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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 000-26933
LIONBRIDGE TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3398462
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION
NUMBER)
950 WINTER STREET, WALTHAM, MA 02451
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (781) 434-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of January 31, 2000, was approximately $103 million (based on the
closing price of the registrant's Common Stock on January 31, 2000, of $19.75
per share).
The number of shares outstanding of the registrant's $.01 par value Common
Stock as of January 31, 2000 was 16,586,684.
DOCUMENTS INCORPORATED BY REFERENCE
Lionbridge intends to file a joint proxy statement/prospectus on Form S-4
pursuant to Regulation 14A within 120 days of the end of the fiscal year ended
December 31, 1999. Portions of such joint proxy statement/prospectus are
incorporated by reference into Part III of this Report. In addition, Lionbridge
has filed a Registration Statement on Form S-1, File No. 333-81233, and a
Quarterly Report on Form 10-Q, File No. 000-26933, for the quarter ended
September 30, 1999. Portions of both such documents are incorporated by
reference into Part IV of this Report.
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LIONBRIDGE TECHNOLOGIES, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
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PART I PAGE NO.
<S> <C> <C>
Item 1. Business.................................................................... 3
Item 2. Properties.................................................................. 7
Item 3. Legal Proceedings........................................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......................... 7
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....... 7
Item 6. Selected Consolidated Financial Data........................................ 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................. 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................. 20
Item 8. Financial Statements and Supplementary Data................................. 20
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................. 20
PART III
Item 10. Directors and Executive Officers of the Registrant.......................... 21
Item 11. Executive Compensation...................................................... 21
Item 12. Security Ownership of Certain Beneficial Owners and Management
of Lionbridge............................................................... 21
Item 13. Certain Relationships and Related Transactions.............................. 21
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............. 21
SIGNATURES............................................................................... II-1
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PART I
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED IN
THIS ANNUAL REPORT ON FORM 10-K ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. LIONBRIDGE MAKES SUCH FORWARD-LOOKING STATEMENTS UNDER
THE PROVISION OF THE "SAFE HARBOR" SECTION OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. ANY FORWARD-LOOKING STATEMENTS SHOULD BE CONSIDERED IN LIGHT
OF THE FACTORS DESCRIBED BELOW IN ITEM 7 UNDER "FACTORS THAT MAY AFFECT FUTURE
RESULTS." ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE PROJECTED, ANTICIPATED
OR INDICATED IN ANY FORWARD-LOOKING STATEMENTS. IN THIS ANNUAL REPORT ON FORM
10-K, THE WORDS "ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE,"
"COULD," AND SIMILAR WORDS OR EXPRESSIONS (AS WELL AS OTHER WORDS OR EXPRESSIONS
REFERENCING FUTURE EVENTS, CONDITIONS OR CIRCUMSTANCES) IDENTIFY FORWARD-LOOKING
STATEMENTS.
ITEM 1. BUSINESS
GENERAL
Lionbridge is a leading provider of globalization services to industry-leading
software publishers, computer hardware manufacturers, and telecommunications
companies. Globalization is the process of adapting products or services to meet
the demands of local cultures. 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. As product releases, technical
support and training have evolved toward a Web-based business model, we have in
turn begun to offer multilingual Internet services. While the Internet has been
an integral part of our operations and our relationships with our customers for
several years, in the last year we have developed new multilingual Internet
service offerings that are focused on this rapidly changing business
opportunity.
We provide a complete globalization and multilingual Internet offering to
businesses, particularly industry-leading software publishers, computer hardware
manufacturers, and telecommunications companies. Our full suite of services
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:
o localization, translation, and internationalization services,
o compliance, compatibility, and localization testing of software and hardware,
and
o project management throughout the globalization process.
We have invested in the development of our proprietary RAPID GLOBALIZATION
METHODOLOGY(TM), a process which is at the heart of each client engagement. Our
RAPID GLOBALIZATION METHODOLOGY standardizes processes, defines key activities,
and specifies goals for each project. This approach to a project 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. Our RAPID GLOBALIZATION METHODOLOGY emphasizes the
integration of process and technology into the globalization process to achieve
operational efficiencies and predictable, measurable results. This methodology
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. The RAPID GLOBALIZATION
METHODOLOGY is generally supported by our proprietary internal LIONTRACK(TM)
workflow system.
LIONTRACK can answer the demanding localization requirements of large, complex
Web sites that are subject to continuous updating. LIONTRACK, which became
operational in July 1999, connects directly to our clients' Web sites,
automatically detecting and extracting required changes through our Web-crawling
technology. LIONTRACK routes these changes for translation and localization, and
automatically inserts the localized material into the client's multilingual Web
sites. LIONTRACK enables our clients to maintain continuously updated
multilingual Web sites without disruption, freeing them to focus on content
development. LIONTRACK also enables our clients to submit files and translation
instructions to us via the Internet for automated routing throughout the
localization process. Our clients can then use LIONTRACK to monitor the
real-time progress of individual components of an assignment, which allows them
to plan their product release schedule more effectively.
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Lionbridge, through its predecessor and current wholly owned subsidiary,
Lionbridge America, Inc., was incorporated in Delaware in September, 1996. Our
principal executive offices are located at 950 Winter Street, Waltham,
Massachusetts 02451, our telephone number is (781) 434-6000, and our Web site is
www.lionbridge.com.
RECENT DEVELOPMENTS
In January 2000, Lionbridge entered into an agreement to acquire INT'L.com,
Inc., a company based in Framingham, Massachusetts, with operations in the
United States, France, The Netherlands, Germany and China. The transaction is
intended to be a tax-free, stock-for-stock transaction, accounted for as a
pooling of interests. Lionbridge will issue approximately 9,000,000 shares of
its common stock in exchange for all of the capital stock of INT'L.com. The
acquisition is expected to be consummated in the second quarter of 2000.
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
globalization services consist of the following:
o 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.
o 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.
o TRANSLATION. Lionbridge uses a combination of internal and external
translators, as well as translation software, for its projects. We
have approximately 35 translators who are employees and we also have
established relationships with a global network of over 2,000
in-country translators, including independent agencies and freelance
professionals. A majority of our translation costs are attributable to
outsourcing these services to in-country translators. 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. Historically, a majority of our
revenue from translation services has involved translating information
from English to various foreign languages.
o LOCALIZATION AND INTERNATIONALIZATION TESTING. We provide both
localization testing, and software, hardware, and telecommunications
internationalization testing 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.
Internationalization 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.
o LOGO CERTIFICATION. Lionbridge, under its VeriTest services brand,
provides logo certification programs for many of the leading software
companies, including Autodesk, BMC Software, Microsoft, and Oracle.
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),
AND ORACLE E-CERTIFIED WAREHOUSE(TM).
o 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.
Our revenues from services, excluding non-multilingual compatibility testing and
logo certification, were approximately 90%, 100% and 100% of consolidated
revenues for the years ended December 31, 1999, 1998 and 1997, respectively.
As our clients increasingly use the Internet to deliver products, technical
support, training materials, and sales and marketing information, we are
continuously 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
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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 technical
support databases. As our clients continuously update this Web-based
information, we automatically update the multilingual versions as well. We also
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.
See Note 13 of Notes to Consolidated Financial Statements for financial
information relating to Lionbridge's operating segments and geographic areas of
operation.
SALES AND MARKETING
Substantially all of Lionbridge's revenue has been generated through its
dedicated direct sales force. As of January 31, 2000, we had 24 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 corporate
marketing team is 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 multinational organizations in the
software, hardware and telecommunications industries. The following companies
are representative of Lionbridge's clients in 1999:
Autodesk IBM Oce
Baan Kodak Oracle
Bentley Systems Microsoft Page Factory
Bull Motorola Parametric Technology
Candle Network Associates Sonic Foundry
Cisco Systems Nokia Sun Microsystems
Corel Nortel Networks Sybase
Hewlett Packard Novell Symantec
In 1999, Lionbridge's largest client, IBM, accounted for approximately 15% of
total revenue. In 1999 and 1998, our five largest clients accounted for
approximately 35% and 39%, respectively, of revenue.
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COMPETITION
Lionbridge provides a broad range of globalization and multilingual Internet
service offerings to its clients. The market for our services is highly
fragmented, and we have many competitors. Our current competitors include the
following:
o localization or translation services providers such as Berlitz
International, Bowne & Co., Lernout and Hauspie, and regional vendors
of translation services specializing in specific languages in
particular geographic areas,
o companies providing outsourcing of technical support call centers
including Stream International and Sykes Enterprises, and
o independent testing labs providing testing and logo certification
services such as National Software Testing Laboratories (a division of
CMP Media), and Keylabs (a subsidiary of Exodus Communications).
Lionbridge also faces competition from internal localization departments in
large multinational 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. 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.
Lionbridge believes that the principal competitive factors in providing its
services include project management expertise, quality, speed of service
delivery, vertical industry knowledge, the ability to provide clients end-to-end
localization solutions, expertise in certain geographic areas, corporate
reputation, and expertise in Internet-related services.
We believe we compete favorably with respect to these factors. We have
developed significant expertise in project management which has allowed us to
provide high-quality and quick service in our clients' particular industries
and geographic regions. We have been able to successfully provide our
customers with a one-stop globalization service and, in 1999, began offering
our Internet-related services. As a result, we have developed a strong
reputation in our industry.
There are relatively few barriers preventing companies from competing with us.
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 licensed from third parties in our localization
process, and to a lesser extent machine translation software also licensed from
third parties, 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 system, 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 December 31, 1999, we had 480 employees. Of these, 349 were consulting and
service delivery professionals and 131 were management and administrative
personnel performing marketing, sales, operations, process and technology,
research and development, finance, accounting, and administrative functions.
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 that our employee relations are good.
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ITEM 2. PROPERTIES
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 Chicago, Seattle, Houston, Los Angeles,
and San Francisco in the United States; Dublin, Ireland; Paris, France; and
Tokyo, 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 31, 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; and Tokyo, Japan. Lionbridge expects to close its Monterey,
California office by March 31, 2000. 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.
ITEM 3. LEGAL PROCEEDINGS
Lionbridge is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Lionbridge's security holders during
the fourth quarter of the fiscal year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Lionbridge commenced its initial public offering of common stock on August 20,
1999 at a price to the public of $10.00 per share. As of January 31, 2000, there
were approximately 100 holders of record of Lionbridge's common stock.
Lionbridge's common stock is listed and traded on the Nasdaq National Market
under the symbol "LIOX."
The following table sets forth, for the periods indicated, the range of high
and low bid prices for the common stock since Lionbridge's initial public
offering, all as reported by the Nasdaq National Market. The quotations
represent interdealer quotations, without adjustments for retail mark ups,
mark downs, or commissions, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
HIGH LOW
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August 20, 1999 - September 30, 1999............................ $37.3750 $10.3750
Fourth quarter ended December 31, 1999.......................... $25.7500 $14.8125
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Lionbridge has not paid any cash dividends on its common stock and currently
intends to retain any future earnings for use in its business. In addition,
the terms of its credit facility with Silicon Valley Bank prohibit the
payment of cash dividends to Lionbridge by its European subsidiaries and the
terms of the subordinated notes held by Capital Resource Lenders and two
Morgan Stanley limited partnerships prohibit Lionbridge from paying any
dividends to its stockholders. Accordingly, Lionbridge does not anticipate
that any cash dividends will be declared or paid on the common stock in the
foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
During the fiscal year ended December 31, 1999, Lionbridge issued the following
securities that were not registered under the Securities Act of 1933, as
amended:
(a) ISSUANCES OF CAPITAL STOCK
In January 1999, Lionbridge issued 66,668 shares of common stock, $0.01 par
value per share, as part of its agreement to acquire all of the stock of
VeriTest, Inc. In February 1999, Lionbridge issued 24,268 shares of common
stock, $0.01 par value per share, as part of its agreement, dated February
27, 1998, to acquire all of the outstanding stock of Japanese Language
Services, Inc.
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(b) EXERCISES OF STOCK OPTIONS
From January 1, 1999 to December 31, 1999, Lionbridge issued 626,456 shares of
common stock at exercise prices ranging from $0.15 to $1.50 for an aggregate
purchase price of approximately $117,000 pursuant to the exercise of employee
stock options. Of these, 610,891 shares were unregistered.
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 the exercise 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.
USE OF PROCEEDS FROM ISSUANCE OF REGISTERED SECURITIES
On August 20, 1999, we commenced our initial public offering of 3,500,000 shares
of common stock (4,025,000 shares including 525,000 over-allotment shares
offered by selling stockholders and Lionbridge), $.01 par value per share,
pursuant to our final prospectus dated August 20, 1999. That prospectus was
contained in Lionbridge's Registration Statement on Form S-1, which was declared
effective by the Securities and Exchange Commission (SEC File No. 333-81233) on
August 20, 1999. Of the 4,025,000 shares of common stock offered, 3,798,000 were
offered and sold, 3,500,000 shares by Lionbridge and 298,000 shares by certain
stockholders of Lionbridge. The initial public offering closed on August 25,
1999 as to the shares offered and sold by Lionbridge and on September 10, 1999
as to the shares offered and sold by the selling stockholders.
The aggregate offering price of the initial public offering to the public was
approximately $38.0 million, with proceeds to Lionbridge and the selling
stockholders, after deduction of underwriting discounts and commissions, of
$33.1 million and $2.8 million, respectively. The aggregate amount of expenses
incurred by Lionbridge through December 31, 1999 in connection with the issuance
and distribution of the shares of common stock offered and sold in the initial
public offering was approximately $3.2 million, including approximately $1.9
million in underwriting discounts and commissions and $1.3 million in other
expenses. None of the expenses paid by Lionbridge in connection with the initial
public offering or the exercise of the overallotment option were paid, directly
or indirectly, to directors, officers, persons owning 10% or more of
Lionbridge's equity securities, or affiliates of Lionbridge. Prudential
Securities Incorporated, U.S. Bancorp Piper Jaffray Inc. and Adams, Harkness &
Hill, Inc. acted as underwriters for the initial public offering.
The primary purposes of the initial public offering were to obtain additional
capital, create a public market for Lionbridge's common stock, provide
liquidity to existing stockholders and optionholders, create a currency for
future acquisitions and facilitate future access to public markets.
Lionbridge used $16.1 million of the offering proceeds to redeem shares of
Series B redeemable preferred stock, $6.0 million to repay subordinated notes
and approximately $535,000 to purchase fixed assets. Of these previous
amounts, Lionbridge paid approximately $15.4 million of the net proceeds of
the offering to officers and affiliates of Lionbridge to redeem shares of our
Series B redeemable preferred stock and paid $6.0 million to affiliates of
Lionbridge to repay the senior subordinated notes held by those affiliates.
The remainder of the proceeds are intended to be used for working capital and
general corporate purposes.
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ITEM 6. 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 France, Ireland, and The Netherlands. Until 1996,
Stream did not maintain complete accounting records for these localization
businesses. 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 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 are incorporated
by reference herein from Lionbridge's Registration Statement on Form S-1. The
selected consolidated financial data as of December 31, 1999, 1998, and 1997
and for the years then ended have been derived from the consolidated
financial statements of Lionbridge which appear elsewhere in this document.
The results of operations of Lionbridge for the period from inception (September
11, 1996) to December 31, 1996 are immaterial, consisting of no revenues,
general and administrative expenses of $158,000, interest expense of $1,000, and
a net loss of $159,000. 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 document, or incorporated by reference herein from
Lionbridge's Registration Statement on Form S-1.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997 1996 (1)
---- ---- ---- --------
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
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Revenue.................................................... $49,508 $38,412 $26,462 $28,134
Cost of revenue............................................ 33,486 25,546 18,914 24,977
--------- -------- --------- --------
Gross profit......................................... 16,022 12,866 7,548 3,157
--------- -------- --------- --------
Operating expenses:
Sales and marketing..................................... 5,554 2,735 1,306 ----
General and administrative.............................. 14,147 10,889 8,210 3,144
Research and development................................ 1,491 ---- ---- ----
Amortization of acquisition-related intangible assets... 3,170 2,145 4,400 ----
Restructuring charges................................... ---- 501 541 ----
Stock-based compensation................................ 730 ---- ---- ----
--------- -------- --------- --------
Total operating expenses............................. 25,092 16,270 14,457 3,144
--------- -------- --------- --------
Income (loss) from operations.............................. (9,070) (3,404) (6,909) 13
Interest expense:
Interest on outstanding debt............................ (1,511) (648) (127) (154)
Accretion of discount on subordinated notes payable..... (5,967) ---- ---- ----
Other income (expense), net................................ (339) 49 (506) (72)
--------- -------- --------- --------
Loss before income taxes................................... (16,887) (4,003) (7,542) (213)
Provision for income taxes................................. 699 259 112 ----
--------- -------- --------- --------
Net loss................................................... (17,586) (4,262) (7,654) (213)
Accrued dividends on preferred stock....................... (687) (1,062) (1,062) ----
--------- -------- --------- --------
Net loss attributable to common stockholders............... $(18,273) $(5,324) $ (8,716) $ (213)
========= ======== ========= ========
Basic and diluted net loss per share attributable to
common stockholders (2).................................... $ (2.45) $ (2.99) $(8.85)
Shares used in computing basic and diluted net loss per
share attributable to common stockholders.................. 7,450 1,782 985
</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
9
<PAGE>
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.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998 1997
-------- --------- ------
(IN THOUSANDS)
BALANCE SHEET DATA:
<S> <C> <C> <C>
Cash and cash equivalents...................................... $11,537 $ 732 $ 1,098
Working capital (deficit)...................................... 3,316 (7,718) (1,476)
Total assets................................................... 35,612 22,402 18,756
Long-term debt................................................. 6,731 ---- ----
Redeemable convertible preferred stock......................... ---- 15,418 14,356
Stockholders' equity (deficit)................................. 7,403 (13,521) (8,086)
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS
AND UNCERTAINTIES. LIONBRIDGE MAKES SUCH FORWARD-LOOKING STATEMENTS UNDER THE
PROVISION OF THE "SAFE HARBOR" SECTION OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. ANY FORWARD-LOOKING STATEMENTS SHOULD BE CONSIDERED IN LIGHT
OF THE FACTORS DESCRIBED BELOW IN THIS ITEM 7 UNDER "FACTORS THAT MAY AFFECT
FUTURE RESULTS." ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE PROJECTED,
ANTICIPATED OR INDICATED IN ANY FORWARD-LOOKING STATEMENTS. IN THIS ITEM 7, THE
WORDS "ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE," "COULD," AND
SIMILAR WORDS OR EXPRESSIONS (AS WELL AS OTHER WORDS OR EXPRESSIONS REFERENCING
FUTURE EVENTS, CONDITIONS, OR CIRCUMSTANCES) IDENTIFY FORWARD-LOOKING
STATEMENTS. THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH "SELECTED CONSOLIDATED FINANCIAL DATA" AND THE ACCOMPANYING CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS FORM 10-K.
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 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 offered multilingual Internet services.
Lionbridge's revenues are generally derived from fees for services generated on
a project-by-project basis. Projects are generally billed on a time and expense
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 expenses incurred
through the termination date. If clients terminate existing projects or if
Lionbridge is unable to enter into new engagements, its 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 December 31, 1999, had an accumulated deficit
of $32.5 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.
10
<PAGE>
In 1996, we acquired the localization businesses of Stream International in
Ireland, The Netherlands, and France by acquiring all of the capital stock of
five subsidiaries of Stream - two subsidiaries incorporated in The Netherlands
and one each in Belgium, France and Ireland. The Belgian subsidiary was inactive
and was subsequently dissolved by Lionbridge. Stream's business was formed as
the result of a combination of R.R. Donnelley's localization business with the
business of another company, Corporate Software. R.R. Donnelley owned a majority
interest in Stream. We 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, we recorded $9.2 million of
goodwill, which is being amortized over five years. Additionally, during 1997,
we renegotiated an earlier agreement with Stream and purchased assets, including
cash, property and equipment, rights under contracts, and accounts receivable,
from three subsidiaries of Stream International which represented the
localization businesses of Stream in Japan, China, South Korea and Taiwan. We
paid approximately $100,000 in cash and assumed liabilities of $317,000 in
exchange for these assets. Following this transaction, we expanded our business
in Asia.
In June 1998, we entered into an agreement with Stream settling outstanding
intercompany balances as well as claims that we had made that Stream had
breached some of the representations, warranties and covenants that it had made
in connection with our acquisition of the European businesses. Our principal
claim was that, in connection with this acquisition, we had assumed more
liabilities and fewer assets than Stream had previously disclosed to us. Under
the terms of the settlement agreement, our purchase price for the European
business was reduced by $531,000.
In January 1998, Lionbridge acquired Japanese Language Services, a company
specializing in Japanese localization services with operations in the United
States and Japan, for total initial consideration of $2.3 million consisting
of cash of $2.2 million and 286,959 shares of common stock valued at $86,000.
The shares of common stock may be redeemed, at the option of the holder, at a
price of $1.35 per share at any time from July 2001 to September 2001.
Subsequent to the acquisition date, Lionbridge paid a further $449,000 and
issued 24,268 shares of common stock, valued at approximately $35,000, in
connection with the purchase. In connection with this acquisition, we have
recorded $2.7 million of goodwill. The goodwill is being amortized over five
years.
In April 1998, Lionbridge acquired the business and 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 66,668 shares of our common stock valued at $344,000. 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 initially recorded $3.2
million of goodwill, not including any additional contingent amounts that may
be paid in the future. The goodwill is being amortized over five years.
In January 2000, Lionbridge acquired certain assets and operations of the
Language Services Operation of Nortel Networks Corporation in Montreal and
Ottawa, Canada; Beijing, China; Sao Paulo, Brazil; and Bogota, Columbia for
total initial consideration of $2.5 million. In connection with the
acquisition, Nortel Networks awarded a preferred vendor designation to
Lionbridge as part of a three-year services agreement. The purchase agreement
provides for certain contingent payments to be made by Lionbridge during the
first three years of the services agreement, dependent on the level of
revenues generated under the services agreement during those periods.
In January 2000, Lionbridge entered into an agreement to acquire INT'L.com,
Inc., a company based in Framingham, Massachusetts, with operations in the
United States, France, The Netherlands, Germany and China. The transaction is
intended to be a tax-free, stock-for-stock transaction, accounted for as a
pooling of interests. Lionbridge will issue approximately 9,000,000 shares of
its common stock in exchange for all of the capital stock of INT'L.com. The
acquisition is expected to be consummated in the second quarter of 2000.
We believe our acquisitions contributed to our growth by rapidly expanding our
employee base, geographic coverage, client base, industry expertise, and
technical skills. We anticipate that a material portion of our 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
11
<PAGE>
organization effectively; to retain and motivate key personnel of acquired
businesses; and to retain customers of acquired firms. We cannot guarantee that
we 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.
RESTRUCTURING CHARGES
During the fourth quarter of 1997, the first quarter of 1998, and the fourth
quarter of 1998, Lionbridge recorded restructuring 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, as a result of a decrease in
resources required on a specific customer contract. These reductions in
workforce were completed to correspond with the anticipated lower volume of work
orders under the contract. 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 nor do we anticipate
any further resource reductions associated with the customer contract.
Lionbridge does not anticipate any significant net effect on operating results
from these actions.
NON-CASH CHARGES
DEFERRED COMPENSATION
Lionbridge recorded deferred compensation of approximately $3.8 million in 1999,
representing the difference between the exercise price of stock options granted
to employees 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, $730,000 had been amortized and $236,000 had
been reversed due to forfeitures of the underlying options at December 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 December 31, 1999 in the fiscal periods ending:
<TABLE>
<S> <C>
December 31, 2000............................................................................ $860,000
December 31, 2001............................................................................ $860,000
December 31, 2002............................................................................ $860,000
December 31, 2003............................................................................ $257,000
</TABLE>
ORIGINAL ISSUE DISCOUNT ON SUBORDINATED NOTES
Interest expense for the year ended December 31, 1999 includes approximately
$6.0 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
1,533,260 shares of common stock, at an exercise price of $0.015 per share,
granted in connection with this debt financing. As we were previously
required to repay the subordinated notes in full upon the closing of our
initial public offering, we recorded 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 expected the initial public offering to occur. Pursuant to
an amendment of the debt agreements effective August 19, 1999, Lionbridge was
required to redeem only $6.0 million of the subordinated notes upon the
closing of its initial public offering of securities on August 25, 1999.
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain consolidated financial data as a
percentage of total revenues.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Revenue............................................................. 100.0% 100.0% 100.0%
Cost of revenue..................................................... 67.6 66.5 71.5
----------- ----------- ----------
Gross profit........................................................ 32.4 33.5 28.5
Operating expenses:
Sales and marketing.............................................. 11.2 7.1 4.9
General and administrative....................................... 28.6 28.4 31.1
Research and development......................................... 3.0 --- ---
Amortization of acquisition-related intangible assets............ 6.4 5.6 16.6
Restructuring charges............................................ --- 1.3 2.0
Stock-based compensation......................................... 1.5 --- ---
--------- --------- --------
Total operating expenses...................................... 50.7 42.4 54.6
Loss from operations................................................ (18.3) (8.9) (26.1)
Interest expense:
Interest on outstanding debt..................................... (3.0) (1.6) (0.5)
Accretion of discount on subordinated notes payable ............. (12.1) --- ----
Other income (expense), net......................................... (0.7) 0.1 (1.9)
--------- --------- --------
Loss before income taxes............................................ (34.1) (10.4) (28.5)
Provision for income taxes.......................................... 1.4 0.7 0.4
--------- --------- --------
Net loss............................................................ (35.5)% (11.1)% (28.9)%
========= ========= ========
</TABLE>
13
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUE. In 1999, revenue increased 28.9% to $49.5 million from $38.4 million in
1998. This increase results from additional project volume during 1999 as
compared to 1998, reflecting the continued impact of a strengthened sales
organization. Additionally, the 1999 results reflect the impact of the VeriTest
acquisition, which accounted for approximately $5.7 million of revenue in 1999.
COST OF REVENUE. Cost of revenue consists primarily of expenses 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 was 67.6% in 1999, remaining
relatively consistent compared with 66.5% during 1998. However, our fixed
cost of revenue as a percentage of revenue was impacted in fiscal 1999
compared to fiscal 1998 by the acquisition in January 1999 of VeriTest, which
had a higher ratio of fixed cost to revenue.
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 costs
increased 103.1% to $5.6 million in 1999 from $2.7 million in 1998. This
increase was primarily due to expenses associated with the continued hiring of
additional direct sales personnel in fiscal 1999, as well as expanded marketing
activities including advertising and public relations initiatives. As a
percentage of revenue, sales and marketing expenses increased to 11.2% from 7.1%
during 1998. Sales and marketing expenses are expected to continue to increase
in absolute dollars as we continue to expand our marketing programs.
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 related depreciation and amortization; information systems costs;
professional fees; travel; and all other site and corporate costs. General
and administrative costs increased 29.9% to $14.1 million in 1999 from $10.9
million in 1998 as a result of higher depreciation, the hiring of additional
employees and other personnel-related costs, as well as the additional
infrastructure costs of adding the VeriTest facilities. As a percentage of
revenue, general and administrative expenses were 28.6% in 1999 compared to
28.4% in 1998.
RESEARCH AND DEVELOPMENT. Research and development expenses relate to
LIONTRACK, our proprietary internal workflow system, and include salaries
and associated employee benefits, equipment depreciation and third-party
contractor expenses. Research and development expense totaled $1.5 million
for the year ended December 31, 1999. No research and development expense was
incurred in 1998. We expect that research and development expense relating to
LIONTRACK will increase in absolute dollars in the foreseeable future.
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 47.8% to $3.2 million in 1999 from $2.1 million in 1998. This
increase is primarily attributable to the amortization of goodwill and other
intangible assets from the acquisition of VeriTest in 1999.
INTEREST EXPENSE. Interest expense represents interest paid or payable on debt
and the accretion of original issue discount on subordinated notes with
detachable warrants. Interest expense increased 1,054% to $7.5 million in 1999
from $648,000 in 1998. The increase is principally due to the accretion of $6.0
million of original issue discount on 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 translation gains or losses arising from exchange rate
fluctuations on transactions denominated in currencies other than the local
currencies of the countries in which the
14
<PAGE>
transactions are recorded. As a percentage of revenue, other income (expense),
net, decreased to (0.7%) from 0.1% for the years ended December 31, 1999 and
1998, respectively.
PROVISION FOR INCOME TAXES. The provision for income taxes for the years ended
December 31, 1999 and 1998 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 these
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, 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, which accounted for approximately
$4.0 million of revenue in 1998.
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 these
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.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, Lionbridge has relied upon sales of equity securities and
borrowings to fund operations. On August 25, 1999, we completed our initial
public offering of 3,500,000 shares of common stock. After deducting expenses,
Lionbridge received approximately $31.8 million in cash proceeds from this
transaction.
We have incurred significant losses since our inception and, at December 31,
1999, had an accumulated deficit of $32.5 million. We conduct our business
through our wholly owned subsidiaries in the United States and overseas.
15
<PAGE>
We have a commercial credit facility with Silicon Valley Bank that allows
Lionbridge to borrow up to $8.0 million and that expires on March 20, 2000. 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% (9.5% at December 31, 1999) and is collateralized by worldwide accounts
receivable and work in process. As of December 31, 1999, $6.6 million was
outstanding under the facility.
In the first quarter of 1999, we entered into subordinated loan agreements
with Morgan Stanley Venture Capital Fund II Annex, L.P. and Morgan Stanley
Venture Investors Annex, L.P., existing stockholders of Lionbridge, and
Capital Resource Lenders III, L.P. Under the terms of the agreements, we
issued $12.0 million of subordinated notes with detachable warrants to
purchase 1,533,260 shares of our common stock at an exercise price of $0.015
per share. The agreements require Lionbridge to comply with several operating
and financial covenants, including a prohibition on the payment of dividends
to its stockholders. In connection with our initial public offering, we
repaid $6.0 million of the subordinated notes and Capital Resource Lenders
and the Morgan Stanley-sponsored limited partnerships agreed to defer the
repayment of the remaining $6 million of the subordinated notes that would
otherwise have been due upon the completion of our initial public offering in
order to enable us to meet our anticipated liquidity needs over the next 18
months with reasonable liquidity reserves to meet unanticipated
contingencies. The $6.0 million of notes bear interest at 12% per year and
are due upon the earlier of August 25, 2001 or the completion of an
underwritten public offering of securities (other than our initial public
offering) with aggregate gross proceeds of at least $10.0 million. As of
March 31, 1999, we were not in compliance with one of the covenants common to
each of the above loan agreements. We subsequently obtained waivers from the
Morgan Stanley-sponsored limited partnerships and Capital Resource Lenders
which released us from the requirement to comply with that covenant for the
quarter ended March 31, 1999 and for the quarters ended June 30 and September
30, 1999. As of December 31, 1999, we were in compliance with all of the
required covenants.
Net cash used in operations was $3.5 million in 1999, $1.7 million in 1998, and
$1.4 million in 1997. Cash used in these periods was primarily to fund the net
losses of $17.6 million, $4.3 million and $7.7 million incurred during these
years, respectively, offset in part by depreciation, amortization and other
non-cash expenses, and movements in operating assets and liabilities. Movements
in operating assets and liabilities were largely the result of the growth of our
business operations during these periods. We have not experienced any
significant trends in accounts receivable other than changes relative to
increases in sales. Fluctuations in accounts receivable from period to period
relative to changes in sales are a result of the timing of customer invoicing
and receipt of milestone payments from customers.
Net cash used in investing activities was $5.6 million in 1999, $4.5 million in
1998, and $426,000 in 1997. Investing activities for these periods were
primarily purchases of equipment and the acquisitions of Japanese Language
Services and the localization services division of Lucent Technologies in 1998
and VeriTest in 1999.
Net cash provided by financing activities was $20.3 million in 1999, $5.9
million in 1998, and $1.3 million in 1997. The primary financing activity was
the completion of our initial public offering in 1999, with additional resources
being provided by borrowings against our bank line of credit in each year as
well as the issuance of the subordinated debt in 1999.
As of December 31, 1999, Lionbridge's other significant financial commitments
consisted of $750,000 of notes payable as well as obligations under operating
leases.
Lionbridge has an agreement with the Irish Industrial Development Agency
regarding financial grants to its Irish subsidiary from this agency. Under the
agreement, the Irish subsidiary may not pay dividends or otherwise distribute
its cash, including any distributions to Lionbridge. In addition, our European
subsidiaries, including our Irish subsidiary, are restricted from paying
dividends to us under the terms of our commercial credit facility with Silicon
Valley Bank. These restrictions have not had a material impact on Lionbridge or
any of our subsidiaries and we do not expect that these restrictions will have a
material impact in the future.
As of December 31, 1999, we had cash and cash equivalents of $11.5 million
and an additional $1.4 million available for borrowing under the bank line of
credit. Our future financing requirements will depend upon a number of
factors, including Lionbridge's operating performance and increases in
operating expenses associated with growth in our business. We anticipate that
our present cash position 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 COMPLIANCE
Lionbridge believes that its Year 2000 compliance programs and systems
modifications were completed on time, and the conversion process was successful.
Our business has not been adversely affected to date due to the failure of key
third parties to successfully
16
<PAGE>
complete their Year 2000 conversions. Although there can be no assurance that
all third-parties with which we have material relationships had successful
conversion programs, we do not expect that any such failure would have a
material adverse effect on our financial position, results of operations or
liquidity. The costs of our Year 2000 compliance programs to date have not
been material, and we know of no further required modifications to our
information technology or embedded technology systems that would have a
material impact on our financial position, results of operations or liquidity.
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 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 was amended on
July 7, 1999 by the issuance of Statement of Accounting Standards No. 137
("SFAS 137"), "Accounting for Derivative Instruments and Hedging Activities--
Deferral of the Effective Date of FASB Statement No. 133--an amendment of
FAS Statement No. 133." SFAS 137 defers the implementation of SFAS No. 133 by
one year. SFAS No. 133, as amended, is effective for fiscal quarters
beginning after January 1, 2001 for Lionbridge, and we do not expect its
adoption to have a material impact on our financial position or results of
operations.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements."
This bulletin summarizes certain views of the staff on applying generally
accepted accounting principals to revenue recognition in financial
statements. The staff believes that revenue is realized or realizable and
earned when all of the following criteria are met: persuasive evidence of an
arrangement exists; delivery has occurred or services have been rendered; the
seller's price to the buyer is fixed or determinable; and collectibility is
reasonably assured. We believe that our current revenue recognition policy
complies with the Commission's guidelines.
FACTORS THAT MAY AFFECT FUTURE RESULTS
This Annual Report on Form 10-K contains forward-looking statements which
involve risks and uncertainties. Lionbridge's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, without limitation, those set forth in the
following risk factors and elsewhere in this Annual Report on Form 10-K. In
addition to the other information included or incorporated by reference in this
Annual Report on Form 10-K, the following risk factors should be considered
carefully in evaluating Lionbridge and its 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 1999, IBM
accounted for approximately 15% of our revenue and our five largest clients
(including IBM) 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 cash flow, and adversely affect our
ability to achieve and maintain profitability.
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
makes it difficult to predict our future revenues.
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 $32.5 million as of
December 31, 1999 and a net loss of $17.6 million for the year ended
December 31, 1999. Although our revenues have grown significantly since 1997,
this growth may not be
17
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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 acquisitions, and our sales and
marketing efforts. In addition, our acquisitions have 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 ability to achieve and maintain profitability for the
foreseeable future. We cannot predict when we will operate profitably, if ever.
IF OUR LOSSES CONTINUE, WE WILL NEED TO RAISE ADDITIONAL CAPITAL. IF WE ARE
UNABLE TO DO SO, OR WE DO SO ON UNFAVORABLE TERMS, THE VALUE OF YOUR INVESTMENT
IN OUR STOCK MAY DECLINE.
If our losses continue, we will be unable to pay our expenses unless we raise
additional capital. If we need to raise additional capital but are unable to do
so, we may not be able to continue as a going concern. If we need to raise
additional capital but are able to do so only on unfavorable terms, the value of
your investment in our stock may decline.
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 future years comparable to the revenue increases in prior
years. 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.
IF WE FAIL TO ATTRACT AND RETAIN PROFESSIONAL STAFF, OUR ABILITY TO COMPLETE OUR
PROJECTS AND OBTAIN NEW PROJECTS COULD SUFFER.
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 and revenues. 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 December 31, 1999, our staff increased from
approximately 270 to approximately 480 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 our initial public
offering are being 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.
OUR OUTSOURCE ACQUISITION STRATEGY MAY CAUSE US TO LOSE MONEY.
Part of our strategy is to acquire other companies' internal localization
operations and then enter into multi-year contracts with the sellers of these
operations to meet their globalization requirements on an outsourcing basis. As
such, our strategy is to buy these operations with the objective of recouping
our up-front purchase price out of future revenues from the seller. If we pay
too much for these acquisitions or these contracts prove unprofitable, our
revenues and profitability will suffer.
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 December 31, 1999, we had goodwill and other
acquisition-related intangible assets of approximately $8.3 million, net of
accumulated amortization, which represented approximately 23% of our total
assets. The amount of goodwill associated with our acquisition of 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 VeriTest 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 ability
to achieve and maintain profitability for the foreseeable future.
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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 ability to achieve and maintain profitability.
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. Except for Lionbridge's January 2000 agreement to acquire
INT'L.com, Inc. and its January 2000 acquisition of certain assets and
operations of Nortel Networks Corporation, we currently do not have
commitments or agreements with respect to any acquisitions. 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.
PURSUING AND COMPLETING POTENTIAL ACQUISITIONS COULD DIVERT MANAGEMENT
ATTENTION AND FINANCIAL RESOURCES AND MAY NOT PRODUCE THE DESIRED BUSINESS
RESULTS. As part of our growth strategy, we intend to pursue and make
acquisitions of other complementary businesses. We do not have specific
personnel dedicated solely to pursuing and making acquisitions. As a result,
if we pursue any acquisition, our management, in addition to their
operational responsibilities, could spend a significant amount of time and
management and financial resources to pursue and integrate the acquired
business with our existing business. To pay for an acquisition, we might use
capital stock, cash 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 ability to
achieve and maintain profitability.
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:
o difficulties in the assimilation of the operations, technologies, products
and personnel of the acquired company,
o risks of entering markets in which we have no or limited prior experience,
o expenses of any undisclosed or potential legal liabilities of the acquired
company,
o the applicability of rules and regulations that might restrict our ability
to operate, and
o 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.
In order to continue to provide quality services in our rapidly changing
business, we believe it is particularly important to retain personnel with
experience and expertise relevant to our business. Our future success,
therefore, 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 seriously impede our success. 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 is our ability to conduct business in
international markets, as evidenced by the fact that a majority of our current
operations are outside of the United States. As a result, our business is
subject to the political and economic fluctuations in various countries,
including Japan and other Asian countries. For example, in the past, we have
experienced periods of slowdowns in revenue growth as our clients reassessed
their strategies in China and Japan based on political and economic conditions.
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We must employ and retain personnel throughout the world. Furthermore,
employment laws vary widely from country to country where we operate. To date,
we have been able to successfully staff our international operations, but if we
continue to grow our operations, it may become more difficult to manage our
business. If we fail to manage these operations successfully, our ability to
service our clients and grow our business will be seriously impeded.
We have experienced long payment cycles and occasional problems in collecting
accounts receivable originating outside of the United States. We have
experienced foreign currency fluctuations and they may have a more significant
impact on our revenues, cash flow and ability to achieve and maintain
profitability as we attempt to grow our business.
WE COMPETE IN A HIGHLY COMPETITIVE MARKET THAT HAS LOW BARRIERS TO ENTRY.
The market for our services is very competitive and we face many competitors. We
cannot assure you that we will compete successfully against these competitors in
the future. Many of these companies have longer operating histories,
significantly greater resources, and greater name recognition than Lionbridge.
If we fail to be competitive with these companies in the future, we may lose
market share and our revenues could fail to grow or decline.
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 also 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 currently offer
globalization services. Companies currently providing information technology
services may choose to broaden their range of services to include globalization.
While we currently 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 enable more companies to offer
localization services and thus to compete with us. We cannot assure you that we
will be able to compete effectively with these potential future competitors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Lionbridge is exposed to market risk related to changes in interest rates and
foreign currency exchange rates. We do not use derivative financial instruments
for speculative or trading purposes.
INTEREST RATE RISK. Lionbridge is exposed to market risk from changes in
interest rates primarily through its investing activities. In addition, our
ability to finance future acquisition transactions my be impacted if we are
unable to obtain appropriate financing at acceptable rates. Our investment
portfolio consists solely of investments in high-grade commercial bank money
market accounts.
FOREIGN CURRENCY EXCHANGE RATE LOSSES. The majority of our contracts with
clients are denominated in U.S. dollars. However, 59% of our costs and expenses
in 1999 and 73% of our costs and expenses in 1998 were denominated in foreign
currencies. 52% and 59% of our assets were recorded in foreign currencies as of
December 31, 1999 and 1998, respectively. 29% and 48% of our liabilities were
recorded in foreign currencies as of December 31, 1999 and 1998, respectively.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Lionbridge's consolidated financial statements together with the related notes
and the report of PricewaterhouseCoopers LLP, independent accountants, are set
forth beginning on page F-1 of Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
Anything herein to the contrary notwithstanding, in no event whatsoever are the
sections entitled "Stock Performance Graph" and "Compensation Committee Report
on Executive Compensation" to be incorporated by reference herein from
Lionbridge's joint proxy statement/prospectus in connection with its special
meeting of stockholders expected to be held in the second quarter of 2000.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information relating to directors and executive officers of
Lionbridge is incorporated by reference herein from Lionbridge's joint proxy
statement/prospectus in connection with its special meeting of stockholders
expected to be held in the second quarter of 2000, which joint proxy
statement/prospectus will be filed with the Securities and Exchange
Commission not later than 120 days after the close of Lionbridge's fiscal
year ended December 31, 1999.
ITEM 11. EXECUTIVE COMPENSATION
Certain information relating to remuneration of directors and executive
officers and other transactions involving management is incorporated by
reference herein from Lionbridge's joint proxy statement/prospectus in
connection with its special meeting of stockholders expected to be held in
the second quarter of 2000, which joint proxy statement/prospectus will be
filed with the Securities and Exchange Commission not later than 120 days
after the close of Lionbridge's fiscal year ended December 31, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
LIONBRIDGE
Certain information relating to security ownership of certain beneficial
owners and management is incorporated by reference herein from Lionbridge's
joint proxy statement/prospectus in connection with its special meeting of
stockholders expected to be held in the second quarter of 2000, which joint
proxy statement/prospectus will be filed with the Securities and Exchange
Commission not later than 120 days after the close of Lionbridge's fiscal
year ended December 31, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain information relating to certain relationships and related
transactions is incorporated by reference herein from Lionbridge's joint
proxy statement/prospectus in connection with its special meeting of
stockholders expected to be held in the second quarter of 2000, which joint
proxy statement/prospectus will be filed with the Securities and Exchange
Commission not later than 120 days after the close of Lionbridge's fiscal
year ended December 31, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Form 10-K:
<TABLE>
<CAPTION>
Page Number
(1) Financial Statements:
<S> <C>
Report of Independent Accountants F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-2
Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997 F-3
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity
(Deficit) for the years ended December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 F-5
</TABLE>
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<TABLE>
<S> <C>
Notes to Consolidated Financial Statements F-6
</TABLE>
(2) Financial Statement Schedules:
Financial Statement Schedules have been omitted because the information
required to be set forth therein is not applicable or is shown in the
accompanying Consolidated Financial Statements or notes thereto.
(3) Exhibits
EXHIBIT NO. EXHIBIT
2.1 Stock Purchase Agreement dated as of January 2, 1998 by and
among Lionbridge, Japanese Language Services, Inc., Carl
J. Kay and Yoko I. Kay (filed as Exhibit 2.1 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
2.2 Stock Purchase Agreement dated as of January 6, 1999 among
VeriTest, Inc., the shareholders of VeriTest listed on the
signature pages thereto and Lionbridge (filed as Exhibit 2.2 to
the Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
3.1, 4.1 Second Amended and Restated Certificate of Incorporation of
Lionbridge (filed as Exhibit 3.2 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
3.2, 4.2 Amended and Restated By-laws of Lionbridge (filed as
Exhibit 3.4 to the Registration Statement on Form S-1
(File No. 333-81233) and incorporated herein by reference).
4.3 Specimen Certificate for shares of Lionbridge's Common Stock
(filed as Exhibit 4.3 to the Registration Statement on Form S-1
(File No. 333-81233) and incorporated herein by reference).
10.1** 1998 Stock Plan (filed as Exhibit 10.1 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
10.2** 1999 Employee Stock Purchase Plan (filed as Exhibit 10.2 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
10.3 Lease dated as of February 13, 1997 between Shorenstein
Management, Inc., as Trustee of SRI Two Realty Trust, and
Lionbridge Technologies, Inc. (filed as Exhibit 10.3 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
10.4** Employment Agreement dated as of December 23, 1996 between
Lionbridge Technologies, Inc. and Rory J. Cowan (filed as
Exhibit 10.4 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.5** Employment Agreement dated as of February 24, 1997 between
Lionbridge Technologies, Inc. and Myriam Martin-Kail (filed as
Exhibit 10.5 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.6** Employment Agreement dated as of February 11, 1997 between
Lionbridge Technologies, Inc. and Stephen J. Lifshatz (filed as
Exhibit 10.6 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.7** Employment Agreement dated as of February 28, 1997 between
Lionbridge Technologies, Inc. and Peter Wright (filed as
Exhibit 10.7 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
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
(filed as Exhibit 10.8 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
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. (filed as Exhibit 10.9 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
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
(filed as Exhibit 10.10 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
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 (filed as Exhibit 10.11 to the Registration Statement on
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<PAGE>
Form S-1 (File No. 333-81233) and incorporated herein by
reference).
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 (filed as
Exhibit 10.12 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
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
(filed as Exhibit 10.13 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
10.14 Letter of Deposit dated as of September 26, 1997 of Lionbridge
Technologies Holdings B.V. and Rory Cowan to Silicon Valley
Bank (filed as Exhibit 10.14 to the Registration Statement on
Form S-1 (File No. 333-81233) and incorporated herein by
reference).
10.15 Security Agreement dated as of September 26, 1997 between
Lionbridge Technologies, Inc. and Silicon Valley Bank (filed as
Exhibit 10.15 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.16 Guarantee dated as of September 26, 1997 made by Lionbridge
Technologies Ireland in favor of Silicon Valley Bank (filed as
Exhibit 10.16 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.17 Debenture dated as of September 26, 1997 between Lionbridge
Technologies Ireland and Silicon Valley Bank (filed as Exhibit
10.17 to the Registration Statement on Form S-1 (File No.
333-81233) and incorporated herein by reference).
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 (filed as
Exhibit 10.18 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
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) (filed as
Exhibit 10.19 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.20 Warrant to Purchase Common Stock of Lionbridge dated as of May
21, 1998 issued to Silicon Valley Bancshares (filed as Exhibit
10.20 to the Registration Statement on Form S-1 (File No.
333-81233) and incorporated herein by reference).
10.21 Pledge Agreement dated as of May 21, 1998 between Lionbridge
and Silicon Valley Bank regarding capital stock of Lionbridge
Technologies California, Inc. (filed as Exhibit 10.21 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
10.22 Pledge Agreement dated as of May 21, 1998 between Lionbridge
and Silicon Valley Bank regarding capital stock of Japanese
Language Services, Inc. (filed as Exhibit 10.22 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
10.23 Amended and Restated Guarantee dated as of May 21, 1998 made by
Lionbridge Technologies, Inc. in favor of Silicon Valley Bank
(filed as Exhibit 10.23 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
10.24 Guarantee dated as of May 21, 1998 made by Japanese Language
Services, Inc. in favor of Silicon Valley Bank (filed as
Exhibit 10.24 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
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. (filed as Exhibit 10.25
to the Registration Statement on Form S-1 (File No. 333-81233)
and incorporated herein by reference).
10.26 Security Agreement dated as of May 21, 1998 between Japanese
Language Services, Inc. and Silicon Valley Bank (filed as
Exhibit 10.26 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.27 Guarantee dated as of May 21, 1998 made by Lionbridge Japan
K.K. in favor of Silicon Valley Bank (filed as Exhibit 10.27 to
the Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
10.28 Guarantee dated as of May 21, 1998 made by Lionbridge
Technologies California, Inc. in favor of Silicon Valley Bank
(filed as Exhibit 10.28 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
10.29 Security Agreement dated as of May 21, 1998 between Lionbridge
Technologies California, Inc. and Silicon Valley Bank (filed as
Exhibit 10.29 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.30 First Demand Guarantee dated as of May 21, 1998 made by
Lionbridge Technologies (France) in favor of Silicon Valley
Bank (filed as Exhibit 10.30 to the Registration Statement on
Form S-1 (File No. 333-81233) and incorporated herein by
reference).
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 (filed as Exhibit 10.31 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
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10.32 Lease dated as of January 1, 1998 between Corke Abbey
Investments Limited and Lionbridge Technologies Ireland (filed
as Exhibit 10.36 to the Registration Statement on Form S-1
(File No. 333-81233) and incorporated herein by reference).
10.33 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 (filed as
Exhibit 10.37 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.34 Lease dated as of September 14, 1990 between Corke Abbey
Investments Limited and European Language Translations Limited
(filed as Exhibit 10.38 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
10.35 Agreement dated as of December 4, 1998 between the Industrial
Development Agency (Ireland) and Lionbridge (filed as Exhibit
10.39 to the Registration Statement on Form S-1 (File No.
333-81233) and incorporated herein by reference).
10.36 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 (filed as
Exhibit 10.40 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.37** Form of Non-Competition Agreement as entered into between
Lionbridge and each of Rory J. Cowan, Stephen J. Lifshatz,
and Peter Wright (filed as Exhibit 10.41 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
10.38 Loan Document Modification Agreement Number 4 dated as of July
16, 1999 by and among Lionbridge Technologies Holdings B.V.,
Lionbridge Technologies B.V., Lionbridge America, Inc., and
Silicon Valley Bank (filed as Exhibit 10.43 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
10.39 Senior Subordinated Note Purchase Agreement by and among
Lionbridge, Morgan Stanley Venture Capital Fund II Annex,
L.P. and Morgan Stanley Venture Investors Annex, L.P. dated as
of March 9, 1999 (filed as Exhibit 10.44 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
10.40 Senior Subordinated Note Purchase Agreement by and among
Lionbridge Technologies Holdings B.V., Morgan Stanley Venture
Capital Fund II Annex, L.P. and Morgan Stanley Venture
Investors Annex, L.P. dated as of March 9, 1999 (filed as
Exhibit 10.45 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.41 First Amended and Restated Senior Subordinated Note Purchase
Agreement by and between Lionbridge and Capital Resource
Lenders III, L.P. dated as of February 26, 1999 (filed as
Exhibit 10.46 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.42 Senior Subordinated Note Purchase Agreement by and between
Lionbridge Technologies Holdings B.V. and Capital Resource
Lenders III, L.P. dated as of February 26, 1999 (filed as
Exhibit 10.47 to the Registration Statement on Form S-1
(File No. 333-81233) and incorporated herein by reference).
10.43 Form of Senior Subordinated Promissory Notes issued pursuant to
Senior Subordinated Note Purchase Agreements (filed as Exhibit
10.48 to the Registration Statement on Form S-1 (File No.
333-81233) and incorporated herein by reference).
10.44 Letter Agreements amending each of the Senior Subordinated Note
Purchase Agreements (filed as Exhibit 10.49 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
10.45 Loan Document Modification Agreement Number 5 dated as of
September 20, 1999 by and among Lionbridge Technologies
Holdings B.V., Lionbridge Technologies B.V., Lionbridge
and Silicon Valley Bank (filed as Exhibit 10.1 to the Quarterly
Report on Form 10-Q (File No. 000-26933) for the quarter
ended September 30, 1999 and incorporated herein by reference).
10.46* Loan Document Modification Agreement Number 6 dated as of
December 20, 1999 by and among Lionbridge Technologies
Holdings B.V., Lionbridge Technologies B.V., Lionbridge
and Silicon Valley Bank.
10.47* Amended and Restated Promissory Note dated as of December
20, 1999 payable to Silicon Valley Bank.
10.48* First Amendment to lease dated as of June 29, 1999 between
Bay Colony Corporate Center LLC and Lionbridge.
10.49* Second Amendment to lease dated as of December 10, 1999
between Bay Colony Corporate Center LLC and Lionbridge.
10.50* Agreement and Plan of Reorganization dated January 19, 2000
by and among Lionbridge, LTI Acquisition Corp. and INT'L.com,
Inc.
21.1* Subsidiaries of Lionbridge.
23.1* Consent of PricewaterhouseCoopers LLP.
24.1* Power of Attorney (included in signature page).
27.1* Financial Data Schedule.
* Filed herewith
** Indicates a management contract or any compensatory plan, contract or
arrangement required to be filed as an Exhibit pursuant to Item 14(c).
24
<PAGE>
(b) Reports on Form 8-K:
None.
(c) Exhibits:
Lionbridge hereby files as part of this Form 10-K the exhibits listed in
Item 14(a)(3) above. Exhibits which are incorporated herein by reference
can be inspected and copied at the public reference rooms maintained by the
Securities and Exchange Commission in Washington, D.C., New York, New York,
and Chicago, Illinois. Please call the Securities and Exchange Commission
at 1-800-SEC-0330 for further information on the public reference rooms.
Securities and Exchange Commission filings are also available to the public
from commercial document retrieval services and at the Web site maintained
by the Securities and Exchange Commission at http://www.sec.gov.
(d) Financial Statement Schedules:
Lionbridge hereby files as part of this Form 10-K in Item 14(b) attached
hereto the consolidated financial statement schedules listed in Item
14(a)(2) above, if any.
25
<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' equity (deficit) and cash flows present fairly, in all
material respects, the consolidated financial position of Lionbridge
Technologies, Inc. (the "Company") at December 31, 1999 and 1998 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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
January 24, 2000
F-1
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................................................. $ 11,537 $ 732
Accounts receivable, net of allowances of $698 and $573 at December 31, 1999 and 1998, respectively..... 8,918 7,321
Work in process......................................................................................... 3,705 3,929
Other current assets.................................................................................... 634 805
--------- --------
Total current assets................................................................................. 24,794 12,787
Property and equipment, net................................................................................ 2,171 1,840
Goodwill and other intangible assets, net.................................................................. 8,288 7,370
Other assets............................................................................................... 359 405
--------- --------
Total assets....................................................................................... $ 35,612 $ 22,402
========= ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Amounts owed to banks................................................................................... $ -- $ 416
Short-term debt......................................................................................... 6,593 7,693
Accounts payable........................................................................................ 4,667 3,964
Accrued compensation and benefits....................................................................... 2,985 2,356
Other accrued expenses.................................................................................. 4,709 5,664
Deferred revenue........................................................................................ 2,524 412
--------- --------
Total current liabilities............................................................................ 21,478 20,505
--------- --------
Long-term debt............................................................................................. 6,731 --
Redeemable convertible preferred stock, $0.01 par value:
Series A convertible preferred stock, 0 and 17,271,314 shares authorized at
December 31, 1999 and 1998, respectively; 0 and 13,271,314 shares issued and
outstanding at December 31, 1999 and 1998, respectively.............................................. -- 15,418
Series D nonvoting convertible preferred stock, 0 and 200 shares authorized
at December 31, 1999 and 1998, respectively; 0 and 140 shares issued and outstanding at
December 31, 1999 and 1998, respectively............................................................. -- --
Commitments (Note 7)
Stockholders' equity (deficit):
Preferred stock, $0.01 par value; 5,000,000 shares authorized at December 31, 1999; no shares issued and
outstanding.......................................................................................... -- --
Common stock, $0.01 par value; 100,000,000 and 25,950,867 shares authorized at December 31, 1999 and
1998, respectively; 16,561,705 and 1,963,614 shares issued and outstanding at December 31,
1999 and 1998, respectively......................................................................... 166 20
Additional paid-in capital.............................................................................. 42,085 300
Accumulated deficit..................................................................................... (32,495) (14,222)
Deferred compensation................................................................................... (2,837) --
Accumulated other comprehensive income.................................................................. 484 381
--------- --------
Total stockholders' equity (deficit)................................................................. 7,403 (13,521)
--------- --------
Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)....... $ 35,612 $ 22,402
========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS.
F-2
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997
---------- ---------- -------
<S> <C> <C> <C>
Revenue....................................................... $49,508 $38,412 $26,462
Cost of revenue............................................... 33,486 25,546 18,914
---------- ---------- ----------
Gross profit............................................ 16,022 12,866 7,548
---------- ---------- ----------
Operating expenses:
Sales and marketing........................................ 5,554 2,735 1,306
General and administrative................................. 14,147 10,889 8,210
Research and development................................... 1,491 ---- ----
Amortization of acquisition-related intangible assets...... 3,170 2,145 4,400
Restructuring charges...................................... ---- 501 541
Stock-based compensation................................... 730 ---- ----
---------- ---------- ----------
Total operating expenses................................ 25,092 16,270 14,457
---------- ---------- ----------
Loss from operations.......................................... (9,070) (3,404) (6,909)
Interest expense:
Interest on outstanding debt............................... (1,511) (648) (127)
Accretion of discount on subordinated notes payable........ (5,967) -- --
Other income (expense), net................................... (339) 49 (506)
---------- ---------- ----------
Loss before income taxes...................................... (16,887) (4,003) (7,542)
Provision for income taxes.................................... 699 259 112
---------- ---------- ----------
Net loss...................................................... (17,586) (4,262) (7,654)
Accrued dividends on preferred stock.......................... (687) (1,062) (1,062)
---------- ---------- ----------
Net loss attributable to common stockholders.................. $ (18,273) $ (5,324) $ (8,716)
========== ========= =========
Basic and diluted net loss per share attributable to common
stockholders.................................................. $ (2.45) $ (2.99) $ (8.85)
Shares used in computing basic and diluted net loss per share
attributable to common stockholders........................... 7,450 1,782 985
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS.
F-3
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (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
----------- -------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996................... 13,673,098 $ 13,696 984,608 $ 10 $ 5 $ (182)
Stock options exercised........................ 375,385 4 52
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 14,356 1,359,993 14 57 (8,898)
Issuance of common stock in connection with the
Acquisition of Japanese Language Services,
Inc....................................... 286,959 3 83
Stock options exercised........................ 316,662 3 39
Accrual of dividends on preferred stock........ 1,062 (1,062)
Accretion of common stock to redemption value.. 121
Comprehensive loss:
Net loss.................................. (4,262)
Other comprehensive loss:
Translation adjustment...............
Comprehensive loss........................
----------- -------- ---------- ----- --------- ---------
Balance at December 31, 1998................... 13,271,454 15,418 1,963,614 20 300 (14,222)
Issuance of common stock in connection with the
acquisition of VeriTest, Inc.............. 66,668 1 343
Issuance of common stock in connection with the
acquisition of Japanese Language Services,
Inc....................................... 24,268 -- 35
Issuance of warrants in connection with debt
financing................................. 5,967
Deferred compensation.......................... 3,803
Amortization of deferred compensation..........
Reversal of deferred compensation due to
option forfeitures........................ (236)
Stock options exercised........................ 626,456 6 111
Accrual of dividends on preferred stock........ 687 (687)
Accretion of common stock to redemption value.. 120
Warrants exercised............................. 1,533,050 16 5
Issuance of common stock in connection with
initial public offering................... 3,500,000 35 31,725
Redemption and conversion of preferred stock... (13,271,454) (16,105) 8,847,649 88 (88)
Comprehensive loss:
Net loss.................................. (17,586)
Other comprehensive income:
Translation adjustment...............
Comprehensive loss........................
----------- -------- ---------- ----- --------- ---------
Balance at December 31, 1999................... -- $ -- 16,561,705 $ 166 $ 42,085 $ (32,495)
=========== ======== ========== ===== ========= =========
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
DEFERRED COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE
COMPENSATION INCOME EQUITY (DEFICIT) LOSS
------------ ------ ---------------- ----
<S> <C> <C> <C> <C>
Balance at December 31, 1996.................. $ (167)
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 (8,086)
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)
Accretion of common stock to redemption value. 121
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 (13,521)
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......................... $ (3,803) ----
Amortization of deferred compensation......... 730 730
Reversal of deferred compensation due to
option forfeitures............................ 236 ----
Stock options exercised....................... 117
Accrual of dividends on preferred stock....... (687)
Accretion of common stock to redemption value. 120
Warrants exercised............................ 21
Issuance of common stock in connection with
initial public offering....................... 31,760
Redemption and conversion of preferred stock.. ----
Comprehensive loss:
Net loss................................. (17,586) $(17,586)
Other comprehensive income:
Translation adjustment.............. 103 103 103
--------
Comprehensive loss....................... $(17,483)
------- ---- -------- ========
Balance at December 31, 1999................. $(2,837) $484 $ 7,403
======= ==== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS.
F-4
<PAGE>
LIONBRIDGE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997
---------- ---------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................................... $(17,586) $ (4,262) $(7,654)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of acquisition-related intangible assets.................. 3,170 2,145 4,400
Compensation expense for stock options granted......................... 730 -- --
Accretion of discount on subordinated notes payable.................... 5,967 -- --
Depreciation and amortization of property and equipment................ 1,581 1,187 1,164
Provision for doubtful accounts........................................ 218 182 380
Deferred income taxes............................................. 519 206 112
Foreign currency (gain) loss on intercompany transactions......... 759 (67) 353
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable............................................... (2,309) 214 187
Work in process................................................... (74) (828) (592)
Other current assets.............................................. 157 (295) 690
Other assets...................................................... 52 (193) (78)
Accounts payable.................................................. 1,000 (401) (426)
Accrued compensation and benefits................................. 629 341 781
Other accrued expenses............................................ (492) 478 184
Deferred revenue.................................................. 2,169 (440) (943)
-------- -------- --------
Net cash used in operating activities........................ (3,510) (1,733) (1,442)
-------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment......................................... (1,904) (1,363) (923)
Payments for businesses acquired, net of cash acquired...................... (3,740) (3,141) (18)
Payments for Asian asset purchase, net of cash acquired..................... -- -- (85)
Transfer of funds from escrow............................................... -- -- 600
-------- -------- -------
Net cash used in investing activities........................ (5,644) (4,504) (426)
-------- -------- -------
Cash flows from financing activities:
Net increase (decrease) in amounts owed to banks............................ (348) 328 (522)
Net increase (decrease) in short-term debt.................................. (1,148) 5,551 1,197
Proceeds from issuance of long-term debt.................................... 12,000 -- --
Repayment of long-term debt................................................. (6,000) -- --
Proceeds from issuance of preferred stock................................... -- -- 570
Redemption of preferred stock............................................... (16,105) -- --
Proceeds from exercise of stock options..................................... 117 42 56
Net proceeds from initial public offering of common stock................... 31,760 -- --
-------- -------- -------
Net cash provided by financing activities.................... 20,276 5,921 1,301
-------- -------- -------
Net increase(decrease) in cash and cash equivalents ............................. 11,122 (316) (567)
Effects of exchange rate changes on cash and cash equivalents.................... (317) (50) (130)
Cash and cash equivalents at beginning of year................................... 732 1,098 1,795
-------- -------- -------
Cash and cash equivalents at end of year......................................... $ 11,537 $ 732 $ 1,098
======== ======== =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<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" or the "Company") is a provider of globalization services,
primarily 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 localization 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. As these assets did not
comprise businesses, the Company allocated the purchase price based on their
fair values.
On August 25, 1999, Lionbridge consummated an initial public offering
of its common stock. In connection with this offering, Lionbridge sold 3,500,000
shares of its common stock and received net proceeds of approximately
$31,760,000.
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-6
<PAGE>
REVENUE RECOGNITION
Lionbridge recognizes revenue from the provision of services to its
customers on the percentage-of-completion method of accounting, based on all
costs incurred to date 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. Advertising costs were approximately $224,000, $120,000
and $0 for the years ended December 31, 1999, 1998 and 1997, respectively.
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 year. Assets and liabilities of foreign
operations are translated into U.S. dollars at year-end rates of exchange.
Resulting cumulative translation adjustments are reflected as a separate
component of accumulated other comprehensive income in stockholders' equity
(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 $332,000, $49,000 and $(472,000)
for the years ended December 31, 1999, 1998 and 1997, 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.
CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The Company invests
its excess cash primarily in money market accounts.
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. Billing of amounts in work in process occurs
according to customer-agreed payment schedules or upon completion of specified
project milestones. All of Lionbridge's projects in work in process are expected
to be billed and collected within one year.
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:
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
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.
GOODWILL AND OTHER 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. Other intangible assets consist of the value of
acquired workforce and the VeriTest trade name, both which are being
amortized on a straight-line basis 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-7
<PAGE>
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
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.
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 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 and related guidance.
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 cash and cash
equivalents and trade accounts receivables. The Company places its cash and
cash equivalents with financial institutions with high credit standing.
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 12). 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 and cash equivalents, 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, 1999, 1998 and 1997. 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 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities." SFAS 133 was amended on July
7, 1999 by the issuance of Statement of Accounting Standards No. 13 ("SFAS
137"), "Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133 - an amendment of FASB Statement
No. 133." SFAS 137 defers the implementation of SFAS 133 by one year. SFAS 133,
as amended, is effective for fiscal
F-8
<PAGE>
quarters beginning after January 1, 2001 for the Company and its adoption is not
expected to have a material impact on the Company's financial position or
results of operations.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements."
This bulletin summarizes certain views of the staff on applying generally
accepted accounting principals to revenue recognition in financial
statements. The staff believes that revenue is realized or realizable and
earned when all of the following criteria are met: persuasive evidence of an
arrangement exists; delivery has occurred or services have been rendered; the
seller's price to the buyer is fixed or determinable; and collectibility is
reasonably assured. The Company believes that its current revenue recognition
policy complies with the Commission's guidelines.
3. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Computer software and equipment...................... $4,360,000 $2,035,000
Furniture and office equipment....................... 857,000 708,000
Leasehold improvements............................... 431,000 327,000
---------- ----------
5,648,000 3,070,000
Less: Accumulated depreciation and amortization..... (3,477,000) (1,230,000)
---------- ----------
Total................................................ $2,171,000 $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. Goodwill of $9,224,000 was
initially recognized in connection with this acquisition.
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 1999, 1998 and 1997, acquired net operating loss carryforwards
of approximately $1,540,000, $1,291,000 and $1,120,000, respectively, were
utilized to offset taxable income in Ireland, France 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 $519,000, $207,000, and $112,000 in 1999, 1998 and 1997,
respectively.
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 $2,323,000 consisting of cash of $2,237,000 and
286,959 shares of common stock valued at $86,000. The shares of common stock
may be redeemed, at the option of the holder, at a price of $1.35 per share
at any time from July 2001 to September 2001. The carrying amount of the
redeemable common stock will be increased to the redemption amount of
$387,000 over the 30-month period ending July 2001. The agreement also
required certain contingent stock issuances, limited to 24,268 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 purchase price, including direct
costs of the acquisition, was allocated based on the fair values of the
acquired assets and assumed liabilities as follows:
F-9
<PAGE>
<TABLE>
<S> <C>
Current assets............................ $935,000
Current liabilities....................... (789,000)
Property and equipment.................... 247,000
Goodwill.................................. 1,999,000
----------
$2,392,000
==========
</TABLE>
The initial calculation of goodwill did not include any anticipated
contingent consideration. Additional goodwill of $484,000 was subsequently
recorded through December 31, 1999 in connection with incremental payments
and stock issuances being made under the terms of the original agreement.
Goodwill was also increased by $120,000 during each of the years ended
December 31, 1999 and 1998, respectively, related to the accretion to the
redemption amount of the redeemable common stock. Pro forma statements of
operations for the year ended December 31, 1997 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
purchase price, including direct costs of the acquisition, was allocated to
current assets of $244,000, property and equipment of $299,000 and goodwill of
$470,000 based on their fair values 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.
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, 66,668
shares of common stock valued at $344,000, and notes 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. The
acquisition was accounted for using the purchase method of accounting. The
purchase price, including direct costs of the acquisition, was allocated based
on the fair values of the acquired assets and assumed liabilities as follows:
<TABLE>
<S> <C>
Current assets............................... $522,000
Current liabilities.......................... (616,000)
Property and equipment....................... 175,000
Intangible assets............................ 1,181,000
Goodwill..................................... 3,157,000
----------
$4,419,000
==========
</TABLE>
Intangible assets consist of the value of the acquired workforce of
$676,000 and the VertiTest trade name of $505,000, both of which are being
amortized on a straight-line basis over a five-year period.
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.
The following unaudited pro forma consolidated results of operations
for the years ended December 31, 1999 and 1998 assume that the acquisition of
VeriTest, Inc. occurred as of January 1, 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenue.................................................................... $49,508,000 $42,147,000
Net loss................................................................... (17,803,000) (6,615,000)
Basic and diluted net loss per share attributable to common stockholders... (2.48) (4.08)
</TABLE>
F-10
<PAGE>
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 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 related to all acquisitions was
$2,934,000, $2,145,000, and $1,841,000 in 1999, 1998 and 1997, respectively.
Additionally, amortization of $236,000 was recorded in 1999 in connection
with intangible assets acquired as part of the VeriTest transaction and
$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 as of December 31, 1998.
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). 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. The net effect of the settlement
agreement was to reduce by $531,000 the Company's purchase price for the
European business acquired from Stream. The effective date of this agreement was
December 31, 1997, and its impact was reflected in the consolidated financial
statements as of that date.
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 December 20, 1999, and expires on March 20, 2000. At the time of
the May 1998 amendment, Lionbridge issued a warrant for the purchase of 83,334
shares of common stock at an exercise price of $2.40 per share. This warrant was
exercisable immediately and expires on May 21, 2003. The value ascribed to this
warrant was 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%, 8.8%, and 9.5% at December 31, 1999, 1998 and 1997,
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 amounts outstanding on the
line of credit at December 31, 1999 and 1998 were $6,593,000 and $7,693,000,
respectively.
The agreement requires Lionbridge to maintain certain financial ratios
and restricts the payment of dividends. As of December 31, 1999, 1998 and 1997,
Lionbridge was in compliance with the financial covenants as amended by the
bank.
ADDITIONAL FINANCING
On January 11, 1999, Lionbridge entered into two substantially
identical promissory note agreements with the former owners of VeriTest, Inc.
in connection with the acquisition of this business (see Note 4). The notes
are for an aggregate amount of $750,000 and are payable in one installment on
January 11, 2001. Interest on the notes is due annually at a rate of 8%.
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 and the $4,000,000 senior subordinated
note. Under the terms of the new agreement, Lionbridge issued $10,000,000, 12%
senior subordinated notes.
F-11
<PAGE>
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. The terms of the subordinated debt agreement prohibits Lionbridge
from paying dividends to its stockholders. In connection with the issuance of
these notes, Lionbridge issued detachable warrants to purchase 1,277,716
shares of common stock at a price of $0.015 per share, valued at $4,972,000.
These warrants were exercised in full in August 1999.
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 notes. 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. The
terms of the subordinated debt agreement prohibits Lionbridge from paying
dividends to its stockholders. In connection with the issuance of these
notes, Lionbridge issued detachable warrants to purchase 255,544 shares of
common stock at a price $0.015 per share, valued at $995,000. These warrants
were exercised in full in November 1999.
The aggregate value of the warrants issued in connection with these
financings was recorded as a discount on subordinated notes payable and was
amortized as additional interest expense using the straight-line method over the
period from issuance until August 1999, based on the initially expected
repayment of the debt upon the initial public offering of securities by
Lionbridge.
On August 19, 1999, Lionbridge entered into amendments to the
subordinated debt agreements pursuant to which the 12% senior subordinated
notes were issued. As a result, Lionbridge was required to repay one-half of
the aggregate principal amount of each of the notes, together with all
accrued and unpaid interest thereon, upon the closing of its initial public
offering. The remaining aggregate principal amount of such notes, together
with all accrued and unpaid interest thereon, is required to be repaid upon
the earlier of August 25, 2001 or an underwritten public offering by
Lionbridge subsequent to the initial public offering of securities with
aggregate proceeds of at least $10,000,000. These notes had previously
required that all of the principal amount be paid upon a closing of an
initial public offering of securities with aggregate proceeds of at least
$25,000,000. As of December 31, 1999, $5,981,000 was outstanding under these
subordinated notes.
7. COMMITMENTS:
LEASE COMMITMENTS
The Company leases certain equipment and office space under
noncancelable agreements and leases which expire at various dates through
2026. Future minimum lease payments under noncancelable operating leases at
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
2000....................................................... $1,671,000
2001....................................................... 1,121,000
2002....................................................... 847,000
2002....................................................... 596,000
2004....................................................... 541,000
Thereafter................................................. 4,112,000
---------
$8,888,000
==========
</TABLE>
Total rental expenses charged to operations were $1,443,000, $952,000
and $697,000 in 1999, 1998 and 1997, respectively.
F-12
<PAGE>
8. CAPITAL STOCK:
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of preferred stock
in one or more series, each with such terms and rights as adopted by the Company
in creating such series. No preferred stock was issued or outstanding as of
December 31, 1999.
CONVERSION AND REDEMPTION OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
Upon the closing of the Company's initial public offering of common
stock on August 25, 1999, all 13,271,314 shares and 140 shares of its Series
A convertible preferred stock and Series D nonvoting convertible preferred
stock, respectively, were converted into 132.7145 shares of Series B
redeemable preferred stock and 8,847,649 shares of Series C convertible
preferred stock. The Series B redeemable preferred stock was redeemed for
$100,000 per share plus an 8% annual premium for a total payment of
approximately $16,105,000. At the same time, the Series C convertible
preferred stock was converted into 8,847,649 shares of common stock.
STOCK OPTION PLANS
Lionbridge maintains a stock option plan (the "Plan") for the
issuance of incentive and nonqualified stock options. The initial number of
shares of common stock available for issuance under the Plan was 2,855,365
shares, an amount that was increased to 5,522,032 shares in June 1999.
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. Prior to the Company's initial public offering
of securities, the Board of Directors, in assessing the fair market value of
Lionbridge's common stock, considered 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.
F-13
<PAGE>
Transactions involving the Plan for the period from January 1, 1997 to
December 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- ---------
<S> <C> <C>
Outstanding at January 1, 1997................ 1,501,529 $0.165
Granted....................................... 1,472,555 0.150
Exercised..................................... (375,385) 0.150
Canceled...................................... (382,363) 0.150
---------
Outstanding at December 31, 1997.............. 2,216,336 0.165
Granted....................................... 407,573 0.525
Exercised..................................... (316,662) 0.135
Canceled...................................... (115,025) 0.195
---------
Outstanding at December 31, 1998.............. 2,192,222 0.225
Granted....................................... 925,901 6.069
Exercised..................................... (626,456) 0.188
Canceled...................................... (161,211) 2.691
---------
Outstanding at December 31, 1999.............. 2,330,456 2.385
=========
</TABLE>
Options for 529,960, 421,380 and 0 shares were exercisable at
December 31, 1999, 1998 and 1997, respectively. There were 1,872,274, 636,843
and 263,644 shares available for future grant under the Plan at December 31,
1999, 1998 and 1997, respectively.
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
PRICES
----------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.150 - 0.165 1,217,494 7.1 years $0.160 476,669 $0.160
0.300 168,004 8.1 years 0.300 39,960 0.300
0.450 7,095 8.3 years 0.450 1,059 0.450
0.900 47,423 8.6 years 0.900 10,068 0.900
1.500 - 1.800 482,775 9.2 years 1.520 2,204 1.500
6.000 36,667 9.4 years 6.000 ---
9.750 286,298 9.4 years 9.750 ---
18.000 - 18.310 84,700 9.8 years 18.010 ---
--------------- ---------------
2,330,456 529,960
=============== ===============
</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, 1999, consistent
with the provisions of SFAS No. 123, Lionbridge's net loss for 1999, 1998 and
1997 would have been increased to $18,002,000, $4,283,000 and $7,668,000,
respectively, and the net loss per common share attributable to common
stockholders for 1999, 1998 and 1997 would have been increased to $2.51,
$3.00 and $8.87, respectively. The weighted average fair value of options
granted during 1999, 1998 and 1997 was $3.04, $0.06, and $0.02 per share,
respectively. Stock options granted with an exercise price in the range from
$1.50 through $9.75 per share have an exercise price which exceeded the fair
value of the underlying common stock on the date of grant. The weighted
average fair value of these options, which were all granted in 1999, was
$2.18 per share.
For these pro forma calculations, the fair value of each option
granted prior to the Company's initial public offering of securities on
August 20, 1999 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 5.30%, 5.40% and 6.11% for
1999, 1998 and 1997, respectively, (2) weighted-average expected option life
of 4.0 years, and (3) expected dividend yield of $0. The fair value of
options granted after the initial public offering of securities has been
calculated using the Black-Scholes option pricing model with the same
weighted average assumptions as above for 1999, but with an additional
expected volatility factor of 85%.
EMPLOYEE STOCK PURCHASE PLAN
On June 15, 1999, the Board of Directors adopted the 1999 Employee
Stock Purchase Plan (the "Purchase Plan"), effective upon the consummation of
the Company's initial public offering. The Purchase Plan allows for the issuance
of 1,000,000 shares of Lionbridge's common stock to eligible employees. Under
the Purchase Plan, Lionbridge is authorized to make a series of offerings
F-14
<PAGE>
during which employees may purchase shares of common stock through payroll
deductions made over the term of the offering. The per-share purchase price at
the end of each offering is equal to 85% of the fair market value of the common
stock at the beginning or end of the offering period (as defined by the Purchase
Plan), whichever is lower. The first offering period of the Purchase Plan
commenced on November 1, 1999 and will end on April 30, 2000.
DEFERRED COMPENSATION
During the year ended December 31, 1999, Lionbridge recorded deferred
compensation in connection with options granted at exercise prices below the
then fair market value of Lionbridge's common stock totaling $3,803,000,
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 $730,000 in the year
ended December 31, 1999.
TREASURY STOCK
In connection with the December 23, 1996 financing of Lionbridge,
Stream was granted a put option to sell its 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.
REVERSE STOCK SPLIT
Effective August 13, 1999, the Company's Board of Directors declared a
2-for-3 reverse common stock split. All references in these consolidated
financial statements to shares of common stock have been retroactively adjusted
to reflect this reverse stock split.
9. INCOME TAXES:
The provision for income taxes for the years ended December 31,
1999, 1998 and 1997 is due to taxable income generated in foreign
jurisdictions for which U.S. tax credit utilization is currently uncertain.
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current:
State $ 20,000 $ --- $ ---
Foreign 160,000 52,000 ---
------- -------- ---
Total current provision $180,000 $ 52,000 $ ---
======== ======== ========
Deferred:
Foreign $519,000 $207,000 $112,000
-------- -------- --------
Total deferred provision $519,000 $207,000 $112,000
======== ======== ========
</TABLE>
The benefit from the utilization of net operating loss carryforwards in
Europe during the years ended December 31, 1999, 1998 and 1997 was recorded as a
reduction of goodwill of $519,000, $207,000 and $112,000, 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.
F-15
<PAGE>
The components of the loss before income taxes were as follows for the
years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
United States................................................. $(12,723,000) $(4,636,000) $(6,115,000)
Foreign....................................................... (4,164,000) 633,000 (1,427,000)
----------- ------- -----------
Loss before income taxes...................................... $(16,887,000) $(4,003,000) $(7,542,000)
============= ============ ============
</TABLE>
The consolidated deferred tax assets of the Company were as follows at
December 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
U.S. net operating loss carryforwards......................... $ 4,473,000 $ 1,309,000
Foreign net operating loss carryforwards...................... 3,745,000 1,696,000
Difference in accounting for amortization and depreciation.... 1,243,000 1,113,000
Research and development tax credits.......................... 50,000 --
Other......................................................... 254,000 32,000
Valuation allowance........................................... (9,765,000) (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 not certain that Lionbridge will
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, 1999, Lionbridge had net operating loss
carryforwards for U.S. federal and state income tax purposes of approximately
$11,100,000 which may be used to offset future taxable income, which begin to
expire in 2011. The Company has federal research and development tax credits
which may be used to offset future income tax of approximately $43,000 which
expire in 2019. Additionally, Lionbridge has net operating loss carryforwards
in France of approximately $3,100,000 which begin to expire in 2002; net
operating loss carryforwards in Japan of approximately $1,100,000 which begin
to expire in 2003; and net operating loss carryforwards in The Netherlands of
approximately $6,200,000 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.
10. RESTRUCTURING CHARGES:
During the fourth quarter of 1998, the first quarter of 1998 and the
fourth quarter of 1997, Lionbridge recorded restructuring charges of $50,000,
$451,000 and $541,000, 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 $0, $0 and
$541,000 remaining at December 31, 1999, 1998 and 1997, respectively, in other
accrued expenses in relation to these charges. As of December 31, 1999, none of
these employees remained with Lionbridge and management does not anticipate any
future expenditures related to these actions.
11. EMPLOYEE BENEFIT PLANS:
Lionbridge maintains an employee benefit plan qualified under Section
401(k) of the Internal Revenue Code. All U.S. employees may participate in the
401(k) plan subject to certain eligibility requirements. 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 -- $10,000 in 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, Lionbridge may make
discretionary profit-sharing contributions into the 401(k) plan for all eligible
employees. To date, Lionbridge has made no profit-sharing contributions to the
401(k) plan. In addition, as of December 31, 1999, 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 $294,000,
$350,000 and $154,000 in 1999, 1998 and 1997, respectively.
F-16
<PAGE>
12. SIGNIFICANT CUSTOMERS:
Lionbridge's two largest customers accounted for the following
percentages of total Localization and Testing revenues for the years ended:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Customer A.......................................... 15% 14% 19%
Customer B.......................................... 9% 6% 10%
</TABLE>
13. OPERATING SEGMENT AND GEOGRAPHICAL INFORMATION:
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," requires that public business enterprises report certain
information about operating segments in 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 has determined that its operating segments are those that
are based on its method of internal reporting, which separately presents its
business by the geographic site in which services are performed. Lionbridge has
combined those segments which meet the aggregation criteria of SFAS No. 131 in
determining its reportable segments.
The Company's reportable segments are Localization and Testing. The
Localization segment provides globalization services, including translation,
software localization, internationalization engineering and multilingual
technical publishing, that enable simultaneous worldwide release and ongoing
maintenance of products and related technical support, training materials, and
sales and marketing information in multiple languages. The Testing segment
provides localization and internationalization testing of software, hardware and
telecommunications equipment, as well as logo certification programs. All other
unallocated enterprise costs are reflected in the "Corporate and Other"
category.
F-17
<PAGE>
The table below presents information about the reported net loss of the
Company for the years ended December 31, 1999, 1998 and 1997. For the year ended
December 31, 1997, Lionbridge's only reportable segment was Localization. Asset
information by reportable segment is not reported, since the Company does not
produce such information internally.
<TABLE>
<CAPTION>
CORPORATE AND
LOCALIZATION TESTING OTHER ELIMINATIONS TOTAL
------------ ------- ----- ------------ -----
<S> <C> <C> <C> <C> <C>
1999
External revenue $42,326,000 $ 7,182,000 $ -- $ 49,508,000
=========== =========== ============= =============
Inter-segment revenue $ -- $ 315,000 $ -- $ (315,000) $ --
=========== =========== ============= =============
Depreciation and amortization $ 982,000 $ 402,000 $ 3,367,000 $ 4,751,000
=========== =========== ============= =============
Site contribution $ 7,804,000 $ 1,384,000 $ -- $ 9,188,000
Interest income (expense), income tax
expense and other items of
income (expense) (4,104,000) (1,120,000) (21,550,000) (26,774,000)
----------- ----------- ------------- -------------
Net income (loss) $ 3,700,000 $ 264,000 $ (21,550,000) $ (17,586,000)
=========== =========== ============= =============
1998
External revenue $36,226,000 $ 2,186,000 $ -- $ 38,412,000
=========== =========== ============= =============
Inter-segment revenue $ -- $ 144,000 $ -- $ (144,000) $ --
=========== =========== ============= =============
Depreciation and amortization $ 1,038,000 $ 90,000 $ 2,204,000 $ 3,332,000
=========== =========== ============= =============
Site contribution $ 6,566,000 $ 675,000 $ -- $ 7,241,000
Interest income (expense), income tax
expense and other items of
income (expense) (6,889,000) (346,000) (4,268,000) (11,503,000)
----------- ----------- ------------- -------------
Net income (loss) $ (323,000) $ 329,000 $ (4,268,000) $ (4,262,000)
=========== =========== ============= =============
1997
External revenue $26,462,000 $ -- $ -- $ 26,462,000
=========== =========== ============= =============
Inter-segment revenue $ -- $ -- $ -- $ --
=========== =========== ============= =============
Depreciation and amortization $ 1,148,000 $ -- $ 4,416,000 $ 5,564,000
=========== =========== ============= =============
Site contribution $ 2,888,000 $ -- $ -- $ 2,888,000
Interest income (expense), income tax
expense and other items of
income (expense) (2,496,000) -- (8,046,000) (10,542,000)
----------- ----------- ------------ -------------
Net income (loss) $ 392,000 $ -- $(8,046,000) $ (7,654,000)
=========== =========== ============ =============
</TABLE>
A summary of Lionbridge's operations and other financial information by
geographical region follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net revenues:
United States.................... $12,951,000 $ 4,683,000 $ --
Asia............................. 7,567,000 4,801,000 1,510,000
France........................... 11,571,000 9,094,000 11,070,000
Ireland.......................... 14,398,000 14,296,000 11,157,000
The Netherlands.................. 6,006,000 6,799,000 3,724,000
Eliminations..................... (2,985,000) (1,261,000) (999,000)
----------- ----------- ---------
$49,508,000 $38,412,000 $26,462,000
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Long-lived assets:
United States................... $9,013,000 $7,990,000 $6,776,000
Asia............................ 366,000 320,000 146,000
France.......................... 837,000 207,000 121,000
Ireland......................... 552,000 989,000 595,000
The Netherlands................. 50,000 109,000 108,000
----------- ---------- ----------
$10,818,000 $9,615,000 $7,746,000
=========== ========== ==========
</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, 1999,
1998 and 1997 include goodwill and other intangible assets from acquisitions
of $8,288,000, $7,370,000 and $6,710,000, respectively.
Lionbridge has an agreement with the Irish Industrial Development
Agency regarding financial grants to its Irish subsidiary from this agency.
Under the agreement, the Irish subsidiary may not pay dividends or otherwise
distribute its cash, including any distributions to Lionbridge.
F-18
<PAGE>
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Interest paid............................................. $1,511,000 $648,000 $ 127,000
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
$2,323,000, effective January 2, 1998. In conjunction
with the acquisition, liabilities were assumed as
follows:
Fair value of assets acquired and goodwill.............. $ 3,181,000
Cash paid for capital stock............................. (2,237,000)
Common stock issued..................................... (86,000)
-----------
Liabilities assumed..................................... $ 858,000
===========
Lionbridge purchased all of the outstanding capital stock
of VeriTest, Inc. for $4,354,000, effective January 11,
1999. In conjunction with the acquisition, liabilities
were assumed as follows:
Fair value of assets acquired and goodwill..............$ 5,035,000
Cash paid for capital stock............................. (3,260,000)
Common stock issued..................................... (344,000)
Notes issued............................................ (750,000)
-----------
Liabilities assumed.....................................$ 681,000
===========
</TABLE>
15. 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 YEAR OPERATIONS DEDUCTIONS YEAR
------- ---------- ---------- ----------
<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
December 31, 1999 573,000 280,000 (155,000) 698,000
</TABLE>
16. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:
Diluted net loss per share attributable to common stockholders does not
differ from basic net 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 years presented and are
therefore excluded from the calculation. Preferred stock convertible into 0,
8,847,649 and 8,847,649 shares of common stock, options to purchase 2,330,456,
2,192,222 and 2,216,336 shares of common stock, and warrants to purchase 83,334,
83,334 and 0 shares of common stock, were outstanding as of December 31, 1999,
1998 and 1997, 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.
17. SUBSEQUENT EVENTS:
In January 2000, Lionbridge acquired certain assets and operations
of the Language Services Operation of Nortel Networks Corporation in Montreal
and Ottawa, Canada; Beijing, China; Sao Paulo, Brazil; and Bogota, Columbia for
total initial consideration of approximately $2,476,000. In connection with the
acquisition, Nortel Networks awarded a preferred vendor designation to
Lionbridge as part of a three-year services agreement. The purchase agreement
provides for certain contingent payments to be made by Lionbridge during the
first three years of the agreement, dependent on the level of revenues generated
under the services agreement during those periods. The transaction will be
accounted for using the purchase method of accounting.
F-19
<PAGE>
In January 2000, the Company entered into an agreement to acquire
INT'L.com, Inc., a company based in Framingham, Massachusetts, with operations
in the United States, France, The Netherlands, Germany and China. The
transaction is intended to be a tax-free, stock-for-stock transaction,
accounted for as a pooling of interests. The Company will issue approximately
9,000,000 shares of its common stock in exchange for all of the capital stock
of INT'L.com. The acquisition is expected to be consummated in the second
quarter of 2000.
F-20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
LIONBRIDGE TECHNOLOGIES, INC.
(Registrant)
Date: March 7, 2000
By: /s/ Stephen J. Lifshatz
---------------------------------------
Stephen J. Lifshatz
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Lionbridge Technologies, Inc.,
hereby severally constitute and appoint Stephen J. Lifshatz, our true and lawful
attorney, with full power to him singly, to sign for us and in our names in the
capacities indicated below, any amendments to this Annual Report on Form 10-K,
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 Exchange Act of 1934, as amended, and all the requirements of the
Securities Exchange Commission.
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ RORY J. COWAN President, Chief Executive Officer and Chairman of the March 6, 2000
- ------------------------------- Board (Principal Executive Officer)
Rory J. Cowan
/s/ STEPHEN J. LIFSHATZ Chief Financial Officer, Treasurer and Secretary March 6, 2000
- ------------------------------- (Principal Financial and
Stephen J. Lifshatz Accounting Officer)
/s/ MARCIA J. HOOPER Director March 6, 2000
- -------------------------------
Marcia J. Hooper
/s/ GUY L. DE CHAZAL Director March 6, 2000
- -------------------------------
Guy L. de Chazal
/s/ CLAUDE P.SHEER Director March 6, 2000
- -------------------------------
Claude P. Sheer
/s/ PAUL KAVANAGH Director March 6, 2000
- -------------------------------
Paul Kavanagh
</TABLE>
II-1
<PAGE>
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1999
EXHIBIT NO. EXHIBIT
2.1 Stock Purchase Agreement dated as of January 2, 1998 by and
among Lionbridge, Japanese Language Services, Inc., Carl
J. Kay and Yoko I. Kay (filed as Exhibit 2.1 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
2.2 Stock Purchase Agreement dated as of January 6, 1999 among
VeriTest, Inc., the shareholders of VeriTest listed on the
signature pages thereto and Lionbridge (filed as Exhibit 2.2 to
the Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
3.1, 4.1 Second Amended and Restated Certificate of Incorporation of
Lionbridge (filed as Exhibit 3.2 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
3.2, 4.2 Amended and Restated By-laws of Lionbridge (filed as
Exhibit 3.4 to the Registration Statement on Form S-1
(File No. 333-81233) and incorporated herein by reference).
4.3 Specimen Certificate for shares of Lionbridge's Common Stock
(filed as Exhibit 4.3 to the Registration Statement on Form S-1
(File No. 333-81233) and incorporated herein by reference).
10.1** 1998 Stock Plan (filed as Exhibit 10.1 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
10.2** 1999 Employee Stock Purchase Plan (filed as Exhibit 10.2 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
10.3 Lease dated as of February 13, 1997 between Shorenstein
Management, Inc., as Trustee of SRI Two Realty Trust, and
Lionbridge Technologies, Inc. (filed as Exhibit 10.3 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
10.4** Employment Agreement dated as of December 23, 1996 between
Lionbridge Technologies, Inc. and Rory J. Cowan (filed as
Exhibit 10.4 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.5** Employment Agreement dated as of February 24, 1997 between
Lionbridge Technologies, Inc. and Myriam Martin-Kail (filed as
Exhibit 10.5 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.6** Employment Agreement dated as of February 11, 1997 between
Lionbridge Technologies, Inc. and Stephen J. Lifshatz (filed as
Exhibit 10.6 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.7** Employment Agreement dated as of February 28, 1997 between
Lionbridge Technologies, Inc. and Peter Wright (filed as
Exhibit 10.7 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
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
(filed as Exhibit 10.8 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
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. (filed as Exhibit 10.9 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
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
(filed as Exhibit 10.10 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
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 (filed as Exhibit 10.11 to the Registration Statement on
II-2
<PAGE>
Form S-1 (File No. 333-81233) and incorporated herein by
reference).
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 (filed as
Exhibit 10.12 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
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
(filed as Exhibit 10.13 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
10.14 Letter of Deposit dated as of September 26, 1997 of Lionbridge
Technologies Holdings B.V. and Rory Cowan to Silicon Valley
Bank (filed as Exhibit 10.14 to the Registration Statement on
Form S-1 (File No. 333-81233) and incorporated herein by
reference).
10.15 Security Agreement dated as of September 26, 1997 between
Lionbridge Technologies, Inc. and Silicon Valley Bank (filed as
Exhibit 10.15 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.16 Guarantee dated as of September 26, 1997 made by Lionbridge
Technologies Ireland in favor of Silicon Valley Bank (filed as
Exhibit 10.16 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.17 Debenture dated as of September 26, 1997 between Lionbridge
Technologies Ireland and Silicon Valley Bank (filed as Exhibit
10.17 to the Registration Statement on Form S-1 (File No.
333-81233) and incorporated herein by reference).
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 (filed as
Exhibit 10.18 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
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) (filed as
Exhibit 10.19 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.20 Warrant to Purchase Common Stock of Lionbridge dated as of May
21, 1998 issued to Silicon Valley Bancshares (filed as Exhibit
10.20 to the Registration Statement on Form S-1 (File No.
333-81233) and incorporated herein by reference).
10.21 Pledge Agreement dated as of May 21, 1998 between Lionbridge
and Silicon Valley Bank regarding capital stock of Lionbridge
Technologies California, Inc. (filed as Exhibit 10.21 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
10.22 Pledge Agreement dated as of May 21, 1998 between Lionbridge
and Silicon Valley Bank regarding capital stock of Japanese
Language Services, Inc. (filed as Exhibit 10.22 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
10.23 Amended and Restated Guarantee dated as of May 21, 1998 made by
Lionbridge Technologies, Inc. in favor of Silicon Valley Bank
(filed as Exhibit 10.23 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
10.24 Guarantee dated as of May 21, 1998 made by Japanese Language
Services, Inc. in favor of Silicon Valley Bank (filed as
Exhibit 10.24 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
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. (filed as Exhibit 10.25
to the Registration Statement on Form S-1 (File No. 333-81233)
and incorporated herein by reference).
10.26 Security Agreement dated as of May 21, 1998 between Japanese
Language Services, Inc. and Silicon Valley Bank (filed as
Exhibit 10.26 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.27 Guarantee dated as of May 21, 1998 made by Lionbridge Japan
K.K. in favor of Silicon Valley Bank (filed as Exhibit 10.27 to
the Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
10.28 Guarantee dated as of May 21, 1998 made by Lionbridge
Technologies California, Inc. in favor of Silicon Valley Bank
(filed as Exhibit 10.28 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
10.29 Security Agreement dated as of May 21, 1998 between Lionbridge
Technologies California, Inc. and Silicon Valley Bank (filed as
Exhibit 10.29 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.30 First Demand Guarantee dated as of May 21, 1998 made by
Lionbridge Technologies (France) in favor of Silicon Valley
Bank (filed as Exhibit 10.30 to the Registration Statement on
Form S-1 (File No. 333-81233) and incorporated herein by
reference).
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 (filed as Exhibit 10.31 to the
Registration Statement on Form S-1 (File No. 333-81233) and
incorporated herein by reference).
II-3
<PAGE>
10.32 Lease dated as of January 1, 1998 between Corke Abbey
Investments Limited and Lionbridge Technologies Ireland (filed
as Exhibit 10.36 to the Registration Statement on Form S-1
(File No. 333-81233) and incorporated herein by reference).
10.33 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 (filed as
Exhibit 10.37 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.34 Lease dated as of September 14, 1990 between Corke Abbey
Investments Limited and European Language Translations Limited
(filed as Exhibit 10.38 to the Registration Statement on Form
S-1 (File No. 333-81233) and incorporated herein by reference).
10.35 Agreement dated as of December 4, 1998 between the Industrial
Development Agency (Ireland) and Lionbridge (filed as Exhibit
10.39 to the Registration Statement on Form S-1 (File No.
333-81233) and incorporated herein by reference).
10.36 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 (filed as
Exhibit 10.40 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.37** Form of Non-Competition Agreement as entered into between
Lionbridge and each of Rory J. Cowan, Stephen J. Lifshatz,
and Peter Wright (filed as Exhibit 10.41 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
10.38 Loan Document Modification Agreement Number 4 dated as of July
16, 1999 by and among Lionbridge Technologies Holdings B.V.,
Lionbridge Technologies B.V., Lionbridge America, Inc., and
Silicon Valley Bank (filed as Exhibit 10.43 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
10.39 Senior Subordinated Note Purchase Agreement by and among
Lionbridge, Morgan Stanley Venture Capital Fund II Annex,
L.P. and Morgan Stanley Venture Investors Annex, L.P. dated as
of March 9, 1999 (filed as Exhibit 10.44 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
10.40 Senior Subordinated Note Purchase Agreement by and among
Lionbridge Technologies Holdings B.V., Morgan Stanley Venture
Capital Fund II Annex, L.P. and Morgan Stanley Venture
Investors Annex, L.P. dated as of March 9, 1999 (filed as
Exhibit 10.45 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.41 First Amended and Restated Senior Subordinated Note Purchase
Agreement by and between Lionbridge and Capital Resource
Lenders III, L.P. dated as of February 26, 1999 (filed as
Exhibit 10.46 to the Registration Statement on Form S-1 (File
No. 333-81233) and incorporated herein by reference).
10.42 Senior Subordinated Note Purchase Agreement by and between
Lionbridge Technologies Holdings B.V. and Capital Resource
Lenders III, L.P. dated as of February 26, 1999 (filed as
Exhibit 10.47 to the Registration Statement on Form S-1
(File No. 333-81233) and incorporated herein by reference).
10.43 Form of Senior Subordinated Promissory Notes issued pursuant to
Senior Subordinated Note Purchase Agreements (filed as Exhibit
10.48 to the Registration Statement on Form S-1 (File No.
333-81233) and incorporated herein by reference).
10.44 Letter Agreements amending each of the Senior Subordinated Note
Purchase Agreements (filed as Exhibit 10.49 to the Registration
Statement on Form S-1 (File No. 333-81233) and incorporated
herein by reference).
10.45 Loan Document Modification Agreement Number 5 dated as of
September 20, 1999 by and among Lionbridge Technologies
Holdings B.V., Lionbridge Technologies B.V., Lionbridge
and Silicon Valley Bank (filed as Exhibit 10.1 to the Quarterly
Report on Form 10-Q (File No. 000-26933) for the quarter
ended September 30, 1999 and incorporated herein by reference).
10.46* Loan Document Modification Agreement Number 6 dated as of
December 20, 1999 by and among Lionbridge Technologies
Holdings B.V., Lionbridge Technologies B.V., Lionbridge
and Silicon Valley Bank.
10.47* Amended and Restated Promissory Note dated as of December
20, 1999 payable to Silicon Valley Bank.
10.48* First Amendment to lease dated as of June 29, 1999 between
Bay Colony Corporate Center LLC and Lionbridge.
10.49* Second Amendment to lease dated as of December 10, 1999
between Bay Colony Corporate Center LLC and Lionbridge.
10.50* Agreement and Plan of Reorganization dated January 19, 2000
by and among Lionbridge, LTI Acquisition Corp. and INT'L.com,
Inc.
21.1* Subsidiaries of Lionbridge.
23.1* Consent of PricewaterhouseCoopers LLP.
24.1* Power of Attorney (included in signature page).
27.1* Financial Data Schedule.
* Filed herewith
** Indicates a management contract or any compensatory plan, contract or
arrangement required to be filed as an Exhibit pursuant to Item 14(c).
II-4
<PAGE>
Exhibit 10.46
LOAN DOCUMENT MODIFICATION AGREEMENT
Number 6; dated as of December 20, 1999
LOAN DOCUMENT MODIFICATION AGREEMENT dated as of December 20, 1999 (this
"Agreement") by and among SILICON VALLEY BANK (the "Bank"), a
California-chartered bank with its principal place of business located at 3003
Tasman Drive, Santa Clara, California 95054, and with a loan production office
located at 40 William Street, Wellesley, Massachusetts 02481, doing business
under the name "Silicon Valley East," 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, 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 LIONBRIDGE TECHNOLOGIES, INC., a Delaware company with its
principal place of business located at 950 Winter Street, Suite 2410, Waltham,
Massachusetts 02451 (the "Parent Guarantor").
1. Reference to Existing Loan Documents.
Reference is hereby made to that Loan Agreement dated as of September 26,
1997 among the Bank and the Borrowers, as amended by Loan Documentation
Modification Agreement No. 1 dated as of May 21, 1998, as further amended by
Loan Document Modification Agreement No. 2 dated as of February 25, 1999, Loan
Document Modification Agreement No. 3 dated as of May 20, 1999, Loan Document
Modification Agreement No. 4 dated as of July 16, 1999 and Loan Document
Modification Agreement No. 5 dated as of September 20, 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 "Loan
Agreement") and the Loan Documents referred to therein, including without
limitation that certain Amended and Restated Promissory Note of the Borrowers
dated as of September 20, 1999 in the principal amount of $8,000,000 (the
"Amended Note") and the Security Documents referred to therein, and also
including that certain 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 Loan Agreement.
2. Effective Date.
This Agreement shall become effective as of December 20, 1999 (the
"Effective Date"), provided that the Bank shall have received the following on
or before December 29, 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. an amended and restated promissory note in the form enclosed
herewith (the "Amended Note"), duly executed by the Borrowers;
<PAGE>
-2-
c. the attached consents of affiliated entities who have previously
furnished guaranties in favor of the Bank of the obligations of the Borrowers,
duly executed by officers thereof
d. payment of the Bank's facility fee specified below; and
e. 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 Loan 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 $ 10,000 in order to pay the Bank's
facility fee for the 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 Loan Agreement and the other Loan Documents.
3. Description of Change in Terms.
As of the Effective Date, the Loan Agreement and the Parent Guarantee are
modified in the following respects:
a. Section 1.1 of the Loan Agreement is hereby amended by restating
the definition of "Revolving Maturity Date" in its entirety as follows:
"'Revolving Maturity Date' means March 20, 2000."
b. Section 13(c) of the Parent Guarantee is hereby amended by (i)
decreasing the minimum EBITDA requirement for the fiscal quarter ended December
31, 1999 from ($1,000,000) to ($1,750,000) and (ii) setting the minimum EBITDA
requirement for the fiscal quarter ended March 31, 2000 at ($1,000,000).
c. The Compliance Certificate attached to the Parent Guarantee is
amended by restating in its entirety Exhibit A thereto in the form of Exhibit A
hereto.
d. The Loan 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 (i) "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 (ii) "the Parent
Guarantee," "thereunder," "thereof," "therein" or words of like import referring
to the Parent Guarantee, shall mean and be a reference to the Parent
<PAGE>
-3-
Guarantee, as amended hereby. Except as specifically set forth above, the Loan
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 Loan 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 Loan Agreement, as modified
hereby, or the other Loan Documents, and shall not obligate the Bank to assent
to any further modifications.
5. 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 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>
-4-
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:
---------------------------------------
Andrew H. Tsao
Senior Vice President
SILICON VALLEY BANK
By:
---------------------------------------
Name:
Title:
(signed in Santa Clara, CA)
BORROWERS:
LIONBRIDGE TECHNOLOGIES HOLDINGS B.V.
By: /s/ Rory J. Cowan
---------------------------------------
Rory J. Cowan
Managing Director
LIONBRIDGE TECHNOLOGIES B.V.
By: /s/ Rory J. Cowan
---------------------------------------
Rory J. Cowan
Managing Director
PARENT GUARANTOR:
LIONBRIDGE TECHNOLOGIES, INC.
By: /s/ Rory J. Cowan
---------------------------------------
Rory J. Cowan
Title:
<PAGE>
Exhibit 10.47
FORM OF
AMENDED AND RESTATED PROMISSORY NOTE
$8,000,000 Boston, Massachusetts
As of December 20, 1999
FOR VALUE RECEIVED, the undersigned (the "Borrowers"), jointly and
severally, absolutely and unconditionally promise to pay to the order of Silicon
Valley Bank ("Payee") at the head office of Payee at 3003 Tasman Drive, Santa
Clara, California 95054:
(a) on March 20, 2000, the principal amount of EIGHT MILLION DOLLARS
($8,000,000) or, if less, the aggregate unpaid principal amount of Advances made
by the Payee to the Borrowers pursuant to the Loan Agreement dated as of
September 26, 1997, as amended May 21, 1998, February 25, 1999, May 20, 1999,
September 20, 1999 and December 20, 1999 and as may be further amended or
supplemented from time to time (the "Loan Agreement"), by and among the
Borrowers and the Payee; and
(b) interest on the principal balance hereof from time to time
outstanding from the date hereof through and including the date on which such
principal amount is paid in full, at the times and at the rates provided in the
Loan Agreement.
This Note constitutes an amendment and restatement in its entirety of the
Amended and Restated Promissory Note payable to the Payee in the original
principal amount of $8,000,000 dated September 20, 1999, (the "Preceding Note")
and is in substitution therefor and a replacement thereof. Nothing herein or in
any other document shall be construed to constitute payment of the Preceding
Note or to release or terminate the security interest created by any Security
Documents in favor of the Payee in respect of the obligations of the Borrowers,
thereunder.
This Note evidences borrowings under, is subject to the terms and
conditions of and has been issued by the Borrowers in accordance with the terms
of, the Loan Agreement. The Payee and any holder hereof is entitled to the
benefits and subject to the conditions of the Loan Agreement and may enforce the
agreements of the Borrowers contained therein, and any holder hereof may
exercise the respective remedies provided for thereby or otherwise available in
respect thereof, all in accordance with the respective terms thereof. This Note
is secured by the Security Documents described in the Loan Agreement.
All capitalized terms used in this Note and not otherwise defined herein
shall have the same meanings herein as in the Loan Agreement.
This Note may be prepaid at any time, without premium or penalty, in whole
or in part. Any prepayment of principal shall be accompanied by a payment of
accrued interest in respect of the principal being prepaid.
If any Event of Default shall occur and be continuing, the Payee may
declare any or all obligations or liabilities of the Borrowers to the Payee
(including the unpaid principal hereunder
<PAGE>
and any interest due thereon) immediately due and payable without presentment,
demand, protest or notice.
The Borrowers and every endorser and guarantor of this Note or the
obligation represented hereby waive presentment, demand, notice, protest and all
other demands and notice in connection with the delivery, acceptance,
performance, default or enforcement of this Note, assent to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
This Note 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 hereby submits to the exclusive
jurisdiction of the state and Federal courts located in The Commonwealth of
Massachusetts and in the County of Santa Clara, State of California in
connection with any suit under or in connection with this Note. The Borrowers
irrevocably waive any objection which they may now or hereafter have to the
laying of venue of any such action brought in the courts referred to in the
preceding sentence and irrevocably waive and agree not to plead or claim in any
such action that such action has been brought in an inconvenient forum. THE
BORROWERS 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
BORROWER RECOGNIZES AND AGREES THAT THE FOREGOING WAIVE CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH BORROWER REPRESENTS AND
WARRANTS THAT IS HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
This Note shall be deemed to take effect as a sealed instrument under the
laws of The Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws (without regard to conflicts of laws
rules).
(Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the Borrowers have caused this Note to be signed under
seal by their duly authorized officers as of the day and year first above
written.
BORROWERS:
LIONBRIDGE TECHNOLOGIES
HOLDINGS B.V.
By: /s/ Rory J. Cowan
---------------------------------------
Rory J. Cowan
Managing Director
LIONBRIDGE TECHNOLOGIES B.V.
By: /s/ Rory J. Cowan
---------------------------------------
Rory J. Cowan
Managing Director
<PAGE>
Exhibit 10.48
FIRST AMENDMENT TO LEASE
(Substitution of Premises and Extension of Lease Term)
THIS FIRST AMENDMENT TO LEASE ("Amendment") is executed as of June 29,
1999, between BAY COLONY CORPORATE CENTER LLC ("Landlord"), and LIONBRIDGE
TECHNOLOGIES, INC., a Delaware corporation ("Tenant").
RECITALS
A. Shorenstein Management, Inc., as Trustee of SRI Two Realty Trust, as
landlord, and Tenant, as tenant, entered into a written lease, dated February
13, 1997, pursuant to which Tenant leased from Landlord a portion of the fourth
(4th) floor of the building located at 950 Winter Street, Waltham, Massachusetts
(the "Building"). The lease was modified and supplemented by that certain letter
agreement, dated March 28, 1997, which confirmed the commencement date of the
lease, and that certain letter, dated January 29, 1999, pursuant to which the
address for notices to Landlord under the lease was changed. The lease, as so
modified and supplemented, is hereinafter referred to as the "Lease", and the
premises presently demised under the Lease are referred to herein as the
"Original Premises". The term of the Lease is scheduled to expire on February
28, 2001. Capitalized terms not otherwise defined herein shall have the meanings
given them in the Lease.
B. Landlord and Tenant presently desire to amend the Lease to provide for
(i) the substitution of space on the second (2nd) floor of the Building for the
Original Premises, (ii) the construction by Landlord of certain improvements in
the new premises, (iii) the extension of the expiration date of the Lease to a
date that is approximately thirty-six (36) months from the date of such
substitution of premises, and (iv) certain other provisions agreed to by
Landlord and Tenant.
NOW, THEREFORE, in consideration of the foregoing, Landlord and Tenant
hereby agree as follows:
1. Extension of Lease Term. Effective as of the date hereof, the Lease
term set forth in Paragraph 2.b. of the Lease is extended for an additional
period commencing on March 1, 2001, and ending on the date that is the last day
of the thirty-sixth (36th) full calendar month after the Effective Date (as
defined in Paragraph 2.b. below).
2. Substitution of Premises.
a. Lease of Substitute Premises. From and after the Effective Date
(as defined below), those certain premises located on the second (2nd) floor of
the Building and outlined and labeled "Substitute Premises" on the attached
Exhibit A-1 (the "Substitute Premises") shall be substituted under the Lease for
the Original Premises, and thereupon all references in the Lease to the
"Premises" shall be deemed to refer to the Substitute Premises. The "Effective
Date" shall be the date on which Landlord Substantially Completes (as defined in
Paragraph 3.e. below) the Tenant Improvements (as defined in Paragraph 3.b.ii.
below) to be constructed by Landlord in the Substitute Premises pursuant to
Paragraph 3 below. The Effective Date shall be confirmed by the parties in
writing following Substantial Completion of the Tenant Improvements, as provided
in Paragraph 3 below.
b. Deletion of Original Premises. Notwithstanding the substitution
of the Substitute Premises for the Original Premises, Tenant shall remain liable
for all of Tenant's rental and other obligations under the Lease with regard to
the Original Premises until such time as Tenant actually vacates and surrenders
the Original Premises to Landlord as required by Paragraph 4 below (the
"Surrender Date"); provided, however, that any and all obligations of Tenant
under the Lease that survive the expiration and termination of the Lease shall
survive the deletion of the Original Premises from the Lease with respect to
such obligations accruing prior to the later of such deletion or the Surrender
Date. Subject to the terms of the immediately preceding sentence and to payment
by Tenant of any accrued but unpaid Monthly Rent, Tenant's Electrical Charge,
Additional Rent and any other accrued but unpaid sums under the Lease with
respect to the Original Premises, Tenant shall have no further obligations under
the Lease with respect to the Original Premises from and after the date Tenant
so vacates the Original Premises.
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<PAGE>
3. Improvements to Substitute Premises.
a. Generally. Improvements shall be constructed in the Substitute
Premises by Landlord, through a contractor selected by Landlord (the
"Contractor"), pursuant to this Paragraph 3. Except as specifically provided in
this Paragraph 3, Tenant shall accept the Substitute Premises in their "as is"
condition, and Landlord shall have no obligation to make or pay for any
improvements or renovations in or to the Substitute Premises to prepare such
space for Tenant's occupancy, except as specifically provided in this Paragraph
3.
b. Plans.
i. Promptly after execution of this Amendment by Landlord and
Tenant, Tenant shall furnish to Landlord for Landlord's review and approval
plans indicating the proposed location of walls and partitions in the Substitute
Premises or other conceptual or space plans of the improvements Tenant desires
in the Substitute Premises, together with such other plans and specifications as
are then available with respect to such improvements (the "Space Plans"),
prepared by an architect reasonably acceptable to Landlord ("Tenant's
Architect"). The Space Plans shall (A) show the general layout of all of the
improvements which Tenant desires to be constructed in the Substitute Premises,
and all such improvements shall comply with all applicable building codes and
other Legal Requirements (as defined in Paragraph 7.a.(16) of the Lease), (B)
include all applicable telephone and cable requirements, drywall, finish
specifications and special requirements, (C) separately note any proposed
structural work or extraordinary or supplemental electrical, plumbing or HVAC
requirements, and (D) contain such detail and specifications as would permit a
general contractor to obtain preliminary estimates of the cost of performing all
work shown thereon. The Space Plans and improvements shown thereon shall also
comply with the "Tenant Construction Standards" and "Conditions for
Construction" applicable to the Building (collectively, the "Building
Construction Standards"). The Space Plans shall identify any "long-lead"
materials (as described in Paragraph 3.f. below) then known by Tenant or
Tenant's Architect. Landlord shall respond to the Space Plans within ten (10)
days of its receipt thereof. Tenant shall respond promptly to any objections of
Landlord to the Space Plans and shall resubmit appropriately revised Space Plans
prepared by Tenant's Architect within five (5) days after Tenant's receipt of
Landlord's objections. The Space Plans, as finally approved in writing by
Landlord, shall be referred to herein as the "Final Space Plans."
ii. Final Plans. As soon as available following approval of
the Final Space Plans Tenant shall furnish to Landlord for Landlord's written
approval working plans and specifications (the "Working Drawings") prepared by
Tenant's Architect for all of the improvements which Tenant desires to be
constructed in the Substitute Premises. The Working Drawings shall show
improvements that conform to the Final Space Plans and the Building Construction
Standards, shall separately note any proposed structural work or extraordinary
or supplemental electrical, plumbing or HVAC requirements, and shall be in
sufficient detail as to enable the general contractor for the work to obtain all
necessary governmental permits for construction of all of the improvements and
to secure complete bids from qualified contractors to perform the work for all
of the improvements to be constructed in the Substitute Premises. Landlord shall
respond to the Working Drawings within ten (10) days of its receipt thereof.
Tenant shall respond promptly to any reasonable objections of Landlord to the
Working Drawings and shall resubmit appropriately revised Working Drawings
prepared by Tenant's Architect within five (5) days of Tenant's receipt of
Landlord's objections, and such resubmitted plans shall clearly indicate which
portions of the plans are revised and which portions of the plan remain
unchanged from the previously submitted plans. (The Working Drawings, as
approved in writing by Landlord, as revised by Tenant from time to time with
Landlord's written approval in accordance with the following provisions of this
Paragraph 3, are hereinafter called the "Final Plans", the improvements to be
performed in the Substitute Premises in accordance with the Final Plans are
hereinafter called the "Tenant Improvements". Tenant shall be responsible for
causing the Working Drawings to be completed (including Landlord's review and
approval, and Tenant's Architect's revisions of the Working Drawings, according
to the procedure and schedule set forth above) no later than June 15, 1999.
iii. Cooperation; No Release. Landlord and Tenant shall
cooperate with each other to resolve any space planning or other issues that are
raised by applicable local, state or federal building codes during the planning,
permit or construction process. Notwithstanding anything to the contrary
contained herein, Landlord's approval of any item reviewed by Landlord under
this Paragraph 3 shall merely indicate Landlord's consent to the proposed work
shown thereon, and in no event shall such consent by Landlord be deemed to
constitute a representation by Landlord that the work called for therein
complies with applicable building codes or other Legal Requirements nor shall
such consent release Tenant from Tenant's obligations to supply Space Plans,
Working Drawings and Final Plans that do so conform to applicable building codes
and Legal Requirements.
c. Preparation of Budget and Revisions of Final Plans. Upon approval
of the Final Plans, the Contractor shall prepare a budget for the Tenant
Improvements and shall submit the same to Tenant. If Tenant disapproves of the
budget, then within three (3) days or Tenant's receipt thereof, Tenant shall so
notify Landlord and the Final Plans shall promptly be modified by the Architect,
in order to
2
<PAGE>
satisfactorily reduce the cost of the work as shown on the budget. Any and all
revisions to the Final Plans shall be subject to Landlord's approval and at
Tenant's cost. Upon such revision of the Final Plans, Landlord shall cause the
Contractor to promptly prepare and submit to Tenant a revised estimated budget.
Tenant shall respond to the revised estimated budget in the manner described
above. Any delay in Substantial Completion (as defined in Paragraph 3.d. below)
of the Tenant improvements resulting from any revision to the Final Plans or the
budget shall constitute a Tenant Delay as defined in Paragraph 3.f. below. If
Tenant fails to raise any objections to the budget within the period described
above, Tenant shall be deemed to have approved the proposed budget.
d. Changes. If Tenant shall desire any change, addition or
alteration in or to the Final Plans ("Change"), Tenant shall request that the
Architect prepare Working Drawings incorporating the requested Change; provided,
however, that Landlord reserves the right to reasonably disapprove any proposed
Change. If Landlord approves any proposed Change, Landlord shall give Tenant the
estimated cost of the Change and the estimated delay, if any, in Substantial
Completion of the Tenant Improvements, which will be caused by the Change.
Landlord will use reasonable care in preparing the estimates, but they shall be
estimates only and will not limit Tenant's obligation to pay for the actual cost
of the Change or be responsible for the delay resulting therefrom. Within two
(2) days after receipt of such cost and delay estimates, 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 the Allowance (as defined in
Paragraph 3.g. 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. If the Change causes a delay in Substantial
Completion of the Tenant Improvements, Tenant's obligation to pay rent for the
Substitute Premises shall be accelerated as provided in Paragraph 3.f. below.
Within two (2) days after receipt of such cost and delay estimates, Tenant shall
notify Landlord in writing whether Tenant approves the Change. If Tenant fails
to approve the Change within such two (2) day period, construction of the Tenant
Improvements shall proceed as provided in accordance with the Final Plans as
they existed prior to the requested Change.
e. Construction; Substantial Completion. Upon Tenant's approval of
the budget, Landlord shall cause the Contractor to promptly commence and
diligently pursue to completion construction of the Tenant Improvements. The
Contractor will provide ordinary power wiring to locations shown on the Final
Plans and shall provide and cause to be installed conduits to above ceiling line
from wall or floor outlets for Tenant's telephone and computer systems as shown
on the Final Plans, but shall in no event provide, install, pull or hook up such
wires, supply jacks or plugs or provide wiring necessary for special conditioned
power to the Substitute Premises. "Substantial Completion" of the Tenant
Improvements shall be deemed to have occurred when they have been completed
pursuant to the Final Plans, subject only to the completion or correction of
Landlord's Punch List Items. Punch List Items shall mean incomplete or defective
work or materials in the improvements called for in the Final Plans which do not
materially impair Tenant's use of the Substitute Premises for the conduct of
Tenant's business therein.
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<PAGE>
f. Tenant Delays. If the Effective Date is delayed as a result of
(i) the failure of Tenant to submit Space Plans, Working Drawings or Final Plans
to Landlord by the dates or within the time periods set forth in Paragraph 3.b.
above, (ii) any Changes requested by Tenant in the Tenant Improvements shown on
the Final Plans (including any cost or delay resulting from proposed changes
that are not ultimately made), (iii) 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), (iv) the
inclusion in the Tenant Improvements of any so-called "long lead" materials
(such as fabrics, panellings, tiling, carpeting, light fixtures, HVAC equipment
or other items that must be imported or are of unusual character or limited
availability), (v) any delay by Tenant in 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 (vi) any other delay
requested or caused by Tenant, then the date of commencement of Tenant's
obligation to pay rent for the Substitute Premises, as set forth in Paragraphs 5
and 6 below, shall be accelerated by the number of days of such delay. In no
event shall Landlord be liable to Tenant for any delay in completion of the
Tenant Improvements shown on the Final Plans caused or occasioned by strikes,
lockouts, labor disputes, shortages of material or labor, fire or other
casualty, acts of God or any other cause.
g. Cost of Tenant Improvements. Landlord shall bear the entire cost
of Landlord's Work, as provided in Paragraph 3.h. below. Further, Landlord shall
bear the cost of construction of the Tenant Improvements (including
architectural and design costs and the Contractor's fees, and Landlord's
supervision fee of five percent (5%) of the total coat of construction), limited
however to a maximum expenditure by Landlord for the Tenant Improvements of
Seventy Eight Thousand Seven Hundred Ninety Dollars ($78,790.00) (the
"Allowance"). Tenant shall pay for all costs of the design and construction of
the Tenant Improvements which are in excess of the Allowance (collectively, the
"Excess Cost"), which Excess Cost shall be paid by Tenant to Landlord, within
twenty (20) days of written demand, which demand may be for payment in advance
or in course-of-construction installments. No portion of the Allowance may be
applied to the purchase of signage, trade fixtures, equipment, furniture,
consultants' fees, free rent or any other costs other than design and
construction costs due under the terms of this Amendment.
h. Landlord's Work. Landlord shall bear the entire cost of (i)
demising the Substitute Premises, (ii) demolishing the existing demising wall
between the eastern and western sections of the Substitute Premises, (iii)
demolishing those interior walls in the western section of the Substitute
Premises as indicated on the Final Plans, and (iv) supplying and installing (in
locations designated by Tenant and approved by Landlord) the dishwasher, sink
and cabinets presently located in the kitchen area of the premises located to
the immediate north of the Substitute Premises. The foregoing is collectively
referred to herein as "Landlord's Work." In no event shall Landlord be liable to
Tenant for any delay in completion of any of Landlord's Work occasioned by
strikes, lockouts, labor disputes, shortages of material or labor, fire or other
casualty, acts of God or other causes.
4. Surrender of Original Premises. Tenant shall surrender the Original
Premises to Landlord within ten (10) business days after the date on which the
Tenant Improvements in the Substitute Premises have been Substantially
Completed. The Original Premises shall be surrendered by Tenant in the condition
required by Paragraph 20.a. of the Lease. All costs of moving Tenant's
furnishings and equipment (including relocation and/or installation of voice and
data cabling) out of the Original Premises and into the Substitute Premises
shall be borne by Tenant.
5. Monthly Rent for Substitute Premises. To reflect the lease of the
Substitute Premises, effective as of the Effective Date, Monthly Rent under
Paragraphs 2.c. and 5 of the Lease shall be payable for the Substitute Premises
in the amount of Twenty One Thousand Ten and 67/100 Dollars ($21,010.67) per
month.
6. Tenant's Share. Base Year, Base Tax Year, and Tenant's Electrical
Charge for Substitute Premises. To reflect the lease of the Substitute Premises,
effective as of the Effective Date: (a) the Tenant's Share set forth in
Paragraph 2.e. of the Lease shall be 2.87%, (b) the Base Year set forth in
Paragraph 2.f. of the Lease shall be calendar year 1999, (c) the Base Tax Year
set forth in Paragraph 2.f, of the Lease shall be the fiscal tax year ending
June 30, 2000, and (d) the Tenant's Electrical Charge set forth in Paragraph
2.i. of the Lease shall be Six Hundred Twenty-Three and 75/100 Dollars ($623.75)
per month.
7. Retention of Existing Security Deposit. To reflect the lease of the
Substitute Premises, effective as of the date hereof, the final grammatical
paragraph of Paragraph 6 of the Lease, regarding Landlord's return of a portion
of the Security Deposit required under Paragraph 2.d. of the Lease after the
first anniversary of the Commencement Date of the Lease, shall be deleted.
8. Real Estate Brokers. Tenant represents and warrants that it has
negotiated this Amendment directly with Shorenstein Management, Inc., 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 Amendment. Tenant shall indemnify, defend and hold Landlord harmless from
and against any and all Claims by any real estate broker or salesman other than
Shorenstein Management, Inc.
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<PAGE>
for a commission, finder's fee or other compensation as a result of Tenant's
entering into this Amendment.
9. Lease in Full Force and Effect. Except as provided above, the Lease is
unmodified hereby and remains in full force and effect.
10. Authority. If Tenant is a corporation, partnership, trust, association
or other entity, Tenant and each person executing this Amendment 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 Amendment and to perform all Tenant's
obligations under the Lease, as amended by this Amendment, and (d) each person
(and all of the persons if more than one signs) signing this Amendment on behalf
of Tenant is duly and validly authorized to do so.
5
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11. No Offer. Submission of this instrument for examination and signature
by Tenant does not constitute an offer to lease or to amend the Lease, or an
reservation of or option for lease or to amend the Lease, and is not effective
as a lease amendment or otherwise until execution and delivery by both Landlord
and Tenant.
IN WITNESS WHEREOF, the parties hereto have executed this document as of
the date and year first above written.
Landlord: Tenant:
BAY COLONY CORPORATE CENTER LLC, LIONBRIDGE TECHNOLOGIES, INC.
a Delaware limited liability company a Delaware corporation
By Shorenstein Realty Investors Two, L.P,. By: /s/ Stephen Lifshatz
a California limited partnership, -------------------------
Member Name: Stephen Lifshatz
------------------------
By SRI Investors Two, L.P., Title: CFO
a California limited partnership, -----------------------
General Partner
By Shorenstein Company, L.P., a
California limited partnership,
General Partner
By Shorenstein Management, Inc., a
California corporation,
General Partner
By __________________________________
Douglas W. Shorenstein
President
6
<PAGE>
Exhibit 10.49
SECOND AMENDMENT TO LEASE
(Adding Additional Premises)
THIS SECOND AMENDMENT TO LEASE ("Amendment") is executed as of
December 10, 1999, between BAY COLONY CORPORATE CENTER LLC, a Delaware limited
liability company ("Landlord"), and LIONBRIDGE TECHNOLOGIES, INC., a Delaware
corporation ("Tenant").
RECITALS
A. Shorenstein Management, Inc., as Trustee of SRI Two Realty Trust,
as landlord, and Tenant, as tenant, entered into a written lease, dated February
13, 1997, pursuant to which Tenant leased from Landlord a portion of the fourth
(4th) floor of the building located at 950 Winter Street, Waltham, Massachusetts
(the "Building"). The lease was modified and supplemented by that certain letter
agreement, dated March 28, 1997, which confirmed the commencement date of the
lease, and that certain letter, dated January 29, 1999, pursuant to which the
address for notices to Landlord under the lease was changed, and was amended by
a First Amendment to Lease between Landlord and Tenant dated June 29, 1999,
pursuant to which certain premises on the second (2nd) floor of the Building
were substituted for the premises originally covered by the lease and the term
of the lease was extended. The lease, as so modified, supplemented and amended,
is hereinafter referred to as the "Lease". The term of the Lease is scheduled to
expire on August 31, 2002. Capitalized terms not otherwise defined herein shall
have the meanings given them in the Lease.
B. Landlord and Tenant presently desire to amend the Lease to
provide for the leasing by Tenant of additional space on the second (2nd) floor
of the Building upon and subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the parties
hereto agree as follows:
1. Additional Premises. The space located on the second (2nd) floor
of the Building and outlined on attached Exhibit A (the "Additional Premises")
shall be added to the Premises covered by the Lease effective as of the date on
which the Additional Premises are delivered to Tenant in their "as is" condition
(the "Additional Premises Commencement Date"), and continuing through the
expiration of the Lease term. Notwithstanding the foregoing, if for any reason
Landlord is delayed in delivering the Additional Premises to Tenant, then
neither this Amendment or the Lease shall not be void or voidable, nor shall
Landlord be liable to Tenant for any loss or damage resulting therefrom.
2. Additional Premises As-Is. Tenant shall accept the Additional
Premises in their "as-is" condition, and, notwithstanding any provision of the
Lease to the contrary, Landlord shall have no obligation to make or pay for any
improvements or renovations in or to the Additional Premises or to otherwise
prepare the Additional Premises for Tenant's occupancy.
3. Monthly Rent for Additional Premises. To reflect the lease by
Tenant of the Additional Premises, effective as of the Additional Premises
Commencement Date, Tenant shall pay Monthly Rent under Paragraphs 2.c. and 5 of
the Lease with respect to the Additional Premises in the amount of $2,711.50 per
month.
4. Tenant's Share, Base Year, Base Tax Year, and Tenant's Electrical
Charge for Additional Premises. To reflect the lease of the Additional Premises,
effective as of the Additional Premises Commencement Date, Tenant shall pay
Tenant's Share of increases of Operating Expenses and Tax Expenses under
Paragraph 7 of the Lease with respect to the Additional Premises, as to which:
(a) the Tenant's Share set forth in Paragraph 2.e. of the Lease shall be 0.41%,
(b) the Base Year set forth in Paragraph 2.f. of the Lease shall be calendar
year 1999, (c) the Base Tax Year set forth in Paragraph 2.f. of the Lease shall
be the fiscal tax year ending June 30, 1999, and (d) the Tenant's Electrical
Charge set forth in Paragraph 2.i. of the Lease shall be Eighty-Eight and 83/100
Dollars ($88.83) per month.
5. Real Estate Brokers. Tenant represents and warrants that it has
negotiated this Amendment directly with Shorenstein Realty Services, L.P., 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 Amendment. Tenant shall indemnify, defend and hold Landlord harmless
from and against any and all Claims by any real estate broker or salesman other
than Shorenstein Realty Services, L.P. for a commission, finder's fee or other
compensation as a result of Tenant's entering into this Amendment.
6. Authority. If Tenant is a corporation, partnership, trust,
association or other entity, Tenant and each person executing this Amendment 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
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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 Amendment and to perform all Tenant's
obligations under the Lease, as amended by this Amendment, and (d) each person
(and all of the persons if more than one signs) signing this Amendment on behalf
of Tenant is duly and validly authorized to do so..
7. No Offer. Submission of this instrument for examination and
signature by Tenant does not constitute an offer to lease or to amend the Lease,
or an reservation of or option for lease or to amend the Lease, and is not
effective as a lease amendment or otherwise until execution and delivery by both
Landlord and Tenant.
8. Lease in Full Force and Effect. Except as provided above, the
Lease is unmodified hereby and remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this document
as of the date and year first above written.
Landlord: Tenant:
BAY COLONY CORPORATE CENTER LLC, LIONBRIDGE TECHNOLOGIES, INC.
a Delaware limited liability company a Delaware corporation
By Shorenstein Realty Investors Two, L.P,. By: /s/ Stephen Lifshatz
a California limited partnership, -------------------------
Member Name: Stephen Lifshatz
------------------------
By SRI Investors Two, L.P., Title: CFO
a California limited partnership, -----------------------
General Partner
By Shorenstein Company, L.P., a
California limited partnership,
General Partner
By Shorenstein Management, Inc., a
California corporation,
General Partner
By /s/ Eric Yopes
--------------------------
Eric Yopes
Vice Chairman, Investments
2
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Exhibit 10.50
LIONBRIDGE TECHNOLOGIES, INC.,
LTI ACQUISITION CORP.
AND
INT'L.COM, INC.
AGREEMENT AND PLAN OF REORGANIZATION
Dated as of January 19, 2000
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<TABLE>
TABLE OF CONTENTS
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ARTICLE I. THE MERGER...............................................................................................1
1.1 The Merger....................................................................................................1
1.2 Effects of the Merger.........................................................................................1
1.3 Closing.......................................................................................................1
1.4 Approval by the Stockholders of INT'L.com.....................................................................2
1.5 Approval by the Stockholders of Parent........................................................................2
ARTICLE II. CONVERSION AND EXCHANGE OF SHARES; DISSENTING SHARES....................................................2
2.1 Conversion of Shares of INT'L.com Stock.......................................................................2
2.2 Escrow Shares.................................................................................................5
2.3 Dissenting Shares.............................................................................................6
2.4 Delivery of Evidence of Ownership.............................................................................6
2.5 No Further Ownership Rights in INT'L.com Stock................................................................7
2.6 No Fractional Shares..........................................................................................7
2.7 Assumption of Stock Options...................................................................................7
2.8 Notes.........................................................................................................8
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF INT'L.COM............................................................8
3.1 Organization, Standing and Power; Subsidiaries................................................................8
3.2 Capital Structure.............................................................................................9
3.3 Authority....................................................................................................10
3.4 Compliance with Laws and Other Instruments; Non-Contravention................................................11
3.5 Technology and Intellectual Property Rights..................................................................12
3.6 Financial Statements; Business Information...................................................................14
3.7 Taxes........................................................................................................15
3.8 Absence of Certain Changes and Events........................................................................16
3.9 Leases in Effect.............................................................................................18
3.10 Personal Property; Real Estate................................................................................18
3.11 Certain Transactions..........................................................................................19
3.12 Litigation and Other Proceedings..............................................................................19
3.13 No Defaults...................................................................................................20
3.14 Major Contracts...............................................................................................20
3.15 Material Reductions...........................................................................................21
3.16 Insurance and Banking Facilities..............................................................................21
3.17 Employees.....................................................................................................21
3.18 Employee Benefit Plans........................................................................................22
3.19 Certain Agreements............................................................................................23
3.20 Guarantees and Suretyships....................................................................................23
3.21 Brokers and Finders...........................................................................................24
3.22 Certain Payments..............................................................................................24
3.23 Environmental Matters.........................................................................................24
3.24 Enforceability of Contracts, etc..............................................................................24
3.25 Accounting Matters............................................................................................25
3.26 Year 2000.....................................................................................................25
3.27 Disclosure....................................................................................................25
3.28 Reliance......................................................................................................25
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................................................26
4.1 Organization and Qualification...............................................................................26
4.2 Capitalization...............................................................................................26
4.3 Authority Relative to this Agreement.........................................................................27
4.4 Non-Contravention............................................................................................27
</TABLE>
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4.5 Reports and Financial Statements.............................................................................27
4.6 Validity of Parent Merger Shares.............................................................................28
4.7 Consents and Approvals of Governmental Authorities...........................................................28
4.8 Absence of Certain Changes or Events.........................................................................28
4.9 Litigation and Other Proceedings.............................................................................29
4.10 Disclosure....................................................................................................29
4.11 Reliance......................................................................................................29
4.12 Brokers and Finders...........................................................................................29
4.13 Accounting Matters............................................................................................29
ARTICLE V. COVENANTS OF INT'L.COM..................................................................................29
5.1 Conduct of Business in Ordinary Course.......................................................................29
5.2 Dividends, Issuance of, or Changes in Securities.............................................................30
5.3 Governing Documents..........................................................................................31
5.4 No Acquisitions..............................................................................................31
5.5 No Dispositions..............................................................................................31
5.6 Indebtedness.................................................................................................31
5.7 Compensation.................................................................................................31
5.8 Claims.......................................................................................................31
5.9 Access to Properties and Records.............................................................................31
5.10 Breach of Representations and Warranties......................................................................32
5.11 Consents......................................................................................................32
5.12 Tax Returns...................................................................................................32
5.13 Exclusivity; Acquisition Proposals............................................................................32
5.14 Notice of Events..............................................................................................33
5.15 Reasonable Best Efforts.......................................................................................33
5.16 Insurance.....................................................................................................33
5.17 Financial Statements..........................................................................................33
ARTICLE VI. COVENANTS OF PARENT....................................................................................34
6.1 Breach of Representations and Warranties.....................................................................34
6.2 Additional Information; Access...............................................................................34
6.3 Consents.....................................................................................................34
6.4 Reasonable Best Efforts......................................................................................34
6.5 Officers and Directors.......................................................................................34
6.6 Nasdaq National Market Listing...............................................................................35
6.7 Notice of Events.............................................................................................35
6.8 Third Party Beneficiaries....................................................................................35
ARTICLE VII. ADDITIONAL AGREEMENTS.................................................................................35
7.1 Preparation of the Form S-4 and the Proxy Statement; Stockholders Meeting.....................................35
7.2 Legal Conditions to the Merger...............................................................................38
7.3 Employee Benefits............................................................................................38
7.4 Expenses.....................................................................................................38
7.5 Additional Agreements........................................................................................38
7.6 Public Announcements.........................................................................................39
7.7 Confidentiality..............................................................................................39
7.8 Pooling......................................................................................................39
7.9 INT'L.com Voting Agreement...................................................................................40
7.10 Parent Voting Agreement.......................................................................................40
7.11 Hart-Scott-Rodino Filing......................................................................................40
7.12 Board of Directors Meetings...................................................................................40
7.13 Employment and Noncompetition Agreements......................................................................41
7.14 INT'L.com Conversion........................................................................................41
ARTICLE VIII. CONDITIONS PRECEDENT.................................................................................41
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8.1 Conditions to Each Party's Obligation to Effect the Merger...................................................41
8.2 Conditions of Obligations of Parent and Merger Sub...........................................................42
8.3 Conditions of Obligation of INT'L.com........................................................................44
ARTICLE IX. INDEMNIFICATION........................................................................................46
9.1 Indemnification Relating to Agreement........................................................................46
9.2 Third Party Claims...........................................................................................46
9.3 Limitations..................................................................................................47
9.4 Binding Effect...............................................................................................47
9.5 Time Limit...................................................................................................47
9.6 Sole Remedy..................................................................................................48
ARTICLE X. TERMINATION.............................................................................................48
10.1 Mutual Agreement..............................................................................................48
10.2 Termination by Parent.........................................................................................48
10.3 Termination by INT'L.com......................................................................................48
10.4 Outside Date..................................................................................................49
10.5 Effect of Termination.........................................................................................49
ARTICLE XI. MISCELLANEOUS..........................................................................................49
11.1 Entire Agreement.............................................................................................49
11.2 Governing Law; Consent to Jurisdiction.......................................................................49
11.3 Notices......................................................................................................50
11.4 Severability.................................................................................................51
11.5 Survival of Representations and Warranties...................................................................51
11.6 Assignment...................................................................................................51
11.7 Counterparts.................................................................................................52
11.8 Amendment....................................................................................................52
11.9 Extension, Waiver............................................................................................52
11.10 Interpretation................................................................................................52
11.11 Knowledge.....................................................................................................52
11.12 Transfer, Sales, Documentary, Stamp and Other Similar Taxes...................................................52
</TABLE>
EXHIBITS
EXHIBIT 1.1 -- Merger Documents
EXHIBIT 2.2 -- Escrow Agreement Exhibit 2.4 -- Letter of Transmittal
EXHIBIT 7.1 -- Registration Rights Agreement
EXHIBIT 7.8(b) -- INT'L.com Affiliate Agreement
EXHIBIT 7.8(c) -- Parent Affiliate Agreement
EXHIBIT 7.9 -- INT'L.com Voting Agreement
EXHIBIT 7.10 -- Parent Voting Agreement
Exhibit 7.14 -- Conversion Notice
EXHIBIT 8.2 -- Opinion of Neal, Gerber & Eisenberg
EXHIBIT 8.3 -- Opinion of Testa, Hurwitz & Thibeault, LLP
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of January 19, 2000
(this "AGREEMENT"), by and among Lionbridge Technologies, Inc., a Delaware
corporation ("PARENT"); LTI Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"); and INT'L.com, Inc., a
Delaware corporation ("INT'L.COM").
Intending to be legally bound, and in consideration of the mutual
representations, warranties, covenants and agreements contained herein, Parent,
Merger Sub and INT'L.com agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions hereof, and in
accordance with the Delaware General Corporation Law (the "DGCL"), Merger Sub
will be merged with and into INT'L.com (the "MERGER"). A Certificate of Merger
and any other required documents (collectively, the "MERGER DOCUMENTS"),
substantially in the form attached as EXHIBIT 1.1, will be duly prepared,
executed and acknowledged by INT'L.com and Merger Sub and thereafter delivered
to the Secretary of State of Delaware for filing in accordance with the DGCL
contemporaneously with the Closing (as defined in Section 1.3). The Merger will
become effective at such time as the Merger Documents have been filed with the
Secretary of State of Delaware (the "EFFECTIVE TIME"). Following the Merger,
INT'L.com will continue as the surviving corporation of the Merger (the
"SURVIVING CORPORATION") under the laws of the State of Delaware, and the
separate corporate existence of Merger Sub will cease.
1.2 EFFECTS OF THE MERGER. At and after the Effective Time, (i) the
Merger will have all of the effects provided by the Certificate of Merger and
applicable law, (ii) the Certificate of Incorporation of INT'L.com will be
amended in the form attached as APPENDIX A to EXHIBIT 1.1 until duly further
amended, (iii) the bylaws of Merger Sub will be the bylaws of the Surviving
Corporation until duly amended, (iv) the directors of Merger Sub will be the
directors of the Surviving Corporation, to hold office in accordance with the
bylaws of the Surviving Corporation, (v) the officers of INT'L.com will be the
officers of the Surviving Corporation, to hold office in accordance with the
bylaws of the Surviving Corporation and (vi) the issued and outstanding
certificates for the capital stock of Merger Sub will be the issued and
outstanding certificates initially representing all of the issued capital stock
of the Surviving Corporation. The Merger is intended to be a reorganization
within the meaning of Section 368(a)(2)(E) of the Internal Revenue Code of 1986,
as amended (the "CODE"), and this Agreement is intended to constitute a "plan of
reorganization" within the meaning of the regulations promulgated under Section
368 of the Code.
1.3 CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") will take place as soon as practicable (but no more
than three (3) business days) after satisfaction or waiver of the last to be
fulfilled of the conditions set forth in Article VIII that by their terms are
not to occur at the Closing (the "CLOSING DATE"), but in no event later than
June 30, 2000, at the offices of Testa, Hurwitz & Thibeault, LLP in Boston,
Massachusetts, unless another date or place is agreed to in writing by Parent
and INT'L.com. If all of the conditions set forth in Article VIII hereof are
determined to be satisfied (or duly waived) at the Closing, concurrently with
the Closing the parties hereto will cause the Merger to be consummated by the
filing of the Merger Documents with the Secretary of State of Delaware. The
Closing will be deemed to have concluded at the Effective Time.
1.4 APPROVAL BY THE STOCKHOLDERS OF INT'L.COM. INT'L.com will take all
action necessary in accordance with the DGCL, its Charter Documents (as defined
below) and any agreements to which it is a party to solicit the approval of this
Agreement, the Merger and all of the transactions contemplated hereby by all
stockholders of INT'L.com by means of a duly convened meeting of stockholders.
INT'L.com will use its reasonable best efforts to obtain such stockholder
approval. INT'L.com represents
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and warrants that its Board of Directors has duly (i) approved the Merger in
accordance with the DGCL and (ii) resolved to recommend to the stockholders of
INT'L.com that they approve this Agreement, the Merger and all of the
transactions contemplated hereby.
1.5 APPROVAL BY THE STOCKHOLDERS OF PARENT. Parent will take all action
necessary to obtain the approval of the issuance of its shares in connection
with the Merger by the stockholders of Parent by means of a duly convened
meeting of the stockholders of Parent, as required by the rules of the Nasdaq
Stock Market, in accordance with the applicable requirements of the DGCL, its
Charter Documents and any agreements to which it is a party. Parent will use its
reasonable best efforts to obtain such stockholder approval. Parent represents
and warrants that its Board of Directors has duly (i) approved the Merger in
accordance with the DGCL and (ii) resolved to recommend to the stockholders of
Parent that they approve the issuance of its shares in connection with the
Merger.
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES; DISSENTING SHARES
2.1 CONVERSION OF SHARES OF INT'L.COM STOCK. (a) Subject, without
limitation, to the provisions of Section 2.3 hereof, at the Effective Time, all
of (i) the shares of Series A common stock, $0.01 par value per share, of
INT'L.com ("INT'L.COM SERIES A COMMON STOCK"), Series B common stock, $0.01 par
value per share, of INT'L.com ("INT'L.COM SERIES B COMMON STOCK" and along with
the Int'l Series A Common Stock, the "INT'L.COM COMMON STOCK"), Series A
preferred stock, $0.01 par value per share, of INT'L.com ("INT'L.COM SERIES A
PREFERRED Stock"), and Series B preferred stock, $0.01 par value per share, of
INT'L.com ("INT'L.COM SERIES B PREFERRED Stock" and along with the INT'L.com
Series A Common Stock, the INT'L.com Series B Common Stock and the INT'L.com
Series A Preferred Stock, "INT'L.COM CAPITAL STOCK") issued and outstanding
immediately prior to the Effective Time excluding any INT'L.com Capital Stock
held by Parent or Merger Sub or any other subsidiary of Parent, or by INT'L.com
or any subsidiary of INT'L.com, which shares ("EXCLUDED SHARES") will be
automatically canceled in the Merger without payment of any consideration
therefor, and excluding Dissenting Shares (as defined in Section 2.3 hereof))
will automatically, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into shares of common stock, $0.01 par value
per share, of Parent ("PARENT COMMON STOCK") in accordance with Section 2.1(e),
and cash (rounded down to the nearest whole cent) in lieu of fractional shares,
if any, pursuant to Section 2.6 below. Shares of INT'L.com Capital Stock that
are actually issued and outstanding immediately prior to the Effective Time
(excluding the Excluded Shares) are sometimes referred to herein as the
"OUTSTANDING INT'L.COM CAPITAL STOCK SHARES." All rights, warrants or options to
acquire INT'L.com Common Stock and securities convertible into INT'L.com Common
Stock (except for the INT'L.com Series A Preferred Stock, the INT'L.com Series B
Preferred Stock, the Series C preferred stock, $0.01 par value per share, of
INT'L.com ("INT'L.COM SERIES C PREFERRED STOCK") and the Series D preferred
stock, $0.01 par value per share, of INT'L.com ("INT'L.COM SERIES D PREFERRED
STOCK") and the INT'L.com Notes (as defined in Section 2.8 below)) that are
outstanding immediately prior to the Effective Time and do not expire pursuant
to their terms on or before the Closing (each of which is specifically
identified in Section 3.2 of the INT'L.com Disclosure Schedule (as defined
below)) are sometimes referred to herein as the "OUTSTANDING INT'L.COM OPTIONS."
(b) The aggregate number of shares of Parent Common Stock to
be issued in exchange for the acquisition of all Outstanding INT'L.com Capital
Stock Shares and the assumption of all Outstanding INT'L.com Options will be
equal to the Modified Share Amount (as defined in (d) below). Such shares are
herein referred to as the "PARENT STOCK MERGER SHARES".
(c) Subject, without limitation, to the provisions of Section
2.3 hereof, at the Effective Time, all of the shares of INT'L.com Series C
Preferred Stock issued and outstanding immediately prior to the Effective Time
(excluding any INT'L.com Series C Preferred Stock held by Parent or Merger Sub
or any other subsidiary of Parent, or by INT'L.com or any subsidiary of
INT'L.com, which shares ("EXCLUDED SERIES C SHARES") will be automatically
canceled in the Merger without payment of any consideration therefor, and
excluding Dissenting Shares (as defined in Section 2.3 hereof)), will
automatically, by virtue
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of the Merger and without any action on the part of the holder thereof, be
converted into shares of Parent Common Stock in accordance with Section 2.1(f),
and cash (rounded down to the nearest whole cent) in lieu of fractional shares,
if any, pursuant to Section 2.6 below. Shares of INT'L.com Series C Preferred
Stock that are actually issued and outstanding immediately prior to the
Effective Time, excluding the Excluded Series C Shares, are sometimes referred
to herein as the "OUTSTANDING INT'L.COM SERIES C SHARES." Subject, without
limitation, to the provisions of Section 2.3 hereof, at the Effective Time, all
of the shares of INT'L.com Series D Preferred Stock issued and outstanding
immediately prior to the Effective Time (excluding any INT'L.com Series D
Preferred Stock held by Parent or Merger Sub or any other subsidiary of Parent,
or by INT'L.com or any subsidiary of INT'L.com, which shares ("EXCLUDED SERIES D
SHARES") will be automatically canceled in the Merger without payment of any
consideration therefor, and excluding Dissenting Shares (as defined in Section
2.3 hereof)), will automatically, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into shares of Parent Common
Stock in accordance with Section 2.1(g), and cash (rounded down to the nearest
whole cent) in lieu of fractional shares, if any, pursuant to Section 2.6 below.
Shares of INT'L.com Series D Preferred Stock that are actually issued and
outstanding immediately prior to the Effective Time, excluding the Excluded
Series D Shares, are sometimes referred to herein as the "OUTSTANDING INT'L.COM
SERIES D SHARES" and along with the Outstanding INT'L.com Capital Stock Shares
and the Outstanding INT'L.com Series C Shares, collectively the "OUTSTANDING
INT'L.COM SHARES."
(d) The aggregate number of shares of Parent Common Stock to
be issued in exchange for the acquisition of all Outstanding INT'L.com Series C
Shares will be equal to the INT'L.com Series C Base Amount divided by the Parent
Average Closing Price. Such shares are herein referred to as the "PARENT SERIES
C MERGER SHARES". The aggregate number of shares of Parent Common Stock to be
issued in exchange for the acquisition of all Outstanding INT'L.com Series D
Shares will be equal to the INT'L.com Series D Base Amount divided by the Parent
Average Closing Price. Such shares are herein referred to as the "PARENT SERIES
D MERGER SHARES" and along with the Parent Stock Merger Shares and the Parent
Series C Merger Shares, collectively the "PARENT MERGER SHARES".
The following definitions will be used in making the foregoing
calculations and for all other purposes of this Agreement:
"INT'L.COM SERIES C BASE AMOUNT" will mean the aggregate accrued
liquidation preference of INT'L.com Series C Preferred Stock calculated as of
the Closing Date in accordance with the terms of the Charter Documents of
INT'L.com.
"INT'L.COM SERIES D BASE AMOUNT" will mean the aggregate accrued
liquidation preference of INT'L.com Series D Preferred Stock calculated as of
the Closing Date in accordance with the terms of the Charter Documents of
INT'L.com.
"PARENT AVERAGE CLOSING PRICE" will be equal to the weighted average
closing price of the Parent Common Stock as publicly reported by the Wall Street
Journal over the twenty Trading Days ending two Trading Days prior to the date
of this Agreement.
"MODIFIED SHARE AMOUNT" will mean the Share Amount LESS (i) the number
of Note Payment Shares (as defined in Section 2.8 below) (ii) the number of Debt
Payment Shares (as defined in Section 7.15 below) and (iii) such number of
shares of Parent Common Stock having a value (as determined using the Parent
Average Closing Price) equal to any expenses to be borne by the stockholders of
INT'L.com pursuant to Section 7.4.
"SHARE AMOUNT" will mean 8,500,000 shares of Parent Common Stock
(appropriately adjusted for any stock split, stock dividend, recapitalization or
similar event).
"TRADING DAY" will mean days on which closing prices for purchases and
sales of Parent Common Stock are reported by the Nasdaq National Market.
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(e) The ratio at which one Outstanding INT'L.com Capital Stock
Share will be converted into shares of Parent Common Stock at the Effective Time
is herein called the "CONVERSION RATIO" and will be calculated as set forth in
this Section 2.1(e). Subject to Section 2.3, at the Effective Time, each
Outstanding INT'L.com Capital Stock Share will be converted into the right to
receive that number (which may be a fraction) of shares of Parent Common Stock
that equals the quotient obtained by DIVIDING the number of Parent Stock Merger
Shares by the sum of the number of Outstanding INT'L.com Capital Stock Shares
PLUS the number of shares of INT'L.com Common Stock issuable upon the exercise
or conversion of all Outstanding INT'L.com Options. Each holder of Outstanding
INT'L.com Capital Stock Shares will be entitled to receive that aggregate number
of shares of Parent Common Stock equal to the Conversion Ratio multiplied by the
number of Outstanding INT'L.com Capital Stock Shares held by such holder
immediately prior to the Effective Time, subject to Section 2.3 herein.
(f) The ratio at which one Outstanding INT'L.com Series C
Share will be converted into shares of Parent Common Stock at the Effective Time
is herein called the "SERIES C CONVERSION RATIO" and will be calculated as set
forth in this Section 2.1(f). Subject to Section 2.3, at the Effective Time,
each Outstanding INT'L.com Series C Share will be converted into the right to
receive that number (which may be a fraction) of shares of Parent Common Stock
that equals the quotient obtained by DIVIDING the number of Parent Series C
Merger Shares by the number of Outstanding INT'L.com Series C Shares. Each
holder of Outstanding INT'L.com Series C Shares will be entitled to receive that
aggregate number of shares of Parent Common Stock equal to the Series C
Conversion Ratio multiplied by the number of Outstanding INT'L.com Series C
Shares held by such holder immediately prior to the Effective Time, subject to
Section 2.3 herein.
(g) The ratio at which one Outstanding INT'L.com Series D
Share will be converted into shares of Parent Common Stock at the Effective Time
is herein called the "SERIES D CONVERSION RATIO" and will be calculated as set
forth in this Section 2.1(g). Subject to Section 2.3, at the Effective Time,
each Outstanding INT'L.com Series D Share will be converted into the right to
receive that number (which may be a fraction) of shares of Parent Common Stock
that equals the quotient obtained by DIVIDING the number of Parent Series D
Merger Shares by the number of Outstanding INT'L.com Series D Shares. Each
holder of Outstanding INT'L.com Series D Shares will be entitled to receive that
aggregate number of shares of Parent Common Stock equal to the Series D
Conversion Ratio multiplied by the number of Outstanding INT'L.com Series D
Shares held by such holder immediately prior to the Effective Time, subject to
Section 2.3 herein.
(h) At the Effective Time, each share of common stock, $0.01
par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time will, by virtue of the Merger and without any action on the part
of the holder hereof, be converted into one share of common stock, $0.01 par
value per share, of the Surviving Corporation.
2.2 ESCROW SHARES. Ten percent (10%) of the Parent Merger Shares
issuable at Closing (excluding any Parent Merger Shares issuable after the
Closing with respect to Outstanding INT'L.com Options, the Excluded Shares, the
Series C Excluded Shares and the Series D Excluded Shares), rounded up to the
nearest whole share (the "ESCROW SHARES") will be deposited and held in escrow
in accordance with the Escrow Agreement attached as EXHIBIT 2.2 (the "ESCROW
AGREEMENT") as the sole source of indemnification payments that may become due
to Parent pursuant to Article IX or otherwise prior to the release of the Escrow
Shares pursuant to Section 3.1 of the Escrow Agreement; provided that the
aggregate liability of any single stockholder for indemnification obligations
pursuant to Article IX of this Agreement shall be equal to a dollar amount equal
to the Parent Average Closing Price multiplied by the aggregate number of Escrow
Shares deposited in escrow by or on behalf of such stockholder; and provided,
further, that each INT'L.com stockholder shall be severally (and not jointly)
liable beyond such holder's allocable portion of the Escrow Shares solely in
respect of any breach by such stockholder of any representation or warranty
contained in a Letter of Transmittal (as defined in Section 2.4 below) delivered
by such stockholder. The Escrow Shares will be withheld on a pro rata basis
among the holders of the Outstanding INT'L.com Shares based on the number of
Parent Merger Shares issuable at the closing to such holders. The exact number
of Escrow Shares held for the account of each INT'L.com stockholder will be
determined at the Closing by the agreement in writing of Parent and INT'L.com.
The delivery of the
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Escrow Shares will be made on behalf of the holders of the Outstanding INT'L.com
Shares in accordance with the provisions hereof, with the same force and effect
as if such shares had been delivered by Parent directly to such holders and
subsequently delivered by such holders to the Escrow Agent. The adoption of this
Agreement by stockholders of INT'L.com will also constitute their approval of
the terms and provisions of the Escrow Agreement, including, without limitation,
the appointment of Steven Fingerhood as the Indemnification Representative (as
defined in the Escrow Agreement), which is an integral term of the Merger.
2.3 DISSENTING SHARES. Any holder of shares of INT'L.com Capital Stock,
INT'L.com Series C Preferred Stock and INT'L.com Series D Preferred Stock
(collectively, the "INT'L.COM STOCK") that are outstanding on the record date
for the determination of which holders will be entitled to vote for or against
the Merger who objects to the Merger and complies with all of the provisions of
the DGCL concerning the rights of holders to dissent from the Merger and require
appraisal (such shares are referred to as "DISSENTING SHARES") will be entitled
to exercise appraisal rights pursuant to Section 262 of the DGCL with respect to
such Dissenting Shares PROVIDED THAT such holder meets all of the requirements
of the DGCL with respect to such Dissenting Shares, and will not be entitled to
receive Parent Merger Shares, unless otherwise provided by the DGCL or agreed in
writing by Parent. INT'L.com will, after consultation with Parent, give such
notices with respect to appraisal rights as may be required by the DGCL as soon
as practicable.
2.4 DELIVERY OF EVIDENCE OF OWNERSHIP. Prior to the Closing, Parent
shall send a notice and transmittal form in substantially the form of EXHIBIT
2.4 hereto (individually, a "Letter of Transmittal" and collectively, the
"LETTERS OF TRANSMITTAL") to each holder of a certificate or other documentation
representing Outstanding INT'L.com Shares, other than Dissenting Shares, each
holder of a certificate or other documentation representing Outstanding
INT'L.com Shares, other than Dissenting Shares, will surrender such certificates
or other documentation to Parent or its designee, and, if not previously
delivered, (i) a duly executed counterpart of the Escrow Agreement, (ii) a duly
executed Letter of Transmittal and (iii) such other duly executed documentation
as may be reasonably required by Parent to effect a transfer of such shares, and
upon such surrender and after the Effective Time each such holder will be
entitled to receive promptly from Parent or its transfer agent certificates
registered in the name of such holder representing the applicable number of
Parent Merger Shares, and the cash (calculated pursuant to Section 2.6, which
will be paid by check), to which such holder is entitled pursuant to the
provisions of this Agreement, with a portion of such shares to be deposited in
escrow pursuant to the Escrow Agreement, as provided in Section 2.2. The
adoption of this Agreement by stockholders of INT'L.com will also constitute
their approval of the terms and provisions of the Letter of Transmittal. In the
event any certificates or instruments representing Outstanding INT'L.com Shares
or Outstanding INT'L.com Options shall have been lost, stolen or destroyed, upon
the making and delivery of an affidavit of that fact by the person claiming same
to have been lost, stolen or destroyed and the posting by such person of a
bonding such reasonable amount as Parent may direct as indemnity against any
claim that would be made against Parent with respect to such certificate or
instrument, Parent will issue in exchange for such lost, stolen or destroyed
certificate or instrument the Parent Merger Shares and cash deliverable in
respect thereof pursuant to this Agreement.
2.5 NO FURTHER OWNERSHIP RIGHTS IN INT'L.COM STOCK. The Merger and its
approval by the stockholders of INT'L.com and the execution of this Agreement
will be deemed, at the Effective Time, to constitute full satisfaction and
termination of all rights and agreements pertaining to INT'L.com Stock pursuant
to the DGCL, by contract or otherwise, except for any rights pertaining to this
Agreement. After the Effective Time, there will be no transfers on the stock
transfer books of INT'L.com of INT'L.com Stock or exercises of any options,
warrants or other rights to acquire INT'L.com Stock. Prior to or upon Closing,
INT'L.com will cause rights to purchase or acquire INT'L.com Stock other than
the Outstanding INT'L.com Options assumed pursuant to Section 2.7 below to
either be exercised or canceled. Until surrendered to Parent, each certificate
for INT'L.com Stock will, after the Effective Time, represent only the right to
receive the right to receive cash and Parent Merger Shares into which the shares
of INT'L.com Stock formerly represented thereby will have been converted
pursuant to this Agreement. Any dividends or other distribution declared after
the Effective Time with respect to Parent Common Stock will be paid to
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the holder of any certificate for shares of INT'L.com Stock when the holder
thereof is entitled to receive a certificate for such holder's Parent Merger
Shares in accordance with this Agreement.
2.6 NO FRACTIONAL SHARES. No certificates or scrip for fractional
shares of Parent Common Stock will be issued, no Parent stock split or dividend
will be paid in respect of any fractional share interest, and no such fractional
share interest will entitle the owner thereof to vote or to any rights of or as
a stockholder of Parent. In lieu of such fractional shares, any holder of
Outstanding INT'L.com Shares who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock to be received by such holder) will be paid the cash value of such
fraction (rounded down to the nearest whole cent), which will be equal to such
fraction MULTIPLIED BY the Parent Average Closing Price.
2.7 ASSUMPTION OF STOCK OPTIONS. At the Effective Time, Parent shall
assume each Outstanding INT'L.com Option and each holder thereof (each an
"OPTION HOLDER") shall thereby be entitled to acquire, by virtue of the Merger
and without any action on the part of the Option Holder, on substantially the
same terms (including the dates and extent of exercisability) and subject to the
same conditions, including vesting, as such Outstanding INT'L.com Option, the
number of shares of Parent Common Stock determined by MULTIPLYING the number of
shares of INT'L.com Common Stock for which such Outstanding INT'L.com Option is
then exercisable in accordance with its terms immediately prior to the Effective
Time by the Conversion Ratio (rounded down to the nearest whole share), at an
exercise or conversion price per share of Parent Common Stock (rounded up to the
nearest whole cent) determined by dividing the exercise price per share of
INT'L.com Common Stock of such Outstanding INT'L.com Option immediately prior to
the Effective Time by the Conversion Ratio.
2.8 NOTES. The $2,000,000 in convertible promissory notes dated August
20, 1999 of INT'L.com and any interest accrued thereon (the "INT'L.COM Notes")
shall be paid in full and cancelled by delivery of the Note Payment Shares to
the holders thereof in proportion to their respective interests in the INT'L.com
Notes. "Note Payment Shares" shall mean a number of shares of Parent Common
Stock determined by dividing $2,000,000 plus any interest accrued on the
INT'L.com Notes as of the Closing by the Parent Average Closing Price. In lieu
of any fractional shares, any holder of an INT'L.com Note who would otherwise be
entitled to a fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Parent Common Stock to be received by such holder) will be
paid the cash value of such fraction (rounded down to the nearest whole cent),
which will be equal to such fraction MULTIPLIED BY the Parent Average Closing
Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INT'L.COM
Except as set forth in the disclosure schedule of INT'L.com dated as of
the date hereof and delivered herewith to Parent (the "INT'L.COM DISCLOSURE
SCHEDULE") which identifies the section and subsection to which each disclosure
therein relates (PROVIDED, HOWEVER, that INT'L.com will be deemed to have
adequately disclosed with respect to any section or subsection any matters that
are clearly described elsewhere in such document if the applicability of such
disclosure to such non-referenced sections or subsections is apparent), and
whether or not the INT'L.com Disclosure Schedule is referred to in a specific
section or subsection, INT'L.com represents and warrants to Parent and Merger
Sub as follows:
3.1 ORGANIZATION, STANDING AND POWER; SUBSIDIARIES.
(a) INT'L.com is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its businesses as now being conducted, and is duly qualified and
in good standing to do business in each jurisdiction in which a failure to so
qualify would have a material adverse effect on the Business Condition (as
hereinafter defined) of INT'L.com.
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As used in this Agreement, "BUSINESS CONDITION" with respect
to any Person (as defined below) means the business, financial condition,
results of operations, assets or prospects (as defined below) (without giving
effect to the consequences of the transactions contemplated by this Agreement
and the announcement thereof, and other than any changes arising out of
conditions affecting the economy or industry of the Person in general which does
not affect the Person in a materially disproportionate manner relative to other
participants in the economy or such industry, respectively) of such Person or
Persons including its Subsidiaries taken as a whole. In this Agreement, a
"SUBSIDIARY" of any Person means a corporation, partnership, limited liability
company, joint venture or other entity of which such Person directly or
indirectly owns or controls a majority of the equity interests or voting
securities or other interests that are sufficient to elect a majority of the
Board of Directors or other managers of such corporation, partnership, limited
liability company, joint venture or other entity. In this Agreement, the
"Material INT'L.com Subsidiaries" shall mean the following Subsidiaries of
INT'L.com: International Communications Europe GmbH; International Language
Engineering Corporation; International Communications Asia; and ILE Netherlands
BV. In this Agreement, "PROSPECTS" means events, conditions, facts or
developments that are known to INT'L.com or any Subsidiary and that in the
reasonable course of events are expected to have an effect on future operations
of the business as presently conducted by INT'L.com and its Subsidiaries, but
will exclude the results of any changes that are made at the specific written
direction of Parent, that are specifically contemplated herein, or that directly
result from this transaction or the announcement hereof. In this Agreement,
"PERSON" means any natural person, corporation, partnership, limited liability
company, joint venture or other entity. In this Agreement, "ordinary course of
business" means in the ordinary course of business and consistent with past
practices.
All Subsidiaries of INT'L.com and their jurisdiction of
incorporation are completely and correctly listed in Section 3.1 of the
INT'L.com Disclosure Schedule. Each Subsidiary is a corporation duly organized
and validly existing under the laws of the jurisdiction of its incorporation.
INT'L.com has delivered to Parent complete and correct copies of the articles or
certificate of incorporation, bylaws and/or other primary charter and
organizational documents ("CHARTER DOCUMENTS") of INT'L.com and the Material
INT'L.com Subsidiaries, in each case, as amended to the date hereof. The minute
books and stock records of INT'L.com and its Subsidiaries are complete. Section
3.1 of the INT'L.com Disclosure Schedule contains a complete and correct list of
the officers and directors of INT'L.com and any stockholders who beneficially
own (as defined in Rule 13d of the Securities Act) 5% or more of the outstanding
capital stock of INT'L.com.
(b) INT'L.com does not currently own, and has not owned since
January 1, 1998, directly or indirectly, any capital stock or other equity
securities of any corporation or have direct or indirect equity or ownership
interest in any partnership, limited liability company, joint venture or other
entity. All of the outstanding shares of capital stock of each Subsidiary of
INT'L.com are owned beneficially and of record by INT'L.com, one of its other
Subsidiaries, or any combination thereof, in each case free and clear of any
security interests, liens, charges, restrictions, claims, encumbrances or
assessments of any nature whatsoever ("LIENS"); and there are no outstanding
subscriptions, warrants, options, convertible securities, or other rights
(contingent or other) pursuant to which any of the Subsidiaries is or may become
obligated to issue any shares of its capital stock to any Person other than
INT'L.com or one of the other Subsidiaries.
3.2 CAPITAL STRUCTURE.
(a) As of January 17, 2000, the authorized capital stock of
INT'L.com consisted of (i) 5,472,047 shares of preferred stock, $0.01 par value
per share ("INT'L.COM PREFERRED STOCK"), of which 867,047 shares had been
designated INT'L.com Series A Preferred Stock, 867,047 of which were issued and
outstanding, of which 3,500,000 shares had been designated INT'L.com Series B
Preferred Stock, 2,621,477 of which were issued and outstanding, of which 5,000
had been designated INT'L.com Series C Preferred Stock, 5,000 of which were
issued and outstanding, and of which 1,100,000 shares had been designated
INT'L.com Series D Preferred Stock, 936,991 of which were issued and
outstanding; as of the date of this Agreement; and (ii) 14,527,953 shares of
INT'L.com Common Stock, $0.01 par value per share, of which 11,077,953 shares
had been designated INT'L.com Series A Common Stock, and 3,450,000 shares had
been designated INT'L.com Series B Common Stock, and 5,879,271 shares of Common
Stock
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were issued and outstanding as of the date of this Agreement and no shares of
INT'L.com Common Stock were issued and held as treasury shares by INT'L.com. The
INT'L.com Disclosure Schedule sets forth all holders of INT'L.com Common Stock
and INT'L.com Preferred Stock and the number of shares owned. The INT'L.com
Disclosure Schedule also sets forth any options, warrants, calls, conversion
rights, commitments, agreements, contracts, understandings, restrictions,
arrangements or rights of any character (each, an "INT'L.COM OPTION") to which
INT'L.com is a party or by which INT'L.com may be bound obligating INT'L.com to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of INT'L.com Common Stock, or obligating INT'L.com to grant, extend, or
enter into any such option, warrant, call, conversion right, conversion payment,
commitment, agreement, contract, understanding, restriction, arrangement or
right. INT'L.com does not have any outstanding options, warrants, calls,
conversion rights, commitments, agreements, contracts, understandings,
restrictions, arrangements or rights of any character to which INT'L.com is a
party or by which INT'L.com may be bound obligating INT'L.com to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of
INT'L.com Preferred Stock.
(b) All outstanding shares of INT'L.com Common Stock and
INT'L.com Preferred Stock are, and any shares of INT'L.com Common Stock issued
upon exercise of any Outstanding INT'L.com Options will be, validly issued,
fully paid, nonassessable and not subject to any preemptive rights (other than
those which have been duly waived), or to any agreement to which INT'L.com is a
party or by which INT'L.com may be bound. Except for the INT'L.com Notes,
INT'L.com does not have outstanding any bonds, debentures, notes or other
indebtedness the holders of which (i) have the right to vote (or convertible or
exercisable into securities having the right to vote) with holders of shares of
INT'L.com Common Stock on any matter ("INT'L.COM VOTING DEBT") or (ii) are or
will become entitled to receive any payment as a result of the execution of this
Agreement or the completion of the transactions contemplated hereby.
3.3 AUTHORITY. The execution, delivery and performance of this
Agreement and all other agreements contemplated hereby by INT'L.com have been
duly authorized by all necessary action of the Board of Directors of INT'L.com,
and if the Closing shall occur, shall have been duly authorized by all necessary
action of the stockholders of INT'L.com (the "INT'L.com Requisite Stockholder
Approval"). Certified copies of the resolutions adopted by the Board of
Directors of INT'L.com and its stockholders approving this Agreement, all other
agreements contemplated hereby and the Merger have been or will be provided to
Parent prior to the Closing. INT'L.com has duly and validly executed and
delivered this Agreement and has, or prior to Closing, will have duly and
validly executed and delivered all other agreements contemplated hereby to be
executed by INT'L.com, and each of this Agreement and such other agreements
constitutes or upon execution and delivery at or prior to the Closing will
constitute a valid, binding and enforceable obligation of INT'L.com in
accordance with its terms.
3.4 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS; NON-CONTRAVENTION.
INT'L.com and its Subsidiaries hold, and at all times have held or subsequently
obtained, all licenses, permits and authorizations from all Governmental
Entities (as defined below) necessary for the lawful conduct of their respective
businesses pursuant to all applicable statutes, laws, ordinances, rules and
regulations of all such Governmental Entities having jurisdiction over them or
any part of their operations. There are no material violations or claimed
violations known by INT'L.com or any Subsidiary of any such license, permit or
authorization or any such statute, law, ordinance, rule or regulation. Assuming
the receipt of all Consents (as defined below), neither the execution, delivery
or performance of this Agreement and all other agreements contemplated hereby by
INT'L.com, nor the consummation of the Merger or any other transaction described
herein, does or will, after the giving of notice, or the lapse of time, or
otherwise, conflict with, result in a breach of, or constitute a default under,
the Charter Documents of INT'L.com or any Material INT'L.com Subsidiary or any
federal, foreign, state or local court or administrative order or process,
statute, law, ordinance, rule or regulation, or any contract, agreement or
commitment to which INT'L.com or any Material INT'L.com Subsidiary is a party,
or under which INT'L.com or any Material INT'L.com Subsidiary is obligated, or
by which INT'L.com or any Material INT'L.com Subsidiary or any of the rights,
properties or assets of INT'L.com are subject or bound; result in the creation
of any Lien upon, or otherwise adversely affect, any of the rights, properties
or assets of INT'L.com or any Material INT'L.com Subsidiary; terminate, amend
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or modify, or give any party the right to terminate, amend, modify, abandon or
refuse to perform or comply with, any contract, agreement or commitment to which
INT'L.com or any Material INT'L.com Subsidiary is a party, or under which
INT'L.com or any Material INT'L.com Subsidiary is obligated, or by which
INT'L.com or any of the rights, properties or assets of INT'L.com or any
Material INT'L.com Subsidiary are subject or bound; or accelerate, postpone or
modify, or give any party the right to accelerate, postpone or modify, the time
within which, or the terms and conditions under which, any liabilities, duties
or obligations are to be satisfied or performed, or any rights or benefits are
to be received, under any contract, agreement or commitment to which INT'L.com
or any Material INT'L.com Subsidiary is a party, or under which INT'L.com or any
Material INT'L.com Subsidiary may be obligated, or by which INT'L.com or any
Material INT'L.com Subsidiary or any of the rights, properties or assets of
INT'L.com or any Material INT'L.com Subsidiary are subject or bound. Section 3.4
of the INT'L.com Disclosure Schedule sets forth each agreement, contract or
other instrument binding upon INT'L.com requiring a notice or consent (by its
terms or as a result of any conflict or other contravention required to be
disclosed in the INT'L.com Disclosure Schedule pursuant to the preceding
provisions of this Section 3.4) as a result of the execution, delivery or
performance of this Agreement and all other agreements contemplated hereby by
INT'L.com or the consummation of the Merger or any other transaction described
herein (each such notice or consent, a "CONSENT"). No consent, approval, order,
or authorization of or registration, declaration, or filing with or exemption
(also a "CONSENT") by, any court, administrative agency or commission or other
governmental authority or instrumentality, whether domestic or foreign (each a
"GOVERNMENTAL ENTITY") is required by or on behalf of INT'L.com or any Material
INT'L.com Subsidiary in connection with the execution, delivery or performance
of this Agreement and all other agreements contemplated hereby by INT'L.com or
the consummation of the Merger or any other transaction described herein, except
for the filing by INT'L.com and Merger Sub of the appropriate Merger Documents
with the Secretary of State of Delaware.
3.5 TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS.
(a) For the purposes of this Agreement, "INT'L.COM
INTELLECTUAL PROPERTY" consists of the following intellectual property:
(i) all patents, trademarks, trade names, service marks, trade
dress, copyrights and any renewal rights therefor, mask works,
schematics, software, firmware, technology, manufacturing processes,
supplier lists, customer lists, trade secrets, know-how, moral rights
and applications and registrations for any of the foregoing;
(ii) all documents, records and files relating to design, end
user documentation, manufacturing, quality control, sales, marketing or
customer support for all intellectual property described herein;
(iii) all other tangible or intangible proprietary information
and materials; and
(iv) all license and other rights in any third party product
or any third party intellectual property described in (i) through (iii)
above;
that are owned or held by or on behalf of INT'L.com or any Material INT'L.com
Subsidiary or that are being used, and/or have been used since January 1, 1999,
or are currently under development by or for INT'L.com or any Material INT'L.com
Subsidiary for use, in the business of INT'L.com or any Material INT'L.com
subsidiary as it has been, is currently or is currently planned to be conducted
in 2000; PROVIDED, HOWEVER, that the term INT'L.com Intellectual Property does
not include any commercially available third party software or related
intellectual property.
(b) Section 3.5 of the INT'L.com Disclosure Schedule lists:
(i) all patents, copyright registrations, mask works, registered trademarks,
registered service marks, trade dress, any renewal rights for any of the
foregoing, and any applications and registrations for any of the foregoing, that
are included in INT'L.com Intellectual Property and owned by or on behalf of
INT'L.com or any Material INT'L.com Subsidiary; (ii) all hardware products and
tools, software products and tools and services that are currently published,
offered, or under development by INT'L.com or any Material INT'L.com
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Subsidiary; and (iii) all licenses, sublicenses and other agreements to which
INT'L.com is a party and pursuant to which INT'L.com or any Material INT'L.com
Subsidiary or any other person is authorized to use any INT'L.com Intellectual
Property or exercise any other right with regard thereto.
(c) INT'L.com Intellectual Property consists solely of items
and rights that are either: (i) owned solely by INT'L.com; (ii) in the public
domain; or (iii) rightfully used and authorized for use by INT'L.com pursuant to
a valid license. All INT'L.com Intellectual Property that consists of license or
other rights to third party property is separately set forth in Section 3.5 of
the INT'L.com Disclosure Schedule. INT'L.com has all rights in INT'L.com
Intellectual Property necessary to carry out INT'L.com's, and each of its
Subsidiaries', current activities, their activities conducted by them since
January 1, 1999 and their future activities planned for 2000, including without
limitation rights to make, use, exclude others from using, reproduce, modify,
adapt, create derivative works based on, translate, distribute (directly and
indirectly), transmit, display and perform publicly, license, rent, lease,
assign and sell INT'L.com Intellectual Property in all geographic locations and
fields of use, and to sublicense any or all such rights to third parties,
including the right to grant further sublicenses.
(d) Assuming the receipt of all Consents, INT'L.com is not,
nor as a result of the execution or delivery of this Agreement and all other
agreements contemplated hereby, or performance of INT'L.com's obligations
hereunder or the consummation of the Merger, will INT'L.com be, in violation of
any license, sublicense or other agreement relating to any INT'L.com
Intellectual Property to which INT'L.com is a party or otherwise bound.
INT'L.com is not obligated to provide any consideration (whether financial or
otherwise) to any third party, nor is any third party otherwise entitled to any
consideration, with respect to any exercise of rights by INT'L.com or the
Surviving Corporation, as successor to INT'L.com, in INT'L.com Intellectual
Property.
(e) To the knowledge of INT'L.com or any of the Material
INT'L.com Subsidiaries, the use, reproduction, modification, distribution,
licensing, sublicensing, sale, or any other exercise of rights in any product,
work, technology, service or process as used, provided, or offered at any time,
or as proposed for use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights, by INT'L.com or any
Material INT'L.com Subsidiary does not infringe any copyright, patent, trade
secret, trademark, service mark, trade name, firm name, logo, trade dress, mask
work, moral right, other intellectual property right, right of privacy, or right
in personal data of any Person. No claims (i) challenging the validity,
effectiveness, or ownership by INT'L.com or any Material INT'L.com Subsidiary of
any INT'L.com Intellectual Property, or (ii) to the effect that the use,
reproduction, modification, manufacturing, distribution, licensing,
sublicensing, sale, or any other exercise of rights in any product, work,
technology, service, or process as used, provided or offered at any time, or as
proposed for use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights, by INT'L.com or any
Material INT'L.com Subsidiary infringes or will infringe on any intellectual
property or other proprietary or personal right of any Person have been asserted
to INT'L.com or any Material INT'L.com Subsidiary in writing by any Person.
Neither INT'L.com nor any Subsidiary has received notice of any legal or
governmental proceedings, including interference, re-examination, reissue,
opposition, nullity, or cancellation proceedings pending that relate to any
INT'L.com Intellectual Property, other than any review of pending applications
for patent. Neither INT'L.com nor any Subsidiary is aware of any information
indicating that any such proceedings are threatened or contemplated by any
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Governmental Entity or any other Person. All granted or issued patents and mask
works and all registered trademarks and copyright registrations owned by
INT'L.com are valid, enforceable and subsisting. To the knowledge of INT'L.com,
there is no unauthorized use, infringement, or misappropriation of any INT'L.com
Intellectual Property by any third party, employee or former employee.
(f) INT'L.com and its Subsidiaries has secured from all
parties who have created any portion of, or otherwise have any rights in or to,
INT'L.com Intellectual Property, valid and enforceable written assignments of
any such work or other rights to INT'L.com.
(g) Each consultant and subcontractor of INT'L.com and its
Subsidiaries has entered into a confidentiality and assignment of inventions
agreement substantially in the form attached TO SECTION 3.5 OF THE INT'L.COM
DISCLOSURE SCHEDULE.
3.6 FINANCIAL STATEMENTS; BUSINESS INFORMATION.
(a) INT'L.com has delivered to Parent an unaudited
consolidated balance sheet (the "UNAUDITED BALANCE SHEET") as of October 31,
1999 (the "UNAUDITED BALANCE SHEET DATE") and audited consolidated balance
sheets (the "AUDITED BALANCE SHEETS") as of February 28, 1999 (the "AUDITED
BALANCE SHEET DATE") and December 31, 1997, unaudited consolidated statements of
income and cash flows for the eight-month period ended -October 31, 1999 and
audited consolidated statements of income and cash flows for its fiscal years
ended December 31, 1997 and February 28, 1999 (all of such balance sheets and
statements of income and cash flows are collectively referred to as the
"FINANCIAL STATEMENTS"). The Financial Statements: (i) are in accordance with
the books and records of INT'L.com; (ii) present fairly, in all material
respects, the financial position of INT'L.com as of the date indicated and the
results of its operations and cash flows for such periods; and (iii) have been
prepared in accordance with generally accepted accounting principles
consistently applied (subject, in the case of unaudited statements, to the
absence of footnote disclosure and in the case of unaudited interim statements
to year-end adjustments, which will not be material either individually or in
the aggregate and except as described in the Section 3.6 of the INT'L.com
Disclosure Schedule). As of the Unaudited Balance Sheet Date, there were no
material liabilities, claims or obligations of any nature, whether accrued,
absolute, contingent, anticipated or otherwise, whether due or to become due,
that are not shown or provided for either in the Unaudited Balance Sheet or
Section 3.6 of the INT'L.com Disclosure Schedule, and since the Unaudited
Balance Sheet Date, INT'L.com has incurred no liabilities, claims or obligations
of any nature, whether accrued, absolute, contingent, anticipated or otherwise
other than in the ordinary course of business and except for liabilities
incurred by INT'L.com in connection with the preparation and execution of this
Agreement and the consummation of the transactions contemplated herein.
(b) All of the accounts, notes and other receivables which are
reflected in the Unaudited Balance Sheet were acquired in the ordinary course of
business; and, except to the extent reserved against in the Unaudited Balance
Sheet, all of the accounts, notes and other receivables which are reflected
therein have been collected in full, or, to the knowledge of INT'L.com or any
Subsidiary, are valid, binding and enforceable in accordance with their terms in
the ordinary course of business, and arise from bona fide transactions, and
neither INT'L.com nor any Subsidiary has received notice that the same are
subject to counterclaims, refusals to pay or other rights of setoff. All of the
accounts, notes and other receivables which have been acquired by INT'L.com or
any Subsidiary since the Unaudited Balance Sheet Date were acquired in the
ordinary course of business and have been collected in full, or to the knowledge
of INT'L.com or any Subsidiary, are valid, binding and enforceable in accordance
with their terms in the ordinary course of business, and arise from bona fide
transactions, and neither INT'L.com nor any Subsidiary has received notice that
the same are subject to counterclaims, refusals to pay
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or other rights of setoff, subject to an appropriate reserve. No accounts, notes
or other receivables are contingent upon the performance by INT'L.com or any
Subsidiary of any obligation or contract. No Person has any Lien on any of such
receivables and no agreement for deduction or discount has been made with
respect thereto.
(c) The business information previously prepared by INT'L.com
and delivered to Parent was prepared in good faith, based on assumptions
INT'L.com deemed, as of the date such information was delivered to Parent, to be
reasonable, and was prepared for planning purposes, although no assurances are
given that INT'L.com can or will engage in the activities described therein or
achieve the results projected therein.
3.7 TAXES.
(a) The term "TAXES" as used herein means all federal, state,
local and foreign income tax, alternative or add-on minimum tax, estimated,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, capital profits, lease, service, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit taxes, customs, duties and other taxes,
governmental fees and other like assessments and charges of any kind whatsoever,
together with all interest, penalties, additions to tax and additional amounts
with respect thereto, and the term "TAX" means any one of the foregoing Taxes.
The term "TAX RETURNS" as used herein means all returns, declarations, reports,
claims for refund, information statements and other documents relating to Taxes,
including all schedules and attachments thereto, and including all amendments
thereof, and the term "TAX RETURN" means any one of the foregoing Tax Returns.
(b) INT'L.com and each of its Subsidiaries has timely filed
all Tax Returns required to be filed and has paid all Taxes owed (whether or not
shown as due on such Tax Returns), including, without limitation, all Taxes
which INT'L.com or such Subsidiary is obligated to withhold for amounts owing to
employees, creditors and third parties. All Tax Returns filed by INT'L.com and
each of its Subsidiaries were complete and correct in all respects, and such Tax
Returns correctly reflected the facts regarding the income, business, assets,
operations, activities, status and other matters of INT'L.com and each of its
Subsidiaries and any other information required to be shown thereon. None of the
Tax Returns filed by INT'L.com or any of its Subsidiaries or Taxes payable by
INT'L.com or any of its Subsidiaries have been the subject of an audit, action,
suit, proceeding, claim, examination, deficiency or assessment by any
Governmental Entity, and no such audit, action, suit, proceeding, claim,
examination, deficiency or assessment is currently pending or, to the knowledge
of INT'L.com or any of its Subsidiaries, threatened. Neither INT'L.com nor any
Subsidiary is currently the beneficiary of any extension of time within which to
file any Tax Return, and neither INT'L.com nor any Subsidiary has waived any
statute of limitation with respect to any Tax or agreed to any extension of time
with respect to a Tax assessment or deficiency. All material elections with
respect to Taxes affecting INT'L.com or any Subsidiary, as of the date of this
Agreement, are set forth in the Financial Statements or in Section 3.7 of the
INT'L.com Disclosure Schedule. None of the Tax Returns filed by INT'L.com or any
Subsidiary contain a disclosure statement under former Section 6661 of the Code
or Section 6662 of the Code (or any similar provision of state, local or foreign
Tax law). Neither INT'L.com nor any Subsidiary is a party to any Tax sharing
agreement or similar arrangement. Neither INT'L.com nor any Subsidiary has ever
been a member of a group filing a consolidated federal income Tax Return (other
than a group the common parent of which was INT'L.com), and neither INT'L.com
nor any Subsidiary has any liability for the Taxes of any Person (other than
INT'L.com) under Treasury Regulation Section 1.1502-6 (or any corresponding
provision of state, local or foreign Tax law), as a transferee or successor, by
contract, or otherwise.
(c) Neither INT'L.com nor any Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of (i) any "excess parachute
payments" within the meaning of Section 280G of the Code (without regard to the
exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of the Code) or (ii)
any amount for which a deduction would be disallowed or deferred under Section
162 or Section 404 of the Code. Neither INT'L.com nor any Subsidiary has agreed
to make any adjustment under Section 481(a) of the Code (or
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any corresponding provision of state, local or foreign law) by reason of a
change in accounting method or otherwise, and INT'L.com will not be required to
make any such adjustment as a result of the transactions set forth in this
Agreement. Neither INT'L.com nor any Subsidiary has or has had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States and such foreign country. No portion of the
Parent Merger Shares is subject to the Tax withholding provisions of Section
3406 of the Code, or of Subchapter A of Chapter 3 of the Code or of any other
provision of law. None of the assets of INT'L.com or any Subsidiary is property
which is required to be treated as being owned by any other Person pursuant to
the so-called "safe harbor lease" provisions of former Section 168(f)(8) of the
Code. None of the assets of INT'L.com or any Subsidiary directly or indirectly
secures any debt, the interest on which is tax exempt under Section 103(a) of
the Code. None of the assets of INT'L.com or any Subsidiary is "tax-exempt use
property" within the meaning of Section 168(h) of the Code. No claim has ever
been made by any Governmental Entity in a jurisdiction where INT'L.com or any
Subsidiary does not file Tax Returns that it is or may be subject to Tax in that
jurisdiction. Neither INT'L.com nor any Subsidiary has participated in an
international boycott as defined in Section 999 of the Code. None of the shares
of outstanding capital stock of INT'L.com or any Subsidiary are subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of the Code.
(d) There are no liens for Taxes (other than for ad valorem
Taxes not yet due and payable) upon the assets of INT'L.com or any Subsidiary.
The unpaid Taxes of INT'L.com and its Subsidiaries did not, as of the Balance
Sheet Date, exceed the reserve for actual Taxes (as opposed to any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) as shown on the Unaudited Balance Sheet, and will not exceed such
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of INT'L.com and its Subsidiaries
in filing their Tax Returns (taking into account any Taxes incurred as a result
of the transactions contemplated by this Agreement). Section 3.7 of the
INT'L.com Disclosure Schedule sets forth INT'L.com's and each Subsidiary's Tax
basis in each of their respective assets. Neither INT'L.com nor any Subsidiary
is a party to any joint venture, partnership, limited liability company or other
arrangement or contract which could be treated as a partnership for federal
income tax purposes.
3.8 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except for liabilities
incurred in connection with this Agreement and the transactions contemplated
hereby, from the Unaudited Balance Sheet Date, there has not been:
(a) Any transaction involving more than $50,000 entered into
by INT'L.com or any Subsidiary other than in the ordinary course of business;
any change (or any development or combination of developments of which INT'L.com
or any Subsidiary has knowledge which is reasonably likely to result in such a
change) in INT'L.com's Business Condition, other than changes in the ordinary
course of business which in the aggregate have not been and are not expected to
be materially adverse to INT'L.com's Business Condition; or, without limiting
the foregoing, any loss of or damage to any of the properties of INT'L.com or
any Subsidiary due to fire or other casualty or other loss, whether or not
insured, amounting to more than $50,000 in the aggregate;
(b) Any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of INT'L.com
or any Subsidiary, or any repurchase, redemption, retirement or other
acquisition by INT'L.com or any
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Subsidiary of any outstanding shares of capital stock, any INT'L.com Option, or
other securities of, or other equity or ownership interests in, INT'L.com or any
Subsidiary;
(c) Any discharge or satisfaction of any Lien or payment or
satisfaction of any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due) other than current
liabilities shown on the Unaudited Balance Sheet and current liabilities
incurred since the Unaudited Balance Sheet Date in the ordinary course of
business;
(d) Any amendment of any term of any outstanding security of
INT'L.com;
(e) Any incurrence, assumption or guarantee by INT'L.com or
any Subsidiary of any indebtedness for borrowed money other than in the ordinary
course of business and in an aggregate amount exceeding $50,000;
(f) Any creation or assumption by INT'L.com or any Subsidiary
of any Lien on any asset in an aggregate amount exceeding $20,000;
(g) Any making of any loan, advance or capital contributions
to, or investment in, any Person by INT'L.com or any Subsidiary;
(h) Any sale, lease, pledge, transfer or other disposition of
any material capital asset;
(i) Any material transaction or commitment made, or any
material contract or agreement entered into, by INT'L.com or any Subsidiary
relating to its assets or business (including the acquisition or disposition of
any assets) with a value of $100,000 or more or any relinquishment by INT'L.com
or any Subsidiary of any contract or other right with a value of $100,000 or
more;
(j) Any (A) grant of any severance or termination pay to any
director, officer or employee of INT'L.com or any Subsidiary, (B) entering into
of any employment, severance, management, consulting, deferred compensation or
other similar agreement (or any amendment to any such existing agreement) with
any director, officer or employee of INT'L.com or any Subsidiary, (C) change in
benefits payable under existing severance or termination pay policies or
employment, severance, management, consulting or other similar agreements, (D)
change in compensation, bonus or other benefits payable to directors, officers
or employees of INT'L.com or any Subsidiary in excess of 7% or (E) change in the
payment or accrual policy with respect to any of the foregoing;
(k) Any labor dispute or any activity or proceeding by a labor
union or representative thereof to organize any employees of INT'L.com or any
Material INT'L.com Subsidiary, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to any employees of INT'L.com or
any Material INT'L.com Subsidiary;
(l) Any issuance or sale of any stock, bonds, phantom stock
interest or other securities of which INT'L.com or any Subsidiary is the issuer,
or the grant, issuance
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or change of any stock options, warrants, or other rights to purchase securities
of INT'L.com or any Subsidiary or phantom stock interest in INT'L.com or any
Subsidiary other than issuances of common stock in connection with exercises of
employee stock options;
(m) Any cancellation of any debts or claims or waiver of any
rights in an aggregate amount exceeding reserves in the Financial Statements by
$50,000 or more;
(n) Any sale, assignment or transfer of any INT'L.com
Intellectual Property, including licenses therefor;
(o) Any capital expenditures, or commitment to make any
capital expenditures, for additions to property, plant or equipment in an
aggregate amount exceeding $50,000; or
(p) Any agreement undertaking or commitment to do any of the
foregoing.
3.9 LEASES IN EFFECT. All real property leases and subleases as to
which INT'L.com or any Subsidiary is a party and any amendments or modifications
thereof are listed in Section 3.9 of the INT'L.com Disclosure Schedule (each a
"LEASE" and collectively, the "LEASES") and are valid, in full force and effect
and enforceable, and there are no existing defaults on the part of INT'L.com or
any Subsidiary, and neither INT'L.com nor any Subsidiary has received or given
notice of default or claimed default with respect to any Lease, nor is there any
event that with notice or lapse of time, or both, would constitute a default on
the part of INT'L.com or any Subsidiary, or, to the knowledge of INT'L.com and
its Subsidiaries, any other party thereunder.
3.10 PERSONAL PROPERTY; REAL ESTATE. (a) INT'L.com has good and
marketable title, free and clear of all title defects and Liens (including,
without limitation, leases, chattel mortgages, conditional sale contracts,
purchase money security interests, collateral security arrangements and other
title or interest-retaining agreements) to all inventory, receivables,
furniture, machinery, equipment and other personal property, tangible or
otherwise, reflected on the Unaudited Balance Sheet or used in INT'L.com's
business, except for acquisitions and dispositions since the Unaudited Balance
Sheet Date in the ordinary course of business. The INT'L.com Disclosure Schedule
lists (i) all computer equipment and (ii) all other personal property, in each
case having a depreciated book value of $10,000 or more, which are used by
INT'L.com or any Subsidiary in the conduct of its business, and all such
equipment and property, in the aggregate, is in good operating condition and
repair, reasonable wear and tear excepted. There is no asset used or required by
INT'L.com in the conduct of its business as presently operated which is not
either owned by it or licensed or leased to it.
(b) Section 3.10 of the INT'L.com Disclosure Schedule contains
a schedule setting forth all real property which is owned or leased by INT'L.com
or any Subsidiary, or in which INT'L.com or any Subsidiary has any other right,
title or interest. Neither INT'L.com nor any Subsidiary owns any real property.
True and complete copies of each lease have been provided to Parent, and such
leases constitute the entire understanding relating to INT'L.com's or any
Subsidiary's use and occupancy of the leased premises.
(c) INT'L.com and each Subsidiary has obtained consents for
all alterations made as of the date hereof to each leased premise described in
Section 3.10 of the INT'L Disclosure Schedule and, upon the expiration or
earlier termination of the lease or sublease with respect thereto, shall not be
obligated to remove any such
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alterations or restore the premises to the condition they were in prior to the
time such alterations were undertaken, except for removal or restoration
obligations which individually or in the aggregate do not exceed $25,000. To the
knowledge of INT'L.com and its Subsidiaries, the improvements located on the
real property described in Section 3.10 of the INT'L.com Disclosure Schedule are
not the subject of and neither INT'L.com nor any Subsidiary has received written
notice of any official complaint or of a violation of any applicable zoning
ordinance or building code. There is no condemnation proceeding pending or, to
the knowledge of INT'L.com and its Subsidiaries, threatened against INT'L.com or
any Subsidiary and to the knowledge of INT'L.com and its Subsidiaries there are
no use or occupancy restrictions on the real property described in Section 3.10
of the INT'L.com Disclosure Schedule.
3.11 CERTAIN TRANSACTIONS. Except for (a) relationships with INT'L.com
or any Subsidiary as an officer, director, or employee thereof (and compensation
by INT'L.com or any Subsidiary in consideration of such services) and (b)
relationships with INT'L.com as security holders therein, none of the directors,
officers, or stockholders of INT'L.com, or any member of any of their families,
is presently a party to, or was a party to during the year preceding the date of
this Agreement, any transaction, or series of similar transactions, with
INT'L.com or any Subsidiary, in which the amount involved exceeds $60,000,
including, without limitation, any contract, agreement, or other arrangement (i)
providing for the furnishing of services to or by, (ii) providing for rental of
real or personal property to or from, or (iii) otherwise requiring payments to
or from, any such Person or any other Person in which any such Person has or had
a 5%-or-more interest (as a stockholder, partner, beneficiary, or otherwise) or
is or was a director, officer, employee, or trustee, but excluding any
transaction pursuant to existing employee benefit plans. None of INT'L.com's
officers or directors has any interest in any property, real or personal,
tangible or intangible, including inventions, copyrights, trademarks, or trade
names, used in or pertaining to the business of INT'L.com or the Material
INT'L.com Subsidiaries, or, to the knowledge of INT'L.com, any material
supplier, distributor, or customer of INT'L.com or the Material INT'L.com
Subsidiaries, except for the normal rights of a securityholder, and except for
rights under existing employee benefit plans.
3.12 LITIGATION AND OTHER PROCEEDINGS. There is no action, suit, claim,
proceeding, or to the knowledge of INT'L.com or any Subsidiary, investigation
pending against or, to the knowledge of INT'L.com or any Subsidiary, threatened
against INT'L.com or any Subsidiary or any of their respective properties and
assets before any court or arbitrator or any Governmental Entity. Neither
INT'L.com nor any Subsidiary is subject to any order, writ, judgment, decree, or
injunction.
3.13 NO DEFAULTS. INT'L.com and the Material INT'L.com Subsidiaries are
not, nor has INT'L.com or any Material INT'L.com Subsidiary received notice that
it would be with the passage of time, in default or violation of any term,
condition, or provision of (i) its Charter Documents; (ii) any judgment, decree,
or order applicable to INT'L.com or any Material INT'L.com Subsidiary; or (iii)
any loan or credit agreement, note, bond, mortgage, indenture, contract,
agreement, lease, license, or other instrument to which INT'L.com or any
Material INT'L.com Subsidiary is now a party or by which it or any of its
properties or assets may be bound, except for defaults and violations which have
been validly waived, or which, individually or in the aggregate, would not have
a material adverse effect on the Business Condition of INT'L.com.
3.14 MAJOR CONTRACTS. Neither INT'L.com nor any Material INT'L.com
Subsidiary is a party to or subject to:
(a) Any union contract, or any employment contract or
arrangement in effect (other than "at-will" employment arrangements) providing
for future compensation, written or oral, with any officer, consultant,
director, or employee;
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(b) Any plan or contract or arrangement, written or oral,
providing for non-standard bonuses, pensions, deferred compensation, retirement
payments, profit-sharing or the like;
(c) Any joint venture contract or arrangement or any other
agreement which has involved or is expected to involve a sharing of profits;
(d) Any OEM agreement, reseller or distribution agreement,
volume purchase agreement, corporate end user sales or service agreement,
reproduction or replication agreement or manufacturing agreement in which the
amount involved exceeds annually, or is expected to exceed in the aggregate over
the life of the contract, $50,000 or pursuant to which INT'L.com has granted or
received manufacturing rights, most favored nation pricing provisions, or
exclusive marketing, production, publishing or distribution rights related to
any product, group of products or territory;
(e) Any agreement, license, franchise, permit, indenture, or
authorization which has not been terminated or performed in its entirety and not
renewed which may be, by its terms, terminated, impaired, or adversely affected
by reason of the execution of this Agreement and all other agreements
contemplated hereby, the consummation of the Merger, or the consummation of the
transactions contemplated hereby or thereby;
(f) Except for trade indebtedness incurred in the ordinary
course of business, any instrument evidencing or related in any way to
indebtedness incurred in the acquisition of companies or other entities or
indebtedness for borrowed money by way of direct loan, sale of debt securities,
purchase money obligation, conditional sale, guarantee, or otherwise which
individually is in the amount of $50,000 or more;
(g) Any license agreement in effect, either as licensor or
licensee (excluding nonexclusive hardware and software licenses granted to
distributors or end-users and commercially available in-licensed software
applications);
(h) Any contract or agreement containing covenants purporting
to limit INT'L.com's or the Material INT'L.com Subsidiaries' freedom to compete
in any line of business in any geographic area; or
(i) Any contract or agreement not elsewhere specifically
disclosed pursuant to this Agreement, involving the payment or receipt by
INT'L.com of more than $250,000 in the aggregate.
For purposes of this Section 3.14, a contract, agreement or arrangement
shall be considered "in effect" if INT'L.com or any Material Subsidiary shall
have any obligations or liabilities pursuant to such contract, agreement or
arrangement.
All contracts, arrangements, plans, agreements, leases, licenses,
franchises, permits, indentures, authorizations, instruments and other
commitments which are listed in the INT'L.com Disclosure Schedule pursuant to
this Section 3.14 are valid and in full force and effect and neither INT'L.com
nor any Material INT'L.com Subsidiary has, nor, to the knowledge of INT'L.com
and the Material INT'L.com Subsidiaries, has any other party thereto, breached
any material provisions of, or entered into default in any material respect
under the terms thereof. INT'L.com has delivered to Parent copies of the
contracts or agreements,
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and descriptions of any verbal agreements or arrangements, referred to in this
Section 3.14 as in effect on the date of this Agreement.
3.15 MATERIAL REDUCTIONS. None of the parties to any of the contracts
identified in the INT'L.com Disclosure Schedule pursuant to Section 3.14 have
terminated, or in any way expressed in writing to INT'L.com or any Subsidiary an
intent to reduce or terminate the amount of its business with INT'L.com or any
Subsidiary in the future.
3.16 INSURANCE AND BANKING FACILITIES. Section 3.16 of the INT'L.com
Disclosure Schedule contains a complete and correct list of (i) all contracts of
insurance or indemnity of INT'L.com in force at the date of this Agreement
(including name of insurer or indemnitor, agent, annual premium, coverage,
deductible amounts and expiration date) and (ii) the names and locations of all
banks in which INT'L.com has accounts or safe deposit boxes, the designation of
each such account and safe deposit box, and the names of all persons authorized
to draw on or have access to each such account and safe deposit box. All
premiums and other payments due from INT'L.com with respect to any such
contracts of insurance or indemnity have been paid, and neither INT'L.com nor
any Material INT'L.com Subsidiary knows of any fact, act, or failure to act
which has or could reasonably be expected to cause any such contract to be
canceled or terminated. All known claims for insurance or indemnity have been
presented or are described in Section 3.16 of the INT'L.com Disclosure Schedule.
3.17 EMPLOYEES. The INT'L.com Disclosure Schedule sets forth a list as
of January 12, 2000 of (a) the names, titles, annual salaries and all bonuses of
all salaried employees of INT'L.com and its Subsidiaries (such term meaning
permanent and temporary, full-time and part-time employees) and (b) the wage
rates for non-salaried employees of INT'L.com and its Subsidiaries. Any persons
engaged by INT'L.com as independent contractors, rather than employees, have
been properly classified as such and have been so engaged in accordance with all
applicable federal, foreign, state or local laws. No employee that INT'L.com or
any Material INT'L.com Subsidiary wishes to retain has stated to INT'L.com or
any Material INT'L.com Subsidiary that such employee intends to resign or retire
as a result of the transactions contemplated by this Agreement or otherwise
within six months after the Closing Date. Hours worked by and payments made to
employees of INT'L.com and its Subsidiaries have not been in violation of the
Fair Labor Standards Act or any other applicable federal, foreign, state or
local laws dealing with such matters. Neither INT'L.com nor any Subsidiary is
engaged in any dispute or litigation with an employee or former employee
regarding matters pertaining to intellectual property or assignment of
inventions. Neither INT'L.com nor any Subsidiary, to the knowledge of INT'L.com
and its Subsidiaries, is subject to a union organizing effort. Neither INT'L.com
nor any Subsidiary has any written contract of employment or other employment,
severance or similar agreement with any of its employees or any established
policy or practice relating thereto, and all of its employees are
employees-at-will. Neither INT'L.com nor any Subsidiary is a party to any
pending, or to the knowledge of INT'L.com and its Subsidiaries, threatened,
labor dispute. INT'L.com and its Subsidiaries have complied in all material
respects with all applicable foreign, federal, state and local laws, ordinances,
rules and regulations and requirements relating to the employment of labor,
including but not limited to the provisions thereof relating to wages, hours,
collective bargaining and ensuring equality of opportunity for employment. There
are no claims pending, or, to the knowledge of INT'L.com and its Subsidiaries,
threatened to be brought, in any court or administrative agency by any former or
current employees of INT'L.com and its Subsidiaries for compensation, pending
severance benefits, vacation time, vacation pay or pension benefits, or any
other claim pending, or, to the knowledge of INT'L.com and its Subsidiaries,
threatened in any court or administrative agency from any current or former
employee or any other Person arising out of INT'L.com's or its Subsidiary's
status as employer, whether in the form of claims for employment discrimination,
harassment, unfair labor practices, grievances, wrongful discharge, or
otherwise.
3.18 EMPLOYEE BENEFIT PLANS. Each Plan (as defined below) covering
active, former, or retired employees of INT'L.com or any Subsidiary is listed in
Section 3.18 of the INT'L.com Disclosure Schedule. "PLAN" means any employee
benefit plan as defined in ERISA (as defined below), maintained or contributed
to by INT'L.com or any of its Subsidiaries within the past six years, and also
includes any employment, severance or similar contract, arrangement or policy
and each plan or arrangement providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability
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benefits, supplemental unemployment benefits, vacation benefits, pension or
retirement benefits or for deferred compensation, profit-sharing, bonuses,
phantom stock, stock options, stock appreciation rights or other forms of
incentive compensation or post-retirement insurance, compensation or benefits in
existence within the past three years or for which there is an unsatisfied
liability. INT'L.com has made available to Parent a copy (or description if no
document exists) of each Plan, and where applicable, any related trust
agreement, annuity, or insurance contract. All annual reports (Form 5500)
required to be filed with the Internal Revenue Service have been properly filed
on a timely basis, and INT'L.com has provided copies of the three most recently
filed Forms 5500 for each applicable Plan. Any Plan intended to be qualified
under Section 401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified or, if no such determination letter has been
received, the form of such Plan complies with the Code's requirements for
qualification, except those requirements for which the remedial amendment period
has not expired, and no event has occurred which is reasonably likely to
threaten the tax-exempt status of such Plan or any trust for such Plan. No Plan
is covered by Title IV of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or Section 412 of the Code. No "prohibited transaction,"
as defined in ERISA Section 406 or Code Section 4975 has occurred with respect
to any Plan, unless such a transaction was exempt from such rules or would not
give rise to a material tax or penalty. Each Plan has been maintained and
administered in material compliance with its terms and with the requirements
prescribed by any and all statutes, including but not limited to ERISA and the
Code, which are applicable to such Plans. There are no pending or, to the
knowledge of INT'L.com and its Subsidiaries, anticipated claims against or
otherwise involving any of the Plans and no suit, action, or other litigation
(excluding claims for benefits incurred in the ordinary course of Plan
activities) is currently pending against or with respect to any Plan for which
there is an unsatisfied liability. All contributions, reserves, or premium
payments to the Plan accrued to the date of this Agreement have been made or
provided for in accordance with prior funding and accrual practices. Within the
six year period preceding the Closing Date, neither INT'L.com nor any
Subsidiary, nor any entity which is considered one employer with INT'L.com or
any Subsidiary under Section 414 of the Code or Section 4001 of ERISA has ever
maintained or contributed to or incurred liability with respect to any Plan
subject to Title IV of ERISA or any "multi-employer plan" within the meaning of
Section 4001(a)(3) of ERISA, and neither INT'L.com nor any Subsidiary expects to
incur any such liability. There are no restrictions on the rights of INT'L.com
or any Subsidiary to amend or terminate any Plan, subject to any applicable
notice requirements without incurring any liability thereunder other than for
benefits accrued prior to the date of termination or amendment. Neither
INT'L.com nor any Subsidiary has engaged in and, to the knowledge of INT'L.com
and its Subsidiaries, it is not a successor or parent corporation to an entity
that has engaged in a transaction described in ERISA Section 4069. There have
been no written interpretations of, or announcements (whether or not written) by
INT'L.com or any Subsidiary relating to, or change in employee participation or
coverage under, any Plan that would increase the expense of maintaining such
Plan above the level of the expense incurred in respect thereof for the fiscal
year ended prior to the date hereof. Neither INT'L.com nor any of its ERISA
affiliates has any liability in respect of post-employment or post-retirement
welfare benefits for retired employees of INT'L.com or any Subsidiary. Neither
INT'L.com nor any Material INT'L.com Subsidiary nor any of their ERISA
Affiliates has any liability with respect to welfare benefits for former
employees other than health care continuation benefits required to be provided
under applicable law or which do not exceed three months in duration. No tax
under Section 4980B or 4980D of the Code has been incurred in respect of any
Plan that is a group health plan, as defined in Section 5000(b)(1) of the Code.
3.19 CERTAIN AGREEMENTS. Except as contemplated by this Agreement,
neither the execution and delivery of this Agreement and all other agreements
contemplated hereby, nor the consummation of the transactions contemplated
hereby will: (i) result in any payment by INT'L.com or any Subsidiary
(including, without limitation, severance, unemployment compensation, parachute
payment, bonus or otherwise) becoming due to any director, employee, or
independent contractor of INT'L.com or any Subsidiary under any Plan, agreement,
or otherwise, (ii) increase any benefits otherwise payable under any Plan or
agreement or (iii) result in the acceleration of the time of payment or vesting
of any such benefits.
3.20 GUARANTEES AND SURETYSHIPS. INT'L.com and its Subsidiaries have no
powers of attorney outstanding (other than those issued in the ordinary course
of business with respect to Tax matters), and INT'L.com and its Subsidiaries
have no material obligations or liabilities (absolute or contingent) as
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guarantor, surety, cosigner, endorser, co-maker, indemnitor, or otherwise
respecting the obligations or liabilities of any Person.
3.21 BROKERS AND FINDERS. INT'L.com has not retained any broker,
finder, or investment banker in connection with this Agreement or any of the
transactions contemplated by this Agreement, nor does or will INT'L.com or any
Subsidiary owe any fee or other amount to any broker, finder, or investment
banker in connection with this Agreement or the transactions contemplated by
this Agreement.
3.22 CERTAIN PAYMENTS. Neither INT'L.com nor any Subsidiary, nor to the
knowledge of INT'L.com and its Subsidiaries, any Person acting on behalf of
INT'L.com or any Subsidiary has, directly or indirectly, on behalf of or with
respect to INT'L.com or any Subsidiary: (i) made an unreported political
contribution, (ii) made or received any payment which was not legal to make or
receive, (iii) engaged in any material transaction or made or received any
material payment which was not properly recorded on the books of INT'L.com and
its Subsidiaries, (iv) created or used any "off-book" bank or cash account or
"slush fund," or (v) engaged in any conduct constituting a violation of the
Foreign Corrupt Practices Act of 1977.
3.23 ENVIRONMENTAL MATTERS. INT'L.com and its Subsidiaries have
complied in all material respects with all applicable federal, state and local
laws (including, without limitation, case law, rules, regulations, orders,
judgments, decrees, permits, licenses and governmental approvals) which are
intended to protect the environment and/or human health or safety (collectively,
"ENVIRONMENTAL LAWS"); neither INT'L.com nor any Subsidiary has handled,
generated, used, stored, transported or disposed of any material, substance or
waste which is regulated by Environmental Laws ("HAZARDOUS MATERIALS"), except
for ordinary office and/or office-cleaning supplies, products, equipment, fluids
and wastes customarily found, and in quantities customarily found, in a
commercial office setting, which have been used in compliance with Environmental
Laws; (iii) to the knowledge of INT'L.com and its Subsidiaries there is not now,
nor has there ever been, any underground storage tank or asbestos on any real
property owned, operated or leased by INT'L.com; (iv) INT'L.com has not
conducted, nor is it aware of, any environmental investigations, studies,
audits, tests, reviews or analyses, the purpose of which was to discover,
identify, or otherwise characterize the condition of the soil, groundwater, air
or the presence of Hazardous Materials at any real property owned, operated or
leased by INT'L.com; and (v) to the knowledge of INT'L.com and its Subsidiaries
there are no "Environmental Liabilities". For purposes of this Agreement,
"ENVIRONMENTAL LIABILITIES" are any claims, demands, or liabilities under
Environmental Laws which (i) arise out of or in any way relate to INT'L.com's or
its Subsidiary's operations or activities, or any real property at any time
owned, operated or leased by INT'L.com or a Subsidiary, or any stockholder's use
or ownership thereof, whether vested or unvested, contingent or fixed, actual or
potential, and (ii) arise from or relate to actions occurring (including any
failure to act) or conditions existing on or before the Closing Date.
3.24 ENFORCEABILITY OF CONTRACTS, ETC.
(a) No Person that is a party to any contract, agreement,
commitment or plan to which INT'L.com or a Subsidiary is a party has a valid
defense, on account of non-performance or malfeasance by INT'L.com or a
Subsidiary, which would make any such contracts, agreement, commitment or plan
not valid and binding upon or enforceable against such parties in accordance
with their terms, except to the extent such enforceability may be subject to or
limited by bankruptcy, insolvency, reorganization, arrangement or similar laws
affecting the rights of creditors generally and usual equity principles.
(b) Neither INT'L.com, nor any Subsidiary, nor to the
knowledge of INT'L.com and its Subsidiaries, any other Person, is in breach or
violation of, or default under, any material contract, agreement, arrangement,
commitment or plan to which INT'L.com or a Subsidiary is a party, and no event
or action has occurred, is pending, or,
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to the knowledge of INT'L.com and its Subsidiaries, is threatened, which, after
the giving of notice, or the lapse of time, or otherwise, would constitute a
breach or a default by INT'L.com or a Subsidiary or, to the knowledge of
INT'L.com and its Subsidiaries, any other Person, under any material contract,
agreement, arrangement, commitment or plan to which INT'L.com or a Subsidiary is
a party.
3.25 ACCOUNTING MATTERS. To the knowledge of INT'L.com and its
Subsidiaries, neither INT'L.com nor any of its Subsidiaries or affiliates has
taken or agreed to, or plans to, take any action that would prevent Parent from
accounting for the Merger as a "pooling of interests" in accordance with
generally accepted accounting principles, Accounting Principles Board Opinion
No. 16 and all published rules, regulations and policies of the Securities and
Exchange Commission (the "Commission").
3.26 YEAR 2000. All computer and other systems, software (whether
embedded or otherwise), hardware and other products owned or licensed by
INT'L.com or its Subsidiaries and used in connection with the services provided
by INT'L.com or its Subsidiaries and, to the knowledge of INT'L.com and its
Subsidiaries, all computer and other systems, software (whether embedded or
otherwise), hardware and other products produced by any third party that are
licensed by INT'L.com, in each case, have been written, manufactured and tested
to be Year 2000 Ready. For purposes of this Agreement, "YEAR 2000 READY" shall
mean, with respect to any systems, software (whether embedded or otherwise),
product, equipment or facility, that such system, product, equipment or facility
is capable of correctly processing, providing, receiving and manufacturing the
date data within and between the twentieth and twenty-first centuries, and its
operations and functionality has not been adversely affected and will not be
adversely affected in any material respect as a result of the advent of the Year
2000.
3.27 DISCLOSURE. Neither the representations or warranties made by
INT'L.com in this Agreement, nor the INT'L.com Disclosure Schedule or any other
certificate executed and delivered by INT'L.com pursuant to this Agreement, when
taken together, contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading in light of the circumstances under which they were
furnished.
3.28 RELIANCE. The foregoing representations and warranties are made by
INT'L.com with the knowledge and expectation that Parent and Merger Sub are
placing reliance thereon.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in either the documents delivered pursuant to
Section 4.5 or in the disclosure schedule of Parent dated as of the date hereof
and delivered herewith to INT'L.com (the "PARENT DISCLOSURE SCHEDULE") which
identifies the section and subsection to which each disclosure therein relates
(PROVIDED, HOWEVER, that Parent will be deemed to have adequately disclosed with
respect to any section or subsection any matters that are clearly described
elsewhere in such document if the applicability of such disclosure to such
non-referenced sections or subsections is apparent, and whether or not the
Parent Disclosure Schedule is) referred to in a specific section or subsection,
Parent and Merger Sub jointly and severally represent and warrant to INT'L.com
as follows:
4.1 ORGANIZATION AND QUALIFICATION. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted,
and is duly qualified and in good standing to do business in each jurisdiction
in which a failure to so qualify would have a material adverse effect on the
Business Condition of Parent. Each Subsidiary of Parent is a corporation duly
organized and validly existing under the laws of the jurisdiction of its
incorporation, and Merger Sub is recently organized, is in good standing, and
has conducted no business activities, other than as contemplated by this
Agreement. In this Agreement, "Material Parent Subsidiaries" shall mean the
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following: Lionbridge Technologies California, Inc., Lionbridge Technologies
(Ireland), Inc., Lionbridge Technologies, B.V. and Lionbridge Technologies
(France).
4.2 CAPITALIZATION. (a) The authorized capital stock of Parent consists
of 5,000,000 shares of preferred stock, $0.01 par value per share, of which no
shares are issued or outstanding or held in Parent's treasury, and 100,000,000
shares of Parent Common Stock, of which, as of November 10, 1999: (a) 16,287,827
shares were validly issued and outstanding, fully paid and nonassessable and (b)
5,221,201 shares were reserved for issuance pursuant to Parent's stock option
and stock purchase plans for its employees and directors. Except for options and
rights relating to shares described in clause (b) of the preceding sentence and
except as set forth in Section 4.2 of the Parent Disclosure Schedule or the
Reports (as defined in Section 4.5), there are no options, warrants or other
rights, agreements or commitments or understandings or rights of any character
(contingent or otherwise) obligating Parent to issue, deliver or sell or cause
to be issued, delivered or sold shares of its capital stock or any other
securities convertible into or evidencing the right to subscribe to shares of
its capital stock. All of the outstanding shares of capital stock of each
Subsidiary of Parent are owned beneficially and of record by Parent, one of its
other Subsidiaries, or any combination thereof, in each case, free and clear of
any Liens; and there are no outstanding subscriptions, warrants, options,
convertible securities or other rights (contingent or other) pursuant to which
any of the Subsidiaries is or may become obligated to issue any shares of its
capital stock to any Person other than Parent or one of the other Subsidiaries.
(b) The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, par value $0.01 per share, of which 1,000 shares
are issued and outstanding, all of which shares are owned beneficially and of
record by Parent.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby by
Parent and Merger Sub have been duly authorized by all necessary action of the
Boards of Directors and stockholders of Parent and Merger Sub. Certified copies
of the resolutions adopted by the Boards of Directors of Parent and Merger Sub
and Parent as sole stockholder of Merger Sub approving this Agreement, all other
agreements contemplated hereby and the Merger have been or will be provided to
INT'L.com. Each of Parent and Merger Sub has duly and validly executed and
delivered this Agreement and has, or prior to Closing, will have duly and
validly executed and delivered all other agreements contemplated hereby to be
executed by it, and each of this Agreement and such other agreements constitutes
a valid, binding and enforceable obligation of each of Parent and Merger Sub in
accordance with its terms.
4.4 NON-CONTRAVENTION. Neither the execution, delivery or performance
of this Agreement and all other agreements contemplated hereby by Parent and
Merger Sub, nor the consummation of the Merger or any other transaction
described herein, does or will, after the giving of notice, or the lapse of
time, or otherwise, conflict with, result in a breach of, or constitute a
default under, the Charter Documents of Parent or Merger Sub or any federal,
foreign, state or local court or administrative order or process, statute, law,
ordinance, rule or regulation, or any contract, agreement or commitment to which
Parent is a party, or under which Parent or any Material Parent Subsidiary is
obligated, or by which Parent or any Material Parent Subsidiary or any of the
rights, properties or assets of Parent or any Material Parent Subsidiary are
subject or bound; result in the creation of any Lien upon, or otherwise
adversely affect, any of the rights, properties or assets of Parent or any
Material Parent Subsidiary; terminate, amend or modify, or give any party the
right to terminate, amend, modify, abandon or refuse to perform or comply with,
any contract, agreement or commitment to which Parent or any Material Parent
Subsidiary is a party, or under which Parent or any Material Parent Subsidiary
is obligated, or by which Parent or any Material Parent Subsidiary or any of the
rights, properties or assets of Parent or any Material Parent Subsidiary are
subject or bound; or accelerate, postpone or modify, or give any party the right
to accelerate, postpone or modify, the time within which, or the terms and
conditions under which, any liabilities, duties or obligations are to be
satisfied or performed, or any rights or benefits are to be received, under any
contract, agreement or commitment to which Parent or any Material Parent
Subsidiary is a party, or under which Parent or any Material Parent Subsidiary
may be obligated, or by which Parent or any of the rights, properties or assets
of Parent or any Material Parent Subsidiary are, subject or bound.
<PAGE>
4.5 REPORTS AND FINANCIAL STATEMENTS. (a) Parent has previously
furnished to INT'L.com true and correct copies of its (i) Prospectus dated as of
August 20, 1999 contained in Parent's Registration Statement on Form S-1, (ii)
Quarterly Report on Form 10-Q for the period ended September 30, 1999 (the
"RECENT 10-Q") and (iii) all other reports filed by it with the Commission under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") since
August 20, 1999.
(b) Parent hereby agrees to furnish to INT'L.com true and
correct copies of all reports filed by it with the Commission after the date
hereof prior to the Closing all in the form (including exhibits) so filed
(collectively, the "REPORTS"). As of their respective dates, the Reports
complied or will comply in all material respects with the then applicable
published rules and regulations of the Commission with respect thereto at the
date of their issuance and did not or will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of the date hereof, no additional
filings or amendments to previously filed Reports are required pursuant to such
rules and regulations. Each of the audited consolidated financial statements and
unaudited interim financial statements included in Parent's Reports has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto)
and fairly presents the financial position of the entity or entities to which it
relates as at its date or the results of operations, stockholders' equity or
cash flows of such entity or entities (subject, in the case of unaudited
statements, to the absence of footnote disclosure and in the case of unaudited
interim statements to year-end adjustments, which will not be material either
individually or in the aggregate, and except as described in Section 4.5 of the
Parent Disclosure Schedule). As of the date of the Recent 10-Q, there were no
material liabilities, claims or obligations of any nature, whether accrued,
absolute, contingent, anticipated or otherwise, whether due or to become due,
that are not shown or provided for either in the Recent 10-Q or Section 4.5 of
the Parent Disclosure Schedule, and since the date of the Recent 10-Q, Parent
has incurred no liabilities, claims or obligations of any nature, whether
accrued, absolute, contingent, anticipated or otherwise other than in the
ordinary course of business and except for liabilities incurred by Parent in
connection with the preparation and execution of this Agreement and the
consummation of the transactions contemplated herein.
4.6 VALIDITY OF PARENT MERGER SHARES. The Parent Merger Shares to be
issued in the Merger will, when issued, be, validly issued, fully paid and
nonassessable.
4.7 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except for (a)
the requirements of state securities (or "Blue Sky") laws, (b) the filing and
recording of the Merger Documents as provided by the DGCL, (c) the filing of
appropriate documents with the Nasdaq Stock Market, (d) the filing of the Proxy
Statement, the Form S-4 and a Form 8-K with the Commission, if applicable, and
(e) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made,
individually or in the aggregate, could not reasonably be expected to impair in
any material respect the ability of Parent or Merger Sub to perform its
obligations under this Agreement or prevent or materially delay the consummation
of any of the transactions contemplated by this Agreement, no consent, approval
or authorization of, or declaration, filing or registration with, any
Governmental Entity is required to be made or obtained by Parent or Merger Sub
in connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since September 30, 1999, there has not been any material adverse change
in the Business Condition of Parent.
4.9 LITIGATION AND OTHER PROCEEDINGS. There is no action, suit, claim,
proceeding, or to the knowledge of Parent or any Subsidiary investigation
pending against or, to the knowledge of Parent or any Subsidiary, threatened
against Parent or any Subsidiary or any of their respective properties and
assets before any court or arbitrator or any Governmental Entity.
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4.10 DISCLOSURE. Neither the representations or warranties made by
Parent in this Agreement, nor the Parent Disclosure Schedule or any other
certificate executed and delivered by Parent pursuant to this Agreement, when
taken together and with knowledge of the contents of the Reports, contains any
untrue statement of a material fact, or omits to state a material fact necessary
to make the statements or facts contained herein or therein not misleading in
light of the circumstances under which they were furnished. Prior to the date of
this Agreement, Parent has disclosed to INT'L.com all material strategic and
financing transactions which Parent has taken action in furtherance of and
involving Parent or any Parent Subsidiary.
4.11 RELIANCE. The foregoing representations and warranties are made by
Parent with the knowledge and expectation that INT'L.com are placing reliance
thereon.
4.12 BROKERS AND FINDERS. Except for Prudential Securities, Inc.,
Parent has not retained any broker, finder, or investment banker in connection
with this Agreement or any of the transactions contemplated by this Agreement.
4.13 ACCOUNTING MATTERS. To the knowledge of Parent, neither Parent nor
any of its affiliates has taken or agreed to, or plans to, take any action that
would prevent Parent from accounting for the Merger as a "pooling of interest"
in accordance with generally accepted accounting principles, Accounting
Principles board Opinion No. 16 and all published rules, regulations and
policies of the Commission.
ARTICLE V
COVENANTS OF INT'L.COM
References in this Article V to INT'L.com shall be deemed to include
all Subsidiaries of INT'L.com. During the period from the date of this Agreement
(except as otherwise indicated) and continuing until the earlier of the
termination of this Agreement or the Effective Time, INT'L.com agrees (except as
expressly set forth in Section 5 of the Parent Disclosure Schedule contemplated
by this Agreement or otherwise permitted with Parent's prior written consent):
5.1 CONDUCT OF BUSINESS IN ORDINARY COURSE. INT'L.com will carry on its
business in the ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent with such business, use all reasonable
best efforts consistent with past practice and policies to preserve intact its
present business organization, keep available the services of its present
officers, consultants and employees and preserve its relationships with
customers, suppliers and distributors and others having business dealings with
it. INT'L.com will confer on a regular and frequent basis with representatives
of Parent to report operational matters of a material nature and to report the
general status of the ongoing operations of the business of INT'L.com. The
foregoing notwithstanding, INT'L.com will not:
(a) other than in the ordinary course of business consistent
with prior practice, enter into any material commitment or transaction,
including but not limited to any purchase of assets (other than raw materials,
supplies or cash equivalents) for a purchase price in excess of $50,000;
(b) grant any bonus, severance or termination pay to any
officer, director, independent contractor or employee of INT'L.com;
(c) enter into or amend any agreements pursuant to which any
other party is granted support, service, marketing or publishing rights, other
than in the ordinary course of business consistent
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with prior practice, or is granted distribution rights of any type or scope with
respect to any products of INT'L.com;
(d) other than in the ordinary course of business consistent
with prior practice, enter into or terminate any contracts, arrangements, plans,
agreements, leases, licenses, franchises, permits, indentures, authorizations,
instruments, or commitments, or amend or otherwise change in any material
respect the terms thereof in a manner adverse to INT'L.com;
(e) commence a lawsuit other than: (i) for the routine
collection of bills, (ii) in such cases where INT'L.com in good faith determines
that failure to commence suit would result in a material impairment of a
valuable aspect of INT'L.com's business PROVIDED THAT INT'L.com consults with
Parent prior to filing such suit, or (iii) for a breach of this Agreement or any
agreement related hereto;
(f) modify in any material respect existing discounts or other
terms and conditions with dealers, distributors and other resellers of
INT'L.com's products or services in a manner adverse to INT'L.com;
(g) accelerate the vesting or otherwise modify any INT'L.com
Option, restricted stock or other outstanding rights or other securities other
than any acceleration or modification that results from the execution and
performance of this Agreement or any of the transactions contemplated hereby;
(h) take any action which would make any representation or
warranty in this Agreement untrue or incorrect, as if made as of such time; or
(i) agree in writing or otherwise to take any of the foregoing
actions.
5.2 DIVIDENDS, ISSUANCE OF, OR CHANGES IN SECURITIES. INT'L.com will
not: (i) declare or pay any dividends on or make other distributions to its
stockholders (whether in cash, shares or property), (ii) issue, deliver, sell,
or authorize, propose, or agree to, or commit to the issuance, delivery, or sale
of any shares of its capital stock of any class, any Company Voting Debt or any
securities convertible into its capital stock, any options, warrants, calls,
conversion rights, commitments, agreements, contracts, understandings,
restrictions, arrangements or rights of any character obligating INT'L.com to
issue any such shares, INT'L.com Voting Debt or other convertible securities
except as any of the foregoing is required by Outstanding INT'L.com Options;
(iii) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of INT'L.com, (iv) repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock or
options or warrants related thereto, or (v) take any action in furtherance of
any of the foregoing.
5.3 GOVERNING DOCUMENTS. INT'L.com will not amend its Charter
Documents.
5.4 NO ACQUISITIONS. INT'L.com will not authorize, recommend, propose
or announce an intention to authorize, recommend or propose, or enter into a
letter of intent (whether or not binding), an agreement in principle or an
agreement with respect to any merger, consolidation or business combination
(other than the Merger), or achieve a comparable effect through any acquisition
of assets or securities.
5.5 NO DISPOSITIONS. INT'L.com will not sell, lease, license, transfer,
mortgage, encumber or otherwise dispose of any of its material assets or cancel,
release, or assign any material indebtedness or claim, except in the ordinary
course of business.
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5.6 INDEBTEDNESS. INT'L.com will not incur any indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise.
5.7 COMPENSATION. Except for the actions, adoptions, amendments,
modifications, and payments described in Section 5.1(b) of the Parent Disclosure
Schedule, INT'L.com will not adopt or amend, or modify in any material respect,
any Plan or pay any pension or retirement allowance not required by any existing
Plan. INT'L.com will not enter into or modify any employment or severance
contracts, increase the salaries, wage rates or fringe benefits of its officers,
directors or employees or pay bonuses or other remuneration except for current
salaries, severance and other remuneration for which INT'L.com is obligated
under arrangements existing prior to the Unaudited Balance Sheet Date to which
INT'L.com is a party and which have been disclosed in the INT'L.com Disclosure
Schedule.
5.8 CLAIMS. INT'L.com will not settle any claim, action or proceeding,
except in the ordinary course of business consistent with prior practice.
5.9 ACCESS TO PROPERTIES AND RECORDS. Subject to contractual and other
obligations, INT'L.com will give Parent and its representatives full access, at
a place reasonably acceptable to INT'L.com, during reasonable business hours and
following reasonable notice but in such a manner as not unduly to disrupt the
business of INT'L.com, to its senior management, senior technical personnel,
premises, properties, contracts, commitments, books, records and affairs, and
will provide Parent with such financial, technical and operating data and other
information pertaining to its business as Parent may request. With INT'L.com's
prior consent, which will not be unreasonably withheld, Parent will be entitled
in conjunction with INT'L.com personnel to make appropriate inquiries of third
parties in the course of its investigation.
5.10 BREACH OF REPRESENTATIONS AND WARRANTIES. INT'L.com will not take
any action that would cause or constitute a breach of any of the representations
and warranties set forth in Article III or that would cause any of such
representations and warranties to be inaccurate in any material respect or that
would constitute a breach of any of its other obligations under this Agreement.
In the event of, and promptly after becoming aware of, the occurrence of or the
pending or threatened occurrence of any event that would cause or constitute
such a breach or inaccuracy, INT'L.com will give detailed notice thereof to
Parent and will use its reasonable best efforts to prevent or remedy promptly
such breach or inaccuracy.
5.11 CONSENTS. INT'L.com will promptly apply for or otherwise seek and
use reasonable best efforts to obtain, all Consents, and make all filings with
Governmental Entities, required with respect to the consummation of the Merger.
5.12 TAX RETURNS. INT'L.com will promptly provide or make available to
Parent copies of all tax returns, reports and information statements that have
been filed or are filed prior to the Closing Date.
5.13 EXCLUSIVITY; ACQUISITION PROPOSALS. Unless and until this
Agreement will have been terminated by either party pursuant to Article X hereof
and thereafter subject to Section 10.5, INT'L.com will not (and will use its
reasonable best efforts to ensure that none of its officers, directors,
stockholders, agents, representatives or affiliates) take or cause or permit any
Person to take, directly or indirectly, any of the following actions with any
party other than Parent and its designees: (i) solicit, encourage, initiate or
participate in any negotiations, inquiries, or discussions with respect to any
offer or proposal to acquire all or any significant part of INT'L.com's
business, assets or capital stock, whether by merger, consolidation, other
business combination, purchase of assets, tender or exchange offer or otherwise
(each of the foregoing, an "ACQUISITION TRANSACTION"), (ii) disclose, in
connection with an Acquisition Transaction, any information not customarily
disclosed to any Person other than Parent or its representatives concerning
INT'L.com's business or properties or afford to any Person other than Parent or
its representatives access to its properties, books, or records, except in the
ordinary course of business and as required by law or pursuant to a governmental
request for information, (iii) enter into or execute any agreement relating to
an Acquisition Transaction, or (iv) make or authorize any public statement,
recommendation or solicitation in support of any Acquisition Transaction or any
offer or proposal relating to an Acquisition Transaction other than with respect
to the Merger PROVIDED, HOWEVER, that (a) INT'L.com may furnish or cause to be
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furnished information concerning INT'L.com and its businesses, properties or
assets to a Person, (b) the Company may engage in discussions or negotiations
with such Person, (c) following receipt of a proposal or offer for an
Acquisition Transaction, may make disclosure to its stockholders and may
recommend such proposal or offer to its stockholders and (d) following receipt
of a proposal or offer for an Acquisition Transaction the Board of Directors of
INT'L.com may enter into an agreement in principle or a definitive agreement
with respect to such Acquisition Transaction, but in each case referred to in
the foregoing clauses (a) through (d) only to the extent that the Board of
Directors of INT'L.com shall conclude in good faith after consultation with
outside legal counsel that such action is necessary or appropriate because
failure to take such action would be inconsistent with the fiduciary duties owed
by the Board of Directors to the stockholders of INT'L.com under applicable law;
and PROVIDED, FURTHER, that the Board of Directors of INT'L.com shall not take
any of the foregoing actions referred to in clauses (a) through (d) without
prior written notice to Parent with respect to such action. In the event that
INT'L.com is contacted by any third party expressing an interest in discussing
an Acquisition Transaction, INT'L.com will promptly notify Parent of such
contact and the identity of the party so contacting INT'L.com.
5.14 NOTICE OF EVENTS. Throughout the period between the date of this
Agreement and the Closing, INT'L.com will promptly advise and consult with
Parent regarding any and all material events and developments concerning its
financial position, results of operations, assets, liabilities or business or
any of the items or matters concerning INT'L.com covered by the representations,
warranties and covenants of INT'L.com contained in this Agreement.
5.15 REASONABLE BEST EFFORTS. INT'L.com will use its reasonable best
efforts to effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to Closing under this Agreement.
5.16 INSURANCE. INT'L.com will use its reasonable best efforts to
maintain in force at the Effective Time policies of insurance of the same
character and coverage as those described in the INT'L.com Disclosure Schedule,
and INT'L.com will promptly notify Parent in writing of any changes in such
insurance coverage occurring prior to the Effective Time.
5.17 FINANCIAL STATEMENTS. INT'L.com will use its reasonable best
efforts to deliver to Parent audited consolidated balance sheets as of December
31, 1997, December 31, 1998 and December 31, 1999 and audited consolidated
statements of income and consolidated cash flows for the twelve months ended
December 31, 1997, December 31, 1998 and December 31, 1999 no later than
February 28, 2000.
5.18 CONFIDENTIALITY AND ASSIGNMENT OF INVENTIONS AGREEMENTS. INTL.com
shall use its reasonable best efforts to cause each officer and employee of
INT'L.com and its Subsidiaries to enter into a confidentiality and assignment of
inventions agreement substantially in the form of such agreement used by Parent
and its Subsidiaries in the country in which such officer or employee performs
services for INT'L.com. Any officer or employee of INT'L.com or any Subsidiary
who has not entered into such agreement shall have been terminated by INTL.com
or such Subsidiary prior to the Closing.
ARTICLE VI
COVENANTS OF PARENT
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time (or later
where so indicated), Parent and Merger Sub agree (except as expressly
contemplated by this Agreement or with INT'L.com's prior written consent):
6.1 BREACH OF REPRESENTATIONS AND WARRANTIES. Neither Parent nor Merger
Sub will take any action which would cause or constitute a breach of any of the
representations and warranties set forth in Article IV or which would cause any
of such representations and warranties to be inaccurate in any material respect.
In the event of, and promptly after becoming aware of, the occurrence of or the
pending or threatened occurrence of any event which would cause or constitute
such a breach or inaccuracy, Parent
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will give detailed notice thereof to INT'L.com and will use its reasonable best
efforts to prevent or remedy promptly such breach or inaccuracy.
6.2 ADDITIONAL INFORMATION; ACCESS. Parent will provide INT'L.com and
its stockholders with the information relating to Parent referred to in Section
4.5 and the information relating to Parent to be included in the Form S-4. In
addition, Parent will afford to INT'L.com and to its counsel and to the persons
expected to become stockholders of Parent pursuant to the Merger access
throughout the period prior to the Effective Time to its senior management and
all other information concerning Parent as INT'L.com or such stockholder may
reasonably request. Such stockholders will also be afforded the opportunity to
ask questions and to receive accurate and complete answers from Parent
concerning the terms and conditions of the Merger and the issuance of the Parent
Merger Shares pursuant thereto.
6.3 CONSENTS. Parent will promptly apply for or otherwise seek, and use
its reasonable best efforts to obtain, all consents and approvals, and make all
filings, required with respect to the consummation of the Merger.
6.4 REASONABLE BEST EFFORTS. Each of Parent and Merger Sub will use its
reasonable best efforts to effectuate the transactions contemplated hereby and
to fulfill and cause to be fulfilled the conditions to Closing under this
Agreement.
6.5 OFFICERS AND DIRECTORS. Parent agrees that all rights to
indemnification and all limitations on liability existing on the date hereof in
favor of, or for the benefit of, the present or former officers and directors of
INT'L.com and its Subsidiaries with respect to actions taken in their capacities
as directors or officers of INT'L.com or such INT'L.com Subsidiary prior to the
Effective Time as provided in the Charter Documents of INT'L.com will survive
the Merger and continue in full force and effect following the Effective Time
and will not be modified by Parent. Notwithstanding the foregoing, the
provisions of such Charter Documents will have no effect on the obligations of
any stockholders of INT'L.com pursuant to Article IX of this Agreement or the
Escrow Agreement.
6.6 NASDAQ NATIONAL MARKET LISTING. Parent will promptly prepare and
submit a NASDAQ listing application and will use its reasonable best efforts to
cause the Parent Merger Shares to be authorized for trading on the Nasdaq
National Market as soon as practicable.
6.7 NOTICE OF EVENTS. Throughout the period between the date of this
Agreement and the Closing, Parent will promptly advise and consult with
INT'L.com regarding any and all material adverse change to the representations,
warranties and covenants of Parent and Merger Sub contained in this Agreement
and will disclose to INT'L.com all material strategic and financing transactions
which Parent takes action in furtherance of which involve Parent or any Parent
Subsidiary.
6.8 THIRD PARTY BENEFICIARIES. Section 6.5 will survive the
consummation of the Merger, is intended to benefit the stockholders of INT'L.com
that receive Parent Merger Shares (the "NEW PARENT Stockholders") and the
present and former officers and directors of INT'L.com and its Subsidiaries,
will be binding on Parent and its successors and assigns, and will be
enforceable by the officers and directors of INT'L.com and the New Parent
Stockholders.
6.9 DIRECTORS OF PARENT. Prior to the date of the mailing of the Proxy
Statement, Parent shall nominate Roger Jeanty to serve as a director of Parent
in accordance with the policies for directors of Parent, and Parent shall take
such action as is necessary to cause such person to become a director of Parent
effective as of the Effective Time.
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ARTICLE VII
ADDITIONAL AGREEMENTS
In addition to the foregoing, Parent, Merger Sub, and INT'L.com each
agree to take the following actions after the execution of this Agreement.
7.1 PREPARATION OF THE FORM S-4 AND THE PROXY STATEMENT;
STOCKHOLDERS MEETING . (a) INT'L.com shall use its reasonable best efforts to
hold one or more special meetings of stockholders in accordance with the
applicable requirements of the DGCL and to obtain the INT'L.com Requisite
Stockholder Approval to enable the Merger to be effective on the Closing Date
(determined without regard to the condition to closing in Section 8.2(h)).
Parent shall use its reasonable best efforts to hold one or more special
meetings of stockholders to obtain the approval of the issuance of its shares
in connection with the Merger by the stockholders of Parent as required by
the rules of the Nasdaq Stock Market and in accordance with the applicable
requirements of the DCGL. In connection with obtaining the approval of its
stockholders, Parent shall prepare, with the assistance and cooperation of
INT'L.com, a Registration Statement on Form S-4 (the "Form S-4"). The Form
S-4 shall constitute a joint proxy and a prospectus and shall be used for
purposes of offering the Parent Merger Shares to the stockholders of
INT'L.com, soliciting proxies from such stockholders for the purpose of
obtaining the INT'L.com Requisite Stockholder Approval and soliciting proxies
from stockholders of Parent for the purposes of obtaining approval of the
issuance of its shares in connection with the Merger by the stockholders of
Parent (such proxy/ prospectus statement, together with the accompanying
letter to stockholders, notice of meeting and form of proxy shall be referred
to herein as the "Proxy Statement"). INT'L.com agrees to fully cooperate with
Parent in the preparation of the Form S-4, and shall, upon request, furnish
Parent with all information concerning it and its affiliates, directors,
officers and stockholders as Parent may reasonably request in connection with
the preparation of the Form S-4. INT'L.com shall prepare the portions of the
Form S-4, relating to INT'L.com and its subsidiaries including but not
limited to financial information, management of INT'L.com, description of
INT'L.com's business, executive compensation of the INT'L.com, the
recommendation of INT'L.com's Board of Directors, appraisal rights, risk
factors relating to INT'L.com, and INT'L.com portions of background of the
Merger, reasons for the Merger, interests of certain persons in the Merger
and security ownership of certain beneficial owners and management. INT'L.com
shall also prepare the disclosure concerning all payments which in the
absence of stockholder approval would be "Parachute Payments" as defined in
Code Section 280G(b)(2), which shall be in form and substance satisfactory to
Parent and its counsel, to satisfy all requirements applicable to INT'L.com
of applicable state and federal securities laws, the DGCL and Code Section
280G(b)(5)(B) and the regulations thereunder. No filing of, or amendment or
supplement to, the Form S-4 will be made by Parent and no amendment or
supplement to the Proxy Statement will be made by Parent or INT'L.com without
providing the other party the opportunity to review and comment thereon.
Parent will advise INT'L.com, promptly after it receives notice thereof, of
the time when the Form S-4 has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of
the qualification of the Parent Merger Shares for offering or sale in any
jurisdiction, or any request by the Commission for amendment of the Proxy
Statement or
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the Form S-4 or comments thereon and responses thereto or requests by the
Commission for additional information. If at any time prior to the Effective
Time any information relating to Parent or INT'L.com or any of their respective
affiliates, officers or directors, should be discovered by the Parent or
INT'L.com which should be set forth in an amendment or supplement to any of the
Form S-4 or the Proxy Statement, so that any of such documents would not include
any misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, the party which discovers such information shall
promptly notify the other party hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the
Commission, and to the extent required by law, disseminated to the stockholders
of Parent and INT'L.com. If the Commission requires a Tax opinion in connection
with the filing of the Form S-4, INT'L.com shall cause Neal, Gerber & Eisenberg,
counsel to INT'L.com, to provide such opinion in the form required by the
Commission. The issuance of such opinion shall be conditioned upon the receipt
by Neal, Gerber & Eisenberg of customary representation letters from each of
INT'L.com and Parent in a form reasonably agreed to by the parties.
(b) Parent shall file the Form S-4 with the Commission and
shall, with the assistance of INT'L.com, promptly respond to any comments from
the Commission on the Form S-4 and shall otherwise use its best efforts to have
the Form S-4 declared effective under the Securities Act as promptly
practicable. Promptly following such time as the Form S-4 is declared effective,
INT'L.com shall distribute the Proxy Statement to its stockholders and Parent
shall distribute the Proxy Statement to its stockholders. Parent shall comply
with all applicable provisions of and rules under the Securities Act and the
Exchange Act and state securities laws in the preparation and filing of the S-4
Registration Statement, the offering and issuance of the Parent Merger Shares,
the filing and distribution of the Proxy Statement, the solicitation of proxies
thereunder, and the calling and holding of the special meeting of stockholders
of Parent. Parent shall also ensure that any Form S-4 filed by Parent does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading (provided that Parent shall not be responsible for the accuracy and
completeness of information relating to INT'L.com or any of its subsidiaries or
any other information furnished by INT'L.com specifically for inclusion in the
S-4 Registration Statement).
(c) INT'L.com shall ensure that the Proxy Statement does not
contain an untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statement made,
under the circumstances under which it is made, not misleading (provided that
INT'L.com shall not be responsible for the accuracy or completeness of any
information relating to Parent or any of its Subsidiaries or furnished by Parent
specifically for inclusion in the Proxy Statement).
(d) INT'L.com, acting through its Board of Directors, shall
include in the Proxy Statement the unanimous recommendation of its Board of
Directors eligible to vote on such matters that its stockholders vote in favor
of the adoption of this Agreement and the approval of the Merger.
Notwithstanding the foregoing, the obligation set forth in the foregoing
sentence shall not apply (and the Board of Directors shall be permitted to
modify or withdraw any such recommendation previously made) if the Board of
Directors of INT'L.com concludes in good faith, after consultation with its
outside legal
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counsel, that fulfilling the obligations in the foregoing sentence would violate
the fiduciary duties of the Board of Directors under applicable law; PROVIDED,
HOWEVER, that nothing shall limit the obligation of INT'L.com to otherwise use
its reasonable best efforts to fulfill all of its obligations under this
Agreement, including without limitation, INT'L.com's obligations under Section
7.1(a) and (c).
(e) Parent, acting through its Board of Directors, shall
include in the Proxy Statement the unanimous recommendation of its Board of
Directors eligible to vote on such matters that the stockholders of Parent vote
in favor of the issuance of its shares in connection with the Merger.
Notwithstanding the foregoing, the obligation set forth in the foregoing
sentence shall not apply (and the Board of Directors shall be permitted to
modify or withdraw any such recommendation previously made) if the Board of
Directors of Parent concludes in good faith, after consultation with its outside
legal counsel, that fulfilling the obligations in the foregoing sentence would
violate the fiduciary duties of the Board of Directors under applicable law;
PROVIDED, HOWEVER, that nothing shall limit the obligation of the Parent to
otherwise use its reasonable best efforts to fulfill all of its obligations
under this Agreement, including without limitation, Parent's obligations under
Section 7.1 (a) and (b).
(f) All resales of shares of Parent Common Stock by each
INT'L.com Affiliate (as defined in Section 7.8(b)) will be subject to the
restrictions imposed by the third restated registration rights agreement of
Parent (the "REGISTRATION RIGHTS AGREEMENT") in the form attached as EXHIBIT
7.1, which will be entered into by the INT'L.com Affiliates. Parent will be
entitled to place the legends as referred to in the Registration Rights
Agreement on each certificate evidencing any shares of Parent Common Stock to be
received by the INT'L Affiliates pursuant to the terms of this Agreement and to
issue appropriate stop transfer instructions to the transfer agent for shares of
Parent Common Stock consistent with the terms of the Registration Rights
Agreement.
7.2 LEGAL CONDITIONS TO THE MERGER. Each of Parent, Merger Sub, and
INT'L.com will use all reasonable best efforts to take actions necessary to
comply promptly with all legal requirements which may be imposed on it with
respect to the Merger. Each of Parent, Merger Sub and INT'L.com will use all
reasonable best efforts to take all actions to obtain (and to cooperate with the
other parties in obtaining) any consent required to be obtained or made by
INT'L.com, Merger Sub, or Parent in connection with the Merger, or the taking of
any action contemplated thereby or by this Agreement.
7.3 EMPLOYEE BENEFITS. Nothing contained herein will, subject to
Section 6.5, be considered as requiring INT'L.com or Parent to continue any
specific plan or benefit, or to confer upon any employee, beneficiary,
dependent, legal representative or collective bargaining agent of such employee
any right or remedy of any nature or kind whatsoever under or by reason of this
Agreement, including without limitation any right to employment or to continued
employment for any specified period, at any specified location or under any
specified job category, except as specifically provided for in an offer letter
or other agreement of employment. It is specifically understood that continued
employment with INT'L.com or employment with Parent is not offered or implied
for any other employees of INT'L.com and any continuation of employment with
INT'L.com after the Closing will be at will except as specifically provided
otherwise in an offer letter or other agreement of employment. Parent agrees
that it will cause Merger Sub to comply with the WARN Act, to the extent
applicable to INT'l.com and its Subsidiaries in connection with actions taken at
and after the Effective Time.
7.4 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby, including investment banking, legal and
accounting expenses, will be paid by the party incurring such expense; PROVIDED,
HOWEVER, that any such expenses incurred by INT'L.com in excess of $400,000
shall be borne by the stockholders of INT'L.com (without regard to Section 9.4)
through the determination of the Modified Share Amount as set forth in Section
2.1(d); PROVIDED, FURTHER, that INT'L.com will itemize any such investment
banking, legal and accounting expenses of INT'L.com prior to Closing and provide
Parent with an invoice and certification from all organizations providing such
services at the Closing in a form reasonably acceptable to Parent; and PROVIDED,
FURTHER, that the provisions of this Section 7.4 shall not be construed to
relieve a party from liability resulting from such party's breach of this
Agreement.
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7.5 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
INT'L.com, the proper officers and directors of each corporation which is a
party to this Agreement will take all such necessary action. Without limiting
the foregoing, on or prior to the Closing Date, INT'L.com will deliver to Parent
a properly executed statement satisfying the requirements of Treasury Regulation
Sections 1.897-2(h) and 1.1445-2(c)(3) in a form reasonably acceptable to
Parent.
7.6 PUBLIC ANNOUNCEMENTS. Neither Parent nor INT'L.com will directly or
indirectly disseminate any press release or other announcement concerning this
Agreement or the transactions contemplated herein to any third party (except to
the directors, officers and employees of the parties to this Agreement whose
direct involvement is necessary for the consummation of the transactions
contemplated under this Agreement, to the attorneys, advisors and accountants of
the parties hereto, or except as Parent determines in good faith to be required
by applicable law after consultation with INT'L.com) without the prior written
agreement of the other parties.
7.7 CONFIDENTIALITY. INT'L.com and Parent have entered into a Mutual
Nondisclosure Agreement dated October 7, 1999 concerning each party's
obligations to protect the confidential information of the other party.
INT'L.com and Parent each hereby affirm each of their obligations under such
agreement. If this Agreement is terminated in accordance with Article X hereof,
Parent will, and will cause its accountants, counsel and other representatives
to deliver to INT'L.com all documents and other material, and all copies
thereof, obtained by Parent or on its behalf from INT'L.com in connection with
this Agreement, whether so obtained before or after the execution hereof, and
will not disclose any such information or documents to any third parties or make
any use of such. If this Agreement is terminated in accordance with Article X
hereof, INT'L.com will, and will cause its accountants, counsel and other
representatives to, deliver to Parent all documents and other material, and all
copies thereof, obtained by INT'L.com or by an officer, director or
representative of INT'L.com from Parent in connection with this Agreement,
whether so obtained before or after the execution hereof, and will not disclose
any such information or documents to any third parties or make any use of such.
7.8 POOLING.
(a) Parent, the Merger Sub and INT'L.com will use all
reasonable best efforts, will cooperate fully and will take all actions as are
reasonably necessary to allow the Merger and other transactions contemplated by
this Agreement to be accounted for as a "pooling of interests" in accordance
with United States generally accepted accounting principles and applicable rules
and regulations of the Commission.
(b) INT'L.com has delivered to Parent prior to the date of
this Agreement a letter from INT'L.com, prepared after consultation with its
counsel, that identifies all persons it believes may be "affiliates" of
INT'L.com, as such term is used in Rule 145 under the Securities Act and
applicable accounting pronouncements of the Commission (each such Person, an
"INT'L.COM AFFILIATE"). Each such INT'L.com Affiliate has executed and delivered
to Parent a written agreement (an "INT'L.COM AFFILIATE AGREEMENT") in the form
of EXHIBIT 7.8(B) hereto to the effect that such INT'L.com Affiliate (i) has not
made and will not make any disposition of any shares of INT'L.com Common Stock
or INT'L.com Preferred Stock or other securities of INT'L.com in the 30-day
period prior to the Effective Time, and (ii) will not make any disposition of
any of the Parent Merger Shares to be received by such Person after the
Effective Time until Parent shall have publicly released a report including the
combined financial results of Parent and INT'L.com for a period of at least 30
days of combined operations of Parent and INT'L.com.
(c) Section 7.8(c) of the Parent Disclosure Schedule
identifies each executive officer and director of Parent (each such Person, a
"PARENT AFFILIATE"). Each such Parent Affiliate has executed and delivered to
INT'L.com a written agreement (a "Parent AFFILIATE AGREEMENT") in the form of
EXHIBIT 7.8(C) hereto to the effect that such Parent Affiliate (i) has not made
and will not make any disposition of any shares of Parent Common Stock in the
30-day period prior to the Effective Time, and (ii)
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will not make any disposition of any shares of Parent Common Stock owned by such
person until Parent shall have publicly released a report including the combined
financial results of Parent and INT'L.com for a period of at least 30 days of
combined operations of Parent and INT'L.com.
7.9 INT'L.COM VOTING AGREEMENT. Simultaneous with the execution of this
Agreement, INT'L.com will cause the voting agreement in the form attached as
EXHIBIT 7.9 (the "INT'L.COM VOTING AGREEMENT") to be executed by all directors,
officers, affiliates and holders of 5% of the capital stock of INT'L.com and
their affiliates holding in the aggregate at least 60% of the Outstanding
INT'L.com Shares and at least 80% of each of the Outstanding INT'L.com Series C
Shares and the Outstanding INT'L.com Series D Shares, and to be delivered to
Parent.
7.10 PARENT VOTING AGREEMENT. Simultaneous with the execution of this
Agreement, Parent will cause the voting agreement in the form attached as
EXHIBIT 7.10 (the "PARENT VOTING AGREEMENT") to be executed by all directors and
officers of Parent and their affiliates holding in the aggregate at least 60% of
the Parent shares of Parent Common Stock outstanding on the date hereof, and to
be delivered to INT'L.com.
7.11 HART-SCOTT-RODINO FILING. If and to the extent applicable, Parent
and INT'L.com agree to file, and to cause any other Person obligated to do so as
a result of such person's stock holdings in Parent or INT'L.com, a Notification
and Report Form in accordance with the notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations thereunder (collectively, the "HSR ACT") with the Antitrust Division
of the United States Department of Justice and the Federal Trade Commission and
to use its and their reasonable best efforts to achieve the prompt termination
or expiration of the waiting period or any extension thereof provided for under
the HSR Act as a prerequisite to the consummation of the transactions provided
for herein.
7.12 BOARD OF DIRECTORS MEETINGS. After the Closing of the Merger, for
as long as Cornerstone Equity Investors IV, L.P. holds at least one-half of the
Parent Merger Shares issued to them in connection with the Merger, Parent shall
permit one (1) representative of Cornerstone Equity Investors IV, L.P. (the
"CORNERSTONE OBSERVER") to attend, in a non-voting observer capacity, each
meeting of the Board of Directors of Parent and each meeting of any committee
thereof and to participate in all discussions during each such meeting. Parent
shall send to the Cornerstone Observer notice of the time and place of any such
meeting, in the same manner and at the same time as notice is sent to its
directors. Parent shall also provide to the Cornerstone Observer copies of all
notices, reports, minutes, contracts and other documents, at the time and in the
same manner as such documents are provided to the Board of Directors of Parent,
unless the Board of Directors or management of Parent shall determine that
delivery of such notice and/or materials to the Cornerstone Observer may be
detrimental to Parent. Upon the request of the Board of Directors of the
Company, the Cornerstone Observer will excuse himself from any portion of Board
or committee meetings if the Board of Directors shall determine that the
Cornerstone Observer's presence may violate the attorney-client privilege or may
create a conflict of interest or may be otherwise detrimental to Parent. Any
materials furnished to the Cornerstone Observer and the discussions and
presentations in connection with or at any meeting shall be considered
confidential information and the Cornerstone Observer will keep such materials
and discussions confidential and will not disclose or divulge such materials and
discussions to any third party.
7.13 EMPLOYMENT, CONSULTING AND NONCOMPETITION AGREEMENTS. Simultaneous
with the execution of this Agreement, INT'L.com will cause each of Roger Jeanty
[, Steven Fingerhood] and Jonathan Clark to execute employment or consulting
and/or non-competition agreements with Parent to become effective at the
Effective Time in the form provided by Parent to INT'L.com.
7.14 INT'L.COM CONVERSION. Simultaneous with the execution of this
Agreement, INT'L.com will cause the conversion notice in the form attached as
EXHIBIT 7.14 to be executed by the holders of INT'L.com Series A Preferred Stock
who, together with the parties executing an INT'L.com Voting Agreement, hold at
least 51% of the outstanding shares of INT'L.com Series A Preferred Stock and by
the holders of INT'L.com Series B Preferred Stock who, together with the parties
executing an INT'L.com Voting Agreement, hold at least 51% of the outstanding
shares of INT'L.com Series B Preferred Stock,
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INT'L.com shall cause such notices to be delivered to Parent. INT'L.com hereby
elects that all outstanding shares of INT'L.com Series A Preferred Stock and all
of the outstanding shares of INT'L.com Series B Preferred Stock be converted to
shares of INT'L.com Series A Common Stock immediately prior to the Effective
Time.
7.15 Debt Adjustments. In the event INT'L.com or its Subsidiaries shall
breach the covenants in Section 5.6 hereof, the aggregate amount of all breaches
of such Section 5.6 shall be deemed to be the "Debt Adjustment Amount" for
purposes of this Agreement. "Debt Payment Shares" shall mean a number of shares
of Parent Common Stock determined by dividing the Debt Adjustment Amount plus
any accrued interest on such amount as of the Closing by the Parent Average
Closing Price.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger will be subject to the
satisfaction prior to the Closing Date of the following conditions unless
waived:
(a) GOVERNMENTAL APPROVALS. Other than the filing of the
Merger Documents with the Secretary of State of Delaware, all statutory
requirements and all Consents of Governmental Entities legally required for the
consummation of the Merger and the transactions contemplated by this Agreement
will have been filed, occurred, or been obtained, other than such Consents for
which the failure to obtain would not have a material adverse effect on the
consummation of the Merger or the other transactions contemplated hereby or on
the Business Condition of Parent or INT'L.com. If and to the extent applicable,
the filing and waiting period requirements under the HSR Act will have been
complied with and will have expired or terminated.
(b) NO RESTRAINTS. No statute, rule or regulation, and no
final and nonappealable order, decree or injunction will have been enacted,
entered, promulgated or enforced by any court or Governmental Entity of
competent jurisdiction which enjoins or prohibits the consummation of the
Merger.
(c) PARENT STOCKHOLDER APPROVAL. The issuances of the shares
of Parent Common Stock in connection with the Merger will have been approved by
the requisite vote of the stockholders of Parent.
(d) QUOTATION. The shares of Parent Common Stock issuable to
INT'L.com's stockholders as contemplated by this Agreement shall have been
approved for quotation on the Nasdaq National Market, subject to official notice
of issuance.
(e) FORM S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(f) PARENT POOLING LETTER. Parent will have received a letter
dated immediately prior to the Closing Date from PricewaterhouseCoopers LLP,
Parent's independent accountants, to the effect that such firm concurs with
Parent's management that no conditions exist that would preclude Parent from
accounting for the Merger as a "pooling of interests" in accordance with United
States generally accepted accounting principles and applicable rules and
regulations of the Commission and Parent shall have delivered a copy of such
letter to INT'L.com.
(g) INT'L.COM POOLING LETTER. Arthur Andersen LLP shall have
delivered to INT'L.com a letter dated immediately prior to the Closing Date to
the effect that INT'L.com is "poolable" for accounting purposes under Accounting
Principles Board Opinion No. 16, United States generally accepted accounting
principles and applicable rules and regulations of the Commission and INT'L.com
shall have delivered a copy of such letter to Parent.
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8.2 CONDITIONS OF OBLIGATIONS OF PARENT AND MERGER SUB. The obligations
of Parent and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions unless waived by Parent and Merger Sub:
(a) REPRESENTATIONS AND WARRANTIES OF INT'L.COM. The
representations and warranties of INT'L.com set forth in this Agreement will be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date, except (i)
as otherwise contemplated by this Agreement, (ii) as a result of actions taken
or not taken pursuant to this Agreement or at the direction of or after
consultation with and written concurrence of Parent, (iii) for representations
and warranties specifically limited to an earlier date(s) and (iv) for breaches
which, individually or in the aggregate, would not have a material adverse
effect on the Business Condition of INT'L.com. Parent will have received a
certificate signed by the chief executive officer and the chief financial
officer of INT'L.com to such effect on the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF INT'L.COM. INT'L.com will
have performed all agreements and covenants required to be performed by it under
this Agreement prior to the Closing Date except (i) as otherwise contemplated or
permitted by this Agreement, (ii) as a result of actions taken or not taken at
the direction of or after consultation with and written concurrence of Parent
and (iii) for such failures to perform which, individually or in the aggregate,
would not have a material adverse effect on the Business Condition of INT'L.com;
provided, that INT'L.com hereby acknowledges and agrees that any breaches of the
covenants set forth in Section 5.6 hereof which individually or in the aggregate
exceed $3,000,000 will be deemed for purposes of this Section 8.2(b) to have a
material adverse effect on the Business Condition of INT'L.com. Parent will have
received a certificate signed by the chief executive officer and the chief
financial officer of INT'L.com to such effect on the Closing Date.
(c) ESCROW AGREEMENTS. Parent will have received from
INT'L.com and the Indemnification Representative a duly executed Escrow
Agreement.
(d) LEGAL ACTION. There will not be pending or threatened in
writing any action, proceeding or other application before any court or
Governmental Entity brought by any Person or Governmental Entity: (i)
challenging or seeking to prohibit the consummation of the transactions
contemplated by this Agreement; or (ii) seeking to prohibit or impose any
limitations on Parent's ownership or operation of all or any portion of
INT'L.com's business or assets, or to compel Parent to dispose of or hold
separate all or any portion of its or INT'L.com's business or assets as a result
of the transactions contemplated by the Agreement which, in any such case
described in this clause (ii), if successful would have a material adverse
effect on the Business Condition of INT'L.com.
(e) OPINION OF COUNSEL. Parent will have received an opinion
dated as of the Closing Date of Neal, Gerber & Eisenberg, counsel to INT'L.com,
covering the matters set forth in EXHIBIT 8.2.
(f) CONSENTS. Parent will have received duly executed copies
of all Consents specified in Section 3.4 of the INT'L.com Disclosure Schedule
except where the failure to receive any such Consent either individually or
together with all other failures to receive a Consent would not have a material
adverse effect on the Business Condition of INT'L.com, and there will not be any
Consents which are required to be disclosed in INT'L.com Disclosure Schedule
which have not been so disclosed, and have not been received, if the failure to
receive such Consents would have a material adverse effect on the Business
Condition of INT'L.com, in each case except for such thereof as Parent and
INT'L.com will have agreed in writing will not be obtained.
(g) TERMINATION OF RIGHTS AND CERTAIN SECURITIES. Any
registration rights, rights of refusal, voting rights, rights to any liquidation
preference or redemption rights relating to any security of INT'L.com will have
been terminated or waived or satisfied as of the Closing.
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(h) STOCKHOLDER APPROVALS. This Agreement and the Merger will
have been approved by stockholders of INT'L.com holding at least ninety percent
(90%) of the voting power of the Outstanding INT'L.com Shares.
(i) TERMINATION OF 401K PLAN. The INT'L.com Board of Directors
will have passed and not rescinded resolutions satisfactory to Parent's counsel
effectively terminating INT'L.com's 401(k) Plan immediately prior to the
Closing.
(j) CORPORATE PROCEEDINGS SATISFACTORY. All corporate and
other proceedings to be taken by INT'L.com in connection with the transactions
contemplated hereby and all documents incident thereto will be satisfactory in
form and substance to Parent and its counsel, and Parent and its counsel will
have received all such counterpart originals or certified or other copies of
such documents as they reasonably may request.
(k) LETTER FROM ARTHUR ANDERSEN. The Parent shall have
received a letter dated as of a date not more than two days prior to the date
that the Form S-4 is declared effective and shall have received a subsequent
similar letter dated as of a date not more than two days prior to the Effective
Time, from Arthur Andersen LLP, auditors for INT'L.com, addressed to Parent in a
customary form reasonably satisfactory to Parent, containing statements and
information of the type ordinarily included in an accountants' "comfort letters"
with respect to the financial statements and financial information of INT'L.com
included in the Form S-4.
(l) INT'L.COM NOTES. The INT'L.com Notes will have been
cancelled and be of no further force and effect.
(m) REGISTRATION RIGHTS AGREEMENT. Parent will have received
an executed Registration Rights Agreement from the INT'L.com Affiliates.
(n) Termination of Certain Agreement and Arrangements. The
agreements and arrangements described in Section 8.2(n) of the INT'L.com
Disclosure Schedule will have been terminated with no liability to INT'L.com and
evidence of such termination will have been delivered to Parent.
8.3 CONDITIONS OF OBLIGATION OF INT'L.COM. The obligation of INT'L.com
to effect the Merger is subject to the satisfaction of the following conditions
unless waived by INT'L.com:
(a) REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
The representations and warranties of Parent and Merger Sub set forth in this
Agreement will be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except (i) as otherwise contemplated by this Agreement, (ii) as a
result of actions taken or not taken pursuant to this Agreement, (iii) for
representations and warranties specifically limited to an earlier date(s) and
(iv) for breaches which, individually or in the aggregate, would not have a
material adverse effect on the Business Condition of Parent. INT'L.com will have
received a certificate signed on behalf of Parent by a duly authorized officer
of Parent to such effect on the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUB.
Parent and Merger Sub will have performed all agreements and covenants required
to be performed by them under this Agreement prior to the Closing Date except
(i) as otherwise contemplated or permitted by this Agreement, and (ii) for such
failures to perform which, individually or in the aggregate, would not have a
material adverse effect on the Business Condition of Parent. INT'L.com will have
received a certificate signed on behalf of Parent by officers of Parent to such
effect on the Closing Date.
(c) OPINION OF PARENT'S COUNSEL. INT'L.com have received an
opinion dated the Closing Date of Testa, Hurwitz & Thibeault, LLP, substantially
in the form attached as EXHIBIT 8.3.
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(d) STOCKHOLDER APPROVAL. This Agreement and the Merger will
have been approved and adopted by the requisite vote of the stockholders of
Merger Sub, as required by the DGCL and Merger Sub's Certificate of
Incorporation (the "Requisite Stockholder Approval").
(e) ESCROW AGREEMENT. Parent shall have duly executed and
delivered the Escrow Agreement.
(f) TAX-FREE REORGANIZATION. INT'L.com shall have received a
written opinion from Neal, Gerber & Eisenberg to the effect that the Merger
should constitute a reorganization within the meaning of Section 368 of the
Code. In preparing such tax opinion, counsel may rely on reasonable assumptions
and reasonable written representations from Parent and INT'L.com and their
respective officers relating thereto.
(g) LEGAL ACTION. There will not be pending or threatened in
writing any action, proceeding or other application before any court or
Governmental Entity brought by any Person or Governmental Entity: (i)
challenging or seeking to prohibit the consummation of the transactions
contemplated by this Agreement or (ii) restricting in any way the receipt,
ownership, or ability to dispose of the consideration to be received by any
stockholder of INT'L.com in the transactions contemplated by this Agreement;
PROVIDED, HOWEVER, that INT'L.com will automatically be deemed to waive this
condition if Parent agrees to indemnify, defend and hold any such named party
harmless against any such action.
(h) BOARD OF DIRECTORS. Roger Jeanty shall have been elected
as a member of the Board of Directors of Parent.
(i) REGISTRATION RIGHTS AGREEMENT. Parent and any other party
required to execute the Registration Rights Agreement shall have duly executed
and delivered the Registration Rights Agreement to Cornerstone and Dakota.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION RELATING TO AGREEMENT. Subject to Sections 9.3 and
9.5, as an integral term of the Merger, all stockholders of INT'L.com who accept
the Parent Merger Shares and execute the Escrow Agreement (which is a condition
to receiving such consideration), severally and not jointly, hereby agree to
defend, indemnify and hold Parent harmless from and against, and to reimburse
Parent with respect to, any and all losses, damages, liabilities, claims,
judgments, settlements, fines, costs and expenses (including reasonable
attorneys' fees), determined as provided in Section 9.3 ("INDEMNIFIABLE
AMOUNTS"), of every nature whatsoever incurred by Parent (which will be deemed
to include any of the foregoing incurred by the Surviving Corporation) by reason
of or arising out of or in connection with (i) any breach, or any claim
(including claims by parties other than Parent) that constitutes a breach, by
INT'L.com of any representation or warranty of INT'L.com contained in this
Agreement or in any certificate or other document delivered to Parent pursuant
to this Agreement, other than any breach or related claim in respect of actions
taken or not taken pursuant to this Agreement or at the written direction of or
after consultation with and written concurrence of Parent and (ii) the failure,
partial or total, of INT'L.com or any Subsidiary to perform any agreement or
covenant required by this Agreement to be performed by it or them other than any
breach or related claim in respect of actions taken or not taken pursuant to
this Agreement or at the written direction of or after consultation with and
written concurrence of Parent. The foregoing obligations to indemnify Parent
will be determined without regard to any right to indemnification to which any
Person may have in his or her capacity as an officer, director, employee, agent
or any other capacity of INT'L.com or any Subsidiary, and no stockholder of
INT'L.com will be entitled to any indemnification from INT'L.com or the
Surviving Corporation for amounts paid hereunder. There will be no right of
contribution or subrogation from Parent or the Surviving Corporation for
indemnification payments made by or for the account of the stockholders of
INT'L.com. Notwithstanding any provision in this Agreement
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to the contrary, Indemnifiable Amounts shall not include (i) any lost profits,
lost revenues or lost business opportunities, or (ii) any amounts which shall
have been recovered by Parent under any insurance policies.
9.2 THIRD PARTY CLAIMS. With respect to any claims or demands by third
parties as to which Parent may seek indemnification hereunder whenever Parent
will have received a written notice that such a claim or demand has been
asserted or threatened, Parent will promptly notify the "Indemnification
Representative" (as designated in the Escrow Agreement) of such claim or demand
and of the facts within Parent's knowledge that relate thereto. The
Indemnification Representative will then have the right to defend, contest,
negotiate or settle any such claim or demand through counsel of his own
selection, reasonably satisfactory to Parent, and solely at the Indemnification
Representative's own cost and expense, which costs and expenses will be
reimbursed pursuant to the Escrow Agreement. Notwithstanding the preceding
sentence, the Indemnification Representative will not settle, compromise, or
offer to settle or compromise any such claim or demand without the prior written
consent of Parent, which consent will not be unreasonably withheld. Without
limiting Parent's rights to object for other reasons, Parent may object to a
settlement or compromise which includes any provision which in its reasonable
judgment may have an adverse impact on or establish an adverse precedent for the
Business Condition of Parent or any of its Subsidiaries. If the Indemnification
Representative gives notice to Parent within thirty (30) calendar days after
Parent has notified the Indemnification Representative that any such claim or
demand has been made in writing, that the Indemnification Representative elects
to have Parent defend, contest, negotiate, or settle any such claim or demand,
then Parent will have the right to contest and/or settle any such claim or
demand and seek indemnification pursuant to this Article IX as to any
Indemnifiable Amounts; PROVIDED, HOWEVER, that Parent will not settle,
compromise, or offer to settle or compromise any such claim or demand without
the prior written consent (which may include a general or limited consent) of
the Indemnification Representative, which consent will not be unreasonably
withheld. If the Indemnification Representative fails to give written notice to
Parent of his intention to contest or settle any such claim or demand within
thirty (30) calendar days after Parent has notified the Indemnification
Representative that any such claim or demand has been made in writing, or if any
such notice is given but any such claim or demand is not contested by the
Indemnification Representative within a reasonable time thereafter, Parent will
have the right to contest and/or settle any such claim or demand in its sole
discretion and seek indemnification pursuant to this Article IX as to any
Indemnifiable Amounts. The adoption of this Agreement by the stockholders of
INT'L.com will also constitute their approval of the Indemnification
Representative.
9.3 LIMITATIONS. Notwithstanding any other provision in this Article
IX, Parent will be entitled to indemnification pursuant to this Article IX only
to the extent that the aggregate Indemnifiable Amounts (which shall be
determined for all purposes of this Article IX disregarding any qualification in
any representation or warranty as to "materially" or "material" or "material
adverse effect") exceed Five Hundred Thousand Dollars ($500,000) (the "THRESHOLD
AMOUNT") PROVIDED THAT at such time as the amount to which Parent is entitled to
be indemnified exceeds the Threshold Amount, Parent shall be entitled to be
indemnified up to the full Indemnifiable Amounts including the Threshold Amount.
For purposes of indemnification under this Agreement, each Parent Merger Share
shall at all times be valued at the Parent Average Closing Price. The aggregate
amount to which Parent will be entitled to be indemnified pursuant to this
Article IX will not exceed a dollar amount equal to the value of the aggregate
number of Escrow Shares held in escrow pursuant to the terms of the Escrow
Agreement valued at the Parent Average Closing Price per share , and the
liability of any single stockholder for indemnification obligations pursuant to
this Article IX shall be limited to such stockholder's PRO RATA share of any
Indemnifiable Amounts based on the number of Escrow Shares deposited in escrow
by such stockholder relative to the aggregate number of Escrow Shares and the
aggregate liability of any single stockholder for indemnification obligations
pursuant to this Article IX shall be equal to a dollar amount equal to the
Parent Average Closing Price multiplied by the aggregate number of Escrow Shares
deposited in escrow by such stockholder; PROVIDED, HOWEVER, that there will be
no limitation on the obligations of any person for Indemnifiable Amounts arising
out of criminal activity or fraud by such person, including, without limitation,
any actions in such person's capacity as an employee, officer or director of
INT'L.com or its Subsidiaries, or for any stockholder of INT'L.com for breaches
of any representation or warranty contained in the Letter of Transmittal
delivered by such stockholder.
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9.4 BINDING EFFECT. The indemnification obligations contained in this
Article IX are an integral part of this Agreement and the Merger in the absence
of which Parent would not have entered into this Agreement.
9.5 TIME LIMIT. The representations, warranties, covenants and
agreements of INT'L.com set forth in this Agreement and the certificates and
schedules executed or delivered pursuant to this Agreement will survive the
Closing for one year; PROVIDED, HOWEVER, that claims relating to the
representations and warranties in Sections 3.6(a) and (b) may be made only on or
before the date that Parent publishes audited financial results covering at
least 30 days combined operations of Parent and INT'L.com.
9.6 SOLE REMEDY. Notwithstanding any other provision in this Agreement
to the contrary, the provisions of this Article IX and the provisions of the
Escrow Agreement will be the sole and exclusive remedy of (and corresponding
liability of any stockholder of INT'L.com, in such stockholder's capacity as
such, to) Parent, Merger Sub and the Surviving Corporation for any damage,
claim, cause of action or right of any nature arising out of or relating to any
breach of representations, warranties, covenants and agreements of INT'L.com set
forth in this Agreement and the certificates and schedules executed or delivered
by it pursuant to this Agreement.
ARTICLE X
TERMINATION
10.1 MUTUAL AGREEMENT. This Agreement may be terminated at any time
prior to the Effective Time by the written consent of Parent and INT'L.com.
10.2 TERMINATION BY PARENT. This Agreement may be terminated by Parent
(PROVIDED THAT it is not then in material breach of any representation,
warranty, covenant or agreement contained in this Agreement) alone, by means of
written notice to INT'L.com, if there has been a material breach by INT'L.com or
any Subsidiary of any representation, warranty, covenant or agreement set forth
in this Agreement or other ancillary agreements, which breach would in Parent's
reasonable opinion render it impossible for INT'L.com to satisfy the closing
conditions contained in Section 8.2 and has not been cured within twenty (20)
business days following receipt by INT'L.com of notice of such breach.
10.3 TERMINATION BY INT'L.COM. (a) This Agreement may be terminated by
INT'L.com by means of written notice to Parent and payment of the Termination
Fee (as defined below) if it has fulfilled its obligations under Section 7.1(a)
and (c) hereof but has failed to obtain the INT'L.com Requisite Stockholder
Approval. The Termination Fee shall be paid by wire transfer of immediately
available funds to an account designated by Parent and any termination pursuant
to this Section 10.3(a) shall only be effective upon receipt of the Termination
Fee in such account. THE "TERMINATION FEE" SHALL BE A DOLLAR AMOUNT EQUAL TO 5%
OF THE RESULT OF MULTIPLYING (I) THE PARENT AVERAGE CLOSING PRICE BY (II) THE
NUMBER OF PARENT MERGER SHARES THAT WOULD HAVE BEEN ISSUABLE BY PARENT IF THE
CLOSING HAD OCCURRED ON THE DATE OF SUCH TERMINATION, ASSUMING THAT THERE WERE
NO EXCLUDED SHARES, NO SERIES C EXCLUDED SHARES AND NO SERIES D EXCLUDED SHARES
AND THAT ALL OUTSTANDING INT'L.COM OPTIONS WERE EXERCISED IMMEDIATELY PRIOR TO
SUCH DATE.
(B) This Agreement may also be terminated by INT'L.com (PROVIDED THAT
it is not then in material breach of any representation, warranty, covenant or
agreement contained in this Agreement) alone, by means of written notice to
Parent, if there has been a material breach by Parent or any Subsidiary of any
representation, warranty, covenant or agreement set forth in the Agreement or
other ancillary agreements, which breach would in INT'L.com's reasonable opinion
render it impossible for INT'L.com to satisfy the closing conditions contained
in Section 8.3 and has not been cured within twenty (20) business days following
receipt by Parent of notice of such breach,
10.4 OUTSIDE DATE. This Agreement may be terminated by Parent alone or
by INT'L.com alone by means of written notice if the Effective Time does not
occur on or prior to June 30, 2000;
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PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to the
preceding clause will not be available to any party whose failure to fulfill any
obligation under this Agreement has been a significant cause of, or resulted in,
the failure of the Effective Time to occur on or before such date.
10.5 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either INT'L.com or Parent as provided in this Article, this
Agreement will forthwith become void and have no effect, and there will be no
liability or obligation on the part of Parent, INT'L.com, Merger Sub or their
respective officers or directors, except that (i) the provisions of Sections
7.4, 7.6, 7.7 and 11.2 will survive any such termination and abandonment, and
(ii) no party will be released or relieved from any liability arising from the
willful breach by such party prior to termination of any of its representations,
warranties, covenants or agreements as set forth in this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 ENTIRE AGREEMENT. This Agreement, including the exhibits,
schedules and other agreements delivered pursuant to this Agreement contain all
of the terms and conditions agreed upon by the parties relating to the subject
matter of this Agreement and supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, whether oral or
written, respecting that subject matter.
11.2 GOVERNING LAW; CONSENT TO JURISDICTION. The Merger and this
Agreement will be governed by the internal laws of the State of Delaware. Legal
proceedings relating to this Agreement, the agreements executed in connection
with this Agreement or the transactions contemplated hereby or thereby may be
commenced only in the state or federal courts in the State of Delaware. Each of
the parties hereby consents to the exclusive jurisdiction of such courts (and of
the appropriate appellate courts) in any such action or proceeding and waives
any objection to venue laid therein. The foregoing provisions will not be
construed to preclude any party from bringing a counter-claim in any action or
proceeding properly commenced in accordance with the foregoing provisions.
Process in any such action or proceeding may be served on any party anywhere in
the world. Notwithstanding the foregoing, any dispute relating to a claim under
the Escrow Agreement will be resolved in accordance with the arbitration
provisions of the Escrow Agreement.
11.3 NOTICES. All notices, requests, demands or other communications
which are required or may be given pursuant to the terms of this Agreement will
be in writing and will be deemed to have been duly given: (i) on the date of
delivery if personally delivered by hand, (ii) upon the third day after such
notice is deposited in the United States mail, if mailed by registered or
certified mail, postage prepaid, return receipt requested, (iii) upon the date
scheduled for delivery after such notice is sent by a nationally recognized
overnight express courier or (iv) by fax upon written confirmation (including
the automatic confirmation that is received from the recipient's fax machine) of
receipt by the recipient of such notice:
IF TO PARENT OR MERGER SUB Lionbridge Technologies, Inc.
-------------------------- 950 Winter Street
Waltham, Massachusetts 02451
Attention: Rory J. Cowan
Telephone No.: (781) 434-6000
Fax No.: (781) 434-6034
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WITH COPIES TO:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Attention: George W. Lloyd, Esq. &
Kathy A. Fields, Esq.
Telephone No.: (617) 248-7000
Fax No.: (617) 248-7100
IF TO INT'L.COM: INT'L.com, Inc.
----------------
492 Old Connecticut Path
Framingham, Massachusetts 01701
Attention: Chief Executive Officer
Telephone No.: (508) 620-3900
Fax No.: (508) 620-3999
With copies to:
INT'L.com, Inc.
301 Mission Street, Suite 350
San Francisco, CA 94105
Attention: Steven L. Fingerhood
Telephone No.: (415) 546-6895
Fax No.: (415) 495-4926
Cornerstone Equity IV, L.P.
717 Fifth Avenue, Suite 1100
New York, NY 10022
Attention: Michael Najjar
Telephone: (212) 207-2372
Fax No.: (212) 826-6798
Dakota/EGI, LLC
c/o Equity Group Investments
Two N. Riverside Plaza
Suite 700
Chicago, IL 60606
Attn: Alisa Singer, Esq.
Telephone: (312) 466-3196
Fax No: (312) 454-0335
Neal, Gerber & Eisenberg
Two North LaSalle Street, Suite 2200
Chicago, IL 60602
Attn: Jon Wasserman
Telephone No.: (312) 269-8000
Fax No.: (312) 269-1747
Such addresses may be changed, from time to time, by means of a notice
given in the manner provided in this Section 11.3.
11.4 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, it will be modified rather than voided, if
possible, in order to achieve the intent of the parties to this
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Agreement to the extent possible. In any event, all other provisions of this
Agreement will be deemed valid and enforceable to the full extent.
11.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Parent contained in this Agreement and schedules and
certificates executed or delivered pursuant to this Agreement, will survive the
Effective Time, but any claims for breach thereof may only be made on or before
the first yearly anniversary of the Closing.
11.6 ASSIGNMENT. No party to this Agreement may assign, by operation of
law or otherwise, all or any portion of its rights, obligations, or liabilities
under this Agreement without the prior written consent of INT'L.com, Merger Sub
and Parent, which consent may be withheld in the absolute discretion of the
party asked to grant such consent. Any attempted assignment by Merger Sub or
Parent, on the one hand, or by INT'L.com, on the other hand, in violation of
this Section 11.6 will be voidable and will entitle INT'L.com or Parent,
respectively, to terminate this Agreement at its option.
11.7 COUNTERPARTS. This Agreement may be executed in two or more
partially or fully executed counterparts each of which will be deemed an
original and will bind the signatory, but all of which together will constitute
but one and the same instrument. The execution and delivery of a Signature Page
to this Agreement and Plan of Reorganization in the form annexed to this
Agreement, including a facsimile copy of the actual signature, by any party
hereto who will have been furnished the final form of this Agreement will
constitute the execution and delivery of this Agreement by such party.
11.8 AMENDMENT. This Agreement may not be amended except by an
instrument in writing executed by INT'L.com, Merger Sub and Parent.
11.9 EXTENSION, WAIVER. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed and without prejudice to the
rights of any other party: (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto to the party extending such
time, (ii) waive any inaccuracies in the representations and warranties made to
such party contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements, covenants or conditions for
the benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver will be valid only if set forth in an
instrument in writing signed on behalf of such party.
11.10 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference will be to a Section, Exhibit or
Schedule to this Agreement unless otherwise indicated. The words "include,"
"includes," and "including" when used therein will be deemed in each case to be
followed by the words "without limitation." The table of contents, index to
defined terms, and headings contained in this Agreement are for reference
purposes only and will not affect in any way the meaning or interpretation of
this Agreement.
11.11 KNOWLEDGE. For purposes of this Agreement, the term "KNOWLEDGE"
(including any derivation thereof such as "know" or "knowing", and similar such
as "aware" and regardless of whether such word starts with an initial capital)
in reference to INT'L.com or any Subsidiary will mean the knowledge of the
directors and executive officers of INT'L.com or such Subsidiary as the case may
be, and in reference to Parent or any Subsidiary will mean the knowledge of the
directors and executive officers of Parent or such Subsidiary as the case may
be.
11.12 TRANSFER, SALES, DOCUMENTARY, STAMP AND OTHER SIMILAR TAXES. Any
and all transfer, sales, documentary, stamp and other similar Taxes imposed in
connection with the transactions contemplated by this Agreement will be paid by
the stockholder of INT'L.com with respect to which such Tax relates. At Parent's
discretion, the amount paid to any Person pursuant to this Agreement will be
reduced by the amount of Taxes payable by such Person pursuant to this Section
11.12. Any amounts so withheld will be promptly remitted to the appropriate
taxing authority.
-45-
<PAGE>
SIGNATURE PAGE TO
AGREEMENT AND PLAN OF REORGANIZATION
IN WITNESS WHEREOF, Parent, Merger Sub and, INT'L.com have executed
this Agreement as of the date first written above.
LIONBRIDGE TECHNOLOGIES, INC. INT'L.COM, INC.
By: /s/ Rory J. Cowan By: /s/ Roger O. Jeanty
-------------------------------------- ----------------------------
Rory J. Cowan Name: Roger O. Jeanty
Chief Executive Officer & President Title: Chief Executive Officer
LTI ACQUISITION CORP.
By: /s/ Rory J. Cowan
--------------------------------------
Rory J. Cowan
Chief Executive Officer & President
-46-
<PAGE>
Exhibit 21.1
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) Ltd. Ireland Lionbridge Technologies
Lionbridge Technologies S.A.R.L. France Lionbridge Technologies
Lionbridge Japan K.K. Japan Lionbridge Technologies
Japanese Language Services, Inc. Massachusetts Lionbridge Technologies
Lionbridge Technologies (Canada) Inc. Quebec Lionbridge Technologies
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-91179) of Lionbridge Technologies, Inc. of our
report dated January 24, 2000 relating to the financial statements, which
appears in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 3, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS 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>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 11,537
<SECURITIES> 0
<RECEIVABLES> 9,616
<ALLOWANCES> (698)
<INVENTORY> 0
<CURRENT-ASSETS> 24,794
<PP&E> 5,648
<DEPRECIATION> (3,477)
<TOTAL-ASSETS> 35,612
<CURRENT-LIABILITIES> 21,478
<BONDS> 0
0
0
<COMMON> 166
<OTHER-SE> 7,237
<TOTAL-LIABILITY-AND-EQUITY> 7,403
<SALES> 0
<TOTAL-REVENUES> 49,508
<CGS> 0
<TOTAL-COSTS> 58,578
<OTHER-EXPENSES> (339)
<LOSS-PROVISION> 218
<INTEREST-EXPENSE> 7,478
<INCOME-PRETAX> (16,887)
<INCOME-TAX> 699
<INCOME-CONTINUING> (17,586)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,586)
<EPS-BASIC> (2.45)
<EPS-DILUTED> (2.45)
</TABLE>
