of all the
outstanding capital stock of Lionbridge Technologies B.V. and as a consequence
the Company will derive benefit from the Bank's agreement to make credit
extensions to the Borrowers;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the
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parties agree as follows:
SECTION 1. DEFINITIONS
Except for the terms defined below or elsewhere in this Agreement, the
terms used herein shall have the respective meanings provided for in the Loan
Agreement:
"ACCOUNTS" means all "accounts" (as defined in the UCC) now
owned or hereafter acquired by the Company and shall also mean and
include all accounts receivable, contract rights, book debts, notes,
drafts and other obligations or indebtedness owing to the Company
arising from the sale, lease or exchange of goods or other property
and/or the performance of services by it (including any obligation
which might be characterized as an account, contract right or general
intangible under the UCC) and all the Company's rights in, to and under
all purchase orders for goods, services or other property, and all the
Company's rights to any goods, services or other property represented
by any of the foregoing (including returned or repossessed goods and
unpaid sellers' rights of rescission, replevin, reclamation and rights
to stoppage in transit) and all monies due to or to become due to the
Company under all contracts for the sale, lease or exchange of goods or
other property and/or the performance of services by it (whether or not
yet earned by performance on the part of the Company), in each case
whether now in existence or hereafter arising or acquired, including
the right to receive the proceeds of said purchase orders and contracts
and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
"COLLATERAL" has the meaning set forth in SECTION 3.
"DOCUMENTS" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods, now owned or
hereafter acquired, by the Company.
"EQUIPMENT" means all "equipment" (as defined in the UCC) now
owned or hereafter acquired by the Company, including, without limitation, all
motor vehicles, trucks and trailers.
"GENERAL INTANGIBLES" means all "general intangibles" (as
defined in the UCC) now owned or hereafter acquired by the Company,
including, without limitation, all (a) obligations or indebtedness
owing to the Company (other than Accounts) from whatever source
arising, (b) information, customer lists,
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identification of suppliers, data, plans, blueprints, specifications,
designs, drawings, recorded knowledge, surveys, engineering reports,
test reports, manuals, materials standards, catalogs, computer and
automatic machinery software and programs and the like pertaining to
the business of the Company, (c) field repair data, sales data, and
other information relating to sales or service of products now or
hereafter manufactured, (d) accounting information and all media in or
on which any of the information, knowledge, data or records may be
recorded or stored and all computer programs used for the compilation
or printout thereof, (e) causes of action, claims and warranties now or
hereafter owned or acquired by the Company in respect of any of the
items listed above and (f) all tax refunds to which the Company is
entitled.
"INSTRUMENTS" means all "instruments", "chattel paper" or
"letters of credit" (each as defined in the UCC) evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including promissory notes, drafts, bills of exchange and trade
acceptances, now owned or hereafter acquired by the Company.
"INVENTORY" means all "inventory" (as defined in the UCC), now
owned or hereafter acquired by the Company, wherever located, and shall
also mean and include, without limitation, all raw materials and other
materials and supplies, work-in-process and finished goods and any
products made or processed therefrom and all substances, if any,
commingled therewith or added thereto.
"PERFECTION CERTIFICATE" means a certificate substantially in
the form of Exhibit A hereto, completed with the schedules and
attachments contemplated thereby to the satisfaction of the Bank, and
duly executed by the chief financial officer of the Company.
"PERMITTED FINANCING STATEMENTS" means any financing
statements naming the Company as Debtor filed solely pursuant to
Section 9-408 of the UCC.
"PERMITTED LIENS" means the Liens on the Collateral permitted
to be created, assumed or to exist pursuant to the definition in the
Loan Agreement.
"PROCEEDS" means all proceeds of, and all other profits,
rentals or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of,
or realization upon, Collateral, including, without limitation, all
claims of the Company against third parties for loss of, damage to or
destruction of, or for proceeds payable under, or unearned
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premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect
to any Collateral, in each case whether now existing or hereafter
arising.
"SECURED OBLIGATIONS" means all obligations of the Company
under or in connection with the Guarantee, whether now existing or
hereafter incurred or created, joint or several, direct or indirect,
absolute or contingent, due or to become due, matured or unmatured,
liquidated or unliquidated, arising by contract, operation of law or
otherwise.
"SECURITY INTERESTS" means the security interests granted
pursuant to SECTION 3 hereof, as well as all other security interests
created or assigned as additional security for the Secured Obligations
pursuant to the provisions of this Agreement.
"UCC" means the Uniform Commercial Code in effect on the date
hereof in Massachusetts; provided that if by reason of law, the
perfection or effect of perfection or non-perfection of the Security
Interests in any Collateral is governed by the Uniform Commercial Code
in effect in a jurisdiction other than Massachusetts, "UCC" means the
Uniform Commercial Code in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect
of perfection or non-perfection.
SECTION 2. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants as follows:
(a) The Company has good title to all of the Collateral, free and clear
of any Liens other than the Permitted Liens and the Security Interests.
(b) Neither the Company nor its predecessors has performed any acts
which might prevent the Bank from enforcing any of the terms of this Agreement
or which would limit the Bank in any such enforcement. Other than the Permitted
Financing Statements and financing statements or other similar or equivalent
documents or instruments with respect to the Security Interests, no financing
statement, mortgage, security agreement or similar or equivalent document or
instrument covering all or any part of the Collateral is on file or of record in
any jurisdiction in which such filing or recording would be effective to perfect
a Lien on such Collateral. No Collateral is in the possession of any Person
(other than the Company) asserting any claim thereto or security interest
therein, except that the Bank or its designee may have possession of
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Collateral as contemplated hereby.
(c) Prior to the first borrowing under the Loan Agreement, the Company
shall deliver the Perfection Certificate to the Bank. The information set forth
therein shall be correct and complete.
(d) When UCC financing statements in appropriate form have been filed
in the offices specified in the Perfection Certificate to the extent that a
security interest therein may be perfected by filing pursuant to the UCC, the
Security Interests shall constitute valid and perfected security interests in
the Collateral (except Inventory in transit), in each case prior to all other
Liens and rights of others therein.
(e) Except for the filings referred to in paragraph (d) above, no
authorization, approval or other action by, and no notice of filing with, any
Governmental Authority that has not been received, taken or made is required (i)
for the grant by the Company of the Security Interests or for the execution,
delivery or performance of this Agreement by the Company, (ii) for the
perfection and maintenance of the Security Interests as first priority security
interests and liens, or (iii) for the exercise by the Bank of the rights or the
remedies in respect of the Collateral pursuant to this Agreement.
(f) The Inventory and Equipment are insured in accordance with the
requirements of this Security Agreement and the Loan Agreement.
SECTION 3. THE SECURITY INTERESTS
(a) In order to secure the full and punctual payment of the Secured
Obligations in accordance with their respective terms, the Company hereby
hypothecates, assigns, pledges and grants to the Bank a continuing security
interest and lien in and to all right, title and interest of the Company in the
following property, whether now owned or existing or hereafter acquired or
arising and regardless of where located (all being collectively referred to as
the "COLLATERAL"):
(i) Accounts;
(ii) Inventory;
(iii) General Intangibles;
(iv) Documents;
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(v) Instruments;
(vi) Equipment;
(vii) All monies and property of any kind of the Company in the
possession or under the control of the Bank;
(viii) All books and records (including customer lists, marketing
information, credit files, price lists, operating records, vendor and supplier
price lists, sales literature, computer programs, printouts and other computer
materials and records) of the Company pertaining to any of the Collateral; and
(ix) All Proceeds of, attachments or accessions to, or substitutions
for all or any of the Collateral described in Clauses (i) through (viii) hereof.
(b) The Security Interests are granted as security only and shall not
subject the Bank to, or transfer or in any way affect or modify, any obligation
or liability of the Company with respect to any of the Collateral or any related
transaction.
SECTION 4. FURTHER ASSURANCES; COVENANTS
The Company covenants as follows:
(a) The Company will not change (i) the locations of its principal
place of business or its chief executive office, (ii) its federal tax
identification number, (iii) the locations where it keeps or holds any
Collateral or related records from the applicable locations described in the
Perfection Certificate, or (iv) its name, identity or corporate structure in any
manner, without giving the Bank 30 days prior written notice. In the event of
any such change, the Company shall, at its cost and expense, cooperate with the
Bank and cause to be filed or recorded additional financing statements,
amendments or supplements to existing financing statements, continuation
statements or other documents required to be recorded or filed in order to
perfect and protect the Security Interests. The Company shall not, in any event,
make any such change if such change would cause the Security Interests in any
Collateral to lapse or cease to be perfected.
(b) The Company will, from time to time, at its expense, execute,
deliver, file and record any statement, assignment, instrument, document,
agreement or other paper and take any other action (including, without
limitation, any filings of financing or continuation statements under the UCC)
that the Bank may from time to time reasonably determine to be necessary or
desirable in order to create, preserve, upgrade in rank (to
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the extent required hereby), perfect, confirm or validate the Security Interests
or to enable the Bank to (i) obtain the full benefits of this Agreement, or (ii)
to exercise and enforce any of its rights, powers and remedies hereunder with
respect to any of the Collateral. At the Bank's request, the Company will use
reasonable efforts to obtain the consent of any Person that is necessary or
desirable to effect the pledge hereunder of any right, title, claims and
benefits now owned or hereafter acquired by the Company in and to any General
Intangible. To the extent permitted by law, the Company hereby authorizes the
Bank to execute and file financing statements or continuation statements without
the Company's signature appearing thereon. The Company agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement. The Company shall pay the costs of, or
incidental to, any recording or filing of any financing or continuation
statements concerning the Collateral.
(c) If any warehouseman, bailee or any of the Company's agents or
processors possesses or controls any Collateral, the Company shall, upon the
request of the Bank, notify such warehouseman, bailee, agent or processor of the
Security Interests created hereby and to hold all such Collateral for the Bank's
account subject to the Bank's instructions.
(d) The Company shall keep complete and accurate books and records
relating to the Collateral, and stamp or otherwise mark them in such manner as
the Bank may reasonably request in order to reflect the Security Interests.
(e) The Company will promptly deliver and pledge each Instrument to the
Bank, appropriately endorsed to the Bank without recourse, provided that so long
as no Event of Default shall have occurred and be continuing it, the Company may
retain for collection in the ordinary course any Instruments it receives in the
ordinary course of business and the Bank shall, promptly upon request of the
Company, make appropriate arrangements for making any other Instrument pledged
by the Company available to it for purposes of presentation, collection or
renewal (any such arrangement to be effected, to the extent deemed appropriate
by the Bank, against trust receipt or like document).
(f) The Company shall use its best efforts to cause to be collected
from its account debtors, as and when due, any and all amounts owing under or on
account of each Account (including, without limitation, Accounts which are
delinquent, such Accounts to be collected in accordance with lawful collection
procedures and the Company's standard procedures) and apply forthwith upon
receipt all such amounts so collected to the outstanding balance of such
Account, except that, unless an Event of Default has occurred and is continuing
and the Bank is exercising its rights hereunder to
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collect Accounts, the Company may allow in the ordinary course of business as
adjustments to amounts owing under its Accounts (i) an extension or renewal of
the time of payment, or settlement for less than the total unpaid balance, which
the Company finds appropriate in accordance with prudent business judgment and
(ii) a refund or credit due as a result of returned or damaged merchandise, all
in accordance with the Company's ordinary course of business consistent with its
historical collection practices. The costs and expenses (including, without
limitation, attorney's fees) of collection, whether incurred by the Company or
the Bank, shall be borne by the Company.
(g) Upon the occurrence and during the continuance of any Event of
Default, upon the request of the Bank, the Company will promptly notify (and the
Company hereby authorizes the Bank so to notify) each account debtor in respect
of any Account or Instrument that such Collateral has been assigned to the Bank,
and that any payments due or to become due in respect of such Collateral are to
be made directly to the Bank or any designee of the Bank. Following such request
of the Bank, the Company shall hold all proceeds from collection of Accounts as
trustee for the Bank (without commingling the same with other funds of the
Company) and shall turn the same over to the Bank immediately upon receipt in
the form received (duly endorsed by the Company to the Bank, if required). The
Bank shall apply the proceeds of such collections it receives to the Secured
Obligations in accordance with SECTION 8 of this Agreement. The application of
the proceeds of such collections shall be conditional upon the final payment in
cash of the items so collected. If any item is not so paid or the Bank is
required for any reason to return any payment made, the Bank may reverse any
credit given in respect of such item.
(h) Without the prior written consent of the Bank, the Company will not
(a) sell, lease, exchange, assign or otherwise dispose of, or grant any option
with respect to, any Collateral other than Inventory and obsolete or worn-out
property and equipment and, in the case of any such permitted sale or exchange,
the Security Interests created hereby in such item (but not in any Proceeds
arising from such sale or exchange) shall cease immediately without any further
action on the part of the Bank; or (b) create, incur or suffer to exist any Lien
with respect to any Collateral, except for Permitted Liens and the Security
Interests;
(i) The Company will maintain, with financially sound and reputable
companies, insurance policies (i) insuring all Inventory and Equipment against
loss by fire, explosion, theft and other casualties reasonably satisfactory to
the Bank and (ii) insuring the Company and the Bank against liability for
personal injury and property damage relating to Inventory and Equipment, such
policies to be in such form and amounts and having such coverage as is
reasonably satisfactory to the Bank, with losses payable to the Bank as sole
loss payee. All such insurance shall (A) provide that no termination,
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cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after receipt by the Bank of
written notice thereof, (B) in the case of the policies referenced in clause
(ii) above, name the Bank as additional insured and (C) be otherwise reasonably
satisfactory to the Bank.
(j) The Company will keep each item of Equipment in good order and
repair and will not use the same in violation of law or any policy of insurance
thereon.
(k) The Company will, promptly upon request, provide to the Bank all
information and evidence it may reasonably request concerning the Collateral
(including without limitation, the names, addresses, face value, and date of
invoices for each debtor obligated on each Account) to enable the Bank to
enforce the provisions of this Agreement.
SECTION 5. GENERAL AUTHORITY
The Company hereby irrevocably appoints the Bank its true and lawful
attorney, with full power of substitution, in the name of the Company, the Bank,
or otherwise, for the sole use and benefit of the Bank, but at the Company's
expense, to the extent permitted by law to exercise, at any time and from time
to time while an Event of Default has occurred and is continuing, all or any of
the following powers with respect to all or any of the Collateral:
(a) to endorse the Company's name on any checks, notes,
acceptances, money orders, drafts, filings or other forms of
payment or security that may come into the Bank's possession,
(b) to demand, sue for, collect, receive and give
acquittance for any and all monies due or to become due thereon or
by virtue thereof,
(c) to settle, compromise, compound, prosecute or defend
any action or proceeding with respect thereto,
(d) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and
effectively as if the Bank were the absolute owner, and
(e) to extend the time of payment thereof and to make any
allowance and other adjustments with reference thereto;
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PROVIDED that the Bank shall give the Company not less than ten days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral, except any Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market. The Company agrees that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 6. REMEDIES UPON EVENT OF DEFAULT
(a) If any Event of Default has occurred and is continuing, the Bank
may exercise all rights of a secured party under the UCC (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
the Bank may, without being required to give any notice, except as herein
provided or as may be required by law, sell any and all of the Collateral at
public or private sale, for cash, upon credit or for future delivery, and at
such prices as the Bank may deem satisfactory. The Bank may be the purchaser of
any or all of the Collateral so sold at any public sale (or, if the Collateral
is of a type customarily sold in a recognized market or is of a type which is
the subject of widely distributed standard price quotations, at any private
sale) and thereafter hold the same, absolutely, free from any right or claim of
whatsoever kind. The Company will execute and deliver such documents and take
such other action as the Bank deems necessary or advisable in order that any
such sale may be made in compliance with law. Upon any such sale the Bank shall
have the right to deliver, assign and transfer to the purchaser the Collateral
so sold. Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely, free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Company. The Company, to the extent
permitted by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale required by SECTION 5 hereof shall (i)
in case of a public sale, state the time and place fixed for such sale, and (ii)
in the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time(s) within ordinary
business hours and at such places as the Bank may fix in the notice of such
sale. At any such sale the Collateral may be sold in one lot as an entirety or
in separate parcels, as the Bank may determine. The Bank shall not be obligated
to make any such sale pursuant to any such notice. The Bank may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Bank until
the selling price is paid by the purchaser thereof, but the Bank shall not incur
any liability in case of the failure of such purchaser to take up and pay for
the Collateral so sold and, in case of any such failure, such Collateral may
again be sold
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upon like notice. The Bank, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) For the purpose of enforcing its rights and remedies under this
Agreement, the Bank may (i) require the Company to, and the Company agrees that
it will, at its expense and upon the request of the Bank, forthwith assemble all
or any part of the Collateral as directed by the Bank and make it available at a
place designated by the Bank which is, in its opinion, reasonably convenient to
the Bank, whether at the premises of the Company or otherwise, (ii) to the
extent permitted by law, enter, with or without process of law and without
breach of the peace, any premise where any of the Collateral may be located, and
without charge or liability to it seize and remove such Collateral from such
premises, (iii) have access to and use the Company's books and records relating
to the Collateral and (iv) prior to the disposition of the Collateral, store or
transfer it without charge in or by means of any storage or transportation
facility owned or leased by the Company, process, repair or recondition it or
otherwise prepare it for disposition in any manner and to the extent the Bank
deems appropriate to preserve and enhance its value and, in connection with such
preparation and disposition, use, as a licensee (or if no decline in the value
of the Collateral would result, otherwise) without charge any trademark, trade
name, copyright, patent or technical process used by the Company.
SECTION 7. LIMITATION ON DUTY OF BANK IN RESPECT OF COLLATERAL.
Beyond the safe custody thereof in accordance with law, the Bank shall
have no duty as to any Collateral in the possession or control of the Bank or
any agent or bailee, or any income thereon, or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Bank shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equivalent to that which it accords its own property of like
nature, and shall not be liable or responsible for any loss or damage to any of
the Collateral, or for any diminution in the value thereof, by reason of the act
or omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by the Bank in good faith and in the absence of gross
negligence.
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SECTION 8. APPLICATION OF PROCEEDS
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral shall be applied by the Bank in the following order of priorities:
FIRST, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Bank and its agents and
counsel in connection therewith, and all expenses, liabilities and advances
incurred or made by the Bank in connection therewith, and any other unreimbursed
expenses for which the Bank is to be reimbursed pursuant to the Guaranty, or
SECTION 9 hereof and unpaid fees owing to the Bank under the Loan Agreement;
SECOND, to the payment of accrued but unpaid interest in
connection with the Secured Obligations;
THIRD, to the payment of all other Secured Obligations, until
all Secured Obligations shall have been paid in full; and
FINALLY, to payment to the Company or its successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
The Bank may make distributions hereunder in cash or in kind or in any
combination thereof.
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SECTION 9. EXPENSES
In the event that the Company fails to comply with the provisions of
the Loan Agreement, the Guarantee, or this Agreement, such that the value of any
Collateral or the validity, perfection, rank or value of any Security Interest
is thereby diminished or potentially diminished or put at risk, the Bank may
effect such compliance on behalf of the Company, and the Company shall reimburse
the Bank for the costs thereof within two Business Days of demand therefor. All
insurance expenses and all reasonable expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining, and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral, or in respect of
the sale or other disposition thereof, shall be borne by the Company; and if the
Company fails to promptly pay any portion thereof when due, the Bank may, at its
option, but shall not be required to, pay the same and charge the Company's
account therefor, and the Company agrees to reimburse the Bank therefor on
demand. All sums so paid or incurred by the Bank for any of the foregoing and
any and all other sums for which the Company may become liable hereunder and all
reasonable costs and expenses (including attorneys' fees, legal expenses and
court costs) reasonably incurred by the Bank in enforcing or protecting the
Security Interests or any of their rights or remedies under this Agreement,
shall, together with interest thereon until paid at the rate applicable to
advances made under the Loan Agreement, be additional Secured Obligations
hereunder.
SECTION 10. TERMINATION OF SECURITY INTERESTS
Upon the indefeasible payment in full of all Secured Obligations and
the termination of the Commitment, the Security Interests shall terminate and
all rights to the Collateral shall revert to the Company, and this Security
Agreement shall terminate and no longer be of any force and effect.
SECTION 11. NOTICES
All notices, approvals, requests, demands and other communications
hereunder shall be given in accordance with the Loan Agreement.
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SECTION 12. WAIVERS, NON-EXCLUSIVE REMEDIES
No failure on the part of the Bank to exercise, and no delay in
exercising and no course of dealing with respect to, any right under the Loan
Agreement, the Guarantee, or this Agreement shall operate as a waiver thereof;
nor shall any single or partial exercise by the Bank of any right under the Loan
Agreement, the Guarantee, or this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The rights in this
Agreement, the Guarantee, and the Loan Agreement are cumulative and are not
exclusive of any other remedies provided by law.
SECTION 13. SUCCESSORS AND ASSIGNS
This Agreement is for the benefit of the Bank and its successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the indebtedness
so assigned, may be transferred with such indebtedness. This Agreement shall be
binding on the Company and its successors and assigns.
SECTION 14. CHANGES IN WRITING
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Company and
the Bank.
SECTION 15. MASSACHUSETTS LAW
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, EXCEPT AS OTHERWISE REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY
THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF MASSACHUSETTS ARE
GOVERNED BY THE LAWS OF SUCH JURISDICTION.
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SECTION 16. SEVERABILITY
If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Bank in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (b) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 17. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
JAPANESE LANGUAGE SERVICES, INC.
By:
------------------------------
Name:
Title:
SILICON VALLEY BANK
By:
------------------------------
Name: Andrew H. Tsao
Title: Vice President
<PAGE>
EXHIBIT A
PERFECTION CERTIFICATE
OF
JAPANESE LANGUAGE SERVICES, INC.
The undersigned, the chief financial officer of Japanese Language
Services, Inc., a Massachusetts corporation (the "COMPANY"), hereby certifies to
Silicon Valley Bank (the "BANK") with reference to the Security Agreement dated
as of May ___, 1998, between the Company and the Bank (the terms defined therein
being used herein as therein defined) as follows:
1. NAMES. (a) The exact corporate name of the Company as it appears in
its certificate of incorporation is as follows:
Japanese Language Services, Inc.
(b) Set forth below is each other corporate name the Company has had
since its organization, together with the date of the relevant change:
(c) Set forth below is a description of each change by the Company
of its identity or corporate structure in any way within the past five years:
(d) The following is a list of all other names (including trade
names or similar appellations) used by the Company or any of its divisions or
other business units at any time during the past five years:
(e) The Federal tax identification number of the Company is as
follows:
<PAGE>
-2-
2. CURRENT LOCATIONS. (a) The chief executive office of the Company is
located at the following address:
(b) The following are all the locations where the Company maintains
any books or records relating to any Accounts:
Mailing
Name Address City State
---- ------- ---- -----
(c) The following are all the locations where Equipment and
Inventory of the Company are located:
Mailing
Name Address City State
---- ------- ---- -----
(d) The following are all the places of business of the Company not
identified above:
<PAGE>
-3-
Mailing
Name Address City State
---- ------- ---- -----
3. PRIOR LOCATIONS. Set forth below is the information required by
subparagraphs (a), (b), (c) and (d) of paragraph 2 with respect to each location
or place of business maintained by the Company at any time during the past five
years:
4. UNUSUAL TRANSACTIONS. All Accounts have been originated by the
Company and all Equipment has been acquired by the Company in the ordinary
course of its business.
5. FILE SEARCH REPORTS. Attached hereto as Schedule A is a true copy of
a file search report in each jurisdiction identified in paragraph 2 or 3 above
with respect to each name set forth in paragraph 1 above together with a true
copy of each financing statement or other filing identified in such file search
reports. To the best knowledge of the Company, no other financing statements
have been filed listing the Company as a debtor and no such filings are pending
except in favor of the Bank.
IN WITNESS WHEREOF, I have hereunto set my hand this __ day of
___________, 1998.
---------------------------
Name:
----------------------
Title:
----------------------
<PAGE>
Exhibit 10.27
GUARANTEE
GUARANTEE dated as of May 21, 1998 made by LIONBRIDGE JAPAN
K.K., a Japanese corporation (the "GUARANTOR") in favor of SILICON VALLEY BANK
(the "BANK").
W I T N E S S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September 26, 1997
among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies B.V.,
each a Netherlands company with limited liability (together, the "BORROWERS")
and the Bank (the "ORIGINAL LOAN AGREEMENT"), the Bank agreed, subject to the
terms and conditions thereof, to make credit extensions to the Borrowers to be
evidenced by their promissory note payable to the order of the Bank, also dated
September 26, 1997 (the "ORIGINAL NOT );
WHEREAS, the Borrowers wish to enter into a Loan Document Modification
Agreement of even date amending the Original Loan Agreement (the Original Loan
Agreement as so amended, and as the same may hereafter be further amended,
modified, supplemented, extended or restated from time to time, the "LOAN
AGREEMENT") pursuant to which they will issue to the Bank an Amended and
Restated Note of even date herewith in the original principal amount of
$8,000,000 (as the same may hereafter be amended, modified, increased,
supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, it is a condition to the Bank's entering into the Loan
Modification Agreement that the Guarantor enter into a guarantee on the terms
set forth in this guarantee (as the same may be amended, modified, supplemented,
extended or restated from time to time, the "GUARANTEE");
WHEREAS, the Guarantor is a wholly-owned subsidiary of Lionbridge
Technologies Holdings, Inc., which is the registered and beneficial owner of
approximately 39.6% of the outstanding capital stock of Lionbridge Technologies
Holdings B.V. which in turn is the registered owner of all the outstanding
capital stock of Lionbridge Technologies, B.V. and for this reason the Guarantor
will derive the benefit of using the money procured from the Bank's agreement to
make Credit Extensions to the Borrowers;
WHEREAS, the Guarantor now wishes to enter into this Guarantee in order
to induce the Bank to enter into the above referenced Loan Modification
Agreement;
NOW, THEREFORE, in consideration of the premises and to induce
the Bank to make advances and other extensions of credit to the Borrowers
thereunder, the Guarantor hereby agrees with the Bank as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms which
are
<PAGE>
-2-
defined in the Loan Agreement and used herein are so used as so defined. In
addition, the following terms shall have the meanings set forth below:
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, property, condition (financial or
otherwise) or prospects of the Guarantor, (b) the ability of the
Guarantor to perform its obligations under this Guarantee, or (c) the
validity or enforceability of this Guarantee, or the rights of the Bank
hereunder.
"OBLIGATIONS" shall mean all obligations of the Borrowers to
the Bank, whether such obligations are now existing or hereafter
incurred or created, joint or several, direct or indirect, absolute or
contingent, due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrowers) on any
advance to the Borrowers under the Loan Agreement or the Note; (b) all
other amounts (including, without limitation, any fees or expenses)
payable by the Borrowers under the Loan Agreement, the Note or any
other Loan Document; (c) all amounts payable to the Bank in connection
with the issuance of any letter of credit by the Bank for the account
of the Borrowers or any drawing thereunder, including without
limitation, any reimbursement obligation and letter of credit fees
payable under any letter of credit application or reimbursement
agreement executed by the Borrowers in connection with any such letter
of credit; and (d) any renewals, refinancings or extensions of any of
the foregoing.
2. GUARANTEE. The Guarantor hereby unconditionally and
irrevocably guarantees, to the extent of its net worth, to the Bank the prompt
and complete payment and performance by the Borrowers when due (whether at
stated maturity, by acceleration or otherwise) of the Obligations. The Guarantor
represents and warrants that the Guarantor's current net worth, as of May 21,
1998, is ____________. The Guarantor further agrees to pay any and all expenses
(including, without limitation, all reasonable fees and disbursements of counsel
to the Bank) which may be paid or incurred by the Bank in enforcing, or
obtaining advice of counsel in respect of, any of its rights under this
Guarantee. The Guarantee shall remain in full force and effect until the
Obligations are paid in full and the Bank's obligation to make Advances or other
Credit Extensions under the Loan Agreement is terminated, notwithstanding that
from time to time prior thereto the Borrowers may be free from any Obligations.
3. RIGHT OF SET-OFF. Regardless of the adequacy of any
collateral or other means of obtaining repayment of the Obligations, any
deposits (general or special, time or demand, provisional or final, including,
but not limited to indebtedness evidenced by a certificate of deposit, whether
matured or unmatured) and any other indebtedness at any time held or owing by
the Bank to the Guarantor may, at any time and from time to time after the
occurrence of an Event of Default, without prior notice to the Guarantor or
compliance with any other condition precedent now or hereafter imposed by
statute, rule of law, or otherwise (all of which are hereby expressly waived to
the extent permitted by law) be set off, appropriated, and applied by the Bank
against any and all obligations of the Guarantor to the
<PAGE>
-3-
Bank then due and payable in such manner as the Bank in its sole discretion may
determine, and the Guarantor hereby grants the Bank a continuing security
interest in such deposits and indebtedness for the payment and performance of
such obligations.
4. SUBROGATION AND CONTRIBUTION. Until payment and performance
in full of all the Obligations, the Guarantor irrevocably and unconditionally
waives any and all rights to which it may be entitled, by operation of law or
otherwise, (a) to be subrogated, with respect to any payment made by the
Guarantor hereunder, to the rights of the Bank against the Borrowers, or
otherwise to be reimbursed, indemnified or exonerated by the Borrowers in
respect thereof or (b) to receive any payment, in the nature of contribution or
for any other reason, from any other guarantor of the Obligations with respect
to any payment made by the Guarantor hereunder.
5. EFFECT OF BANKRUPTCY STAY. If acceleration of the time for
payment or performance of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Borrowers or any other Person or otherwise,
all such amounts otherwise subject to acceleration shall nonetheless be payable
by the Guarantor under this Guarantee forthwith upon demand.
6. RECEIPT OF LOAN DOCUMENTS, ETC. The Guarantor confirms,
represents and warrants to the Bank that (i) it has received true and complete
copies of the Loan Agreement, the Note and the other Loan Documents entered into
as of the date hereof from the Borrowers, has read the contents thereof and
reviewed the same with legal counsel of its choice; (ii) no representations or
agreements of any kind have been made to the Guarantor which would limit or
qualify in any way the terms of this Guarantee; (iii) the Bank has made no
representation to the Guarantor as to the creditworthiness of the Borrowers; and
(iv) the Guarantor has established adequate means of obtaining from the
Borrowers on a continuing basis information regarding the Borrowers' financial
condition. The Guarantor agrees to keep adequately informed from such means of
any facts, events, or circumstances which might in any way affect the
Guarantor's risks under this Guarantee, and the Guarantor further agrees that
the Bank shall have no obligation to disclose to the Guarantor any information
or documents acquired by the Bank in the course of its relationship with the
Borrowers.
7. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The
obligations of the Guarantor under this Guarantee shall remain in full force and
effect without regard to, and shall not be released, altered, exhausted,
discharged or in any way affected by any circumstance or condition (whether or
not the Borrowers shall have any knowledge or notice thereof), including without
limitation (i) any amendment or modification of or supplement to the Loan
Agreement, the Note, or any other Loan Document, or any obligation, duty or
agreement of the Borrowers or any other Person thereunder or in respect thereof,
(ii) any assignment or transfer in whole or in part of any of the Obligations,
(iii) any furnishing or acceptance of any direct or indirect security or
guaranty, or any release of or non-perfection or invalidity of any direct or
indirect security or guaranty, for any of the Obligations, (iv) any waiver,
consent, extension, renewal, indulgence, settlement, compromise or other action
or inaction under or in respect of the Loan Agreement, the Note, or any other
Loan Document, or any exercise or nonexercise of any right, remedy, power or
privilege under or in respect of any such instrument (whether by operation of
law or otherwise), (v) any bankruptcy,
<PAGE>
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or similar proceeding with respect to the Borrowers or any other Person (other
than the Guarantor) or any of their respective properties or creditors or any
resulting release or discharge of any Obligations, (vi) the voluntary or
involuntary sale or other disposition of all or substantially all the assets of
the Borrowers or any other Person, (vii) the voluntary or involuntary
liquidation, dissolution or termination of the Borrowers or any other Person,
(viii) any invalidity or unenforceability, in whole or in part, of any term
hereof or of the Loan Agreement, the Note, or any other Loan Document, or any
obligation, duty or agreement of the Borrowers or any other Person (other than
the Guarantor) thereunder or in respect thereof, or any provision of any
applicable law or regulation purporting to prohibit the payment or performance
by the Borrowers or any other Person (other than the Guarantor) of any
Obligations, (ix) any failure on the part of the Borrowers or any other Person
for any reason to perform or comply with any term of the Loan Agreement, the
Note, or any other Loan Document or any other agreement, or (x) any other act,
omission or occurrence whatsoever, whether similar or dissimilar to the
foregoing. The Guarantor authorizes the Borrowers, each other guarantor in
respect of Obligations and the Bank at any time in its discretion, as the case
may be, to alter any of the terms of Obligations.
8. GUARANTOR AS PRINCIPAL. If for any reason the Borrowers or
any other Person is under no legal obligation to discharge any Obligations, or
if any other moneys included in Obligations have become unrecoverable from the
Borrowers or any other Person by operation of law or for any other reason,
including, without limitation, the invalidity or irregularity in whole or in
part of any Obligation or of the Loan Agreement, the Note, or any other Loan
Document, the legal disability of the Borrowers or any other obligor in respect
of Obligations, any discharge of or limitation on the liability of the Borrowers
or any other person or any limitation on the method or terms of payment under
any Obligation, or of the Loan Agreement, the Note, or any other Loan Document,
which may now or hereafter be caused or imposed in any manner whatsoever
(whether consensual or arising by operation of law or otherwise), this Guarantee
shall nevertheless remain in full force and effect and shall be binding upon the
Guarantor to the same extent as if the Guarantor at all times had been the
principal obligor on all Obligations.
9. WAIVER OF DEMAND, NOTICE, ETC. The Guarantor hereby waives,
to the extent not prohibited by applicable law, (i) all presentments, demands
for performance, notice of nonperformance, protests, notices of protests and
notices of dishonor in connection with the Obligations or the Loan Agreement,
the Note, or any other Loan Document, including but not limited to notice of
additional indebtedness constituting Obligations or the existence, creation or
incurring of any new or additional indebtedness or obligation or of any action
or non-action on the part of the Borrowers, the Bank, any endorser or creditor
of the Borrowers or any other Person; (ii) any notice of any indulgence,
extensions or renewals granted to any obligor with respect to Obligations; (iii)
any requirement of diligence or promptness in the enforcement of rights under
the Loan Agreement, the Note, or any other Loan Document, or any other agreement
or instrument directly or indirectly relating thereto or to the Obligations;
(iv) any enforcement of any present or future agreement or instrument relating
directly or indirectly thereto or to the Obligations; (v) notice of any of the
matters referred to in PARAGRAPH 8 above, (vi) any defense of any kind which the
Guarantor may now have with respect to his liability under this Guarantee; (vii)
any right to require the Bank, as a condition of enforcement of this
<PAGE>
-5-
Guarantee, to proceed against the Borrowers or any other Person or to proceed
against or exhaust any security held by the Bank at any time or to pursue any
other right or remedy in the Bank's power before proceeding against the
Guarantor; (viii) any defense that may arise by reason of the incapacity, lack
of authority, death or disability of any other Person or Persons or the failure
of the Bank to file or enforce a claim against the estate (in administration,
bankruptcy, or any other proceeding) of any other Person or Persons; (ix) any
defense based upon an election of remedies by the Bank; (x) any defense arising
by reason of any "one action" or "anti-deficiency" law or any other law which
may prevent the Bank from bringing any action, including a claim for deficiency,
against the Guarantor, before or after the Bank's commencement of completion of
any foreclosure action, either judicially or by exercise of a power of sale;
(xi) any defense based upon any lack of diligence by the Bank in the collection
of any Obligation; (xii) any duty on the part of the Bank to disclose to the
Guarantor any facts the Bank may now or hereafter know about the Borrowers or
any other obligor in respect of Obligations; (xiii) any defense arising because
of an election made by the Bank under Section 1111(b)(2) of the Federal
Bankruptcy Code; (xiv) any defense based on any borrowing or grant of a security
interest under Section 364 of the Federal Bankruptcy Code; and (xv) any defense
based upon or arising out of any defense which the Borrowers or any other Person
may have to the payment or performance of Obligations (including but not limited
to failure of consideration, breach of warranty, fraud, payment, accord and
satisfaction, strict foreclosure, statute of frauds, bankruptcy, infancy,
statute of limitations, lender liability and usury). Guarantor acknowledges and
agrees that each of the waivers set forth herein on the part of the Guarantor is
made with Guarantor's full knowledge of the significance and consequences
thereof and that under the circumstances the waivers are reasonable. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by such law or public
policy.
10. REINSTATEMENT. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Bank upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrowers or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrowers or any substantial part of its property, or
otherwise, all as though such payments had not been made.
11. PAYMENTS. The Guarantor hereby agrees that the Obligations
will be paid to the Bank without set-off or counterclaim in U.S. Dollars at the
office of the Bank located at 3003 Tasman Drive, Santa Clara, California 95054,
or to such other location as the Bank shall notify the Guarantor.
12. REPRESENTATIONS AND WARRANTIES. The Guarantor represents
and warrants that:
(a) CORPORATE EXISTENCE. The Guarantor is a corporation duly
incorporated and validly existing under the laws of the jurisdiction of
its incorporation, and is duly licensed or qualified as a foreign
corporation in all states wherein the nature of its property owned or
business transacted by it makes such licensing or qualification
necessary.
<PAGE>
-6-
(b) NO VIOLATION. The execution, delivery and performance of
this Guarantee will not contravene any provision of law, statute, rule
or regulation to which the Guarantor is subject or any judgment,
decree, franchise, order or permit applicable to the Guarantor, or will
conflict or will be inconsistent with or will result in any breach of,
any of the terms, covenants, conditions or provisions of, or constitute
a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or
assets of the Guarantor pursuant to the terms of any contractual
obligation of the Guarantor, or violate any provision of the corporate
charter or by-laws of the Guarantor.
(c) CORPORATE AUTHORITY AND POWER. The execution, delivery and
performance of this Guarantee is within the corporate powers of the
Guarantor and has been duly authorized by all necessary corporate
action.
(d) ENFORCEABILITY. This Guarantee constitutes a valid and
binding obligation of the Guarantor enforceable against the Guarantor
in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
and except as enforceability may be subject to general principles of
equity, whether such principles are applied in a court of equity or at
law.
(e) GOVERNMENTAL APPROVALS. No order, permission, consent,
approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental authority is required to
authorize, or is required in connection with, the execution, delivery
and performance of this Guarantee, or the taking of any action
contemplated hereby or thereby.
(f) LITIGATION. There are no actions, suits or proceedings
pending or, to the Guarantor's knowledge, threatened against or
affecting the Guarantor before any governmental authority, which in any
one case or in the aggregate, if determined adversely to the interests
of the Guarantor, would have a Material Adverse Effect.
(g) COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Guarantor
is in default under (i) any contractual obligation, where such default
could have a Material Adverse Effect, or (ii) the terms of any
agreements relating to any Indebtedness of the Guarantor.
(h) COMPLIANCE WITH LAW. The Guarantor is not in default with
respect to any applicable statute, rule, writ, injunction, decree,
order or regulation of any Governmental Authority having jurisdiction
over the Guarantor which could reasonably be expected to have a
Material Adverse Effect.
(i) INVESTMENT COMPANY STATUS; LIMITS ON ABILITY TO INCUR
INDEBTEDNESS. The Guarantor is not an "investment company" or a company
"controlled by" an investment company within the meaning of the
Investment Company Act of 1940, as amended.
<PAGE>
-7-
(j) TITLE TO PROPERTY. The Guarantor has good and marketable
title to all of its properties and assets, and none of such properties
or assets is subject to (i) any Lien except for Permitted Liens, or
(ii) a defect in title or other claim other than defects and claims
that, in the aggregate, would have no Material Adverse Effect. The
Guarantor enjoys peaceful and undisturbed possession under all leases
necessary in any material respect for the operation of its properties
and assets, none of which contains any unusual or burdensome provisions
which could reasonably be expected to have a Material Adverse Effect.
All such leases are valid and subsisting and are in full force and
effect.
(k) TAXES. All tax returns of the Guarantor required to be
filed have been timely filed, all taxes, fees and other governmental
charges (other than those being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate
reserves have been established and, in the case of AD VALOREM taxes or
betterment assessments, no proceedings to foreclose any lien with
respect thereto have been commenced and, in all other cases, no notice
of lien has been filed or other action taken to perfect or enforce such
lien) shown thereon which are payable have been paid. The charges and
reserves on the books of the Guarantor in respect of all income and
other taxes are adequate, and the Guarantor knows of no additional
assessment or any basis therefor. The Federal income tax returns of the
Guarantor have not been audited within the last three years, all prior
audits have been closed, and there are no unpaid assessments, penalties
or other charges arising from such prior audits.
13. COVENANTS. The Guarantor hereby covenants and agrees with
the Bank, from and after the date of this Guarantee until the Obligations are
paid in full and the obligation of the Bank to make Advances or other Credit
Extensions is terminated, to maintain its existence and not to take any action
or refrain from taking any action which would cause the Borrowers to be in
default of any of their covenants or agreements contained in the Loan Agreement.
14. SUBORDINATION OF CLAIMS AGAINST BORROWERS. Without
limiting the provisions of PARAGRAPH 4 hereof, the Guarantor hereby irrevocably
agrees that any and all claims which the Guarantor may now or hereafter have
against the Borrowers or any other guarantor of the Obligations, including,
without limitation, the benefit of any setoff or counterclaim or proof against
dividend, composition or payment by the Borrowers or such other guarantor, shall
be subject and subordinate to the prior payment in full of all of the
Obligations to the Bank. After the occurrence and during the continuation of an
Event of Default, the Guarantor shall not claim from the Borrowers or such other
guarantor, or with respect to any of their respective properties, any sums which
may be owing to the Guarantor, or have the benefit of any setoff or counterclaim
or proof against dividend, composition or payment by the Borrowers or such other
guarantor, until all the Obligations shall have been paid in full. Should any
payment or distribution or security or the benefit of proceeds thereof be
received by the Guarantor upon or with respect to amounts due to him from the
Borrowers or any other guarantor of the Obligations after an Event of Default
has occurred and is continuing and prior to the payment in full of all
Obligations, the Guarantor will forthwith
<PAGE>
-8-
deliver the same to the Bank in precisely the form received (except for
endorsement or assignment where necessary), for application in or towards
repayment of the Obligations and, until so delivered, the same shall be held in
trust as property of the Bank. In the event of the failure of the Guarantor to
make any such endorsement or assignment, the Bank is hereby irrevocably
authorized to make the same on behalf of the Guarantor.
15. SEVERABILITY. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. PARAGRAPH HEADINGS. The paragraph headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
17. NO WAIVER, CUMULATIVE REMEDIES. The Bank shall not by any
act (except by a written instrument pursuant to PARAGRAPH 18 hereof), delay,
indulgence, omission or otherwise, be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Bank, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Bank of any right or remedy hereunder on any one occasion shall not be construed
as a bar to any right or remedy which the Bank would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
18. MISCELLANEOUS. This Guarantee constitutes the entire
agreement of the Guarantor with respect to the matters set forth herein. None of
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Guarantor
and the Bank, provided that any provision of this Guarantee may be waived by the
Bank in a letter or agreement executed by the Bank or by telecopy from the Bank.
This Guarantee shall be binding upon the successors and assigns of the Guarantor
and shall inure to the benefit of the Bank and its successors and assigns.
19. CONSENT TO JURISDICTION; GOVERNING LAW. BY ITS
EXECUTION AND DELIVERY OF THIS GUARANTEE, THE GUARANTOR ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH
SUCH ACTION, SUIT OR
<PAGE>
-9-
PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN WHICH IT
SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED, AND
TO THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT, BY
WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING
ANY CLAIMS THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH
COURT, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION,
THAT THE ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR
THAT THE VENUE THEREOF IS IMPROPER.
THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF JAPAN.
20. NOTICES. All notices under this Guarantee shall be in
writing, and shall be delivered by hand, by an internationally recognized
commercial overnight delivery service, by U.S. first class mail or by telecopy,
delivered, addressed or transmitted, if to the Bank, at its address or telecopy
number set forth in the Loan Agreement, and if to the Guarantor, at its address
or telecopy number set out below its signature in this Guarantee. Such notices
shall be effective (a) in the case of hand deliveries, when received, (b) in the
case of an overnight delivery service, on the next Business Day after being
placed in the possession of such delivery service, with delivery charges
prepaid, (c) in the case of mail, three days after deposit in the U.S. postal
system, first class postage prepaid and (d) in the case of telecopy notices,
when electronic indication of receipt is received. Either party may change its
address and telecopy number by written notice to the other.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered as of the date first above written.
LIONBRIDGE JAPAN K.K.
By
----------------------------------
Name: Carl Kay
Title: Representative Director
Address for Notices:
Lionbridge Japan K.K.
16-10-305, Esakacho I-chome
Suita-shi, Osaka, Japan
Telecopy No.:
Accepted and agreed to:
SILICON VALLEY BANK
By:________________________________
Andrew H. Tsao
Vice President
<PAGE>
Exhibit 10.28
GUARANTEE
GUARANTEE dated as of May 21, 1998 made by LIONBRIDGE
TECHNOLOGIES CALIFORNIA, INC., a Delaware corporation (the "GUARANTOR") in favor
of SILICON VALLEY BANK (the "BANK").
W I T N E S S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September 26, 1997
among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies B.V.,
each a Netherlands company with limited liability (together, the "BORROWERS")
and the Bank (the "ORIGINAL LOAN AGREEMENT"), the Bank agreed, subject to the
terms and conditions thereof, to make credit extensions to the Borrowers to be
evidenced by their promissory note payable to the order of the Bank, also dated
September 26, 1997 (the "ORIGINAL NOTE");
WHEREAS, the Borrowers wish to enter into a Loan Document Modification
Agreement of even date amending the Original Loan Agreement (the Original Loan
Agreement as so amended, and as the same may hereafter be further amended,
modified, supplemented, extended or restated from time to time, the "LOAN
AGREEMENT") pursuant to which they will issue to the Bank an Amended and
Restated Note of even date herewith in the original principal amount of
$8,000,000 (as the same may hereafter be amended, modified, increased,
supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, it is a condition to the Bank's entering into the Loan
Modification Agreement that the Guarantor enter into a guarantee on the terms
set forth in this guarantee (as the same may be amended, modified, supplemented,
extended or restated from time to time, the "GUARANTEE");
WHEREAS, the Guarantor is a wholly-owned subsidiary of Lionbridge
Technologies Holdings, Inc., which is the registered and beneficial owner of
approximately 39.6% of the outstanding capital stock of Lionbridge Technologies
Holdings B.V. which in turn is the registered owner of all the outstanding
capital stock of Lionbridge Technologies, B.V. and for this reason the Guarantor
will derive the benefit of using the money procured from the Bank's agreement to
make Credit Extensions to the Borrowers;
WHEREAS, the Guarantor now wishes to enter into this Guarantee in order
to induce the Bank to enter into the above referenced Loan Modification
Agreement;
NOW, THEREFORE, in consideration of the premises and to induce
the Bank to make advances and other extensions of credit to the Borrowers
thereunder, the Guarantor hereby agrees with the Bank as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms which
are
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defined in the Loan Agreement and used herein are so used as so defined. In
addition, the following terms shall have the meanings set forth below:
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, property, condition (financial or
otherwise) or prospects of the Guarantor, (b) the ability of the
Guarantor to perform its obligations under this Guarantee, or (c) the
validity or enforceability of this Guarantee, or the rights of the Bank
hereunder.
"OBLIGATIONS" shall mean all obligations of the Borrowers to
the Bank, whether such obligations are now existing or hereafter
incurred or created, joint or several, direct or indirect, absolute or
contingent, due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrowers) on any
advance to the Borrowers under the Loan Agreement or the Note; (b) all
other amounts (including, without limitation, any fees or expenses)
payable by the Borrowers under the Loan Agreement, the Note or any
other Loan Document; (c) all amounts payable to the Bank in connection
with the issuance of any letter of credit by the Bank for the account
of the Borrowers or any drawing thereunder, including without
limitation, any reimbursement obligation and letter of credit fees
payable under any letter of credit application or reimbursement
agreement executed by the Borrowers in connection with any such letter
of credit; and (d) any renewals, refinancings or extensions of any of
the foregoing.
2. GUARANTEE. The Guarantor hereby unconditionally and
irrevocably guarantees to the Bank the prompt and complete payment and
performance by the Borrowers when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations. The Guarantor further agrees to
pay any and all expenses (including, without limitation, all reasonable fees and
disbursements of counsel to the Bank) which may be paid or incurred by the Bank
in enforcing, or obtaining advice of counsel in respect of, any of its rights
under this Guarantee. The Guarantee shall remain in full force and effect until
the Obligations are paid in full and the Bank's obligation to make Advances or
other Credit Extensions under the Loan Agreement is terminated, notwithstanding
that from time to time prior thereto the Borrowers may be free from any
Obligations.
3. RIGHT OF SET-OFF. Regardless of the adequacy of any
collateral or other means of obtaining repayment of the Obligations, any
deposits (general or special, time or demand, provisional or final, including,
but not limited to indebtedness evidenced by a certificate of deposit, whether
matured or unmatured) and any other indebtedness at any time held or owing by
the Bank to the Guarantor may, at any time and from time to time after the
occurrence of an Event of Default, without prior notice to the Guarantor or
compliance with any other condition precedent now or hereafter imposed by
statute, rule of law, or otherwise (all of which are hereby expressly waived to
the extent permitted by law) be set off, appropriated, and applied by the Bank
against any and all obligations of the Guarantor to the Bank then due and
payable in such manner as the Bank in its sole discretion may determine, and the
Guarantor hereby grants the Bank a continuing security interest in such deposits
and
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indebtedness for the payment and performance of such obligations.
4. SUBROGATION AND CONTRIBUTION. Until payment and performance
in full of all the Obligations, the Guarantor irrevocably and unconditionally
waives any and all rights to which it may be entitled, by operation of law or
otherwise, (a) to be subrogated, with respect to any payment made by the
Guarantor hereunder, to the rights of the Bank against the Borrowers, or
otherwise to be reimbursed, indemnified or exonerated by the Borrowers in
respect thereof or (b) to receive any payment, in the nature of contribution or
for any other reason, from any other guarantor of the Obligations with respect
to any payment made by the Guarantor hereunder.
5. EFFECT OF BANKRUPTCY STAY. If acceleration of the time for
payment or performance of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Borrowers or any other Person or otherwise,
all such amounts otherwise subject to acceleration shall nonetheless be payable
by the Guarantor under this Guarantee forthwith upon demand.
6. RECEIPT OF LOAN DOCUMENTS, ETC. The Guarantor confirms,
represents and warrants to the Bank that (i) it has received true and complete
copies of the Loan Agreement, the Note and the other Loan Documents entered into
as of the date hereof from the Borrowers, has read the contents thereof and
reviewed the same with legal counsel of its choice; (ii) no representations or
agreements of any kind have been made to the Guarantor which would limit or
qualify in any way the terms of this Guarantee; (iii) the Bank has made no
representation to the Guarantor as to the creditworthiness of the Borrowers; and
(iv) the Guarantor has established adequate means of obtaining from the
Borrowers on a continuing basis information regarding the Borrowers' financial
condition. The Guarantor agrees to keep adequately informed from such means of
any facts, events, or circumstances which might in any way affect the
Guarantor's risks under this Guarantee, and the Guarantor further agrees that
the Bank shall have no obligation to disclose to the Guarantor any information
or documents acquired by the Bank in the course of its relationship with the
Borrowers.
7. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The
obligations of the Guarantor under this Guarantee shall remain in full force and
effect without regard to, and shall not be released, altered, exhausted,
discharged or in any way affected by any circumstance or condition (whether or
not the Borrowers shall have any knowledge or notice thereof), including without
limitation (i) any amendment or modification of or supplement to the Loan
Agreement, the Note, or any other Loan Document, or any obligation, duty or
agreement of the Borrowers or any other Person thereunder or in respect thereof,
(ii) any assignment or transfer in whole or in part of any of the Obligations,
(iii) any furnishing or acceptance of any direct or indirect security or
guaranty, or any release of or non-perfection or invalidity of any direct or
indirect security or guaranty, for any of the Obligations, (iv) any waiver,
consent, extension, renewal, indulgence, settlement, compromise or other action
or inaction under or in respect of the Loan Agreement, the Note, or any other
Loan Document, or any exercise or nonexercise of any right, remedy, power or
privilege under or in respect of any such instrument (whether by operation of
law or otherwise), (v) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to the
Borrowers or any other Person (other than the Guarantor) or
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any of their respective properties or creditors or any resulting release or
discharge of any Obligations, (vi) the voluntary or involuntary sale or other
disposition of all or substantially all the assets of the Borrowers or any other
Person, (vii) the voluntary or involuntary liquidation, dissolution or
termination of the Borrowers or any other Person, (viii) any invalidity or
unenforceability, in whole or in part, of any term hereof or of the Loan
Agreement, the Note, or any other Loan Document, or any obligation, duty or
agreement of the Borrowers or any other Person (other than the Guarantor)
thereunder or in respect thereof, or any provision of any applicable law or
regulation purporting to prohibit the payment or performance by the Borrowers or
any other Person (other than the Guarantor) of any Obligations, (ix) any failure
on the part of the Borrowers or any other Person for any reason to perform or
comply with any term of the Loan Agreement, the Note, or any other Loan Document
or any other agreement, or (x) any other act, omission or occurrence whatsoever,
whether similar or dissimilar to the foregoing. The Guarantor authorizes the
Borrowers, each other guarantor in respect of Obligations and the Bank at any
time in its discretion, as the case may be, to alter any of the terms of
Obligations.
8. GUARANTOR AS PRINCIPAL. If for any reason the Borrowers or
any other Person is under no legal obligation to discharge any Obligations, or
if any other moneys included in Obligations have become unrecoverable from the
Borrowers or any other Person by operation of law or for any other reason,
including, without limitation, the invalidity or irregularity in whole or in
part of any Obligation or of the Loan Agreement, the Note, or any other Loan
Document, the legal disability of the Borrowers or any other obligor in respect
of Obligations, any discharge of or limitation on the liability of the Borrowers
or any other person or any limitation on the method or terms of payment under
any Obligation, or of the Loan Agreement, the Note, or any other Loan Document,
which may now or hereafter be caused or imposed in any manner whatsoever
(whether consensual or arising by operation of law or otherwise), this Guarantee
shall nevertheless remain in full force and effect and shall be binding upon the
Guarantor to the same extent as if the Guarantor at all times had been the
principal obligor on all Obligations.
9. WAIVER OF DEMAND, NOTICE, ETC. The Guarantor hereby waives,
to the extent not prohibited by applicable law, (i) all presentments, demands
for performance, notice of nonperformance, protests, notices of protests and
notices of dishonor in connection with the Obligations or the Loan Agreement,
the Note, or any other Loan Document, including but not limited to notice of
additional indebtedness constituting Obligations or the existence, creation or
incurring of any new or additional indebtedness or obligation or of any action
or non-action on the part of the Borrowers, the Bank, any endorser or creditor
of the Borrowers or any other Person; (ii) any notice of any indulgence,
extensions or renewals granted to any obligor with respect to Obligations; (iii)
any requirement of diligence or promptness in the enforcement of rights under
the Loan Agreement, the Note, or any other Loan Document, or any other agreement
or instrument directly or indirectly relating thereto or to the Obligations;
(iv) any enforcement of any present or future agreement or instrument relating
directly or indirectly thereto or to the Obligations; (v) notice of any of the
matters referred to in PARAGRAPH 8 above, (vi) any defense of any kind which the
Guarantor may now have with respect to his liability under this Guarantee; (vii)
any right to require the Bank, as a condition of enforcement of this Guarantee,
to proceed against the Borrowers or any other Person or to proceed against or
exhaust any security held by the Bank at any time or to pursue any other right
or remedy in
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the Bank's power before proceeding against the Guarantor; (viii) any defense
that may arise by reason of the incapacity, lack of authority, death or
disability of any other Person or Persons or the failure of the Bank to file or
enforce a claim against the estate (in administration, bankruptcy, or any other
proceeding) of any other Person or Persons; (ix) any defense based upon an
election of remedies by the Bank; (x) any defense arising by reason of any "one
action" or "anti-deficiency" law or any other law which may prevent the Bank
from bringing any action, including a claim for deficiency, against the
Guarantor, before or after the Bank's commencement of completion of any
foreclosure action, either judicially or by exercise of a power of sale; (xi)
any defense based upon any lack of diligence by the Bank in the collection of
any Obligation; (xii) any duty on the part of the Bank to disclose to the
Guarantor any facts the Bank may now or hereafter know about the Borrowers or
any other obligor in respect of Obligations; (xiii) any defense arising because
of an election made by the Bank under Section 1111(b)(2) of the Federal
Bankruptcy Code; (xiv) any defense based on any borrowing or grant of a security
interest under Section 364 of the Federal Bankruptcy Code; and (xv) any defense
based upon or arising out of any defense which the Borrowers or any other Person
may have to the payment or performance of Obligations (including but not limited
to failure of consideration, breach of warranty, fraud, payment, accord and
satisfaction, strict foreclosure, statute of frauds, bankruptcy, infancy,
statute of limitations, lender liability and usury). Guarantor acknowledges and
agrees that each of the waivers set forth herein on the part of the Guarantor is
made with Guarantor's full knowledge of the significance and consequences
thereof and that under the circumstances the waivers are reasonable. If any such
waiver is determined to be contrary to any applicable law or public policy, such
waiver shall be effective only to the extent permitted by such law or public
policy.
10. REINSTATEMENT. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Bank upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrowers or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrowers or any substantial part of its property, or
otherwise, all as though such payments had not been made.
11. PAYMENTS. The Guarantor hereby agrees that the Obligations
will be paid to the Bank without set-off or counterclaim in U.S. Dollars at the
office of the Bank located at 3003 Tasman Drive, Santa Clara, California 95054,
or to such other location as the Bank shall notify the Guarantor.
12. REPRESENTATIONS AND WARRANTIES. The Guarantor represents
and warrants that:
(a) CORPORATE EXISTENCE. The Guarantor is a corporation duly
incorporated and validly existing under the laws of the jurisdiction of
its incorporation, and is duly licensed or qualified as a foreign
corporation in all states wherein the nature of its property owned or
business transacted by it makes such licensing or qualification
necessary.
(b) NO VIOLATION. The execution, delivery and performance of
this
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Guarantee will not contravene any provision of law, statute, rule
or regulation to which the Guarantor is subject or any judgment,
decree, franchise, order or permit applicable to the Guarantor, or will
conflict or will be inconsistent with or will result in any breach of,
any of the terms, covenants, conditions or provisions of, or constitute
a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or
assets of the Guarantor pursuant to the terms of any contractual
obligation of the Guarantor, or violate any provision of the corporate
charter or by-laws of the Guarantor.
(c) CORPORATE AUTHORITY AND POWER. The execution, delivery and
performance of this Guarantee is within the corporate powers of the
Guarantor and has been duly authorized by all necessary corporate
action.
(d) ENFORCEABILITY. This Guarantee constitutes a valid and
binding obligation of the Guarantor enforceable against the Guarantor
in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
and except as enforceability may be subject to general principles of
equity, whether such principles are applied in a court of equity or at
law.
(e) GOVERNMENTAL APPROVALS. No order, permission, consent,
approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental authority is required to
authorize, or is required in connection with, the execution, delivery
and performance of this Guarantee, or the taking of any action
contemplated hereby or thereby.
(f) LITIGATION. There are no actions, suits or proceedings
pending or, to the Guarantor's knowledge, threatened against or
affecting the Guarantor before any governmental authority, which in any
one case or in the aggregate, if determined adversely to the interests
of the Guarantor, would have a Material Adverse Effect.
(g) COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Guarantor
is in default under (i) any contractual obligation, where such default
could have a Material Adverse Effect, or (ii) the terms of any
agreements relating to any Indebtedness of the Guarantor.
(h) COMPLIANCE WITH LAW. The Guarantor is not in default with
respect to any applicable statute, rule, writ, injunction, decree,
order or regulation of any Governmental Authority having jurisdiction
over the Guarantor which could reasonably be expected to have a
Material Adverse Effect.
(i) INVESTMENT COMPANY STATUS; LIMITS ON ABILITY TO INCUR
INDEBTEDNESS. The Guarantor is not an "investment company" or a company
"controlled by" an investment company within the meaning of the
Investment Company Act of 1940, as amended. The Guarantor is not
subject to regulation under any Federal or State statute or regulation
which limits its ability to incur Indebtedness.
<PAGE>
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(j) TITLE TO PROPERTY. The Guarantor has good and marketable
title to all of its properties and assets, and none of such properties
or assets is subject to (i) any Lien except for Permitted Liens, or
(ii) a defect in title or other claim other than defects and claims
that, in the aggregate, would have no Material Adverse Effect. The
Guarantor enjoys peaceful and undisturbed possession under all leases
necessary in any material respect for the operation of its properties
and assets, none of which contains any unusual or burdensome provisions
which could reasonably be expected to have a Material Adverse Effect.
All such leases are valid and subsisting and are in full force and
effect.
(k) ERISA PLANS. Each "employee benefit plan," "employee
pension benefit plan," "defined benefit plan," or "multiemployer plan,"
which the Guarantor has established or maintained or to which the
Guarantor is required to contribute (collectively, the "PLANS") is in
compliance in all material respects with all applicable provisions of
ERISA and the Internal Revenue Code of 1986 as amended, and the rules
and regulations thereunder, except where failure to so comply would not
have a Material Adverse Effect. There have been no "prohibited
transactions" under ERISA with respect to the Plans which would result
in any material liability to the Guarantor under ERISA or the Code. As
used in the Loan Documents, the terms "employee benefit plan,"
"employee pension benefit plan," "defined benefit plan," and
"multiemployer plan" shall have the respective meanings assigned to
such terms in Section 3 of ERISA. The Guarantor thereof has not
incurred any material "accumulated funding deficiency" within the
meaning of ERISA or incurred any material liability to the PBGC in
connection with a Plan (or other class of benefit which the PBGC has
elected to insure) established or maintained by the Guarantor.
(l) TAXES. All tax returns of the Guarantor required to be
filed have been timely filed, all taxes, fees and other governmental
charges (other than those being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate
reserves have been established and, in the case of AD VALOREM taxes or
betterment assessments, no proceedings to foreclose any lien with
respect thereto have been commenced and, in all other cases, no notice
of lien has been filed or other action taken to perfect or enforce such
lien) shown thereon which are payable have been paid. The charges and
reserves on the books of the Guarantor in respect of all income and
other taxes are adequate, and the Guarantor knows of no additional
assessment or any basis therefor. The Federal income tax returns of the
Guarantor have not been audited within the last three years, all prior
audits have been closed, and there are no unpaid assessments, penalties
or other charges arising from such prior audits.
13. COVENANTS. The Guarantor hereby covenants and agrees with
the Bank from and after the date of this Guarantee until the Obligations are
paid in full and the obligation of the Bank to make Advances or other Credit
Extensions is terminated to maintain its existence and not to take any action or
refrain from taking any action which would cause the Borrowers to be in default
of any of their covenants or agreements contained in the Loan Agreement.
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14. SUBORDINATION OF CLAIMS AGAINST BORROWERS. Without
limiting the provisions of PARAGRAPH 4 hereof, the Guarantor hereby irrevocably
agrees that any and all claims which the Guarantor may now or hereafter have
against the Borrowers or any other guarantor of the Obligations, including,
without limitation, the benefit of any setoff or counterclaim or proof against
dividend, composition or payment by the Borrowers or such other guarantor, shall
be subject and subordinate to the prior payment in full of all of the
Obligations to the Bank. After the occurrence and during the continuation of an
Event of Default, the Guarantor shall not claim from the Borrowers or such other
guarantor, or with respect to any of their respective properties, any sums which
may be owing to the Guarantor, or have the benefit of any setoff or counterclaim
or proof against dividend, composition or payment by the Borrowers or such other
guarantor, until all the Obligations shall have been paid in full. Should any
payment or distribution or security or the benefit of proceeds thereof be
received by the Guarantor upon or with respect to amounts due to him from the
Borrowers or any other guarantor of the Obligations after an Event of Default
has occurred and is continuing and prior to the payment in full of all
Obligations, the Guarantor will forthwith deliver the same to the Bank in
precisely the form received (except for endorsement or assignment where
necessary), for application in or towards repayment of the Obligations and,
until so delivered, the same shall be held in trust as property of the Bank. In
the event of the failure of the Guarantor to make any such endorsement or
assignment, the Bank is hereby irrevocably authorized to make the same on behalf
of the Guarantor.
15. SEVERABILITY. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. PARAGRAPH HEADINGS. The paragraph headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
17. NO WAIVER, CUMULATIVE REMEDIES. The Bank shall not by any
act (except by a written instrument pursuant to PARAGRAPH 18 hereof), delay,
indulgence, omission or otherwise, be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Bank, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Bank of any right or remedy hereunder on any one occasion shall not be construed
as a bar to any right or remedy which the Bank would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
18. MISCELLANEOUS. This Guarantee constitutes the entire
agreement of the Guarantor with respect to the matters set forth herein. None of
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified except by a written
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instrument executed by the Guarantor and the Bank, provided that any provision
of this Guarantee may be waived by the Bank in a letter or agreement executed by
the Bank or by telecopy from the Bank. This Guarantee shall be binding upon the
successors and assigns of the Guarantor and shall inure to the benefit of the
Bank and its successors and assigns.
19. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; GOVERNING
LAW. THE GUARANTOR AND THE BANK BY ITS ACCEPTANCE HEREOF EACH HEREBY EXPRESSLY
WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO A JURY TRIAL IN ANY SUIT,
ACTION, PROCEEDING OR COUNTERCLAIM WHICH ARISES OUT OF, BASED UPON OR BY REASON
OF THIS GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN
FULLY DISCUSSED BY THE BANK AND THE GUARANTOR, AND SHALL BE SUBJECT TO NO
EXCEPTIONS.
BY ITS EXECUTION AND DELIVERY OF THIS GUARANTEE, THE GUARANTOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN AGREEMENT), OR THE
TRANSACTIONS CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH SUCH
ACTION, SUIT OR PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN
WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED,
AND TO THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING
ANY CLAIMS THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT,
THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE
ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE
THEREOF IS IMPROPER.
THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
20. NOTICES. All notices under this Guarantee shall be in
writing, and shall be delivered by hand, by an internationally recognized
commercial overnight delivery service, by U.S. first class mail or by telecopy,
delivered, addressed or transmitted, if to the Bank, at its address or telecopy
number set forth in the Loan Agreement, and if to the Guarantor, at its address
or telecopy number set out below its signature in this Guarantee. Such notices
shall be effective (a) in the case of hand deliveries, when received, (b) in the
case of an overnight delivery service, on the next Business Day after being
placed in the possession of such
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delivery service, with delivery charges prepaid, (c) in the case of mail, three
days after deposit in the U.S. postal system, first class postage prepaid and
(d) in the case of telecopy notices, when electronic indication of receipt is
received. Either party may change its address and telecopy number by written
notice to the other.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered as of the date first above written.
LIONBRIDGE TECHNOLOGIES
CALIFORNIA, INC.
By
----------------------------------------
Name:
Title:
Address for Notices:
Lionbridge Technologies California, Inc.
950 Winter Street, Suite 4300
Waltham, MA 02154
Telecopy No.: (781) 890-3122
Accepted and agreed to:
SILICON VALLEY BANK
By:
--------------------------------
Andrew H. Tsao
Vice President
<PAGE>
SCHEDULE A
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
Section 12(1): Guarantor has filed for an automatic extension with the relevant
state and federal tax authorities with respect to its 1997 tax returns.
<PAGE>
Exhibit 10.29
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of May 21, 1998 between LIONBRIDGE
TECHNOLOGIES CALIFORNIA, INC., a Delaware corporation (the "COMPANY") and
SILICON VALLEY BANK (the "BANK"), a California chartered bank.
W I T N E S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September
26, 1997 among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies
B.V., each a Netherlands company with limited liability (together, the
"BORROWERS") and the Bank (the "ORIGINAL LOAN AGREEMENT"), the Bank agreed,
subject to the terms and conditions thereof, to make credit extensions to the
Borrowers to be evidenced by their promissory note payable to the order of the
Bank, also dated September 26, 1997 (the " ORIGINAL NOTE");
WHEREAS, the Borrowers wish to enter into a Loan Document
Modification Agreement of even date herewith amending the Original Loan
Agreement (the Original Loan Agreement as so amended, and as the same may
hereafter be further amended, modified, supplemented, extended or restated from
time to time, the "LOAN AGREEMENT") pursuant to which they will issue to the
Bank an Amended and Restated Note of even date herewith in the original
principal amount of $8,000,000 (as the same may hereafter be amended, modified,
increased, supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, in order to induce the Bank to enter into the Loan
Document Modification Agreement, the Company has agreed to enter into a
guarantee of the obligations of the Borrowers under the Loan Agreement (as the
same may be amended, supplemented, extended, or restated from time to time, the
"GUARANTEE") and to grant a security interest in and to the Collateral (which is
hereafter defined and which includes the assets of the Company set forth in
SECTION 3 hereof) to secure its obligations under the Guarantee;
WHEREAS, the Company is a wholly-owned subsidiary of
Lionbridge Technologies Holdings, Inc. which is the registered and beneficial
owner of approximately 39.6% of the outstanding capital stock of Lionbridge
Technologies Holdings B.V. which in turn is the registered owner of all the
outstanding capital stock of Lionbridge Technologies B.V. and as a consequence
the Company will derive benefit from the Bank's agreement to make credit
extensions to the Borrowers;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the
<PAGE>
-2-
parties agree as follows:
SECTION 1. DEFINITIONS
Except for the terms defined below or elsewhere in this Agreement, the
terms used herein shall have the respective meanings provided for in the Loan
Agreement:
"ACCOUNTS" means all "accounts" (as defined in the UCC) now
owned or hereafter acquired by the Company and shall also mean and
include all accounts receivable, contract rights, book debts, notes,
drafts and other obligations or indebtedness owing to the Company
arising from the sale, lease or exchange of goods or other property
and/or the performance of services by it (including any obligation
which might be characterized as an account, contract right or general
intangible under the UCC) and all the Company's rights in, to and under
all purchase orders for goods, services or other property, and all the
Company's rights to any goods, services or other property represented
by any of the foregoing (including returned or repossessed goods and
unpaid sellers' rights of rescission, replevin, reclamation and rights
to stoppage in transit) and all monies due to or to become due to the
Company under all contracts for the sale, lease or exchange of goods or
other property and/or the performance of services by it (whether or not
yet earned by performance on the part of the Company), in each case
whether now in existence or hereafter arising or acquired, including
the right to receive the proceeds of said purchase orders and contracts
and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
"COLLATERAL" has the meaning set forth in SECTION 3.
"DOCUMENTS" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods, now owned or
hereafter acquired, by the Company.
"EQUIPMENT" means all "equipment" (as defined in the UCC) now
owned or hereafter acquired by the Company, including, without
limitation, all motor vehicles, trucks and trailers.
"GENERAL INTANGIBLES" means all "general intangibles" (as
defined in the UCC) now owned or hereafter acquired by the Company,
including, without limitation, all (a) obligations or indebtedness
owing to the Company (other than Accounts) from whatever source
arising, (b) information, customer lists,
<PAGE>
-3-
identification of suppliers, data, plans, blueprints, specifications,
designs, drawings, recorded knowledge, surveys, engineering reports,
test reports, manuals, materials standards, catalogs, computer and
automatic machinery software and programs and the like pertaining to
the business of the Company, (c) field repair data, sales data, and
other information relating to sales or service of products now or
hereafter manufactured, (d) accounting information and all media in or
on which any of the information, knowledge, data or records may be
recorded or stored and all computer programs used for the compilation
or printout thereof, (e) causes of action, claims and warranties now
or hereafter owned or acquired by the Company in respect of any of the
items listed above and (f) all tax refunds to which the Company is
entitled.
"INSTRUMENTS" means all "instruments", "chattel paper" or
"letters of credit" (each as defined in the UCC) evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including promissory notes, drafts, bills of exchange and trade
acceptances, now owned or hereafter acquired by the Company.
"INVENTORY" means all "inventory" (as defined in the UCC), now
owned or hereafter acquired by the Company, wherever located, and shall
also mean and include, without limitation, all raw materials and other
materials and supplies, work-in-process and finished goods and any
products made or processed therefrom and all substances, if any,
commingled therewith or added thereto.
"PERFECTION CERTIFICATE" means a certificate substantially in
the form of Exhibit A hereto, completed with the schedules and
attachments contemplated thereby to the satisfaction of the Bank, and
duly executed by the chief financial officer of the Company.
"PERMITTED FINANCING STATEMENTS" means any financing
statements naming the Company as Debtor filed solely pursuant to
Section 9-408 of the UCC.
"PERMITTED LIENS" means the Liens on the Collateral permitted
to be created, assumed or to exist pursuant to the definition in the
Loan Agreement.
"PROCEEDS" means all proceeds of, and all other
profits, rentals or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other
disposition of, or realization upon, Collateral, including, without
limitation, all claims of the Company against third parties for loss
of, damage to or destruction of, or for proceeds payable under, or
unearned
<PAGE>
-4-
premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect
to any Collateral, in each case whether now existing or hereafter
arising.
"SECURED OBLIGATIONS" means all obligations of the Company
under or in connection with the Guarantee, whether now existing or
hereafter incurred or created, joint or several, direct or indirect,
absolute or contingent, due or to become due, matured or unmatured,
liquidated or unliquidated, arising by contract, operation of law or
otherwise.
"SECURITY INTERESTS" means the security interests granted
pursuant to SECTION 3 hereof, as well as all other security interests
created or assigned as additional security for the Secured Obligations
pursuant to the provisions of this Agreement.
"UCC" means the Uniform Commercial Code in effect on the date
hereof in Massachusetts; provided that if by reason of law, the
perfection or effect of perfection or non-perfection of the Security
Interests in any Collateral is governed by the Uniform Commercial Code
in effect in a jurisdiction other than Massachusetts, "UCC" means the
Uniform Commercial Code in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect
of perfection or non-perfection.
SECTION 2. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants as follows:
(a) The Company has good title to all of the Collateral, free and clear
of any Liens other than the Permitted Liens and the Security Interests.
(b) Neither the Company nor its predecessors has performed any acts
which might prevent the Bank from enforcing any of the terms of this Agreement
or which would limit the Bank in any such enforcement. Other than the Permitted
Financing Statements and financing statements or other similar or equivalent
documents or instruments with respect to the Security Interests, no financing
statement, mortgage, security agreement or similar or equivalent document or
instrument covering all or any part of the Collateral is on file or of record in
any jurisdiction in which such filing or recording would be effective to perfect
a Lien on such Collateral. No Collateral is in the possession of any Person
(other than the Company) asserting any claim thereto or security interest
therein, except that the Bank or its designee may have possession of
<PAGE>
-5-
Collateral as contemplated hereby.
(c) Prior to the first borrowing under the Loan Agreement, the Company
shall deliver the Perfection Certificate to the Bank. The information set forth
therein shall be correct and complete.
(d) When UCC financing statements in appropriate form have been filed
in the offices specified in the Perfection Certificate to the extent that a
security interest therein may be perfected by filing pursuant to the UCC, the
Security Interests shall constitute valid and perfected security interests in
the Collateral (except Inventory in transit), in each case prior to all other
Liens and rights of others therein.
(e) Except for the filings referred to in paragraph (d) above, no
authorization, approval or other action by, and no notice of filing with, any
Governmental Authority that has not been received, taken or made is required (i)
for the grant by the Company of the Security Interests or for the execution,
delivery or performance of this Agreement by the Company, (ii) for the
perfection and maintenance of the Security Interests as first priority security
interests and liens, or (iii) for the exercise by the Bank of the rights or the
remedies in respect of the Collateral pursuant to this Agreement.
(f) The Inventory and Equipment are insured in accordance with the
requirements of this Security Agreement and the Loan Agreement.
SECTION 3. THE SECURITY INTERESTS
(a) In order to secure the full and punctual payment of the Secured
Obligations in accordance with their respective terms, the Company hereby
hypothecates, assigns, pledges and grants to the Bank a continuing security
interest and lien in and to all right, title and interest of the Company in the
following property, whether now owned or existing or hereafter acquired or
arising and regardless of where located (all being collectively referred to as
the "COLLATERAL"):
(i) Accounts;
(ii) Inventory;
(iii) General Intangibles;
(iv) Documents;
<PAGE>
-6-
(v) Instruments;
(vi) Equipment;
(vii) All monies and property of any kind of the Company in the
possession or under the control of the Bank;
(viii) All books and records (including customer lists, marketing
information, credit files, price lists, operating records, vendor and
supplier price lists, sales literature, computer programs, printouts
and other computer materials and records) of the Company pertaining to
any of the Collateral; and
(ix) All Proceeds of, attachments or accessions to, or substitutions
for all or any of the Collateral described in Clauses (i) through
(viii) hereof.
(b) The Security Interests are granted as security only and shall not
subject the Bank to, or transfer or in any way affect or modify, any obligation
or liability of the Company with respect to any of the Collateral or any related
transaction.
SECTION 4. FURTHER ASSURANCES; COVENANTS
The Company covenants as follows:
(a) The Company will not change (i) the locations of its principal
place of business or its chief executive office, (ii) its federal tax
identification number, (iii) the locations where it keeps or holds any
Collateral or related records from the applicable locations described in the
Perfection Certificate, or (iv) its name, identity or corporate structure in any
manner, without giving the Bank 30 days prior written notice. In the event of
any such change, the Company shall, at its cost and expense, cooperate with the
Bank and cause to be filed or recorded additional financing statements,
amendments or supplements to existing financing statements, continuation
statements or other documents required to be recorded or filed in order to
perfect and protect the Security Interests. The Company shall not, in any event,
make any such change if such change would cause the Security Interests in any
Collateral to lapse or cease to be perfected.
(b) The Company will, from time to time, at its expense, execute,
deliver, file and record any statement, assignment, instrument, document,
agreement or other paper and take any other action (including, without
limitation, any filings of financing or continuation statements under the UCC)
that the Bank may from time to time reasonably determine to be necessary or
desirable in order to create, preserve, upgrade in rank (to
<PAGE>
-7-
the extent required hereby), perfect, confirm or validate the Security Interests
or to enable the Bank to (i) obtain the full benefits of this Agreement, or (ii)
to exercise and enforce any of its rights, powers and remedies hereunder with
respect to any of the Collateral. At the Bank's request, the Company will use
reasonable efforts to obtain the consent of any Person that is necessary or
desirable to effect the pledge hereunder of any right, title, claims and
benefits now owned or hereafter acquired by the Company in and to any General
Intangible. To the extent permitted by law, the Company hereby authorizes the
Bank to execute and file financing statements or continuation statements without
the Company's signature appearing thereon. The Company agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement. The Company shall pay the costs of, or
incidental to, any recording or filing of any financing or continuation
statements concerning the Collateral.
(c) If any warehouseman, bailee or any of the Company's agents or
processors possesses or controls any Collateral, the Company shall, upon the
request of the Bank, notify such warehouseman, bailee, agent or processor of the
Security Interests created hereby and to hold all such Collateral for the Bank's
account subject to the Bank's instructions.
(d) The Company shall keep complete and accurate books and records
relating to the Collateral, and stamp or otherwise mark them in such manner as
the Bank may reasonably request in order to reflect the Security Interests.
(e) The Company will promptly deliver and pledge each Instrument to the
Bank, appropriately endorsed to the Bank without recourse, provided that so long
as no Event of Default shall have occurred and be continuing it, the Company may
retain for collection in the ordinary course any Instruments it receives in the
ordinary course of business and the Bank shall, promptly upon request of the
Company, make appropriate arrangements for making any other Instrument pledged
by the Company available to it for purposes of presentation, collection or
renewal (any such arrangement to be effected, to the extent deemed appropriate
by the Bank, against trust receipt or like document).
(f) The Company shall use its best efforts to cause to be collected
from its account debtors, as and when due, any and all amounts owing under or on
account of each Account (including, without limitation, Accounts which are
delinquent, such Accounts to be collected in accordance with lawful collection
procedures and the Company's standard procedures) and apply forthwith upon
receipt all such amounts so collected to the outstanding balance of such
Account, except that, unless an Event of Default has occurred and is continuing
and the Bank is exercising its rights hereunder to
<PAGE>
-8-
collect Accounts, the Company may allow in the ordinary course of business as
adjustments to amounts owing under its Accounts (i) an extension or renewal of
the time of payment, or settlement for less than the total unpaid balance, which
the Company finds appropriate in accordance with prudent business judgment and
(ii) a refund or credit due as a result of returned or damaged merchandise, all
in accordance with the Company's ordinary course of business consistent with its
historical collection practices. The costs and expenses (including, without
limitation, attorney's fees) of collection, whether incurred by the Company or
the Bank, shall be borne by the Company.
(g) Upon the occurrence and during the continuance of any Event of
Default, upon the request of the Bank, the Company will promptly notify (and the
Company hereby authorizes the Bank so to notify) each account debtor in respect
of any Account or Instrument that such Collateral has been assigned to the Bank,
and that any payments due or to become due in respect of such Collateral are to
be made directly to the Bank or any designee of the Bank. Following such request
of the Bank, the Company shall hold all proceeds from collection of Accounts as
trustee for the Bank (without commingling the same with other funds of the
Company) and shall turn the same over to the Bank immediately upon receipt in
the form received (duly endorsed by the Company to the Bank, if required). The
Bank shall apply the proceeds of such collections it receives to the Secured
Obligations in accordance with SECTION 8 of this Agreement. The application of
the proceeds of such collections shall be conditional upon the final payment in
cash of the items so collected. If any item is not so paid or the Bank is
required for any reason to return any payment made, the Bank may reverse any
credit given in respect of such item.
(h) Without the prior written consent of the Bank, the Company will not
(a) sell, lease, exchange, assign or otherwise dispose of, or grant any option
with respect to, any Collateral other than Inventory and obsolete or worn-out
property and equipment and, in the case of any such permitted sale or exchange,
the Security Interests created hereby in such item (but not in any Proceeds
arising from such sale or exchange) shall cease immediately without any further
action on the part of the Bank; or (b) create, incur or suffer to exist any Lien
with respect to any Collateral, except for Permitted Liens and the Security
Interests; provided, however, the Bank hereby agrees (i) to permit the Company
to sell in one or more transactions certain of its assets, including furnishings
and telephone and computer equipment, worth an aggregate of up to $250,000 and
(ii) to make all such filings as are necessary to amend the UCC financing
statements contemplated herein to reflect the disposition of assets pursuant to
the preceding clause (i).
(i) The Company will maintain, with financially sound and reputable
companies, insurance policies (i) insuring all Inventory and Equipment against
loss by fire,
<PAGE>
-9-
explosion, theft and other casualties reasonably satisfactory to the Bank and
(ii) insuring the Company and the Bank against liability for personal injury and
property damage relating to Inventory and Equipment, such policies to be in such
form and amounts and having such coverage as is reasonably satisfactory to the
Bank, with losses payable to the Bank as sole loss payee. All such insurance
shall (A) provide that no termination, cancellation, material reduction in
amount or material change in coverage thereof shall be effective until at least
30 days after receipt by the Bank of written notice thereof, (B) in the case of
the policies referenced in clause (ii) above, name the Bank as additional
insured and (C) be otherwise reasonably satisfactory to the Bank.
(j) The Company will keep each item of Equipment in good order and
repair and will not use the same in violation of law or any policy of insurance
thereon.
(k) The Company will, promptly upon request, provide to the Bank all
information and evidence it may reasonably request concerning the Collateral
(including without limitation, the names, addresses, face value, and date of
invoices for each debtor obligated on each Account) to enable the Bank to
enforce the provisions of this Agreement.
SECTION 5. GENERAL AUTHORITY
The Company hereby irrevocably appoints the Bank its true and lawful
attorney, with full power of substitution, in the name of the Company, the Bank,
or otherwise, for the sole use and benefit of the Bank, but at the Company's
expense, to the extent permitted by law to exercise, at any time and from time
to time while an Event of Default has occurred and is continuing, all or any of
the following powers with respect to all or any of the Collateral:
(a) to endorse the Company's name on any checks, notes,
acceptances, money orders, drafts, filings or other forms of
payment or security that may come into the Bank's possession,
(b) to demand, sue for, collect, receive and give
acquittance for any and all monies due or to become due thereon or
by virtue thereof,
(c) to settle, compromise, compound, prosecute or defend
any action or proceeding with respect thereto,
(d) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and
effectively as if the Bank
<PAGE>
-10-
were the absolute owner, and
(e) to extend the time of payment thereof and to make any
allowance and other adjustments with reference thereto;
PROVIDED that the Bank shall give the Company not less than ten days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral, except any Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market. The Company agrees that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 6. REMEDIES UPON EVENT OF DEFAULT
(a) If any Event of Default has occurred and is continuing, the Bank
may exercise all rights of a secured party under the UCC (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
the Bank may, without being required to give any notice, except as herein
provided or as may be required by law, sell any and all of the Collateral at
public or private sale, for cash, upon credit or for future delivery, and at
such prices as the Bank may deem satisfactory. The Bank may be the purchaser of
any or all of the Collateral so sold at any public sale (or, if the Collateral
is of a type customarily sold in a recognized market or is of a type which is
the subject of widely distributed standard price quotations, at any private
sale) and thereafter hold the same, absolutely, free from any right or claim of
whatsoever kind. The Company will execute and deliver such documents and take
such other action as the Bank deems necessary or advisable in order that any
such sale may be made in compliance with law. Upon any such sale the Bank shall
have the right to deliver, assign and transfer to the purchaser the Collateral
so sold. Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely, free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Company. The Company, to the extent
permitted by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale required by SECTION 5 hereof shall (i)
in case of a public sale, state the time and place fixed for such sale, and (ii)
in the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time(s) within ordinary
business hours and at such places as the Bank may fix in the notice of such
sale. At any such sale the Collateral may be sold in one lot as an entirety or
in separate parcels, as the Bank may determine. The Bank shall not be obligated
to make any such sale pursuant to any such notice. The Bank may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any
<PAGE>
-11-
time or place to which the same may be so adjourned. In case of any sale of all
or any part of the Collateral on credit or for future delivery, the Collateral
so sold may be retained by the Bank until the selling price is paid by the
purchaser thereof, but the Bank shall not incur any liability in case of the
failure of such purchaser to take up and pay for the Collateral so sold and, in
case of any such failure, such Collateral may again be sold upon like notice.
The Bank, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(b) For the purpose of enforcing its rights and remedies under this
Agreement, the Bank may (i) require the Company to, and the Company agrees that
it will, at its expense and upon the request of the Bank, forthwith assemble all
or any part of the Collateral as directed by the Bank and make it available at a
place designated by the Bank which is, in its opinion, reasonably convenient to
the Bank, whether at the premises of the Company or otherwise, (ii) to the
extent permitted by law, enter, with or without process of law and without
breach of the peace, any premise where any of the Collateral may be located, and
without charge or liability to it seize and remove such Collateral from such
premises, (iii) have access to and use the Company's books and records relating
to the Collateral and (iv) prior to the disposition of the Collateral, store or
transfer it without charge in or by means of any storage or transportation
facility owned or leased by the Company, process, repair or recondition it or
otherwise prepare it for disposition in any manner and to the extent the Bank
deems appropriate to preserve and enhance its value and, in connection with such
preparation and disposition, use, as a licensee (or if no decline in the value
of the Collateral would result, otherwise) without charge any trademark, trade
name, copyright, patent or technical process used by the Company.
SECTION 7. LIMITATION ON DUTY OF BANK IN RESPECT OF COLLATERAL.
Beyond the safe custody thereof in accordance with law, the Bank shall
have no duty as to any Collateral in the possession or control of the Bank or
any agent or bailee, or any income thereon, or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Bank shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equivalent to that which it accords its own property of like
nature, and shall not be liable or responsible for any loss or damage to any of
the Collateral, or for any diminution in the value thereof, by reason of the act
or omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by the Bank in good faith and in the absence of gross
negligence.
<PAGE>
-12-
SECTION 8. APPLICATION OF PROCEEDS
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral shall be applied by the Bank in the following order of priorities:
FIRST, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Bank and its agents and
counsel in connection therewith, and all expenses, liabilities and advances
incurred or made by the Bank in connection therewith, and any other unreimbursed
expenses for which the Bank is to be reimbursed pursuant to the Guaranty, or
SECTION 9 hereof and unpaid fees owing to the Bank under the Loan Agreement;
SECOND, to the payment of accrued but unpaid interest in
connection with the Secured Obligations;
THIRD, to the payment of all other Secured Obligations, until
all Secured Obligations shall have been paid in full; and
FINALLY, to payment to the Company or its successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
The Bank may make distributions hereunder in cash or in kind or in any
combination thereof.
<PAGE>
-13-
SECTION 9. EXPENSES
In the event that the Company fails to comply with the provisions of
the Loan Agreement, the Guarantee, or this Agreement, such that the value of any
Collateral or the validity, perfection, rank or value of any Security Interest
is thereby diminished or potentially diminished or put at risk, the Bank may
effect such compliance on behalf of the Company, and the Company shall reimburse
the Bank for the costs thereof within two Business Days of demand therefor. All
insurance expenses and all reasonable expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining, and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral, or in respect of
the sale or other disposition thereof, shall be borne by the Company; and if the
Company fails to promptly pay any portion thereof when due, the Bank may, at its
option, but shall not be required to, pay the same and charge the Company's
account therefor, and the Company agrees to reimburse the Bank therefor on
demand. All sums so paid or incurred by the Bank for any of the foregoing and
any and all other sums for which the Company may become liable hereunder and all
reasonable costs and expenses (including attorneys' fees, legal expenses and
court costs) reasonably incurred by the Bank in enforcing or protecting the
Security Interests or any of their rights or remedies under this Agreement,
shall, together with interest thereon until paid at the rate applicable to
advances made under the Loan Agreement, be additional Secured Obligations
hereunder.
SECTION 10. TERMINATION OF SECURITY INTERESTS
Upon the indefeasible payment in full of all Secured Obligations and
the termination of the Commitment, the Security Interests shall terminate and
all rights to the Collateral shall revert to the Company, and this Security
Agreement shall terminate and no longer be of any force and effect.
SECTION 11. NOTICES
All notices, approvals, requests, demands and other communications
hereunder shall be given in accordance with the Loan Agreement.
<PAGE>
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SECTION 12. WAIVERS, NON-EXCLUSIVE REMEDIES
No failure on the part of the Bank to exercise, and no delay in
exercising and no course of dealing with respect to, any right under the Loan
Agreement, the Guarantee, or this Agreement shall operate as a waiver thereof;
nor shall any single or partial exercise by the Bank of any right under the Loan
Agreement, the Guarantee, or this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The rights in this
Agreement, the Guarantee, and the Loan Agreement are cumulative and are not
exclusive of any other remedies provided by law.
SECTION 13. SUCCESSORS AND ASSIGNS
This Agreement is for the benefit of the Bank and its successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the indebtedness
so assigned, may be transferred with such indebtedness. This Agreement shall be
binding on the Company and its successors and assigns.
SECTION 14. CHANGES IN WRITING
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Company and
the Bank.
SECTION 15. MASSACHUSETTS LAW
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, EXCEPT AS OTHERWISE REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY
THE LAWS OF ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF MASSACHUSETTS ARE
GOVERNED BY THE LAWS OF SUCH JURISDICTION.
<PAGE>
-15-
SECTION 16. SEVERABILITY
If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Bank in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (b) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 17. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
LIONBRIDGE TECHNOLOGIES
CALIFORNIA, INC.
By:
--------------------------
Name:
Title:
SILICON VALLEY BANK
By:
--------------------------
Name: Andrew H. Tsao
Title: Vice President
<PAGE>
EXHIBIT A
PERFECTION CERTIFICATE
OF
LIONBRIDGE TECHNOLOGIES CALIFORNIA, INC.
The undersigned, the chief financial officer of Lionbridge Technologies
California, Inc., a Delaware corporation (the "COMPANY"), hereby certifies to
Silicon Valley Bank (the "BANK") with reference to the Security Agreement dated
as of May ___, 1998, between the Company and the Bank (the terms defined therein
being used herein as therein defined) as follows:
1. NAMES. (a) The exact corporate name of the Company as it appears in
its certificate of incorporation is as follows:
Lionbridge Technologies California, Inc.
(b) Set forth below is each other corporate name the Company
has had since its organization, together with the date of the relevant change:
(c) Set forth below is a description of each change by the
Company of its identity or corporate structure in any way within the past five
years:
(d) The following is a list of all other names (including
trade names or similar appellations) used by the Company or any of its divisions
or other business units at any time during the past five years:
(e) The Federal tax identification number of the Company is as
follows:
<PAGE>
-2-
2. CURRENT LOCATIONS. (a) The chief executive office of the Company is
located at the following address:
(b) The following are all the locations where the Company
maintains any books or records relating to any Accounts:
Mailing
Name Address City State
---- ------- ---- -----
(c) The following are all the locations where Equipment and
Inventory of the Company are located:
Mailing
Name Address City State
---- ------- ---- -----
(d) The following are all the places of business of the
Company not identified above:
<PAGE>
-3-
Mailing
Name Address City State
---- ------- ---- -----
3. PRIOR LOCATIONS. Set forth below is the information required by
subparagraphs (a), (b), (c) and (d) of paragraph 2 with respect to each location
or place of business maintained by the Company at any time during the past five
years:
4. UNUSUAL TRANSACTIONS. All Accounts have been originated by the
Company and all Equipment has been acquired by the Company in the ordinary
course of its business.
5. FILE SEARCH REPORTS. Attached hereto as Schedule A is a true copy of
a file search report in each jurisdiction identified in paragraph 2 or 3 above
with respect to each name set forth in paragraph 1 above together with a true
copy of each financing statement or other filing identified in such file search
reports. To the best knowledge of the Company, no other financing statements
have been filed listing the Company as a debtor and no such filings are pending
except in favor of the Bank.
IN WITNESS WHEREOF, I have hereunto set my hand this __ day of
___________, 1998.
---------------------------
Name:
----------------------
Title:
----------------------
<PAGE>
Exhibit 10.30
FIRST DEMAND GUARANTEE
FIRST DEMAND GUARANTEE dated as of May 21, 1998 made by
LIONBRIDGE TECHNOLOGIES FRANCE, a French company (the "GUARANTOR") in favor of
SILICON VALLEY BANK (the "BANK").
W I T N E S S E T H :
WHEREAS, pursuant to the Loan Agreement dated as of September 26,
1997 among Lionbridge Technologies Holdings B.V. and Lionbridge Technologies
B.V., each a Netherlands company with limited liability (together, the
"BORROWERS") and the Bank (the "ORIGINAL LOAN AGREEMENT"), the Bank agreed,
subject to the terms and conditions thereof, to make credit extensions to the
Borrowers to be evidenced by their promissory note payable to the order of
the Bank, also dated September 26, 1997 (the "ORIGINAL NOTE");
WHEREAS, the Borrowers wish to enter into a Loan Document Modification
Agreement of even date amending the Original Loan Agreement (the Original Loan
Agreement as so amended, and as the same may hereafter be further amended,
modified, supplemented, extended or restated from time to time, the "LOAN
AGREEMENT") pursuant to which they will issue to the Bank an Amended and
Restated Note of even date herewith in the original principal amount of
$8,000,000 (as the same may hereafter be amended, modified, increased,
supplemented, extended or restated from time to time, the "NOTE");
WHEREAS, it is a condition to the Bank's entering into the Loan
Modification Agreement that the Guarantor enter into a first demand guarantee on
the terms set forth in this first demand guarantee (as the same may be amended,
modified, supplemented, extended or restated from time to time, the "FIRST
DEMAND GUARANTEE");
WHEREAS, the Guarantor is a wholly-owned subsidiary of Lionbridge
Technologies Holdings BV, the corporate purpose of which is to finance the
activities of its subsidiaries, and, as a consequence the Guarantor will derive
benefit from the Bank's agreement to make Credit Extensions to Lionbridge
Technologies Holdings BV;
WHEREAS, the Guarantor will derive benefit from the Bank's agreement to
make Credit Extensions to Lionbridge Technologies BV given that the latter has
agreed to pay a commission to the Guarantor in an amount of ________;
WHEREAS, the Guarantor now wishes to enter into this First Demand
Guarantee in order to induce the Bank to enter into the above referenced Loan
Modification Agreement;
NOW, THEREFORE, in consideration of the premises and to induce
the Bank to make advances and other extensions of credit to the Borrowers
thereunder, the Guarantor hereby agrees with the Bank as follows:
<PAGE>
-2-
1. DEFINED TERMS. Unless otherwise defined herein, terms which
are defined in the Loan Agreement and used herein are so used as so defined. In
addition, the following terms shall have the meanings set forth below:
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, property, condition (financial or
otherwise) or prospects of the Guarantor, (b) the ability of the
Guarantor to perform its obligations under this First Demand Guarantee,
or (c) the validity or enforceability of this First Demand Guarantee,
or the rights of the Bank hereunder.
"OBLIGATIONS" shall mean all obligations of the Borrowers to
the Bank, whether such obligations are now existing or hereafter
incurred or created, joint or several, direct or indirect, absolute or
contingent, due or to become due, matured or unmatured, liquidated or
unliquidated, arising by contract, operation of law or otherwise,
including, without limitation, (a) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrowers) on any
advance to the Borrowers under the Loan Agreement or the Note; (b) all
other amounts (including, without limitation, any fees or expenses)
payable by the Borrowers under the Loan Agreement, the Note or any
other Loan Document; (c) all amounts payable to the Bank in connection
with the issuance of any letter of credit by the Bank for the account
of the Borrowers or any drawing thereunder, including without
limitation, any reimbursement obligation and letter of credit fees
payable under any letter of credit application or reimbursement
agreement executed by the Borrowers in connection with any such letter
of credit; and (d) any renewals, refinancings or extensions of any of
the foregoing.
2. FIRST DEMAND GUARANTEE. The Guarantor hereby
unconditionally and irrevocably guarantees to the Bank that, upon demand of the
Bank, it will promptly and completely pay eight million dollars (US$8,000,000)
or each lesser sum required to be paid by the Bank. The Guarantor hereby
expressly waives all defenses or exceptions it would normally be entitled to
invoke. The Guarantor agrees that its obligations under this First Demand
Guarantee are independent from the Obligations. The First Demand Guarantee will
remain in full force and effect for three years from the date hereof. Each
payment made by the Guarantor upon demand of the Bank will reduce
correspondingly the maximum amount to be paid by the Guarantor as indicated
above. Notwithstanding any other provision of this First Demand Guarantee, the
total amount to be paid by the Guarantor pursuant to this First Demand Guarantee
shall not exceed 60% of its net assets (which at the date hereof is a negative
net worth) at the time of any payment.
3. RIGHT OF SET-OFF. Regardless of the adequacy of any
collateral or other means of obtaining repayment of the Obligations, any
deposits (general or special, time or demand, provisional or final, including,
but not limited to indebtedness evidenced by a certificate of deposit, whether
matured or unmatured) and any other indebtedness at any time held or owing by
the Bank to the Guarantor may, at any time and from time to time after the
occurrence of an Event of Default, without prior notice to the Guarantor or
compliance with
<PAGE>
-3-
any other condition precedent now or hereafter imposed by statute, rule of law,
or otherwise (all of which are hereby expressly waived to the extent permitted
by law) be set off, appropriated, and applied by the Bank against any and all
obligations of the Guarantor to the Bank then due and payable in such manner as
the Bank in its sole discretion may determine, and the Guarantor hereby grants
the Bank a continuing security interest in such deposits and indebtedness for
the payment and performance of such obligations.
4. SUBROGATION AND CONTRIBUTION. Until payment and performance
in full of all the Obligations, the Guarantor irrevocably and unconditionally
waives any and all rights to which it may be entitled, by operation of law or
otherwise, (a) to be subrogated, with respect to any payment made by the
Guarantor hereunder, to the rights of the Bank against the Borrowers, or
otherwise to be reimbursed, indemnified or exonerated by the Borrowers in
respect thereof or (b) to receive any payment, in the nature of contribution or
for any other reason, from any other guarantor of the Obligations with respect
to any payment made by the Guarantor hereunder.
5. EFFECT OF BANKRUPTCY STAY. If acceleration of the time for payment
or performance of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Borrowers or any other Person or otherwise,
all such amounts otherwise subject to acceleration shall nonetheless be payable
by the Guarantor under this First Demand Guarantee forthwith upon demand.
6. RECEIPT OF LOAN DOCUMENTS, ETC. The Guarantor confirms,
represents and warrants to the Bank that (i) it has received true and complete
copies of the Loan Agreement, the Note and the other Loan Documents entered into
as of the date hereof from the Borrowers, has read the contents thereof and
reviewed the same with legal counsel of its choice; (ii) no representations or
agreements of any kind have been made to the Guarantor which would limit or
qualify in any way the terms of this First Demand Guarantee; (iii) the Bank has
made no representation to the Guarantor as to the creditworthiness of the
Borrowers; and (iv) the Guarantor has established adequate means of obtaining
from the Borrowers on a continuing basis information regarding the Borrowers'
financial condition. The Guarantor agrees to keep adequately informed from such
means of any facts, events, or circumstances which might in any way affect the
Guarantor's risks under this First Demand Guarantee, and the Guarantor further
agrees that the Bank shall have no obligation to disclose to the Guarantor any
information or documents acquired by the Bank in the course of its relationship
with the Borrowers.
7. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The
obligations of the Guarantor under this First Demand Guarantee shall remain in
full force and effect without regard to, and shall not be released, altered,
exhausted, discharged or in any way affected by any circumstance or condition
(whether or not the Borrowers shall have any knowledge or notice thereof),
including without limitation (i) any amendment or modification of or supplement
to the Loan Agreement, the Note, or any other Loan Document, or any obligation,
duty or agreement of the Borrowers or any other Person thereunder or in respect
thereof, (ii) any assignment or transfer in whole or in part of any of the
Obligations, (iii) any furnishing or acceptance of any direct or indirect
security or guaranty, or any release of or non-perfection or invalidity of any
direct or indirect security or guaranty, for any of the Obligations, (iv) any
<PAGE>
-4-
waiver, consent, extension, renewal, indulgence, settlement, compromise or other
action or inaction under or in respect of the Loan Agreement, the Note, or any
other Loan Document, or any exercise or nonexercise of any right, remedy, power
or privilege under or in respect of any such instrument (whether by operation of
law or otherwise), (v) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to the
Borrowers or any other Person (other than the Guarantor) or any of their
respective properties or creditors or any resulting release or discharge of any
Obligations, (vi) the voluntary or involuntary sale or other disposition of all
or substantially all the assets of the Borrowers or any other Person, (vii) the
voluntary or involuntary liquidation, dissolution or termination of the
Borrowers or any other Person, (viii) any invalidity or unenforceability, in
whole or in part, of any term hereof or of the Loan Agreement, the Note, or any
other Loan Document, or any obligation, duty or agreement of the Borrowers or
any other Person (other than the Guarantor) thereunder or in respect thereof, or
any provision of any applicable law or regulation purporting to prohibit the
payment or performance by the Borrowers or any other Person (other than the
Guarantor) of any Obligations, (ix) any failure on the part of the Borrowers or
any other Person for any reason to perform or comply with any term of the Loan
Agreement, the Note, or any other Loan Document or any other agreement, or (x)
any other act, omission or occurrence whatsoever, whether similar or dissimilar
to the foregoing. The Guarantor authorizes the Borrowers, each other guarantor
in respect of Obligations and the Bank at any time in its discretion, as the
case may be, to alter any of the terms of Obligations.
8. GUARANTOR AS PRINCIPAL. If for any reason the Borrowers or
any other Person is under no legal obligation to discharge any Obligations, or
if any other moneys included in Obligations have become unrecoverable from the
Borrowers or any other Person by operation of law or for any other reason,
including, without limitation, the invalidity or irregularity in whole or in
part of any Obligation or of the Loan Agreement, the Note, or any other Loan
Document, the legal disability of the Borrowers or any other obligor in respect
of Obligations, any discharge of or limitation on the liability of the Borrowers
or any other person or any limitation on the method or terms of payment under
any Obligation, or of the Loan Agreement, the Note, or any other Loan Document,
which may now or hereafter be caused or imposed in any manner whatsoever
(whether consensual or arising by operation of law or otherwise), this First
Demand Guarantee shall nevertheless remain in full force and effect and shall be
binding upon the Guarantor to the same extent as if the Guarantor at all times
had been the principal obligor on all Obligations.
9. WAIVER OF DEMAND, NOTICE, ETC. The Guarantor hereby waives,
to the extent not prohibited by applicable law, (i) all presentments, demands
for performance, notice of nonperformance, protests, notices of protests and
notices of dishonor in connection with the Obligations or the Loan Agreement,
the Note, or any other Loan Document, including but not limited to notice of
additional indebtedness constituting Obligations or the existence, creation or
incurring of any new or additional indebtedness or obligation or of any action
or non-action on the part of the Borrowers, the Bank, any endorser or creditor
of the Borrowers or any other Person; (ii) any notice of any indulgence,
extensions or renewals granted to any obligor with respect to Obligations; (iii)
any requirement of diligence or promptness in the enforcement of rights under
the Loan Agreement, the Note, or any other Loan Document, or any other agreement
or instrument directly or indirectly relating thereto or to the Obligations;
(iv) any
<PAGE>
-5-
enforcement of any present or future agreement or instrument relating directly
or indirectly thereto or to the Obligations; (v) notice of any of the matters
referred to in PARAGRAPH 8 above, (vi) any defense of any kind which the
Guarantor may now have with respect to his liability under this First Demand
Guarantee; (vii) any right to require the Bank, as a condition of enforcement of
this First Demand Guarantee, to proceed against the Borrowers or any other
Person or to proceed against or exhaust any security held by the Bank at any
time or to pursue any other right or remedy in the Bank's power before
proceeding against the Guarantor; (viii) any defense that may arise by reason of
the incapacity, lack of authority, death or disability of any other Person or
Persons or the failure of the Bank to file or enforce a claim against the estate
(in administration, bankruptcy, or any other proceeding) of any other Person or
Persons; (ix) any defense based upon an election of remedies by the Bank; (x)
any defense arising by reason of any "one action" or "anti-deficiency" law or
any other law which may prevent the Bank from bringing any action, including a
claim for deficiency, against the Guarantor, before or after the Bank's
commencement of completion of any foreclosure action, either judicially or by
exercise of a power of sale; (xi) any defense based upon any lack of diligence
by the Bank in the collection of any Obligation; (xii) any duty on the part of
the Bank to disclose to the Guarantor any facts the Bank may now or hereafter
know about the Borrowers or any other obligor in respect of Obligations; (xiii)
any defense arising because of an election made by the Bank under Section
1111(b)(2) of the Federal Bankruptcy Code; (xiv) any defense based on any
borrowing or grant of a security interest under Section 364 of the Federal
Bankruptcy Code; and (xv) any defense based upon or arising out of any defense
which the Borrowers or any other Person may have to the payment or performance
of Obligations (including but not limited to failure of consideration, breach of
warranty, fraud, payment, accord and satisfaction, strict foreclosure, statute
of frauds, bankruptcy, infancy, statute of limitations, lender liability and
usury). Guarantor acknowledges and agrees that each of the waivers set forth
herein on the part of the Guarantor is made with Guarantor's full knowledge of
the significance and consequences thereof and that under the circumstances the
waivers are reasonable. If any such waiver is determined to be contrary to any
applicable law or public policy, such waiver shall be effective only to the
extent permitted by such law or public policy.
10. PAYMENTS. The Guarantor hereby agrees that the Obligations will be
paid to the Bank without set-off or counterclaim in U.S. Dollars at the office
of the Bank located at 3003 Tasman Drive, Santa Clara, California 95054, or to
such other location as the Bank shall notify the Guarantor.
11. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and
warrants that:
(a) CORPORATE EXISTENCE. The Guarantor is a corporation duly
incorporated and validly existing under the laws of the jurisdiction of
its incorporation, and is duly licensed or qualified as a foreign
corporation in all states wherein the nature of its property owned or
business transacted by it makes such licensing or qualification
necessary.
(b) NO VIOLATION. The execution, delivery and performance of
this First Demand Guarantee will not contravene any provision of law,
statute, rule or regulation
<PAGE>
-6-
to which the Guarantor is subject or any judgment, decree, franchise,
order or permit applicable to the Guarantor, or will conflict or will
be inconsistent with or will result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under,
or result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of the Guarantor
pursuant to the terms of any contractual obligation of the Guarantor,
or violate any provision of the corporate charter or by-laws of the
Guarantor.
(c) CORPORATE AUTHORITY AND POWER. The execution, delivery and
performance of this First Demand Guarantee is within the corporate
powers of the Guarantor and has been duly authorized by all necessary
corporate action.
(d) ENFORCEABILITY. This First Demand Guarantee constitutes a
valid and binding obligation of the Guarantor enforceable against the
Guarantor in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and except as enforceability may be subject to general
principles of equity, whether such principles are applied in a court of
equity or at law.
(e) GOVERNMENTAL APPROVALS. No order, permission, consent,
approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental authority is required to
authorize, or is required in connection with, the execution, delivery
and performance of this First Demand Guarantee, or the taking of any
action contemplated hereby or thereby.
(f) LITIGATION. There are no actions, suits or proceedings
pending or, to the Guarantor's knowledge, threatened against or
affecting the Guarantor before any governmental authority, which in any
one case or in the aggregate, if determined adversely to the interests
of the Guarantor, would have a Material Adverse Effect.
(g) COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Guarantor
is in default under (i) any contractual obligation, where such default
could have a Material Adverse Effect, or (ii) the terms of any
agreements relating to any Indebtedness of the Guarantor.
(h) COMPLIANCE WITH LAW. The Guarantor is not in default with
respect to any applicable statute, rule, writ, injunction, decree,
order or regulation of any Governmental Authority having jurisdiction
over the Guarantor which could reasonably be expected to have a
Material Adverse Effect.
(i) INVESTMENT COMPANY STATUS; LIMITS ON ABILITY TO INCUR
INDEBTEDNESS. The Guarantor is not an "investment company" or a company
"controlled by" an investment company within the meaning of the
Investment Company Act of 1940, as amended. The Guarantor is not
subject to regulation under any Federal or State statute or regulation
which limits its ability to incur Indebtedness.
(j) TITLE TO PROPERTY. The Guarantor has good and marketable
title to all of
<PAGE>
-7-
its properties and assets, and none of such properties or assets is
subject to (i) any Lien except for Permitted Liens, or (ii) a defect in
title or other claim other than defects and claims that, in the
aggregate, would have no Material Adverse Effect. The Guarantor enjoys
peaceful and undisturbed possession under all leases necessary in any
material respect for the operation of its properties and assets, none
of which contains any unusual or burdensome provisions which could
reasonably be expected to have a Material Adverse Effect. All such
leases are valid and subsisting and are in full force and effect.
(k) ERISA PLANS. Each "employee benefit plan," "employee
pension benefit plan," "defined benefit plan," or "multiemployer plan,"
which the Guarantor has established or maintained or to which the
Guarantor is required to contribute (collectively, the "PLANS") is in
compliance in all material respects with all applicable provisions of
ERISA and the Internal Revenue Code of 1986 as amended, and the rules
and regulations thereunder, except where failure to so comply would not
have a Material Adverse Effect. There have been no "prohibited
transactions" under ERISA with respect to the Plans which would result
in any material liability to the Guarantor under ERISA or the Code. As
used in the Loan Documents, the terms "employee benefit plan,"
"employee pension benefit plan," "defined benefit plan," and
"multiemployer plan" shall have the respective meanings assigned to
such terms in Section 3 of ERISA. The Guarantor thereof has not
incurred any material "accumulated funding deficiency" within the
meaning of ERISA or incurred any material liability to the PBGC in
connection with a Plan (or other class of benefit which the PBGC has
elected to insure) established or maintained by the Guarantor.
(l) TAXES. All tax returns of the Guarantor required to be
filed have been timely filed, all taxes, fees and other governmental
charges (other than those being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate
reserves have been established and, in the case of AD VALOREM taxes or
betterment assessments, no proceedings to foreclose any lien with
respect thereto have been commenced and, in all other cases, no notice
of lien has been filed or other action taken to perfect or enforce such
lien) shown thereon which are payable have been paid. The charges and
reserves on the books of the Guarantor in respect of all income and
other taxes are adequate, and the Guarantor knows of no additional
assessment or any basis therefor. The Federal income tax returns of the
Guarantor have not been audited within the last three years, all prior
audits have been closed, and there are no unpaid assessments, penalties
or other charges arising from such prior audits.
12. COVENANTS. The Guarantor hereby covenants and agrees with
the Bank from and after the date of this First Demand Guarantee until the
Obligations are paid in full and the obligation of the Bank to make Advances or
other Credit Extensions is terminated to maintain its existence and not to take
any action or refrain from taking any action which would cause the Borrowers to
be in default of any of their covenants or agreements contained in the Loan
Agreement.
13. SUBORDINATION OF CLAIMS AGAINST BORROWERS. Without
limiting the
<PAGE>
-8-
provisions of PARAGRAPH 4 hereof, the Guarantor hereby irrevocably agrees that
any and all claims which the Guarantor may now or hereafter have against the
Borrowers or any other guarantor of the Obligations, including, without
limitation, the benefit of any setoff or counterclaim or proof against dividend,
composition or payment by the Borrowers or such other guarantor, shall be
subject and subordinate to the prior payment in full of all of the Obligations
to the Bank. After the occurrence and during the continuation of an Event of
Default, the Guarantor shall not claim from the Borrowers or such other
guarantor, or with respect to any of their respective properties, any sums which
may be owing to the Guarantor, or have the benefit of any setoff or counterclaim
or proof against dividend, composition or payment by the Borrowers or such other
guarantor, until all the Obligations shall have been paid in full. Should any
payment or distribution or security or the benefit of proceeds thereof be
received by the Guarantor upon or with respect to amounts due to him from the
Borrowers or any other guarantor of the Obligations after an Event of Default
has occurred and is continuing and prior to the payment in full of all
Obligations, the Guarantor will forthwith deliver the same to the Bank in
precisely the form received (except for endorsement or assignment where
necessary), for application in or towards repayment of the Obligations and,
until so delivered, the same shall be held in trust as property of the Bank. In
the event of the failure of the Guarantor to make any such endorsement or
assignment, the Bank is hereby irrevocably authorized to make the same on behalf
of the Guarantor.
14. SEVERABILITY. Any provision of this First Demand Guarantee
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
15. PARAGRAPH HEADINGS. The paragraph headings used in this
First Demand Guarantee are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in the
interpretation hereof.
16. NO WAIVER, CUMULATIVE REMEDIES. The Bank shall not by any
act (except by a written instrument pursuant to PARAGRAPH 18 hereof), delay,
indulgence, omission or otherwise, be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Bank, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Bank of any right or remedy hereunder on any one occasion shall not be construed
as a bar to any right or remedy which the Bank would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
17. MISCELLANEOUS. This First Demand Guarantee constitutes the
entire agreement of the Guarantor with respect to the matters set forth herein.
None of the terms or provisions of this First Demand Guarantee may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Guarantor and the Bank,
<PAGE>
-9-
provided that any provision of this First Demand Guarantee may be waived by the
Bank in a letter or agreement executed by the Bank or by telecopy from the Bank.
This First Demand Guarantee shall be binding upon the successors and assigns of
the Guarantor and shall inure to the benefit of the Bank and its successors and
assigns.
18. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; GOVERNING
LAW. THE GUARANTOR AND THE BANK BY ITS ACCEPTANCE HEREOF EACH HEREBY EXPRESSLY
WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO A JURY TRIAL IN ANY SUIT,
ACTION, PROCEEDING OR COUNTERCLAIM WHICH ARISES OUT OF, BASED UPON OR BY REASON
OF THIS FIRST DEMAND GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN
AGREEMENT), OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE PROVISIONS OF THIS
PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK AND THE GUARANTOR, AND SHALL BE
SUBJECT TO NO EXCEPTIONS.
BY ITS EXECUTION AND DELIVERY OF THIS FIRST DEMAND GUARANTEE, THE
GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY
ACTION, SUIT OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY
REASON OF THIS FIRST DEMAND GUARANTEE, ANY LOAN DOCUMENT (AS DEFINED IN THE LOAN
AGREEMENT), OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER
COURT IN WHICH SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT, IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH
ACTION, SUIT OR PROCEEDING IN WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN
THE MANNER HEREINAFTER PROVIDED, AND TO THE EXTENT THAT IT MAY LAWFULLY DO SO,
WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN
SUCH ACTION, SUIT OR PROCEEDING ANY CLAIMS THAT IT IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF SUCH COURT, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM
ATTACHMENT OR EXECUTION, THAT THE ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER.
THIS FIRST DEMAND GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF FRANCE.
<PAGE>
-10-
19. NOTICES. All notices under this First Demand Guarantee
shall be in writing, and shall be delivered by hand, by an internationally
recognized commercial overnight delivery service, by U.S. first class mail or by
telecopy, delivered, addressed or transmitted, if to the Bank, at its address or
telecopy number set forth in the Loan Agreement, and if to the Guarantor, at its
address or telecopy number set out below its signature in this First Demand
Guarantee. Such notices shall be effective (a) in the case of hand deliveries,
when received, (b) in the case of an overnight delivery service, on the next
Business Day after being placed in the possession of such delivery service, with
delivery charges prepaid, (c) in the case of mail, three days after deposit in
the U.S. postal system, first class postage prepaid and (d) in the case of
telecopy notices, when electronic indication of receipt is received. Either
party may change its address and telecopy number by written notice to the other.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Handwritten notation:
BON POUR GARANTIE DE LA SOMME DE HUIT MILLIONS DE DOLLARS (US
$8,000,000), PAYABLE A PREMIERE DEMANDE, EN UNE OU PLUSIEURS FOIS, ET SANS
SOULEVER D'EXCEPTION. IL EST BIEN ENTENDU QUE LA PRESENTE GARANTIE EST UNE
GARANTIE INDEPENDANTE ET AUTONOME DE TOUS AUTRES ENGAGEMENTS.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this First Demand
Guarantee to be duly executed and delivered as of the date first above written.
LIONBRIDGE TECHNOLOGIES FRANCE
By
---------------------------------
Name:
Title:
Address for Notices:
Lionbridge Technologies France
Telecopy No.:
Accepted and agreed to:
SILICON VALLEY BANK
By:
--------------------------------
Andrew H. Tsao
Vice President
<PAGE>
SCHEDULE A
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
<PAGE>
Exhibit 10.31
LOAN DOCUMENT MODIFICATION AGREEMENT
NUMBER 2; DATED AS OF FEBRUARY 25, 1999
LOAN DOCUMENT MODIFICATION AGREEMENT dated as of February 25, 1999
(this "Agreement") by and among Lionbridge Technologies Holdings B.V. and
Lionbridge Technologies B.V. (each a "Borrower" and together the "Borrowers")
and Lionbridge Technologies, Inc., a Delaware company with its principal place
of business located at 950 Winter Street, #4300, Waltham, Massachusetts 02154
(the "Parent Guarantor") and SILICON VALLEY BANK (the "Bank"), a California
chartered bank with its principal place of business at 3003 Tasman Drive, Santa
Clara, California 95054, and with a loan production office located at Wellesley
Office Park, 40 William Street, Wellesley, MA 02181, doing business under the
name "Silicon Valley East".
1. REFERENCE TO EXISTING LOAN DOCUMENTS.
Reference is hereby made to that Loan Agreement dated September 26,
1997 between the Bank and the Borrowers, as so amended on May 21, 1998 (with the
attached schedules and exhibits, and as the same may hereafter be further
amended, modified, supplemented, extended or restated from time to time, the
"Credit Agreement") and the Loan Documents referred to therein, including
without limitation that certain Amended and Restated Promissory Note of the
Borrowers dated May 21, 1998 in the principal amount of $8,000,000 (the "Note"),
and the Security Documents referred to therein, including the Amended and
Restated Guarantee of the Parent Guarantor dated as of May 21, 1998 in favor of
the Bank (the "Parent Guarantee"). Unless otherwise defined herein, capitalized
terms used in this Agreement shall have the same respective meanings as set
forth in the Credit Agreement.
2. EFFECTIVE DATE.
Except for the provisions of Section 7 which shall be effective as of
the date hereof, this Agreement shall become effective as of February 25, 1999
(the "Effective Date"), provided that the Bank shall have received the following
on or before February 26, 1999 and provided further, however, in no event shall
this Agreement become effective until signed by an officer of the Bank in
California:
a. two copies of this Agreement, duly executed by each Borrower and
the Parent Guarantor.
b. the attached consents of U.S. organized affiliated entities who
have previously furnished guaranties in favor of the Bank of the obligations of
the Borrowers, duly executed by officers thereof (executed consents of foreign
organized affiliated entities shall be furnished to the Bank within ten (10)
days of the date hereof);
c. a certificate or certificates of the Chief Financial Officer of
Lionbridge Technologies Holdings, Inc. ("LHTI") and Lionbridge Technologies
Holdings, B.V. (the "Dutch Holding Company") to the effect that, but for the
effectiveness and delivery of this Agreement and the execution by CRL, LHTI and
the Dutch Holding Company of a subordination agreement in the form previously
circulated to and approved by the Bank (the "Subordination Agreement"),
<PAGE>
-2-
which such parties indicate they are prepared to sign, the conditions to the
closing of the CRL Senior Subordination Debt Transaction (as defined below),
have been satisfied and LHTI and the Dutch Holding Company are prepared to close
such transaction, including the execution and delivery of the Subordination
Agreement, and a certificate of Capital Resource Lenders III, L.P. ("CRL") that
it is prepared to close such transaction, including the execution and delivery
of the Subordination Agreement (for purposes hereof, the term "CRL Senior
Subordination Debt Transaction" shall mean: (a) LTHI's entering into with CRL a
First Amended and Restated Senior Subordinated Note Purchase Agreement and the
issuance by LTHI to CRL pursuant thereto of its First Amended and Restated 12%
Senior Subordinated Promissory Note due February __, 2006 in the principal
amount of $6,000,000 (it being understood that the proceeds thereof shall be
used in part to refinance a bridge subordinated note previously issued by LTHI
to CRL in the principal amount of $4 million); (b) the Dutch Holding Company's
entering into with CRL of a Senior Subordinated Note Purchase Agreement and the
issuance pursuant thereto of its Senior Subordinated Promissory Note due
February __, 2006 in the principal amount of $4,000,000; and (c) the other
transactions and documents as contemplated by the foregoing, as set forth on the
closing agenda attached hereto as Exhibit B, including without limitation
guaranties by certain U.S. and foreign organized affiliates.
d. copies of all documentation relating to the acquisition of
VeriTest, Inc. as previously required by the Bank; and
e. a legal opinion of Testa, Hurwitz and Thibeault, LLP, counsel to
the Borrowers, the Parent Guarantor and LTHI in form and substance reasonably
acceptable to the Bank and its special counsel; and
f. a check or a wire transfer in the previously billed by Sullivan &
Worcester LLP, special counsel to the Bank.
By the signature of its authorized officer below, each Borrower and the
Parent Guarantor is hereby representing that, except as modified in SCHEDULE A
attached hereto, the representations of the Borrowers and the Parent Guarantor
set forth in the Credit Agreement and the other Loan Documents (including those
contained in the Parent Guarantee, as amended by this Agreement) are true and
correct as of the Effective Date as if made on and as of such date. Finally,
each Borrower (and the Parent Guarantor signing below) agrees that, as of the
Effective Date, it has no defenses against its obligations to pay any amounts
under the Credit Agreement, the Parent Guarantee and the other Loan Documents to
which it is a party. Finally, by the signature of its authorized officer set
forth below, Lionbridge Technologies, Inc. authorizes the debiting of its
depository account in the amount of $2,500 to cover payment of the Bank's
modification fee.
The Borrowers agree to deliver to the Bank within one business day of
the Effective Date fully executed originals of the Subordination Agreement, and
within five (5) business days of the Effective Date conformed copies of all of
the other closing documents, relating to the CRL Senior Subordinated Debt
Financing, certified by the Chief Financial Office of the Parent Guarantor and
3. DESCRIPTION OF CHANGE IN TERMS.
<PAGE>
-3-
As of the Effective Date, the Parent Guarantee is modified in the
following respects:
a. Section 13(b) is hereby amended by decreasing the minimum
required quarterly ratio of Quick Asset to Current Liabilities, commencing with
the fiscal quarter ending March 31, 1999, from 0.75 to 1.0 to 0.5 to 1.0.
b. Section 13(c) is hereby amended (i) by decreasing the Minimum
EBITDA requirement for the fiscal quarter ending December 31, 1998 from
$1,000,000 to $500,000 and (ii) by decreasing the Minimum EBITDA requirement for
the fiscal quarter ending March 31, 1999 from $750,00 to ($250,000).
c. The Compliance Certificate attached to the Parent Guarantee as
Exhibit A is hereby amended and restated in its entirety by the form of
Compliance Certificate attached hereto as EXHIBIT A.
d. The Guarantee, the Credit Agreement and the other Loan
Documents are hereby amended wherever necessary or appropriate to reflect the
foregoing changes.
4. VERITEST, INC. AS A DESIGNATED SUBSIDIARY.
The Borrowers agree to co-operate with the Bank in the Bank's
conducting of an accounts receivable audit at VeriTest, Inc., a California
corporation with its principal place of business at 3420 Ocean Park Boulevard,
Suite 2030, Santa Monica, California 90405 ("Veritest"), the cost of such audit
to be borne by the Borrowers on a joint and several basis. Upon notice by the
Bank to the Borrowers that the results of such audit are acceptable to the Bank,
the Credit Agreement shall be deemed to be amended as of such date so as to add
Veritest as a "Designated Subsidiary" within the meaning of such definition as
set forth in the Credit Agreement.
5. WAIVER OF DEFAULT OR EVENT OF DEFAULT ON FINANCIAL COVENANT.
The Bank hereby waives any default or any event of default that may
have arisen under the Credit Agreement, the Parent Guarantee or any of the other
Loan Documents as a result of the failure to comply with the Minimum EBITDA
covenant set forth in Section 13(c) of the Parent Guarantee for the fiscal
quarter ending September 30, 1998 or the fiscal quarter ending December 31,
1998. This waiver does not constitute a waiver or modification of any term,
condition or covenant of the Parent Guarantee, the Credit Agreement or any other
Loan Document and shall not prejudice any rights which the Bank may now or
hereafter have under or in connection with the Parent Guarantee, the Credit
Agreement or other Loan Documents except with respect to the subject matter of
the waiver set forth above, and shall not obligate the Bank to grant any further
waivers.
6. CONTINUING VALIDITY.
Upon the effectiveness hereof, each reference in each Security
Instrument or other Loan
<PAGE>
-4-
Document to "the Parent Guarantee", "thereunder", "thereof", "therein", or words
of like import, shall mean and be a reference to the Parent Guarantee, as
amended hereby. Except as specifically set forth above, the Parent Guarantee
shall remain in full force and effect and is hereby ratified and confirmed.
Each of the other Loan Documents is in full force and effect and is
hereby ratified and confirmed. The amendments and limited waiver set forth above
(i) do not constitute a waiver or modification of any term, condition or
covenant of the Credit Agreement or any other Loan Document, other than as
expressly set forth herein, and (ii) shall not prejudice any rights which the
Bank may now or hereafter have under or in connection with the Credit Agreement,
as modified hereby, or the other Loan Documents and shall not obligate the Bank
to assent to any further modifications.
7. CONSENT TO CRL SUBORDINATED DEBT TRANSACTION.
The Bank hereby consents to the CRL Senior Subordinated Note
Transaction and agrees that the consummation of the CRL Senior Subordinated Note
Transaction will not in and of itself constitute an Event of Default under the
Credit Agreement or any of the Loan Documents, provided that such transaction
closes within thirty (30) days of the date hereof and the Subordination
Agreement is executed and delivered in a timely manner to the Bank in accordance
with the terms hereof.
8. MISCELLANEOUS.
a. This Agreement may be signed in one or more counterparts each of
which taken together shall constitute one and the same document.
b. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
c. EACH BORROWER AND THE PARENT GUARANTOR ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION
OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF
MASSACHUSETTS IN ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND AGAINST IT WHICH
ARISES OUT OF OR BY REASON OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY
REASON THE BANK CANNOT AVAIL ITSELF OF THE COURTS OF THE
<PAGE>
-5-
COMMONWEALTH OF MASSACHUSETTS, THEN VENUE SHALL LIE IN SANTA CLARA COUNTY,
CALIFORNIA.
d. Each Borrower agrees, jointly and severally, to promptly pay on
demand all costs and expenses of the Bank in connection with the preparation,
reproduction, execution and delivery of this Agreement and the other instruments
and documents to be delivered hereunder, including the reasonable fees and
out-of-pocket expenses of Sullivan & Worcester LLP, special counsel for the Bank
with respect thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Bank and the Borrower have caused this
Agreement to be signed under seal by their respective duly authorized officers
as of the date set forth above.
BANK:
SILICON VALLEY EAST, a Division
of Silicon Valley Bank
By:
--------------------------------
Name: Andrew H. Tsao
Title: Vice President
SILICON VALLEY BANK
By:
--------------------------------
Name:
Title:
(signed in Santa Clara, CA)
PARENT GUARANTOR:
LIONBRIDGE TECHNOLOGIES, INC.
By:
--------------------------------
Name: Rory J. Cowan
Title: Managing Director
BORROWERS:
LIONBRIDGE TECHNOLOGIES HOLDINGS
B.V.
By:
--------------------------------
Name:
Title:
LIONBRIDGE TECHNOLOGIES B.V.
By:
--------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
EXCEPTIONS TO LOAN DOCUMENT REPRESENTATIONS
None
<PAGE>
EXHIBIT A
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: LIONBRIDGE TECHNOLOGIES, INC.
The undersigned authorized officer of Lionbridge Technologies, Inc.
(the "Parent Guarantor") hereby certifies that in accordance with the terms
and conditions of the Guarantee in favor of Bank (the "Guarantee"), (i)
except as noted below, Consolidated Group is in complete compliance for the
period ending _________ with all required financial covenants set forth
herein and the Borrowers are in complete compliance with their covenants as
set forth in the Credit Agreement to which they are a party and (ii) all
representations and warranties of Parent Guarantor in the Guarantee and
Borrowers stated in the Credit Agreement are true and correct in all material
respects as of the date hereof. Attached herewith are the required documents
supporting the above certification. The Officer further certifies that these
are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) and are consistently applied from one period to the next except as
explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
<S> <C> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
10Q and 10K Within 5 days after filing Yes No
with the SEC
A/R & A/P Agings Monthly within 30 days Yes No
A/R Audit Initial and Semi-Annual Yes No
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
<S> <C> <C> <C> <C>
Maintain for the quarters indicated:
Minimum Quarterly Quick Ratio
commencing with the quarter
ending March 31, 1999 0.50 to 1.0 _____:1.0 Yes No
Minimum Profitability
Quarter Ending 6/30/98 ($500,000) $________ Yes No
Quarter Ending 9/30/98 $500,000 $________ Yes No
Quarter Ending 12/31/98 $500,000 $________ Yes No
Quarter Ending 3/31/99
and thereafter ($250,000) $________ Yes No
</TABLE>
<PAGE>
-2-
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
- -----------------------------------
SIGNATURE
TITLE:
-----------------------------
DATE:
-----------------------------
<PAGE>
Exhibit 10.32
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS
OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS
THEREFROM. THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO, SECOND
RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF FEBRUARY 26, 1999 (THE
"STOCKHOLDERS' AGREEMENT"). COPIES OF THE STOCKHOLDERS' AGREEMENT ARE ON FILE AT
THE OFFICE OF THE SECRETARY OF THE COMPANY.
No. PW-1-A Right to Purchase up to 1,911,303 Shares of
Common Stock of Lionbridge
Technologies Holdings, Inc.
Lionbridge Technologies Holdings, Inc.
COMMON STOCK PURCHASE WARRANT
February 27, 1999
Lionbridge Technologies Holdings, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, Capital Resource Lenders
III, L.P., a Delaware limited partnership ("CRL"), or assigns, is entitled,
subject to the terms set forth below, to purchase from the Company at any time
or from time to time before 5:00 p.m., Boston time, on February 26, 2006, or
such later time as may be specified in Section 17 hereof, up to One Million,
Nine Hundred Eleven Thousand, Three Hundred Three (1,911,303) fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the Company,
at a purchase price per share of $.01 (such purchase price per share as adjusted
from time to time as herein provided is referred to herein as the "Purchase
Price"). The number and character of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided herein.
This Common Stock Purchase Warrant (this "Warrant") is one of the
Warrants evidencing the right or purchase shares of Common Stock of the Company
issued pursuant to a certain First Amended and Restated Senior Subordinated Note
Purchase Agreement (the "Agreement"), dated as of February 26, 1999, by and
between the Company and CRL, and subject to the Stockholders' Agreement, copies
of which agreements are on file at the principal office of the Company, and the
holder of this Warrant shall be entitled to all of the benefits and bound by all
of the applicable obligations of the Agreement and the Stockholders' Agreement,
as provided therein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Lionbridge Technologies Holdings,
Inc. and any corporation which shall succeed to, or assume the obligations of,
the Company hereunder.
<PAGE>
(b) The term "Common Stock" includes (i) the Company's Common Stock,
par value $.01 per share, as authorized on the date of the Agreement, (ii) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount per share, either to all or to a share of the
balance of current dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to preference in the payment
thereof, and the holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote may have been suspended by the
happening of such a contingency), and (iii) any other securities into which or
for which any of the securities described in clause (i) or (ii) above may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(c) The term "Conversion Price" means the amount that the Purchase
Price would be, immediately prior to the determination of the Conversion Price
and giving effect to all adjustments that would have been required under Section
5, if the initial Purchase Price had been $.80 per share of Common Stock.
(d) The term "Notes" refers to any and all Notes and LTHBV Notes (as
such terms are defined in the Agreement).
(e) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrants, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.
(f) The term "Warrant" or "Warrants" refers to any and all of the
Warrants (as that term is defined in the Agreement).
1. EXERCISE OF WARRANT.
1.1 FULL EXERCISE. This Warrant may be exercised at any time before its
expiration in full by the holder hereof by surrender of this Warrant, with the
form of subscription at the end hereof duly executed by such holder, to the
Company at its principal office, accompanied by payment, in cash or by certified
or official bank check payable to the order of the Company, in the amount
obtained by multiplying the number of shares of Common Stock for which this
Warrant is then exercisable by the Purchase Price then in effect.
1.2 PARTIAL EXERCISE. This Warrant may be exercised in part at any time
before its expiration by surrender of this Warrant and payment of the Purchase
Price then in effect in the manner and at the place provided in Section 1.1,
except that the amount payable by the holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of whole shares of Common
Stock designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants
-2-
<PAGE>
of like tenor, in the name of the holder hereof or as such holder (upon payment
by such holder of any applicable transfer taxes) may request, calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
for which such Warrant or Warrants may still be exercised.
1.3 PAYMENT BY SURRENDER OF NOTES. Notwithstanding the payment
provisions of subsections 1.1 and 1.2, all or part of the payment due upon
exercise of this Warrant in full or in part may be made by the surrender by such
holder to the Company of any of the Notes and such Notes so surrendered shall be
credited against such payment in an amount equal to the principal amount thereof
plus premium (if any) and accrued interest to the date of surrender.
1.4 COMPANY ACKNOWLEDGMENT. The Company will, at the time of the
exercise of this Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.5 NET ISSUE ELECTION. The holder may elect to receive, without the
payment by the holder of any additional consideration, shares equal to the value
of this Warrant or any portion hereof by the surrender of this Warrant or such
portion to the Company, with the net issue election notice annexed hereto duly
executed, at the office of the Company. Thereupon, the Company shall issue to
the holder such number of fully paid and nonassessable shares of Common Stock as
is computed using the following formula:
X = Y (A-B)
-------
A
where X = the number of shares to be issued to the holder pursuant to
this Section 1.5.
Y = the number of shares covered by this Warrant in respect of
which the net issue election is made pursuant to this Section
1.5.
A = the fair market value of one share of Common Stock, as
determined in accordance with the provisions of this Section
1.5.
B = the Purchase Price in effect under this Warrant at the time
the net issue election is made pursuant to this Section 1.5.
For purposes of this Section 1.5, the "fair market value" per share of the
Company's Common Stock shall mean:
(a) If the net issue election is exercised in connection with and
contingent upon the Company's initial public offering, and if the Company's
registration statement relating to such offering has been declared effective by
the Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering; or
-3-
<PAGE>
(b) If the net issue election is not exercised in connection with and
contingent upon the Company's initial public offering, then as follows:
(1) If the Common Stock is traded on a national
securities exchange or admitted to unlisted trading
privileges on such an exchange, or is listed on the
National Market (the "National Market") of the
National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), the fair market value
shall be the last reported sale price of the Common
Stock on such exchange or on the National Market on
the last business day before the effective date of
exercise of the net issue election or if no such sale
is made on such day, the mean of the closing bid and
asked prices for such day on such exchange or on the
National Market;
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the fair market value
shall be the mean of the last bid and asked prices
reported on the last business day before the date of
the election (1) by the NASDAQ or (2) if reports are
unavailable under clause (1) above by the National
Quotation Bureau Incorporated; and
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and ask prices
are not reported, the fair market value shall be the
price per share which the Company could obtain from a
willing buyer for shares sold by the Company from
authorized but unissued shares, as such price shall
be determined by mutual agreement of the Company and
the holder of this Warrant. If the holder of this
Warrant and the Company are unable to agree on such
fair market value, the holder of this Warrant shall
select a pool of three independent and
nationally-recognized investment banking or
accounting firms from which the Company shall select
one such firm to appraise the fair market value of
the Warrant and to perform the computations involved.
The determination of such investment banking firm
shall be binding upon the Company, the holder of this
Warrant and any other holder of Warrants or Warrant
Shares in connection with any transaction occurring
at the time of such determination. All expenses of
such investment banking firm shall be borne equally
by the holder of this Warrant and the Company.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) days thereafter unless a determination of fair market
value per share of Common Stock is required pursuant to Section 1.5(b)(3) above,
the Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the holder
hereof, or any Affiliate of such holder as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full share, together with any
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other stock or other securities and property (including cash, where applicable)
to which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
Reclassification, etc. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) in their capacity as such shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or
similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to receive the
amount of stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3) which such holder
would hold on the date of such exercise if on the date hereof he had been the
holder of record of the number of shares of Common Stock called for on the face
of this Warrant and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and all such other
or additional stock and other securities and property (including cash in the
cases referred to in subdivisions (b) and (c) of this Section 3) receivable by
him as aforesaid during such period, giving effect to all adjustments called for
during such period by Sections 4 and 5.
4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
4.1 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, the holder of this Warrant, on the exercise hereof as provided in Section
1 at any time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in Sections 3
and 5.
4.2 CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 4, this Warrant
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shall continue in full force and effect, subject to expiration in accordance
with Section 17 hereof, and the terms hereof shall be applicable to the shares
of stock and other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation or merger
or the effective date of dissolution following any such transfer, as the case
may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 5.12.
5. ANTI-DILUTION ADJUSTMENT.
5.1 GENERAL. The Purchase Price shall be subject to adjustment from
time to time as hereinafter provided. Upon each adjustment of the Purchase
Price, the holder of this Warrant shall thereafter be entitled to purchase, at
the Purchase Price resulting from such adjustment, the number of shares obtained
by multiplying the Purchase Price in effect immediately prior to such adjustment
by the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Purchase Price resulting from
such adjustment.
5.2 PURCHASE PRICE ADJUSTMENTS. If and whenever after the date hereof
the Company shall issue or sell any shares of its Common Stock (except upon
exercise of one or more of the Warrants) for a consideration per share less than
the Purchase Price in effect immediately prior to the time of such issuance or
sale, and/or the Company shall issue or sell any shares of its Common Stock for
a consideration per share less than the Conversion Price on the date of such
issuance or sale, or shall be deemed under the provisions of this Section 5 to
have effected any such issuance or sale, then, forthwith upon such issuance or
sale, the Purchase Price shall be reduced to the price (calculated to the
nearest $0.0001) obtained by multiplying the Purchase Price in effect
immediately prior to the time of such issuance or sale by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the
Conversion Price immediately prior to such issuance or sale plus (ii) the
consideration received by the Company upon such issuance or sale, and the
denominator of which shall be the product of (iii) the total number of shares of
Common Stock outstanding immediately after such issuance or sale, multiplied by
(iv) the Conversion Price immediately prior to such issuance or sale.
Notwithstanding the foregoing, no adjustment of the Purchase Price shall be made
in an amount less than $0.0001 per share, but any such 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 adjustments so carried forward
shall amount to $0.0001 per share or more.
5.3 OPTION GRANTS. In the event that at any time the Company shall in
any manner grant (directly, by assumption in a merger or otherwise) any rights
to subscribe for or to purchase, or any options for the purchase of, Common
Stock or any stock or securities convertible into or exchangeable for Common
Stock (such rights or options being herein called "Options" and such convertible
or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert or exchange
any such Convertible Securities are immediately exercisable, and the price per
share for which
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Common Stock is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options,
plus, in the case of any such Options which relate to Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable upon
the issuance or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the Purchase Price in effect immediately prior to the time of the granting
of such Options (or less than the Conversion Price, determined as of the date of
granting such Options, as the case may be), then the total number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total amount of such Convertible Securities issuable upon the
exercise of such Options shall (as of the date of granting such Options) be
deemed to be outstanding and to have been issued for such price per share.
Except as otherwise provided in subsection 5.5, no further adjustment of the
Purchase Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.
5.4 CONVERTIBLE SECURITY GRANTS. In the event that the Company shall in
any manner issue (directly, by assumption in a merger or otherwise) or sell any
Convertible Securities (other than pursuant to the exercise of Options to
purchase such Convertible Securities covered by subsection 5.3), whether or not
the rights to exchange or convert thereunder are immediately exercisable, and
the price per share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or receivable by
the Company as consideration for the issuance or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Purchase
Price in effect immediately prior to the time of such issuance or sale (or less
than the Conversion Price, determined as of the date of such issuance or sale of
such Convertible Securities, as the case may be), then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date of the issuance or sale of such
Convertible Securities) be deemed to be outstanding and to have been issued for
such price per share, provided that, except as otherwise provided in Section
5.5, no further adjustment of the Purchase Price shall be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.
5.5 EFFECT OF ALTERATION TO OPTION OR CONVERTIBLE SECURITY TERMS. In
connection with any change in, or the expiration or termination of, the purchase
rights under any Option or the conversion or exchange rights under any
Convertible Securities, the following provisions shall apply:
(A) If the purchase price provided for in any Option referred to in
subsection 5.3, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in subsection
5.3 or 5.4, or the rate at which any Convertible Securities
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referred to in subsection 5.3 or 5.4 are convertible into or exchangeable for
Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution), then the Purchase Price in
effect at the time of such change shall forthwith be increased or decreased to
the Purchase Price which would be in effect immediately after such change if (a)
the adjustments which were made upon the issuance of such Options or Convertible
Securities had been made upon the basis of (and taking into account the total
consideration received for) (i) the issuance at that time of the Common Stock,
if any, delivered upon the exercise of any such Options or upon the conversion
or exchange of any such Convertible Securities before such change, and (ii) the
issuance at that time of all such Options or Convertible Securities, with terms
and provisions reflecting such change, which are still outstanding after such
change, and (b) the Purchase Price as adjusted pursuant to clause (a) preceding
had been used as the basis for the adjustments required hereunder in connection
with all other issues or sales of Common Stock, Options or Convertible
Securities by the Company subsequent to the issuance of such Options or
Convertible Securities.
(B) On the partial or complete expiration of any Options or termination
of any right to convert or exchange Convertible Securities, the Purchase Price
then in effect hereunder shall forthwith be increased or decreased to the
Purchase Price which would be in effect at the time of such expiration or
termination if (a) the adjustments which were made upon the issuance of such
Options or Convertible Securities had been made upon the basis of (and taking
into account the total consideration received for) (i) the issuance at that time
of the Common Stock, if any, delivered upon the exercise of such Options or upon
the conversion or exchange of such Convertible Securities before such expiration
or termination, and (ii) the issuance at that time of only those such Options or
Convertible Securities which remain outstanding after such expiration or
termination, and (b) the Purchase Price as adjusted pursuant to clause (a)
preceding had been used as the basis for adjustments required hereunder in
connection with all other issues or sales of Common Stock, Options or
Convertible Securities by the Company subsequent to the issuance of such Options
or Convertible Securities.
(C) If the purchase price provided for in any Option referred to in
subsection 5.3 or the rate at which any Convertible Securities referred to in
subsection 5.3 or 5.4 are convertible into or exchangeable for Common Stock
shall be reduced at any time under or by reason or provisions with respect
thereto designed to protect against dilution, and the event causing such
reduction is one that did not also require an adjustment in the Purchase Price
under other provisions of this Section 5, then in case of the delivery of shares
of Common Stock upon the exercise of any such Option or upon conversion or
exchange of any such Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be adjusted to such amount as would have obtained if
such Option or Convertible Securities had never been issued and if the
adjustments made upon the issuance of such Option or Convertible Securities had
been made upon the basis of the issuance of (and taking into account the total
consideration received for) the shares of Common Stock delivered as aforesaid
(provided that the Conversion Price used in such determination shall be the
Conversion Price on the date of issuance of such shares); provided that no such
adjustment shall be made unless the Purchase Price then in effect would be
reduced thereby.
5.6 DIVIDENDS OF COMMON STOCK, OPTIONS OR CONVERTIBLE SECURITIES. In
the event that the Company shall declare a dividend or make any other
distribution upon any stock of the
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Company payable in Common Stock, Options or Convertible Securities, any Common
Stock, Options or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been issued or
sold without consideration.
5.7 DILUTION IN CASE OF OTHER SECURITIES. In case any Other Securities
shall be issued or sold by the Company, or shall become subject to issue upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any other issuer of Other Securities or any other person referred to in Section
4) or to subscription, purchase or other acquisition pursuant to any rights or
options granted by the Company (or such other issuer or person), for a
consideration per share such as to dilute the purchase rights evidenced by this
Warrant, the computations, adjustments and readjustments provided for in this
Section 5 with respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable on the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
5.8 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such subdivision shall
be proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock of the Company shall at any time be combined into a
smaller number of shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced. Except as provided in this
subsection 5.8 no adjustment in the Purchase Price or Conversion Price and no
change in the number of Warrant Shares purchasable shall be made under this
Section 5 as a result of or by reason of any such subdivision or combination.
5.9 DETERMINATION OF CONSIDERATION RECEIVED. For purposes of this
Section 5, the amount of consideration received by the Company in connection
with the issuance or sale of Common Stock, Options or Convertible Securities
shall be determined in accordance with the following:
(A) In the event that shares of Common Stock, Options or Convertible
Securities shall be issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company therefor, without
deduction therefrom of any expenses incurred or any underwriting commissions or
concessions or discounts paid or allowed by the Company in connection therewith.
(B) In the event that any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash payable to the Company
shall be deemed to be the fair value of such consideration as reasonably
determined by the Board of Directors of the Company, without deduction of any
expenses incurred or any underwriting commissions or concessions or discounts
paid or allowed by the Company in connection therewith.
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(C) The amount of consideration deemed to be received by the Company
pursuant to the foregoing provisions of this subsection 5.9 upon any issuance
and/or sale, pursuant to an established compensation plan of the Company, to
directors, officers or employees of the Company in connection with their
employment, of shares of Common Stock, Options or Convertible Securities, shall
be increased by the amount of any tax benefit realized by the Company as a
result of such issuance and/or sale, the amount of such tax benefit being the
amount by which the federal and/or state income or other tax liability of the
Company shall be reduced by reason of any deduction or credit in respect of such
issuance and/or sale.
(D) In the event that any shares of Common Stock, Options or
Convertible Securities shall be issued in connection with any merger in which
the Company is the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value as reasonably determined by the Board of
Directors of the Company of such portion of the assets and business of the
non-surviving corporation as such Board shall determine to be attributable to
such Common Stock, Options or Convertible Securities, as the case may be.
(E) In the event that any Common Stock, Options and/or Convertible
Securities shall be issued in connection with the issue and sale of other
securities or property of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Common
Stock, Options or Convertible Securities by the parties thereto, such Common
Stock, Options and/or Convertible Securities shall be deemed to have been issued
without consideration.
5.10 RECORD DATE AS DATE OF ISSUANCE OR SALE. In the event that at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities, or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
5.11 TREASURY STOCK. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares (other than their
cancellation without reissuance) shall be considered an issue or sale of Common
Stock for the purposes of this Section 5.
5.12 CERTAIN ISSUES OF COMMON STOCK EXCEPTED. Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustments pursuant to this Section 5, or deliver any notice pursuant to
Section 8, in the case of the issuance of, or the grant of options for the
purchase of, (a) up to an aggregate of 9,170,033 shares of Common Stock
(appropriately adjusted to reflect stock splits, stock dividends, etc.) to
officers and employees of the Company in connection with their service to the
Company; (b) up to an aggregate of 383,315 shares of Common Stock (appropriately
adjusted to reflect stock splits, stock dividends, etc.) to Morgan Stanley; or
(c) up to an aggregate of 125,000 shares of Common Stock (appropriately adjusted
to reflect stock splits, stock dividends, etc.) to the Bank.
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6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value or stated
value of any shares of stock receivable on the EXERCISE of the Warrants above
the amount payable therefor on such exercise, (b) will take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock on the exercise of
all Warrants from time to time outstanding, (c) will not issue any capital stock
of any class which is preferred as to dividends or as to the distribution of
assets upon voluntary or involuntary dissolution, liquidation or winding up,
unless the rights of the holders thereof shall be limited to a fixed sum or
percentage of par value in respect of participation in dividends and in any such
distribution of assets, and (d) will not transfer all or substantially all of
its properties and assets to any other person (corporate or otherwise), or
consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and become
bound by all the terms of the Warrants.
7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company's chief financial officer shall compute
such adjustment or readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock (or Other Securities) issued
or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and
(c) the Purchase Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to each holder of a Warrant, and
will, on the written request at any time of any holder of a Warrant, furnish to
such holder a like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. NOTICES OF RECORD DATE, ETC. IN THE EVENT OF:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other person, or
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(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company, or
(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of the Warrants
or as provided in Section 5.12),
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall be mailed at least ten (10) days
prior to the date specified in such notice on which any such action is to be
taken.
9. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANTS. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrants.
10. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. WARRANT AGENT. The Company may, by written notice to each holder of
a Warrant, appoint an agent having an office in Boston, Massachusetts for the
purpose of issuing Common Stock (or Other Securities) on the exercise of the
Warrants pursuant to Section 1, exchanging Warrants pursuant to Section 10, and
replacing Warrants pursuant to Section 11, or
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any of the foregoing, and thereafter any such issuance, exchange or replacement,
as the case may be, shall be made at such office by such agent.
13. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. NEGOTIABILITY, ETC. THIS Warrant is issued upon the following
terms, to all of which each holder or owner hereof by the taking hereof consents
and agrees:
(a) title to this Warrant may be transferred to any Affiliate of the
holder hereof by endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same manner as in the case of
a negotiable instrument transferable by endorsement and delivery; and
(b) any permitted transferee in possession of this Warrant properly
endorsed for transfer to such person (including endorsed in blank) is authorized
to represent himself as absolute owner hereof and is empowered to transfer
absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby. Nothing in this paragraph (b) shall create
any liability on the part of the Company beyond any liability or responsibility
it has under law.
15. NOTICES, ETC. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
16. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. This Warrant is being executed as an instrument
under seal. The invalidity or unenforceability of any provision hereof shall in
no way affect the validity or enforceability of any other provision.
17. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
p.m., Boston time, on the later of (i) February 26, 2006 or (ii) at such time as
all principal and interest on the Notes are paid in full. Notwithstanding the
foregoing, this Warrant shall automatically be deemed to be exercised in full
pursuant to the provisions of Section 1.5 hereof, without any
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further action on behalf of the holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding sentence.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
By:
---------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
By:
-------------------------------
Name:
Title:
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FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
Lionbridge Technologies Holdings, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ........ shares
of Common Stock of Lionbridge Technologies Holdings, Inc. and herewith makes
payment of $........ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to .............., federal
taxpayer identification number ............, whose address is
...................
Dated:
-----------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
-----------------------------------
(Address)
Signed in the presence of:
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FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto .................., federal taxpayer identification number
..........., whose address is ............, and who is an Affiliate of the
undersigned (as defined in the within Warrant) the right represented by the
within Warrant to purchase ............. shares of Common Stock of Lionbridge
Technologies Holdings, Inc. to which the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the books of
Lionbridge Technologies Holdings, Inc. with full power of substitution in the
premises.
Dated:
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(Signature must conform to name
of holder as specified on the
face of the Warrant)
------------------------------------
(Address)
Signed in the presence of:
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Exhibit 10.33
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS
OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS
THEREFROM. THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO, SECOND
RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF FEBRUARY 26, 1999 (THE
"STOCKHOLDERS' AGREEMENT"). COPIES OF THE STOCKHOLDERS' AGREEMENT ARE ON FILE AT
THE OFFICE OF THE SECRETARY OF THE COMPANY.
No. PW-1-B Right to Purchase up to 5,271 Shares of
Common Stock of Lionbridge
Technologies Holdings, Inc.
Lionbridge Technologies Holdings, Inc.
COMMON STOCK PURCHASE WARRANT
February 27, 1999
Lionbridge Technologies Holdings, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, CRP Investment Partners
III, LLC, a Delaware limited liability company ("CRIP"), or assigns, is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or from time to time before 5:00 p.m., Boston time, on February 26,
2006, or such later time as may be specified in Section 17 hereof, up to Five
Thousand, Two Hundred Seventy-One (5,271) fully paid and nonassessable shares of
Common Stock, par value $.01 per share, of the Company, at a purchase price per
share of $.01 (such purchase price per share as adjusted from time to time as
herein provided is referred to herein as the "Purchase Price"). The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein.
This Common Stock Purchase Warrant (this "Warrant") is one of the
Warrants evidencing the right or purchase shares of Common Stock of the Company
issued pursuant to a certain First Amended and Restated Senior Subordinated Note
Purchase Agreement (the "Agreement"), dated as of February 26, 1999, by and
between the Company and Capital Resource Lenders III, L.P., a Delaware limited
partnership, and subject to the Stockholders' Agreement, copies of which
agreements are on file at the principal office of the Company, and the holder of
this Warrant shall be entitled to all of the benefits and bound by all of the
applicable obligations of the Agreement and the Stockholders' Agreement, as
provided therein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Lionbridge Technologies Holdings,
Inc. and any corporation which shall succeed to, or assume the obligations of,
the Company hereunder.
<PAGE>
(b) The term "Common Stock" includes (i) the Company's Common Stock, par
value $.01 per share, as authorized on the date of the Agreement, (ii) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount per share, either to all or to a share of the
balance of current dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to preference in the payment
thereof, and the holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote may have been suspended by the
happening of such a contingency), and (iii) any other securities into which or
for which any of the securities described in clause (i) or (ii) above may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(c) The term "Conversion Price" means the amount that the Purchase Price
would be, immediately prior to the determination of the Conversion Price and
giving effect to all adjustments that would have been required under Section 5,
if the initial Purchase Price had been $.80 per share of Common Stock.
(d) The term "Notes" refers to any and all Notes and LTHBV Notes (as such
terms are defined in the Agreement).
(e) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrants, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.
(f) The term "Warrant" or "Warrants" refers to any and all of the
Warrants (as that term is defined in the Agreement).
1. EXERCISE OF WARRANT.
1.1 FULL EXERCISE. This Warrant may be exercised at any time before its
expiration in full by the holder hereof by surrender of this Warrant, with the
form of subscription at the end hereof duly executed by such holder, to the
Company at its principal office, accompanied by payment, in cash or by certified
or official bank check payable to the order of the Company, in the amount
obtained by multiplying the number of shares of Common Stock for which this
Warrant is then exercisable by the Purchase Price then in effect.
1.2 PARTIAL EXERCISE. This Warrant may be exercised in part at any time
before its expiration by surrender of this Warrant and payment of the Purchase
Price then in effect in the manner and at the place provided in Section 1.1,
except that the amount payable by the holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of whole shares of Common
Stock designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants
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<PAGE>
of like tenor, in the name of the holder hereof or as such holder (upon payment
by such holder of any applicable transfer taxes) may request, calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
for which such Warrant or Warrants may still be exercised.
1.3 INTENTIONALLY OMITTED.
1.4 COMPANY ACKNOWLEDGMENT. The Company will, at the time of the exercise
of this Warrant, upon the request of the holder hereof acknowledge in writing
its continuing obligation to afford to such holder any rights to which such
holder shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such holder any such rights.
1.5 NET ISSUE ELECTION. The holder may elect to receive, without the
payment by the holder of any additional consideration, shares equal to the
value of this Warrant or any portion hereof by the surrender of this Warrant
or such portion to the Company, with the net issue election notice annexed
hereto duly executed, at the office of the Company. Thereupon, the Company
shall issue to the holder such number of fully paid and nonassessable shares
of Common Stock as is computed using the following formula:
X = Y (A-B)
___________
A
where X = the number of shares to be issued to the holder pursuant to this
Section 1.5.
Y = the number of shares covered by this Warrant in respect of which
the net issue election is made pursuant to this Section 1.5.
A = the fair market value of one share of Common Stock, as determined
in accordance with the provisions of this Section 1.5.
B = the Purchase Price in effect under this Warrant at the time the net
issue election is made pursuant to this Section 1.5.
For purposes of this Section 1.5, the "fair market value" per share of the
Company's Common Stock shall mean:
(a) If the net issue election is exercised in connection with and
contingent upon the Company's initial public offering, and if the Company's
registration statement relating to such offering has been declared effective by
the Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering; or
(b) If the net issue election is not exercised in connection with and
contingent upon the Company's initial public offering, then as follows:
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<PAGE>
(1) If the Common Stock is traded on a national securities
exchange or admitted to unlisted trading privileges on such
an exchange, or is listed on the National Market (the
"National Market") of the National Association of Securities
Dealers Automated Quotations System ("NASDAQ"), the fair
market value shall be the last reported sale price of the
Common Stock on such exchange or on the National Market on
the last business day before the effective date of exercise
of the net issue election or if no such sale is made on such
day, the mean of the closing bid and asked prices for such
day on such exchange or on the National Market;
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the fair market value shall be the mean
of the last bid and asked prices reported on the last
business day before the date of the election (1) by the
NASDAQ or (2) if reports are unavailable under clause (1)
above by the National Quotation Bureau Incorporated; and
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and ask prices are not reported,
the fair market value shall be the price per share which the
Company could obtain from a willing buyer for shares sold by
the Company from authorized but unissued shares, as such
price shall be determined by mutual agreement of the Company
and the holder of this Warrant. If the holder of this
Warrant and the Company are unable to agree on such fair
market value, the holder of this Warrant shall select a pool
of three independent and nationally-recognized investment
banking or accounting firms from which the Company shall
select one such firm to appraise the fair market value of
the Warrant and to perform the computations involved. The
determination of such investment banking firm shall be
binding upon the Company, the holder of this Warrant and any
other holder of Warrants or Warrant Shares in connection
with any transaction occurring at the time of such
determination. All expenses of such investment banking firm
shall be borne equally by the holder of this Warrant and the
Company.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) days thereafter unless a determination of fair market
value per share of Common Stock is required pursuant to Section 1.5(b)(3) above,
the Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the holder
hereof, or any Affiliate of such holder as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
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<PAGE>
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
Reclassification, etc. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) in their capacity as such shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other than
cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings or
earned surplus of the Company), or
(c) other or additional stock or other securities or property (including
cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to receive the
amount of stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3) which such holder
would hold on the date of such exercise if on the date hereof he had been the
holder of record of the number of shares of Common Stock called for on the face
of this Warrant and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and all such other
or additional stock and other securities and property (including cash in the
cases referred to in subdivisions (b) and (c) of this Section 3) receivable by
him as aforesaid during such period, giving effect to all adjustments called for
during such period by Sections 4 and 5.
4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
4.1 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, the holder of this Warrant, on the exercise hereof as provided in Section
1 at any time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in Sections 3
and 5.
4.2 CONTINUATION OF TERMS. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 4, this Warrant shall continue in full force and effect, subject to
expiration in accordance with Section 17 hereof, and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
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<PAGE>
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 5.12.
5. ANTI-DILUTION ADJUSTMENT.
5.1 GENERAL. The Purchase Price shall be subject to adjustment from time
to time as hereinafter provided. Upon each adjustment of the Purchase Price, the
holder of this Warrant shall thereafter be entitled to purchase, at the Purchase
Price resulting from such adjustment, the number of shares obtained by
multiplying the Purchase Price in effect immediately prior to such adjustment by
the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Purchase Price resulting from
such adjustment.
5.2 PURCHASE PRICE ADJUSTMENTS. If and whenever after the date hereof the
Company shall issue or sell any shares of its Common Stock (except upon exercise
of one or more of the Warrants) for a consideration per share less than the
Purchase Price in effect immediately prior to the time of such issuance or sale,
and/or the Company shall issue or sell any shares of its Common Stock for a
consideration per share less than the Conversion Price on the date of such
issuance or sale, or shall be deemed under the provisions of this Section 5 to
have effected any such issuance or sale, then, forthwith upon such issuance or
sale, the Purchase Price shall be reduced to the price (calculated to the
nearest $0.0001) obtained by multiplying the Purchase Price in effect
immediately prior to the time of such issuance or sale by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the
Conversion Price immediately prior to such issuance or sale plus (ii) the
consideration received by the Company upon such issuance or sale, and the
denominator of which shall be the product of (iii) the total number of shares of
Common Stock outstanding immediately after such issuance or sale, multiplied by
(iv) the Conversion Price immediately prior to such issuance or sale.
Notwithstanding the foregoing, no adjustment of the Purchase Price shall be made
in an amount less than $0.0001 per share, but any such 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 adjustments so carried forward
shall amount to $0.0001 per share or more.
5.3 OPTION GRANTS. In the event that at any time the Company shall in any
manner grant (directly, by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, Common Stock
or any stock or securities convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum
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<PAGE>
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus, in the case of any such Options which relate
to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issuance or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total number
of shares of Common Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Purchase Price in effect
immediately prior to the time of the granting of such Options (or less than the
Conversion Price, determined as of the date of granting such Options, as the
case may be), then the total number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total amount of
such Convertible Securities issuable upon the exercise of such Options shall (as
of the date of granting such Options) be deemed to be outstanding and to have
been issued for such price per share. Except as otherwise provided in subsection
5.5, no further adjustment of the Purchase Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
5.4 CONVERTIBLE SECURITY GRANTS. In the event that the Company shall in
any manner issue (directly, by assumption in a merger or otherwise) or sell any
Convertible Securities (other than pursuant to the exercise of Options to
purchase such Convertible Securities covered by subsection 5.3), whether or not
the rights to exchange or convert thereunder are immediately exercisable, and
the price per share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or receivable by
the Company as consideration for the issuance or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Purchase
Price in effect immediately prior to the time of such issuance or sale (or less
than the Conversion Price, determined as of the date of such issuance or sale of
such Convertible Securities, as the case may be), then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date of the issuance or sale of such
Convertible Securities) be deemed to be outstanding and to have been issued for
such price per share, provided that, except as otherwise provided in Section
5.5, no further adjustment of the Purchase Price shall be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.
5.5 EFFECT OF ALTERATION TO OPTION OR CONVERTIBLE SECURITY TERMS. In
connection with any change in, or the expiration or termination of, the purchase
rights under any Option or the conversion or exchange rights under any
Convertible Securities, the following provisions shall apply:
(A) If the purchase price provided for in any Option referred to in
subsection 5.3, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in subsection
5.3 or 5.4, or the rate at which any Convertible Securities referred to in
subsection 5.3 or 5.4 are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), then the Purchase Price in effect at the time of
such change shall forthwith be increased
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or decreased to the Purchase Price which would be in effect immediately after
such change if (a) the adjustments which were made upon the issuance of such
Options or Convertible Securities had been made upon the basis of (and taking
into account the total consideration received for) (i) the issuance at that time
of the Common Stock, if any, delivered upon the exercise of any such Options or
upon the conversion or exchange of any such Convertible Securities before such
change, and (ii) the issuance at that time of all such Options or Convertible
Securities, with terms and provisions reflecting such change, which are still
outstanding after such change, and (b) the Purchase Price as adjusted pursuant
to clause (a) preceding had been used as the basis for the adjustments required
hereunder in connection with all other issues or sales of Common Stock, Options
or Convertible Securities by the Company subsequent to the issuance of such
Options or Convertible Securities.
(B) On the partial or complete expiration of any Options or termination
of any right to convert or exchange Convertible Securities, the Purchase Price
then in effect hereunder shall forthwith be increased or decreased to the
Purchase Price which would be in effect at the time of such expiration or
termination if (a) the adjustments which were made upon the issuance of such
Options or Convertible Securities had been made upon the basis of (and taking
into account the total consideration received for) (i) the issuance at that time
of the Common Stock, if any, delivered upon the exercise of such Options or upon
the conversion or exchange of such Convertible Securities before such expiration
or termination, and (ii) the issuance at that time of only those such Options or
Convertible Securities which remain outstanding after such expiration or
termination, and (b) the Purchase Price as adjusted pursuant to clause (a)
preceding had been used as the basis for adjustments required hereunder in
connection with all other issues or sales of Common Stock, Options or
Convertible Securities by the Company subsequent to the issuance of such Options
or Convertible Securities.
(C) If the purchase price provided for in any Option referred to in
subsection 5.3 or the rate at which any Convertible Securities referred to in
subsection 5.3 or 5.4 are convertible into or exchangeable for Common Stock
shall be reduced at any time under or by reason or provisions with respect
thereto designed to protect against dilution, and the event causing such
reduction is one that did not also require an adjustment in the Purchase Price
under other provisions of this Section 5, then in case of the delivery of shares
of Common Stock upon the exercise of any such Option or upon conversion or
exchange of any such Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be adjusted to such amount as would have obtained if
such Option or Convertible Securities had never been issued and if the
adjustments made upon the issuance of such Option or Convertible Securities had
been made upon the basis of the issuance of (and taking into account the total
consideration received for) the shares of Common Stock delivered as aforesaid
(provided that the Conversion Price used in such determination shall be the
Conversion Price on the date of issuance of such shares); provided that no such
adjustment shall be made unless the Purchase Price then in effect would be
reduced thereby.
5.6 DIVIDENDS OF COMMON STOCK, OPTIONS OR CONVERTIBLE SECURITIES. In the
event that the Company shall declare a dividend or make any other distribution
upon any stock of the Company payable in Common Stock, Options or Convertible
Securities, any Common Stock, Options or Convertible Securities, as the case may
be, issuable in payment of such dividend or distribution shall be deemed to have
been issued or sold without consideration.
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5.7 DILUTION IN CASE OF OTHER SECURITIES. In case any Other Securities
shall be issued or sold by the Company, or shall become subject to issue upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any other issuer of Other Securities or any other person referred to in Section
4) or to subscription, purchase or other acquisition pursuant to any rights or
options granted by the Company (or such other issuer or person), for a
consideration per share such as to dilute the purchase rights evidenced by this
Warrant, the computations, adjustments and readjustments provided for in this
Section 5 with respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable on the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
5.8 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Purchase Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Warrant
Shares purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in the event
that the outstanding shares of Common Stock of the Company shall at any time
be combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall be proportionately increased and
the number of Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately reduced.
Except as provided in this subsection 5.8 no adjustment in the Purchase Price
or Conversion Price and no change in the number of Warrant Shares purchasable
shall be made under this Section 5 as a result of or by reason of any such
subdivision or combination.
5.9 DETERMINATION OF CONSIDERATION RECEIVED. For purposes of this Section
5, the amount of consideration received by the Company in connection with the
issuance or sale of Common Stock, Options or Convertible Securities shall be
determined in accordance with the following:
(A) In the event that shares of Common Stock, Options or Convertible
Securities shall be issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company therefor, without
deduction therefrom of any expenses incurred or any underwriting commissions or
concessions or discounts paid or allowed by the Company in connection therewith.
(B) In the event that any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash payable to the Company shall be
deemed to be the fair value of such consideration as reasonably determined by
the Board of Directors of the Company, without deduction of any expenses
incurred or any underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(C) The amount of consideration deemed to be received by the Company
pursuant to the foregoing provisions of this subsection 5.9 upon any issuance
and/or sale, pursuant to an established compensation plan of the Company, to
directors, officers or employees of the Company in connection with their
employment, of shares of Common Stock, Options or
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Convertible Securities, shall be increased by the amount of any tax benefit
realized by the Company as a result of such issuance and/or sale, the amount of
such tax benefit being the amount by which the federal and/or state income or
other tax liability of the Company shall be reduced by reason of any deduction
or credit in respect of such issuance and/or sale.
(D) In the event that any shares of Common Stock, Options or Convertible
Securities shall be issued in connection with any merger in which the Company is
the surviving corporation, the amount of consideration therefor shall be deemed
to be the fair value as reasonably determined by the Board of Directors of the
Company of such portion of the assets and business of the non-surviving
corporation as such Board shall determine to be attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
(E) In the event that any Common Stock, Options and/or Convertible
Securities shall be issued in connection with the issue and sale of other
securities or property of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Common
Stock, Options or Convertible Securities by the parties thereto, such Common
Stock, Options and/or Convertible Securities shall be deemed to have been issued
without consideration.
5.10 RECORD DATE AS DATE OF ISSUANCE OR SALE. In the event that at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities, or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
5.11 TREASURY STOCK. The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
the Company, and the disposition of any such shares (other than their
cancellation without reissuance) shall be considered an issue or sale of Common
Stock for the purposes of this Section 5.
5.12 CERTAIN ISSUES OF COMMON STOCK EXCEPTED. Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustments pursuant to this Section 5, or deliver any notice pursuant to
Section 8, in the case of the issuance of, or the grant of options for the
purchase of, (a) up to an aggregate of 9,170,033 shares of Common Stock
(appropriately adjusted to reflect stock splits, stock dividends, etc.) to
officers and employees of the Company in connection with their service to the
Company; (b) up to an aggregate of 383,315 shares of Common Stock (appropriately
adjusted to reflect stock splits, stock dividends, etc.) to Morgan Stanley; or
(c) up to an aggregate of 125,000 shares of Common Stock (appropriately adjusted
to reflect stock splits, stock dividends, etc.) to the Bank.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in
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<PAGE>
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holders of the Warrants against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not increase the
par value or stated value of any shares of stock receivable on the EXERCISE of
the Warrants above the amount payable therefor on such exercise, (b) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of stock on the
exercise of all Warrants from time to time outstanding, (c) will not issue any
capital stock of any class which is preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary dissolution, liquidation or
winding up, unless the rights of the holders thereof shall be limited to a fixed
sum or percentage of par value in respect of participation in dividends and in
any such distribution of assets, and (d) will not transfer all or substantially
all of its properties and assets to any other person (corporate or otherwise),
or consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and become
bound by all the terms of the Warrants.
7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company's chief financial officer shall compute
such adjustment or readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock (or Other Securities) issued
or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and
(c) the Purchase Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to each holder of a Warrant, and
will, on the written request at any time of any holder of a Warrant, furnish to
such holder a like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. NOTICES OF RECORD DATE, ETC. IN THE EVENT OF:
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company, or
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<PAGE>
(d) any proposed issue or grant by the Company of any shares of stock of
any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of the Warrants
or as provided in Section 5.12), then and in each such event the Company will
mail or cause to be mailed to each holder of a Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the
time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of
Common Stock (or Other Securities) for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of
such proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed
at least ten (10) days prior to the date specified in such notice on which
any such action is to be taken.
9. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANTS. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrants.
10. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. WARRANT AGENT. The Company may, by written notice to each holder of a
Warrant, appoint an agent having an office in Boston, Massachusetts for the
purpose of issuing Common Stock (or Other Securities) on the exercise of the
Warrants pursuant to Section 1, exchanging Warrants pursuant to Section 10, and
replacing Warrants pursuant to Section 11, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
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<PAGE>
13. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. NEGOTIABILITY, ETC. THIS Warrant is issued upon the following terms,
to all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred to any Affiliate of the
holder hereof by endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same manner as in the case of
a negotiable instrument transferable by endorsement and delivery; and
(b) any permitted transferee in possession of this Warrant properly
endorsed for transfer to such person (including endorsed in blank) is authorized
to represent himself as absolute owner hereof and is empowered to transfer
absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby. Nothing in this paragraph (b) shall create
any liability on the part of the Company beyond any liability or responsibility
it has under law.
15. NOTICES, ETC. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
16. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. This Warrant is being executed as an instrument
under seal. The invalidity or unenforceability of any provision hereof shall in
no way affect the validity or enforceability of any other provision.
17. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
p.m., Boston time, on the later of (i) February 26, 2006 or (ii) at such time as
all principal and interest on the Notes are paid in full. Notwithstanding the
foregoing, this Warrant shall automatically be deemed to be exercised in full
pursuant to the provisions of Section 1.5 hereof, without any further action on
behalf of the holder, immediately prior to the time this Warrant would otherwise
expire pursuant to the preceding sentence.
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<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
By:
------------------------------
Name:
Title:
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<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
Lionbridge Technologies Holdings, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, _______ shares
of Common Stock of Lionbridge Technologies Holdings, Inc. and herewith makes
payment of $_______ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to _____________, federal
taxpayer identification number ___________, whose address is
________________________.
Dated:
-----------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
-----------------------------------
(Address)
Signed in the presence of:
- ------------------------------
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<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto __________________, federal taxpayer identification number _____________,
whose address is ______________, and who is an Affiliate of the undersigned (as
defined in the within Warrant) the right represented by the within Warrant to
purchase ________________ shares of Common Stock of Lionbridge Technologies
Holdings, Inc. to which the within Warrant relates, and appoints
________________________, Attorney to transfer such right on the books of
Lionbridge Technologies Holdings, Inc. with full power of substitution in the
premises.
Dated: ------------------------------------
(Signature must conform to name
of holder as specified on the
face of the Warrant)
------------------------------------
(Address)
Signed in the presence of:
- ---------------------------------
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<PAGE>
Exhibit 10.34
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS
OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS
THEREFROM.
THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO, SECOND RESTATED
STOCKHOLDERS' AGREEMENT DATED AS OF FEBRUARY 26, 1999 (THE "STOCKHOLDERS'
AGREEMENT"). COPIES OF THE STOCKHOLDERS' AGREEMENT ARE ON FILE AT THE OFFICE OF
THE SECRETARY OF THE COMPANY.
No. PW-2 Right to Purchase up to 337,202 Shares of
Common Stock of Lionbridge
Technologies Holdings, Inc.
Lionbridge Technologies Holdings, Inc.
COMMON STOCK PURCHASE WARRANT
March 9, 1999
Lionbridge Technologies Holdings, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, Morgan Stanley Venture
Capital Fund II Annex, L.P. a Delaware limited partnership ("MSC"), or assigns,
is entitled, subject to the terms set forth below, to purchase from the Company
at any time or from time to time before 5:00 p.m., Boston time, on March 9,
2006, or such later time as may be specified in Section 17 hereof, up to Three
Hundred Thirty-Seven Thousand Two Hundred Two (337,202) fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the Company,
at a purchase price per share of $.01 (such purchase price per share as adjusted
from time to time as herein provided is referred to herein as the "Purchase
Price"). The number and character of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided herein.
This Common Stock Purchase Warrant (this "Warrant") is one of the Warrants
evidencing the right or purchase shares of Common Stock of the Company issued
pursuant to a certain Senior Subordinated Note Purchase Agreement (the
"Agreement"), dated as of March 9, 1999, by and between the Company, MSC and
Morgan Stanley Venture Investors Annex, L.P., and subject to the Stockholders'
Agreement, copies of which agreements are on file at the principal office of the
Company, and the holder of this Warrant shall be entitled to all of the benefits
and bound by all of the applicable obligations of the Agreement and the
Stockholders' Agreement, as provided therein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Lionbridge Technologies Holdings, Inc.
and
<PAGE>
any corporation which shall succeed to, or assume the obligations of, the
Company hereunder.
(b) The term "Common Stock" includes (i) the Company's Common Stock, par
value $.01 per share, as authorized on the date of the Agreement, (ii) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount per share, either to all or to a share of the
balance of current dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to preference in the payment
thereof, and the holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote may have been suspended by the
happening of such a contingency), and (iii) any other securities into which or
for which any of the securities described in clause (i) or (ii) above may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(c) The term "Conversion Price" means the amount that the Purchase Price
would be, immediately prior to the determination of the Conversion Price and
giving effect to all adjustments that would have been required under Section 5,
if the initial Purchase Price had been $.80 per share of Common Stock.
(d) The term "Notes" refers to any and all Notes and LTHBV Notes (as such
terms are defined in the Agreement).
(e) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrants, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.
(f) The term "Warrant" or "Warrants" refers to any and all of the Warrants
(as that term is defined in the Agreement).
1. EXERCISE OF WARRANT.
1.1 FULL EXERCISE. This Warrant may be exercised at any time before
its expiration in full by the holder hereof by surrender of this Warrant, with
the form of subscription at the end hereof duly executed by such holder, to the
Company at its principal office, accompanied by payment, in cash or by certified
or official bank check payable to the order of the Company, in the amount
obtained by multiplying the number of shares of Common Stock for which this
Warrant is then exercisable by the Purchase Price then in effect.
1.2 PARTIAL EXERCISE. This Warrant may be exercised in part at any
time
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<PAGE>
before its expiration by surrender of this Warrant and payment of the Purchase
Price then in effect in the manner and at the place provided in Section 1.1,
except that the amount payable by the holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of whole shares of Common
Stock designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3 PAYMENT BY SURRENDER OF NOTES. Notwithstanding the payment
provisions of subsections 1.1 and 1.2, all or part of the payment due upon
exercise of this Warrant in full or in part may be made by the surrender by such
holder to the Company of any of the Notes and such Notes so surrendered shall be
credited against such payment in an amount equal to the principal amount thereof
plus premium (if any) and accrued interest to the date of surrender.
1.4 COMPANY ACKNOWLEDGMENT. The Company will, at the time of the
exercise of this Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.5 NET ISSUE ELECTION. The holder may elect to receive, without the
payment by the holder of any additional consideration, shares equal to the value
of this Warrant or any portion hereof by the surrender of this Warrant or such
portion to the Company, with the net issue election notice annexed hereto duly
executed, at the office of the Company. Thereupon, the Company shall issue to
the holder such number of fully paid and nonassessable shares of Common Stock as
is computed using the following formula:
X = Y (A-B)
-------
A
where X = the number of shares to be issued to the holder pursuant to this
Section 1.5.
Y = the number of shares covered by this Warrant in respect of
which the net issue election is made pursuant to this Section 1.5.
A = the fair market value of one share of Common Stock, as
determined in accordance with the provisions of this Section 1.5.
B = the Purchase Price in effect under this Warrant at the time
the net issue election is made pursuant to this Section 1.5.
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<PAGE>
For purposes of this Section 1.5, the "fair market value" per share of the
Company's Common Stock shall mean:
(a) If the net issue election is exercised in connection with and
contingent upon the Company's initial public offering, and if the Company's
registration statement relating to such offering has been declared effective by
the Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering; or
(b) If the net issue election is not exercised in connection with and
contingent upon the Company's initial public offering, then as follows:
(1) If the Common Stock is traded on a national securities
exchange or admitted to unlisted trading privileges on such
an exchange, or is listed on the National Market (the
"National Market") of the National Association of Securities
Dealers Automated Quotations System ("NASDAQ"), the fair
market value shall be the last reported sale price of the
Common Stock on such exchange or on the National Market on
the last business day before the effective date of exercise
of the net issue election or if no such sale is made on such
day, the mean of the closing bid and asked prices for such
day on such exchange or on the National Market;
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the fair market value shall be the mean
of the last bid and asked prices reported on the last
business day before the date of the election (1) by the
NASDAQ or (2) if reports are unavailable under clause (1)
above by the National Quotation Bureau Incorporated; and
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and ask prices are not reported,
the fair market value shall be the price per share which the
Company could obtain from a willing buyer for shares sold by
the Company from authorized but unissued shares, as such
price shall be determined by mutual agreement of the Company
and the holder of this Warrant. If the holder of this
Warrant and the Company are unable to agree on such fair
market value, the holder of this Warrant shall select a pool
of three independent and nationally-recognized investment
banking or accounting firms from which the Company shall
select one such firm to appraise the fair market value of
the Warrant and to perform the computations involved. The
determination of such investment banking firm shall be
binding upon the Company, the holder of
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<PAGE>
this Warrant and any other holder of Warrants or Warrant
Shares in connection with any transaction occurring at the
time of such determination. All expenses of such investment
banking firm shall be borne equally by the holder of this
Warrant and the Company.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) days thereafter unless a determination of fair market
value per share of Common Stock is required pursuant to Section 1.5(b)(3) above,
the Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the holder
hereof, or any Affiliate of such holder as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) in their capacity as such shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to receive the
amount of stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3) which such holder
would hold on the date of such exercise if on the date hereof he had been the
holder of record of the number of shares of Common Stock called for on the face
of this Warrant and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and all such other
or additional stock and other securities and property
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<PAGE>
(including cash in the cases referred to in subdivisions (b) and (c) of this
Section 3) receivable by him as aforesaid during such period, giving effect to
all adjustments called for during such period by Sections 4 and 5.
4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
4.1 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, the holder of this Warrant, on the exercise hereof as provided in Section
1 at any time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in Sections 3
and 5.
4.2 CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 4, this Warrant shall continue in full force and effect, subject to
expiration in accordance with Section 17 hereof, and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 5.12.
5. ANTI-DILUTION ADJUSTMENT.
5.1 GENERAL. The Purchase Price shall be subject to adjustment from
time to time as hereinafter provided. Upon each adjustment of the Purchase
Price, the holder of this Warrant shall thereafter be entitled to purchase, at
the Purchase Price resulting from such adjustment, the number of shares obtained
by multiplying the Purchase Price in effect immediately prior to such adjustment
by the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Purchase Price resulting from
such adjustment.
5.2 PURCHASE PRICE ADJUSTMENTS. If and whenever after the date hereof
the Company shall issue or sell any shares of its Common Stock (except upon
exercise of one or more of the Warrants) for a consideration per share less than
the Purchase Price in effect immediately prior to the time of such issuance or
sale, and/or the Company shall issue or sell any shares of its Common Stock for
a consideration per share less than the Conversion Price
-6-
<PAGE>
on the date of such issuance or sale, or shall be deemed under the provisions of
this Section 5 to have effected any such issuance or sale, then, forthwith upon
such issuance or sale, the Purchase Price shall be reduced to the price
(calculated to the nearest $0.0001) obtained by multiplying the Purchase Price
in effect immediately prior to the time of such issuance or sale by a fraction,
the numerator of which shall be the sum of (i) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale multiplied by the
Conversion Price immediately prior to such issuance or sale plus (ii) the
consideration received by the Company upon such issuance or sale, and the
denominator of which shall be the product of (iii) the total number of shares of
Common Stock outstanding immediately after such issuance or sale, multiplied by
(iv) the Conversion Price immediately prior to such issuance or sale.
Notwithstanding the foregoing, no adjustment of the Purchase Price shall be made
in an amount less than $0.0001 per share, but any such 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 adjustments so carried forward
shall amount to $0.0001 per share or more.
5.3 OPTION GRANTS. In the event that at any time the Company shall in
any manner grant (directly, by assumption in a merger or otherwise) any rights
to subscribe for or to purchase, or any options for the purchase of, Common
Stock or any stock or securities convertible into or exchangeable for Common
Stock (such rights or options being herein called "Options" and such convertible
or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert or exchange
any such Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such Options or
upon conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of any such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issuance or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total number
of shares of Common Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Purchase Price in effect
immediately prior to the time of the granting of such Options (or less than the
Conversion Price, determined as of the date of granting such Options, as the
case may be), then the total number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total amount of
such Convertible Securities issuable upon the exercise of such Options shall (as
of the date of granting such Options) be deemed to be outstanding and to have
been issued for such price per share. Except as otherwise provided in subsection
5.5, no further adjustment of the Purchase Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
5.4 CONVERTIBLE SECURITY GRANTS. In the event that the Company shall
in any manner issue (directly, by assumption in a merger or otherwise) or sell
any Convertible
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Securities (other than pursuant to the exercise of Options to purchase such
Convertible Securities covered by subsection 5.3), whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the total amount received or receivable by the
Company as consideration for the issuance or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Purchase
Price in effect immediately prior to the time of such issuance or sale (or less
than the Conversion Price, determined as of the date of such issuance or sale of
such Convertible Securities, as the case may be), then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date of the issuance or sale of such
Convertible Securities) be deemed to be outstanding and to have been issued for
such price per share, provided that, except as otherwise provided in Section
5.5, no further adjustment of the Purchase Price shall be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.
5.5 EFFECT OF ALTERATION TO OPTION OR CONVERTIBLE SECURITY TERMS. In
connection with any change in, or the expiration or termination of, the purchase
rights under any Option or the conversion or exchange rights under any
Convertible Securities, the following provisions shall apply:
(A) If the purchase price provided for in any Option referred to in
subsection 5.3, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in subsection
5.3 or 5.4, or the rate at which any Convertible Securities referred to in
subsection 5.3 or 5.4 are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), then the Purchase Price in effect at the time of
such change shall forthwith be increased or decreased to the Purchase Price
which would be in effect immediately after such change if (a) the adjustments
which were made upon the issuance of such Options or Convertible Securities had
been made upon the basis of (and taking into account the total consideration
received for) (i) the issuance at that time of the Common Stock, if any,
delivered upon the exercise of any such Options or upon the conversion or
exchange of any such Convertible Securities before such change, and (ii) the
issuance at that time of all such Options or Convertible Securities, with terms
and provisions reflecting such change, which are still outstanding after such
change, and (b) the Purchase Price as adjusted pursuant to clause (a) preceding
had been used as the basis for the adjustments required hereunder in connection
with all other issues or sales of Common Stock, Options or Convertible
Securities by the Company subsequent to the issuance of such Options or
Convertible Securities.
(B) On the partial or complete expiration of any Options or termination of
any right to convert or exchange Convertible Securities, the Purchase Price then
in effect hereunder shall forthwith be increased or decreased to the Purchase
Price which would be in effect at the time of such expiration or termination if
(a) the adjustments which were made
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upon the issuance of such Options or Convertible Securities had been made upon
the basis of (and taking into account the total consideration received for) (i)
the issuance at that time of the Common Stock, if any, delivered upon the
exercise of such Options or upon the conversion or exchange of such Convertible
Securities before such expiration or termination, and (ii) the issuance at that
time of only those such Options or Convertible Securities which remain
outstanding after such expiration or termination, and (b) the Purchase Price as
adjusted pursuant to clause (a) preceding had been used as the basis for
adjustments required hereunder in connection with all other issues or sales of
Common Stock, Options or Convertible Securities by the Company subsequent to the
issuance of such Options or Convertible Securities.
(C) If the purchase price provided for in any Option referred to in
subsection 5.3 or the rate at which any Convertible Securities referred to in
subsection 5.3 or 5.4 are convertible into or exchangeable for Common Stock
shall be reduced at any time under or by reason or provisions with respect
thereto designed to protect against dilution, and the event causing such
reduction is one that did not also require an adjustment in the Purchase Price
under other provisions of this Section 5, then in case of the delivery of shares
of Common Stock upon the exercise of any such Option or upon conversion or
exchange of any such Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be adjusted to such amount as would have obtained if
such Option or Convertible Securities had never been issued and if the
adjustments made upon the issuance of such Option or Convertible Securities had
been made upon the basis of the issuance of (and taking into account the total
consideration received for) the shares of Common Stock delivered as aforesaid
(provided that the Conversion Price used in such determination shall be the
Conversion Price on the date of issuance of such shares); provided that no such
adjustment shall be made unless the Purchase Price then in effect would be
reduced thereby.
5.6 DIVIDENDS OF COMMON STOCK, OPTIONS OR CONVERTIBLE SECURITIES. In
the event that the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in Common Stock, Options or
Convertible Securities, any Common Stock, Options or Convertible Securities, as
the case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
5.7 DILUTION IN CASE OF OTHER SECURITIES. In case any Other
Securities shall be issued or sold by the Company, or shall become subject to
issue upon the conversion or exchange of any stock (or Other Securities) of the
Company (or any other issuer of Other Securities or any other person referred to
in Section 4) or to subscription, purchase or other acquisition pursuant to any
rights or options granted by the Company (or such other issuer or person), for a
consideration per share such as to dilute the purchase rights evidenced by this
Warrant, the computations, adjustments and readjustments provided for in this
Section 5 with respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable on the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
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<PAGE>
5.8 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such subdivision shall
be proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock of the Company shall at any time be combined into a
smaller number of shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced. Except as provided in this
subsection 5.8 no adjustment in the Purchase Price or Conversion Price and no
change in the number of Warrant Shares purchasable shall be made under this
Section 5 as a result of or by reason of any such subdivision or combination.
5.9 DETERMINATION OF CONSIDERATION RECEIVED. For purposes of this
Section 5, the amount of consideration received by the Company in connection
with the issuance or sale of Common Stock, Options or Convertible Securities
shall be determined in accordance with the following:
(A) In the event that shares of Common Stock, Options or Convertible
Securities shall be issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company therefor, without
deduction therefrom of any expenses incurred or any underwriting commissions or
concessions or discounts paid or allowed by the Company in connection therewith.
(B) In the event that any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash payable to the Company
shall be deemed to be the fair value of such consideration as reasonably
determined by the Board of Directors of the Company, without deduction of any
expenses incurred or any underwriting commissions or concessions or discounts
paid or allowed by the Company in connection therewith.
(C) The amount of consideration deemed to be received by the Company
pursuant to the foregoing provisions of this subsection 5.9 upon any issuance
and/or sale, pursuant to an established compensation plan of the Company, to
directors, officers or employees of the Company in connection with their
employment, of shares of Common Stock, Options or Convertible Securities, shall
be increased by the amount of any tax benefit realized by the Company as a
result of such issuance and/or sale, the amount of such tax benefit being the
amount by which the federal and/or state income or other tax liability of the
Company shall be reduced by reason of any deduction or credit in respect of such
issuance and/or sale.
(D) In the event that any shares of Common Stock, Options or
Convertible Securities shall be issued in connection with any merger in which
the Company is the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value as reasonably determined by the Board of
Directors of the Company of such portion of
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the assets and business of the non-surviving corporation as such Board shall
determine to be attributable to such Common Stock, Options or Convertible
Securities, as the case may be.
(E) In the event that any Common Stock, Options and/or Convertible
Securities shall be issued in connection with the issue and sale of other
securities or property of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Common
Stock, Options or Convertible Securities by the parties thereto, such Common
Stock, Options and/or Convertible Securities shall be deemed to have been issued
without consideration.
5.10 RECORD DATE AS DATE OF ISSUANCE OR SALE. In the event that at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities, or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
5.11 TREASURY STOCK. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares (other than their
cancellation without reissuance) shall be considered an issue or sale of Common
Stock for the purposes of this Section 5.
5.12 CERTAIN ISSUES OF COMMON STOCK EXCEPTED. Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustments pursuant to this Section 5, or deliver any notice pursuant to
Section 8, in the case of the issuance of, or the grant of options for the
purchase of, (a) up to an aggregate of 8,670,033 shares of Common Stock
(appropriately adjusted to reflect stock splits, stock dividends, etc.) to
officers and employees of the Company in connection with their service to the
Company; (b) up to an aggregate of 1,916,574 shares of Common Stock
(appropriately adjusted to reflect stock splits, stock dividends, etc.) to
Capital Resource Lenders III, L.P., a Delaware limited partnership; (c) up to an
aggregate of 125,000 shares of Common Stock (appropriately adjusted to reflect
stock splits, stock dividends, etc.) to the Bank; or (d) up to an aggregate of
46,113 shares of Common Stock (appropriately adjusted to reflect stock splits,
stock dividends, etc.) to Morgan Stanley Venture Investors Annex, L.P., a
Delaware limited partnership.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of the Warrants, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the
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Company (a) will not increase the par value or stated value of any shares of
stock receivable on the exercise of the Warrants above the amount payable
therefor on such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of all Warrants from time to
time outstanding, (c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding up, unless the rights of the
holders thereof shall be limited to a fixed sum or percentage of par value in
respect of participation in dividends and in any such distribution of assets,
and (d) will not transfer all or substantially all of its properties and assets
to any other person (corporate or otherwise), or consolidate with or merge into
any other person or permit any such person to consolidate with or merge into the
Company (if the Company is not the surviving person), unless such other person
shall expressly assume in writing and become bound by all the terms of the
Warrants.
7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company's chief financial officer shall compute
such adjustment or readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock (or Other Securities) issued
or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and
(c) the Purchase Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to each holder of a Warrant, and
will, on the written request at any time of any holder of a Warrant, furnish to
such holder a like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
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<PAGE>
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of the Warrants
or as provided in Section 5.12),
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall be mailed at least ten (10) days
prior to the date specified in such notice on which any such action is to be
taken.
9. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANTS. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrants.
10. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. WARRANT AGENT. The Company may, by written notice to each holder of a
Warrant, appoint an agent having an office in Boston, Massachusetts for the
purpose of issuing Common Stock (or Other Securities) on the exercise of the
Warrants pursuant to Section 1, exchanging Warrants pursuant to Section 10, and
replacing Warrants pursuant to Section 11, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the
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case may be, shall be made at such office by such agent.
13. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms,
to all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred to any Affiliate of the
holder hereof by endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same manner as in the case of
a negotiable instrument transferable by endorsement and delivery; and
(b) any permitted transferee in possession of this Warrant properly
endorsed for transfer to such person (including endorsed in blank) is authorized
to represent himself as absolute owner hereof and is empowered to transfer
absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby. Nothing in this paragraph (b) shall create
any liability on the part of the Company beyond any liability or responsibility
it has under law.
15. NOTICES, ETC. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
16. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. This Warrant is being executed as an instrument
under seal. The invalidity or unenforceability of any provision hereof shall in
no way affect the validity or enforceability of any other provision.
17. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
p.m., Boston time, on the later of (i) March 9, 2006 or (ii) at such time as all
principal and interest on the Notes are paid in full. Notwithstanding the
foregoing, this Warrant shall automatically be deemed to be exercised in full
pursuant to the provisions of Section 1.5 hereof, without any further action on
behalf of the holder, immediately prior to the time this Warrant would
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otherwise expire pursuant to the preceding sentence.
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<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as of
the date first written above.
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
By: ___________________________________
Name:
Title:
[Corporate Seal]
Attest:
By:______________________________
Name:
Title:
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
Lionbridge Technologies Holdings, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ........ shares
of Common Stock of Lionbridge Technologies Holdings, Inc. and herewith makes
payment of $........ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to .............., federal
taxpayer identification number ............, whose address is
...................
Dated: ____________________________________
(Signature must conform to name
of holder as specified on the
face of the Warrant)
-----------------------------------
(Address)
Signed in the presence of:
- -----------------------------------
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto .................., federal taxpayer identification number ...........,
whose address is ............, and who is an Affiliate of the undersigned (as
defined in the within Warrant) the right represented by the within Warrant to
purchase ............. shares of Common Stock of Lionbridge Technologies
Holdings, Inc. to which the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the books of
Lionbridge Technologies Holdings, Inc. with full power of substitution in the
premises.
Dated: ____________________________________
(Signature must conform to name
of holder as specified on the
face of the Warrant)
-----------------------------------
(Address)
Signed in the presence of:
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<PAGE>
EXHIBIT 10.35
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS
OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS
THEREFROM.
THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO, SECOND RESTATED
STOCKHOLDERS' AGREEMENT DATED AS OF FEBRUARY 26, 1999 (THE "STOCKHOLDERS'
AGREEMENT"). COPIES OF THE STOCKHOLDERS' AGREEMENT ARE ON FILE AT THE OFFICE OF
THE SECRETARY OF THE COMPANY.
No. PW-3 Right to Purchase up to 46,113 Shares of
Common Stock of Lionbridge
Technologies Holdings, Inc.
Lionbridge Technologies Holdings, Inc.
COMMON STOCK PURCHASE WARRANT
March 9, 1999
Lionbridge Technologies Holdings, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, Morgan Stanley Venture
Investors Annex, L.P. a Delaware limited partnership ("MSI"), or assigns, is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or from time to time before 5:00 p.m., Boston time, on March 9, 2006,
or such later time as may be specified in Section 17 hereof, up to Forty-Six
Thousand One Hundred Thirteen (46,113) fully paid and nonassessable shares of
Common Stock, par value $.01 per share, of the Company, at a purchase price per
share of $.01 (such purchase price per share as adjusted from time to time as
herein provided is referred to herein as the "Purchase Price"). The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein.
This Common Stock Purchase Warrant (this "Warrant") is one of the Warrants
evidencing the right or purchase shares of Common Stock of the Company issued
pursuant to a certain Senior Subordinated Note Purchase Agreement (the
"Agreement"), dated as of March 9, 1999, by and between the Company, MSI and
Morgan Stanley Venture Capital Fund II Annex, L.P., and subject to the
Stockholders' Agreement, copies of which agreements are on file at the principal
office of the Company, and the holder of this Warrant shall be entitled to all
of the benefits and bound by all of the applicable obligations of the Agreement
and the Stockholders' Agreement, as provided therein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Lionbridge Technologies Holdings,
Inc. and any corporation which shall succeed to, or assume the obligations of,
the Company hereunder.
<PAGE>
(b) The term "Common Stock" includes (i) the Company's Common Stock, par
value $.01 per share, as authorized on the date of the Agreement, (ii) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount per share, either to all or to a share of the
balance of current dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to preference in the payment
thereof, and the holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of a majority of directors
of the Company (even though the right so to vote may have been suspended by the
happening of such a contingency), and (iii) any other securities into which or
for which any of the securities described in clause (i) or (ii) above may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(c) The term "Conversion Price" means the amount that the Purchase Price
would be, immediately prior to the determination of the Conversion Price and
giving effect to all adjustments that would have been required under Section 5,
if the initial Purchase Price had been $.80 per share of Common Stock.
(d) The term "Notes" refers to any and all Notes and LTHBV Notes (as such
terms are defined in the Agreement).
(e) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrants, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.
(f) The term "Warrant" or "Warrants" refers to any and all of the Warrants
(as that term is defined in the Agreement).
1. EXERCISE OF WARRANT.
1.1 FULL EXERCISE. This Warrant may be exercised at any time before
its expiration in full by the holder hereof by surrender of this Warrant, with
the form of subscription at the end hereof duly executed by such holder, to the
Company at its principal office, accompanied by payment, in cash or by certified
or official bank check payable to the order of the Company, in the amount
obtained by multiplying the number of shares of Common Stock for which this
Warrant is then exercisable by the Purchase Price then in effect.
1.2 PARTIAL EXERCISE. This Warrant may be exercised in part at any
time before its expiration by surrender of this Warrant and payment of the
Purchase Price then in
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effect in the manner and at the place provided in Section 1.1, except that the
amount payable by the holder on such partial exercise shall be the amount
obtained by multiplying (a) the number of whole shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3 PAYMENT BY SURRENDER OF NOTES. Notwithstanding the payment
provisions of subsections 1.1 and 1.2, all or part of the payment due upon
exercise of this Warrant in full or in part may be made by the surrender by such
holder to the Company of any of the Notes and such Notes so surrendered shall be
credited against such payment in an amount equal to the principal amount thereof
plus premium (if any) and accrued interest to the date of surrender.
1.4 COMPANY ACKNOWLEDGMENT. The Company will, at the time of the
exercise of this Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.5 NET ISSUE ELECTION. The holder may elect to receive, without the
payment by the holder of any additional consideration, shares equal to the value
of this Warrant or any portion hereof by the surrender of this Warrant or such
portion to the Company, with the net issue election notice annexed hereto duly
executed, at the office of the Company. Thereupon, the Company shall issue to
the holder such number of fully paid and nonassessable shares of Common Stock as
is computed using the following formula:
X = Y (A-B)
-------
A
where X = the number of shares to be issued to the holder pursuant to this
Section 1.5.
Y = the number of shares covered by this Warrant in respect of which
the net issue election is made pursuant to this Section 1.5.
A = the fair market value of one share of Common Stock, as determined
in accordance with the provisions of this Section 1.5.
B = the Purchase Price in effect under this Warrant at the time the
net issue election is made pursuant to this Section 1.5.
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For purposes of this Section 1.5, the "fair market value" per share of the
Company's Common Stock shall mean:
(a) If the net issue election is exercised in connection with and
contingent upon the Company's initial public offering, and if the Company's
registration statement relating to such offering has been declared effective by
the Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering; or
(b) If the net issue election is not exercised in connection with and
contingent upon the Company's initial public offering, then as follows:
(1) If the Common Stock is traded on a national securities
exchange or admitted to unlisted trading privileges on such
an exchange, or is listed on the National Market (the
"National Market") of the National Association of Securities
Dealers Automated Quotations System ("NASDAQ"), the fair
market value shall be the last reported sale price of the
Common Stock on such exchange or on the National Market on
the last business day before the effective date of exercise
of the net issue election or if no such sale is made on such
day, the mean of the closing bid and asked prices for such
day on such exchange or on the National Market;
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the fair market value shall be the mean
of the last bid and asked prices reported on the last
business day before the date of the election (1) by the
NASDAQ or (2) if reports are unavailable under clause (1)
above by the National Quotation Bureau Incorporated; and
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and ask prices are not reported,
the fair market value shall be the price per share which the
Company could obtain from a willing buyer for shares sold by
the Company from authorized but unissued shares, as such
price shall be determined by mutual agreement of the Company
and the holder of this Warrant. If the holder of this
Warrant and the Company are unable to agree on such fair
market value, the holder of this Warrant shall select a pool
of three independent and nationally-recognized investment
banking or accounting firms from which the Company shall
select one such firm to appraise the fair market value of
the Warrant and to perform the computations involved. The
determination of such investment banking firm shall be
binding upon the Company, the holder of this Warrant and any
other holder of Warrants or Warrant Shares
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in connection with any transaction occurring at the time of
such determination. All expenses of such investment banking
firm shall be borne equally by the holder of this Warrant
and the Company.
2. DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within ten (10) days thereafter unless a determination of fair market
value per share of Common Stock is required pursuant to Section 1.5(b)(3) above,
the Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the holder
hereof, or any Affiliate of such holder as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) in their capacity as such shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to receive the
amount of stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3) which such holder
would hold on the date of such exercise if on the date hereof he had been the
holder of record of the number of shares of Common Stock called for on the face
of this Warrant and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and all such other
or additional stock and other securities and property (including cash in the
cases referred to in subdivisions (b) and (c) of this Section 3) receivable
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by him as aforesaid during such period, giving effect to all adjustments called
for during such period by Sections 4 and 5.
4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
4.1 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, the holder of this Warrant, on the exercise hereof as provided in Section
1 at any time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in Sections 3
and 5.
4.2 CONTINUATION OF TERMS. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 4, this Warrant shall continue in full force and effect, subject to
expiration in accordance with Section 17 hereof, and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 5.12.
5. ANTI-DILUTION ADJUSTMENT.
5.1 GENERAL. The Purchase Price shall be subject to adjustment from
time to time as hereinafter provided. Upon each adjustment of the Purchase
Price, the holder of this Warrant shall thereafter be entitled to purchase, at
the Purchase Price resulting from such adjustment, the number of shares obtained
by multiplying the Purchase Price in effect immediately prior to such adjustment
by the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Purchase Price resulting from
such adjustment.
5.2 PURCHASE PRICE ADJUSTMENTS. If and whenever after the date hereof
the Company shall issue or sell any shares of its Common Stock (except upon
exercise of one or more of the Warrants) for a consideration per share less than
the Purchase Price in effect immediately prior to the time of such issuance or
sale, and/or the Company shall issue or sell any shares of its Common Stock for
a consideration per share less than the Conversion Price on the date of such
issuance or sale, or shall be deemed under the provisions of this Section 5
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<PAGE>
to have effected any such issuance or sale, then, forthwith upon such issuance
or sale, the Purchase Price shall be reduced to the price (calculated to the
nearest $0.0001) obtained by multiplying the Purchase Price in effect
immediately prior to the time of such issuance or sale by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the
Conversion Price immediately prior to such issuance or sale plus (ii) the
consideration received by the Company upon such issuance or sale, and the
denominator of which shall be the product of (iii) the total number of shares of
Common Stock outstanding immediately after such issuance or sale, multiplied by
(iv) the Conversion Price immediately prior to such issuance or sale.
Notwithstanding the foregoing, no adjustment of the Purchase Price shall be made
in an amount less than $0.0001 per share, but any such 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 adjustments so carried forward
shall amount to $0.0001 per share or more.
5.3 OPTION GRANTS. In the event that at any time the Company shall in
any manner grant (directly, by assumption in a merger or otherwise) any rights
to subscribe for or to purchase, or any options for the purchase of, Common
Stock or any stock or securities convertible into or exchangeable for Common
Stock (such rights or options being herein called "Options" and such convertible
or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert or exchange
any such Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such Options or
upon conversion or exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of any such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issuance or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total number
of shares of Common Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Purchase Price in effect
immediately prior to the time of the granting of such Options (or less than the
Conversion Price, determined as of the date of granting such Options, as the
case may be), then the total number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total amount of
such Convertible Securities issuable upon the exercise of such Options shall (as
of the date of granting such Options) be deemed to be outstanding and to have
been issued for such price per share. Except as otherwise provided in subsection
5.5, no further adjustment of the Purchase Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
5.4 CONVERTIBLE SECURITY GRANTS. In the event that the Company shall
in any manner issue (directly, by assumption in a merger or otherwise) or sell
any Convertible Securities (other than pursuant to the exercise of Options to
purchase such Convertible
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<PAGE>
Securities covered by subsection 5.3), whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange (determined by
dividing (i) the total amount received or receivable by the Company as
consideration for the issuance or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issuance or sale (or less than the
Conversion Price, determined as of the date of such issuance or sale of such
Convertible Securities, as the case may be), then the total maximum number of
shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date of the issuance or sale of such
Convertible Securities) be deemed to be outstanding and to have been issued for
such price per share, provided that, except as otherwise provided in Section
5.5, no further adjustment of the Purchase Price shall be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.
5.5 EFFECT OF ALTERATION TO OPTION OR CONVERTIBLE SECURITY TERMS. In
connection with any change in, or the expiration or termination of, the purchase
rights under any Option or the conversion or exchange rights under any
Convertible Securities, the following provisions shall apply:
(A) If the purchase price provided for in any Option referred to in
subsection 5.3, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in subsection
5.3 or 5.4, or the rate at which any Convertible Securities referred to in
subsection 5.3 or 5.4 are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), then the Purchase Price in effect at the time of
such change shall forthwith be increased or decreased to the Purchase Price
which would be in effect immediately after such change if (a) the adjustments
which were made upon the issuance of such Options or Convertible Securities had
been made upon the basis of (and taking into account the total consideration
received for) (i) the issuance at that time of the Common Stock, if any,
delivered upon the exercise of any such Options or upon the conversion or
exchange of any such Convertible Securities before such change, and (ii) the
issuance at that time of all such Options or Convertible Securities, with terms
and provisions reflecting such change, which are still outstanding after such
change, and (b) the Purchase Price as adjusted pursuant to clause (a) preceding
had been used as the basis for the adjustments required hereunder in connection
with all other issues or sales of Common Stock, Options or Convertible
Securities by the Company subsequent to the issuance of such Options or
Convertible Securities.
(B) On the partial or complete expiration of any Options or
termination of any right to convert or exchange Convertible Securities, the
Purchase Price then in effect hereunder shall forthwith be increased or
decreased to the Purchase Price which would be in effect at the time of such
expiration or termination if (a) the adjustments which were made upon the
issuance of such Options or Convertible Securities had been made upon the basis
of
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<PAGE>
(and taking into account the total consideration received for) (i) the issuance
at that time of the Common Stock, if any, delivered upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities before
such expiration or termination, and (ii) the issuance at that time of only those
such Options or Convertible Securities which remain outstanding after such
expiration or termination, and (b) the Purchase Price as adjusted pursuant to
clause (a) preceding had been used as the basis for adjustments required
hereunder in connection with all other issues or sales of Common Stock, Options
or Convertible Securities by the Company subsequent to the issuance of such
Options or Convertible Securities.
(C) If the purchase price provided for in any Option referred to in
subsection 5.3 or the rate at which any Convertible Securities referred to in
subsection 5.3 or 5.4 are convertible into or exchangeable for Common Stock
shall be reduced at any time under or by reason or provisions with respect
thereto designed to protect against dilution, and the event causing such
reduction is one that did not also require an adjustment in the Purchase Price
under other provisions of this Section 5, then in case of the delivery of shares
of Common Stock upon the exercise of any such Option or upon conversion or
exchange of any such Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be adjusted to such amount as would have obtained if
such Option or Convertible Securities had never been issued and if the
adjustments made upon the issuance of such Option or Convertible Securities had
been made upon the basis of the issuance of (and taking into account the total
consideration received for) the shares of Common Stock delivered as aforesaid
(provided that the Conversion Price used in such determination shall be the
Conversion Price on the date of issuance of such shares); provided that no such
adjustment shall be made unless the Purchase Price then in effect would be
reduced thereby.
5.6 DIVIDENDS OF COMMON STOCK, OPTIONS OR CONVERTIBLE SECURITIES. In
the event that the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in Common Stock, Options or
Convertible Securities, any Common Stock, Options or Convertible Securities, as
the case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
5.7 DILUTION IN CASE OF OTHER SECURITIES. In case any Other
Securities shall be issued or sold by the Company, or shall become subject to
issue upon the conversion or exchange of any stock (or Other Securities) of the
Company (or any other issuer of Other Securities or any other person referred to
in Section 4) or to subscription, purchase or other acquisition pursuant to any
rights or options granted by the Company (or such other issuer or person), for a
consideration per share such as to dilute the purchase rights evidenced by this
Warrant, the computations, adjustments and readjustments provided for in this
Section 5 with respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable on the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
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5.8 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such subdivision shall
be proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock of the Company shall at any time be combined into a
smaller number of shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced. Except as provided in this
subsection 5.8 no adjustment in the Purchase Price or Conversion Price and no
change in the number of Warrant Shares purchasable shall be made under this
Section 5 as a result of or by reason of any such subdivision or combination.
5.9 DETERMINATION OF CONSIDERATION RECEIVED. For purposes of this
Section 5, the amount of consideration received by the Company in connection
with the issuance or sale of Common Stock, Options or Convertible Securities
shall be determined in accordance with the following:
(A) In the event that shares of Common Stock, Options or Convertible
Securities shall be issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company therefor, without
deduction therefrom of any expenses incurred or any underwriting commissions or
concessions or discounts paid or allowed by the Company in connection therewith.
(B) In the event that any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash payable to the Company
shall be deemed to be the fair value of such consideration as reasonably
determined by the Board of Directors of the Company, without deduction of any
expenses incurred or any underwriting commissions or concessions or discounts
paid or allowed by the Company in connection therewith.
(C) The amount of consideration deemed to be received by the Company
pursuant to the foregoing provisions of this subsection 5.9 upon any issuance
and/or sale, pursuant to an established compensation plan of the Company, to
directors, officers or employees of the Company in connection with their
employment, of shares of Common Stock, Options or Convertible Securities, shall
be increased by the amount of any tax benefit realized by the Company as a
result of such issuance and/or sale, the amount of such tax benefit being the
amount by which the federal and/or state income or other tax liability of the
Company shall be reduced by reason of any deduction or credit in respect of such
issuance and/or sale.
(D) In the event that any shares of Common Stock, Options or
Convertible Securities shall be issued in connection with any merger in which
the Company is the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value as reasonably determined by the Board of
Directors of the Company of such portion of the assets and business of the
non-surviving corporation as such Board shall determine to be
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attributable to such Common Stock, Options or Convertible Securities, as the
case may be.
(E) In the event that any Common Stock, Options and/or Convertible
Securities shall be issued in connection with the issue and sale of other
securities or property of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Common
Stock, Options or Convertible Securities by the parties thereto, such Common
Stock, Options and/or Convertible Securities shall be deemed to have been issued
without consideration.
5.10 RECORD DATE AS DATE OF ISSUANCE OR SALE. In the event that at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities, or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
5.11 TREASURY STOCK. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares (other than their
cancellation without reissuance) shall be considered an issue or sale of Common
Stock for the purposes of this Section 5.
5.12 CERTAIN ISSUES OF COMMON STOCK EXCEPTED. Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustments pursuant to this Section 5, or deliver any notice pursuant to
Section 8, in the case of the issuance of, or the grant of options for the
purchase of, (a) up to an aggregate of 8,670,033 shares of Common Stock
(appropriately adjusted to reflect stock splits, stock dividends, etc.) to
officers and employees of the Company in connection with their service to the
Company; (b) up to an aggregate of 1,916,574 shares of Common Stock
(appropriately adjusted to reflect stock splits, stock dividends, etc.) to
Capital Resource Lenders III, L.P., a Delaware limited partnership; (c) up to an
aggregate of 125,000 shares of Common Stock (appropriately adjusted to reflect
stock splits, stock dividends, etc.) to the Bank; or (d) up to an aggregate of
337,202 shares of Common Stock (appropriately adjusted to reflect stock splits,
stock dividends, etc.) to Morgan Stanley Venture Capital Fund II Annex, L.P., a
Delaware limited partnership.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value or stated
value of any shares of stock receivable
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on the exercise of the Warrants above the amount payable therefor on
suchexercise, (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of all Warrants from time to time
outstanding, (c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding up, unless the rights of the
holders thereof shall be limited to a fixed sum or percentage of par value in
respect of participation in dividends and in any such distribution of assets,
and (d) will not transfer all or substantially all of its properties and assets
to any other person (corporate or otherwise), or consolidate with or merge into
any other person or permit any such person to consolidate with or merge into the
Company (if the Company is not the surviving person), unless such other person
shall expressly assume in writing and become bound by all the terms of the
Warrants.
7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company's chief financial officer shall compute
such adjustment or readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock (or Other Securities) issued
or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and
(c) the Purchase Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to each holder of a Warrant, and
will, on the written request at any time of any holder of a Warrant, furnish to
such holder a like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
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(d) any proposed issue or grant by the Company of any shares of stock
of any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of the Warrants
or as provided in Section 5.12),
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall be mailed at least ten (10) days
prior to the date specified in such notice on which any such action is to be
taken.
9. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANTS. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrants.
10. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. WARRANT AGENT. The Company may, by written notice to each holder of a
Warrant, appoint an agent having an office in Boston, Massachusetts for the
purpose of issuing Common Stock (or Other Securities) on the exercise of the
Warrants pursuant to Section 1, exchanging Warrants pursuant to Section 10, and
replacing Warrants pursuant to Section 11, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
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<PAGE>
13. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms,
to all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred to any Affiliate of the
holder hereof by endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same manner as in the case of
a negotiable instrument transferable by endorsement and delivery; and
(b) any permitted transferee in possession of this Warrant properly
endorsed for transfer to such person (including endorsed in blank) is authorized
to represent himself as absolute owner hereof and is empowered to transfer
absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby. Nothing in this paragraph (b) shall create
any liability on the part of the Company beyond any liability or responsibility
it has under law.
15. NOTICES, ETC. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
16. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. This Warrant is being executed as an instrument
under seal. The invalidity or unenforceability of any provision hereof shall in
no way affect the validity or enforceability of any other provision.
17. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
p.m., Boston time, on the later of (i) March 9, 2006 or (ii) at such time as all
principal and interest on the Notes are paid in full. Notwithstanding the
foregoing, this Warrant shall automatically be deemed to be exercised in full
pursuant to the provisions of Section 1.5 hereof, without any further action on
behalf of the holder, immediately prior to the time this Warrant would otherwise
expire pursuant to the preceding sentence.
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<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as of
the date first written above.
LIONBRIDGE TECHNOLOGIES HOLDINGS, INC.
By: ____________________________________
Name:
Title:
[Corporate Seal]
Attest:
By:______________________________
Name:
Title:
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
Lionbridge Technologies Holdings, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ........ shares
of Common Stock of Lionbridge Technologies Holdings, Inc. and herewith makes
payment of $........ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to .............., federal
taxpayer identification number ............, whose address is
...................
Dated: ____________________________________
(Signature must conform to name
of holder as specified on the
face of the Warrant)
-----------------------------------
(Address)
Signed in the presence of:
- -----------------------------------
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto .................., federal taxpayer identification number ...........,
whose address is ............, and who is an Affiliate of the undersigned (as
defined in the within Warrant) the right represented by the within Warrant to
purchase ............. shares of Common Stock of Lionbridge Technologies
Holdings, Inc. to which the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the books of
Lionbridge Technologies Holdings, Inc. with full power of substitution in the
premises.
Dated: ____________________________________
(Signature must conform to name
of holder as specified on the
face of the Warrant)
----------------------------------
(Address)
Signed in the presence of:
- ---------------------------------
HarmerDionne2541/12.807807v1
<PAGE>
EXHIBIT 10.36
THIS LEASE is made the 20th day of October One Thousand Nine Hundred and Ninety
Eight BETWEEN CORKE ABBEY INVESTMENTS LIMITED having its Registered Office at
10A the Crescent, Monkstown, Co Dublin (hereinafter called "the Landlord" which
expression where the context so admits shall include its Successors in title and
assigns) of the one part, AND LIONBRIDGE TECHNOLOGIES IRELAND having its
Registered Office at Grattan House, Temple Road, Blackrock, Co Dublin
(hereinafter called "the Tenant" which expression where the context so admits
shall include their and each of their successors in title and assigns) of the
other part
WITNESSETH as follows:
1. DEFINITIONS:
In the Lease the following expressions shall have the following meanings:
"DEMISED PREMISE" means the premises described in the First Part of the
First Schedule hereto with the easements rights and privileges but
excepting the exceptions and reservations;
"EASEMENTS RIGHTS AND PRIVILEGES" means those specified in the Second
Part of the First Schedule hereto;
"EXCEPTIONS AND RESERVATIONS" means those specified in the Third Part of
the First Schedule hereto;
"THE DEVELOPMENT" means the land shown edged in green on the plan hereto
annexed together with the building (of which the demised premises forms
part) and Landlord's fixtures from time to time erected or standing upon
the said land (known or to be know as Grattan House, Temple Road,
Blackrock in the County of Dublin).
"COMMON PARTS" means all such parts of the Development as are not for the
time being let separately or as are not in the possession of the Landlord
and the other facilities improvements services and privileges which are
from time to time provided by the
<PAGE>
Landlord for common or general use in common by the Tenant and the other
tenants and occupiers of the Development and other persons authorized by
the Landlord including (without prejudice to the generality of the
foregoing) the roof and exterior walls, foundations, internal load
bearing walls and the structural parts of the roofs, ceilings and floors,
all party structures, boundary walls, pedestrian ways, entrances and
exits, stairways, ramps, landscaped areas, corridors, passages, lobbies,
landings, staircases, lifts and all conduits except any that form part of
the demised premises and other lettable areas.
"CONDUITS" means all sewers, drains, pipes, gullies, gutters, ducts,
mains, watercourses, channels, subways, wires, cables, conduits, flues
and other conducting media of whatsoever nature and kind.
2. DEMISE
In consideration of the rent hereby reserved and of the covenants on the
part of the Tenant hereinafter contained the Landlord hereby demises unto
the Tenant ALL those the demised premises being part of the Development
together with the easements rights and privileges but excepting and
reserving the exceptions and reservations TO HOLD the demised premises
except and reserved as aforesaid unto the Tenant for the term of 25
(twenty five) years (hereinafter called "the term") from the lst day of
January One Thousand Nine Hundred and Ninety Eight YIELDING AND PAYING
therefor during the first four years of the said term the yearly rent of
IRL31,583.20 (Thirty One Thousand Five Hundred and Eighty Three Irish
Pounds 20p) and thereafter the said yearly rent of IRL31,583.20 (Thirty
One Thousand Five Hundred and Eighty Three Irish Pounds 20p) or such
increased rent as may be payable pursuant to the provisions of clause 3
hereof by four equal quarterly payments in advance on every lst day of
January, lst day of April, lst day of July, and lst day of October, the
first payment to be made on the execution hereof and to be in respect of
the period from the lst day of January One Thousand Nine Hundred and
Ninety Eight to the 31st day of March One Thousand Nine Hundred and
Ninety Eight AND ALSO PAYING by way of additional rent the amount or
amounts payable by the Tenant pursuant to the Tenant's covenant
hereinafter contained in Clause
<PAGE>
4(l)(b) in respect of insurance effected from time to time by the
Landlord such additional payment to be payable at the times and in the
manner specified at said Clause 4(l)(b). AND ALSO PAYING by way of
additional rent the amount or amounts payable by the Tenant pursuant
to the Tenant's covenant hereinafter contained in Clause 6 in respect
of service charge such additional payment to be payable at the times
and in the manner specified at the said Clause. All such payments save
for any initial broken payment payable hereunder to be paid by Bankers
Order or direct debit mandate (at the option of the Landlord) PROVIDED
ALWAYS that if the Tenant shall fail to pay the rent hereinbefore
reserved and made payable or the contribution to Insurance Premium
payable by the Tenant pursuant to clause 4(l)(b) hereof or the Service
Charge payable by the tenant pursuant to clause 6 hereof within
fourteen (14) days of the day and in the manner herein prescribed for
payment of same such unpaid sum or sums shall bear interest from and
including the day on which same shall have become due to date of
actual payment at the A rate of interest plus three per cent (3%)
charged by Allied Irish Banks PLC in the Republic of Ireland at that
date or if there shall be no such rate twelve per cent (12%) per annum.
3. RENT REVIEW PROVISIONS
(I) In this Clause the following expressions shall have the following
meanings respectively:
(a) `Review Date" shall mean the last day of the fourth year and the last day
of each subsequent fifth year of the term hereby granted.
(b) "Current Market Rent" shall mean the gross full market rent without any
deduction whatsoever at which the demised premises might reasonably be
expected to be let at the nearest Review Date in the open market without
a fine or premium and with vacant possession thereof by a willing
Landlord to a willing Tenant for a term equal to the residue of the term
of this Lease but having regard to any statutory rights of the Tenant of
renewal under a Lease on the same terms and conditions in all other
respects as this
<PAGE>
present Lease and upon the supposition (if not a fact) that the Tenant
has complied with all the obligations as to repair and decoration herein
imposed there being disregarded:
(1) any effect on rent of the fact that the Tenant has been in
occupation of the demised premises and any goodwill attached to
the demised premises by reason of the carrying on thereat of the
business of the Tenant
(2) any effect on rent of any improvement (whether within the meaning
of the Landlord and Tenant Acts, 1967 to 1989 or any Acts amending
extending or re-enacting same) of the demised premises or any part
thereof carried out by the Tenant with the Licence of the Landlord
at the Tenant's own expense (otherwise than in pursuance of any
obligation to the Landlord) and carried out during the term of
this Lease.
(ii) The rent for the time being payable by the Tenant hereunder shall be
subject to increase in accordance with the following provisions of this
clause.
(iii) The Landlord its servants or agents shall be entitled by notice in
writing given to the Tenant not earlier than twelve months before and at
any time after a Review Date to call for review of the rent payable by
the Tenant to the Landlord at the Review Date specified in the notice and
if upon any such review it shall be ascertained or determined that the
Current Market Rent of the demised premises at the Review Date is greater
than the rent payable hereunder immediately prior to such Review Date
then as from that Review Date the yearly rent payable hereunder shall be
increased to the Current Market Rent so ascertained PROVIDED that in no
circumstances shall the rent payable hereunder following such review be
less than the rent payable by the Tenant immediately prior to the Review
Date.
(iv) Every such review as aforesaid shall in the first instance be agreed by
the Landlord and the Tenant or their respective Surveyors in
collaboration but if no agreement as to the amount of the Current Market
Rent at the Review Date shall have been reached between the parties
hereto or their Surveyors within one month or such extended period as may
be agreed by the Landlord and Tenant after the date of the Landlord's
notice calling for such review then the question of the amount of the
Current Market Rent of the demised premises at the Review Date shall be
referred to the decision of a single arbitrator who
<PAGE>
shall be a Chartered Surveyor nominated by the Landlord by notice in
writing to the Tenant and if the Tenant shall reject such nomination or
fail or neglect to agree within one month of the Landlord's notice such
arbitrator shall be appointed on the application of the Landlord by the
Chairman for the time being of the Society of Chartered Surveyors in the
Republic of Ireland which term shall include any other body established
from time to time in succession or substitution or carrying on the
function currently carried out by the same and in default of any such
appointment for any reason within one month of such application by a
Chartered Surveyor to be nominated by the Landlord and this sub-clause
shall be deemed to be a submission to arbitration within the Arbitration
Acts 1954 and 1980 or any statutory modification or re-enactment thereof
for the time being in force and subject to the jurisdiction of the Courts
of the State for the enforcement of any award of said Arbitrator.
(v) If the Arbitrator shall fail to determine the new rent within two months
of his appointment or nomination or if he shall relinquish his
appointment or die or if it shall become apparent that for any reason he
will be unable to complete his duties hereunder a new arbitrator shall be
appointed or nominated in his place in accordance with sub-clause (iv)
above.
(vi) If upon any such review the amount of the increased rent shall not be
ascertained or determined prior to the Review Date the Tenant shall
continue to pay rent at the yearly rate payable immediately prior to the
Review Date until the quarter day next following the ascertainment or
determination of any increased rent whereupon there shall be due as a
debt payable by the Tenant to the Landlord on demand a sum equal to the
amount by which the rent for the period since the Review Date calculated
at the increased rate exceeds the rent for that period calculated at the
previous rate and in addition shall pay interest on said sums from the
Review Date until the date of actual payment at the rate of interest for
the time being chargeable under Section 22 of the Courts Act 1981 plus 3%
(three per cent) at the Review Date or if there shall be no such rate the
corresponding or nearest appropriate rate thereto.
(vii) If upon any such review as aforesaid it shall be agreed or determined
that the rent previously payable hereunder shall be increased the
Landlord and the Tenant shall (if required by the Landlord) forthwith at
any time not later than one year from such
<PAGE>
determination or expiration complete and sign a written memorandum
recording the increased rent thenceforth payable.
(viii) In the event of the Landlord being prevented or prohibited in whole or
in part from exercising its rights under this clause and/or obtaining
an increase in the rent on any of the Review Dates by reason of any
Legislation Statute Government Order or Decree or Notice (increase in
this context meaning such increase as would be obtainable disregarding
the provisions of any such legislation and otherwise as aforesaid)
then the date at which the review would otherwise have taken effect
shall be deemed to be extended to permit and require such review to
take place on the first date thereafter upon which such right or
increase may be exercised and/or obtained in whole or in part and when
in part on so many occasions as shall be necessary to obtain the whole
increase (meaning the whole of the increase which the Landlord would
have obtained if not prevented or prohibited as aforesaid) and if
there shall be a partial prevention only there shall be a further
review on the first date or dates as aforesaid notwithstanding the
rent may have been increased in part on or since the date of review
PROVIDED ALWAYS that the provisions of this Sub-clause shall be
without prejudice to the Landlord's rights to review the yearly rents
on the Review Dates as specified in sub-clause (I).
4. THE TENANT HEREBY COVENANTS WITH THE LANDLORD as follows:
PAY RENT AND INSURANCE PREMIUM
(1)(a) To pay the rent and the increased rent hereby reserved on the
days and in manner aforesaid without deduction or set-off.
(b) To pay to the Landlord from time to time on demand on the date or
dates when the Insurance Premium falls due without any deduction
or abatement 33.33% of the amount or amounts expended by the
Landlord for keeping on foot the insurance in accordance with
Covenant 7(4) on the part of the Landlord herein.
<PAGE>
(c) To pay to the Landlord on demand fees incurred by the Landlords
Surveyor in determining the reinstatement value of the demised
premises from time to time.
PAY RATES AND OUTGOINGS
(2)(a) From time to time and at all times during the said term to pay
and discharge all rates water rates taxes duties charges
assessments impositions burdens and outgoings of an annual or
recurring nature and also of a non-annual or non-recurring nature
where the same are legally chargeable against the Tenant or
occupier and whether Parliamentary or Local or of any other
description that may be assessed charged or imposed upon the
demised premises or the owner or occupier in respect thereof
(Landlords Capital Taxes only excepted) and to refund to the
Landlord any such amounts paid by it in respect of the demised
premises and pending a separate valuation of the demised premises
to pay to the Landlord by way of additional rent rates at the
poundage from time to time current on a rateable valuation of
L135.00;
(b) To be solely responsible for and promptly pay all charges for
water gas electricity or heat (if any) or any other utility used
or consumed in the demised premises but so that the Landlord
shall not be liable in any event for any interruption or failure
in the supply of any such utilities to the demised premises;
TO COMPLY WITH ENACTMENTS
(3) Subject to all outstanding matters being dealt with by the
landlord prior to commencement at its own expense to do and
execute all such works as are or shall be at any time during the
term under or by virtue of any Act or Acts of Parliament or the
Oireachtas already passed or hereafter to be passed and for the
time being in force or Law of the European Community now or
hereafter to be passed and any instrument directive regulation or
bye-law made
<PAGE>
thereunder which has force in the State or by any Local or other
Authority directed or required to be done or executed in respect
of the demised premises or any part thereof whether by the owner
or occupier thereof and to indemnify and keep the Landlord
indemnified against all or any claims demands and liability in
respect thereof.
AGAINST ALTERATIONS
(4) Not without the previous consent in writing of the Landlord which
if granted may be subject to such conditions as the Landlord
thinks fit to erect or to permit or suffer to be erected any new
building upon the demised premises or to make or to permit or
suffer to be made any external or structural alteration in or
addition whatsoever to the demised premises and any such erections
alterations or additions for which consent is granted shall be
carried out in accordance with plans and specifications to be
first approved by and to the satisfaction in all respects of the
Landlord's architects or surveyors and the Tenant shall pay the
reasonable and proper charges of such architects or surveyors and
of the Solicitors to the Landlord for each such consent;
NOT TO AVOID INSURANCE
(5)(a) Not to do or permit or suffer upon or bring or suffer to be
brought on to the demised premises any matter or thing or article
which shall or may cause the policy or policies for the insurance
of the demised premises or of any adjoining or neighboring
premises or of the Development or any part thereof to become void
or voidable or the premium or premiums payable in respect of the
said policy or policies to be increased above the ordinary or
common rate applicable to the demised premises or any adjoining or
neighboring premises or the Development and to repay to the
Landlord all sums paid by way of increased premiums and expenses
incurred by it in or about the continuance or
<PAGE>
renewal of such policy or policies rendered necessary by a breach
of this covenant and all such payments shall be added to the rent
hereinbefore reserved and shall be recoverable as rent;
(b) In the event of the demised premises or any part thereof being
destroyed or damaged from or by any of the Insured Risks (as
hereinafter defined) and the whole or part of the insurance money
in respect of the same being irrecoverable by reason solely or in
part of any act or default of the Tenant then and in every such
case the Tenant shall forthwith pay to the Landlord the whole or
(as the case may require) a fair proportion of the cost of
rebuilding and reinstating the demised premises and any other
premises in respect of which the Landlord's Insurance shall be
vitiated by the act or default of the Tenant.
REPAIR MAINTAIN AND KEEP TIDY
(6)(a) Throughout the term well and substantially to repair maintain
and cleanse the demised premises and all additions thereto with
all due diligence (but so that the Tenant shall not be liable
under this covenant for any repairs covenanted to be carried out
by the Landlord under the provisions of this Lease) and to keep
the same well and substantially repaired maintained and cleansed
and to execute all such sanitary and other works as the Local
Authority may from time to time lawfully require to be executed by
the owner or occupier upon or in respect of the demised premises
or any part thereof for any purpose under any statutory provision
in that behalf;
(b) Not to block up obstruct or interfere with the ventilating louvres
situate in the walls and doors of the demised premises (if there
be any);
(c) To keep the demised premises clean and tidy and free from deposits
of material or refuse and not to bring or keep or suffer to be
brought or kept on the demised premises or on the Development or
any part of any of them any dump or rubbish or scrap heap or
anything which in the opinion of the
<PAGE>
Landlord is or may become unclean unsightly noisome or offensive
or calculated or liable to detract from the quality amenity or
reputation of the Development or of any adjoining premises or any
of them and so often as it shall be necessary or desirable to
remove from the demised premises and from the Development all such
refuse rubbish and scrap which may accumulate or be there.
TO PAINT
(7) Without prejudice to the generality of the provisions of
paragraphs (a) and (b) of sub-clause (6) of this clause to paint
with two coats at least of good quality paint all the inside parts
of the demised premises as are usually painted in a good and
workmanlike manner such painting of the inside parts to be carried
out not less than once in every third year the last such painting
to be in the year immediately preceding the termination of this
Lease and at the same time with every said inside painting to
paper grain and varnish and colour such parts of the inside of the
demised premises as are usually or have been previously papered
grained varnished or coloured;
TO PERMIT INSPECTION
(8) To permit the Landlord and its agents and workmen with all
necessary appliances to enter upon the demised premises at all
reasonable times after giving reasonable notice to the Tenant for
the purpose of viewing the condition thereof taking a schedule of
the fixtures and fittings therein or of inspecting any works in
progress and upon written notice given by the Landlord to execute
any repairs lawfully required by such notice for which the Tenant
is liable under the provisions hereof and if the Tenant shall not
execute such repairs within two months of the date of the service
upon it of such notice (or if in the opinion of the Landlord there
is any emergency then within such lesser period as may be
practicable but in such event without any delay whatsoever) the
Landlord may itself execute such repairs and the costs incurred by
it in so doing (as certified by the Landlord's surveyors) shall be
<PAGE>
paid by the Tenant to the Landlord upon demand and shall be a debt
recoverable from the Tenant by the Landlord in any court of
competent jurisdiction;
TO PERMT LANDLORDS WORKS
(9) To permit the Landlord and all persons authorized by it and the
tenants or occupiers of the Development (the said tenants or
occupiers if authorized in writing by the Landlord) and their
officers employees agents contractors licensees and workmen at all
reasonable times after making a prior appointment (except in case
of emergency) to enter (and if necessary to erect and maintain
scaffolding) upon the demised premises with all necessary
appliances:
(a) to execute repairs alterations painting redecoration or other work
to the demised premises or any adjoining or neighbouring premises
or to the Development.
(b) for the purpose of inspecting repairing renewing cleansing
emptying maintaining or protecting any sewers watercourses
culverts drains gutters conduits water pipes oil pipes and tanks
electric wires and cables gas pipes and telephone wires in under
or over the demised premises in connection with or for the
accommodation of any adjoining or neighbouring premises or the
Development.
In either case the person or persons exercising such rights making good
or paying compensation for any damage (other than consequential loss or
damage) thereby occasioned and causing as little inconvenience and
disturbance as practicable to the Tenant and to the Tenants business;
AGAINST NUISANCE
(10) Not to carry on or permit or suffer to be carried on upon any part
of the demised premises any offensive or noisy trade business
manufacture or occupation or permit or suffer the demised premises
to be used for any illegal
<PAGE>
or immoral purposes nor to do or permit or suffer to be done in
or upon the demised premises anything which in the opinion of the
Landlord may be or tend to be a nuisance annoyance disturbance or
damage or in any way interfere with the quiet or comfort of the
occupants of adjoining or neighboring premises or the Development
and to execute all such works as may be necessary for abating any
such nuisance in obedience to a notice lawfully served by a Local
or Public Authority or pursuant to any Court Order or in
obedience to any Notice served by the Landlord and in default
thereof to pay to the Landlord all costs charges and expenses
which may be incurred by the Landlord in abating such nuisance in
respect of the demised premises.
AGAINST EASEMENTS
(11) To use its best endeavors to prevent any easement or right
belonging to or used with the demised premises from being
obstructed or lost and not knowingly to allow any encroachment to
be made or easements to be acquired on under or over the demised
premises and the Development except with the consent of or by the
direction of the Landlord.
SIGNS
(12)(a) Not to paint fix or exhibit or permit or suffer to be painted
fixed or exhibited any advertisement notice sign placard hoarding
name or writing to or upon any part of the exterior of the
demised premises or on or in the windows or external walls of the
demised premises or upon any entrance doors thereof without the
consent in writing of the Landlord (such consent not to be
unreasonably withheld in the case of the Tenant's usual trade
name and fascia of a permanent character) and PROVIDED that in
connection with any such consent which may be given as aforesaid
any necessary consent of the appropriate authorities under any
planning or other legislation be also first obtained by the
Tenant;
<PAGE>
(b) Not to hang or place or exhibit or permit or suffer to be hung or
placed or exhibited any goods outside the demised premises or the
entrance doors or display windows of the demised premises or upon
or over any part of the Development.
AERIALS
(13) Not to erect or permit the erection of any television or radio
receiving aerials on the exterior of the demised premises or in
or upon the Development.
RELETTING SIGNS AND VIEWING
(14)(a) To permit the Landlord during the six months immediately
preceding the expiration of the term to affix and retain without
interference to or upon any part of the demised premises (but so
as not unduly to obscure the windows thereof or interfere with
the Tenant's use thereof) a notice for reletting the same and
during the said six months to permit persons with written
authority from the Landlord or its agents at reasonable times of
the day to view the demised premises;
(b) To permit upon reasonable notice at any time during the term
hereof prospective purchasers of or dealers in or agents
instructed in connection with the sale of the Landlord's
reversion or of any interest superior to the term hereof to view
the demised premises without interruption provided the same are
authorized in writing by the Landlord or its agent.
CONVEYANCING ACT NOTICES
(15) To give immediate notice thereof to the Landlord of any notice or
claim affecting the demised premises and to pay all costs charges
and expenses (including Solicitors' costs and surveyors' fees)
incurred by the Landlord for the purpose of or incidental to the
preparation and service of a notice under
<PAGE>
Section 14 of the Conveyancing and Law of Property Act 1881
requiring the Tenant to remedy a breach of any of the covenants
herein contained notwithstanding forfeiture for such breach shall
be avoided otherwise than by relief granted by the Courts;
ALIENATION
(16)(a) Not to assign underlet or part with the possession control or
occupation of nor to franchise the use of part only of the
demised premises;
(b) Not to assign underlet or part with the possession or control or
occupation of nor to franchise the use of the whole of the
demised premises without the consent in writing of the Landlord
first obtained which consent shall not be unreasonably withheld
in the case of a respectable and responsible assignee or
underlessee proof of which is furnished to the Landlord and upon
any such assignment to obtain if the Landlord shall so require an
acceptable Guarantor or Guarantors for any Assignee and subject
to the following provisions or such of them as may be
appropriate, that is to say:-
(I) The Tenant shall prior to any such assignment or underlease apply
to the Landlord and give all reasonable information concerning
the proposed assignee or under-Lessee as the Landlord may
require.
(ii) The Landlord's consent to any such Assignment or underletting
shall be given in writing and the Tenant shall pay the Landlords
reasonable costs in connection with such consent.
(iii) In the case of an under-Lease the same shall be of the entire of
the demised premises at the then current market rent without any
deduction whatsoever and without a fine or premium or at the rent
payable hereunder at the time of the granting of such under-Lease
(whichever is the higher) and the under-Lessee shall
<PAGE>
if required by the Landlord enter into a direct covenant with the
Landlord to perform and observe all the covenants (other than
that for payment of the rent hereby reserved) and conditions
herein contained and every such under-Lease shall also be subject
to the following conditions, that is to say that it shall
contain:-
(1) an unqualified covenant on the part of the under-Lessee not
to assign under-Lease or part with or share the possession
of part only of the premises thereby demised;
(2) a covenant on the part of the under-Lessee not to assign the
premises thereby demised without obtaining the previous
consent in writing of the Landlord hereto;
(3) a covenant condition or proviso under which the rent
reserved by the under-Lease shall be reviewed at least every
five years and if every five years the Review Dates therein
shall be the days which are six months after the Review
Dates in this Lease (notwithstanding that this provision may
necessitate a first review before the expiration of five
years from the commencement of the under-Lease) but
otherwise in the same terms as provided in this Lease;
(4) a covenant condition or proviso under which the rent from
time to time payable under such under-Lease shall not be
less than the rent from time to time payable hereunder save
for the six monthly period between the Review Dates of this
and the under-Lease as hereinbefore provided;
(5) covenants and conditions in the same terms as nearly as
circumstances admit as those contained in this Lease.
<PAGE>
NOTICE OF ASSIGNMENT
(17) Within one calendar month after the execution of any assignment
transfer underlease or the devolution of the demised premises to
give notice in writing with particulars to the Landlord's
Solicitors and to produce to them with such notice such
assignment or transfer or the counterpart of such underlease or
the probate or letters of administration or other instrument
under which such devolution arises and leave the same with them
for the period of fourteen days for registration and pay to them
a reasonable fee for the registration of each such deed or
document.
DISCLOSURE OF NOTICES
(18) Upon receipt of any notice order requisition direction or other
thing from a competent authority affecting or likely to affect the
demised premises (whether the same shall be served directly on the
Tenant or the original or a copy thereof be received by the Tenant
from any person whatsoever) forthwith to deliver to the Landlord a
copy thereof and so far as the same or the Act regulations or
other instrument under and by virtue of which it is issued or the
provisions thereof require the Tenant so to do to comply therewith
at its own expense;
USER
(19)(a) Not to use or occupy the demised premises or any part thereof or
permit the same to be used or occupied for any other purpose than
as offices nor in any manner inconsistent with such user or
occupation except with the consent in writing of the Landlord
(such consent not to be unreasonably withheld) but in considering
and giving such consent the Landlord shall be entitled to have
full regard to the principles of good estate management and the
interests of the tenants or occupiers of other premises in the
Development and the Landlord shall be entitled to refuse such
consent where the change of use would
<PAGE>
substantially increase the rate of insurance in respect of the
demised premises or the Development or nearby or adjoining
premises and so that nothing herein shall be deemed to be a
warranty on the part of the landlord that the Tenant shall have
the exclusive or preferential right to carry on the said retail
trade or business in the Development or prevent the Landlord at
the Landlord's sole discretion from permitting the same or a
similar user to be carried on in other Units of the Development
or in areas therein in the possession of the Landlord or
ancillary or associated Companies of the Landlord.
(b) Not to permit or suffer anyone to sleep in the demised premises
and not to use or permit or suffer the use of the same or any
part thereof for residential purposes or as licensed premises for
the sale of excisable or intoxicating liquors or as an amusement
arcade or bingo hall or any similar user.
(c) Not to use the demised premises or any part thereof or permit or
suffer the same to be used for gaming or for the purpose of any
betting transaction within the meaning of the Betting Act 1931
(and any statutory modification or reenactment thereof for the
time being in force) with or between persons resorting to the
demised premises and not to make or permit or suffer to be made
any application for a betting office licence in respect of the
demised premises or any part thereof,
(d) Not to have or permit any sale by auction in or upon the demised
premises or any part thereof;
MACHINERY OVERLOADING AND INFLAMMABLE GOODS
(20)(a) Not (except so far as the same shall be ancillary to the
permitted user of the demised premises and the installation or
use of the same shall not amount to a breach of any other
provision herein) to erect or install or use in or upon any
<PAGE>
part of the demised premises any steam gas electric or other
engine or machinery of any kind.
(b) Not to do or permit or bring in or upon the demised premises
anything which may throw on the demised premises or any adjoining
premises any weight or strain in excess of that which such
premises are capable of bearing with due margin for safety and in
particular not to overload the floors or the electrical
installations or the other services of in or to the demised
premises nor suspend any excessive weight from the ceilings or
walls, stanchions or the structure thereof. The Tenant shall seek
professional advice at the Tenants own expense to ensure that
there shall not be an infringement of this covenant.
(c) Not to have store or keep upon the demised premises or any part
thereof any substance of an explosive or of an inflammable or
dangerous nature or such as might increase the risk of fire or
explosion or which might attack or in any way injure by
percolation corrosion or otherwise the demised premises or any
adjoining premises or the keeping or use whereof may contravene
any statutory or local regulation or bye-law and in particular
without prejudice to the generality of the foregoing not to keep
portable gas appliances for use on the demised premises.
PLANNING ACTS
(21) In relation to the Planning Acts (by which expression it is
intended herein to designate the Local Government (Planning and
Development) Acts, 1963 to 1993, and any statutory modification
or re-enactment thereof for the time being in force and any
Regulations or Orders made thereunder):-
(a) Not to do or omit or permit to be done or omitted anything on or
in connection with the demised premises the doing or omission of
which shall be a contravention of the Planning Acts, or of any
notices, orders, licences, consents, permissions and conditions
(if any) served, made, granted or imposed thereunder or under any
enactment repealed thereby and to indemnify (as well after the
expiration of the term by effluxion of time or otherwise as
<PAGE>
during its continuance) and keep indemnified the Landlord against
all actions, proceedings, damages, penalties, costs, charges,
claims and demands in respect of such acts and omissions or any
of them and against the costs of any application for Planning
Permissions and the works and things done in pursuance thereof.
(b) In the event of the Landlord giving written consent to any of the
matters in respect of which the Landlord's consent shall be
required under the provisions of this Lease or otherwise and in
the event of permission from any Planning Authority under the
Planning Acts being necessary for any additions, alterations, or
changes in or to the demised premises or for the change of user
thereof or for any "Development" as defined in the Planning Acts
to apply at the cost of the Tenant to the Local Planning
Authority for all consents and permissions which may be required
in connection therewith and to give notice to the Landlord of the
granting or refusal (as the case may be) of all such consents and
permissions forthwith on the receipt thereof.
(c) To give notice forthwith to the Landlord of any Notice Order or
Proposal for a Notice or Order served on the Tenant under the
Planning Acts or if so required by the Landlord to produce the
same and at the request of the Landlord and the cost of the
Tenant to make or join in making such objections or
representations in respect of any proposals as the Landlord may
require.
(d) To comply at its own cost with any notices or orders served on
the Tenant and to comply with all conditions attached to any
permission granted under the provisions of the Planning Acts.
(e) If and when called upon to do so to produce to the Landlord or
its surveyors all such plans, documents and other evidence as the
Landlord may reasonably require in order to satisfy itself that
the provisions of this sub-clause have been complied with in all
respects.
<PAGE>
INSURE GLASS
(22) To insure and keep insured the glass in the demised premises in
the names of the Landlord and the Tenant in the full
reinstatement cost thereof and if required to produce the policy
and the receipt for the latest premium to the Landlord.
TO INDEMNIFY AGAINST CLAIMS
(23) To take out and maintain at all times during the term hereby
granted a Policy of Insurance covering Public and Employers
liability in respect of and covering the liability of the
Landlord or its Agents and the Tenant in respect of the demised
premises in an amount of not less than IRL1,000,000.00 (One
Million Pounds) to be adjusted from time to time as the Landlord
deems necessary and to produce said Policy and the receipt for
payment of the last premium thereon to the Landlord on demand and
to indemnify and keep indemnified the Landlord against all and
any actions expenses costs claims damages and other liabilities
whatsoever in respect of the injury or death of any person or
damage to any property howsoever arising and in particular
without prejudice to the generality of the foregoing arising
directly or indirectly out of:
(a) The state of repair or condition of the demised premises.
(b) The making or exercising of any alteration to the demised
premises or state of repair or condition of such alteration.
(c) The user of the demised premises.
(d) Any work carried out or in the course of being carried out
on the demised premises.
(e) Anything now or hereinafter attached to or projecting from
the demised premises or any other cause whatsoever.
<PAGE>
FIRE REQUIREMENTS
(24)(a) Subject to all matters being in order prior to commencement
herein at all times during the said term to comply with all the
recommendations or requirements of the appropriate authority and
the insurers of the Development whether notified or directed to
the Landlord or the Tenant in relation to fire precautions and in
particular the provision of fire screens and to comply with all
the regulations from time to time made by the Landlord in
relation to fire precautions and to indemnify the Landlord
against any costs and expenses in complying with any such
requirement or recommendation and will not obstruct the access to
or means of working any apparatus and appliance for that purpose
for the time being installed in the demised premises.
(b) If required by the Landlord for the purposes of safety or to
comply with the recommendations or requirements of the Insurers
of the Development to pay to the Landlord on demand the cost of
providing and installing portable fire extinguishers fire hose
reels or similar devices or at the Landlord's option to instal
same at the Landlord's direction and at the Tenant's expense.
(c) In the event of the demised premises or any part thereof being
damaged or destroyed by any of the Insured Risks to give
immediate notice to the Landlord.
NOT TO OBSTRUCT PIPES
(25) Not to stop up or obstruct or permit or suffer to be stopped up
or obstructed or to suffer any oil grease or other noxious or
harmful matters or substances to enter the drains sewers gutters
pipes channels and watercourses of the demised premises or of the
Development and to employ such method for treating any
deleterious effluent that may reasonably be required by the
Landlord or be required by the Local Authority before permitting
such effluent to enter any such drains sewers gutters pipes
channels and watercourses;
NOT TO OBSTRUCT COMMON PARTS
<PAGE>
(26)(a) Not to stand or place or permit or suffer to be placed or
deposited on the Common Parts or on any part thereof any goods
machines display case board or article of any description
whatsoever or obstruct any part of the Development in any way
whatsoever but at all times to keep the same free and
unobstructed;
(b) Not to allow its Employees, Directors, Agents, Servants or
Suppliers to park their cars or other vehicles or otherwise to
make use of or obstruct the car park or parking facilities within
the Development;
TO OBSERVE RULES
(27) To observe and perform the Rules and Regulations set out in the
Third Schedule hereto and all and any amendments and additions
thereto made by the Landlord from time to time under the
provisions of sub-clause (5) of Clause 9 hereof;
(28) To keep the ladies and gents toilets the hallway and the entire
lobby at ground floor level of Grattan House (standing on the
Development) clean and in a neat and tidy condition at all times.
TO PAY STAMP DUTY AND V.A.T.
(29) To pay the Stamp Duty on the original and counterpart of this
Lease and also all Value Added Tax (or any tax of a similar nature
that may be substituted for it or levied in addition to it)
arising on the creation of this Lease or chargeable in respect of
any payment made by the Tenant under any of the provisions of or
in connection with this Lease.
TO YIELD UP
<PAGE>
(30) To yield up the demised premises with the Landlord's fixtures and
fittings and additions and improvements thereto at the expiration
or sooner determination of the term (howsoever the same may be
determined) in such good and substantial repair and condition as
is at present and always in such a state of repair and condition
as shall be in accordance with the continued performance and
observance of the Tenant's covenants herein contained.
5. IT IS HEREBY AGREED AND DECLARED that so far as the same shall not be or
become the responsibility of the Local Authority or be or become
separately demised from time to time the Common Parts shall at all times
be subject to the exclusive control and management of the Landlord and in
particular:-
(a) the Landlord shall have the right to install maintain and operate
lighting heating ventilating and air-conditioning apparatus and
equipment serving the Common Parts and to police and procure the
policing of the same but may for reasonable and proper cause from
time to time change the area level location and arrangement of the
Common Parts and restrict parking and make parking charges;
(b) the Landlord may close or restrict all or any portion of the
Common Parts to such extent as may be legally sufficient to
prevent a dedication thereof or the accrual of any rights to any
person or the public therein and may close or restrict temporarily
all or any of the Common Parts for the purpose of repairing
renovating and replacing cleansing and maintaining the same;
6. THE TENANT FURTHER COVENANTS WITH THE LANDLORD as follows:
(1) From time to time and at all times during the term hereby granted
to repay to the Landlord forthwith upon demand as hereinafter
provided a charge (hereinafter called "the Service Charge") being
33.33% of all costs and expenses which are from time to time or at
any time hereafter during the term expended incurred or payable or
to be so expended incurred or paid by the Landlord (computed upon
the basis of providing an indemnity to the
<PAGE>
Landlord) in respect of the items set out in the Second Schedule
hereto together with any value added or other tax thereon;
(2) The amount of the Service Charge shall be ascertained and
certified by a certificate (hereinafter called "the certificate")
signed by the Landlord's auditors or accountants or managing
agents (at the discretion of the Landlord) acting as experts and
not as arbitrators annually and so soon after the end of the
Landlord's financial year as may be practicable and shall relate
to such year in manner hereinafter mentioned;
(3) The expression "the Landlord's financial year" shall mean the
period from the 1st day of January in each year to the 31st day of
December of that same year or such other annual period as the
Landlord may at its discretion from time to time determine as
being that in which the accounts of the Landlord either generally
or relating to the Development shall be made up;
(4) A copy of the certificate for each such financial year shall be
supplied by the Landlord to the Tenant on written request and
without charge to the Tenant;
(5) The certificate shall contain a summary of the Landlord's said
costs and expenses incurred by the Landlord during the Landlord's
financial year to which it relates together with a summary of the
relevant details and figures forming the basis of the Service
Charge and the certificate (or a copy thereof duly certified by
the person by whom the same was given) shall be conclusive
evidence for the purposes hereof of the matters which it purports
to certify;
(6) The expression "the costs and expenses incurred by the Landlord"
as hereinbefore used shall be deemed to include not only those
costs and expenses hereinbefore described which have been actually
disbursed incurred or made by the Landlord during the year in
question but also such reasonable part of all such costs and
expenses hereinbefore described which are of a periodically
recurring nature (whether recurring by regular or irregular
<PAGE>
periods) whenever disbursed incurred or made and whether prior to
the commencement of the term or otherwise including a sum or sums
of money by way of reasonable provision for anticipated
expenditure in respect thereof as the Landlord or its auditors or
accountants or managing agents (as the case may be) may in their
discretion allocate to the year in question as being fair and
reasonable in the circumstance;
(7) The Tenant shall if required by the Landlord with every quarterly
payment of rent reserved hereunder pay to the Landlord such sum
in advance and on account of the Service Charge as the Landlord
or its auditors or accountants or managing agents (as the case
may be) shall specify at their discretion to be a fair and
reasonable interim payment.
(8) As soon as practicable after the signature of the certificate the
Landlord shall furnish to the Tenant an account of the Service
Charge payable by the Tenant for the year in question due credit
being given therein for all interim payments made by the Tenant
in respect of the said year and upon the furnishing of such
account showing such adjustment as may be appropriate there shall
be paid by the Tenant to the Landlord the amount of the Service
Charge as aforesaid or any balance found payable or there shall
be allowed by the Landlord to the Tenant any amount which may
have been overpaid by the Tenant by way of interim payment as the
case may require;
(9) IT IS HEREBY AGREED AND DECLARED that nothing in this Clause or
these presents contained shall disable the Landlord from
maintaining an action against the Tenant in respect of
non-payment of any such interim payment as aforesaid
notwithstanding that the Certificate had not been signed at the
time of the Proceedings.
(10) PROVIDED ALWAYS and notwithstanding anything herein contained it
is agreed and declared as follows:
(a) That in regard to the commencement of the term hereby granted the
Service Charge shall be duly apportioned in respect of the period
from the date on which the first payment of rent shall fall due
hereunder to the ensuing day of
<PAGE>
and not in respect of the period from the date of commencement of
the term to such ensuing day of
(b) That the provisions of sub-clause (8) of this Clause shall
continue to apply notwithstanding the expiration or sooner
determination of the term hereby granted but only in respect of
the period down to such expiration or sooner determination of the
term.
7. THE LANDLORD HEREBY COVENANTS WITH THE TENANT as follows:
(1) The Tenant paying the rent hereby reserved and observing and
performing the several covenants and stipulations herein on its
part contained shall peaceably hold and enjoy the demised
premises during the term without any interruption by the Landlord
or any person rightfully claiming under or in trust for it;
(2) To keep the Common Parts and the pipes and wires water gas
drainage electricity services and the lift in the Common Parts in
good and substantial repair and condition so far as such services
are not maintainable by a statutory undertaker or maintained at
public expense;
(3) The Landlord will use its best endeavours (subject to the receipt
by the Landlord of the Service Charge from the Tenant throughout
the term) to provide and carry out or procure the provision and
carrying out of the services particulars of which are set out in
the third paragraph of the Second Schedule hereto provided that
(without affecting the generality of the provisions of this
sub-clause) the Landlord shall not be liable for any failure or
omission at any time or from time to time during the term hereby
granted to provide supply or procure any or all of the said
services if it shall be prevented hampered or restricted in any
way from so doing by virtue of strikes lock-outs non-availability
of or restrictions upon supplies or materials or labour or other
services weather conditions inevitable accident emergency act of
God or any cause whatsoever or howsoever arising and not within
the control of the Landlord provided always that the Landlord
shall be entitled to cease to
<PAGE>
provide any such service if in the opinion of the Landlord it
shall cease to be for the benefit of the Tenant or has become due
to technological change obsolete or redundant and provided always
that in the event of the Landlord being able to provide the
relevant services, the service charge shall be suspended during
the period that the services are not available.
(4) Subject to the Landlord being able to effect insurance against
any one or more of the risks hereinafter specified and subject to
reimbursement of the appropriate insurance premium as provided by
Clause 4(l)(b) hereof to insure in the name of the Landlord the
Development and the demised premises and all Landlord's fixtures
and fittings therein and thereon excluding glass and to keep the
same insured in the full reinstatement cost (to be determined
from time to time by the Landlord or its surveyors) and including
an inflationary factor against damage by fire, explosion,
lightning, impact, earthquake, aircraft, flood, storms and
tempest, riot and civil commotion and malicious damage or
bursting or overflowing of water tanks, apparatus and pipes and
including demolition, site clearance expenses, architects and
other fees and taxes in relation to the reinstatement of the
Development and the demised premises and three years loss of rent
and the service charge and all stamp duties and V.A.T. exigible
on any building or like contract as may be entered into relative
to the re-construction, reinstatement or repair of the
Development and the demised premises or any part thereof
resulting from the destruction, loss or damage thereof or thereto
from any of the perils aforesaid and public liability and
employers liability and against such other risks as the Landlord
may from time to time in its absolute discretion consider prudent
and desirable (all such perils and risks for the time being so
covered by insurance hereinafter called `the insured risks") and
such risks may be covered by any policy or policies of insurance
as the Landlord may consider appropriate PROVIDED HOWEVER that
the Landlord shall not be responsible to the Tenant its servants
agents licensees invitees or visitors for any injury death damage
destruction financial or consequential loss whether to person or
<PAGE>
property due to the state and condition of the Development or the
demised premises or any part thereof or due to any act or default
of any agent servant workman or other person authorized by the
Landlord to enter the Development or the demised premises save to
the extent to which the same may be insured against by the
Landlord pursuant to the terms of this Lease.
(5) In case the Development or the demised premises or any part
thereof shall be destroyed or damaged by fire or from any of the
insured risks then (subject to the Landlord obtaining Planning
Permission and all other necessary pertinent licences and
approvals) to reinstate the Development and the demised premises
substantially in accordance with its existing plan and elevation
and as often as shall happen to lay out all monies received in
respect of such insurance as aforesaid as soon as practicable in
or upon rebuilding, repairing or reinstating the Development and
the demised premises in a good and substantial manner unless the
relevant policy shall have been vitiated or rendered less than
fully effective by any act, neglect, default or omission on the
part of the Tenant and without being required to make up any
deficiency out of its own monies.
8. IT IS HEREBY AGREED AND DECLARED as follows:
(1) The demised premises are held subject to all rights of light and
air and all other easements or rights (if any) now enjoyed by the
adjoining or neighbouring lands buildings and properties over the
demised premises;
(2) The Tenant shall not be entitled to any right of access or light
or air or other easements or rights to any building for the time
being comprised herein which would restrict or interfere with the
user of any adjoining or neighbouring land for building or for
any other purpose;
9. PROVIDED ALWAYS AND IT IS HEREBY EXPRESSLY AGREED as follows:
<PAGE>
(1) If the said yearly rent or the Service Charge or other
contributions hereby reserved or any part thereof shall at any
time be in arrear and unpaid for fourteen days after the same
shall have become due (whether any formal or legal demand therefor
shall have been made or not) or if the Tenant shall at any time
fail or neglect to perform or observe any of the covenants
conditions or agreements herein contained and on its part to be
performed and observed or if the Tenant while the demised premises
or any part thereof shall remain vested in it shall enter into
liquidation whether compulsory or voluntary (not being a voluntary
liquidation for the purpose of amalgamation or reconstruction) or
permit any execution to be levied on the demised premises or
(being an individual) shall become bankrupt or compound with his
creditors then and in any such case it shall be lawful for the
Landlord or any person or persons duly authorized by it into or
upon the demised premises or any part thereof in the name of the
whole to re-enter and the demised premises peaceably to hold and
enjoy thenceforth as if this Lease had not been made without
prejudice to any right of action or remedy of the Landlord in
respect of any antecedent breach of any of the covenants by the
Tenant hereinbefore contained;
(2) In the event of the demised premises being damaged or destroyed by
any of the risks from time to time insured against by the Landlord
so as to be unfit for occupation and use then (unless the
insurance monies shall be irrecoverable in whole or in part by
reason solely or in part of any act neglect default or omission of
the Tenant) the rent hereby reserved and the Service Charge or
fair proportions of both according to the nature and extent of the
damage sustained shall be suspended until the demised premises
shall again be rendered fit for occupation and use or for the
period of three years from the date of such destruction or damage
whichever is the shorter and in the event of any dispute
concerning the provisions of this sub-clause the same shall be
determined by a single arbitrator in accordance with the
provisions of the
<PAGE>
Arbitration Acts 1954 and 1980 or any statutory modification or
re-enactment thereof for the time being in force;
(3) Any Notice under this Lease shall be in writing. Any Notice to the
Tenant shall be sufficiently served if signed by the Landlord or
its Agent for the time being and handed to the Tenant or left at
or affixed to the demised premises or any part thereof or sent by
Registered or Recorded Post to the registered office of the Tenant
in Great Britain or Northern Ireland or Republic of Ireland. Any
Notice by the Tenant to the Landlord shall be sufficiently served
if handed to the Landlord or its Agent for the time being or sent
by Registered or Recorded Post to the Landlord at its registered
office or its Agent (at its principal place of business) for the
time being. A Notice sent by post shall be deemed to have been
given forty-eight hours after the time of posting to the address
to which it was sent.
(4) Except in relation to Clause 3 hereof or where the provisions of
this Lease provide for a determination by the Landlord or its
architects auditors accountants agents or surveyors to be final
and conclusive as against the Tenant or where the same relate to
forfeiture of this lease or relief from forfeiture or matters
related thereto all cases of dispute or difference arising out of
or touching upon the rights duties or liabilities of the parties
under this Lease shall be referred to the determination of a
single arbitrator to be agreed upon by the parties or failing
agreement to a person nominated by the President of the
Incorporated Law Society of Ireland upon the application of either
party and the Arbitration shall be conducted in manner provided by
the Arbitration Acts 1954 and 1980 or any statutory modification
or re-enactment thereof for the time being in force. The reference
to the President shall include the duly appointed Deputy of the
President or any person authorized by the President to make
appointments on his behalf.
<PAGE>
(5) The Landlord shall have the right from time to time to amend and
add to the Rules and Regulations set out in the Third Schedule
hereto in such manner as the Landlord shall consider to be in the
best interests of the Development.
10. The Plans annexed hereto and the details shown thereon shall be for the
purpose of identification only and no warranty or condition expressed or
implied shall be given or be deemed to be given in respect of such Plans
or the details shown thereon or any matter or thing shown thereon or
referred to.
INTERPRETATION
11. In this Indenture where the context so admits the words importing the
neuter gender only shall include the masculine or feminine gender as
appropriate and vice versa and words importing the masculine gender only
shall include the feminine gender and words importing the singular number
only shall include the plural number and vice versa and where the Tenant
shall from time to time be or consist of two or more individuals the
covenants herein expressed to be made by the Tenant as the case may be
shall be deemed to be made by such individuals jointly and severally.
Any reference herein contained to an enactment or to a series of
enactments shall be deemed to include any enactment from time to time
extending, amending repealing, replacing or continuing the same or any
order regulation instrument direction scheme or permission made under it
or deriving validity from it.
HEADER NOTES TO AFFECT CONSTRUCTION
12. The Header notes hereof shall not affect the construction of these
presents.
NO WARRANTY
13. Nothing in this Lease contained shall be deemed to constitute any
warranty by the Landlord that the demised premises or any part thereof
are authorized under the Planning Acts or otherwise for use for any
specific purpose.
<PAGE>
BREAK CLAUSE
14. The Tenant shall have the option of surrendering this Lease on the 27th
day of February 2001 on giving unto the Landlord at least one years
notice in writing of its intention to vacate the demised premises
expiring on that date such notice to be served not earlier than 1st
December 1999 and not later than the 1st March 2000. In the event of the
Tenant serving such a notice the Landlord shall accept vacant possession
of the demised premises from the Tenant on the 27th February 2001
whereupon this Lease shall be at an end but without prejudice to the
right of the Landlord to proceed on foot of any antecedent breach of
covenant.
IT IS HEREBY CERTIFIED that the premises hereby demised are situate in the
Borough of Dun Laoghaire.
IT IS HEREBY FURTHER CERTIFIED that the transaction hereby effected does not
form part of a larger transaction or of a series of transactions in respect of
which the amount or value or the aggregate amount or value of the consideration
(other than rent) exceeds IRL5,000.00.
AND IT IS HEREBY FURTHER CERTIFIED that for the purposes of the stamping of this
instrument that this is an instrument to which the provisions of Section 112 of
the Finance Act, 1990 do not apply for the reason that the premises comprise
office premises.
AND IT IS HEREBY FURTHER CERTIFIED for the purposes of Section 29 of the
Companies Act, 1990 that the Landlord and the Tenant are not bodies corporate
connected with one another in a manner which would require this transaction to
be ratified by resolution of either.
IN WITNESS whereof the parties hereto have caused their respective Common Seals
to be hereunto affixed the day and year first herein WRITTEN.
<PAGE>
FIRST SCHEDULE
PART I
DEMISED PREMISES
ALL THAT the Ground Floor Offices being portion of the Development known or to
be known as Temple Road, Blackrock in the County of Dublin as is more
particularly delineated and shown for the purpose of identification only on the
plan annexed hereto and thereon edged red and which premises include:-
(a) the internal plaster surfaces and finishes of all structural or load
bearing walls and columns therein or which enclose the same, but not any
other part of such walls and columns;
(b) the entirety of all non-structural or non-load bearing walls and columns
therein or which enclose the same;
(c) the inner half severed medially of the internal non-load bearing walls
(if any) that divide the same from other parts of the building on the
Development;
(d) the floor finishes thereof save that the lower limit of the Demised
Premises shall not extend to anything below the floor finishes (except
that the cavity above any suspended ceilings shall be included);
(e) the ceiling finishes thereof, including all suspended ceilings (if any)
and light fittings save that the upper limit of the Demised Premises
shall not extend to anything above the ceiling finishes (except that the
cavity above any suspended ceilings shall be included);
(f) all window frames and window furniture and all glass in the windows and
all doors, door furniture and door frames;
(g) all sanitary and hot and cold water apparatus and equipment and the
radiators (if any) therein and all fire fighting equipment and hoses
therein;
<PAGE>
(h) all Conduits therein and exclusively serving the same.
PART II
EASEMENTS, RIGHTS AND PRIVILEGES GRANTED
1. All Landlord's fixtures and fittings in and about the demised premises,
and
2. The right of ingress, egress and regress at all times during the business
hours of 8.00 a.m. to 6.30 p.m. on Mondays to Fridays (Christmas Day and
Bank Holidays excepted) and at such other times as shall be agreed by
prior special arrangement with the Landlord through the Common Parts
leading to the demised premises;
3. The use at the times aforesaid by employees and visitors of the Tenant of
2 (two) car-parking spaces in the car park area as shown colored yellow
on the plan attached hereto (but so that the Landlord shall be under no
liability in respect of any loss or damage to any vehicle or the contents
of any vehicle in such car-parking spaces);
4. The right of free passage and running of water and soil and other
effluent in and through the sewers drains and channels made or to be made
through or under the Development;
5. The free and uninterrupted passage of water and air through the central
heating and/or air-conditioning apparatus;
6. The right of passage of gas electricity air smoke or other effluvia to
and from the demised premises through the pipes wires telephone and
telegraph cables ducts flues and conduits (if any) passing along or
through or over upon or under the Development and the adjoining premises
of the Landlord.
7. The right of support shelter and protection for the demised premises from
the adjoining or neighboring premises and all other parts of any building
erected or to be erected of which the demised premises may form part as
are at present enjoyed or intended to be enjoyed by the demised premises.
<PAGE>
8. Full and free right and liberty for the Tenant its tenants employees and
duly authorized agents upon reasonable notice to enter upon other
premises comprised in the Development so far as may be reasonably
necessary for the purpose of repairing or maintaining the demised
premises or otherwise performing the Tenant's obligations hereunder the
tenant in the exercise of such rights doing as little damage as possible
to such other premises and forthwith making good any damage thereby
occasioned.
And so that all such easements rights and privileges in this Schedule
granted shall be enjoyed in common with the Landlord and all other
persons thereto entitled.
PART III
EXCEPTIONS AND RESERVATIONS
Except and reserved unto the Landlord and the lessees and tenants of the
Development and all other persons at any time authorized by them or any of them
or otherwise entitled to the same rights as follows:
Full right and liberty to vary or permit the variation of the present or any
future scheme layout or use of the Development and without derogating from the
generality of the foregoing:-
(1) Full right and liberty to build upon the demised premises or to build
upon or to extend in height or otherwise buildings from time to time
standing on any land adjoining or adjacent to the demised premises or any
building or any part thereof of which the demised premises form part
notwithstanding that the access of light and air to the demised premises
and the lights windows and openings thereof may be affected;
(2) Full right and liberty from time to time to change vary reduce or add to
the area extent level location and arrangement of the Common Parts and of
the improvements and amenities provided by the Landlord and to restrict
parking and to close off part or parts of any areas designated from time
to time for car parking and to construct buildings or other erections
thereon or on any part or parts of the Development and to close
temporarily all or any of the said Common Parts and improvements and
amenities for the purpose of
<PAGE>
preparing renovating and replacing cleansing and maintaining the same
taking at all times proper account of the reasonable interests of the
tenant and other tenants in the Development and in accordance with the
principles of good estate management.
(3) The full and free right and liberty of running of water and soil gas and
electrical energy the flow of air and the free passage of smoke or other
effluvia from and to the Development and the adjoining premises of the
Landlord and the buildings now or hereafter to be erected in the
Development through the gutters pipes sewers drains wires telephone and
telegraph cables conduits ducts flues and watercourses now or at any time
during the term in or over or upon or under or passing along or through
the demised premises and to enter upon the demised premises and to instal
and make connection with such gutters pipes sewers drains wires telephone
and telegraph cables conduits ducts flues and watercourses or any of them
for the purpose of exercising the said right of running of water and soil
gas electrical energy flow of air and free passage of smoke or other
effluvia the person or persons exercising such rights making good any
damage to the structure of the demised premises thereby occasioned;
(4) Full right and liberty at all reasonable times to enter upon the demised
premises with or without appliances and workmen and others as often as
may be necessary to view the state and condition of and to repair and
maintain the demised premises and clean alter renew remove or instal such
gutters pipes sewers drains wires conduits ducts flues and watercourses
serving the demised premises and adjoining premises and the Development
(including the right if necessary to erect and maintain scaffolding) the
persons exercising such rights ensuring that inconvenience is limited as
far as practicable and that access to the demised premises is not as far
as practicable unduly obstructed;
(5) The full rights of support and of shelter and protection to adjoining
premises and all other parts of the building of which the demised
premises form part and of the Development as are at present enjoyed from
the demised premises;
<PAGE>
(6) The full right and liberty to enter upon the demised premises at any time
during the term hereby granted in order to build on or into any party or
other walls of the demised premises the person or persons exercising such
rights making good all damage to the structure of the demised premises
thereby occasioned;
(7) The right to build or instal or to continue building or installing (and
thereafter to maintain) buildings erections structures signs and fixtures
on the Common Parts or on any part of the Development and/or upon into or
projecting over or under or taking support from the demised premises or
the building of which the demised premises form part PROVIDED that such
buildings and erections and structures and signs and fixtures shall not
become nor form part of the demised premises.
But so that the tenant shall not be entitled to any compensation
whatsoever in respect of the exercise by the Landlord its agents or any
of the persons thereto entitled of any of the rights hereby excepted and
reserved.
SECOND SCHEDULE
PARTICULARS OF COMPONENTS OF SERVICE CHARGE.
1. The costs of the insurances which the Landlord shall incur in providing
the services herein set out.
2. The costs of the repairs decorations and other works which the Landlord
covenants to effect in this Lease.
3. The total costs and expenses incurred in managing operating repairing
renovating cleaning maintaining and replacing the Common Parts and
specifically including but without prejudice to the generality of the
foregoing--
(a) gardening landscaping and line painting;
(b) lighting heating ventilation and air-conditioning (including
central heating);
<PAGE>
(c) sanitary and health control and cleaning and the removal and
disposal of refuse;
(d) providing staff and personnel for carrying out duties in respect
of the operation and maintenance of the Development and the Common
Parts and providing residential or other accommodation for them
and providing repairing and maintaining an office situate at or
near the Development and other accommodation used solely for the
purpose of the Development.
(e) the policing control and security of the Development;
(f) depreciation and provision for replacement (whether by way of an
annual sinking fund or otherwise at the discretion of the
Landlord) of machinery equipment plant apparatus and things
forming part of or used in the operation and maintenance of the
Common Parts;
(g) the provision and maintenance of fire fighting equipment;
(h) the cost of management (including the collection of rent and
service charge) and of employing management agents and the cost of
employment of accountants auditors and surveyors to determine the
amount of the Service Charge;
(l) any legal costs and expenses incurred in the course of managing
operating and maintaining the Development and the Common Parts and
enforcing any covenants conditions and regulations with respect
thereto or complying with or otherwise taking action on any
notices or orders in respect of the Development or the Common
Parts;
(j) all rates taxes charges impositions and outgoings whatsoever
whether parliamentary local or of any other description which may
be assessed charged or imposed or payable on or in respect of the
whole or any part of the Development or the Common Parts so far as
such payments are not the liability of or recoverable from the
Tenant or any other tenant in the Development;
<PAGE>
(k) Providing such reception and security staff for the reception area
and the common areas as may from time to time appear appropriate
to the Landlord
(l) Value Added Tax on all sums payable pursuant to the provisions of
this Schedule.
THIRD SCHEDULE
RULES AND REGULATIONS
(1) The demised premises shall not be used in any manner inappropriate to a
high class office.
(2) No live animals shall be kept in the demised premises.
(3) Nothing shall be deposited and no refuse shall be thrown outside the
demised premises and all refuse and waste shall be deposited by the
tenant in a compactor or area designated by the landlord from time to
time for this purpose.
(4) No paraffin oil or liquid or solid fuel heater shall be used in the
demised premises.
(5) No dangerous or offensive goods shall be stored or kept in the demised
premises.
(6) The Tenant shall keep on the demised premises in compliance with the
Landlord's and Insurers reasonable requirements and legal requirements
(if any) fire fighting and extinguishing apparatus which shall be open to
the inspection of the Landlord and Insurers and shall not obstruct or
permit or suffer to be obstructed the access to or means of working such
apparatus and appliances or any means of escape.
(7) No fuel shall be burned in the demised premises and the Tenant shall
comply in all respects with the requirements of any smoke control order
for the time being in force in the area in which the demised premises are
situate.
(8) No loudspeakers televisions sets radios or other devices shall be used in
a manner so as to be heard outside the demised premises.
<PAGE>
(9) The Tenant shall keep the demised premises at a temperature sufficiently
high to prevent freezing of water in pipes and fixtures.
(10) The plumbing facilities shall not be used for any other purposes than
that for which they are constructed and no foreign substance of any kind
shall be thrown therein.
(11) The Tenant shall not burn any refuse of any kind or any other material in
or about the demised premises or the Development.
(12) The Tenant shall give immediate notice to the Landlord in case of fire or
accident or defects in the demised premises.
(13) The Tenant shall use its best endeavours to ensure that persons having
recourse to the Development shall observe any regulations or instructions
made or given by the Landlord with regard to the parking of vehicles in
the car parking or other areas of the Development.
<PAGE>
PRESENT when the Common Seal
of THE LANDLORD was affixed
hereto:
PRESENT when the Common Seal
of THE TENANT was affixed
hereto:
<PAGE>
EXHIBIT 10.37
THIS LEASE made the 20th day of March, One Thousand Nine Hundred and Ninety-One
BETWEEN CORKE ABBEY INVESTMENTS LIMITED having its Registered Office at 22
Earlsfort Terrace, Dublin 2 (hereinafter called "the Landlord" which expression
where the context so admits shall include its Successors in title and assigns)
of the one part, AND ANDREWS TRAVEL CONSULTANTS LIMITED having its Registered
Office at 10 Meadowvale, Blackrock, County Dublin (hereinafter called "the
Tenant" which expression where the context so admits shall include its
successors in title and assigns) of the other part.
WITNESSETH as follows:
1. DEFINITIONS:-
In this Lease the following expressions shall have the following
meanings:
"DEMISED PREMISES" means the premises described in the First Part of the
First Schedule hereto with the Easements Rights and Privileges but
excepting the Exceptions and Reservations;
"EASEMENTS RIGHTS AND PRIVILEGES" means those specified in the Second
Part of the First Schedule hereto;
"EXCEPTIONS AND RESERVATIONS" means those specified in the Third Part of
the First Schedule hereto;
"THE DEVELOPMENT" means the land shown on Plan No. 1 edged in red
together with the building (of which the demised premises forms part) and
Landlord's fixtures from time to time erected or standing upon the said
land (known or to be known as Grattan House, Temple Road, Blackrock in
the County of Dublin) but excluding such parts of the said land and such
parts of the building and such Landlord's fixtures erected or standing on
any part of such land as may be excluded by the Landlord giving to the
Tenant three months' written notice of such exclusion;
"COMMON PARTS" means all such parts of the Development as are not for the
time being let separately or as are not in the possession of the Landlord
and the other facilities improvements services and privileges which are
from time to time provided by the
<PAGE>
Landlord for common or general use in common by the Tenant and the other
tenants and occupiers of the Development and other persons authorised by
the Landlord including (without prejudice to the generality of the
foregoing) the roof and exterior walls, foundations, internal load
bearing walls and the structural parts of the roofs, ceilings and floors,
all party structures, boundary walls, pedestrian ways, entrances and
exits, stairways, ramps, landscaped areas, corridors, passages, lobbies,
landings, staircases, lifts and all conduits except any that form part of
the demised premises and other lettable areas.
"CONDUITS" means all sewers, drains, pipes, gullies, gutters, ducts,
mains, watercourses, channels, subways, wires, cables, conduits, flues
and other conducting media of whatsoever nature and kind.
2. DEMISE
In consideration of the rent hereby reserved and of the covenants on the
part of the Tenant hereinafter contained the Landlord hereby demises unto
the Tenant ALL those the Demised Premises being part of the Development
together with the easements rights and privileges but excepting and
reserving the exceptions and reservations TO HOLD the demised premises
except and reserved as aforesaid unto the Tenant for the term of 35
(thirty five) years (hereinafter called "the term") from the 1st day of
March One Thousand Nine Hundred and Ninety-One YIELDING AND PAYING
therefor during the first year of the said term the yearly rent of
L25,596.00 (Twenty-Five Thousand Five Hundred and Ninety-Six Pounds) and
during the second year of the said term the yearly rent of L31,878.00
(Thirty-One Thousand Eight Hundred and Seventy-Eight Pounds) and during
the third, fourth and fifth years of the said term the yearly rent of L
34,670.00 (Thirty-Four Thousand Six Hundred and Seventy Pounds) and
thereafter the said yearly rent of L34,670.00 (Thirty-Four Thousand Six
Hundred and Seventy Pounds) or such increased rent as may be payable
pursuant to the provisions of clause 3 hereof by four equal quarterly
payments in advance on every 1st day of March, 1st day of June, 1st day
of September, and 1st day of December, the first payment to be made on
the 1st day of March One Thousand Nine Hundred and Ninety-One and to be
in respect of the period
<PAGE>
from the 1st day of March One Thousand Nine Hundred and Ninety-One to the
31st day of May One Thousand Nine Hundred and Ninety-One AND ALSO PAYING
by way of additional rent the amount or amounts payable by the Tenant
pursuant to the Tenant's covenant hereinafter contained in Clause 4(1)(b)
in respect of insurance effected from time to time by the Landlord such
additional payment to be payable at the times and in the manner specified
at said Clause 4(1)(b).
AND ALSO PAYING by way of additional rent the amount or amounts payable
by the Tenant pursuant to the Tenant's covenant hereinafter contained in
Clause 6 in respect of service charge such additional payment to be
payable at the times and in the manner specified at the said Clause.
All such payments save for any initial broken payment payable hereunder
to be paid by Bankers Order or variable direct debit mandate (at the
option of the Landlord) PROVIDED ALWAYS that if the Tenant shall fail to
pay the rent hereinbefore reserved or all or any of the additional rents
hereinafter reserved and made payable or the contribution to Insurance
Premium payable by the Tenant pursuant to clause 4(1)(b) hereof or the
Service Charge payable by the tenant pursuant to clause 6 hereof within
fourteen (14) days of the day and in the manner herein prescribed for
payment of same such unpaid sum or sums shall bear interest from and
including the day on which same shall have become due to date of actual
payment at the A rate of interest plus three per cent (3%) charged by
Allied Irish Banks PLC in the Republic of Ireland at that date or if
there shall be no such rate twenty per cent (20%) per annum.
RENT REVIEW PROVISIONS
(i) In this Clause the following expressions shall have the following
meanings respectively:
(a) "Review Date" shall mean the last day of the fifth year and
the last day of each subsequent fifth year of the term
hereby granted.
(b) "Current Market Rent" shall mean the gross full market rent
without any deduction whatsoever at which the demised
premises might reasonably be
<PAGE>
expected to be let at the nearest Review Date in the open
market without a fine or premium and with vacant possession
thereof by a willing Landlord to a willing Tenant for a
term equal to the term of this Lease but having regard to
any statutory rights of the Tenant of renewal under a Lease
on the same terms and conditions in all other respects as
this present Lease and upon the supposition (if not a fact)
that the Tenant has complied with all the obligations as to
repair and decoration herein imposed there being
disregarded:
(1) any effect on rent of the fact that the Tenant has
been in occupation of the demised premises and any
goodwill attached to the demised premises by reason
of the carrying on thereat of the business of the
Tenant
(2) any effect on rent of any improvement (whether
within the meaning of the Landlord and Tenant Acts,
1967 to 1989 or any Acts amending extending or
re-enacting same) of the demised premises or any
part thereof carried out by the tenant with the
Licence of the Landlord at the Tenant's own expense
(otherwise than in pursuance of any obligation to
the Landlord) and carried out during the term of
this Lease.
(ii) The rent for the time being payable by the Tenant hereunder
shall be subject to increase in accordance with the
following provisions of this clause.
(iii) The Landlord its servants or agents shall be entitled by
notice in writing given to the Tenant not earlier than
twelve months before and at any time after a Review Date to
call for review of the rent payable by the Tenant to the
Landlord at the Review Date specified in the notice and if
upon any such review it shall be ascertained or determined
that the Current Market Rent of the demised premises at the
Review Date is greater than the rent payable hereunder
immediately prior to such Review Date then as from that
Review Date the yearly rent payable hereunder shall be
increased to the Current Market Rent so ascertained
<PAGE>
PROVIDED that in no circumstances shall the rent payable
hereunder following such review be less than the rent
payable by the Tenant immediately prior to the Review Date.
(iv) Every such review as aforesaid shall in the first instance
be agreed by the Landlord and the Tenant or their
respective Surveyors in collaboration but if no agreement
as to the amount of the Current Market Rent at the Review
Date shall have been reached between the parties hereto or
their Surveyors within one month or such extended period as
may be agreed by the Landlord and Tenant after the date of
the Landlord's notice calling for such review then the
question of the amount of the Current Market Rent of the
demised premises at the Review Date shall be referred to
the decision of a single arbitrator who shall be a
Chartered Surveyor nominated by the Landlord by notice in
writing to the Tenant and if the Tenant shall reject such
nomination or fail or neglect to agree within one month of
the Landlord's notice such arbitrator shall be appointed on
the application of the Landlord by the Chairman for the
time being of the Society of Chartered Surveyors in the
Republic of Ireland which term shall include any other body
established from time to time in succession or substitution
or carrying on the function currently carried out by the
same and in default of any such appointment for any reason
within one month of such application by a Chartered
Surveyor to be nominated by the Landlord and this
sub-clause shall be deemed to be a submission to
arbitration within the Arbitration Acts 1954 and 1980 or
any statutory modification or re-enactment thereof for the
time being in force and subject to the jurisdiction of the
Courts of the State for the enforcement of any award of
said Arbitrator.
(v) If the Arbitrator shall fail to determine the new rent
within two months of his appointment or nomination or if he
shall relinquish his appointment or die or if it shall
become apparent that for any reason he will be unable to
complete his duties hereunder a new arbitrator shall be
appointed or nominated in his place in accordance with
sub-clause (iv) above.
<PAGE>
(vi) If upon any such review the amount of the increased rent
shall not be ascertained or determined prior to the Review
Date the Tenant shall continue to pay rent at the yearly
rate payable immediately prior to the Review Date until the
quarter day next following the ascertainment or
determination of any increased rent whereupon there shall
be due as a debt payable by the Tenant to the Landlord on
demand a sum equal to the amount by which the rent for the
period since the Review Date calculated at the increased
rate exceeds the rent for that period calculated at the
previous rate and in addition shall pay interest on said
sums from the Review Date until the date of actual payment
at the rate of interest for the time being chargeable under
Section 22 of the Courts Act 1981 plus 3% (three per cent)
at the Review Date or if there shall be no such rate the
corresponding or nearest appropriate rate thereto.
(vii) If upon any such review as aforesaid it shall be agreed or
determined that the rent previously payable hereunder shall
be increased the Landlord and the Tenant shall (if required
by the Landlord) forthwith at any time not later than one
year from such determination or expiration complete and
sign a written memorandum recording the increased rent
thenceforth payable and the Tenant shall pay the Stamp Duty
payable on such Memorandum.
(viii) In the event of the Landlord being prevented or prohibited
in whole or in part from exercising its rights under this
clause and/or obtaining an increase in the rent on any of
the Review Dates by reason of any Legislation Statute
Government Order or Decree or Notice (increase in this
context meaning such increase as would be obtainable
disregarding the provisions of any such legislation and
otherwise as aforesaid) then the date at which the review
would otherwise have taken effect shall be deemed to be
extended to permit and require such review to take place on
the first date thereafter upon which such right or increase
may be exercised and/or obtained in whole or in part and
when in part on so many occasions as shall be necessary to
obtain the whole increase (meaning the whole of the
increase which the Landlord would have obtained if not
prevented or prohibited as aforesaid) and if there shall be
a partial prevention only there shall
<PAGE>
be a further review on the first date or dates as aforesaid
notwithstanding the rent may have been increased in part on
or since the date of review PROVIDED ALWAYS that the
provisions of the Sub-clause shall be without prejudice to
the Landlord's rights to review the yearly rents on the
Review Dates as specified in sub-clause (i).
THE TENANT HEREBY COVENANTS WITH THE LANDLORD as follows:
PARENT AND INSURANCE PREMIUMS
(1) (a) To pay the rent and the increased rent hereby reserved on
the days and in manner aforesaid without deduction or
set-off.
(b) To pay to the Landlord from time to time on demand on the
date or dates when the Insurance Premium falls due without
any deduction or abatement 33.33% (Thirty three point three
three per cent) of the amount or amounts expended by the
Landlord for keeping on foot the insurance in accordance
with Covenant 7(4) on the part of the Landlord herein.
(c) To pay to the Landlord on demand fees incurred by the
Landlords Surveyor in determining the reinstatement value
of the demised premises from time to time.
(d) To pay to the Landlord on demand all fees and expenses
incurred by the Landlord and/or its agents in connection
with or in contemplation of any entry onto the demised
premises for the purpose of viewing the condition thereof
or of inspecting any works in progress and/or preparation
of any notice pursuant to clause 4(8) hereof, during or
after the expiration of this Lease.
PAY RATES AND OUTGOINGS
(2) (a) From time to time and at all times during the said term to
pay and discharge all rates water rates taxes duties
charges assessments impositions burdens and outgoings of an
annual or recurring nature
<PAGE>
and also of a non-annual or non-recurring nature where the
same are legally chargeable against the Tenant or occupier
and whether Parliamentary or Local or of any other
description that may be assessed charged or imposed upon
the demised premises or the owner or occupier in respect
thereof (Landlords Capital Taxes only excepted) and to
refund to the Landlord any such amounts paid by it in
respect of the demised premises and pending a separate
valuation of the demised premises to pay to the Landlord by
way of additional rent rates at the poundage from time to
time current on a rateable valuation of L85.00;
(b) To be solely responsible for and promptly pay all charges
for water gas electricity or heat (if any) or any other
utility used or consumed in the demised premises but so
that the Landlord shall not be liable in any event for any
interruption or failure in the supply of any such utilities
to the demised premises;
COMPLY WITH ENACTMENTS
(3) At its own expense to do and execute all such works as are or
shall be at any time during the term under or by virtue of any Act
or Acts of Parliament or the Oireachtas already passed or
hereafter to be passed and for the time being in force or Law of
the European Community now or hereafter to be passed and any
instrument directive regulation or bye-law made thereunder which
has force in the State or by any Local or other Authority directed
or required to be done or executed in respect of the demised
premises or any part thereof whether by the owner or occupier
thereof and to indemnify and keep the Landlord indemnified against
all or any claims demands and liability in respect thereof.
FIRST ALTERATIONS
(4) Not without the previous consent in writing of the Landlord which
if granted may be subject to such conditions as the Landlord
thinks fit to erect or to permit or suffer to be erected any new
building upon the demised premises or to make or to
<PAGE>
permit or suffer to be made any external or structural alteration
in or addition whatsoever to the demised premises and any such
erections alterations or additions for which consent is granted
shall be carried out in accordance with plans and specifications
to be first approved by and to the satisfaction in all respects of
the Landlord's architects or surveyors and the Tenant shall pay
the reasonable and proper charges of such architects or surveyors
and of the Solicitors to the Landlord for each such consent.
NOT TO AVOID INSURANCE
(5) (a) Not to do or permit or suffer upon or bring or suffer to be
brought on to the demised premises any matter or thing or
article which shall or may cause the policy or policies for
the insurance of the demised premises or of any adjoining
or neighbouring premises or of the Development or any part
thereof to become void or voidable or the premium or
premiums payable in respect of the said policy or policies
to be increased above the ordinary or common rate
applicable to the demised premises or any adjoining or
neighbouring premises or the Development and to repay to
the Landlord all sums paid by way of increased premiums and
expenses incurred by it in or about the continuance or
renewal of such policy or policies rendered necessary by a
breach of this covenant and all such payments hall be added
to the rent hereinbefore reserved and shall be recoverable
as rent;
(b) In the event of the demised premises or any part thereof
being destroyed or damaged from or by any of the Insured
Risks (as hereinafter defined) and the whole or part of the
insurance money in respect of the same being irrecoverable
by reason solely or in part of any act or default of the
tenant then and in every such case the Tenant shall
forthwith pay to the Landlord the whole or (as the case may
require) a fair proportion of the cost of rebuilding and
reinstating the demised premises and any other premises in
respect of which the Landlord's Insurance shall be vitiated
by the act or default of the Tenant.
<PAGE>
REPAIR MAINTAIN AND KEEP TIDY
(6) (a) Throughout the term well and substantially to repair
maintain and cleanse the demised premises and all additions
thereto with all due diligence (but so that the Tenant
shall not be liable under this covenant for any repairs
covenanted to be carried out by the Landlord under the
provisions of this Lease) and to keep the same well and
substantially repaired maintained and cleansed and to
execute all such sanitary and other works as the Local
Authority may from time to time lawfully require to be
executed by the owner or occupier upon or in respect of the
demised premises or any part thereof for any purpose under
any statutory provision in that behalf;
(b) From time to time and at all times during the term well and
substantially to repair maintain and cleanse or when
requisite to pay and contribute a proportion towards the
expense of repairing maintaining and cleansing all party
walls floors structures and ceilings such proportion in the
event of dispute to be decided by the Landlord's surveyors
whose decision shall be final and binding on the Tenant;
(c) Not to block up obstruct or interfere with the ventilating
louvres situate in the walls and doors of the demised
premises (if there be any);
(d) To keep the demised premises clean and tidy and free from
deposits of material or refuse and not to bring or keep or
suffer to be brought or kept on the demised premises or on
the Development or any part of any of them any dump or
rubbish or scrap heap or anything which in the opinion of
the Landlord is or may become unclean unsightly noisome or
offensive or calculated or liable to detract from the
quality amenity or reputation of the Development or of any
adjoining premises or any of them and so often as it shall
be necessary or desirable to remove from the demised
premises and from the Development all such refuse rubbish
and scrap which may accumulate or be there.
<PAGE>
(7) Without prejudice to the generality of the provisions of
paragraphs (a) and (b) of sub-clause (6) of this clause to paint
with two coats at least of good quality paint all the inside parts
of the demised premises as are usually painted in a good and
workmanlike manner such painting of the inside parts to be carried
out not less than once in every third year the last such painting
to be in the year immediately preceding the termination of this
Lease and at the same time with every said inside painting to
paper grain and varnish and colour such parts of the inside of the
demised premises as are usually or have been previously papered
grained varnished or coloured;
TO PERMIT INSPECTION
(8) To permit the Landlord and its agents and workmen with all
necessary appliances to enter upon the demised premises at all
reasonable times after giving reasonable notice to the Tenant for
the purpose of viewing the condition thereof taking a schedule of
the fixtures and fittings therein or of inspecting any works in
progress and upon written notice given by the Landlord to execute
any repairs lawfully required by such notice for which the Tenant
is liable under the provisions hereof and if the Tenant shall not
execute such repairs within two months of the date of the service
upon it of such notice (or if in the opinion of the Landlord there
is any emergency then within such lesser period as may be
practicable but in such event without any delay whatsoever) the
Landlord may itself execute such repairs and the costs incurred by
it in so doing (as certified by the Landlord's surveyors) shall be
paid by the Tenant to the Landlord upon demand and shall be a debt
recoverable from the Tenant by the Landlord in any court of
competent jurisdiction;
TO PERMIT LANDLORDS WORKS
(9) To permit the Landlord and all persons authorised by it and the
tenants or occupiers of the Development (the said tenants or
occupiers if authorised in writing by the Landlord) and their
officers employees agents contractors licensees and workmen at all
reasonable times after making a prior appointment (except in
<PAGE>
case of emergency) to enter (and if necessary to erect and
maintain scaffolding) upon the demised premises with all necessary
appliances:
(a) to execute repairs alterations painting redecoration or
other work to the demised premises or any adjoining or
neighbouring premises or to the Development.
(b) for the purpose of inspecting repairing renewing cleansing
emptying maintaining or protecting any sewers watercourses
culverts drains gutters conduits water pipes oil pipes and
tanks electric wires and cables gas pipes and telephone
wires in under or over the demised premises in connection
with or for the accommodation of any adjoining or
neighbouring premises or the Development.
In either case the person or persons exercising such rights making good
or paying compensation for any damage (other than consequential loss
or damage) thereby occasioned and causing as little inconvenience as
practicable to the Tenant;
AGAINST NUISANCE
(10) Not to carry on or permit or suffer to be carried on upon any part
of the demised premises any offensive or noisy trade business
manufacture or occupation or permit or suffer the demised premises
to be used for any illegal or immoral purposes nor to do or permit
or suffer to be done in or upon the demised premises anything
which in the opinion of the Landlord may be or tend to be a
nuisance annoyance disturbance or damage or in any way interfere
with the quiet or comfort of the occupants of adjoining or
neighbouring premises or the Development and to execute all such
works as may be necessary for abating any such nuisance in
obedience to a notice lawfully served by a Local or Public
Authority or pursuant to any Court Order or in obedience to any
Notice served by the Landlord and in default thereof to pay to the
Landlord all costs charges and expenses which may be incurred by
the Landlord in abating such nuisance in respect of the demised
premises.
<PAGE>
AGAINST EASEMENTS
(11) To use its best endeavours to prevent any easement or right
belonging to or used with the demised premises from being
obstructed or lost and not knowingly to allow any encroachment to
be made or easements to be acquired on under or over the demised
premises and the Development except with the consent of or by the
direction of the Landlord.
(12) (a) Not to paint fix or exhibit or permit or suffer to be
painted fixed or exhibited any advertisement notice sign
placard hoarding name or writing to or upon any part of the
exterior of the demised premises or on or in the windows or
external walls of the demised premises or upon any entrance
doors thereof without the consent in writing of the
Landlord (such consent not to be unreasonably withheld in
the case of the Tenant's usual trade name and fascia of a
permanent character) and PROVIDED that in connection with
any such consent which may be given as aforesaid any
necessary consent of the appropriate authorities under any
planning or other legislation be also first obtained by the
Tenant;
(b) Not to hang or place or exhibit or permit or suffer to
be hung or placed or exhibited any goods outside the
demised premises or the entrance doors or display
windows of the demised premises or upon or over any part
of the Development.
AERIALS
(13) Not to erect or permit the erection of any television or radio
receiving aerials on the exterior of the demised premises or in or
upon the Development.
LETTING SIGNS AND VIEWING
(14) (a) To permit the Landlord during the six months immediately
preceding the expiration of the term to affix and retain
without interference to or upon any part of the demised
premises (but so as not unduly to obscure the
<PAGE>
windows thereof or interfere with the Tenant's use thereof)
a notice for reletting the same and during the said six
months to permit persons with written authority from the
Landlord or its agents at reasonable times of the day to
view the demised premises;
(b) To permit upon reasonable notice at any time during the
term hereof prospective purchasers of or dealers in or
agents instructed in connection with the sale of the
Landlord's reversion or of any interest superior to the
term hereof to view the demised premises without
interruption provided the same are authorised in writing by
the Landlord or its agent.
CONVEYANCING ACT NOTICES
(15) To give immediate notice thereof to the Landlord of any notice or
claim affecting the demised premises and to pay all costs charges
and expenses (including Solicitors' costs and surveyors' fees)
incurred by the Landlord for the purpose of or incidental to the
preparation and service of a notice under Section 14 of the
Conveyancing and Law of Property Act 1881 requiring the Tenant to
remedy a breach of any of the covenants herein contained
notwithstanding forfeiture for such breach shall be avoided
otherwise than by relief granted by the Courts;
ALIENATION
(16) (a) Not to assign underlet or part with the possession control
or occupation of nor to franchise the use of part only of
the demised premises;
(b) Not to assign underlet or part with the possession or
control or occupation of nor to franchise the use of the
whole of the demised premises without the consent in
writing of the Landlord first obtained which consent shall
not be unreasonably withheld in the case of a respectable
and responsible assignee or underlessee proof of which is
furnished to the Landlord and upon any such assignment to
obtain if the Landlord shall so require an acceptable
Guarantor or Guarantors for any Assignee and subject to the
following provision or such of them as may be appropriate,
that is to say:-
<PAGE>
(i) The Tenant shall prior to any such assignment or
underlease apply to the Landlord and give all
reasonable information concerning the proposed
assignee or under-Lessee as the Landlord may
require.
(ii) The Landlord's consent to any such Assignment or
under-letting shall be given in writing and the
Tenant shall pay the Landlords' reasonable costs in
connection with such consent.
(iii) In the case of an under-Lease the same shall be of
the entire of the demised premises at the then
current market rent without any deduction whatsoever
and without a fine or premium or at the rent payable
hereunder at the time of the granting of such
under-Lease (whichever is the higher) and the
under-Lessee shall if required by the Landlord enter
into a direct covenant with the Landlord to perform
and observe all the covenants (other than that for
payment of the rent hereby reserved) and conditions
herein contained and every such under-Lease shall
also be subject to the following conditions, that is
to say that it shall contain:-
(1) an unqualified covenant on the part of the
under-Lessee not to assign under-Lease or
part with or share the possession of part
only of the premises thereby demised;
(2) a covenant on the part of the under-Lessee
not to assign the premises thereby demised
without obtaining the previous consent in
writing of the Landlord hereto;
(3) a covenant condition or proviso under which
the rent reserved by the under-Lease shall be
reviewed at least every five years and if
every five years the Review Dates therein
shall be the days which are six months after
the Review Dates in this Lease
(notwithstanding that this provision may
necessitate a first review before the
expiration of five years from the
commencement
<PAGE>
of the under-Lease) but otherwise in the same
terms as provided in this Lease;
(4) a covenant condition or proviso under which
the rent from time to time payable under such
under-Lease shall not be less than the rent
from time to time payable hereunder save for
the six monthly period between the Review
Dates of this and the under-Lease as
hereinbefore provided;
(5) covenants and conditions in the same terms as
nearly as circumstances admit as those
contained in this Lease.
NOTICE OF ASSIGNMENT
(17) Within one calendar month after the execution of any assignment
transfer underlease or the devolution of the demised premises to
give notice in writing with particulars to the Landlord's
Solicitors and to produce to them with such notice such assignment
or transfer or the counterpart of such underlease or the probate
or letters of administration or other instrument under which such
devolution arises and leave the same with them for the period of
fourteen days for registration and pay to them a reasonable fee
for the registration of each such deed or document.
DISCLOSURE OF NOTICES
(18) Upon receipt of any notice order requisition direction or other
thing from a competent authority affecting or likely to affect the
demised premises (whether the same shall be served directly on the
Tenant or the original or a copy thereof be received by the Tenant
from any person whatsoever) forthwith to deliver to the Landlord a
copy thereof and so far as the same or the Act regulations or
other instrument under and by virtue of which it is issued or the
provisions thereof require the Tenant so to do to comply therewith
at its own expense.
<PAGE>
USER
(19) (a) Not to use or occupy the demised premises or any part
thereof or permit the same to be used or occupied for any
other purpose than as offices nor in any manner
inconsistent with such user or occupation except with the
consent in writing of the Landlord (such consent not to be
unreasonably withheld) but in considering and giving such
consent the Landlord shall be entitled to have full regard
to the principles of good estate management and the
interests of the tenants or occupiers of other premises in
the Development and the Landlord shall be entitled to
refuse such consent where the change of use would
substantially increase the rate of insurance in respect of
the demised premises or the Development or nearby or
adjoining premises and so that nothing herein shall be
deemed to be a warranty on the part of the Landlord that
the Tenant shall have the exclusive or preferential right
to carry on the said retail trade or business in the
Development or prevent the Landlord at the Landlord's sole
discretion from permitting the same or a similar user to be
carried on in other Units of the Development or in areas
therein in the possession of the Landlord or ancillary or
associated Companies of the Landlord.
(b) Not to permit or suffer anyone to sleep in the demised
premises and not to use or permit or suffer the use of the
same or any part thereof for residential purposes or as
licensed premises for the sale of excisable or intoxicating
liquors or as an amusement arcade or bingo hall or any
similar user.
(c) Not to use the demised premises or any part thereof or
permit or suffer the same to be used for gaming or for the
purpose of any betting transaction within the meaning of
the Betting Act 1931 (and any statutory modification on
re-enactment thereof for the time being in force) with or
between persons resorting to the demised premises and not
to make or
<PAGE>
permit or suffer to be made any application for a betting
office license in respect of the demised premises or any
part thereof.
(d) Not to have or permit any sale by auction in or upon the
demised premises or any part thereof.
MACHINERY OVERLOADING AND INFLAMMABLE GOODS
(20) (a) Not (except so far as the same shall be ancillary to the
permitted user of the demised premises and the installation
or use of the same shall not amount to a breach of any
other provision herein) to erect or install or use in or
upon any part of the demised premises any steam gas
electric or other engine or machinery of any kind.
(b) Not to do or permit or bring in or upon the demised
premises anything which may throw on the demised premises
or any adjoining premises any weight or strain in excess of
that which such premises are capable of bearing with due
margin for safety and in particular not to overload the
floors or the electrical installations or the other
services of in or to the demised premises nor suspend any
excessive weight from the ceilings or walls, stanchions or
the structure thereof. The Tenant shall seek professional
advice at the Tenants own expense to ensure that there
shall not be an infringement of this covenant.
(c) Not to have store or keep upon the demised premises or any
part thereof any substance of an explosive or of an
inflammable or dangerous nature or such as might increase
the risk of fire or explosion or which might attack or in
any way injure by percolation corrosion or otherwise the
demised premises or any adjoining premises or the keeping
or use whereof may contravene any statutory or local
regulation or by-law and in particular without prejudice to
the generality of the foregoing not to keep portable gas
appliances for use on the demised premises.
PLANNING ACTS
<PAGE>
(21) In relation to the Planning Acts (by which expression it is
intended herein to designate the Local Government (Planning and
Development) Acts, 1963 to 1990, and any statutory modification or
re-enactment thereof for the time being in force and any
Regulations or Orders made thereunder): -
(a) Not to do or omit or permit to be done or omitted anything
on or in connection with the demised premises the doing or
omission of which shall be a contravention of the Planning
Acts, or of any notices, orders, licenses, consents,
permissions and conditions (if any) served, made, granted
or imposed thereunder or under any enactment repealed
thereby and to indemnify (as well after the expiration of
the term by effluxion of time or otherwise as during its
continuance) and keep indemnified the Landlord against all
actions, proceedings, damages, penalties, costs, charges,
claims and demands in respect of such acts and omissions or
any of them and against the costs of any application for
Planning Permissions and the works and things done in
pursuance thereof.
(b) In the event of the Landlord giving written consent to any
of the matters in respect of which the Landlord's consent
shall be required under the provisions of this Lease or
otherwise and in the event of permission from any Planning
Authority under the Planning Acts being necessary for any
additions, alterations, or changes in or to the demised
premises or for the change of user thereof or for any
"Development" as defined in the Planning Acts to apply at
the cost of the Tenant to the Local Planning Authority for
all consents and permissions which may be required in
connection therewith and to give notice to the Landlord of
the granting or refusal (as the case may be) of all such
consents and permissions forthwith on the receipt thereof.
(c) To give notice forthwith to the Landlord of any Notice
Order or Proposal for a Notice or Order served on the
Tenant under the Planning Acts or if so required by the
Landlord to produce the same and at the request of the
<PAGE>
Landlord and the cost of the Tenant to make or join in
making such objections or representations in respect of any
proposals as the Landlord may require.
(d) To comply at its own cost with any notices or orders served
on the Tenant and to comply with all conditions attached to
any permission granted under the provisions of the Planning
Acts.
(e) If and when called upon to do so to produce to the Landlord
or its surveyors all such plans, documents and other
evidence as the Landlord may reasonably require in order to
satisfy itself that the provisions of this sub-clause have
been complied with in all respects.
INSURE GLASS
(22) To insure and keep insured the glass in the demised premises in
the names of the Landlord and the Tenant in the full reinstatement
cost thereof and if required to produce the policy and the receipt
for the latest premium to the Landlord.
INDEMNIFY AGAINST CLAIMS
(23) To take out and maintain at all times during the term hereby
granted a Policy of Insurance covering Public and Employers
liability in respect of and covering the liability of the Landlord
or its Agents and the Tenant in respect of the demised premises in
an amount of not less than IRL1,000,000.00 (One Million Pounds) to
be adjusted from time to time as the Landlord deems necessary and
to produce said Policy and the receipt for payment of the last
premium thereon to the Landlord on demand and to indemnify and
keep indemnified the Landlord against all and any actions expenses
costs claims damages and other liabilities whatsoever in respect
of the injury or death of any person or damage to any property
howsoever arising and in particular without prejudice to the
generality of the foregoing arising directly or indirectly out of:
-
(a) The state of repair or condition of the demised premises.
<PAGE>
(b) The making or exercising of any alteration to the demised
premises or state of repair or condition of such
alteration.
(c) The user of the demised premises.
(d) Any work carried out or in the course of being carried out
on the demised premises.
(e) Anything now or hereinafter attached to or projecting from
the demised premises or any other cause whatsoever.
FIRE REQUIREMENTS
(24) (a) At all times during the said term to comply with all the
recommendations or requirements of the appropriate
authority and the insurers of the Development whether
notified or directed to the Landlord or the Tenant in
relation to fire precautions and in particular the
provision of fire screens and to comply with all the
regulations from time to time made by the Landlord in
relation to fire precautions and to indemnify the Landlord
against any costs and expenses in complying with any such
requirement or recommendation and will not obstruct the
access to or means of working any apparatus and appliance
for that purpose for the time being installed in the
demised premises.
(b) If required by the Landlord for the purposes of safety or
to comply with the recommendations or requirements of the
Insurers of the Development to pay to the Landlord on
demand the cost of providing and installing portable fire
extinguishers fire hose reels or similar devices or at the
Landlord's option to install same at the Landlord's
direction and at the Tenant's expense.
(c) In the event of the demised premises or any part thereof
being damaged or destroyed by any of the Insured Risks to
give immediate notice to the Landlord.
<PAGE>
NOT TO OBSTRUCT PIPES
(25) Not to stop up or obstruct or permit or suffer to be stopped up or
obstructed or to suffer any oil grease or other noxious or harmful
matters or substances to enter the drains sewers gutters pipes
channels and watercourses of the demised premises or of the
Development and to employ such method for treating any deleterious
effluent that may reasonably be required by the Landlord or be
required by the Local Authority before permitting such effluent to
enter any such drains sewers gutters pipes channels and
watercourses.
NOT TO OBSTRUCT COMMON PARTS
(26) (a) Not to stand or place or permit or suffer to be placed or
deposited on the Common Parts or on any part thereof any
goods machines display case board or article of any
description whatsoever or obstruct any part of the
Development in any way whatsoever but at all times to keep
the same free and unobstructed;
(b) Not to allow its Employees, Directors, Agents, Servants or
Suppliers to park their cars or other vehicles or otherwise
to make use of or obstruct the car park or parking
facilities within the Development.
TO OBSERVE RULES
(27) To observe and perform the Rules and Regulations set out in the
Third Schedule hereto and all and any amendments and additions
thereto made by the Landlord from time to time under the
provisions of sub-clause (5) of Clause 9 hereof;
(28) To keep the stairway leading from the ground floor level to the
first floor level, the entire lobby at first floor level and the
ladies and gents toilets and w.c's at first floor level of Grattan
House (standing on the Development) clean and in a neat and tidy
condition at all times.
TO PAY STAMP DUTY AND V.A.T.
<PAGE>
(29) To pay the Stamp Duty on the original and counterpart of this
Lease and also all Value Added Tax (or any tax of a similar nature
that may be substituted for it or levied in addition to it)
arising on the creation of this Lease or chargeable in respect of
any payment made by the Tenant under any of the provisions of or
in connection with this Lease.
TO YIELD UP
(30) To yield up the demised premises with the Landlord's fixtures and
fittings and additions and improvements thereto at the expiration
or sooner determination of the term (howsoever the same may be
determined) in good and substantial repair and condition and
always in such a state of repair and condition as shall be in
accordance with the continued performance and observance of the
Tenant's covenants herein contained.
IT IS HEREBY AGREED AND DECLARED that so far as the same shall not be or
become the responsibility of the Local Authority or be or become
separately demised from time to time the Common Parts shall at all times
be subject to the exclusive control and management of the Landlord and in
particular:-
(a) the Landlord shall have the right to install maintain and operate
lighting heating ventilating and air-conditioning apparatus and
equipment serving the Common Parts and to police and procure the
policing of the same but may for reasonable and proper cause from
time to time change the area level location and arrangement of the
Common Parts and restrict parking and make parking charges;
(b) the Landlord may close or restrict all or any portion of the
Common Parts to such extent as may be legally sufficient to
prevent a dedication thereof or the accrual of any rights to any
person or the public therein and may close or restrict temporarily
all or any of the Common Parts for the purpose of repairing
renovating and replacing cleansing and maintaining the same;
THE TENANT FURTHER COVENANTS WITH THE LANDLORD as follows:
<PAGE>
(1) From time to time and at all times during the term hereby granted
to repay to the Landlord forthwith upon demand as hereinafter
provided a charge (hereinafter called "the Service Charge") being
33.33% (Thirty three point three three) per cent of all costs and
expenses which are from time to time or at any time hereafter
during the term expended incurred or payable or to be so expended
incurred or paid by the Landlord (computed upon the basis of
providing an indemnity to the Landlord) in respect of the items
set out in the Second Schedule hereto together with any value
added or other tax thereon;
(2) the amount of the Service Charge shall be ascertained and
certified by a certificate (hereinafter called "the certificate")
signed by the Landlord's auditors or accountants or managing
agents (at the discretion of the Landlord) acting as experts and
not as arbitrators annually and so soon after the end of the
Landlord's financial year as may be practicable and shall relate
to such year in manner hereinafter mentioned;
(3) The expression "the Landlord's financial year" shall mean the
period from the 1st day of January in each year to the 31st day of
December of that same year or such other annual period as the
Landlord may at its discretion from time to time determine as
being that in which the accounts of the Landlord either generally
or relating to the Development shall be made up;
(4) A copy of the certificate for each such financial year shall be
supplied by the Landlord to the Tenant on written request and
without charge to the Tenant;
(5) The certificate shall contain a summary of the Landlord's said
costs and expenses incurred by the Landlord during the Landlord's
financial year to which it relates together with a summary of the
relevant details and figures forming the basis of the Service
Charge and the certificate (or a copy thereof duly certified by
the person by whom the same was given) shall be conclusive
evidence for the purposes hereof of the matters which it purports
to certify;
<PAGE>
(6) The expression "the costs and expenses incurred by the Landlord"
as hereinbefore used shall be deemed to include not only those
costs and expenses hereinbefore described which have been actually
disbursed incurred or made by the Landlord during the year in
question but also such reasonable part of all such costs and
expenses hereinbefore described which are of a periodically
recurring nature (whether recurring by regular or irregular
periods) whenever disbursed incurred or made and whether prior to
the commencement of the term or otherwise including a sum or sums
of money by way of reasonable provision for anticipated
expenditure in respect thereof as the Landlord or its auditors or
accountants or managing agents (as the case may be) may in their
discretion allocate to the year in question as being fair and
reasonable in the circumstance;
(7) The Tenant shall if required by the Landlord with every quarterly
payment of rent reserved hereunder pay to the Landlord such sum in
advance and on account of the Service Charge as the Landlord or
its auditors or accountants or managing agents (as the case may
be) shall specify at their discretion to be a fair and reasonable
interim payment.
(8) As soon as practicable after the signature of the certificate the
Landlord shall furnish to the Tenant an account of the Service
Charge payable by the Tenant for the year in question due credit
being given therein for all interim payments made by the Tenant in
respect of the said year and upon the furnishing of such account
showing such adjustment as may be appropriate there shall be paid
by the Tenant to the Landlord the amount of the Service Charge as
aforesaid or any balance found payable or there shall be allowed
by the Landlord to the Tenant any amount which may have been
overpaid by the Tenant by way of interim payment as the case may
require;
(9) IT IS HEREBY AGREED AND DECLARED that nothing in this Clause or
these presents contained shall disable the Landlord from
maintaining an action against the Tenant in respect of non-payment
of any such interim payment as aforesaid
<PAGE>
notwithstanding that the Certificate had not been signed at the
time of the Proceedings.
(10) PROVIDED ALWAYS and notwithstanding anything herein contained it
is agreed and declared as follows:
(a) That in regard to the commencement of the term hereby
granted the Service Charge shall be duly apportioned in
respect of the period from the date on which the first
payment of rent shall fall due hereunder to the ensuing day
of ___________ and not in respect of the period from the
date of commencement of the term to such ensuing day
of___________________.
(b) That the provisions of sub-clause (8) of this Clause shall
continue to apply notwithstanding the expiration or sooner
determination of the term hereby granted but only in
respect of the period down to such expiration or sooner
determination of the term.
THE LANDLORD HEREBY COVENANTS WITH THE TENANT as follows:
(1) The Tenant paying the rent hereby reserved and observing and
performing the several covenants and stipulations herein on its
part contained shall peaceably hold and enjoy the demised premises
during the term without any interruption by the Landlord or any
person rightfully claiming under or in trust for it;
(2) To keep the Common Parts and the pipes and wires water gas
drainage electricity services and the lift in the Common Parts in
good and substantial repair and condition so far as such services
are not maintainable by a statutory undertaker or maintained at
public expense;
(3) The Landlord will use its best endeavors (subject to the receipt
by the Landlord of the Service Charge from the Tenant throughout
the term) to provide and carry out or procure the provision and
carrying out of the services particulars of which are set out in
the third paragraph of the Second Schedule hereto provided that
<PAGE>
(without affecting the generality of the provisions of this
sub-clause) the Landlord shall not be liable for any failure or
omission at any time or from time to time during the term hereby
granted to provide supply or procure any or all of the said
services if it shall be prevented hampered or restricted in any
way from so doing by virtue of strikes lock-outs non-availability
of or restrictions upon supplies or materials or labor or other
services weather conditions inevitable accident emergency act of
God or any cause whatsoever or howsoever arising and not within
the control of the Landlord provided always that the Landlord
shall be entitled to cease to provide any such service if in the
opinion of the Landlord it shall cease to be for the benefit of
the Tenant or has become due to technological change obsolete or
redundant.
(4) Subject to the Landlord being able to effect insurance against any
one or more of the risks hereinafter specified and subject to
reimbursement of the appropriate insurance premium as provided by
Clause 4(1)(b) hereof to insure in the name of the Landlord the
Development and the demised premises and all Landlord's fixtures
and fittings therein and thereon excluding glass and to keep the
same insured in the full reinstatement cost (to be determined from
time to time by the Landlord or its surveyors) and including an
inflationary factor against damage by fire, explosion, lightning,
impact, earthquake, aircraft, flood, storms and tempest, riot and
civil commotion and malicious damage or bursting or overflowing of
water tanks, apparatus and pipes and including demolition, site
clearance expenses, architects and other fees and taxes in
relation to the reinstatement of the Development and the demised
premises and three years loss of rent and the service charge and
all stamp duties and V.A.T. exigible on any building or like
contract as may be entered into relative to the re-construction,
reinstatement or repair of the Development and the demised
premises or any part thereof resulting from the destruction, loss
or damage thereof or thereto from any of the perils aforesaid and
public liability and employers liability and against such other
risks as the Landlord may from time to time in its absolute
discretion consider prudent and desirable (all such perils and
risks for the time being so covered by insurance hereinafter
called "the insured risks") and such risks may be covered by any
<PAGE>
policy or policies of insurance as the Landlord may consider
appropriate PROVIDED HOWEVER that the Landlord shall not be
responsible for the Tenant its servants agents licensees invitees
or visitors for any injury death damage destruction financial or
consequential loss whether to person or property due to the state
and condition of the Development or the demised premises or any
part thereof or due to any act or default of any agent servant
workman or other person authorised by the Landlord to enter the
Development or the demised premises save to the extent to which
the same may be insured against by the Landlord pursuant to the
terms of this Lease.
(5) In case the Development or the demised premises or any part
thereof shall be destroyed or damaged by fire or from any of the
insured risks then (subject to the Landlord obtaining Planning
Permission and all other necessary pertinent licences and
approvals) to reinstate the Development and the demised premises
substantially in accordance with its existing plan and elevation
and as often as shall happen to lay out all monies received in
respect of such insurance as aforesaid as soon as practicable in
or upon rebuilding, repairing or reinstating the Development and
the demised premises in a good and substantial manner unless the
relevant policy shall have been vitiated or rendered less than
fully effective by any act, neglect, default or omission on the
part of the Tenant and without being required to make up any
deficiency out of its own monies PROVIDED ALWAYS that in the event
of the Landlord being unable to reinstate the Development and/or
the demised premises substantially in accordance with its existing
plan and elevation due to refusal of planning or other approvals
consents or licences the Tenant agrees to surrender this Lease
when called upon by the Landlord to do so whereupon the said
Insurance monies shall belong absolutely to the Landlord.
IT IS HEREBY AGREED AND DECLARED as follows:
(1) The demised premises are held subject to all rights of light and
air and all other easements or rights (if any) now enjoyed by the
adjoining or neighbouring lands buildings and properties over the
demised premises;
<PAGE>
(2) The Tenant shall not be entitled to any right of access or light
or air or other easements or rights to any building for the time
being comprised herein which would restrict or interfere with the
user of any adjoining or neighbouring land for building or for any
other purpose;
PROVIDED ALWAYS AND IT IS HEREBY EXPRESSLY AGREED as follows:
(1) If the said yearly rent or the Service Charge or other
contributions hereby reserved or any part thereof shall at any
time be in arrear and unpaid for fourteen days after the same
shall have become due (whether any formal or legal demand therefor
shall have been made or not) or if the Tenant shall at any time
fail or neglect to perform or observe any of the covenants
conditions or agreements herein contained and on its part to be
performed and observed or if the Tenant while the demised premises
or any part thereof shall remain vested in it shall enter into
liquidation whether compulsory or voluntary (not being a voluntary
liquidation for the purpose of amalgamation or reconstruction) or
permit any execution to be levied on the demised premises or
(being an individual) shall become bankrupt or compound with his
creditors then and in any such case it shall be lawful for the
Landlord or any person or persons duly authorised by it into or
upon the demised premises or any part thereof in the name of the
whole to re-enter and the demised premises peaceably to hold and
enjoy thenceforth as if this Lease had not been made without
prejudice to any right of action or remedy of the Landlord in
respect of any antecedent breach of any of the covenants by the
Tenant hereinbefore contained;
(2) In the event of the demised premises being damaged or destroyed by
any of the risks from time to time insured against by the Landlord
so as to be unfit for occupation and use then (unless the
insurance monies shall be irrecoverable in whole or in part by
reason solely or in part of any act neglect default or omission of
the Tenant) the rent hereby reserved and the Service Charge or
fair proportions of both according to the nature and extent of the
damage sustained shall be suspended until the demised premises
shall again be rendered fit for occupation
<PAGE>
and use or for the period of three years from the date of such
destruction or damage whichever is the shorter and in the event of
any dispute concerning the provisions of this sub-clause the same
shall be determined by a single arbitrator in accordance with the
provisions of the Arbitration Acts of 1954 and 1980 or any
statutory modification or re-enactment thereof for the time being
in force;
(3) Any Notice under this Lease shall be in writing. Any Notice to the
Tenant shall be sufficiently served if signed by the Landlord or
its Agent for the time being and handed to the Tenant or left at
or affixed to the demised premises or any part thereof or sent by
Registered or Recorded Post to the registered office of the Tenant
in Great Britain or Northern Ireland or Republic of Ireland. Any
Notice by the Tenant to the Landlord shall be sufficiently served
if handed to the Landlord or its Agent for the time being or sent
by Registered or Recorded Post to the Landlord at its registered
office or its Agent (at its principal place of business) for the
time being. A Notice sent by post shall be deemed to have been
given forty-eight hours after the time of posting to the address
to which it was sent.
(4) Except in relation to Clause 3 hereof or where the provisions of
this Lease provide for a determination by the Landlord or its
architects auditors accountants agents or surveyors to be final
and conclusive as against the Tenant or where the same relate to
forfeiture of this lease or relief from forfeiture or matters
related thereto all cases of dispute or difference arising out of
or touching upon the rights duties or liabilities of the parties
under this Lease shall be referred to the determination of a
single arbitrator to be agreed upon by the parties or failing
agreement to a person nominated by the President of the
Incorporated Law Society of Ireland upon the application of either
party and the Arbitration shall be conducted in manner provided by
the Arbitration Acts 1954 and 1980 or any statutory modification
or re-enactment thereof for the time being in force. The reference
to the President shall include the duly appointed Deputy of the
President or any person authorised by the President to make
appointments on his behalf.
<PAGE>
(5) The Landlord shall have the right from time to time to amend and
add to the Rules and Regulations set out in the Third Schedule
hereto in such manner as the Landlord shall consider to be in the
best interests of the Development.
10. The Landlord shall not be liable to the Tenant for any loss damage
inconvenience or injury suffered by the Tenant or any employee workman or
customer or invitee or person resorting to the Development or demised
premises through or as a result of any state of disrepair of the demised
premises or of any breakdown or suspension of or any defect in any
fixture or fitting or any service or facility supplied in or about the
demised premises or anything in or upon any part of the Development
(including the demised premises and the Common Parts).
11. The Plans annexed hereto and the details shown thereon shall be for the
purpose of identification only and no warranty or condition expressed or
implied shall be given or be deemed to be given in respect of such Plans
or the details shown thereon or any matter or thing shown thereon or
referred to.
SURRENDER
12. In case the demised premises or any part thereof shall be destroyed or
become ruinous and uninhabitable or incapable of beneficial occupation or
enjoyment by or from any of the risks specified in clause 7(4) hereof
during the term hereby granted the Tenant hereby absolutely waives and
abandons its rights (if any) to surrender this Lease under the provisions
of Section 40 of the Landlord & Tenant Law Amendment, Ireland, Act 1860
or otherwise.
INTERPRETATION
13. In this Indenture where the context so admits the words importing the
neuter gender only shall include the masculine or feminine gender as
appropriate and vice versa and words importing the masculine gender only
shall include the feminine gender and words importing the singular number
only shall include the plural number and vice versa and where the Tenant
or the Guarantors shall from time to time be or consist of two or more
<PAGE>
individuals the covenants herein expressed to be made by the Tenant or
the Guarantors as the case may be shall be deemed to be made by such
individuals jointly and severally.
Any reference herein contained to an enactment or to a series of
enactments shall be deemed to include any enactment from time to time
extending, amending, repealing, replacing or continuing the same or any
order regulation instrument direction or scheme or permission made under
it or deriving validity from it.
OTHER NOTES TO AFFECT CONSTRUCTION
The Header notes hereof shall not affect the construction of these
presents.
WARRANTY
Nothing in this Lease contained shall be deemed to constitute any
warranty by the Landlord that the demised premises or any part thereof
are authorised under the Planning Acts or otherwise for use for any
specific purpose.
GUARANTEE
(1) The Guarantors in consideration of the demise hereinbefore
contained having been made at their request hereby covenant with
the Landlord that the Tenant will pay the rents service charge
and other contributions hereby reserved on the days and in manner
aforesaid and will perform and observe all the Tenant's covenants
herein before contained and that in case of default in such
payment of rents service charge and other contributions or in the
performance or observance of such covenants as aforesaid the
Guarantors will pay and make good to the Landlord on demand all
losses damages costs and expenses thereby arising or incurred by
the Landlord PROVIDED ALWAYS and it is hereby agreed that any
neglect or forbearance of the Landlord in endeavouring to obtain
payment of the rents service charge and other contributions hereby
reserved when the same become payable or to enforce performance of
the several stipulations herein on the Tenant's part contained and
any time which may be given to the Tenant by the
<PAGE>
Landlord shall not release or exonerate or in any way affect the
liability of the Guarantors under this covenant.
(2) In the event of the Tenant (being a company) during the term
hereby granted entering into liquidation whether compulsory or
voluntary and the liquidator in such liquidation disclaiming
this Lease or in the event of the Tenant (being an individual)
becoming bankrupt and the Assignee or Assignees in bankruptcy
disclaiming this Lease then in either such event the Guarantors
hereby covenant with the Landlord that the Guarantors will at
the request of the Landlord accept from the Landlord a Lease of
the demised premises for a term equal in duration to the
residue remaining unexpired of the term hereby granted at the
time of the granting of such Lease to the Guarantors such Lease
to contain the same Landlord's and Tenant's covenants
respectively and the same provisos and conditions in all
respects (including the provisos for re-entry) as are herein
contained.
BREAK CLAUSE
17. The Tenant shall have the option of surrendering this Lease on the 27th
day of February, 2001 on giving unto the Landlord at least one years notice in
writing of its intention to vacate the demised premises expiring on that date
such notice to be served not earlier than 1st December 1999 and not later than
1st March 2000. In the event of the Tenant serving such a notice the Landlord
shall accept vacant possession of the demised premises from the Tenant on the
27th February 2001 whereupon this Lease shall be at an end but without prejudice
to the right of the Landlord to proceed on foot of any antecedent breach of
covenant.
IT IS HEREBY CERTIFIED that the premises hereby demised are situate in the
Borough of Dun Laoghaire.
IT IS HEREBY FURTHER CERTIFIED for the purposes of the stamping of this
instrument, that this is an instrument to which the provisions of Section 112 of
the Finance Act 1990 do not apply for the reason that the premises being demised
are an existing office block.
<PAGE>
IT IS HEREBY FURTHER CERTIFIED that the transaction hereby effected does not
form part of a larger transaction or of a series of transactions in respect of
which the amount or value or the aggregate amount or value of the consideration
(other than rent) exceeds L5,000.00.
IN WITNESS whereof the parties hereto have caused their respective Common Seals
to be hereunto affixed the day and year first herein WRITTEN.
<PAGE>
FIRST SCHEDULE
PART I
DEMISED PREMISES
ALL THAT the First Floor Offices being portion of the Development known or to be
known as Grattan House, Temple Road, Blackrock in the County of Dublin as is
more particularly delineated and shown for the purpose of identification only on
Plan No. 2 annexed hereto and thereon edged green and which premises include:-
(a) the internal plaster surfaces and finishes of all structural or load
bearing walls and columns therein or which enclose the same, but not any
other part of such walls and columns;
(b) the entirety of all non-structural or non-load bearing walls and columns
therein or which enclose the same, but not any other part of such walls
and columns;
(c) the inner half severed medially of the internal non-load bearing walls
(if any) that divide the same from other parts of the building on the
Development;
(d) the floor finishes thereof save that the lower limit of the Demised
Premises shall not extend to anything below the floor finishes (except
that the cavity above any suspended ceilings shall be included);
(e) the ceiling finishes thereof, including all suspended ceilings (if any)
and light fittings save that the upper limit of the Demised Premises
shall not extend to anything above the ceiling finishes (except that the
cavity above any suspended ceilings shall be included);
(f) all window frame and window furniture and all glass in the windows and
all doors, door furniture and door frames;
(g) all sanitary and hot and cold water apparatus and equipment and the
radiators (if any) therein and all fire fighting equipment and hoses
therein;
(h) all Conduits therein and exclusively serving the same.
<PAGE>
PART II
EASEMENTS, RIGHTS AND PRIVILEGES GRANTED
1. All Landlord's fixtures and fittings in and about the demised premises,
and
2. The right of ingress, egress and regress at all times during the business
hours of 8.00 a.m. to 6.30 p.m. on Mondays to Fridays (Christmas Day and
Bank Holidays excepted) and at such other times as shall be agreed by
prior special arrangement with the Landlord through the Common Parts
leading to the demised premises;
3. The use at the times aforesaid by employees and visitors of the Tenant of
2 (two) car-parking spaces in the car-park area as shown coloured yellow
on plan No. 1 (One) attached hereto (but so that the Landlord shall be
under no liability in respect of any loss or damage to any vehicle or the
contents of any vehicle in such car-parking spaces);
4. The right of free passage and running of water and soil and other
effluent in and through the sewers drains and channels made or to be made
through or under the Development;
5. The free and uninterrupted passage of water and air through the central
heating and/or air-conditioning apparatus;
6. The right of passage of gas electricity air smoke or other effluvia to
and from the demised premises through the pipes wires telephone and
telegraph cables ducts flutes and conduits (if any) passing along or
through or over upon or under the Development and the adjoining premises
of the Landlord.
7. The right of support, shelter and protection for the demised premises
from the adjoining or neighbouring premises and all other parts of any
building erected or to be erected of which the demised premises may form
part as are at present enjoyed or intended to be enjoyed by the demised
premises.
8. Full and free right and liberty for the Tenant its tenants employees and
duly authorised agents upon reasonable notice to enter upon other
premises comprised in the Development so far as may be reasonably
necessary for the purpose of repairing or
<PAGE>
maintaining the demised premises or otherwise performing the Tenant's
obligations hereunder the tenant in the exercise of such rights doing as
little damage as possible to such other premises and forthwith making
good any damage thereby occasioned.
And so that all such easements rights and privileges in this Schedule
granted shall be enjoyed in common with the Landlord and all other
persons thereto entitled.
PART III
EXCEPTIONS AND RESERVATIONS
Except and reserved unto the Landlord and the lessees and tenants of the
Development and all other persons at any time authorised by them or any of them
or otherwise entitled to the same rights as follows:
Full right and liberty to vary or permit the variation of the present or any
future scheme layout or use of the Development and without derogating from the
generality of the foregoing:
(1) Full right and liberty to build upon the demised premises or to
build upon or to extend in height or otherwise buildings from time
to time standing on any land adjoining or adjacent to the demised
premises or any building or any part thereof of which the demised
premises form part notwithstanding that the access of light and
air to the demised premises and the lights windows and openings
thereof may be affected;
(2) Full right and liberty from time to time to change vary reduce or
add to the area extent level location and arrangement of the
Common Parts and of the improvements and amenities provided by the
Landlord but so that any interference with the rights to parking
specified herein are not interfered with save on a short term
temporary basis and to close temporarily all or any of the said
Common Parts and improvements and amenities for the purpose of
preparing renovating and replacing cleansing and maintaining the
same taking at all times proper account of the reasonable
interests of the tenant and other tenants in the Development and
in accordance with the principles of good estate management.
<PAGE>
(3) The full and free right and liberty of running of water and soil
gas and electrical energy the flow of air and the free passage of
smoke or effluvia from and to the Development and the adjoining
premises of the Landlord and the buildings now or hereafter to be
erected in the Development through the gutters pipes sewers drains
wires telephone and telegraph cables conduits ducts flues and
watercourses now or at any time during the term in or over or upon
or under or passing along or through the demised premises and to
enter upon the demised premises and to install and make connection
with such gutters pipes sewers drains wires telephone and
telegraph cables conduits ducts flues and watercourses or any of
them for the purpose of exercising the said right of running of
water and soil gas electrical energy flow of air and free passage
of smoke or other effluvia the person or persons exercising such
rights making good any damage to the structure of the demised
premises thereby occasioned;
(4) Full rights and liberty at all reasonable times to enter upon the
demised premises with or without appliances and workmen and others
as often as may be necessary to view the state and condition of
and to repair and maintain the demised premises and clean alter
renew remove or install such gutters pipes sewers drains wires
conduits ducts flues and watercourses serving the demised premises
and adjoining premises and the Development (including the right if
necessary to erect and maintain scaffolding) the persons
exercising such rights ensuring that inconvenience is limited as
far as practicable and that access to the demised premises is not
as far as practicable unduly obstructed;
(5) The full rights of support and of shelter and protection to
adjoining premises and all other parts of the building of which
the demised premises form part and of the Development as are at
present enjoyed from the demised premises;
(6) The full right and liberty to enter upon the demised premises at
any time during the term hereby granted in order to build on or
into any party or other walls of the demised premises the person
or persons exercising such rights making good all damage to the
structure of the demised premises thereby occasioned;
<PAGE>
(7) The right to build or install or to continue building or
installing (and thereafter to maintain) buildings erections
structures signs and fixtures on the Common Parts or on any part
of the Development and/or upon into or projecting over or under or
taking support from the demised premises or the building of which
the demised premises form part PROVIDED that such buildings and
erections and structures and signs and fixtures shall not become
nor form part of the demised premises.
But so that the tenant shall not be entitled to any compensation
whatsoever in respect of the exercise by the Landlord its agents or any
of the persons thereto entitled of any of the rights hereby excepted and
reserved.
SECOND SCHEDULE
PARTICULARS OF COMPONENTS OF SERVICE CHARGE
1. The costs of the insurances which the Landlord shall incur in providing
the services herein set out.
2. The costs of the repairs decorations and other works which the Landlord
covenants to effect in this Lease.
3. The total costs and expenses incurred in managing operating repairing
renovating cleaning maintaining and replacing the Common Parts and
specifically including but without prejudice to the generality of the
foregoing:-
(a) gardening landscaping and line painting;
(b) lighting heating ventilation and air-conditioning (including
central heating);
(c) sanitary and health control and cleaning and the removal and
disposal of refuse;
(d) providing staff and personnel for carrying out duties in respect
of the operation and maintenance of the Development and the Common
Parts and providing residential or other accommodation for them
and providing repairing and
<PAGE>
maintaining an office situate at or near the Development and other
accommodation used solely for the purpose of the Development.
(e) the policing control and security of the Development;
(f) depreciation and provision for replacement (whether by way of an
annual sinking fund or otherwise at the discretion of the
Landlord) of machinery equipment plant apparatus and things
forming part of or used in the operation and maintenance of the
Common Parts;
(g) the provision and maintenance of fire fighting equipment;
(h) the cost of management (including the collection of rent and
service charge) and of employing management agents and the cost of
employment of accountants auditors and surveyors to determine the
amount of the Service Charge;
(i) any legal costs and expenses incurred in the course of managing
operating and maintaining the Development and the Common Parts and
enforcing any covenants conditions and regulations with respect
thereto or complying with or otherwise taking action on any
notices or orders in respect of the Development or the Common
Parts;
(j) all rates taxes charges impositions and outgoings whatsoever
whether parliamentary local or of any other description which may
be assessed charged or imposed or payable on or in respect of the
whole or any part of the Development or the Common Parts so far as
such payments are not the liability of or recoverable from the
Tenant or any other tenant in the Development;
(k) Providing such reception and security staff for the reception area
and the common areas as may from time to time appear appropriate
to the Landlord
(l) Value Added Tax on all sums payable pursuant to the provisions of
this Schedule.
<PAGE>
THIRD SCHEDULE
RULES AND REGULATION
(1) The demised premises shall not be used in any manner inappropriate to a
high class office.
(2) No live animals shall be kept in the demised premises.
(3) Nothing shall be deposited and no refuse shall be thrown outside the
demised premises and all refuse and waste shall be deposited by the
tenant in a compactor or area designated by the landlord from time to
time for this purpose.
(4) No paraffin oil or liquid or solid fuel heater shall be used in the
demised premises.
(5) No dangerous or offensive goods shall be stored or kept in the demised
premises.
(6) The Tenant shall keep on the demised premises in compliance with the
Landlord's and Insurers reasonable requirements and legal requirements
(if any) fire fighting and extinguishing apparatus which shall be open to
the inspection of the Landlord and Insurers and shall not obstruct or
permit or suffer to be obstructed the access to or means of working such
apparatus and appliances or any means of escape.
(7) No fuel shall be burned in the demised premises and the Tenant shall
comply in all respects with the requirements of any smoke control order
for the time being in force in the area in which the demised premises are
situate.
(8) No loudspeakers televisions sets radios or other devices shall be used in
a manner so as to be heard outside the demised premises.
(9) The Tenant shall keep the demised premises at a temperature sufficiently
high to prevent freezing of water in pipes and fixtures.
(10) The plumbing facilities shall not be used for any other purposes than
that for which they are constructed and no foreign substance of any kind
shall be thrown therein.
<PAGE>
(11) The Tenant shall not burn any refuse of any kind or any other material in
or about the demised premises or the Development.
(12) The Tenant shall give immediate notice to the Landlord in case of fire or
accident or defects in the demised premises.
(13) The Tenant shall use its best endeavours to ensure that persons having
recourse to the Development shall observe any regulations or instructions
made or given by the Landlord with regard to the parking of vehicles in
the car parking or other areas of the Development.
PRESENT when the Common Seal
of THE LANDLORD was affixed
hereto:
PRESENT when the Common Seal
of THE TENANT was affixed
hereto:
<PAGE>
A & L GOODBODY
SOLICITORS
Dated 12th March, 1993
ANDREWS TRAVEL CONSULTANTS LIMITED
ONE PART
AND
EUROPEAN LANGUAGE TRANSLATIONS LIMITED
OTHER PART
ASSIGNMENT
A & L Goodbody,
1, Earlsfort Centre,
Hatch Street,
Dublin 2.
MGAS2501.01/PW
<PAGE>
THIS INDENTURE made this 12th day of March 1993 BETWEEN ANDREWS TRAVEL
CONSULTANTS LIMITED having its registered office at Meadowvale, Blackrock in the
County of Dublin (hereinafter called "the Vendor" which expression shall where
the context so admits or requires include its successors and assigns) of the one
part and EUROPEAN LANGUAGE TRANSLATIONS LIMITED having its registered office at
Grattan House, Temple Road, Blackrock in the County of Dublin (hereinafter
called "the Purchaser" which expression shall where the context so admits or
requires include its successors and assigns) of the other part.
WHEREAS:
1. By Indenture of Lease (hereinafter called "the Lease") dated the 20th day
of March, 1991 between Corke Abbey Investments Limited of the one part
and the Vendor of the other part the premises therein and hereinafter
more particularly described and intended to be hereby assigned were
demised unto the Vendor for the term of 35 years from the 1st day of
March, 1991 subject to the initial yearly rent of IRL25,596.00 thereby
reserved and to the covenants on the part of the Vendor and the
conditions therein contained.
2. In consideration of the Purchaser assuming all the liabilities and
obligations of the Vendor on foot of all the covenants and conditions
contained in the Lease the Vendor has agreed with the Purchaser to assign
its interest in the said premises free from encumbrances.
NOW THIS INDENTURE WITNESSETH that in pursuance of the said agreement and in
consideration of the premises the Vendor as beneficial owner HEREBY ASSIGNS unto
the Purchaser ALL THAT the premises comprised in and demised by the Lease and
more particularly described and set forth in the Schedule hereto TO HOLD the
same unto the
<PAGE>
Purchaser for all the residue now unexpired of the term of years granted by the
Lease subject to the yearly rent thereby reserved and to the covenants on the
part of the Lessee and conditions therein contained.
THE PURCHASER HEREBY COVENANTS with the Vendor that it the Purchaser will
henceforth during the continuance of the said term pay the yearly rent and
increased yearly rent thereby reserved and will perform and observe the
covenants on the part of the Lessee and the conditions contained in the Lease
and will indemnify and keep indemnified the Vendor from and against all actions,
proceedings, costs, damages, claims, expenses or demands whatsoever or howsoever
arising by reason or on account of the non-payment of the said rent or any part
thereof or the breach, non-performance or non-observance of the said covenants
and conditions or any of them.
IT IS HEREBY CERTIFIED that the transaction hereby effected does not form part
of a larger transaction or services of transactions in respect of which the
amount or value or the aggregate amount or value of the consideration exceeds
IRL5,000.00.
IT IS HEREBY CERTIFIED that the premises hereinbefore assigned are situate in
the Borough of Dun Laoghaire.
IT IS HEREBY CERTIFIED for the purposes of the stamping of this Instrument,
that this is an Instrument to which the provisions of Section 112 of the
Finance Act 1990 do not apply for the reason that the premises being assigned
are part of an existing office block.
IT IS HEREBY CERTIFIED for the purposes of Section 29 of the Companies Act 1990
that the Vendor and the Purchaser are not bodies corporate connected with one
another in a manner which would require this transaction to be ratified by
resolution of either.
<PAGE>
IN WITNESS whereof the parties hereto have caused their Common Seals to be
affixed the day and year first herein WRITTEN.
SCHEDULE
ALL THAT the premises comprised in and demised by the Lease and therein
described as ALL THAT the First Floor Offices being portion of the Development
known or to be known as Grattan House, Temple Road, Blackrock in the County of
Dublin as is more particularly delineated and shown for the purpose of
identification only on Plan No. 2 annexed hereto and thereon edged green and
which premises include: -
(a) the internal plaster surfaces and finishes of all structural or load
bearing walls and columns therein or which enclose the same, but not any
other part of such walls and columns;
(b) the entirety of all non-structural or non-load bearing walls and columns
therein or which enclose the same but not any other part of such walls
and columns;
(c) the inner half severed medially of the internal non-load bearing walls
(if any) that divide the same from other parts of the building on the
Development;
(d) the floor finishes thereof save that the lower limit of the Demised
Premises shall not extend to anything below the floor finishes (except
that the cavity above any suspended ceilings shall be included);
(e) the ceiling finishes thereof, including all suspended ceilings (if any)
and light fittings save that the upper limit of the Demised Premises
shall not extend to anything above the ceiling finishes (except that the
cavity above any suspended ceilings shall be included);
(f) all window frames and window furniture and all glass in the windows and
all doors, door furniture and door frames;
<PAGE>
(g) all sanitary and hot and cold water apparatus and equipment and the
radiators (if any) therein and all fire fighting equipment and hoses
therein;
(i) all Conduits therein and exclusively serving the same TOGETHER WITH the
benefit of all the easements rights and privileges more particularly
described and granted in the First Schedule Part ii of the Lease.
(j)
PRESENT when the Common Seal
of ANDREWS TRAVEL CONSULTANTS
LIMITED was affixed hereto: -
PRESENT when the Common Seal
of EUROPEAN LANGUAGE TRANSLATIONS
LIMITED was affixed hereto: -
<PAGE>
DATED THE______ DAY OF _______1993
CORKE ABBEY INVESTMENTS LIMITED
FIRST PART
ANDREWS TRAVEL CONSULTANTS LIMITED
SECOND PART
EUROPEAN LANGUAGE TRANSLATIONS LIMITED
THIRD PART
LICENCE TO ASSIGN
Matheson Ormsby Prentice,
Solicitors,
3 Burlington Road,
DUBLIN 4
MD/[WP\CORKELIC.ASS]
(10th March 1993)
<PAGE>
THIS LICENCE is made the 19th day of March One Thousand Nine Hundred and
Ninety-Three
BETWEEN
CORKE ABBEY INVESTMENTS LIMITED having its Registered Office at 6A Old
Dunleary, Dun Laoghaire, County Dublin (hereinafter called "the Landlords")
of the First Part, ANDREWS TRAVEL CONSULTANTS LIMITED having its Registered
Office at 10 Meadowvale, Blackrock, County Dublin (hereinafter called "the
Tenant") of the Second Part, and EUROPEAN LANGUAGE TRANSLATIONS LIMITED
having its Registered Office at Ditton House, Upper Fitzwilliam Street,
Dublin 2 (hereinafter called "the Assignee") of the Third part.
WHEREAS by Indenture of Lease (hereinafter called "the Lease") dated the 20th
day of March and made between the Landlords of the One Part and the Tenant other
part the Landlord dated ALL THAT the premises (hereinafter called "the demised
premises") known as the First Offices of Grattan House, Temple Road, Blackrock,
County Dublin as more particularly described in the Lease for the term of 35
years from the 1st day of March 1991 subject to the initial yearly rent Twenty
Five Thousand Hundred and Ninety Six Pounds (L25,596.00) increasing and subject
to review as therein provided and subject to the covenants on the part of the
Lessee and conditions therein contained.
AND WHEREAS the Lease contains covenants on the part of the Tenant (inter alia)
not to assign the demised premises without the consent in writing of the
Landlords.
AND WHEREAS the Tenant desires to assign all its estate and interest in the
demised premises to the Assignee and the Landlords have agreed to grant a
License to the Tenant to assign the demised premises to the Assignee for the
residue of the term demised by the Lease as hereinafter set out in consideration
of the covenants by the Tenant and the Assignee hereinafter contained.
NOW IT IS AGREED as follows:
1. In consideration of the covenants by the Tenant and the Assignee
hereinafter contained the Landlords Hereby Grant to the Tenant licence to
assign all its estate and interest in the Lease to the Assignee PROVIDED
ALWAYS that this Licence shall not authorise any further or other
assignment or parting wholly or partially with the possession of the
<PAGE>
demised premises or any part thereof otherwise than in accordance with
the Lease or prejudice or affect any of the covenants, conditions or
provisions in the Lease or the Landlords' remedies now or at any future
time against any person in respect thereof.
2. The Assignee hereby covenants with the Landlords:-
(a) That from the date when the Tenants estate and interest in the
Lease shall be assigned to it pursuant to the Licence hereinbefore
contained and henceforth during the residue of the term granted by the
Lease to pay the rent and other sums thereby reserved and perform and
observe the covenants and conditions on the part of the Tenant therein
and in the Lease contained.
(b) Not to carry out any alterations or fitting out to the demised
premises without the prior approval in writing of the Landlords'
Architect of detailed plans and specifications thereof and all works so
approved shall be carried out under such Architect's supervision and in
compliance with Planning Permission and Bye-Laws Approvals and statutory
requirements.
(c) Not to erect any new fascia sign without first submitting details
(including a drawing showing full dimensions) to the Landlords or its
agents or Architect and subject only to the consent of the Landlords or
its agents or Architect and in compliance with Planning Permission and
Bye-Laws Approval and statutory requirements.
(d) To furnish to the Landlords a copy of the deed of Assignment to it
when stamped and registered.
(e) To pay the Landlords' Architects costs arising out of the consent
hereby given.
3. And the Tenant hereby covenants to pay the Landlords legal costs, and
Agents costs arising out of the consent hereby given.
IN WITNESS whereof this Memorandum has been executed in manner hereinafter
appearing the day and year first herein WRITTEN.
<PAGE>
PRESENT when the Common Seal of
CORKE ABBEY INVESTMENTS LIMITED
was affixed hereto:-
PRESENT when the Common Seal of
ANDREWS TRAVEL CONSULTANTS LIMITED
was affixed hereto:-
PRESENT when the Common Seal of
EUROPEAN LANGUAGE TRANSLATIONS LIMITED
was affixed hereto:-
<PAGE>
European Language Translations
8.5 Operating Leases
8.5.1 GENERAL
The Company has three operating leases as follows:
- First Floor, Grattan House (Section 8.5.2)
- Second Floor, Grattan House (Section 8.5.3)
- EP's Company Car (Section 8.5.4)
8.5.2 FIRST FLOOR, GRATTAN HOUSE
ELT sub-leased approximately 40% of the first floor from Andrews Travel
Consultants Limited on 28 September, 1992. We understand that the
permission of the landlord Corke Abbey Investments Limited ("CAIL") was
obtained. Rental of IRL1,442 per month was paid under the sub-lease
arrangement from October, 1992 to January, 1993 (Appendix 8.4) This
arrangement was subsequently extended to 12 March, 1993. We understand
that the first floor lease was assigned to ELT on 12 March, 1993. We have
obtained a copy of the head lease between Andrews Travel Consultants
("ATCL") and CAIL (summarised in Appendix 8.5). We reviewed a signed copy
of the deed of assignment between ATCL and ELT dated 12 March, 1993
noting ATCL agreed to assign its interest in the first floor free from
encumbrances. We reviewed a signed copy of the licence to assign between
CAIL, ATCL and ELT dated 19 March, 1993.
8.5.3 SECOND FLOOR, GRATTAN HOUSE
This lease is summarised in Appendix 8.6. The guarantor for the lease is
Paul Kavanagh and we are not aware whether this guarantee has been
released.
8.5.4 EP'S COMPANY CAR
<PAGE>
EP has the use of a Mercedes 190E car (registration number 90 D 31558). A
copy of the operating lease is included in Appendix 8.7.
<PAGE>
ANDREWS TRAVEL CONSULTANTS LTD
PROPOSED SUB LEASE ARRANGEMENTS
<TABLE>
<CAPTION>
FROM TO
<S> <C> <C> <C>
: YEAR 2 : 1st MARCH 1992 28th FEBRUARY 1993 365 DAYS
: PERIOD : 28th SEP. 1992 31st JANUARY 1993 130 DAYS
: AREA ALLOCATED 40% APPROX
</TABLE>
<TABLE>
<CAPTION>
TIME AREA
TOTAL APPORTIONMENT ALLOCATED
----- ------------- ---------
<S> <C> <C> <C>
31,878.00 11,353.81 4,541.52
4,757.00 1,594.27 577.71
CE CHARGES 1,125.00 400.58 150.27
ANCE 500.00 178.08 71.23
--------
CHARGE 5,450.74
<CAPTION>
& HEAT PER 2 MONTHS FOR 4 MONTHS
<S> <C> <C> <C>
275.00 550.00 220.00
RD GAIS 120.00 240.00 96.00
--------
5,756.74
--------
--------
</TABLE>
<TABLE>
<CAPTION>
4 INSTALLMENTS AS FOLLOWS:
<S> <C>
OCTOBER 1992 1,441.68
NOVEMBER 1992 1,441.68
DECEMBER 1992 1,441.68
JANUARY 1993 1,441.68
--------
5,766.74
--------
--------
</TABLE>
<PAGE>
European Language Translations
APPENDIX 8.5
FIRST FLOOR LEASE, GRATTAN HOUSE
SUMMARY
Head Lease Summary
Premises: First Floor, Grattan House,
Temple Road, Blackrock, County Dublin
Two car parking spaces are also included
Landlord: Corke Abbey Investments Limited
22 Earlsfort Terrace, Dublin 2
Period: 35 years
Commencing: 1 March, 1990
Rent: First year IRL25,596
Second year IRL31,878 Third, fourth and
fifth year IRL34,670 Thereafter IRL34,670
plus rent reviews
A service charge, rates and 33.33% of insurance are
also payable
Payment: Quarterly in arrears
Rent Reviews: Last day of fifth year plus last day of each
subsequent fifth year
Break Clause: Option to surrender on 27 February, 2001 provided
notice given one year in advance
<PAGE>
European Language Translations
APPENDIX 8.6
SECOND FLOOR LEASE, GRATTAN HOUSE
SUMMARY
Premises: Second Floor, Grattan House,
Temple Road, Blackrock, County Dublin
Two car parking spaces are also included
Landlord: Corke Abbey Investments Limited
22 Earlsfort Terrace, Dublin 2
Guarantor: Paul Kavanagh, Killiney, County Dublin
Period: 35 years
Commencing: 14 September, 1990
Rent: First year IRL27,920
Second year IRL29,316 Third, fourth and
fifth year IRL30,712 Thereafter IRL30,712
plus rent reviews
A service charge, rates and 33.33% of insurance are
also payable
Payment: Quarterly in arrears
Rent Reviews: Last day of fifth year plus last day of each
subsequent fifth year
Break Clause: Option to surrender on 3 September, 1993 provided
notice given one year in advance. EP informed us
that no such notice has been given.
<PAGE>
EXHIBIT 10.38
THIS LEASE made the 19th day of September One Thousand Nine Hundred and Ninety
BETWEEN CORKE ABBEY INVESTMENTS LIMITED having its Registered Office at 22
Earlsfort Terrace, Dublin 2 (hereinafter called "the Landlord" which expression
where the context so admits shall include its Successors in title and assigns)
of the first part, and EUROPEAN LANGUAGE TRANSLATIONS LIMITED having its
Registered Office at Ditton House, Upper Fitzwilliam Street, Dublin 2
(hereinafter called "the Tenant" which expression where the context so admits
shall include their and each of their successors in title and assigns) of the
second part and PAUL KAVANAGH of Arcachon, Strathmore Road, Killiney in the
County of Dublin (hereinafter called "the Guarantor" which expression where the
context so admits shall include his Successors in title and assigns) of the
third part.
WITNESSETH as follows:
1. DEFINITIONS
In this Lease the following expressions shall have the following
meanings:
"DEMISED PREMISES" means the premises described in the First Part of the
First Schedule hereto with the easements rights and privileges but
excepting the exceptions and reservations;
"EASEMENTS RIGHTS AND PRIVILEGES" means those specified in the Second
Part of the First Schedule hereto;
"EXCEPTIONS AND RESERVATIONS" means those specified in the Third Part of
the First Schedule hereto;
"THE DEVELOPMENT" means the land shown on Plan No. 1 edged in red
together with the building (of which the demised premises forms part) and
Landlord's fixtures from time to time erected or standing upon the said
land (known or to be known as Grattan House, Temple Road, Blackrock in
the County of Dublin) but excluding such parts of the said land and such
parts of the building and such Landlord's fixtures erected or standing on
<PAGE>
2
any part of such land as may be excluded by the Landlord giving to the
Tenant three months' written notice of such exclusion;
"COMMON PARTS" means all such parts of the Development as are not for the
time being let separately or as are not in the possession of the Landlord
and the other facilities improvements services and privileges which are
from time to time provided by the Landlord for common or general use in
common by the Tenant and the other tenants and occupiers of the
Development and other persons authorized by the Landlord including
(without prejudice to the generality of the foregoing) the roof and
exterior walls, foundations, internal load bearing walls and the
structural parts of the roofs ceilings and floors, all party structures,
boundary walls, pedestrian ways, entrances and exits, stairways, ramps,
landscaped areas, corridors, passages, lobbies, landings, staircases,
lifts and all conduits except any that form part of the demised premises
and other lettable areas.
"CONDUITS" mean all sewers, drains, pipes, gullies, gutters, ducts,
mains, watercourses, channels, subways, wires cables, conduits, flues and
all other conducting media of whatsoever nature and kind.
2. DEMISE
In consideration of the rent hereby reserved and of the covenants on the
part of the Tenant hereinafter contained the Landlord hereby demises unto
the Tenant ALL those the demised premises being part of the Development
together with the easements rights and privileges but excepting and
reserving the exceptions and reservations TO HOLD the demised premises
except and reserved as aforesaid unto the Tenant for the term of 35
(thirty-five) years (hereinafter called "the term") from the 14th day of
September One Thousand Nine Hundred and Ninety YIELDING AND PAYING
therefor during the first year of the said term the yearly rent of
L27,920.00 (Twenty Seven Thousand Nine Hundred and Twenty Pounds) during
the second year of the said term the yearly rent of L29,316.00 (Twenty
Nine Thousand Three Hundred and Sixteen Pounds) during the third, fourth
and fifth years of the said term the yearly rent of L30,712.00 (Thirty
Thousand Seven Hundred and Twelve Pounds) and thereafter the said yearly
rent of L30,712.00 (Thirty
<PAGE>
3
Thousand Seven Hundred and Twelve Pounds) or such increased rent as may
be payable pursuant to the provisions of clause 3 hereof by four equal
quarterly payments in advance on every 14th day of September, 14th day of
December, 14th day of March, and 14th day of June, the first payment to
be made on the 14th day of September One Thousand Nine Hundred and Ninety
and to be in respect of the period from the 14th day of September One
Thousand Nine Hundred and Ninety to the 13th day of December One Thousand
Nine Hundred and Ninety AND ALSO PAYING by way of additional rent the
amount or amounts payable by the Tenant pursuant to the Tenant's covenant
hereinafter contained in Clause 4(1)(b) in respect of insurance effected
from time to time by the Landlord such additional payment to be payable
at the times and in the manner specified at said Clause 4(1)(b).
AND ALSO PAYING by way of additional rent the amount or amounts payable
by the Tenant pursuant to the Tenant's covenant hereinafter contained in
Clause 6 in respect of service charge such additional payment to be
payable at the times and in the manner specified at the said Clause.
All such payments save for any initial broken payment payable hereunder
to be paid by Bankers Order or variable direct debit mandate (at the
option of the Landlord) PROVIDED ALWAYS that if the Tenant shall fail to
pay the rent hereinbefore reserved or all or any of the additional rents
hereinafter reserved and made payable or the contribution to Insurance
Premium payable by the Tenant pursuant to clause 4(1)(b) hereof or the
Service Charge payable by the tenant pursuant to clause 6 hereof within
fourteen (14) days of the day and in the manner herein prescribed for
payment of same such unpaid sum or sums shall bear interest from and
including the day on which same shall have become due to date of actual
payment at the A rate of interest plus three per cent (3%) charged by
Allied Irish Banks PLC in the Republic of Ireland at that date or if
there shall be no such rate twenty per cent (20%) per annum.
3. RENT REVIEW PROVISIONS
<PAGE>
4
(i) In this Clause the following expressions shall have the following
meanings respectively:
(a) "Review Date" shall mean the last day of the fifth year and the
last day of each subsequent fifth year of the term hereby granted.
(b) "Current Market Rent" shall mean the gross full market rent
without any deduction whatsoever at which the demised premises
might reasonably be expected to be let at the nearest Review Date
in the open market without a fine or premium and with vacant
possession thereof by a willing Landlord to a willing Tenant for a
term equal to the term of this Lease but having regard to any
statutory rights of the Tenant of renewal under a Lease on the
same terms and conditions in all other respects as this present
Lease and upon the supposition (if not a fact) that the Tenant has
complied with all the obligations as to repair and decoration
herein imposed there being disregarded:
(1) any effect on rent of the fact that the Tenant has been in
occupation of the demised premises and any goodwill
attached to the demised premises by reason of the carrying
on thereat of the business of the Tenant
(2) any effect on rent of any improvement (whether within the
meaning of the Landlord and Tenant Acts, 1967 to 1989 or
any Acts amending extending or re-enacting same) of the
demised premises or any part thereof carried out by the
Tenant with the Licence of the Landlord at the Tenant's own
expense (otherwise than in pursuance of any obligation to
the Landlord) and carried out during the term of this
Lease.
(ii) The rent for the time being payable by the Tenant hereunder shall be
subject to increase in accordance with the following provisions of
clause.
(iii) The Landlord its servants or agents shall be entitled by notice in
writing given to the Tenant- not earlier than twelve months before and at
any time after a Review Date to call for review of the rent payable by
the Tenant to the Landlord at the Review Date specified in the notice and
if upon any such review it shall be ascertained or determined that the
<PAGE>
5
Current Market Rent of the demised premises at the Review Date is greater
than the rent payable hereunder immediately prior to such Review Date
then as from that Review Date the yearly rent payable hereunder shall be
increased to the Current Market Rent so ascertained PROVIDED that in no
circumstances shall the rent payable hereunder following such review be
less than the rent payable by the Tenant immediately prior to the Review
Date.
(iv) Every such review as aforesaid shall in the first instance be agreed by
the Landlord and the Tenant or their respective Surveyors in
collaboration but if no agreement as to the amount of the Current Market
Rent at the Review Date shall have been reached between the parties
hereto or their Surveyors within one month or such extended period as may
be agreed by the Landlord and Tenant after the date of the Landlord's
notice calling for such review then the question of the amount of the
Current Market Rent of the demised premises at the Review Date shall be
referred to the decision of a single arbitrator who shall be a Chartered
Surveyor nominated by the Landlord by notice in writing to the Tenant and
if the Tenant shall reject such nomination or fail or neglect to agree
within one month of the Landlord's notice such arbitrator shall be
appointed on the application of the Landlord by the Chairman for the time
being of the Society of Chartered Surveyors in the Republic of Ireland
which term shall include any other body established from time to time in
succession or substitution or carrying on the function currently carried
out by the same and in default of any such appointment for any reason
within one month of such application by a Chartered Surveyor to be
nominated by the Landlord and this sub-clause shall be deemed to be a
submission to arbitration within the Arbitration Acts 1954 and 1980 or
any statutory modification or re-enactment thereof for the time being in
force and subject to the jurisdiction of the Courts of the State for the
enforcement of any award of said Arbitrator.
(v) If the Arbitrator shall fail to determine the new rent within two months
of his appointment or nomination or if he shall relinquish his
appointment or die or if it shall become apparent that for any reason he
will be unable to complete his duties hereunder a
<PAGE>
6
new arbitrator shall be appointed or nominated in his place in accordance
with sub-clause (iv) above.
(vi) If upon any such review the amount of the increased rent shall not be
ascertained or determined prior to the Review Date the Tenant shall
continue to pay rent at the yearly rate payable immediately prior to the
Review Date until the quarter day next following the ascertainment or
determination of any increased rent whereupon there shall be due as a
debt payable by the Tenant to the Landlord on demand a sum equal to the
amount by which the rent for the period since the Review Date calculated
at the increased rate exceeds the rent for that period calculated at the
previous rate and in addition shall pay interest on said sums from the
Review Date until the date of actual payment at the rate of interest for
the time being chargeable under Section 22 of the Courts Act 1981 plus 3%
at the Review Date or if there shall be no such rate the corresponding or
nearest appropriate rate thereto.
(vii) If upon any such review as aforesaid it shall be agreed or determined
that the rent previously payable hereunder shall be increased the
Landlord and the Tenant shall (if required by the Landlord) forthwith at
any time not later than one year from such determination or expiration
complete and sign a written memorandum recording the increased rent
thenceforth payable and the Tenant shall pay the Stamp Duty payable on
such Memorandum.
(viii) In the event of the Landlord being prevented or prohibited in whole or in
part from exercising its rights under this clause and/or obtaining an
increase in the rent on any of the Review Dates by reason of any
Legislation Statute Government Order or Decree or Notice (increase m
context meaning such increase as would be obtainable disregarding the
provisions of any such legislation and otherwise as aforesaid) then the
date at which the review would otherwise have taken effect shall be
deemed to be extended to permit and require such review to take place on
the first date thereafter upon which such right or increase may be
exercised and/or obtained in whole or in part and when in part on so many
occasions as shall be necessary to obtain the whole increase (meaning the
whole of the increase which the Landlord would have obtained if not
prevented or prohibited as
<PAGE>
7
aforesaid) and if there shall be a partial prevention only there shall be
a further review on the first date or dates as aforesaid notwithstanding
the rent may have been increased in part on or since the date of review
PROVIDED ALWAYS that the provisions of this Sub-clause shall be without
prejudice to the Landlord's rights to review the yearly rents on the
Review Dates as specified in sub-clause (I).
4. THE TENANT HEREBY COVENANTS WITH THE LANDLORD as follows:
PAY RENT AND INSURANCE PREMIUM
(1) (a) To pay the rent and the increased rent hereby reserved on
the days and in manner aforesaid without deduction or
set-off.
(b) To pay to the Landlord from time to time on demand on the
date or dates when the Insurance Premium falls due without
any deduction or abatement 33.33% (Thirty Three and One
Third) of the amount or amounts expended by the Landlord
for keeping on foot the insurance in accordance with
Covenant 7(4) on the part of the Landlord herein.
(c) To pay to the Landlord on demand fees incurred by the
Landlords Surveyor in determining the reinstatement value
of the demised premises from time to time.
PAY RATES AND OUTGOINGS
(2) (a) From time to time and at all times during the said term to
pay and discharge all rates water rates taxes duties
charges assessments impositions burdens and outgoings of an
annual or recurring nature and also of a non-annual or
non-recurring nature where the same are legally chargeable
against the Tenant or occupier and whether Parliamentary or
Local or of any other description that may be assessed
charged or imposed upon the demised premises or the owner
or occupier in respect thereof (Landlords Capital Taxes
only excepted) and to refund to the Landlord any
<PAGE>
8
such amounts paid by it in respect of the demised premises
and pending a separate valuation of the demised premises to
pay to the Landlord by way of additional rent rates at the
poundage from time to time current on a rateable valuation
of L85.00. PROVIDED ALWAYS that the Tenant shall not be
liable for any of the aforesaid outgoings prior to the
commencement date herein;
(b) To be solely responsible for and promptly pay all charges
for water gas electricity or heat (if any) or any other
utility used or consumed in the demised premises but so
that the Landlord shall not be liable in any event for any
interruption or failure in the supply of any such utilities
to the demised premises;
TO COMPLY WITH ENACTMENTS
(3) At its own expense to do and execute all such works as are or
shall be at any time during the term under or by virtue of any Act
or Acts of Parliament or the Oireachtas already passed or
hereafter to be passed and for the time being in force or Law of
the European Community now or hereafter to be passed and any
instrument directive regulation or bye-law made thereunder which
has force in the State or by any Local or other Authority directed
or required to be done or executed in respect of the demised
premises or any part thereof whether by the owner or occupier
thereof and to indemnify and keep the Landlord indemnified against
all or any claims demands and liability in respect thereof.
AGAINST ALTERATIONS
(4) Not without the previous consent in writing of the Landlord which
if granted may be subject to such conditions as the Landlord
thinks fit to erect or to permit or suffer to be erected any new
building upon the demised premises or to make or to permit or
suffer to be made any external or structural alteration in or
addition whatsoever to the demised premises and any such erections
alterations or
<PAGE>
9
additions for which consent is granted shall be carried out in
accordance with plans and specifications to be first approved by
and to the satisfaction in all respects of the Landlord's
architects or surveyors and the Tenant shall pay the reasonable
and proper charges of such architects or surveyors and of the
Solicitors to the Landlord for each such consent;
NOT TO AVOID INSURANCE
(5) (a) Not to do or permit or suffer upon or bring or suffer to be
brought on to the demised premises any matter or thing or
article which shall or may cause the policy or policies for
the insurance of the demised premises or of any adjoining
or neighbouring premises or of the Development or any part
thereof to become void or voidable or the premium or
premiums payable in respect of the said policy or policies
to be increased above the ordinary or common rate
applicable to the demised premises or any adjoining or
neighbouring premises or the Development and to repay to
the Landlord all sums paid by way of increased premiums and
expenses incurred by it in or about the continuance or
renewal of such policy or policies rendered necessary by a
breach of covenant and all such payments shall be added to
the rent hereinbefore reserved and shall be recoverable as
rent;
(b) in the event of the demised premises or any part thereof
being destroyed or damaged from or by any of the Insured
Risks (as hereinafter defined) and the whole or part of the
insurance money in respect of the same being irrecoverable
by reason solely or in part of any act or default of the
Tenant then and in every such case the Tenant shall
forthwith pay to the Landlord the whole or (as the case may
require) a fair proportion of the cost of rebuilding and
reinstating the demised premises and any other premises in
respect of which the Landlord's Insurance shall be vitiated
by the act or default of the Tenant.
REPAIR MAINTAIN AND KEEP TIDY
<PAGE>
10
(6) (a) Throughout the term well and substantially to repair
maintain and cleanse the demised premises and all additions
thereto with all due diligence (but so that the Tenant
shall not be liable under this covenant for any repairs
covenanted to be carried out by the Landlord under the
provisions of this Lease) and to keep the same well and
substantially repaired maintained and cleansed and to
execute all such sanitary and other works as the Local
Authority may from time to time lawfully require to be
executed by the owner or occupier upon or in respect of the
demised premises or any part thereof for any purpose under
any statutory provision in that behalf;
(b) Not to block up obstruct or interfere with the ventilating
louvres situate in the walls and doors of the demised
premises (if there be any);
(c) To keep the demised premises clean and tidy and free from
deposits of material or refuse and not to bring or keep or
suffer to be brought or kept on the demised premises or on
the Development or any part of any of them any dump or
rubbish or scrap heap or anything which in the opinion of
the Landlord is or may become unclean unsightly noisome or
offensive or calculated or liable to detract from the
quality amenity or reputation of the Development or of any
adjoining premises or any of them and so often as it shall
be necessary or desirable to remove from the demised
premises and from the Development all such refuse rubbish
and scrap which may accumulate or be there.
TO PAINT
(7) Without prejudice to the generality of the provisions of
paragraphs (a) and (b) of sub-clause (6) of this clause to paint
with two coats at least of good quality paint all the inside parts
of the demised premises as are usually painted in a good and
workmanlike manner such painting of the inside parts to be carried
out not less than once in every third year the last such painting
to be in the year immediately preceding the termination of this
Lease and at the same time with every said
<PAGE>
11
inside painting to paper grain and varnish and colour such parts
of the inside of the demised premises as are usually or have been
previously papered grained varnished or coloured;
TO PERMIT INSPECTION
(8) To permit the Landlord and its agents and workmen with all
necessary appliances to enter upon the demised premises at all
reasonable times after giving reasonable notice to the Tenant for
the purpose of viewing the condition thereof taking a schedule of
the fixtures and fittings therein or of inspecting any works in
progress and upon written notice given by the Landlord to execute
any repairs lawfully required by such notice for which the Tenant
is liable under the provisions hereof and if the Tenant shall not
execute such repairs within two months of the date of the service
upon it of such notice (or if in the opinion of the Landlord there
is any emergency then within such lesser period as may be
practicable but in such event without any delay whatsoever) the
Landlord may itself execute such repairs and the costs incurred by
it in so doing (as certified by the Landlord's surveyors) shall be
paid by the Tenant to the Landlord upon demand and shall be a debt
recoverable from the Tenant by the Landlord in any court of
competent jurisdiction;
TO PERMIT LANDLORDS WORKS
(9) To permit the Landlord and all persons authorised by it and the
tenants or occupiers of the Development (the said tenants or
occupiers if authorised in writing by the Landlord) and their
officers employees agents contractors licensees and workmen at all
reasonable times after making a prior appointment (except in case
of emergency) to enter (and if necessary to erect and maintain
scaffolding) upon the demised premises with all necessary
appliances:
(a) to execute repairs alterations painting redecoration or
other work to the demised premises or any adjoining or
neighbouring premises or to the Development.
<PAGE>
12
(b) for the purpose of inspecting repairing renewing cleansing
emptying maintaining or protecting any sewers watercourses
culverts drains gutters conduits water pipes oil pipes and
tanks electric wires and cables gas pipes and telephone
wires in under or over the demised premises in connection
with or for the accommodation of any adjoining or
neighbouring premises or the Development.
In either case the person or persons exercising such rights making good or
paying compensation for any damage (other than consequence loss or damage)
thereby occasioned and causing as little inconvenience as practicable to the
Tenant;
AGAINST NUISANCE
(10) Not to carry on or permit or suffer to be carried on upon any part
of the demised premises any offensive or noisy trade business
manufacture or occupation or permit or suffer the demised premises
to be used for any illegal or immoral purposes nor to do or permit
or suffer to be done in or upon the demised premises anything
which in the opinion of the Landlord may be or tend to be a
nuisance annoyance disturbance or damage or in any way interfere
with the quiet or comfort of the occupants of adjoining or
neighbouring premises or the Development and to execute all such
works as may be necessary for abating any such nuisance in
obedience to a notice lawfully served by a Local or Public
Authority or pursuant to any Court Order or in obedience to any
Notice served by the Landlord and in default thereof to pay to the
Landlord all costs charges and expenses which may be incurred by
the Landlord in abating such nuisance in respect of the demised
premises.
AGAINST EASEMENTS
(11) To use its best endeavours to prevent any easement or right
belonging to or used with the demised premises from being
obstructed or lost and not knowingly to allow any encroachment to
be made or easements to be acquired on under or over
<PAGE>
13
the demised premises and the Development except with the consent
of or by the direction of the Landlord.
SIGNS
(12) (a) Not to paint fix or exhibit or permit or suffer to be
painted fixed or exhibited any advertisement notice sign
placard hoarding name or writing to or upon any part of the
exterior of the demised premises or on or in the windows or
external walls of the demised premises or upon any entrance
doors thereof without the consent in writing of the
Landlord (such consent not to be unreasonably withheld in
the case of the Tenant's usual trade name and fascia of a
permanent character) and PROVIDED that in connection with
any such consent which may be given as aforesaid any
necessary consent of the appropriate authorities under any
planning or other legislation be also first obtained by the
Tenant;
(b) Not to hang or place or exhibit or permit or suffer to be
hung or placed or exhibited any goods outside the demised
premises or the entrance doors or display windows of the
demised premises or upon or over any part of the
Development.
AERIALS
(13) Not to erect or permit the erection of any television or radio
receiving aerials on the exterior of the demised premises or in or
upon the Development.
RELETTING SIGNS AND VIEWING
(14) (a) To permit the Landlord during the six months immediately
preceding the expiration of the term to affix and retain
without interference to or upon any part of the demised
premises (but so as not unduly to obscure the windows
thereof or interfere with the Tenant's use thereof) a
notice for reletting the same and during the said six
months to permit persons with
<PAGE>
14
written authority from the Landlord or its agents at
reasonable times of the day to view the demised premises;
(b) To permit upon reasonable notice at any time during the
term hereof prospective purchasers of or dealers in or
agents instructed in connection with the sale of the
Landlord's reversion or of any interest superior to the
term hereof to view the demised premises without
interruption provided the same are authorised in writing
by the Landlord or its agent.
CONVEYANCING ACT NOTICES
(15) To give immediate notice thereof to the Landlord of any notice or
claim affecting the demised premises and to pay all costs charges
and expenses (including Solicitors' costs and surveyors' fees)
incurred by the Landlord for the purpose of or incidental to the
preparation and service of a notice under Section 14 of the
Conveyancing and Law of Property Act 1881 requiring the Tenant to
remedy a breach of any of the covenants herein contained
notwithstanding forfeiture for such breach shall be avoided
otherwise than by relief granted by the Courts;
ALIENATION
(16) (a) Not to assign underlet or part with the possession control
or occupation of nor to franchise the use of part only of
the demised premises;
(b) Not to assign underlet or part with the possession or
control or occupation of nor to franchise the use of the
whole of the demised premises without the consent in
writing of the Landlord first obtained which consent shall
not be unreasonably withheld in the case of a respectable
and responsible assignee or underlessee proof of which is
furnished to the Landlord and upon any such assignment to
obtain if the Landlord shall so require an acceptable
Guarantor or Guarantors for any Assignee and subject to the
following provisions or such of them as may be appropriate,
that is to say:-
<PAGE>
15
(i) The Tenant shall prior to any such assignment or
underlease apply to the Landlord and give all
reasonable information concerning the proposed
assignee or under-Lessee as the Landlord may
require.
(ii) The Landlord's consent to any such Assignment or
underletting shall be given in writing and the
Tenant shall pay the Landlords reasonable costs in
connection with such consent and in the case of an
Assignment the Landlords consent shall be endorsed
on the Indenture of Assignment.
(iii) In the case of an under-Lease the same shall be of
the entire of the demised premises at not less than
the then current market rent without any deduction
whatsoever and without a fine or premium or at not
less than the rent payable hereunder at the time of
the granting of such under-Lease (whichever is the
higher) and the under-Lessee shall if required by
the Landlord enter into a direct covenant with the
Landlord to perform and observe all the covenants
(other than that for payment of the rent hereby
reserved) and conditions herein contained and every
such under-Lease shall also be subject to the
following conditions, that is to say that it shall
contain:
(1) an unqualified covenant on the part of the
under-Lessee not to assign under-Lease or
part with or share the possession of part
only of the premises thereby demised;
(2) a covenant on the part of the under-Lessee
not to assign the premises thereby demised
without obtaining the previous consent in
writing of the Landlord hereto;
(3) a covenant condition or proviso under which
the rent reserved by the under-Lease shall be
reviewed at least every five years and if
every five years the Review Dates therein
<PAGE>
16
shall be the days which are six months after
the Review Dates in this Lease
(notwithstanding that this provision may
necessitate a first review before the
expiration of five years from the
commencement of the under-Lease) but
otherwise in the same terms as provided in
Lease;
(4) a covenant condition or proviso under which
the rent from time to time payable under such
under-Lease shall not be less than the rent
from time to time payable hereunder save for
the six monthly period between the Review
Dates of this and the under-Lease as
hereinbefore provided;
(5) covenants and conditions in the same terms as
nearly as circumstances admit as those
contained in this Lease.
NOTICE OF ASSIGNMENT
(17) Within one calendar month after the execution of any assignment
transfer underlease or the devolution of the demised premises to
give notice in writing with particulars to the Landlord's
Solicitors and to produce to them with such notice such assignment
or transfer or the counterpart of such underlease or the probate
or letters of administration or other instrument under which such
devolution arises and leave the same with them for the period of
fourteen days for registration and pay to them a reasonable fee
for the registration of each such deed or document.
DISCLOSURE OF NOTICES
(18) Upon receipt of any notice order requisition direction or other
thing from a competent authority affecting or likely to affect the
demised premises (whether the same shall be served directly on the
Tenant or the original or a copy thereof be received by the Tenant
from any person whatsoever) forthwith to deliver to the Landlord a
copy thereof and so far as the same or the Act regulations or
other
<PAGE>
17
instrument under and by virtue of which it is issued or the
provisions thereof require the Tenant so to do to comply therewith
at its own expense;
USER
(19) (a) Not to use or occupy the demised premises or any part
thereof or permit the same to be used or occupied for any
other purpose than as offices nor in any manner
inconsistent with such user or occupation except with the
consent in writing of the Landlord (such consent not to be
unreasonably withheld) but in considering and giving such
consent the Landlord shall be entitled to have full regard
to the principles of good estate management and the
interests of the tenants or occupiers of other premises in
the Development and the Landlord shall be entitled to
refuse such consent where the change of use would
substantially increase the rate of insurance in respect of
the demised premises or the Development or nearby or
adjoining premises and so that nothing herein shall be
deemed to be a warranty on the part of the Landlord that
the Tenant shall have the exclusive or preferential right
to carry on the said retail trade or business in the
Development or prevent the Landlord at the Landlord's sole
discretion from permitting the same or a similar user to be
carried on in other Units of the Development or in areas
therein in the possession of the Landlord or ancillary or
associated Companies of the Landlord.
(b) Not to permit or suffer anyone to sleep in the demised
premises and not to use or permit or suffer the use of the
same or any part thereof for residential purposes or as
licensed premises for the sale of excisable or intoxicating
liquors or as an amusement arcade or bingo hall or any
similar user.
(c) Not to use the demised premises or any part thereof or
permit or suffer the same to be used for gaming or for the
purpose of any betting transaction within the meaning of
the Betting Act 1931 (and any statutory
<PAGE>
18
modification or reenactment thereof for the time being in
force) with or between persons resorting to the demised
premises and not to make or permit or suffer to be made any
application for a betting office licence in respect of the
demised premises or any part thereof,
(d) Not to have or permit any sale by auction in or upon the
demised premises or any part thereof.
MACHINERY OVERLOADING AND INFLAMMABLE GOODS
(20) (a) Not (except so far as the same shall be ancillary to the
permitted user of the demised premises and the installation
or use of the same shall not amount to a breach of any
other provision herein) to erect or instal or use in or
upon any part of the demised premises any steam gas
electric or other engine or machinery of any kind.
(b) Not to do or permit or bring in or upon the demised
premises anything which may throw on the demised premises
or any adjoining premises any weight or strain in excess of
that which such premises are capable of bearing with due
margin for safety and in particular not to overload the
floors or the electrical installations or the other
services of in or to the demised premises nor suspend any
excessive weight from the ceilings or walls, stanchions or
the structure thereof. The Tenant shall seek professional
advice at the Tenants own expense to ensure that there
shall not be an infringement of this covenant.
(c) Not to have store or keep upon the demised premises or any
part thereof any substance of an explosive or of an
inflammable or dangerous nature or such as might increase
the risk of fire or explosion or which might attack or in
any way injure by percolation corrosion or otherwise the
demised premises or any adjoining premises or the keeping
or use whereof may contravene any statutory or local
regulation or bye-law and in particular
<PAGE>
19
without prejudice to the generality of the foregoing not to
keep portable gas appliances for use on the demised
premises.
PLANNING ACTS
(21) In relation to the Planning Acts (by which expression it is
intended herein to designate the Local Government (Planning and
Development) Acts, 1963 to 1990, and any statutory modification or
reenactment thereof for the time being in force and any
Regulations or Orders made thereunder):
(a) Not to do or omit or permit to be done or omitted anything
on or in connection with the demised premises the doing or
omission of which shall be a contravention of the Planning
Acts, or of any notices, orders, licences, consents,
permissions and conditions (if any) served, made, granted
or imposed thereunder or under any enactment repealed
thereby and to indemnify (as well after the expiration of
the term by effluxion of time or otherwise as during its
continuance) and keep indemnified the Landlord against all
actions, proceedings, damages, penalties, costs, charges,
claims and demands in respect of such acts and omissions or
any of them and against the costs of any application for
Planning Permissions and the works and things done in
pursuance thereof.
(b) In the event of the Landlord giving written consent to any
of the matters in respect of which the Landlord's consent
shall be required under the provisions of this Lease or
otherwise and in the event of permission from any Planning
Authority under the Planning Acts being necessary for any
additions, alterations, or changes in or to the demised
premises or for the change of user thereof or for any
"Development" as defined in the Planning Acts to apply at
the cost of the Tenant to the Local Planning Authority for
all consents and permissions which may be required in
connection therewith and to give nonce to the Landlord of
the granting or
<PAGE>
20
refusal (as the case may be) of all such consents and
permissions forthwith on the receipt thereof.
(c) To give notice forthwith to the Landlord of any Notice
Order or Proposal for a Notice or Order served on the
Tenant under the Planning Acts or if so required by the
Landlord to produce the same and at the request of the
Landlord and the cost of the Tenant to make or join in
making such objections or representations in respect of any
proposals as the Landlord may require.
(d) To comply at its own cost with any notices or orders served
on the Tenant and to comply with all conditions attached to
any permission granted under the provisions of the Planning
Acts.
(e) If and when called upon to do so to produce to the Landlord
or its surveyors all such plans, documents and other
evidence as the Landlord may reasonably require in order to
satisfy itself that the provisions of this sub-clause have
been complied with in all respects.
INSURE GLASS
(22) To insure and keep insured the glass in the demised premises in
the names of the Landlord and the Tenant in the full reinstatement
cost thereof and if required to produce the policy and the receipt
for the latest premium to the Landlord.
TO INDEMNIFY AGAINST CLAIMS
(23) To take out and maintain at all times during the term hereby
granted a Policy of Insurance covering Public and Employers
liability in respect of and covering the liability of the Landlord
or its Agents and the Tenant in respect of the demised premises in
an amount of not less than IRL1,000,000.00 (One Million Pounds) to
be adjusted from time to time as the Landlord deems necessary and
to produce said Policy and the receipt for payment of the last
premium thereon to the Landlord on demand and to indemnify and
keep indemnified the Landlord against
<PAGE>
21
all and any actions expenses costs claims damages and other
liabilities whatsoever in respect of the injury or death of any
person or damage to any property howsoever arising and in
particular without prejudice to the generality of the foregoing
arising directly or indirectly out of:
(a) The state of repair or condition of the demised premises.
(b) The making or exercising of any alteration to the demised
premises or state of repair or condition of such
alteration.
(c) The user of the demised premises.
(d) Any work carried out or in the course of being carried out
on the demised premises.
(e) Anything now or hereinafter attached to or projecting from
the demised premises or any other cause whatsoever.
FIRE REQUIREMENTS
(24) (a) At all times during the said term to comply with all
recommendations or requirements of the appropriate
authority and the insurers of the Development whether
notified or directed to the Landlord or the Tenant in
relation to fire precautions and in particular the
provision of fire screens and to comply with all the
regulations from time to time made by the Landlord in
relation to fire precautions and to indemnify the Landlord
against any costs and expenses in complying with any such
requirement or recommendation and will not obstruct the
access to or means of working any apparatus and appliance
for that purpose for the time being installed in the
demised premises.
(b) if required by the Landlord for the purposes of safety or
to comply with the recommendations or requirements of the
Insurers of the Development to pay to the Landlord on
demand the cost of providing and installing
<PAGE>
22
portable fire extinguishers fire hose reels or similar
devices or at the Landlord's option to instal same at the
Landlord's direction and at the Tenant's expense.
(c) In the event of the demised premises or any part thereof
being damaged or destroyed by any of the Insured Risks to
give immediate notice to the Landlord.
NOT TO OBSTRUCT PIPES
(25) Not to stop up or obstruct or permit or suffer to be stopped up or
obstructed or to suffer any oil grease or other noxious or harmful
matters or substances to enter the drains sewers gutters pipes
channels and watercourses of the demised premises or of the
Development and to employ such method for treating any deleterious
effluent that may reasonably be required by the Landlord or be
required by the Local Authority before permitting such effluent to
enter any such drains sewers gutters pipes channels and
watercourses;
NOT TO OBSTRUCT COMMON PARTS
(26) (a) Not to stand or place or permit or suffer to be placed or
deposited on the Common Parts or on any part thereof any
goods machines display case board or article of any
description whatsoever or obstruct any part of the
Development in any way whatsoever but at all times to keep
the same free and unobstructed;
(b) Not to allow its Employees, Directors, Agents, Servants or
Suppliers to park their cars or other vehicles or otherwise
to make use of or obstruct the car park or parking
facilities within the Development;
<PAGE>
23
TO OBSERVE RULES
(27) To observe and perform the Rules and Regulations set out in the
Third Schedule hereto and all and any amendments and additions
thereto made by the Landlord from time to time under the
provisions of sub-clause (5) of Clause 9 hereof;
(28) To keep the stairway leading from the first floor level to the
second floor level and the entire lobby at second floor level of
Grattan House (standing on the Development) clean and in a neat
and tidy condition at all times.
TO PAY STAMP DUTY AND V.A.T.
(29) To pay the Stamp Duty on the original and counterpart of this
Lease and also all Value Added Tax (or any tax of a similar nature
that may be substituted for it or levied in addition to it)
arising on the creation of Lease or chargeable in respect of any
payment made by the Tenant under any of the provisions of or in
connection with this Lease.
TO YIELD UP
(30) To yield up the demised premises with the Landlord's fixtures and
fittings and additions and improvements thereto at the expiration
or sooner determination of the term (howsoever the same may be
determined) in good and substantial repair and condition and
always in such a state of repair and condition as shall be in
accordance with the continued performance and observance of the
Tenants covenants herein contained.
5. IT IS HEREBY AGREED AND DECLARED that so far as the same shall not be or
become the responsibility of the Local Authority or be or become
separately demised from time to time the Common Parts shall at all times
be subject to the exclusive control and management of the Landlord and in
particular:
(a) the Landlord shall have the right to instal maintain and operate
lighting hearing ventilating and air-conditioning apparatus and
equipment serving the Common Parts and to police and procure the
policing of the same but may for reasonable
<PAGE>
24
and proper cause from time to time change the area level location
and arrangement of the Common Parts and restrict parking and make
parking charges;
(b) the Landlord may close or restrict all or any portion of the
Common Parts to such extent as may be legally sufficient to
prevent a dedication thereof or the accrual of any rights to any
person or the public therein and may close or restrict temporarily
all or any of the Common Parts for the purpose of repairing,
renovating and replacing cleansing and maintaining the same;
6. THE TENANT FURTHER COVENANTS WITH THE LANDLORD as follows:
(1) From time to time and at all times during the term hereby granted
to repay to the Landlord forthwith upon demand as hereinafter
provided a charge (hereinafter called "the Service Charge") being
33.33% (Thirty Three and one third) per cent of all costs and
expenses which are from time to rime or at any time hereafter
during the term expended incurred or payable or to be so expended
incurred or paid by the Landlord (computed upon the basis of
providing an indemnity to the Landlord) in respect of the items
set out in the Second Schedule hereto together with any value
added or other tax thereon;
(2) The amount of the Service Charge shall be ascertained and
certified by a certificate (hereinafter called "the certificate")
signed by the Landlord's auditors or accountants or managing
agents (at the discretion of the Landlord) acting as experts and
not as arbitrators annually and so soon after the end of the
Landlord's financial year as may be practicable and shall relate
to such year in manner hereinafter mentioned;
(3) The expression "the Landlord's financial year" shall mean the
period from the 1st day of January in each year to the 31st day of
December of that same year or such other annual period as the
Landlord may at its discretion from time to time determine as
being that in which the accounts of the Landlord either generally
or relating to the Development shall be made up;
<PAGE>
25
(4) A copy of the certificate for each such financial year shall be
supplied by the Landlord to the Tenant on written request and
without charge to the Tenant;
(5) The certificate shall contain a summary of the Landlord's said
costs and expenses incurred by the Landlord during the Landlord's
financial year to which it relates together with a summary of the
relevant details and figures forming the basis of the Service
Charge and the certificate (or a copy thereof duly certified by
the person by whom the same was given) shall be conclusive
evidence for the purposes hereof of the matters which it purports
to certify;
(6) The expression "the costs and expenses incurred by the Landlord"
as hereinbefore used shall be deemed to include not only those
costs and expenses hereinbefore described which have been actually
disbursed incurred or made by the Landlord during the year in
question but also such reasonable part of all such costs and
expenses hereinbefore described which are of a periodically
recurring nature (whether recurring by regular or irregular
periods) whenever disbursed incurred or made and whether prior to
the commencement of the term or otherwise including a sum or sums
of money by way of reasonable provision for anticipated
expenditure in respect thereof as the Landlord or its auditors or
accountants or managing agents (as the case may be) may in their
discretion allocate to the year in question as being fair and
reasonable in the circumstance;
(7) The Tenant shall if required by the Landlord with every quarterly
payment of rent reserved hereunder pay to the Landlord such sum in
advance and on account of the Service Charge as the Landlord or
its auditors or accountants or managing agents (as the case may
be) shall specify at their discretion to be a fair and reasonable
interim payment.
(8) As soon as practicable after the signature of the certificate the
Landlord shall furnish to the Tenant an account of the Service
Charge payable by the Tenant for the year in question due credit
being given therein for all interim payments made by the Tenant in
respect of the said year and upon the furnishing of such account
<PAGE>
26
showing such adjustment as may be appropriate there shall be paid
by the Tenant to the Landlord the amount of the Service Charge as
aforesaid or any balance found payable or there shall be allowed
by the Landlord to the Tenant any amount which may have been
overpaid by the Tenant by way of interim payment as the case may
require;
(9) IT IS HEREBY AGREED AND DECLARED that nothing in this Clause or
these presents contained shall disable the Landlord from
maintaining an action against the Tenant in respect of non-payment
of any such interim payment as aforesaid notwithstanding that the
Certificate had not been signed at the time of the Proceedings.
(10) PROVIDED ALWAYS and notwithstanding anything herein contained it
is agreed and declared as follows:
(a) That in regard to the commencement of the term hereby
granted the Service Charge shall be duly apportioned in
respect of the period from the date on which the first
payment of rent shall fall due hereunder to the ensuing day
of ____________ and not in respect of the period from the
date of commencement of the term to such ensuing day of
__________.
(b) That the provisions of sub-clause (8) of this Clause shall
continue to apply notwithstanding the expiration or sooner
determination of the term hereby granted but only in
respect of the period down to such expiration or sooner
determination of the term.
7. THE LANDLORD HEREBY COVENANTS WITH THE TENANT as follows:
(1) The Tenant paying the rent hereby reserved and observing and
performing the several covenants and stipulations herein on its
part contained shall peaceably hold and enjoy the demised premises
during the term without any interruption by the Landlord or any
person rightfully claiming under or in trust for it;
<PAGE>
27
(2) To keep the Common Parts and the pipes and wires water drainage
electricity services and the lift in the Common Parts in good and
substantial repair and condition so far as such services are not
maintainable by a statutory undertaker or maintained at public
expense;
(3) The Landlord will use its best endeavours (subject to the receipt
by the Landlord of the Service Charge from the Tenant throughout
the term) to provide and carry out or procure the provision and
carrying out of the services particulars of which are set out in
the third paragraph of the Second Schedule hereto provided that
(without affecting the generality of the provisions of this
sub-clause) the Landlord shall not be liable for any failure or
omission at any time or from time to time during the term hereby
granted to provide supply or procure any or all of the said
services if it shall be prevented hampered or restricted in any
way from so doing by virtue of strikes lock-outs non-availability
of or restrictions upon supplies or materials or labour or other
services weather conditions inevitable accident emergency act of
God or any cause whatsoever or howsoever arising and not within
the control of the Landlord provided always that the Landlord
shall be entitled to cease to provide any such service if in the
opinion of the Landlord it shall cease to be for the benefit of
the Tenant or has become due to technological change obsolete or
redundant;
(4) Subject to the Landlord being able to effect insurance against any
one or more of the risks hereinafter specified and subject to
reimbursement of the appropriate insurance premium as provided by
Clause 4(1)(b) hereof to insure in the name of the Landlord the
Development and the demised premises and all Landlord's fixtures
and fittings therein and thereon excluding glass and to keep the
same insured in the full reinstatement cost (to be determined from
time to time by the Landlord or its surveyors) and including an
inflationary factor against damage by fire, explosion, lightning,
impact, earthquake, aircraft, flood, storms and tempest, riot and
civil commotion and malicious damage or bursting or overflowing of
water tanks, apparatus and pipes and including demolition, site
clearance
<PAGE>
28
expenses, architects and other fees and taxes in relation to the
reinstatement of the Development and the demised premises and
three years loss of rent and the service charge and all stamp
duties and V.A.T. exigible on any building or like contract as may
be entered into relative to the reconstruction, reinstatement or
repair of the Development and the demised premises or any part
thereof resulting from the destruction, loss or damage thereof or
thereto from any of the perils aforesaid and public liability and
employers liability and against such other risks as the Landlord
may from time to time in its absolute discretion consider prudent
and desirable (all such perils and risks for the time being so
covered by insurance hereinafter called "the insured risks") and
such risks may be covered by any policy or policies of insurance
as the Landlord may consider appropriate PROVIDED HOWEVER that the
Landlord shall not be responsible to the Tenant its servants
agents licensees invitees or visitors for any injury death damage
destruction financial or consequential loss whether to person or
due to the state and condition of the Development or the demised
premises or any part thereof or due to any act or default of any
agent servant workman or other person authorised by the Landlord
to enter the Development or the demised premises save to the
extent to which the same may be insured against by the Landlord
pursuant to the terms of this Lease.
(5) In case the Development or the demised premises or any part
thereof shall be destroyed or damaged by fire or from any of the
insured risks then (subject to the Landlord obtaining Planning
Permission and all other necessary pertinent licences and
approvals) to reinstate the Development and the demised premises
substantially in accordance with its existing plan and elevation
and as often AS shall happen to lay out all monies received in
respect of such insurance as aforesaid as soon as practicable in
or upon rebuilding, repairing or reinstating the Development and
the demised premises in a good and substantial manner unless the
relevant policy shall have been vitiated or rendered less than
fully effective by any act, neglect, default or occasion on the
part of the Tenant and without being required to make up any
deficiency out of its own monies PROVIDED ALWAYS
<PAGE>
29
that in the event of the Landlord being unable to reinstate the
Development and/or the demised premises substantially in
accordance with its existing plan and elevation due to refusal of
planning or other approvals consents or licences the Tenant agrees
to surrender Lease when called upon by the Landlord to do so
whereupon the said Insurance monies shall belong absolutely to the
Landlord.
8. IT IS HEREBY AGREED AND DECLARED as follows:
(1) The demised premises are held subject to all right of light and
air and all other easements or rights (if any) now enjoyed by the
adjoining or neighbouring lands buildings and properties over the
demised premises;
(2) The Tenant shall not be entitled to any right of access or light
or air or other easements or rights to any building for the time
being comprised herein which would restrict or interfere with the
user of any adjoining or neighbouring land for building or for any
other purpose.
9. PROVIDED ALWAYS AND IT IS HEREBY EXPRESSLY AGREED as follows:
(1) If the said yearly rent or the Service Charge or other
contributions hereby reserved or any part thereof shall at any
time be in arrear and unpaid for fourteen days after the same
shall have become due (whether any formal or legal demand therefor
shall have been made or not) or if the Tenant shall at any time
fail or neglect to perform or observe any of the covenants
conditions or agreements herein contained and on its part to be
performed and observed or if the Tenant while the demised premises
or any part thereof shall remain vested in it shall enter into
liquidation whether compulsory or voluntary (not being a voluntary
liquidation for the purpose of amalgamation or reconstruction) or
permit any execution to be levied on the demised premises or
(being an individual) shall become bankrupt or compound with his
creditors then and in any such case it shall be lawful for the
Landlord or any person or persons duly authorised by it into or
upon the demised premises or any part thereof in the name of the
whole to re-enter and the demised premises peaceably to hold and
enjoy thenceforth as if this Lease had not been
<PAGE>
30
made without prejudice to any right of action or remedy of the
Landlord in respect of any antecedent breach of any of the
covenants by the Tenant hereinbefore contained;
(2) In the event of the demised premises being damaged or destroyed by
any of the risks from time to time insured against by the Landlord
so as to be unfit for occupation and use then (unless the
insurance monies shall be irrecoverable in whole or in part by
reason solely or in part of any act neglect default or omission of
the Tenant) the rent hereby reserved and the Service Charge or
fair proportions of both according to the nature and extent of the
damage sustained shall be suspended until the demised premises
shall again be rendered fit for occupation and use and in the
event of any dispute concerning the provisions of this sub-clause
the same shall be determined by a single arbitrator in accordance
with the provisions of the Arbitration Acts 1954 and 1980 or any
statutory modification or re-enactment thereof for the time being
in force;
(3) Any Notice under this Lease shall be in writing. Any Notice to the
Tenant shall be sufficiently served if signed by the Landlord or
its Agent for the time being and handed to the Tenant or left at
or affixed to the demised premises or any part thereof or sent by
Registered or Recorded Post to the registered office of the Tenant
in Great Britain or Northern Ireland or Republic of Ireland. Any
Notice by the Tenant to the Landlord shall be sufficiently served
if handed to the Landlord or its Agent for the time being or sent
by Registered or Recorded Post to the Landlord at its registered
office or its Agent (at its principal place of business) for the
time being. A Notice sent by post shall be deemed to have been
given forty-eight hours after the time of posting to the address
to which it-was sent.
(4) Except in relation to Clause 3 hereof or where the provisions of
this Lease provide for a determination by the Landlord or its
architects auditors accountants agents or surveyors to be final
and conclusive as against the Tenant or where the same relate to
forfeiture of this lease or relief from forfeiture or matters
related thereto all cases of dispute or difference arising out of
or touching upon the rights duties
<PAGE>
31
or liabilities of the parties under this Lease shall be referred
to the determination of a single arbitrator to be agreed upon by
the parties or failing agreement to a person notarized by the
President of the Incorporated Law Society of Ireland upon the
application of either parry and the Arbitration shall be conducted
in manner provided by the Arbitration Acts 1954 and 1980 or any
statutory modification or reenactment thereof for the time being
in force. The reference to the President shall include the duly
appointed Deputy of the President or any person authorised by the
President to make appointments on his behalf.
(5) The Landlord shall have the right from time to time to amend and
add to the Rules and Regulations set out in the Third Schedule
hereto in such manner as the Landlord shall consider to be in the
best interests of the Development.
10. The Landlord shall not be liable to the Tenant for any loss damage
inconvenience or injury suffered by the Tenant or any employee workman or
customer or invitee or person resorting to the Development or demised
premises through or as a result of any state of disrepair of the demised
premises or of any breakdown or suspension of or any defect in any
fixture or fitting or any service or facility supplied in or about the
demised premises or anything in or upon any part of the Development
(including the demised premises and the Common Parts).
11. The Plans annexed hereto and the details shown thereon shall be for the
purpose of identification only and no warranty or condition expressed or
implied shall be given or be deemed to be given in respect of such Plans
or the details shown thereon or any matter or thing shown thereon or
referred to.
SURRENDER
12. In case the demised premises or any part thereof shall be destroyed or
become ruinous and uninhabitable or incapable of beneficial occupation or
enjoyment by or from any of the risks specified in clause 7(4) hereof
during the term hereby granted the Tenant hereby absolutely waives and
abandons its rights (if any) to surrender this Lease under the
<PAGE>
32
provisions of Section 40 of the Landlord & Tenant Law Amendment, Ireland,
Act 1860 or otherwise.
INTERPRETATION
13. In this Indenture where the context so admits the words importing the
neuter gender only shall include the masculine or feminine gender as
appropriate and vice versa and words importing the masculine gender only
shall include the feminine gender and words importing the singular number
only shall include the plural number and vice versa and where the Tenant
or the Guarantor shall from time to time be or consist of two or more
individuals the covenants herein expressed to be made by the Tenant or
the Guarantors as the case may be shall be deemed to be made by such
individuals jointly and severally. Any reference herein contained to an
enactment or to a series of enactments shall be deemed to include any
enactment from time to time extending, amending repealing, replacing or
continuing the same or any order regulation instrument direction scheme
or permission made under it or deriving validity from it.
14. HEADER NOTES TO AFFECT CONSTRUCTION
The Header notes hereof shall not affect the construction of these
presents.
15. WARRANTY
Nothing in this Lease contained shall be deemed to constitute any
warranty by the Landlord that the demised premises or any part thereof
are authorised under the Planning Acts or otherwise for use for any
specific purpose.
16. GUARANTEE
(1) The Guarantor in consideration of the demise hereinbefore
contained having been made at their request hereby covenant with
the Landlord that the Tenant will pay the rents service charge and
other contributions hereby reserved on the days and in the manner
aforesaid and will perform and observe all the Tenant's covenants
hereinbefore contained and that in case of default in such payment
of rents service charge
<PAGE>
33
and other contributions or in the performance or observance of
such covenants as aforesaid the Guarantor will pay and make good
to the Landlord on demand all losses damages costs and expenses
thereby arising or incurred by the Landlord PROVIDED ALWAYS and it
is hereby agreed that any neglect or forbearance of the Landlord
in endeavouring to obtain payment of the rents service charge and
other contributions hereby reserved when the same become payable
or to enforce performance of the several stipulations herein on
the Tenant's part contained and any time which may be given to the
Tenant by the Landlord shall not release or exonerate or in any
way affect the liability of the Guarantor under this covenant.
(2) In the event of the Tenant (being a company) during the term
hereby granted entering into liquidation whether compulsory or
voluntary and the liquidator in such liquidation disclaiming this
Lease or in the event of the Tenant (being an individual) becoming
bankrupt and the Assignee or Assignees in bankruptcy disclaiming
this Lease then in either such event the Guarantor hereby covenant
with the Landlord that the Guarantor will at the request of the
Landlord accept from the Landlord a Lease of the demised premises
for a term equal in duration to the residue remaining unexpired of
the term hereby granted at the time of the granting of such Lease
to the Guarantor such Lease to contain the same Landlord's and
Tenant's covenants respectively and the same provisos and
conditions in all respects (including the provisos for re-entry)
as are herein contained. PROVIDED ALWAYS that notwithstanding
anything hereinbefore contained in this sub-clause the liability
of the Guarantor herein shall cease on the expiration of the third
year of the term hereby granted.
BREAK CLAUSE
17. [deleted]
IT IS HEREBY CERTIFIED that the premises hereby demised are situate in the
Borough of Dun Laoghaire.
<PAGE>
34
IT IS HEREBY FURTHER CERTIFIED that the transaction hereby effected does not
form part of a larger transaction or of a series of transactions in respect of
which the amount or value or the aggregate amount or value of the consideration
(other than rent) exceeds L5,000.00.
IN WITNESS whereof the parties hereto have caused their respective Common Seals
to be hereunto affixed the day and year first herein written.
FIRST SCHEDULE
PART I
DEMISED PREMISES
ALL THAT the Second Floor Offices being portion of the Development known or to
be known as Temple Road, Blackrock in the County of Dublin as is more
particularly delineated and shown for the purpose of identification only on Plan
No. 2 annexed hereto and thereon edged green and which premises include:
(a) the internal plaster surfaces and finishes of all structural or load
bearing walls and columns therein or which enclose the same, but not any
other part of such walls and columns;
(b) the entirety of all non-structural or non-load bearing walls and columns
therein;
(c) the inner half severed medially of the internal non-load bearing walls
(if any) that divide the same from other parts of the building on the
Development;
(d) the floor finishes thereof save that the lower limit of the Demised
Premises shall not extend to anything below the floor finishes [except
that the cavity above any suspended ceilings shall be included];
(e) the ceiling finishes thereof, including all suspended ceilings (if any)
and light fittings save that the upper limit of the Demised Premises
shall not extend to anything above the ceiling finishes [except that the
cavity above any suspended ceilings shall be included];
<PAGE>
35
(i) all window frames and window furniture and all glass in the
windows and all doors, door furniture and door frames;
(ii) all sanitary and hot and cold water apparatus and equipment and
the radiators (if any) therein and all fire fighting equipment and
hoses therein;
(iii) all Conduits therein and exclusively serving the same.
PART II
EASEMENTS, RIGHTS AND PRIVILEGES GRANTED
1. All Landlord's fixtures and fittings in and about the demised premises,
and
2. The right of ingress, egress and regress at all times during the business
hours of 8 a.m. to 6:30 p.m. on Mondays to Fridays (Christmas Day and
Bank Holidays excepted) and at such other times as shall be agreed by
prior special arrangement with the Landlord through the Common Parts
leading to the demised premises;
3. The use at the times aforesaid by employees and visitors of the Tenant of
2 (two) car-parking spaces in the car park area as shown coloured yellow
on plan No. 1 (One) attached hereto (but so that the Landlord shall be
under no liability in respect of any loss or damage to any vehicle or the
contents of any vehicle in such car-parking spaces);
4. The right of free passage and running of water and soil and other
effluent in and through the sewers drains and channels made or to be made
through or under the Development;
5. The free and uninterrupted passage of water and air through the central
heating and/or air-conditioning apparatus;
6. The right of passage of gas electricity air smoke or other effluvia to
and from the demised premises though the pipes wires telephone and
telegraph cables ducts flues and conduits (if any) passing along or
through or over upon or under the Development and the adjoining premises
of the Landlord.
<PAGE>
36
7. The right of support shelter and protection for the demised premises from
the adjoining or neighbouring premises and all other parts of any
building erected or to be erected of which the demised premises may form
part as are at present enjoyed or intended to be enjoyed by the demised
premises.
8. Full and free right and liberty for the Tenant its tenants employees and
duly authorised agents upon reasonable notice to enter upon other
premises comprised in the Development so far as may be reasonably
necessary for the purpose of repairing or maintaining the demised
premises or otherwise performing the Tenant's obligations hereunder the
tenant in the exercise of such rights doing as little damage as possible
to such other premises and forthwith making good any damage thereby
occasioned.
And so that all such easements rights and privileges in this Schedule
granted shall be enjoyed in common with the Landlord and all other
persons thereto entitled.
PART III
EXCEPTIONS AND RESERVATIONS
Except and reserved unto the Landlord and the lessees and tenants of the
Development and all other persons at any time authorised by them or any of them
or otherwise entitled to the same rights as follows:
Full right and liberty to vary or permit the variation of the present or any
future scheme layout or use of the Development and without derogating from the
generality of the foregoing:-
(1) Full right and liberty to build upon the demised premises or to
build upon or to extend in height or otherwise buildings from time
to time standing on any land adjoining or adjacent to the demised
premises or any building or any part thereof of which the demised
premises form part notwithstanding that the access of light and
air to the demised premises and the lights windows and openings
thereof may be affected;
<PAGE>
37
(2) Full right and liberty from time to time to change vary reduce or
add to the area extent level location and arrangement of the
Common Parts and of the improvements and amenities provided by the
Landlord and to restrict parking and to close off part or parts of
any areas designated from time to time for car parking and to
construct buildings or other erections thereon or on any part or
parts of the Development and to close temporarily all or any of
the said Common Parts and improvements and amenities for the
purpose of preparing renovating and replacing cleansing and
maintaining the same taking at all times proper account of the
reasonable interests of the tenant and other tenants in the
Development and in accordance with the principles of good estate
management.
(3) The full and free right and liberty of running of water and soil
gas and electrical energy the flow of air and the free passage of
smoke or other effluvia from and to the Development and the
adjoining premises of the Landlord and the buildings now or
hereafter to be erected in the Development through the gutters
pipes sewers drains wires telephone and telegraph cables conduits
ducts flues and watercourses now or at any time during the term in
or over or upon or under or passing along or through the demised
premises and to enter upon the demised premises and to install and
make connection with such gutters pipes sewers drains wires
telephone and telegraph cables conduits ducts flues and
watercourses or any of them for the purpose of exercising the said
right of running of water and soil gas electrical energy flow of
air and free passage of smoke or other effluvia the person or
persons exercising such rights making good any damage to the
structure of the demised premises thereby occasioned;
(4) Full right and liberty at all reasonable times to enter upon the
demised premises with or without appliances and workmen and others
as often as may be necessary to view the state and condition of
and to repair and maintain the demised premises and clean alter
renew remove or instal such gutters pipes sewers drains wires
conduits ducts flues and watercourses serving the demised premises
and adjoining premises and the Development (including the right if
necessary to erect and
<PAGE>
38
maintain scaffolding) the persons exercising such rights ensuring
that inconvenience is limited as far as practicable and that
access to the demised premises is not as far as practicable unduly
obstructed;
(5) The full rights of support and of shelter and protection to
adjoining premises and all other parts of the building of which
the demised premises form part and of the Development as are at
present enjoyed from the demised premise;
(6) The full right and liberty to enter upon the demised premises at
any time during the term hereby granted in order to build on or
into any party or other walls of the demised premises the person
or persons exercising such rights making good all damage to the
structure of the demised premises thereby occasioned;
(7) The right to build or instal or to continue building or installing
(and thereafter to maintain) buildings erections structures signs
and fixtures on the Common Parts or on any part of the Development
and/or upon into or projecting over or under or taking support
from the demised premises or the building of which the demised
premises form part PROVIDED that such building and erections and
structures and signs and fixtures shall not become nor form part
of the demised premises.
But so that the tenant shall not be entitled to any compensation
whatsoever in respect of the exercise by the Landlord its agents or any
of the persons thereto entitled of any of the rights hereby excepted and
reserved.
SECOND SCHEDULE
PARTICULARS OF COMPONENTS OF SERVICE CHARGE
1. The costs of the insurances which the Landlord shall incur in providing
the services herein set out.
2. The costs of the repairs decorations and other works which the Landlord
covenants to effect in this Lease.
<PAGE>
39
3. The total costs and expenses incurred in managing operating repairing
renovating cleaning maintaining and replacing the Common Parts and
specifically including but without prejudice to the generality of the
foregoing;
(a) gardening landscaping and line painting;
(b) lighting heating ventilation and air-conditioning (including
central heating);
(c) sanitary and health control and cleaning and the removal and
disposal of refuse;
(d) providing staff and personnel for carrying out duties in respect
of the operation and maintenance of the Development and the Common
Parts and providing residential or other accommodation for them
and providing repairing and maintaining an office situate at or
near the Development and other accommodation used solely for the
purpose of the Development;
(e) the policing control and security of the Development;
(f) depreciation and provision for replacement (whether by way of an
annual sinking fund or otherwise at the discretion of the
Landlord) of machinery equipment plant apparatus and things
forming part of or used in the operation and maintenance of the
Common Parts;
(g) the provision and maintenance of fire fighting equipment;
(h) the cost of management (including the collection of rent and
service charge) and of employing management agents and the cost of
employment of accountants auditors and surveyors to determine the
amount of the Service Charge;
(i) any legal costs and expenses incurred in the course of managing
operating and maintaining the Development and the Common Parts and
enforcing any covenants conditions and regulations with respect
thereto or complying with or otherwise taking action or any
notices or orders in respect of the Development or the Common
Parts;
<PAGE>
40
(j) all rates taxes charges impositions and outgoings whatsoever
whether parliamentary local or of any other description which may
be assessed charged or imposed or payable on or in respect of the
whole or any part of the Development or the Common Parts so far as
such payments are not the liability of or recoverable from the
Tenant or any other tenant in the Development;
(k) Providing such reception and security staff for the reception area
and the common areas as may from time to time appear appropriate
to the Landlord
(l) Value Added Tax on all sums payable pursuant to the provisions of
this Schedule.
THIRD SCHEDULE
RULES AND REGULATIONS
(1) The demised premises shall not be used in any manner in appropriate to a
high class office.
(2) No live animals shall be kept in the demised premises.
(3) Nothing shall be deposited and no refuse shall be thrown outside the
demised premises and all refuse and waste shall be deposited by the
tenant in a compactor or area designated by the landlord from time to
time for this purpose.
(4) No paraffin oil or liquid or solid fuel heater shall be used in the
demised premises.
(5) No dangerous or offensive goods shall be stored or kept in the demised
premises.
(6) The Tenant shall keep on the demised premises in compliance with the
Landlord's and Insurers reasonable requirements and legal requirements
(if any) fire fighting and extinguishing apparatus which shall be open to
the inspection of the Landlord and Insurers and shall not obstruct or
permit or suffer to be obstructed the access to or means of working such
apparatus and appliances or any means of escape.
<PAGE>
41
(7) No fuel shall be burned in the demised premises and the Tenant shall
comply in all respects with the requirements of any smoke control order
for the time being in force in the area in which the demised premises are
situate.
(8) No loudspeakers televisions sets radios or other devices shall be used in
a manner so as to be heard outside the demised premises.
(9) The Tenant shall keep the demised premises at a temperature sufficiently
high to prevent freezing of water in pipes and fixtures.
(10) The plumbing facilities shall not be used for any other purposes than
that for which they are constructed and no foreign substance of any kind
shall be thrown therein.
(11) The Tenant shall not burn any refuse of any kind or any other material in
or about the demised premises or the Development.
(12) The Tenant shall give immediate notice to the Landlord in case of fire or
accident or defects in the demised premises.
(13) The Tenant shall use its best endeavours to ensure that persons having
recourse to the Development shall observe any regulations or instructions
made or given by the Landlord with regard to the parking of vehicles in
the car parking or other areas of the Development.
PRESENT when the Common Seal
of THE LANDLORD was affixed
hereto:
PRESENT when the Common Seal
of THE TENANT was affixed
hereto:
SIGNED SEALED AND DELIVERED
by the said PAUL KAVANAGH
in the presence of:
<PAGE>
42
Dated the day of 199
CORKE ABBEY INVESTMENT LIMITED
First Part
EUROPEAN LANGUAGE TRANSLATIONS LTD
Second Part
PAUL KAVANAGH
Third Part
LEASE
Matheson Ormsby Prentice
Solicitors
3 Burlington Road
Dublin 4
CORKEABB.LET PS/EF 9 August 1990
<PAGE>
Exhibit 10.39
AGREEMENT made the 4th day of December 1998 BETWEEN the INDUSTRIAL DEVELOPMENT
AGENCY (IRELAND) having its principal office at Wilton Park House, Wilton Place,
Dublin 2 ("IDA") of the first part, LIONBRIDGE TECHNOLOGIES IRELAND having its
registered office at ____________________ (the "Company") of the second part and
LIONBRIDGE TECHNOLOGIES HOLDINGS INC. having its registered office at
________________________ (the "Promoters") of the third part.
WHEREAS:
A. The Company which is controlled by the Promoters has been carrying on at
Blackrock, Co Dublin and is in the course of establishing and carrying on
at Ballina, Co Mayo a service undertaking for the provision of
localisation, support and testing services (the "Undertaking") in
accordance with proposals furnished to IDA by the Promoters and has
applied to IDA for financial assistance towards the cost of establishing
the Undertaking which is intended to give employment to 100 persons;
B. The Company and the Promoters having made the necessary enquiries are
satisfied and represent to IDA that to the best of their belief there
will be available to the Undertaking the relevant resources required for
its proper commercial establishment and efficient operation;
C. The Promoters have represented to IDA that the Undertaking will
contribute to the development of the Irish economy.
NOW IT IS HEREBY WITNESSED that in consideration of the Company implementing the
said proposals and carrying on the Undertaking in accordance with this
Agreement, IDA agrees to grant to the Company:
(i) the sum of 1,000,000 Irish Pounds or the aggregate of 10,000 Irish Pounds
for each job created in the Undertaking in accordance with Paragraph 7 of
the Second Schedule hereto whichever is the lesser (the "Employment
Grant");
(ii) the sum of 150,000 Irish Pounds or 33 1/3% of the actual expenditure on
the provision of new machinery and equipment for the Undertaking (the
"eligible assets") whichever is the lesser (the "Capital Grant");
(iii) the sum of 12,000 Irish Pounds or 20% of the annual rent payable for a
period of four years for the premises rented for the Undertaking,
whichever is the lesser (the "Rent Subsidy Grant");
(iv) the sum of 102,000 Irish Pounds or 100% of actual training costs
whichever is the lesser (the "Training Grant").
The Employment Grant, the Capital Grant, the Rent Subsidy Grant and the Training
Grant are hereinafter collectively referred to as the "grants" and are subject
to the following terms and conditions including those contained in the Schedules
hereto:
<PAGE>
2
1. DEVELOPMENT OF THE UNDERTAKING:
The development of the Undertaking and in particular the provision of employment
shall be substantially in accordance with the particulars given in the said
proposals.
2. CONTROL OF THE COMPANY:
The controlling interest in the Company shall be held directly or indirectly by
the Promoters unless otherwise agreed to in writing by IDA.
3. PROVISION OF ELIGIBLE ASSETS:
The expenditure eligible for the capital grant and the provision of the eligible
assets shall be as set forth in the First Schedule.
4. PROMOTERS INVESTMENT:
The Company shall procure or provide for the purposes of the Undertaking:
4.1 Equity Equivalent of IR(pound)1,198,000
For the purposes of this Agreement "Equity Equivalent" shall mean the
total monies obtained by the Company as follows:
1.1.1 cash received by the Company from the Promoters in consideration
for the issue at par of fully paid-up Ordinary Shares in the
Company; and/or
1.1.2 retained earnings of the Company capitalised at par as fully
paid-up Ordinary Shares in the Company; and/or
1.1.3 retained earnings of the Company transferred to a special
non-distributable reserve account which shall be maintained at the
appropriate level for the duration of this Agreement; and/or
1.1.4 loans from the Promoters on the following terms and conditions
("Subordinated Loans"):
1.1.4.1 that no interest on such loans shall be paid by the
Company except out of profits which would otherwise be
available for dividend;
1.1.4.2 that no such loans shall be repaid except out of profits
of the Company which would otherwise be available for
dividend or out of a new loan obtained on the same terms
for this purpose, or out of the proceeds of a new issue
at par of fully paid-up Ordinary Shares of the Company
made for this purpose;
1.1.4.3 that where any such loans are repaid out of profits,
there shall be transferred out of profits which would
otherwise have been available for dividend to a special
non-distributable reserve account a sum equal to
<PAGE>
3
the amount of the loan repaid, and that there shall be
no reduction in the amount of such special
non-distributable reserve account during the term of
this Agreement;
1.1.4.4 that where any such loans are repaid out of a new loan
obtained for this purpose, the new loan shall be subject
to these conditions as if it were the original loan;
1.1.4.5 that in the event of the winding up of the Company the
amount of any such loans still outstanding shall be
subordinated to the claims of the unsecured creditors of
the Company;
PROVIDED ALWAYS that not less than 25% of the Equity Equivalent shall
be Ordinary Shares in the Company as specified at Clauses 4.1.1 and/or
4.1.2 above and PROVIDED FURTHER that retained earnings utilised as
Equity Equivalent as aforesaid shall not include any sum received in
respect of the grants or derived from a revaluation of the fixed assets
of the Company.
1.2 Such further sums, including working capital, as may be required for the
Undertaking.
1.3 The total amount paid from the grants shall at no time exceed the total
amount of Equity Equivalent of which at all times not less than 25% shall
comprise an amount for issued Ordinary Shares in the Company as
aforesaid.
5. PLANNING PERMISSION AND PREVENTION OF POLLUTION:
The Company shall
5.1 obtain all relevant permissions prescribed by Local and/or National
Authorities and shall comply with all requirements of such permissions
and with all Building Regulations and Statutory requirements (if any)
required for the Undertaking;
5.2 comply with all statutory requirements and other requirements which IDA
reasonably considers to be necessary in relation to environmental
controls and the prevention of pollution provided that they are no more
onerous than applicable to similar businesses.
6. GUARANTEES:
The Company shall not give a guarantee in respect of any borrowings other than
borrowings for the purposes of the Undertaking.
7. INSURANCE:
The Company shall:
7.1 keep all the assets insured to their full cost of reinstatement against
loss or damage by fire and explosion;
<PAGE>
4
7.2 obtain on commencement of production and in accordance with good
commercial practice Consequential Loss Insurance to adequately indemnify
the Company against losses and costs resulting from fire and explosion;
and
7.3 make arrangements to ensure that IDA will be notified of any failure to
renew the insurance specified at Clauses 7.1 and 7.2 hereof and also of
any substantial change in such insurance.
8. RESTORATION OF ELIGIBLE ASSETS:
If there should be damage to or loss of eligible assets including buildings
under construction through fire or explosion or any other cause the insurance or
other compensation received by the Company shall be used forthwith to restore to
the reasonable satisfaction of IDA the property so damaged or lost and in the
event of such compensation being insufficient for that purpose the Company shall
make good the deficiency out of its own funds.
9. NON-DISTRIBUTION OF THE GRANTS:
The Company shall not distribute by way of dividend on the share capital of the
Company or otherwise any sum received in respect of the grants.
10. ROYALTIES OR SIMILAR PAYMENTS:
The Company may only make royalty or similar payments on the following terms and
conditions:
10.1 that to the extent that the said royalty and/or similar payments exceed
5% of the Company's net annual sales, such excess shall not be payable
except out of profits of the Company which would otherwise be available
for dividend; and
10.2 that in the event of the winding up of the Company the amount of any such
excess accrued or accruing for payment but unpaid shall be subordinated
to the claims of the unsecured creditors, including IDA, of the Company;
PROVIDED ALWAYS that the provisions of this Clause shall not apply to bona
fide third party arm's length transactions.
11. PAYMENT OF THE GRANTS:
11.1 The grants shall be paid subject to the following terms and conditions
and the Company shall provide evidence satisfactory to IDA:
11.1.1 that the Company has been properly incorporated and that its
Memorandum and Articles of Association empower the Company to
implement this Agreement;
11.1.2 that the Company has obtained suitable premises for the
Undertaking and has title acceptable to IDA to all land and
buildings required for the Undertaking;
<PAGE>
5
11.1.3 that the Company is in compliance with all the terms and
conditions of its property agreements, if any, with IDA;
11.1.4 that the necessary arrangements have been made for the provision
of all capital required for the Undertaking as specified at
Clause 4 hereof;
11.1.5 that all Planning Permissions as aforesaid have been obtained
and complied with;
11.1.6 that all requirements for control of the environment and
prevention of pollution as aforesaid have been complied with;
11.1.7 that insurance arrangements as aforesaid have been made;
11.1.8 that the Company has obtained a tax number in the relevant tax
district; that it is up to date in its tax affairs with the
Revenue Commissioners and prior to payment from the grants it
shall submit an up-to-date tax clearance certificate from the
Revenue Commissioners;
11.1.9 that all expenditure on the eligible assets has been necessarily
incurred and paid and that value has been obtained therefor;
11.1.10 that the Company has complied up-to-date with all the provisions
of this Agreement;
11.2 That before any payment is made from the grants the Promoters shall
submit Annual Audited Accounts for Lionbridge Technologies Inc. as at 31
December 1996 and Lionbridge Technology Holdings Inc. as at 31 December
1997.
11.3 Subject to compliance with all the relevant terms of this Agreement the
grants shall be paid to the Company in accordance with the arrangements
set forth in the Schedule applicable to the particular grant from which
payment is sought.
12. ACHIEVEMENT OF PROJECTED PERFORMANCE:
SCHEDULE OF CAPITAL AND RENT SUBSIDY GRANT DRAWDOWN FOR THE UNDERTAKING
<TABLE>
<CAPTION>
- ------------------------------ --------------- ----------------- ----------------- ---------------- -----------------
Year 1 Year 2 Year 3 Year 4 Year 5
Ending Ending Ending Ending Ending
Period 31.12.1998 31.12.1999 31.12.2000 31.12.2001 31.12.2002
- ------------------------------ --------------- ----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Cumulative Jobs to be
created 50 74 100 100 100
- ------------------------------ --------------- ----------------- ----------------- ---------------- -----------------
Maximum Cumulative Grant
Drawdown IR(pound) 162,000 174,000 186,000 198,000 198,000
- ------------------------------ --------------- ----------------- ----------------- ---------------- -----------------
</TABLE>
Unless otherwise agreed to by IDA and notwithstanding any other provision in
this Agreement:
<PAGE>
6
1.1 The aggregate amount payable from the Capital and Rent Subsidy Grants in
each period set out above shall not exceed the maximum amount specified
for that period.
1.2 The maximum Capital and Rent Subsidy Grant drawdown in the period to the
end of Year 1 shall be available subject to compliance with the
provisions of this Agreement.
1.3 Subject to compliance as aforesaid, payment from the maximum cumulative
Capital and Rent Subsidy Grant drawdowns in the periods to the end of
Years 2, 3 and 4 respectively, shall be conditional upon the cumulative
number of Jobs (as set out above) being created by the immediately
preceding end of year; in the event of such number of Jobs not having
been created by the relevant date no part of the Capital and Rent Subsidy
Grant drawdown for the following year will be paid to the Company until
such number of Relevant Jobs has been created.
1.4 On or after 31 December 2002 the Company and IDA shall review the
development of the Undertaking to that date with particular reference to
the creation of Jobs in the Company. Should the total number of jobs
existing in the Company at the date of review be less than 100, unless
otherwise agreed to by IDA and notwithstanding any other provision in
this Agreement, all monies paid from the Capital and Rent Subsidy Grants
on foot of this Agreement in excess of IR(pound)1,980 per Job multiplied
by the number of Jobs existing in the Company at the date of review shall
be repayable on demand to IDA by the Company (and in the event of default
by the Company in making repayment shall be repayable on demand by the
Promoters) within one month from date of demand. For the purposes of this
Clause "Jobs" shall mean full-time permanent Jobs existing in the Company
at the relevant date.
13. FURNISHING OF INFORMATION:
13.1 The Company shall permit the officers and agents of IDA to inspect the
eligible assets at all reasonable times on prior notice during the term
of this Agreement and shall furnish to IDA promptly whenever required to
do so by IDA all such information and documentary evidence as IDA may
from time to time reasonably require to vouch compliance by the Company
with any of the terms and conditions of this Agreement.
13.2 The Company and/or the Promoters shall submit Annual Audited Accounts
satisfactory to IDA for the duration of this Agreement within nine months
from the end of the relevant financial year.
14. NOTICES:
14.1 The Certificate of an Officer of IDA certifying any decision of IDA taken
or made hereunder shall be conclusive evidence of any such decision.
14.2 Any notice by IDA to the Company or the Promoters or vice versa under
this Agreement shall be sent by registered post to the Registered Office
of the party for whom it is intended.
<PAGE>
7
14.3 The IDA shall use its best endeavours to send copies of all notices
issued by it on foot of this Agreement to the Promoters at their address
herein specified, but failure to do so shall not constitute a breach of
this Agreement on its part.
15. CONSENTS:
15.1 Circumstances requiring the consent, approval or permission of any party
hereto shall be interpreted to mean that such consents, approvals or
permissions shall not be unreasonably withheld. This provision shall not
apply to the provisions of Clause 2 hereof and Paragraph 2 of the Third
Schedule hereto.
15.2 Any variation or modification of any of the terms or conditions herein
made at the request of or with the agreement of the Company and with the
consent of IDA shall not in any way determine or prejudice the Promoters'
liability hereunder PROVIDED that the financial amount of the Promoters'
said liability shall not be increased without its express agreement in
writing.
16. TERMINATION OF AGREEMENT:
This Agreement shall terminate five years from the date of the last payment from
_____ grants.
17. CANCELLATION AND REVOCATION OF THE GRANTS:
IDA may stop payment of the grants and/or revoke and cancel or reduce the grants
or so much thereof as shall not then have been actually paid to the Company if
any one or more of the following events occur:
17.1 if there by any breach of the terms or conditions of Clause 2 hereof
and/or Paragraph 2 of the Third Schedule hereto;
17.2 if the Company should to a material extent be in breach of any of the
terms and conditions of this Agreement other than those specified in
Clause 17.1 and having failed to establish to the reasonable satisfaction
of IDA that such breach was due to force majeure shall not have rectified
such breach within 45 days after written notice thereof has been served
on the Company;
17.3 if an order is made or an effective resolution is passed for the winding
up of the Company;
17.4 if a Receiver or an Examiner is appointed over any of the property of the
Company or if a distress or execution is levied or served upon any of the
property of the Company and is not paid off within 45 days;
17.5 if the Company should cease to carry on the Undertaking.
If the grants be revoked the Company and/or the Promoters shall repay to IDA on
demand all sums received in respect of the grants and if the grants be reduced
the Company and/or the Promoters shall repay to IDA on demand all sums received
in excess of the amount of the
<PAGE>
8
reduced grants and in either case in default of
such repayment such sums shall be recoverable by IDA from the Company and/or the
Promoters as a joint and several simple contract debt.
18. GOVERNING LAW:
This Agreement shall be governed by and be construed in accordance with the Laws
of Ireland and the parties hereto expressly and irrevocably submit to the
jurisdiction of the Irish Courts and the Promoters hereby irrevocably appoint
the Company to be its attorney for the purpose of accepting service on its
behalf of any notice, document or legal process with respect to the Promoter's
obligations pursuant to the provisions of Clause 17 and/or Clause 12 hereof and
service of any such document on such attorney shall be deemed for all purposes
to be good service.
<PAGE>
FIRST SCHEDULE
PROVISION OF ELIGIBLE ASSETS FOR THE UNDERTAKING
<TABLE>
<CAPTION>
- --------- ----------------------------------------- ---------------------------
<S> <C> <C>
1. ELIGIBLE ASSETS ESTIMATED COSTS
IR(L)
- --------- ----------------------------------------- ---------------------------
1.1 New Machinery and Equipment 450,000
- --------- ----------------------------------------- ---------------------------
Total 450,000
- --------- ----------------------------------------- ---------------------------
</TABLE>
2. The Company shall:
2.1 Have obtained a Lease of suitable office premises for the Undertaking not
later than 31 July 1998;
2.2 Purchase and have installed in a proper and workmanlike manner ready for
operation in the said office premises all machinery and equipment
suitable in all respects required for the Undertaking by 31 December
2000;
2.3 Have commenced business in the Undertaking by 31 March 1998.
<PAGE>
10
SECOND SCHEDULE
ADDITIONAL TERMS AND CONDITIONS RELATING TO THE
EMPLOYMENT GRANT
1. The Employment Grant shall be payable in respect of the total number of
such jobs as are created in the Company (in accordance with paragraph 7
of this Schedule) provided such jobs are occupied by EU citizens who
are subject to Irish taxation.
2. A job for the purposes of the Employment Grant shall be a permanent
full time position in the Undertaking and shall be deemed to be created
when a contract of employment has been signed and payment has been made
to an employee in respect of work done in the job.
3. The Employment Grant in respect of each job created shall be paid in
two moieties. The first moiety shall be payable when the job has been
created and the second moiety shall be payable when permanent full-time
employment in the job for a twelve month period has been completed.
4. Claims for payment of an instalment from the Employment Grant may be
submitted monthly and shall be certified by the Company's Auditors in
an agreed format.
5. The Company shall also submit details of the Undertakings employment
history to date; this shall give such particulars as IDA may require in
a format satisfactory to IDA.
6. IDA may at any time within five years from the date of payment of the
first moiety of the Employment Grant in respect of any job revoke the
Employment Grant paid in respect of that job if the job should become
vacant and remain vacant for a period in excess of six calendar months.
7.
<TABLE>
<CAPTION>
- ------------------------------------------- --------------------------- ----------------------- ---------------------
*Year 1 Year 2 Year 3
Job Description Ending Ending Ending
31.12.1998 31.12.1999 31.12.2000
- ------------------------------------------- --------------------------- ----------------------- ---------------------
<S> <C> <C> <C>
Management 1 1 1
- ------------------------------------------- --------------------------- ----------------------- ---------------------
Engineers 4 6 7
- ------------------------------------------- --------------------------- ----------------------- ---------------------
Supervisor (Test Team Readers) 4 6 7
- ------------------------------------------- --------------------------- ----------------------- ---------------------
Test Engineers 40 60 84
- ------------------------------------------- --------------------------- ----------------------- ---------------------
Administration 1 1 1
- ------------------------------------------- --------------------------- ----------------------- ---------------------
TOTAL 50 74 100
- ------------------------------------------- --------------------------- ----------------------- ---------------------
</TABLE>
* Jobs created prior to 16 October 1997 will be deemed ineligible for grant
assistance on foot of this Grant Agreement.
<PAGE>
11
THIRD SCHEDULE
ADDITIONAL TERMS AND CONDITIONS ATTACHING TO THE
CAPITAL GRANT
1. PLACING OF CONTRACTS:
1.1 Subject to the specialised requirements of the Undertaking which shall
have been notified to and approved in writing by IDA, the Company shall
ensure in relation to the placing of contracts for the eligible assets
that:
1.1.1 Prior to appointment of Architects and/or Consultants, the
Company will obtain the approval of IDA on the proposed
composition of the Design Team for the implementation of the
Undertaking;
1.1.2 Before tenders are invited on building works and services the
Company will consult with the Construction Advisory Unit of IDA;
1.1.3 A minimum of three competitive quotations is sought and that
none but the lowest is accepted without the prior written
consent of IDA;
1.1.4 No arrangements are made for the direct hire of labour in the
construction of the said office buildings, building services and
facilities except with the prior written consent of IDA.
1.2 In the placing of contracts for the construction of the said office
buildings, building services and facilities any contractors appointed by
the Company in the aforesaid construction shall at the date of such
appointment possess an up-to-date tax clearance certificate or a current
C2 certificate from the Revenue Of Commissioners. The Company shall
retain copies of such certificates for inspection by IDA as evidence of
compliance with this sub-paragraph.
2. ALIENATION OF ASSETS:
The Company shall not alienate, assign, part with the possession of or otherwise
dispose of or remove (save for purpose of normal repair, renewal, replacement or
substitution) or mortgage or charge (except for the purpose of securing finance
for the Undertaking) the eligible assets or any part thereof without the prior
written consent of IDA. The provisions of this Agreement shall apply also to
assets which are substituted for eligible assets.
3. USE OF ELIGIBLE ASSETS:
The Company shall not without the prior written consent of IDA use or permit the
use of the eligible assets or any part thereof except for the purposes of the
Undertaking.
<PAGE>
12
12. PAYMENT OF CAPITAL GRANT:
Subject to compliance by the Company with the terms and conditions of this
Agreement the Capital Grant shall be paid to the Company in instalments of 33
1/3% of each sum of IR(pound)50,000 or more expended by the Company on the
provision of eligible assets when installed and commissioned in the premises as
aforesaid PROVIDED ALWAYS that all such expenditure shall be vouched and
examined in such manner as IDA may reasonably require.
<PAGE>
13
FOURTH SCHEDULE
ADDITIONAL TERMS AND CONDITIONS ATTACHED TO
THE RENT SUBSIDY GRANT
1. The Company shall furnish to IDA a copy, certified by the Lessor to be a
true copy, of the Lease of any premises in respect of which payment is
sought from the Rent Subsidy Grant.
2. The terms and conditions of any such Lease shall be satisfactory to IDA.
3. The Rent Subsidy Grant shall be payable in instalments related to the
rent instalments paid by the Company in accordance with the Lease and
which have been vouched in such manner as IDA may require.
4. The Company shall notify and verify in such manner as IDA may require any
changes made from time to time in the terms of any such Lease.
5. Any premises in respect of which a payment is made from the Rent Subsidy
Grant shall be used solely for the purposes of the Undertaking unless
otherwise agreed to in writing by IDA.
6. The Company shall procure that the said premises are kept insured against
the insured risks as defined in the Lease and shall furnish to IDA before
any part of the Rent Subsidy Grant is paid and whenever required to do so
thereafter evidence in writing that the said insurance has been so
arranged.
7. The Company will procure that in the event of the premises being
destroyed or damaged by any of the insured risks as defined in the said
Lease the insurance monies or any other compensation monies received by
the Lessee or Lessor of the said premises shall be used forthwith to
restore in full and to the satisfaction of IDA the property so damaged or
lost or alternatively will arrange to occupy suitable equivalent
accommodation for the remaining period of this Agreement.
8. The Company shall not alienate, assign, sub-let or part with the
possession of any premises in respect of which a payment is made from the
Rent Subsidy Grant or any part thereof or grant any rights in respect
thereof without the prior consent in writing of IDA and will continue to
occupy premises suitable for the Undertaking.
<PAGE>
14
FIFTH SCHEDULE
ADDITIONAL TERMS AND CONDITIONS RELATING TO THE TRAINING GRANT
1. Before payments from the Training Grant commence an agreed detailed
Training Programme shall be agreed and signed by the Company, FAS and IDA
(the "Training Programme").
2. The training shall be carried out and the grant shall be paid in
accordance with the Training Programme.
3. The Company shall permit FAS at all reasonable time to inspect the
progress of the training and to have access to the Company's records of
the training and will have due regard to the recommendation of FAS
concerning the training.
4. IDA shall be satisfied upon the advice of FAS that the training has been
satisfactory.
5. All claims for payment out of the Training Grant shall be made on a
quarterly basis and in respect of expenditure on the training incurred in
any particular calendar year shall be furnished to IDA not later than 31
January of the following year. In the event of any claim not being
received by IDA within the aforesaid time limit, IDA shall be entitled to
cancel that portion of the grant otherwise payable in respect of such
claim by an amount up to 75%. The Training Grant shall be reduced by the
amount of such reductions and/or cancellations.
6. The Company shall notify IDA before 30 September in any year of the
amount it will be seeking by way of payment from the Training Grant in
the following and subsequent calendar years.
7. All claims for payment of an instalment from the Training Grant shall be
certified by the Company's Auditors and the certificate shall be
supported with the details of the trainees and the actual training
carried out such details to be specified in the claim Form specified by
IDA in relation to the period for which the claim is being made.
8. Upon 80% of the approved grant being paid, the Company and FAS shall
review the progress of the Training Programme and payment of the balance
of the training grant shall be subject to FAS being satisfied that the
Training Programme has been undertaken satisfactorily and will be
completed in a satisfactory manner.
9. The Training Grant shall not be repayable in the event of revocation of
the grants in accordance with Clause 17 of the Agreement.
<PAGE>
15
IN WITNESS WHEREOF the parties hereto have affixed their respective seals the
day and year first herein written.
PRESENT when the Seal of the
INDUSTRIAL DEVELOPMENT AGENCY (IRELAND)
was affixed hereto:
[ILLEGIBLE]
------------------------------------
AUTHORISED OFFICER
[ILLEGIBLE]
------------------------------------
AUTHORISED OFFICER
PRESENT when the Seal of
LIONBRIDGE TECHNOLOGIES IRELAND was affixed hereto:
[RORY J. COWAN]
------------------------------------
Director
[DEIRDRE ATTRIDGE]
------------------------------------
Director
PRESENT when the Seal of
LIONBRIDGE TECHNOLOGIES HOLDINGS INC.
was affixed hereto:
[RORY J. COWAN]
------------------------------------
Director
[PAUL KAVANAGH]
------------------------------------
Director
<PAGE>
16
Dated the 4th day of December 1998
INDUSTRIAL DEVELOPMENT AGENCY
(IRELAND)
First Part
LIONBRIDGE TECHNOLOGIES IRELAND
Second Part
- and -
LIONBRIDGE TECHNOLOGIES HOLDINGS INC.
Third Part
---------------------------------------
GRANT AGREEMENT
---------------------------------------
Industrial Development Agency (Ireland)
Wilton Park House
Wilton Place
DUBLIN 2
<PAGE>
Exhibit 10.40
LOAN DOCUMENT MODIFICATION AGREEMENT
NUMBER 3; DATED AS OF MAY 20, 1999
LOAN DOCUMENT MODIFICATION AGREEMENT dated as of May 20, 1999 (this
"Agreement") by and among Lionbridge Technologies Holdings B.V. and Lionbridge
Technologies B.V. (each a "Borrower" and together the "Borrowers") and
Lionbridge Technologies, Inc., a Delaware company with its principal place of
business located at 950 Winter Street, #4300, Waltham, Massachusetts 02154 (the
"Parent Guarantor") and SILICON VALLEY BANK (the "Bank"), a California chartered
bank with its principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054, and with a loan production office located at Wellesley Office
Park, 40 William Street, Wellesley, MA 02181, doing business under the name
"Silicon Valley East".
1. REFERENCE TO EXISTING LOAN DOCUMENTS.
Reference is hereby made to that Loan Agreement dated September 26,
1997 among the Bank and the Borrowers, as so amended on May 21, 1998 and
February 25, 1999 (with the attached schedules and exhibits, and as the same may
hereafter be further amended, modified, supplemented, extended or restated from
time to time, the "Credit Agreement") and the Loan Documents referred to
therein, including without limitation that certain Amended and Restated
Promissory Note of the Borrowers dated May 21, 1998 in the principal amount of
$8,000,000 (the "Note"), and the Security Documents referred to therein,
including the Amended and Restated Guarantee of the Parent Guarantor dated as of
May 21, 1998 in favor of the Bank (the "Parent Guarantee"). Unless otherwise
defined herein, capitalized terms used in this Agreement shall have the same
respective meanings as set forth in the Credit Agreement.
2. EFFECTIVE DATE.
This Agreement shall become effective as of May 20, 1999 (the
"Effective Date"), provided that the Bank shall have received the following on
or before June 22, 1999 and provided further, however, in no event shall this
Agreement become effective until signed by an officer of the Bank in California:
1. two copies of this Agreement, duly executed by each
Borrower and the Parent Guarantor.
2. an amended and restated Promissory Note in the form
enclosed herewith (the "Amended Note") duly executed by the Borrowers;
3. the attached consents of U.S. organized affiliated entities
who have previously furnished guaranties in favor of the Bank of the obligations
of the Borrowers, duly executed by officers thereof (executed consents of
foreign organized affiliated entities shall be furnished to the Bank within ten
(10) days of the date hereof);
By the signature of its authorized officer below, each Borrower and the
Parent Guarantor is hereby representing that, except as modified in SCHEDULE A
attached hereto, the representations
<PAGE>
-2-
of the Borrowers and the Parent Guarantor set forth in the Credit Agreement and
the other Loan Documents (including those contained in the Parent Guarantee, as
amended by this Agreement) are true and correct as of the Effective Date as if
made on and as of such date. Finally, each Borrower (and the Parent Guarantor
signing below) agrees that, as of the Effective Date, it has no defenses against
its obligations to pay any amounts under the Credit Agreement, the Parent
Guarantee and the other Loan Documents to which it is a party. Finally, by the
signature of its authorized officer set forth below, Lionbridge Technologies,
Inc. authorizes the debiting of its depository account in the amount of $10,000
to cover payment of the Bank's modification fee.
3. DESCRIPTION OF CHANGE IN TERMS.
As of the Effective Date, the Parent Guarantee is modified in the
following respects:
1. Section 13(b) is hereby amended and restated in its
entirety as follows:
(b) QUICK RATIO. The Guarantor shall cause the
Consolidated Group to maintain at the end of each of the following fiscal
periods a ratio of Quick Assets to Current Liabilities not less than the
respective ratios set forth below opposite such periods:
<TABLE>
<CAPTION>
Fiscal Periods Minimum Quick Ratio
-------------- -------------------
<S> <C>
Quarter ending 3/31/99 0.50 to 1.0
Quarter ending 6/30/99 and thereafter 0.50 to 1.0
</TABLE>
For purposes of this subparagraph (b), "Quick Assets" shall mean, as of any
applicable date, the consolidated cash, cash equivalents, accounts receivable
and investments with maturities of less than 90 days of the Consolidated Group
determined in accordance with GAAP; and "Current Liabilities" shall mean, as of
any applicable date, all amounts that should, in accordance with GAAP, be
included as current liabilities on the consolidated balance sheet of the
Guarantor and its Subsidiaries, as at such date, plus, to the extent not already
included therein, all outstanding Credit Extensions made under the Loan
Agreement, including all Indebtedness that is payable upon demand or within one
year from the date of determination thereof unless such Indebtedness is
renewable or extendable at the option of the Guarantor, a Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding any Indebtedness incurred by the Guarantor or any Subsidiary that is
subordinated to debt owing by the Guarantor or any Subsidiary to the Bank on
terms acceptable to the Bank and is identified as such by the Bank
("Subordinated Debt").
2. Section 13(d) is hereby amended and restated in its
entirety as follows:
(d) The Guarantor shall cause the Consolidated Group
to have at the end of the following fiscal period minimum EBITDA not less than
the respective amount set forth below opposite such fiscal period:
<PAGE>
-3-
<TABLE>
<CAPTION>
Fiscal Period Minimum Ebitda
------------- --------------
<S> <C>
Quarter Ending 3/31/99 ($600,000)
Quarter Ending 6/30/99 ($2,500,000), excluding charges
against earnings of warrant/option
value, accrued dividends and
employee non-cash compensation of
no greater than $6,500,000.
</TABLE>
For purposes of this subparagraph (c) "EBITDA" means, for any applicable fiscal
period, consolidated net income (or loss) after taxes for such period of the
Guarantor and its Subsidiaries as determined in accordance with GAAP, plus the
following to the extent deducted in computing the foregoing: (i) Interest
Expense (as defined below); (ii) taxes; (iii) depreciation; (iv) amortization of
good will and other intangibles; and (v) foreign exchange transaction gains and
losses. "Interest Expense" means, for any applicable fiscal period, the sum of
the aggregate amount of interest required to be paid in cash during such period
on Indebtedness of the Guarantor and its Subsidiaries (on a consolidated basis).
3. Section 13(e) is hereby amended by deleting:
"(ii) as soon as available, but in any event within
ninety (90) days after the end of the fiscal year of
the Consolidated Group, audited consolidated and
consolidating financial statements of the
Consolidated Group, prepared in accordance with GAAP,
consistently applied, together with an unqualified
opinion on such financial statements of an
independent certified public accounting firm
reasonably acceptable to Bank "
and replacing it with the following language:
"(ii) as soon as available, but in any event within
ninety (90) days after the end of the fiscal year of
the Consolidated Group, audited consolidated and
consolidating financial statements of the
Consolidated Group, prepared in accordance with GAAP,
consistently applied, together with an unqualified
opinion on such financial statements of an
independent certified public accounting firm
reasonably acceptable to Bank; notwithstanding the
foregoing, such financial statements for the fiscal
year 1998 are due by June 25, 1999, and within 90
days thereafter".
<PAGE>
-4-
4. The Compliance Certificate attached to the Parent Guarantee
as Exhibit A is hereby amended and restated in its entirety by the form of
Compliance Certificate attached hereto as EXHIBIT A.
5. The Guarantee, the Credit Agreement and the other Loan
Documents are hereby amended wherever necessary or appropriate to reflect the
foregoing changes.
4. CONTINUING VALIDITY.
Upon the effectiveness hereof, each reference in each Security
Instrument or other Loan Document to "the Parent Guarantee", "thereunder",
"thereof", "therein", or words of like import, shall mean and be a reference to
the Parent Guarantee, as amended hereby. Except as specifically set forth above,
the Parent Guarantee shall remain in full force and effect and is hereby
ratified and confirmed.
Each of the other Loan Documents is in full force and effect and is
hereby ratified and confirmed. The amendments and limited waiver set forth above
(i) do not constitute a waiver or modification of any term, condition or
covenant of the Credit Agreement or any other Loan Document, other than as
expressly set forth herein, and (ii) shall not prejudice any rights which the
Bank may now or hereafter have under or in connection with the Credit Agreement,
as modified hereby, or the other Loan Documents and shall not obligate the Bank
to assent to any further modifications.
5. MISCELLANEOUS.
1. This Agreement may be signed in one or more counterparts
each of which taken together shall constitute one and the same document.
2. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
3. EACH BORROWER AND THE PARENT GUARANTOR ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND
AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS AGREEMENT; PROVIDED,
HOWEVER, THAT IF FOR ANY REASON THE BANK CANNOT AVAIL ITSELF OF THE COURTS OF
THE COMMONWEALTH OF MASSACHUSETTS, THEN VENUE SHALL LIE IN SANTA CLARA COUNTY,
CALIFORNIA.
<PAGE>
-5-
4. Each Borrower agrees, jointly and severally, to promptly
pay on demand all costs and expenses of the Bank in connection with the
preparation, reproduction, execution and delivery of this Agreement and the
other instruments and documents to be delivered hereunder, including the
reasonable fees and out-of-pocket expenses of Sullivan & Worcester LLP, special
counsel for the Bank with respect thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-6-
IN WITNESS WHEREOF, the Bank and the Borrower have caused this
Agreement to be signed under seal by their respective duly authorized officers
as of the date set forth above.
BANK:
SILICON VALLEY EAST, a Division
of Silicon Valley Bank
By:_____________________________
Name: Andrew H. Tsao
Title: Vice President
SILICON VALLEY BANK
By:______________________________
Name:
Title:
(signed in Santa Clara, CA)
PARENT GUARANTOR:
LIONBRIDGE TECHNOLOGIES, INC.
By:______________________________
Name: Rory J. Cowan
Title: Managing Director
BORROWERS:
LIONBRIDGE TECHNOLOGIES HOLDINGS
B.V.
By:______________________________
Name:
Title:
LIONBRIDGE TECHNOLOGIES B.V.
By:______________________________
Name:
Title:
<PAGE>
CONSENT
The undersigned, as Guarantor under the Guarantee dated as of September
26, 1997 (the "Guarantee") in favor of Silicon Valley Bank, hereby consents to
the foregoing Loan Document Modification Agreement and hereby confirms and
agrees that the Guarantee is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects, except that, upon the
effectiveness of, and on and after the date of, said amendment, each reference
in the Guarantee and in each other Loan Document (as defined in the Loan
Agreement) to which the undersigned is a party, including, to "the Credit
Agreement", the "Loan Agreement," "thereunder", "thereof", "therein", or words
of like import referring to the Loan Agreement, shall mean and be a reference to
the Loan Agreement, as amended hereby, and each reference in the Guarantee and
in each such other Loan Document to "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Amended and Restated
Promissory Note dated May 21, 1998, shall mean and be a reference to such
Promissory Note, as amended and restated by the Amended Note dated May 20, 1999.
LIONBRIDGE TECHNOLOGIES IRELAND
By:___________________________
Name:
Title:
<PAGE>
CONSENT
The undersigned, as Guarantor under the Guarantee dated as of May 21,
1998 (the "Guarantee") in favor of Silicon Valley Bank, hereby consents to the
foregoing Loan Document Modification Agreement and hereby confirms and agrees
that the Guarantee is, and shall continue to be, in full force and effect and is
hereby ratified and confirmed in all respects, except that, upon the
effectiveness of, and on and after the date of, said amendment, each reference
in the Guarantee and in each other Loan Document (as defined in the Loan
Agreement) to which the undersigned is a party, including, to "the Credit
Agreement", the "Loan Agreement," "thereunder", "thereof", "therein", or words
of like import referring to the Loan Agreement, shall mean and be a reference to
the Loan Agreement, as amended hereby, and each reference in the Guarantee and
in each such other Loan Document to "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Amended and Restated
Promissory Note dated May 21, 1998, shall mean and be a reference to such
Promissory Note, as amended and restated by the Amended Note dated May 20, 1999.
LIONBRIDGE TECHNOLOGIES, INC.
By:___________________________
Name:
Title:
<PAGE>
CONSENT
The undersigned, as Guarantor under the Guarantee dated as of May 21,
1998 (the "Guarantee") in favor of Silicon Valley Bank, hereby consents to the
foregoing Loan Document Modification Agreement and hereby confirms and agrees
that the Guarantee is, and shall continue to be, in full force and effect and is
hereby ratified and confirmed in all respects, except that, upon the
effectiveness of, and on and after the date of, said amendment, each reference
in the Guarantee and in each other Loan Document (as defined in the Loan
Agreement) to which the undersigned is a party, including, to "the Credit
Agreement", the "Loan Agreement," "thereunder", "thereof", "therein", or words
of like import referring to the Loan Agreement, shall mean and be a reference to
the Loan Agreement, as amended hereby, and each reference in the Guarantee and
in each such other Loan Document to "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Amended and Restated
Promissory Note dated May 21, 1998, shall mean and be a reference to such
Promissory Note, as amended and restated by the Amended Note dated May 20, 1999
JAPANESE LANGUAGE SERVICES, INC.
By:___________________________
Name:
Title:
<PAGE>
CONSENT
The undersigned, as Guarantor under the Guarantee dated as of May 21,
1998 (the "Guarantee") in favor of Silicon Valley Bank, hereby consents to the
foregoing Loan Document Modification Agreement and hereby confirms and agrees
that the Guarantee is, and shall continue to be, in full force and effect and is
hereby ratified and confirmed in all respects, except that, upon the
effectiveness of, and on and after the date of, said amendment, each reference
in the Guarantee and in each other Loan Document (as defined in the Loan
Agreement) to which the undersigned is a party, including, to "the Credit
Agreement", the "Loan Agreement," "thereunder", "thereof", "therein", or words
of like import referring to the Loan Agreement, shall mean and be a reference to
the Loan Agreement, as amended hereby, and each reference in the Guarantee and
in each such other Loan Document to "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Amended and Restated
Promissory Note dated May 21, 1998, shall mean and be a reference to such
Promissory Note, as amended and restated by the Amended Note dated May 20, 1999.
LIONBRIDGE TECHNOLOGIES
CALIFORNIA, INC.
By:___________________________
Name:
Title:
<PAGE>
CONSENT
The undersigned, as Guarantor under the Guarantee dated as of May 21,
1998 (the "Guarantee") in favor of Silicon Valley Bank, hereby consents to the
foregoing Loan Document Modification Agreement and hereby confirms and agrees
that the Guarantee is, and shall continue to be, in full force and effect and is
hereby ratified and confirmed in all respects, except that, upon the
effectiveness of, and on and after the date of, said amendment, each reference
in the Guarantee and in each other Loan Document (as defined in the Loan
Agreement) to which the undersigned is a party, including, to "the Credit
Agreement", the "Loan Agreement," "thereunder", "thereof", "therein", or words
of like import referring to the Loan Agreement, shall mean and be a reference to
the Loan Agreement, as amended hereby, and each reference in the Guarantee and
in each such other Loan Document to "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Amended and Restated
Promissory Note dated May 21, 1998, shall mean and be a reference to such
Promissory Note, as amended and restated by the Amended Note dated May 20, 1999.
LIONBRIDGE JAPAN K.K.
By:___________________________
Name:
Title:
<PAGE>
CONSENT
The undersigned, as Guarantor under the Guarantee dated as of May 21,
1998 (the "Guarantee") in favor of Silicon Valley Bank, hereby consents to the
foregoing Loan Document Modification Agreement and hereby confirms and agrees
that the Guarantee is, and shall continue to be, in full force and effect and is
hereby ratified and confirmed in all respects, except that, upon the
effectiveness of, and on and after the date of, said amendment, each reference
in the Guarantee and in each other Loan Document (as defined in the Loan
Agreement) to which the undersigned is a party, including, to "the Credit
Agreement", the "Loan Agreement," "thereunder", "thereof", "therein", or words
of like import referring to the Loan Agreement, shall mean and be a reference to
the Loan Agreement, as amended hereby, and each reference in the Guarantee and
in each such other Loan Document to "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Amended and Restated
Promissory Note dated May 21, 1998, shall mean and be a reference to such
Promissory Note, as amended and restated by the Amended Note dated May 20, 1999.
LIONBRIDGE TECHNOLOGIES FRANCE
By:___________________________
Name:
Title:
<PAGE>
CONSENT
The undersigned, as Guarantor under the Guarantee dated as of January
8, 1999 (the "Guarantee") in favor of Silicon Valley Bank, hereby consents to
the foregoing Loan Document Modification Agreement and hereby confirms and
agrees that the Guarantee is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects, except that, upon the
effectiveness of, and on and after the date of, said amendment, each reference
in the Guarantee and in each other Loan Document (as defined in the Loan
Agreement) to which the undersigned is a party, including, to "the Credit
Agreement", the "Loan Agreement," "thereunder", "thereof", "therein", or words
of like import referring to the Loan Agreement, shall mean and be a reference to
the Loan Agreement, as amended hereby, and each reference in the Guarantee and
in each such other Loan Document to "the Note", "thereof", "therein",
"thereunder", or words of like import referring to the Amended and Restated
Promissory Note dated May 21, 1998, shall mean and be a reference to such
Promissory Note, as amended and restated May 20, 1999.
VERITEST, INC.
By:___________________________
Name:
Title:
<PAGE>
SCHEDULE A
EXCEPTIONS TO LOAN DOCUMENT REPRESENTATIONS
None
<PAGE>
EXHIBIT A
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: LIONBRIDGE TECHNOLOGIES, INC.
The undersigned authorized officer of Lionbridge Technologies, Inc.
(the "Parent Guarantor") hereby certifies that in accordance with the terms and
conditions of the Guarantee in favor of Bank (the "Guarantee"), (i) except as
noted below, Consolidated Group is in complete compliance for the period ending
with all required financial covenants set forth herein and the Borrowers are in
complete compliance with their covenants as set forth in the Credit Agreement to
which they are a party and (ii) all representations and warranties of Parent
Guarantor in the Guarantee and Borrowers stated in the Credit Agreement are true
and correct in all material respects as of the date hereof. Attached herewith
are the required documents supporting the above certification. The Officer
further certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER
"COMPLIES" COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
<S> <C> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
10Q and 10K Within 5 days after filing Yes No
with the SEC
A/R & A/P Agings Monthly within 30 days Yes No
A/R Audit Initial and Semi-Annual Yes No
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
<S> <C> <C> <C> <C>
Maintain for the quarters indicated:
Minimum Quarterly Quick Ratio
Quarter Ending March 31, 1999 0.50 to 1.0 _____:1.0 Yes No
Quarter Ending June 30, 1999 0.50 to 1.0 _____:1.0 Yes No
Minimum Quarterly Profitability
Quarter Ending 3/31/99 ($600,000) $________ Yes No
Quarter Ending 6/30/99
and thereafter ($2,500,000)1 $________ Yes No
</TABLE>
- --------
1 Excluding charges against earnings of warrant/option value, accrued
dividends and
<PAGE>
- --------
employee non-cash compensation of no greater than $6,500,000.
<PAGE>
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
- -----------------------------------
SIGNATURE
TITLE:_____________________________
DATE:_____________________________
<PAGE>
Exhibit 10.41
NON-COMPETITION AGREEMENT
____________, 199_
[EMPLOYEE NAME]
[EMPLOYEE ADDRESS]
Dear [EMPLOYEE NAME]:
You are presently employed as [TITLE] by [CORPORATE ENTITY], a subsidiary
of Lionbridge Technologies, Inc., a Delaware corporation (the "Company"). In
order to make and sell shares of its capital stock to a group of investors (the
"Investor Stock") pursuant to a Preferred Stock Purchase Agreement dated as of
the date hereof. The sale of the Investor Stock is expected to benefit you as a
key employee of the Company since the funds from the sale will enable the
Company to strengthen and expand its business. The obligation of the investors
to purchase the Investor Stock is conditioned upon the execution and delivery by
you of this Agreement. In consideration of your employment by the Company and
the purchase by such investors of the Investor Stock, you hereby covenant and
agree with the Company as follows:
1. The term of this Agreement shall be for a period commencing on the date
hereof and ending 12 months from the date of termination of your employment by
the Company.
2. During the term hereof, you will not, without the Company's prior
written consent, directly or indirectly, alone or as a partner, joint venturer,
officer, director, employee, consultant, agent, independent contractor or
stockholder of any company or business, engage or otherwise have a financial
interest in any business activity which is directly or indirectly in competition
in the United States, Belgium, People's Republic China, France, Ireland, Japan,
Korea, The Netherlands, Taiwan, or any other geographic area where the business
is being conducted or as proposed to be conducted with any of the products or
services being developed, marketed, distributed, planned, sold or otherwise
provided by the Company at such time. The ownership by you of not more than one
percent of the shares of stock of any corporation having a class of equity
securities actively traded on a national securities exchange or on the Nasdaq
Stock Market shall not be deemed, in and of itself, to violate the prohibitions
of this paragraph.
3. During the term hereof, you will not, directly or indirectly, employ,
or knowingly permit any other company or business organization which employs you
or is directly or indirectly controlled by you to employ, any person who is
employed by the Company at any time during the term hereof, or in any manner
seek to induce any such person to leave his or her employment with the Company.
<PAGE>
-2-
4. During the term of this Agreement, you will not solicit or do business
with, directly or indirectly, any present or past customer of the Company, or
any prospective customer of the Company with whom you have had contact, in
connection with any business activity which would violate any other provision of
this Agreement.
5. You hereby represent that, except as you have disclosed in writing to
the Company, you are not a party to, or bound by the terms of, any agreement
with any previous employer or other party to refrain from using or disclosing
any trade secret or confidential or proprietary information in the course of
your employment with the Company or to refrain from competing, directly or
indirectly, with the business of such previous employer or any other party. You
further represent that your performance of all the terms of this Agreement and
as an employee of the Company does not and will not breach any agreement to keep
in confidence proprietary information, knowledge or data acquired by you in
confidence or in trust prior to your employment with the Company, and you will
not disclose to the Company or induce the Company to use any confidential or
proprietary information or material belonging to any previous employer or
others.
6. You agree that the breach of this Agreement by you will cause
irreparable damage to the Company and that in the event of such breach the
Company shall have, in addition to any and all remedies of law, the right to an
injunction, specific performance or other equitable relief to prevent the
violation of your obligations hereunder.
7. You understand that this Agreement does not create an obligation on the
Company or any other person or entity to continue your employment.
8. Any amendment to or modification of this Agreement, and any waiver of
any provision hereof, shall be in writing. Any waiver by the Company of a breach
of any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach hereof.
9. You hereby agree that each provision herein shall be treated as a
separate and independent clause, and the unenforceability of any one clause
shall in no way impair the enforceability of any of the other clauses herein.
Moreover, if one or more of the provisions contained in this Agreement shall for
any reason be held to be excessively broad as to scope, activity or subject so
as to be unenforceable at law, such provision or provisions shall be construed
by the appropriate judicial body by limiting and reducing it or them, so as to
be enforceable to the maximum extent compatible with the applicable law as it
shall then appear.
10. This Agreement shall be governed by and construed in accordance with
the laws of [JURISDICTION].
<PAGE>
-3-
11. The term "Company" shall include Lionbridge Technologies, Inc., and
any subsidiaries, subdivisions or affiliates. The Company shall have the right
to assign this Agreement to its successors and assigns, and all covenants and
agreements hereunder shall inure to the benefit of and be enforceable by said
successors or assigns. Please indicate your acceptance of the foregoing by
signing and returning one copy to the undersigned.
Very truly yours,
LIONBRIDGE TECHNOLOGIES, INC.
By:_________________________
Title: _______________________
AGREED TO AND ACCEPTED as of
the date first above written:
- -----------------------------
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR NAME UNDER WHICH
NAME OF SUBSIDIARY ORGANIZATION SUBSIDIARY DOES BUSINESS
- ------------------ ------------------ ------------------------
<S> <C> <C>
Lionbridge America, Inc. Delaware Lionbridge Technologies
Lionbridge Technologies California, Inc. Delaware Lionbridge Technologies
Lionbridge Technologies Holdings, B.V. The Netherlands Lionbridge Technologies
Lionbridge Technologies, B.V. The Netherlands Lionbridge Technologies
Lionbridge Technologies Ireland Ireland Lionbridge Technologies
Lionbridge Technologies (France) France Lionbridge Technologies
Lionbridge Japan K.K. Japan Lionbridge Technologies
Japanese Language Service, Inc. Massachusetts Lionbridge Technologies
VeriTest, Inc. California Lionbridge Technologies
</TABLE>
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated March 4, 1999 relating to the consolidated financial
statements of Lionbridge Technologies, Inc., and our report dated November 7,
1997 relating to the combined financial statements of The Localization
Businesses of Stream International Holdings, Inc. in Ireland, The Netherlands
and France, which appear in such Registration Statement. We also consent to
the references to us under the headings "Experts" and "Selected Consolidated
Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
June 17, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated June 16, 1999 relating to the financial statements of
VeriTest, Inc., which appears in such Registration Statement. We also consent
to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
Woodland Hills, California
June 17, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM S-1 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001058299
<NAME> LIONBRIDGE TECHNOLOGIES, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<EXCHANGE-RATE> 1 1
<CASH> 732 3,802
<SECURITIES> 0 0
<RECEIVABLES> 7,894 7,421
<ALLOWANCES> (573) (572)
<INVENTORY> 0 0
<CURRENT-ASSETS> 12,787 16,265
<PP&E> 3,070 3,375
<DEPRECIATION> (1,230) (1,590)
<TOTAL-ASSETS> 22,481 29,366
<CURRENT-LIABILITIES> 20,505 17,212
<BONDS> 0 0
15,395 15,660
0 0
<COMMON> 29 35
<OTHER-SE> (13,448) (10,696)
<TOTAL-LIABILITY-AND-EQUITY> 22,481 29,366
<SALES> 0 0
<TOTAL-REVENUES> 38,412 11,690
<CGS> 0 0
<TOTAL-COSTS> 41,816 13,411
<OTHER-EXPENSES> (49) 181
<LOSS-PROVISION> 207 (1)
<INTEREST-EXPENSE> 648 1,468
<INCOME-PRETAX> (4,003) (3,370)
<INCOME-TAX> 259 45
<INCOME-CONTINUING> (4,262) (3,415)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,262) (3,415)
<EPS-BASIC> (1.99) (1.17)
<EPS-DILUTED> (1.99) (1.17)
</TABLE>
