<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000
REGISTRATION NO. 333-33884
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------
OBJECTSPACE, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7372 75-2441715
(State or other jurisdiction (Primary standard (I.R.S. employer
of industrial identification no.)
incorporation or organization) classification code number)
</TABLE>
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OBJECTSPACE, INC.
14850 QUORUM DRIVE, SUITE 500
DALLAS, TEXAS 75240
TELEPHONE: (972) 726-4100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
DAVID NORRIS
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND
PRESIDENT
OBJECTSPACE, INC.
14850 QUORUM DRIVE, SUITE 500
DALLAS, TEXAS 75240
TELEPHONE: (972) 726-4100
FACSIMILE: (972) 715-9000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
Copies of communications to:
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<S> <C>
GREGORY R. SAMUEL RONALD G. SKLOSS
GARRETT A. DEVRIES NATHAN T. DOOLEY
HAYNES AND BOONE, LLP BROBECK, PHLEGER & HARRISON LLP
901 MAIN STREET, SUITE 3100 301 CONGRESS AVENUE, SUITE 1200
DALLAS, TEXAS 75202 AUSTIN, TEXAS 78701
TELEPHONE: (214) 651-5000 TELEPHONE: (512) 477-5495
FACSIMILE: (214) 651-5940 FACSIMILE: (512) 477-5813
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by ObjectSpace, Inc.
("ObjectSpace") in connection with the sale of common stock being registered.
All amounts are estimates except the SEC registration fee, the NASD filing fee
and the Nasdaq listing fee.
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SEC registration fee........................................ $ 30,360
NASD filing fee............................................. 12,000
Nasdaq National Market listing fee.......................... 90,000
Printing and engraving costs................................ *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses.................................. *
Transfer Agent and Registrar fees........................... *
Miscellaneous expenses...................................... *
--------
Total....................................................... $ *
========
</TABLE>
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* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation of ObjectSpace provides that the liability
of the directors of ObjectSpace to ObjectSpace or any of its stockholders for
monetary damages arising from acts of omissions occurring in their capacity as
directors shall be limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware. This limitation does not apply with
respect to any action in which a director would be liable under Section 174 of
the General Corporation Law of the State of Delaware nor does it apply with
respect to any liability in which a director:
- breached his duty of loyalty to ObjectSpace or its stockholders;
- did not act in good faith or, in failing to act, did not act in good
faith;
- acted in a manner involving intentional misconduct or a knowing violation
of law or, in failing to act, shall have acted in a manner involving
intentional misconduct or a knowing violation of law; or
- derived an improper personal benefit.
ObjectSpace's Certificate of Incorporation requires ObjectSpace to indemnify
its directors, officers and employees and former directors, officers and
employees to the fullest extent permitted by the General Corporation Law of the
State of Delaware. Pursuant to the provisions of Section 145 of the General
Corporation Law of the State of Delaware, ObjectSpace has the power to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding (other than an
action by or in the right of ObjectSpace) by reason of the fact that he is or
was a director, officer, employee or agent of ObjectSpace, against any and all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or proceeding. The
power to indemnify applies only if such person acted in good faith and in a
manner he reasonably believed to be in the best interest, or not opposed to the
best interest, of ObjectSpace, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of
ObjectSpace as well, but only to the extent of defense and settlement expenses
and not to any satisfaction of a judgment or settlement of the claim itself and
with the further limitation that in such actions no indemnification
II-1
<PAGE>
shall be made in the event of any adjudication of negligence or misconduct
unless the court, in its discretion, believes that in light of all the
circumstances indemnification should apply.
The statute further specifically provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreements, vote
of stockholders or disinterested directors, or otherwise.
Reference is made to the Form of Underwriting Agreement, to be filed as
Exhibit 1.1 to this registration statement, which provides for indemnification
by the underwriters under certain circumstances of the directors and officers of
ObjectSpace signing the registration statement and certain controlling persons
of ObjectSpace against certain liabilities, including those arising under the
Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling ObjectSpace
pursuant to the foregoing provisions, ObjectSpace has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the registrant has issued unregistered
securities to a limited number of persons as described below:
1. On June 16, 1998, the registrant issued and sold a warrant to purchase up to
196,000 shares of common stock at a purchase price of $0.01 per share in
connection with a financing transaction.
2. On September 4, 1998, the registrant issued and sold 571,429 shares of
Series A preferred stock to one investor for $3.50 per share, or an
aggregate of approximately $2.0 million.
3. On December 30, 1998, the registrant issued and sold an aggregate of
2,702,703 shares of Series B preferred stock to a total of 6 investors for
$3.70 per share, or an aggregate of approximately $10.0 million.
4. On December 30, 1998, the registrant issued and sold a warrant to purchase
234,595 shares of common stock at a purchase price of $1.32 per share in
connection with certain financing transactions.
5. On December 23, 1999, in connection with one of our licensing and
professional services transactions, the registrant issued a warrant to
purchase that number of shares of common stock equal to $2.5 million divided
by the offering price of the common stock in this offering.
6. As of January 17, 2000, the registrant issued and sold a warrant to purchase
up to 4,200 shares of common stock at a purchase price of $8.57 per share in
connection with the registrant's obtaining services from a consultant.
7. As of March 22, 2000, an aggregate of 322,977 shares of common stock had
been issued upon exercise of options under the registrant's stock option
plans.
On January 14, 2000, the registrant effected a split of its common stock in
the form of a stock dividend of one share of common stock for each share of
common stock outstanding as of that date. On March 30, 2000, the registrant
effected a split of its common stock in the form of a stock dividend of 0.4
shares of common stock for each share of common stock outstanding as of that
date.
None of the foregoing transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, and the registrant believes
that each transaction was exempt from the registration requirements of the
Securities Act of 1933, as amended, by virtue of Section 4(2) thereof,
Regulation D promulgated thereunder or Rule 701 promulgated under Section 3(b)
thereof, pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The recipients in such
transactions represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to the share
certificates and instruments issued in such transactions.
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<PAGE>
All recipients had adequate access, through their relationships with the
registrant, to information about the registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a) EXHIBITS.
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<CAPTION>
EXHIBIT NO. DESCRIPTION
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<C> <S>
1.1*** Form of Underwriting Agreement.
2.1* Asset Purchase Agreement dated as of March 8, 2000 by and
between ObjectSpace, Inc. and KLA-Tencor Corporation.
2.2* Stock Purchase Agreement dated as of September 23, 1999 by
and between ObjectSpace, Inc. and Valtech, S.A.
3.1** Certificate of Incorporation.
3.2*** Amended and Restated Bylaws.
3.3** Certificate of Amendment to Certificate of Incorporation
filed on August 20, 1998.
3.4** Certificate of Amendment to Certificate of Incorporation
filed on March 30, 2000.
3.5** Certificate of Amendment to Certificate of Incorporation
filed on March 30, 2000.
4.1*** Specimen common stock certificate.
5.1*** Opinion of Haynes and Boone, LLP, counsel to the registrant.
10.1** Master Services Agreement dated as of August 6, 1999 by and
between ObjectSpace, Inc. and Galileo International,
L.L.C.
10.2* Master Escrow Agreement dated as of November 11, 1998 by and
between ObjectSpace, Inc. and Data Securities
International, Inc.
10.3**+ License Agreement dated as of October 28, 1997 by and
between ObjectSpace, Inc. and Tivoli Systems, Inc.
10.4* Lease Agreement dated as of April 29, 1997 by and between
ObjectSpace, Inc. and CarrAmerica Realty, L.P.
10.5* First Amendment to Lease Agreement dated as of September 23,
1999 by and between ObjectSpace, Inc. and CarrAmerica
Realty, L.P.
10.6* Office Lease Agreement dated as of May 30, 1997 by and
between ObjectSpace, Inc. and 14850 Quorum Associates,
Ltd.
10.7* Office Lease Agreement dated as of September 5, 1997 by and
between ObjectSpace, Inc. and Brookdale Investors, L.P.
10.8* Amended and Restated 1994 Restricted Stock and Stock Option
Plan.
10.9* 1998 Stock Option Plan.
10.10* Amendment No. 3 to 1998 Stock Option Plan dated as of
March 30, 2000.
10.11* Non-Employee Director Stock Option Plan.
10.12** Loan and Security Agreement dated as of February 9, 1998 by
and between ObjectSpace, Inc. and Silicon Valley Bank.
10.13** Senior Subordinated Loan and Security Agreement dated as of
June 16, 1998 by and between ObjectSpace, Inc. and Silicon
Valley Bank.
10.14* Employment Agreement dated as of December 30, 1998 by and
between ObjectSpace, Inc. and David Norris.
10.15* Amendment to Employment Agreement of David Norris, dated as
of March 28, 2000.
10.16** Consulting Agreement dated as of February 1, 2000 by and
between ObjectSpace, Inc. and Graham Glass.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.17**+ Amendment No. 1 to License Agreement dated as of
September 30, 1999 by and between ObjectSpace, Inc. and
Tivoli Systems, Inc.
10.18** First Amendment to Loan and Security Agreement dated as of
March 5, 1998 by and between ObjectSpace, Inc. and Silicon
Valley Bank.
10.19** Second Amendment to Loan and Security Agreement dated as of
September 11, 1998 by and between ObjectSpace, Inc. and
Silicon Valley Bank.
23.1* Consent of Ernst & Young LLP, Independent Auditors.
23.2*** Consent of Haynes and Boone, LLP, counsel to the registrant.
24.1* Power of Attorney.
27.1* Financial Data Schedule.
</TABLE>
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* Previously filed.
** Filed herewith.
*** To be supplied by amendment.
+ Certain confidential portions of this exhibit have been omitted and filed
separately with the Securities and Exchange Commission.
b) FINANCIAL STATEMENT SCHEDULE
Financial Statement Schedules are not listed because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions referenced in
Item 14 of this registration statement or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by a director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this First Amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of
Dallas, State of Texas, on the 27th day of April, 2000.
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OBJECTSPACE, INC.
By: /s/ DAVID NORRIS
-----------------------------------------
David Norris
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
First Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated below.
<TABLE>
<CAPTION>
TITLE DATE
----- ----
<C> <S> <C>
/s/ DAVID NORRIS Chairman of the Board,
------------------------------------------- President and Chief April 27, 2000
David Norris Executive Officer
/s/ PAUL A. LIPARI* Chief Financial Officer
------------------------------------------- (principal financial and April 27, 2000
Paul A. Lipari accounting officer)
/s/ JOHN C. BENTLEY*
------------------------------------------- Director April 27, 2000
John C. Bentley
/s/ GRANT A. DOVE*
------------------------------------------- Director April 27, 2000
Grant A. Dove
/s/ GRAHAM GLASS*
------------------------------------------- Director April 27, 2000
Graham Glass
/s/ EUGENE LOWENTHAL*
------------------------------------------- Director April 27, 2000
Eugene Lowenthal
/s/ R. STEPHEN POLLEY*
------------------------------------------- Director April 27, 2000
R. Stephen Polley
/s/ DAVID NEAR*
------------------------------------------- Director April 27, 2000
David Near
</TABLE>
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*By: /s/ DAVID NORRIS
--------------------------------------
David Norris April 27, 2000
(AS ATTORNEY-IN-FACT
FOR EACH PERSON INDICATED)
</TABLE>
II-5
<PAGE>
CERTIFICATE OF INCORPORATION
OF
OBJECTSPACE, INC.
FIRST: The name of the Corporation is ObjectSpace, Inc.
SECOND: The address of the initial registered office of the
Corporation in the State of Delaware is 1201 North Market Street in the City
of Wilmington, County of New Castle. The name and address of its initial
registered agent is Delaware Corporation Organizers, Inc., Wilmington,
Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the Delaware
General Corporation Law ("DGCL"). The Corporation is to have perpetual
existence.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 21,000,000 shares of capital stock,
classified as (i) 20,000,000 shares of common stock, $.01 par value ("Common
Stock"), and (ii) 1,000,000 shares of preferred stock, $1.00 par value
("Preferred Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and Common Stock are as
follows:
1. PROVISIONS RELATING TO THE PREFERRED STOCK.
(a) The Preferred Stock may be issued from time to time in one or more
classes or series, the shares of each class or series to have such designations
and powers, preferences, and rights, and qualifications, limitations, and
restrictions thereof, as are stated and expressed herein and in the resolution
or resolutions providing for the issue of such class or series adopted, as
hereinafter prescribed, by the entire board of directors of the Corporation
("Board of Directors") or by any duly designated committee thereof
("Committee").
(b) Authority is hereby expressly granted to and vested in the Board of
Directors or Committee to authorize the issuance of the Preferred Stock from
time to time in one or more classes or series, and with respect to each class or
series of the Preferred Stock, to fix and state by the resolution or resolutions
from time to time adopted providing for the issuance thereof the following:
(i) whether or not the class or series is to have voting
rights, full, special, or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a separate
class either alone or together with the holders of one or more other classes
or series of stock;
<PAGE>
(ii) the number of shares to constitute the class or series
and the designations thereof;
(iii) the preferences, and relative, participating, optional,
or other special rights, if any, and the qualifications, limitations, or
restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series shall be
redeemable at the option of the Corporation or the holders thereof or upon the
happening of any specified event, and, if redeemable, the redemption price or
prices (which may be payable in the form of cash, notes, securities, or other
property), and the time or times at which, and the terms and conditions upon
which, such shares shall be redeemable and the manner of redemption;
(v) whether or not the shares of a class or series shall be
subject to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if such retirement or
sinking fund or funds are to be established, the annual amount thereof, and the
terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash,
stock of the Corporation, or other property, the conditions upon which and the
times when such dividends payable on any other class or classes or series of
stock, whether or not such dividends shall be cumulative or noncumulative, and
if cumulative, the date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which
the holders of any class or series thereof shall be entitled to receive upon the
voluntary or involuntary dissolution of, or upon any distribution of the assets
of, the Corporation;
(viii) whether or not the shares of any class or series, at
the option of the Corporation or the holder thereof or upon the happening of any
specified event, shall be convertible into or exchangeable for, the shares or
any other class or classes or of any other series of the same or any other class
or classes of stock, securities, or other property of the Corporation and the
conversion price or prices or ratio or ratios or the rate or rates at which such
exchange may be made, with such adjustments, if any, as shall be stated and
expressed or provided for in such resolution or resolutions; and
(ix) such other special rights and protective provisions with
respect to any class or series as may to the Board of Directors or Committee
deem advisable.
(c) The shares of each class or series of the Preferred Stock may vary
from the shares of any other class or series thereof in any or all of the
foregoing respects. The Board of Directors or Committee may increase the number
of shares of the Preferred Stock designated for any existing class or series by
a resolution adding to such class or series authorized and unissued shares of
the
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<PAGE>
Preferred Stock not designated for any other class or series. The Board of
Directors or Committee may decrease the number of shares of the Preferred
Stock designated for any existing class or series by a resolution subtracting
from such class or series authorized and unissued shares of the Preferred
Stock designated for such existing class or series, and the shares so
subtracted shall become authorized, unissued, and undesignated shares of the
Preferred Stock. The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
Common Stock, without a vote of the holders of the Preferred Stock, or any
series thereof, unless a vote of any such holders is required pursuant to the
terms fixed therefor in the resolution or resolutions providing for the
issuance of such class or series adopted by the Board of Directors or any
Committee.
2. PROVISIONS RELATING TO THE COMMON STOCK.
(a) Each share of Common Stock of the Corporation shall have identical
rights and privileges in every respect. The holders of shares of Common Stock
shall be entitled to vote upon all matters submitted to a vote of the
stockholders of the Corporation and shall be entitled to one vote for each share
of Common Stock held.
(b) Subject to the prior rights and preferences, if any, applicable to
shares of the Preferred Stock or any series thereof, the holders of shares of
the Common Stock shall be entitled to receive such dividends (payable in cash,
stock, or otherwise) as may be declared thereon by the Board of Directors or
Committee at any time and from time to time out of any funds of the Corporation
legally available therefor.
(c) In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, after distribution in full of the
preferential amounts, if any, to be distributed to the holders of shares of the
Preferred Stock or any series thereof, the holders of shares of the Common Stock
shall be entitled to receive all of the remaining assets of the Corporation
available for distribution to its stockholders, ratably in proportion to the
number of shares of the Common Stock held by them. A liquidation, dissolution,
or winding-up of the Corporation, as such terms are used in this paragraph (c),
shall not be deemed to be occasioned by or to include any consolidation or
merger of the Corporation with or into any other corporation or corporations or
other entity or a sale, lease, exchange, or conveyance of all or a part of the
assets of the Corporation.
3. GENERAL.
(a) Subject to the foregoing provisions of this Certificate of
Incorporation and the applicable provisions of the DGCL, the Corporation may
issue shares of its Preferred Stock and Common Stock from time to time for such
consideration (not less than the par value thereof) as may be fixed by the Board
of Directors or Committee, which is expressly authorized to fix the same in its
absolute and uncontrolled discretion subject to the foregoing conditions. Shares
so issued for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall not be
liable for any further payments in respect of such shares.
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<PAGE>
(b) The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase shares of the Corporation's capital
stock of any class or series or other securities of the Corporation, and such
rights and options shall be evidenced by instrument(s) approved by the Board of
Directors or Committee. The Board of Directors or Committee shall be empowered
to set the exercise price, duration, times for exercise, and other terms of such
options or rights; PROVIDED, HOWEVER, that the consideration to be received for
any shares of capital stock subject thereto shall not be less than the par value
thereof.
FIFTH: The number of directors constituting the Board of Directors
shall be fixed by, or in the manner provided in, the bylaws of the Corporation,
provided that such number shall be no less than one (plus such number of
directors as may be elected from time to time pursuant to the terms of any
series of Preferred Stock that may be issued and outstanding from time to time)
and until changed in accordance with the manner prescribed by the bylaws shall
be two (2).
The directors of the Corporation, whether now serving as such or
hereafter elected (exclusive of directors who are elected pursuant to the
terms of, and serve as representatives of the holders of, any series of
Preferred Stock), shall be referred to herein as "Classified Directors" and
shall be divided into three classes, with the first class referred to herein
as "Class 1," the second class as "Class 2," and the third class as "Class 3."
If the total number of Classified Directors equals a number divisible by
three, then the number of directors in each of Class 1, Class 2, and Class 3
shall be that number of directors equal to the total number of directors
divided by three. If, however, the total number of Classified Directors equals
a number that is not divisible by three, each such class of directors shall
consist of that number of directors as nearly equal in number as reasonably
possible to the total number of directors divided by three, as determined by
the Board of Directors in advance of each respective election of directors by
holders of shares of capital stock of the Corporation then entitled to vote in
such election. The term of office of the initial Class 1 directors shall
expire at the 1998 annual meeting of stockholders, the term of office of the
initial Class 2 directors shall expire at the 1999 annual meeting of
stockholders and the term of office of the initial Class 3 directors shall
expire at the 2000 annual meeting of stockholders, with each director to hold
office until his successor shall have been duly elected and qualified. At each
annual meeting of stockholders, commencing with the 1998 annual meeting,
directors elected to succeed those directors whose terms then expire shall be
elected for a term of office to expire at the third succeeding annual meeting
of stockholders after their election, with each director to hold office until
his successor shall have been duly elected and qualified.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by series or by class (excluding holders of Common
Stock), to elect directors, the election, term of office, filling of vacancies,
and other features of such directorships shall be governed by the terms of this
Certificate of Incorporation (including any amendment to this Certificate of
Incorporation that designates a series of Preferred Stock), and such directors
so elected by the holders of Preferred Stock shall not be divided into classes
pursuant to this Article FIFTH unless expressly provided by such terms.
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<PAGE>
Any or all Classified Directors may be removed, with cause, upon the
affirmative vote of the holders of a majority of the outstanding shares of each
class of capital stock of the Corporation then entitled to vote at an election
of such Classified Directors. Except as may otherwise be provided by law, cause
for removal shall exist only if the director whose removal is proposed (a) has
been convicted of a felony by a court of competent jurisdiction and such
conviction is no longer subject to direct appeal, (b) has been adjudged by a
court of competent jurisdiction to be liable for gross negligence or misconduct
in the performance of his duties to the Corporation in a matter of substantial
importance to the Corporation, and such adjudication has become final and
non-appealable, or (c) has missed twelve consecutive meetings of the Board of
Directors.
The name and address of each person who is to serve as a director until
his term of office expires (as described below) or until his successor be
elected and qualified, is as follows, and such person shall serve in the Class
designated:
NAME MAILING ADDRESS CLASS
-------- ----------------- -------
Graham Glass 14850 Quorum Drive 2
Suite 500
Dallas, Texas 75240
David Norris 14850 Quorum Drive 3
Suite 500
Dallas, Texas 75240
SIXTH: All the powers of the Corporation, insofar as the same may be
lawfully vested by this Certificate of Incorporation in the Board of Directors,
are hereby conferred upon the Board of Directors. In furtherance and not in
limitation of that power, the Board of Directors shall have the power, upon the
affirmative vote of at least two-thirds (2/3) of the Classified Directors then
serving to make, adopt, alter, amend, and repeal from time to time the bylaws of
the Corporation and to make from time to time new bylaws of the Corporation
(subject to the right of the stockholders entitled to vote thereon to adopt,
alter, amend, and repeal bylaws made by the Board of Directors or to make new
bylaws); PROVIDED, HOWEVER, that the stockholders of the Corporation shall be
entitled to adopt, alter, amend, or repeal bylaws made by the Board of Directors
or to make new bylaws solely upon the affirmative vote of the holders of at
least two-thirds (2/3) of the outstanding shares of each class of capital stock
of the Corporation then entitled to vote thereon.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation,
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<PAGE>
as the case may be, to be summoned in such manner as the said court directs.
If a majority in number representing three-fourths in value of the creditors
of class of creditors, and/or of the stockholders or class of stockholders of
this Corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or
on all the stockholders or class of stockholders, of this Corporation, as the
case may be, and also on this Corporation.
EIGHTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If
the DGCL hereafter is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended DGCL.
Any repeal or modification of this Article by the stockholders of the
Corporation shall be prospective only and shall not adversely affect any
limitation of the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
NINTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the DGCL, as the same exists or may hereafter
be amended.
Such rights shall be a contract right and as such shall run to the
benefit of any director or officer who is elected and accepts the position of
director or officer of the Corporation or elects to continue to serve as a
director or officer of the Corporation while this Article NINTH is in effect.
Any repeal or amendment of this article NINTH shall be prospective only and
shall not limit the rights of any such director or officer or the obligations of
the Corporation with respect to any claim arising from or related to the
services of such director or officer in any of the foregoing capacities prior to
any such repeal or amendment to this Article NINTH. Such right shall include the
right to be paid by the Corporation expenses incurred in defending any such
proceeding in advance of its final disposition to the maximum extent permitted
under the DGCL.
If a claim for indemnification hereunder is not paid in full by the
Corporation within sixty (60) days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses of
prosecuting such claim. It shall be a defense to any such action that such
indemnification or
-6-
<PAGE>
advancement of costs of defense are not permitted under the DGCL, but the
burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including the Board of Directors or any Committee
thereof, independent legal counsel, or stockholders) to have made its
determination prior to the commencement of such action that indemnification
of, or advancement of costs of defense to, the claimant is permissible in the
circumstances nor an actual determination by the Corporation (including the
Board of Directors or any Committee thereof, independent legal counsel, or
stockholders) that such indemnification or advancement is not permissible
shall be a defense to the action or create a presumption that such
indemnification by the Corporation is not permissible.
In the event of the death of any person having rights of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
bylaw, resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
TENTH: The Corporation expressly elects to be governed by Section 203
of the DGCL.
ELEVENTH: Special meetings of stockholders of the Corporation may only
be called by the Board of Directors pursuant to a resolution adopted by a
majority of the Classified Directors then serving, by the Chairman of the Board
of Directors, or by any holder or holders of at least twenty-five percent (25%)
of the outstanding shares of capital stock of the Corporation then entitled to
vote on any matter for which the respective special meeting is being called.
TWELFTH: Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, the affirmative vote of the holders of at least two-thirds (2/3) of
the outstanding shares of each class of capital stock of the Corporation then
entitled to vote thereon shall be required to amend, alter, or repeal any one or
more of Articles FIFTH, SIXTH, EIGHTH, NINTH, TENTH, ELEVENTH, TWELFTH AND
THIRTEENTH of this Certificate of Incorporation.
THIRTEENTH: Any action required to be taken at any annual or special
meeting of holders of Common Stock, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of two-thirds
(2/3) of the outstanding Common Stock and shall be delivered to the Corporation
by
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<PAGE>
delivery to its registered office in the State of Delaware, the principal
place of business of the Corporation or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders
are recorded. Every written consent shall bear the date of signature of each
such stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within 60
days of the earliest dated consent delivered in the manner required by this
Article THIRTEENTH to the Corporation, written consents signed by a sufficient
number of holders to take action are delivered to the Corporation by delivery
to its registered office in the State of Delaware, the principal place of
business of the Corporation or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
FOURTEENTH: The name and the mailing address of the incorporator are:
NAME MAILING ADDRESS
------ -----------------
Greg R. Samuel 901 Main Street, Suite 3100
Dallas, Texas 75202-3789
* * * * *
-8-
<PAGE>
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this Certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 24th day of November, 1997.
/s/ GREG R. SAMUEL
-------------------------------
Greg R. Samuel, Incorporator
-9-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
OBJECTSPACE, INC.
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
ObjectSpace, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify as follows:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by replacing Article FOURTH in its entirety with the Article FOURTH set
forth on EXHIBIT A attached hereto and incorporated herein by this reference.
SECOND: The Board of Directors of the Corporation duly adopted
resolutions setting forth the above-referenced amendment, declaring such
amendment to be advisable, and calling for a vote of the stockholders of the
Corporation on such amendment.
THIRD: The stockholders of the Corporation duly adopted resolutions
approving the above-referenced amendment.
FOURTH: The above-referenced amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed and attested as of the 20th day of August, 1998.
OBJECTSPACE, INC.
By: /s/ DAVID NORRIS
----------------------------
Name: David Norris
Title: President
ATTEST:
/s/ DEBORAH THOMAS
- -------------------------------
Name: Deborah Thomas
Title: Secretary
2
<PAGE>
EXHIBIT A
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 25,000,000 shares of capital stock, classified as (i)
20,000,000 shares of common stock, $.01 par value ("Common Stock"), and (ii)
5,000,000 shares of preferred stock, $1.00 par value ("Preferred Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and Common Stock are as
follows:
1. PROVISIONS RELATING TO THE PREFERRED STOCK.
(a) The Preferred Stock may be issued from time to time in one
or more classes or series, the shares of each class or series to have such
designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and expressed herein and
in the resolution or resolutions providing for the issue of such class or
series adopted, as hereinafter prescribed, by the entire board of directors
of the Corporation ("Board of Directors") or by any duly designated committee
thereof ("Committee").
(b) Authority is hereby expressly granted to and vested in the
Board of Directors or Committee to authorize the issuance of the Preferred
Stock from time to time in one or more classes or series, and with respect to
each class or series of the Preferred Stock, to fix and state by the
resolution or resolutions from time to time adopted providing for the
issuance thereof the following:
(i) whether or not the class or series is to have voting
rights, full, special, or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a separate
class either alone or together with the holders of one or more other classes
or series of stock;
(ii) the number of shares to constitute the class or series
and the designations thereof;
(iii) the preferences, and relative, participating,
optional, or other special rights, if any, and the qualifications,
limitations, or restrictions thereof, if any, with respect to any class or
series;
(iv) whether or not the shares of any class or series shall
be redeemable at the option of the Corporation or the holders thereof or upon
the happening of any specified event, and, if redeemable, the redemption
price or prices (which may be payable in the form of cash, notes, securities,
or other property), and the time or times at which, and the terms and
conditions upon which, such shares shall be redeemable and the manner of
redemption;
(v) whether or not the shares of a class or series shall be
subject to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for
3
<PAGE>
retirement, and, if such retirement or sinking fund or funds are to be
established, the annual amount thereof, and the terms and provisions relative
to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash,
stock of the Corporation, or other property, the conditions upon which and the
times when such dividends payable on any other class or classes or series of
stock, whether or not such dividends shall be cumulative or noncumulative, and
if cumulative, the date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which
the holders of any class or series thereof shall be entitled to receive upon the
voluntary or involuntary dissolution of, or upon any distribution of the assets
of, the Corporation;
(viii) whether or not the shares of any class or series, at
the option of the Corporation or the holder thereof or upon the happening of any
specified event, shall be convertible into or exchangeable for, the shares or
any other class or classes or of any other series of the same or any other class
or classes of stock, securities, or other property of the Corporation and the
conversion price or prices or ratio or ratios or the rate or rates at which such
exchange may be made, with such adjustments, if any, as shall be stated and
expressed or provided for in such resolution or resolutions; and
(ix) such other special rights and protective provisions with
respect to any class or series as may to the Board of Directors or Committee
deem advisable.
(c) The shares of each class or series of the Preferred Stock may vary
from the shares of any other class or series thereof in any or all of the
foregoing respects. The Board of Directors or Committee may increase the number
of shares of the Preferred Stock designated for any existing class or series by
a resolution adding to such class or series authorized and unissued shares of
the Preferred Stock not designated for any other class or series. The Board of
Directors or Committee may decrease the number of shares of the Preferred Stock
designated for any existing class or series by a resolution subtracting from
such class or series authorized and unissued shares of the Preferred Stock
designated for such existing class or series, and the shares so subtracted shall
become authorized, unissued, and undesignated shares of the Preferred Stock. The
number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the Common Stock, without a vote of the
holders of the Preferred Stock, or any series thereof, unless a vote of any such
holders is required pursuant to the terms fixed therefor in the resolution or
resolutions providing for the issuance of such class or series adopted by the
Board of Directors or any Committee.
2. PROVISIONS RELATING TO THE COMMON STOCK.
(a) Each share of Common Stock of the Corporation shall have identical
rights and privileges in every respect. The holders of shares of Common Stock
shall be entitled to vote upon
4
<PAGE>
all matters submitted to a vote of the stockholders of the Corporation and
shall be entitled to one vote for each share of Common Stock held.
(b) Subject to the prior rights and preferences, if any, applicable to
shares of the Preferred Stock or any series thereof, the holders of shares of
the Common Stock shall be entitled to receive such dividends (payable in cash,
stock, or otherwise) as may be declared thereon by the Board of Directors or
Committee at any time and from time to time out of any funds of the Corporation
legally available therefor.
(c) In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, after distribution in full of the
preferential amounts, if any, to be distributed to the holders of shares of the
Preferred Stock or any series thereof, the holders of shares of the Common Stock
shall be entitled to receive all of the remaining assets of the Corporation
available for distribution to its stockholders, ratably in proportion to the
number of shares of the Common Stock held by them. A liquidation, dissolution,
or winding-up of the Corporation, as such terms are used in this paragraph (c),
shall not be deemed to be occasioned by or to include any consolidation or
merger of the Corporation with or into any other corporation or corporations or
other entity or a sale, lease, exchange, or conveyance of all or a part of the
assets of the Corporation.
3. GENERAL.
(a) Subject to the foregoing provisions of this Certificate of
Incorporation and the applicable provisions of the DGCL, the Corporation may
issue shares of its Preferred Stock and Common Stock from time to time for such
consideration (not less than the par value thereof) as may be fixed by the Board
of Directors or Committee, which is expressly authorized to fix the same in its
absolute and uncontrolled discretion subject to the foregoing conditions. Shares
so issued for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall not be
liable for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase shares of the Corporation's capital
stock of any class or series or other securities of the Corporation, and such
rights and options shall be evidenced by instrument(s) approved by the Board of
Directors or Committee. The Board of Directors or Committee shall be empowered
to set the exercise price, duration, times for exercise, and other terms of such
options or rights; PROVIDED, HOWEVER, that the consideration to be received for
any shares of capital stock subject thereto shall not be less than the par value
thereof.
5
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
OBJECTSPACE, INC.
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
ObjectSpace, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify as follows:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by replacing the first paragraph of Article FOURTH in its entirety with
the paragraph set forth on Exhibit A attached hereto and incorporated herein by
this reference. The remainder of Article FOURTH shall not be changed by this
Certificate of Amendment.
SECOND: The Board of Directors of the Corporation at a duly held Board
meeting approved a resolution setting forth the above-referenced amendment,
declaring such amendment to be advisable, and calling for a vote of the
stockholders of the Corporation on such amendment.
THIRD: The stockholders of the Corporation signed a written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware approving the above-referenced amendment.
FOURTH: The above-referenced amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
*****
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed and attested as of March 30, 2000.
ObjectSpace, Inc.
By: /s/ DAVID NORRIS
--------------------------------
David Norris, President
ATTEST:
By: /s/ PAUL A. LIPARI
-------------------------------
Paul A. Lipari, Secretary
<PAGE>
EXHIBIT A
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 100,000,000 shares of capital stock, classified as
(i) 95,000,000 shares of common stock, $.01 par value ("Common Stock"), and (ii)
5,000,000 shares of preferred stock, $1.00 par value ("Preferred Stock").
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
OBJECTSPACE, INC.
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
ObjectSpace, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify as follows:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by replacing Article THIRTEENTH in its entirety with the Article
THIRTEENTH set forth on Exhibit A attached hereto and incorporated herein by
this reference.
SECOND: The Board of Directors of the Corporation at a duly held Board
meeting approved a resolution setting forth the above-referenced amendment,
declaring such amendment to be advisable, and calling for a vote of the
stockholders of the Corporation on such amendment.
THIRD: The stockholders of the Corporation signed a written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware approving the above-referenced amendment.
FOURTH: The above-referenced amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
*****
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed and attested as of March 30, 2000.
ObjectSpace, Inc.
By: /s/ DAVID NORRIS
-------------------------------
David Norris, President
ATTEST:
By: /s/ PAUL A. LIPARI
-------------------------------
Paul A. Lipari, Secretary
2
<PAGE>
EXHIBIT A
THIRTEENTH: Effective immediately following the consummation of the
initial public offering of the Corporation's Common Stock pursuant to a
registration statement declared effective under the Securities Act of 1933, as
amended and including any successor provisions thereto, any action required or
permitted to be taken by the stockholders of the Corporation must be effected at
a duly called annual or special meeting of stockholders of the Corporation and
may not be effected by any consent in writing by such stockholders.
3
<PAGE>
GALILEO CONTRACT NO.
US995431-ET
ObjectSpace
MASTER SERVICES AGREEMENT
This MASTER SERVICES AGREEMENT ("Agreement") is effective as of the 6th day
of August, 1999 (the "Effective Date") by and between GALILEO INTERNATIONAL,
L.L.C. ("Galileo"), a Delaware limited liability company and wholly owned
subsidiary of Galileo International, Inc., with offices at 9700 West Higgins
Road, Rosemont, Illinois 60018, AND OBJECTSPACE, INC., a Delaware
corporation, whose mailing address is 14850 Quorum Drive, Suite 500, Dallas,
Texas 75240 ("ObjectSpace").
RECITALS
A. ObjectSpace is in the business of creating and deploying advanced
technology solutions that leverage existing object-oriented technology and
providing consulting, training, and software products.
B. Galileo desires to obtain such services from ObjectSpace pursuant to
the terms of this Agreement.
Therefore, in consideration of the mutual covenants contained herein,
Galileo and ObjectSpace agree as follows:
1. SERVICES
A. ObjectSpace shall provide software and/or professional or technical
services (collectively referred to herein as the "Services") described
in one or more Task Orders negotiated and signed from time to time by
authorized representatives of both parties. Each Task Order shall set
forth, at a minimum, a description of the Services to be performed,
the number of ObjectSpace's personnel assigned to the project
(including their names), the duration of each individual's assignment,
the project deliverables, a schedule for completing the project,
reporting requirements, a project manager for each party, software
testing and acceptance criteria and license and maintenance fees (if
applicable), the fees for the Services to be performed, identification
of the portions of any software to be delivered that are New Software
and Other Software, as defined herein, and, to the extent that
software owned by third parties is a portion of the software to be
delivered to Galileo pursuant to a Task Order, the Task Order shall
also include an identification of such third party software and a
specification of the manner in which Galileo has or can obtain rights
to use such third party software including additional costs, as
applicable. A specimen Task Order is attached hereto as Exhibit A.
ObjectSpace shall have the right to accept or decline any proposed
Task Order.
B. Galileo shall have the right to request modifications to the scope of
the Task Order by notifying ObjectSpace of the nature of the proposed
change. For each proposed change or addition, ObjectSpace agrees to
provide to Galileo, at no additional charge, an analysis of such
change or addition, which shall include the following: (1) An estimate
of the time and materials cost for each such change; and (2) An
estimate of the effect such change would have on the project,
including the impact on outstanding and future deliverables and the
related delivery dates for such deliverables. Any changes in the
scope, price, schedule, or requirements of a project must be evidenced
by a written amendment to the Task Order that is executed by
authorized representatives of both parties.
C. The methods, details, and means of performing the Services shall be
determined jointly by ObjectSpace and Galileo, subject to Galileo's
right to assure satisfactory results by exercising its rights to
inspect, stop work, make recommendations regarding details of the
work, and request modifications to the scope of the Task Order. The
Services shall be performed either at Galileo's or ObjectSpace's
premises, as agreed. If Services are performed at Galileo's premises,
Galileo shall provide ObjectSpace's personnel with appropriate
workspace, equipment, and services, and ObjectSpace's personnel shall
observe Galileo's security and safety policies.
Page 1 of 9
<PAGE>
D. Galileo shall provide appropriate cooperation and access to key
personnel to enable ObjectSpace to perform the Services.
2. PERSONNEL
A. The person(s) retained by ObjectSpace and actively engaged in the
provision of Services under this Agreement shall be identified in the
applicable Task Order by name, title or position and responsibilities.
Galileo shall have the right to approve all Personnel providing
Services. If Galileo reasonably determines that any of Consultant's
personnel are not appropriate for the work being performed based on
their skills, background, or experience, ObjectSpace shall make a good
faith effort to assign other qualified personnel.
B. ObjectSpace may not utilize subcontractors to provide the Services
without Galileo's prior written consent. Each subcontractor shall
execute a written agreement whereby he agrees to be bound by the terms
of this Agreement.
C. All persons providing Services to Galileo under this Agreement shall
at all times be employees of ObjectSpace and not of Galileo. It is the
intent of the parties that ObjectSpace at all times shall be an
independent contractor with full and complete responsibility for all
of its employees, representatives, and subcontractors (hereafter
"Personnel"), including, Without limitation, payment of all
payroll-related taxes. Nothing in this Agreement shall be interpreted
to create or establish the relationship of employer and employee
between Galileo and ObjectSpace or any of its Personnel.
3. SOFTWARE DELIVERY AND TESTING
A. To the extent the Services specified in a particular Task Order
contemplate the creation of any new, custom software that does not
exist in the current product offerings of ObjectSpace or any third
party and that is to be created only for Galileo's benefit ("New
Software"), the parties shall agree upon criteria and methods for
testing and acceptance of such New Software. Delivery of such New
Software shall include the New Software itself in object code format,
the source code for the New Software, and any related documentation,
flow charts, design documents, record and file layouts, user and
maintenance manuals, and any other materials deemed necessary by
Galileo to perform the acceptance testing specifically and solely
associated with the New Software (the "Software Deliverables"). The
parties hereto expressly agree that the Software Deliverables shall
only include information, code and documentation associated with New
Software developed for Galileo as a result of a Task Order and shall
not include (1) any preexisting software owned by ObjectSpace or any
third party or (2) other software created by ObjectSpace but not
specifically for Galileo (collectively, the "0ther Software") that may
be used in conjunction with the New Software created for Galileo.
Galileo shall only receive executable code and user level
documentation, where applicable and available for all Other Software.
B. Upon delivery of the Software Deliverables, ObjectSpace shall assist
Galileo in testing the New Software, and take all reasonable steps to
correct any defects identified by Galileo.
4. TERM
This Agreement shall commence on the Effective Date and expire upon the
parties' completion of all obligations set forth under this Agreement or
August 5, 2000, whichever occurs first (such period being referred to
herein as the "Term"). This Agreement may be earlier terminated in
accordance with Section 18 hereof. This Agreement may not be renewed or
extended except by written agreement executed by both parties. Any
obligations that survive the expiration or termination of this Agreement
shall continue thereafter in full force and effect.
5. PROJECT MANAGERS
Page 2 of 9
<PAGE>
ObjectSpace and Galileo shall each designate, prior to the commencement of
work under this Agreement, a project manager who shall have responsibility
for conveying decisions on behalf of the respective parties under this
Agreement. Such designated project managers shall be identified in the
applicable Task Order. All correspondence and reports pertaining to this
Agreement shall be initiated by and addressed to the respective project
managers, except that notices under this Agreement shall be addressed as
specified under Notices, below.
6. REPORTS AND DOCUMENTATION
As specified in the applicable Task Order (or as otherwise agreed by
Galileo and ObjectSpace in writing), ObjectSpace shall provide to Galileo
written reports of the Services (the "Reports").
7. PROPRIETARY RIGHTS
A. ObjectSpace hereby assigns to Galileo all right, title, and Interest
in and to the New Software, the Software Deliverables, Reports, and
other ideas, Inventions, discoveries, improvements, designs, computer
programs, modules, products and related documentation and works of
authorship, including any modifications or enhancements thereto, and
other intellectual property created or conceived wholly or in part by
ObjectSpace or Its Personnel In connection with performing Services
pursuant to this Agreement, whether alone or in cooperation with
Galileo or any other third party that are embodied in New Software
(collectively, the "Work Product"). Galileo shall have the right to
obtain and to hold exclusively in Galileo's own name all rights to any
copyrights in any copyrightable materials embodied in the Work
Product, and any extensions and renewals thereof. ObjectSpace agrees,
at the request of Galileo and for no additional consideration, to
execute such documents and perform such other acts as Galileo deems
necessary to effectuate the transfer of rights hereunder.
B. ObjectSpace hereby agrees and acknowledges that neither ObjectSpace
nor its Personnel shall have any right to: (1) use, reproduce, modify,
prepare derivative works from, distribute, transmit or otherwise
exploit the Work Product by any means whatsoever, or (2) develop, use,
or distribute works that are similar or identical (in function,
structure, sequence, or organization) to the Work Product, except as
may be necessary to perform the Services.
C. The term Work Product shall not be construed to include, and
ObjectSpace shall retain all rights, title, and interest in: (1) the
Other Software or any other software program(s) and documentation
owned or distributed by ObjectSpace that is developed independently by
ObjectSpace outside the scope of the Services; (2) any object oriented
subroutines that are used in developing or that are embodied in the
Work Product (excluding any Galileo Confidential Information); and (3)
any tools or utilities developed by or on behalf of ObjectSpace (the
foregoing being hereinafter collectively referred to as "Proprietary
Materials"). ObjectSpace grants to Galileo a non-exclusive,
nontransferable, perpetual license to use such Proprietary Materials
that are incorporated into the Work Product solely for the operation
of the New Software (other than the "Voyager" software, which shall be
licensed pursuant to a separate license agreement).
C. Notwithstanding the foregoing, ObjectSpace may, except as otherwise
provided herein, freely use the "residuals" from the Work Product,
provided that ObjectSpace shall maintain the confidentiality of
Galileo's Confidential Information. (The term "residuals" shall mean
the Work Product in nontangible form (i.e., not in written or other
documentary form, including tape or disk) that may be retained in the
memories of ObjectSpace Personnel who have had access to or assisted
in development of the Work Product, including know-how, ideas, or
techniques contained therein.)
D. During the term of this Agreement, and for a period of 12 months
thereafter, ObjectSpace shall not, without Galileo's prior written
consent, assign any ObjectSpace Personnel who have performed Services
hereunder to perform, for any entity listed on Exhibit B, services
similar to those performed by such Personnel hereunder.
8. REPRESENTATIONS AND WARRANTIES
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<PAGE>
A. ObjectSpace represents and warrants that the Services shall be
performed in a good and workmanlike manner and that the Services shall
be of the highest professional standards and quality. ObjectSpace
agrees to reperform any Services not meeting this warranty at no
additional cost to Galileo.
B. ObjectSpace represents and warrants that any and all hardware,
software (including embedded software), firmware and systems created
and provided by ObjectSpace hereunder (each a "Product," collectively
the "Products") shall be Year 2000 Compliant, as that term is defined
herein. The term "Year 2000 Compliant" or "Year 2000 Compliance" shall
mean that each Product, when used in accordance with its applicable
documentation, shall be capable upon installation of accurately
processing (including, but not limited to, providing, receiving,
calculating, comparing and sequencing of data) date and daterelated
data from, into, and between the twentieth and twenty-first centuries,
including the years 1999 and 2000, and leap year calculations.
ObjectSpace warrants that any New Software supplied hereunder shall be
Year 2000 Compliant until December 31, 2003. ObjectSpace shall
promptly repair any non-compliant Products and documentation. If
ObjectSpace is unable to rectify a Year 2000 noncompliance issue after
reasonable efforts, ObjectSpace hereby grants Galileo permission to
modify the Products, or any portion thereof, to bring the Product(s)
into Year 2000 Compliance.
C. ObjectSpace represents and warrants that it has obtained all written
assignments and consents from any Personnel or other third party as
may be necessary to effectuate fully the transfer and assignment of
rights to the Work Product, and that no other assignments or consents
are necessary or appropriate under any agreements concerning any of
the Work Product in order for the transfer and assignment of any of
the Work Product under this Agreement to be legally effective in the
United States, India or any other relevant jurisdiction.
D. ObjectSpace warrants that the Work Product, and any modifications or
enhancements thereto, shall not infringe any intellectual property or
other proprietary right of a third party of which ObjectSpace has
direct knowledge, and that ObjectSpace shall not enter into any
agreement or take any action that would conflict with the proprietary
rights granted to Galileo hereunder.
E. ObjectSpace represents and warrants that, for a period of 90 days
following the successful completion of the acceptance testing
procedures specified in Section 3 above, the Software Deliverables
shall conform to Galileo's specifications and requirements.
F. ObjectSpace represents and warrants that neither ObjectSpace nor any
Personnel have any obligations to prior employers or others relating
to proprietary or confidential information or any inventions or
discoveries relating to the business of Galileo, and neither
ObjectSpace nor any Personnel is bound by any restriction, agreement,
judgment or other limitation limiting ObjectSpace's ability to enter
into this Agreement or to carry out its terms or shall engage in any
activity or take any action that would be In conflict with or that
would result in a breach or violation of any such restriction,
agreement, judgment or other limitation.
9. FEES
A. In consideration of performance of the Services pursuant to the terms
of this Agreement, Galileo shall pay to ObjectSpace the amounts
specified in the applicable Task Order. Unless otherwise provided in
the applicable Task Order, ObjectSpace shall submit to Galileo a
monthly invoice for the Services and reimbursable expenses, showing in
reasonable detail the distribution of charges based on milestones
completed and/or the hours worked and an itemization of reimbursable
expenses.
B. In the event that ObjectSpace is compensated in whole or in part on an
hourly basis, ObjectSpace agrees to keep complete and accurate books
and records of the actual number of hours worked in performing the
Services. Galileo shall pay such invoices within thirty (30) days of
receipt by Galileo. During the term of this Agreement and for a period
of one year following expiration or termination for any reason,
Galileo or its representative may, upon reasonable prior notice,
inspect the aforesaid books and records and make copies thereof. Any
such audit shall be at the expense of Galileo.
Page 4 of 9
<PAGE>
10. TRAVEL EXPENSES
Galileo shall reimburse ObjectSpace for reasonable and necessary travel and
living expenses, including, without limitation, air fare (Coach Class
only), lodging, meals (subject to a maximum per them of $40.00), taxi,
telephone and rental car, actually incurred by ObjectSpace or Personnel in
connection with Services related travel preapproved by Galileo, up to the
maximum(s), if any, set forth in the applicable Task Order. Such expenses
shall be reimbursed by Galileo only upon submission by ObjectSpace of
written expense reports documenting such expenses with receipts for all
expenditures greater than twenty-five dollars ($25.00). Except for the
travel-related expenses specified in this Section 10, Galileo shall not be
responsible for any out-of-pocket expenses of ObjectSpace or Personnel,
unless otherwise provided in the applicable Task Order.
11. TAXES
A. Galileo shall pay any United States sales or use taxes (except for any
tax levied upon or measured by ObjectSpace's gross receipts) imposed
by any taxing authority and required to be paid by ObjectSpace or
Galileo as a result of the services provided to Galileo under this
Agreement. Galileo shall not be liable for any tax levied upon or
measured by the income of ObjectSpace. Galileo shall not be liable for
any interest or penalties assessed as a result of any delay by
ObjectSpace in connection with any such taxes.
B. If a claim is made against ObjectSpace for any taxes that are to be
paid by Galileo, ObjectSpace shall promptly notify Galileo. If Galileo
so requests in writing, ObjectSpace shall, at Galileo's expense, take
such action as Galileo may reasonably direct with respect to such
taxes, including payment of such taxes under protest. If the tax has
been paid, and if requested by Galileo, ObjectSpace shall, at
Galileo's expense, take such action as Galileo may reasonably direct,
including allowing Galileo to file a claim or commence legal action in
ObjectSpace's name, to recover such tax payment. In the event of
refund or recovery of any tax, or part thereof, ObjectSpace shall pay
to Galileo promptly that portion of the tax paid by Galileo, including
any interest received thereon.
12. INDEMNIFICATION
ObjectSpace shall defend, indemnify and hold harmless Galileo, its owners,
officers, employees, and agents (collectively "Galileo"), from and against
any and all claims, suits, liabilities, judgments, losses, damages, fines,
costs and expenses (including reasonable attorneys' fees and expenses)
resulting from any claim, suit or demand by any third party arising from
(I) infringement of any intellectual property or other proprietary right of
any third party arising from any act by the ObjectSpace or Personnel or
Galileo's exercise of the rights granted hereunder, (ii) injuries to or
deaths of persons or loss of or damage to tangible property caused by
ObjectSpace or Personnel; (iii) the negligence or willful misconduct of
ObjectSpace or Personnel; or iv) breach by ObjectSpace or Personnel of this
Agreement (including any representation or warranty made hereunder), all
except to the extent proximately caused by the negligence or intentional
misconduct of Galileo. ObjectSpace's obligations under this Section 12
shall survive the expiration or other termination of this Agreement.
Galileo agrees to provide ObjectSpace with written notice of any such third
party claim or suit and reasonable cooperation in the defense of any such
claim or suit. ObjectSpace shall have complete control over the defense and
settlement of any such claim or suit. In the event of a claim or suit
covered by Section 12(1) above, ObjectSpace may, at its option, and in
complete fulfillment of its obligations under this Section 12 either, at
the sole discretion of ObjectSpace, (a) secure by license or otherwise, the
right for Galileo to continue to use the allegedly infringing material, (b)
replace the allegedly infringing material with a non-infringing substitute
of substantially equivalent functionality or, (c) return any funds received
from Galileo that are directly related to the delivery of the allegedly
infringing material, such funds may be associated with one or more Task
Orders and may comprise all or part of the compensation associated with a
Task Order.
13. CONSEQUENTIAL DAMAGES AND LIMITATIONS ON DAMAGES
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<PAGE>
EXCEPT FOR DAMAGES ASSOCIATED WITH CAUSES OF ACTION COVERED BY SECTION
12(i) ABOVE, NEITHER PARTY SHALL BE LIABLE FOR, AND EACH PARTY WAIVES AND
RELEASES ANY CLAIMS AGAINST THE OTHER PARTY FOR, ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST REVENUES, LOST
PROFIT, OR LOSS OF PROSPECTIVE ECONOMIC ADVANTAGE, RESULTING FROM
PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT, EVEN IF ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT AND EXCEPT FOR CLAIMS AND CAUSES OF ACTION COVERED BY
SECTION 12(i) ABOVE, OBJECTSPACE'S TOTAL LIABILITY TO GALILEO FOR ANY CAUSE
OF ACTION BROUGHT BY GALILEO REALTED IN ANY RESPECT TO THIS AGREEMENT OR TO
THE SERVICES PERFORMED HEREUNDER OR THE SYSTEMS OR PRODUCTS DELIVERED
HEREBY SHALL NOT EXCEED THREE TIMES THE AMOUNTS RECEIVED BY OBJECTSPACE
FROM GALILEO FROM THE SERVICES PERFORMED BY OBJECTSPACE AS A RESULT OF THE
TASK ORDER ASSOCIATED WITH THE CAUSE OF ACTION OR THREE TIMES THE AMOUNTS
RECEIVED BY OBJECTSPACE IN THE TWELVE MONTHS PRECEDING THE FILING OF THE
CAUSE OF ACTION, WHICHEVER IS LESS.
14. UNAUTHORIZED PAYMENTS
A. In connection with any performance under this Agreement, ObjectSpace
shall at all times comply, and require all Personnel to comply, fully
with all of the terms and provisions of the Foreign Corrupt Practices
Act and any related or successor statute, regulation or governmental
directive regarding payments to foreign nationals or other persons or
entities.
B. In connection with any performance under this Agreement, ObjectSpace
shall not make, and shall prohibit all Personnel from making, any
payment or offer, promise or authorization of any payment, of any
money or other article of value, to any official, employee or
representative of any foreign government, or foreign business person
or entity doing or seeking to do business with Galileo, in order
either to obtain or to retain Galileo's business, or to direct
Galileo's business to a third party, or to influence any act or
decision of any government employee or representative, or of any
employee or representative of Galileo, to perform or to fail to
perform his or her duties, or to enlist the aid of any third party to
do any of the foregoing.
C. In connection with any performance under this Agreement, ObjectSpace
shall not solicit or receive any amount of cash or negotiable paper,
or any item, service or favor of value from any present or prospective
supplier, vendor or customer of Galileo, or from anyone else with whom
Galileo does business, including any governmental official or
representative, for or in connection with the obtaining or retaining
any business of or with Galileo. ObjectSpace shall refuse to accept
all such gifts and, if received, shall return such gifts to the donor.
In all such cases ObjectSpace shall notify Galileo promptly of such
gift or offer thereof. If Galileo deems it necessary, ObjectSpace
shall turn over such gifts to Galileo for further handling.
ObjectSpace shall require all Personnel to comply with the provisions
of this Section 14.
15. CONFIDENTIAL INFORMATION
Each of the parties is subject to the confidentiality obligations set forth
in the mutual Non-Disclosure Agreement, dated September 1998, attached
hereto as Exhibit C; and each party covenants to comply with its
obligations thereunder throughout the term of this Agreement.
16. PUBLICITY
Neither party shall refer to this Agreement or use the name of the other
party in any form of publicity or advertising, either directly or
indirectly, without the prior written consent of the other party. Neither
party may use any trade name, trademark, service mark or product name of
the other party, without first obtaining the other party's prior written
approval of such use.
Page 6 of 9
<PAGE>
17. FORCE MAJEURE
Neither party shall be responsible for delays In or suspension of
performance caused by acts of God or governmental authority, strikes or
labor disputes, fires or other loss of manufacturing facilities, breach by
suppliers of supply agreements, or other similar or dissimilar causes
beyond the reasonable control of that party.
18. TERMINATION
A. If either party (the "Defaulting Party") fails to observe or perform
any of its material obligations under this Agreement and if its
failure continues for a period of ten (10) days after written notice
from the other party to the Defaulting Party thereof, then, without
prejudice to any other rights or remedies the other party may have,
the other party may terminate this Agreement without termination
liability upon written notice to the Defaulting Party. ObjectSpace
acknowledges and agrees that ObjectSpace shall be in material breach
of this Agreement in the event that ObjectSpace does not perform the
Services to Galileo's reasonable satisfaction.
B. Notwithstanding anything to the contrary in this Section 18, either
party may terminate this Agreement without termination liability
immediately upon written notice to the other party in the event of any
violation of the confidentiality provisions in Section 15 hereof, or,
in the case of Galileo, in the event of a breach by ObjectSpace of any
representation or warranty in Section 8 hereof.
C. All obligations of each party that have accrued before termination or
that are of a continuing nature shall survive termination.
D. In the event of any termination of this Agreement prior to the
expiration of the Term, ObjectSpace shall be entitled to receive the
compensation it is due through the effective date of termination but
shall not be entitled to any compensation after the effective date of
termination, unless otherwise agreed.
E. Notwithstanding anything to the contrary in this Agreement, Galileo
may, at its sole option, terminate any Task Order, or any portion
thereof, upon thirty (30) days' advance written notice. Upon receipt
of such notice, ObjectSpace shall advise Galileo of the extent to
which performance has been completed through such date, and collect
and deliver to Galileo whatever work product then exists in the manner
requested by Galileo. ObjectSpace shall be paid for all work performed
through the date of termination.
19. NON-WAIVER
No waiver by either party of any default or breach by the other party of
any provision of this Agreement shall be effective unless made in writing,
and no waiver shall operate as or be deemed a waiver of any subsequent
default or breach.
20. THIRD PARTY RIGHTS
Nothing contained in this Agreement shall or is intended to create or shall
be construed to create any right in or any duty or obligation to any third
party.
21. AMENDMENTS
This Agreement may be changed, modified, or amended from time to time only
by express written agreement of both parties executed by their authorized
representatives. To the extent any terms contained in a Task Order conflict
with the terms of this Agreement, the terms set forth in the Task Order
shall govern.
22. NOTICES
Page 7 of 9
<PAGE>
Notices under the terms of this Agreement shall be in writing and sent by
prepaid certified mail, return receipt requested, or by telegram or
telecopier, to the addresses provided below:
Attn: Purchasing Manager Fax: +1 (303) 397-5666
Galileo International, L.L.C.
5350 S. Valentia Way
Englewood, CO 80111
ObjectSpace, Inc. Fax: +1 (972) ___ - ___
14850 Quorum Drive, Suite 500
Dallas, Texas 75240
Notices shall be effective on the first business day following receipt
thereof. Notices sent by certified mail shall be deemed received on the
date of delivery as indicated on the return receipt; notices sent by
telegram or telecopier shall be deemed received on the date transmitted.
23. ASSIGNMENT
Galileo may assign this Agreement to any Galileo owner, to any affiliate of
such Galileo owner, to any wholly owned subsidiary, or to any successor of
all or substantially all of its business or assets. This Agreement may not
be otherwise assigned in whole or in part, and any such assignment shall be
void and of no effect. ObjectSpace shall not assign or subcontract any part
of the Services to be performed under this Agreement without the prior
written consent of Galileo.
24. EQUAL OPPORTUNITY EMPLOYER
Galileo certifies that it complies with Executive Order 11246 as amended,
Section 503 of the Rehabilitation Act of 1973 as amended, and the Vietnam
Era Veterans Readjustment Assistance Act of 1974 as amended, (38 USC 4212),
and implementing regulations including the Equal Employment Opportunity
Clause and the Affirmative Action Clause which are hereby incorporated by
reference to the extent that Galileo is covered by those laws.
25. COMPLIANCE WITH LAWS
ObjectSpace agrees to comply with all applicable state, federal, and local
laws including, but not limited to, all applicable requirements of the
Federal Government, pertaining to non-discrimination in employment and
facilities, including without limitation, the provision contained in
Paragraphs 1 through 7 of Part II, Nondiscrimination in Employment by
Government Contractors and Subcontractors, of Executive Order 1124 (as
amended by Executive Order 11375), and Certification of Nonsegregated
Facilities (41 CRF, Chapter 1, Sections 1-12, 803.10) all of which
provisions are incorporated herein by reference and expressly made a part
hereof, ObjectSpace certifies that all articles delivered hereunder were
produced in conformance with the Fair Labor Standards Act.
26. GOVERNING LAW
This Agreement and any dispute arising under or in connection with this
Agreement, including any action in tort, shall be governed by the internal
laws of the State of Illinois of the United States of America, without
regard to its conflict of laws principles. All actions brought to enforce
or arising out of this Agreement shall be brought in federal or state
courts located within the County of Cook, State of Illinois, the parties
hereby consenting to personal jurisdiction and venue therein.
27. ENTIRETY OF AGREEMENT
Page 8 of 9
<PAGE>
This Agreement supersedes all prior oral or written representations or
communications between the parties and, together with the Exhibits, the
Task Orders, and any Non-Disclosure Agreements between the parties,
constitutes the entire understanding of the parties regarding the subject
matter of this Agreement.
28. CONFLICT OF INTEREST WAIVER
ObjectSpace hereby waives any and all rights it may now have or hereafter
acquire to assert, as a basis for rescinding or voiding this Agreement or
in any other manner avoiding the performance of any obligation undertaken
in this Agreement, a claim or defense of conflict-of-interest, based on the
fact that: (I) one or more officers of Galileo serve as director(s) of
ObjectSpace; or (ii) Galileo owns a minority equity interest in
ObjectSpace.
IN WITNESS WHEREOF, the parties by their authorized representatives have
executed this Agreement on the dates provided below.
ObjectSpace, Inc. Galileo Intemational, L.L.C.
By: /s/ Kenneth J. Overton By: /s/ Lori M. Tobin
--------------------------- -----------------------------
Name: Kenneth J. Overton Name: Lori M. Tobin
Title: VP, Enterprise Solutions Title: Senior Manager, Purchasing
Date: September 13, 1999 Date: September 23, 1999
Page 9 of 9
<PAGE>
EXHIBIT A
S P E C I M E N TASK ORDER
TASK ORDER # TO GALILEO CONTRACT NO. US995431-ET
NAME OF PROJECT:
This Task Order is entered into pursuant to the ObjectSpace Master
Services Agreement, dated as of August 6, 1999 ("Master Services Agreement"),
between ObjectSpace, Inc. and Galileo International, L.L.C. This Task Order
(and any attachments incorporate herein by reference) and the Master Services
Agreement constitute the entire agreement between Galileo and ObjectSpace
with respect to the Services described in this Task Order and supersede any
and all prior agreements, proposals, representations, statements, or
understandings, whether written or oral, concerning such Services or the
rights and obligations of the parties relating thereto. In the event of any
inconsistency between the terms of this Task Order (and attachments, if any)
and the Master Services Agreement, the terms of this Task Order shall prevail.
DESCRIPTION OF THE SERVICES TO BE PERFORMED:
PROJECT COMPLETION SCHEDULE:
DELIVERABLE&
OBJECTSPACE PERSONNEL ASSIGNED TO PROJECT:
NAME TITLE RATE OF COMPENSATION DURATION OF ASSIGNMENT
- ---- ----- -------------------- ----------------------
REPORTING REQUIREMENTS:
GALILEO PROJECT MANAGER:
OBJECTSPACE PROJECT MANAGER:
SOFTWARE TESTING AND ACCEPTANCE CRITERIA:
SOFTWARE LICENSE AND MAINTENANCE FEES:
COMPENSATION, BILLING SCHEDULE AND PAYMENT TERMS:
(include applicable milestones and completion incentives)
MAXIMUM REIMBURSABLE EXPENSES:
ADDITIONAL CONDITIONS:
OBJECTSPACE, INC. GALILEO INTERNATIONAL, L.L.C.
By: By:
Name: Name:
Title: Title:
Date: Date:
<PAGE>
EXHIBIT B
To Galileo Contract No. US995431-ET
PRECLUDED ENGAGEMENTS
Sabre
Amadeus
WorldSpan
Microsoft Products Corporation
<PAGE>
EXHIBIT C
NON-DISCLOSURE AGREEMENT
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED. ASTERISKS DENOTE THESE OMISSIONS.
LICENSE AGREEMENT between
ObjectSpace, Inc. and Tivoli Systems Inc. for
ObjectSpace Voyager
Agreement Number: OEM9700287
This Agreement dated October 28, 1997 ("Effective Date") is between ObjectSpace
Inc. ("ObjectSpace") with an address for purposes of this Agreement at 14881
Quorum Drive, Suite 400, Dallas, Texas 75240, and Tivoli Systems Inc.
("Tivoli"), with an address for purposes of this Agreement at 9442 Capital of
Texas Highway, Austin, Texas 78759. Tivoli is a wholly owned subsidiary of
International Business Machines Corporation ("IBM"). Under this Agreement,
ObjectSpace grants Tivoli a limited license to its computer software program
known as ObjectSpace Voyager which enables Tivoli to build Java applications for
system, network and application management using the ObjectSpace Voyager APIs,
tools and run-time environment.
By signing below, the parties agree to the terms of this Agreement. The complete
Agreement between the parties regarding this transaction consists of this
License Agreement and the following Attachments:
1. "Description of Licensed Work;"
2. "Testing, Maintenance and Support;" and
3. "Certificate of Originality."
Confidential Disclosure Agreement ("CDA"), No. OTH9700233, dated August 12,
1997, and the "Tivoli End User License Agreement", No. ETM9700288, are related
agreements between the parties.
This Agreement replaces all prior oral or written communications between the
parties relating to the subject matter. Once signed, any reproduction of this
Agreement made by reliable means (for example, photocopy or facsimile) is
considered an original, unless prohibited by local law.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
TIVOLI SYSTEMS INC. OBJECTSPACE, INC.
By: /s/ HOWARD J. NICHOLAS By: /s/ KENNETH J. OVERTON
-------------------------------- --------------------------------
Authorized Signature Authorized Signature
Name: Howard J. Nicholas Name: Kenneth J. Overton
------------------------------ ------------------------------
Title: Manager, Contract Services Title: VP, Enterprise Solutions
----------------------------- -----------------------------
Date: October 28, 1997 Date: October 28, 1997
------------------------------ ----------------------------
1
<PAGE>
1.0 DEFINITIONS
Capitalized terms in the Agreement have the following meanings.
1.1 Code is computer programming code, including both Object Code and Source
Code.
a. OBJECT CODE is Code substantially in binary form, and includes
header files of the type necessary for use or interoperation
with other computer programs. It is directly executable by a
computer after processing or linking, but without compilation
or assembly. Object Code is all Code other than Source Code.
b. SOURCE CODE is Code in a form which when printed out or
displayed is readable and understandable by a programmer of
ordinary skills. It includes related source code level system
documentation, comments and procedural code. Source Code does
not include Object Code.
1.2 DELIVERABLE is any item that ObjectSpace provides under this Agreement.
1.3 DERIVATIVE WORK is a work that is based on an underlying work and that
would be a copyright infringement if prepared without the authorization
of the copyright owners of the underlying work. Derivative Works are
subject to the ownership rights and licenses of a party or of others in
the underlying work.
1.4 DISTRIBUTORS are those authorized or licensed by Tivoli or IBM, or any
of their Subsidiaries or Distributors, to license or distribute
Products.
1.5 ENHANCEMENTS are changes or additions, other than Error Corrections, to
the Licensed Work.
a. BASIC ENHANCEMENTS are all Enhancements, other than Major
Enhancements, including those that support new releases of
operating systems and devices.
b. MAJOR ENHANCEMENTS provide substantial additional value and
are offered to customers for an additional charge.
1.6 ERROR CORRECTIONS are revisions that correct errors and deficiencies
(collectively referred to as "errors") in the Licensed Works.
1.7 EXTERNALS are (1) any pictorial, graphic, and audiovisual works (such
as icons, screens, sounds, and characters) generated by execution of
Code, and (2) any programming interfaces, languages or protocols
implemented in Code to enable interaction with other computer programs
or the end user. Externals do not include the Code that implements
them.
1.8 LICENSED WORK is (1) ObjectSpace Voyager Code, in both Object Code and
Source Code format, including any other material described in or that
conforms to the description in the Attachment entitled "Description of
Licensed Work," or that is delivered to Tivoli as the Licensed Work,
including (but not limited to) Code, associated documentation, and
Externals, and (2) Error Corrections and Enhancements.
1.9 MORAL RIGHTS are personal rights associated with authorship of a work
under applicable law. They include the rights to approve modifications
and to require authorship identification.
2
<PAGE>
1.10 PRODUCT is a current and/or future product, including a new version or
release of such product, whether or not branded by Tivoli or IBM, which
contains some or all of the Licensed Work or a Derivative Work of a
Licensed Work. A Product must add significant function or value to the
Licensed Work contained in the Product by integrating, embedding,
bundling or incorporating it into or with one or more of Tivoli's
network or systems management products or suite of products (including
IBM if such Tivoli products are transferred to it) such that the
primary reason for developing the Product is other than to license the
Licensed Works by themselves to third parties.
1.11 SUBSIDIARY is an entity during the time that more than 50% of its
voting stock is owned or controlled, directly or indirectly, by another
entity. If there is no voting stock, a Subsidiary is an entity during
the time that more than 50% of its decision-making power is controlled,
directly or indirectly, by another entity.
1.12 TOOLS include devices, compilers, programming, documentation, media and
other items required for the development, maintenance or implementation
of a Deliverable that are not commercially available.
2.0 RESPONSIBILITIES OF OBJECTSPACE
2.1 ObjectSpace will provide the following Deliverables to Tivoli as soon
as commercially practical but no later than 30 days from the Effective
Date:
a one complete set of the Licensed Work described in the
Attachment entitled "Description of Licensed Work".
b. Tools. There are currently no Tools for the Licensed Work. If
Tools are later required, ObjectSpace will provide Tivoli with
a written list that includes a description of the Tool, and
promptly deliver such Tools (including updates to such Tools)
to Tivoli.
c. any updates to the following list. This list identifies any
commercially available devices, compilers, programming,
documentation, media and other items required for the
development, maintenance or implementation of a Deliverable:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
PART NUMBER/ VERSION/
DESCRIPTION MODEL NUMBER RELEASE MANUFACTURER
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
1
-----------------------------------------------------------------------------------------------
2
-----------------------------------------------------------------------------------------------
3
-----------------------------------------------------------------------------------------------
4
-----------------------------------------------------------------------------------------------
5
-----------------------------------------------------------------------------------------------
6
-----------------------------------------------------------------------------------------------
</TABLE>
ObjectSpace's delivery obligations for Tools does not apply to
the items listed in this chart.
c. a completed certificate of originality with the Licensed Work,
and with each Enhancement to the Licensed Work, in the form
specified in the Attachment entitled
3
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED. ASTERISKS DENOTE THESE OMISSIONS.
"Certificate of Originality". Tivoli may suspend payments to
ObjectSpace for the Licensed Work if ObjectSpace does not
provide a properly completed certificate. Payment will resume
after Tivoli receives and accepts the certificate.
2.2 ObjectSpace will provide support for the Licensed Work as follows:
a. For the first full year following the Effective Date,
ObjectSpace will provide to Tivoli, at no charge, testing,
maintenance and support for the Licensed Work as described in
this Agreement, including the Attachment entitled, "Testing,
Maintenance and Support," as well as Basic and Major
Enhancements, and Error Corrections for the Licensed Work
beginning when Tivoli accepts the Licensed Work.
b. For the second full year following the Effective Date, Tivoli
may, at its option, elect to continue to purchase such
testing, maintenance, support, Enhancements (both Basic and
Major), and Error Corrections from ObjectSpace for an annual
fee of *.
c. Thereafter, Tivoli may, at its option, elect to continue to
purchase such testing, maintenance, support, Enhancements
(both Basic and Major), and Error Corrections from ObjectSpace
for the annual fee defined in this paragraph for so long as
Tivoli may require such support. ObjectSpace may charge Tivoli
an annual fee for such support not to exceed 105% of the fee
for the prior twelve month period.
d. ObjectSpace agrees to submit an invoice to Tivoli for such
support on an annual basis, and at least 30 days prior to the
beginning of each 12 month period. If Tivoli does not wish to
receive such support, Tivoli will so notify ObjectSpace.
e. If Tivoli cancels such support, Tivoli may reinstate it at a
later time by paying the support charges then in effect and an
additional fee. The additional fee will be equal to the
current annual support charges multiplied by the number of
annual periods for which support was interrupted. For purposes
of calculating the additional fee, portions of periods will
count as full periods.
2.3 ObjectSpace will:
a. participate in progress reviews, as requested by Tivoli, to
demonstrate ObjectSpace's performance of ObjectSpace's
obligations;
b. implement or continue suitable processes designed to help
prevent contamination by harmful code. ObjectSpace will
provide Tivoli notice if ObjectSpace suspects contamination;
c. have agreements with ObjectSpace's personnel and third parties
to perform obligations and to grant or assign rights to Tivoli
as required by this Agreement. On request, ObjectSpace will
provide Tivoli with evidence of these agreements;
d. maintain records to verify authorship of the Licensed Work for
4 years after the termination or expiration of this Agreement.
On request, ObjectSpace will deliver or otherwise make
available this information in a form specified by Tivoli;
e. not assign or transfer this Agreement or ObjectSpace's rights
under it, or delegate or subcontract ObjectSpace's
obligations, without Tivoli's prior written consent.
Notwithstanding the foregoing, ObjectSpace may assign or
otherwise transfer this
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Agreement, or delegate its duties and obligations under
this Agreement, to a Subsidiary of ObjectSpace, without the
consent of Tivoli, but ObjectSpace will promptly notify
Tivoli of any such transfer, assignment or delegation. Any
other attempt to do so is void. In addition, ObjectSpace
specifically agrees that, prior to any planned sale by
ObjectSpace of the Licensed Work or sale by ObjectSpace of
its assets, which include the Licensed Work, including any
merger or other business combination, it will offer the
Licensed Work to Tivoli under the same terms and
conditions, including pricing, as ObjectSpace agreed on
with such prospective purchaser, on a first right of
refusal basis. If Tivoli elects not to exercise such right,
it will not unreasonably withhold its consent to an
ObjectSpace request under this section;
f. not provide any information to the media, or issue any press
releases or other publicity, regarding this Agreement or the
parties' relationship under it, without Tivoli's prior written
consent, except as otherwise set forth in Section 4.1 of this
Agreement; and
g. not disclose to a third party the terms of this Agreement or
the fact that Tivoli has licensed the Licensed Work, without
Tivoli's prior written consent, except as otherwise set forth
in Section 4.1 of this Agreement. ObjectSpace may, however,
make such disclosures (i) to its accountants, lawyers or other
professional advisors provided that any such advisor is under
a confidentiality obligation and (ii) as required by law
provided ObjectSpace obtains any confidentiality treatment for
it which is available.
2.4 If ObjectSpace fails to deliver the Licensed Work, Tivoli may either
reduce any amounts due hereunder by an amount equal to the value not
received, or have ObjectSpace reimburse Tivoli for the value not
received, up to the total license fee set forth under Section 6 below.
ObjectSpace also acknowledges that if it does not deliver the Licensed
Work, Tivoli will suffer irreparable harm and will be entitled to all
equitable remedies, including specific performance for the delivery of
such Licensed Work.
If ObjectSpace fails to deliver maintenance, support, Enhancements
(both Basic and Major), and Error Corrections for a Licensed Work,
Tivoli may either reduce any amounts due hereunder by an amount equal
to the value not received, or have ObjectSpace reimburse Tivoli for the
value not received, up to a total of the annual fee paid by Tivoli for
the year in which such failure occurred.
3.0 TIVOLI OBLIGATIONS
3.1 Tivoli will provide ObjectSpace with the following Tivoli software
programs, in the quantities specified, under the terms and conditions
of its standard Tivoli End User License Agreement, a copy of which is
attached to this Agreement. In consideration of the rights and licenses
granted by ObjectSpace under this Agreement, Tivoli agrees to waive the
one-time charge for such programs, and the first year's fee for
maintenance and support for the such programs as described in the
Tivoli End User License Agreement. After the first year, such
maintenance and support will be available at Tivoli standard pricing.
5
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED. ASTERISKS DENOTE THESE OMISSIONS.
<TABLE>
<CAPTION>
PROGRAM NAME QUANTITY
<S> <C> <C>
SERVERS CLIENTS
TME [*] Enterprise Console [*] [*]
TME [*] Netview [*] [*]
TME [*] Framework [*] [*]
TME [*] Software Distribution [*] [*]
TME [*] Inventory [*] [*]
TME [*] User Administration [*] [*]
TME [*] Distributed Monitoring [*] [*]
TME [*] Remote Control [*] [*]
_______ [*] [*]
</TABLE>
4.0 MUTUAL OBLIGATIONS
4.1 The parties agree to issue a mutually-acceptable press release
regarding their relationship under this Agreement as soon as
commercially practicable following the Effective Date.
4.2 The parties agree to perform certain joint marketing activities
regarding Products when such marketing is to the mutual benefit of both
parties, as determined by each party in its sole discretion.
4.3 Tivoli agrees to allow ObjectSpace to write a case study covering the
benefits Tivoli received through the use of the Licensed Work as an
infrastructure for the development of Products. Tivoli will allow
ObjectSpace to interview up to five members of its development and
marketing staff in connection with this case study. Subject to Tivoli's
final approval and provided no confidential information of Tivoli is
included, this case study is for unrestricted publication by
ObjectSpace. Tivoli has full rights to review and approve all contents
of the case study. ObjectSpace will cooperate with Tivoli in making any
changes needed to achieve a case study acceptable to Tivoli, and Tivoli
will cooperate with ObjectSpace to facilitate its internal review and
approval processes.
5.0 LICENSE GRANTS
5.1 ObjectSpace grants Tivoli a nonexclusive, worldwide, perpetual,
irrevocable, paid-up license to prepare Derivative Works of, and only
to internally use, execute, reproduce, display, perform, and
distribute, the Licensed Work in Source Code form, any Tools (in the
event ObjectSpace delivers Tools under Section 2.1.b) and such
Derivative Works, in any medium or distribution technology whatsoever,
whether known or unknown, solely for Products. The rights and licenses
granted by ObjectSpace to Tivoli hereunder also include the right of
Tivoli to authorize or sublicense IBM, and any of Tivoli's and IBM's
Subsidiaries, contractors, and consultants, to exercise any of the
rights granted to Tivoli in this Section 5.1. Any such contractors and
consultants will be under appropriate confidentiality restrictions no
less restrictive than the CDA referenced on the first page of this
Agreement.
5.2 ObjectSpace also grants Tivoli a nonexclusive, worldwide, perpetual,
irrevocable, paid-up right to sublicense and deliver a copy of the
Source Code of the Licensed Work and Derivative Works thereof to third
parties, including but not limited to Distributors, only in association
with the
6
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delivery and sublicensing of the Source Code of Products, and only
if the Source Code is subject to the same restrictions as the Source
Code of the Product. This includes the ability to sublicense the
Source Code of a Product to fulfill an escrow obligation if its
customer(s) requires Tivoli or IBM to place Source Code in an escrow
account for maintenance and support purposes. The rights and
licenses granted by ObjectSpace to Tivoli hereunder also include the
right of Tivoli to authorize or sublicense IBM, and any of Tivoli's
and IBM's Subsidiaries, to exercise any of the rights granted to
Tivoli in this Section 5.2.
5.3 ObjectSpace grants Tivoli a nonexclusive, worldwide, perpetual,
irrevocable, paid-up license to reproduce, transfer, distribute
internally and externally, and sublicense the Object Code only of the
Licensed Work and its Derivative Works, and documentation, in any
medium or distribution technology whatsoever, whether known or unknown,
provided that such Object Code is distributed and sublicensed in
conjunction with Products, and not in a stand-alone form. ObjectSpace
grants Tivoli the right to authorize or sublicense others to exercise
any of the rights granted to Tivoli in this Section 5.3.
5.4 ObjectSpace grants Tivoli a nonexclusive, worldwide, perpetual,
irrevocable, paid-up license to prepare Derivative Works of the
Externals, and to use, execute, reproduce, display, perform, transfer,
distribute, and sublicense the Externals and such Derivative Works, in
any medium or distribution technology whatsoever, whether known or
unknown. ObjectSpace grants Tivoli the right to authorize or sublicense
others to exercise any of the rights granted to Tivoli in this Section
5.4.
5.5 The grant of rights and licenses to the Licensed Work and Tools
includes a nonexclusive, worldwide, perpetual, irrevocable, paid-up
license under any patents and patent applications that are owned or
licensable by ObjectSpace now or in the future and are (1) required to
make, have made, use and have used the Licensed Work or its Derivative
Works or (2) required to license or transfer the Licensed Work or its
Derivative Works; provided, however, that-a license to such patents
would have been required to exercise these rights to the Licensed Work
without regard to the Derivative Works. This license applies to the
Licensed Work and its Derivative Works operating alone or in
combination with equipment or Code. The license scope is to make, have
made, use, have used, sell, license or transfer items, and to practice
and have practiced methods, to the extent required to exercise the
rights granted hereunder to the Licensed Work and Tools.
5.6 Subject to ObjectSpace's ownership of the Licensed Work and Tools,
Tivoli will own any Derivative Works it creates.
5.7 ObjectSpace grants Tivoli a nonexclusive, worldwide, perpetual,
irrevocable, paid-up license to use the names and trademarks
ObjectSpace uses to identify the Licensed Work for Tivoli's marketing
of the Products. ObjectSpace grants Tivoli the right to authorize or
sublicense others to exercise any of the rights granted to Tivoli in
this Section 5.7. If Tivoli's use of ObjectSpace's names and trademarks
is improper and ObjectSpace provides Tivoli notice that ObjectSpace
objects to it, Tivoli will take all reasonable steps necessary to
resolve ObjectSpace's objections. ObjectSpace may reasonably monitor
the quality of products bearing its trademark under this license.
7
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED. ASTERISKS DENOTE THESE OMISSIONS.
5.8 Any goodwill attaching to Tivoli's trademarks, service marks, or trade
names belongs to Tivoli and this Agreement does not grant ObjectSpace
any right to use them. Tivoli may state that ObjectSpace has provided
the Licensed Work. ObjectSpace may state that it has licensed the
Licensed Work to Tivoli.
5.9 Subject to agreement on the license fee to be paid to ObjectSpace,
ObjectSpace agrees that the rights and licenses granted by ObjectSpace
hereunder also include the right of Tivoli and IBM to exercise any of
the rights granted to Tivoli in this Section 5 on products other than
the Product.
ObjectSpace further agrees that any such license fee will be
reasonable, nondiscriminatory, and consistent with the license fee paid
by other similarly situated customers.
6.0 PAYMENT
6.1 For the rights and licenses received, Tivoli will pay ObjectSpace a
total license fee of * in two payments, as follows:
Within 30 days of the Effective Date *
On January 31, 1998 *
6.2 ObjectSpace will submit invoices to Tivoli for the above amounts prior
to the payment date. After Tivoli's receipt of a valid invoice, Tivoli
will pay ObjectSpace the amounts due upon the above dates.
6.3. For support as set forth in Section 2.2, ObjectSpace agrees to submit
an invoice to Tivoli for such support on an annual basis, and at least
30 days prior to the beginning of each 12 month period. After Tivoli's
receipt of a valid invoice, Tivoli will pay ObjectSpace the amounts due
within 30 days. If Tivoli does not wish to receive such support, Tivoli
will so notify ObjectSpace.
6.4 All invoices will include the following information:
a. ObjectSpace's company and remit to address; and
b. Reference to this Agreement by its number and its date.
6.5 All invoices will be addressed to the designated Contract Coordinator
at Tivoli Systems, Inc. and sent (with a copy to the Tivoli Technical
Coordinator) to the following address:
9442 Capital of Texas Highway
Austin, Texas 78759
6.6 Each party will be solely responsible for any taxes it incurs, directly
or indirectly, associated with its performance of this Agreement.
8
<PAGE>
6.7 The payments defined in this Section fully compensate ObjectSpace for
its performance under, and for the rights and licenses granted in, this
Agreement.
7.0 TESTING
7.1 ObjectSpace will perform the following tests prior to each delivery of
the Licensed Work:
a. component testing;
b. functional verification testing; and
c. compatibility testing.
Upon Tivoli's request, the details of such testing will be mutually
agreed to by the parties.
7.2 ObjectSpace will provide to Tivoli concurrent with each delivery of the
Licensed Work and Tools all test results, test scenarios, test cases,
and test reports associated with the pre-delivery testing.
7.3 Upon receipt of the Licensed Work by Tivoli, Tivoli may evaluate the
Licensed Work for a period of 30 days and perform such tests as Tivoli
deems appropriate to determine whether:
a. the Licensed Work meets the specifications described in the
Attachment entitled "Description of Licensed Work";
b. the Licensed Work executes repetitively within the system
environment described in the Attachment entitled "Description
of Licensed Work"; and
c. Tivoli can successfully execute to completion all functional
and system test scenarios developed by Tivoli.
Tivoli's testing does not relieve ObjectSpace of its obligations under
this Agreement. Tivoli has no obligation to identify errors.
8.0 REPRESENTATIONS AND WARRANTIES
8.1 ObjectSpace makes the following ongoing representations and warranties:
a. ObjectSpace has full legal rights to grant the rights granted
herein;
b. ObjectSpace is not under, and will not assume, any contractual
obligation that prevents ObjectSpace from performing its
obligations or conflicts with the rights and licenses granted
in this Agreement;
c. there are no liens, encumbrances or claims pending or
threatened against ObjectSpace, or to ObjectSpace's knowledge,
anyone else, that relate to the rights and licenses granted in
this Agreement;
d. except for patents and patent applications of a third party,
the warranty for which is set forth in Section 8.1.e (below),
neither the Licensed Work nor the Tools directly or indirectly
infringe any intellectual property rights of a third party;
e. to ObjectSpace's knowledge, neither the Licensed Work nor the
Tools directly or indirectly infringe any patents or patent
applications of a third party;
f. the Licensed Work and the Tools will perform in accordance
with the requirements set forth in this Agreement, including
the Attachment entitled "Description of Licensed
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<PAGE>
Work", and will conform to ObjectSpace's user
documentation, and any sales and marketing materials
provided by ObjectSpace;
g. the fully commented Source Code that ObjectSpace provides
corresponds to the current release or version of the Licensed
Work provided by ObjectSpace under this Agreement;
h. the Licensed Work supports the Year 2000; it is capable of
correctly processing, providing and receiving date data, as
well as properly exchanging accurate date data with all
products (for example, hardware, software and firmware) with
which the Licensed Work is designed to be used; and
i. neither the Licensed Work nor the Tools are contaminated by
harmful code.
ObjectSpace will immediately provide Tivoli written notice of any
change that may affect its representations and warranties.
8.2 Except as provided above, anything either party provides to the other
related to this Agreement is "AS IS", without warranty of any kind.
9.0 INDEMNIFICATION AND LIABILITY
9.1 BY OBJECTSPACE. ObjectSpace will be responsible for and will indemnify
Tivoli, IBM, and any of their Subsidiaries, from any and all damages,
settlements, costs, expenses and liabilities of any type whatsoever, if
a third party makes a claim against Tivoli, IBM, or any of their
Subsidiaries based on an actual or alleged:
a. failure by ObjectSpace, to the extent not caused by Tivoli, to
perform ObjectSpace's obligations under this Agreement;
b. breach of ObjectSpace's representations and warranties;
c. assertion or claim that a person or entity other than
ObjectSpace has Moral Rights in the Licensed Work;
d. failure by ObjectSpace to comply with government laws and
regulations; or
e. infringement by ObjectSpace, the Licensed Work or Tools of
patents, copyrights, trademarks, trade secrets, and other
intellectual property rights, except to the extent such a
claim is based solely on the combination, operation or use of
the Licensed Work with programs or data not supplied by
ObjectSpace, if such infringement would have been avoided but
for the combination, operation or use of the Licensed Work
with such other programs or data.
Tivoli will:
a. promptly provide ObjectSpace notice of any such claim; and
b. allow ObjectSpace to control, and cooperate with ObjectSpace
in the defense of, the claim and settlement negotiations.
Tivoli may participate in the proceedings at its option and expense.
In addition, if an infringement claim appears likely or is made,
ObjectSpace will:
10
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED. ASTERISKS DENOTE THESE OMISSIONS.
a. obtain the necessary rights for Tivoli, IBM, and any of their
Subsidiaries and Distributors, and their respective customers
to continue to distribute, license, otherwise transfer and use
the Licensed Work on an uninterrupted basis and exercise all
rights granted in the Licensed Work and Tools; or
b. modify the Licensed Work and Tools at ObjectSpace's expense to
resolve the claim. This modified Licensed Work will comply
with the Attachment entitled "Description of Licensed Work."
If ObjectSpace is not able to do either within a reasonable period of
time, Tivoli may terminate this Agreement for ObjectSpace's breach.
ObjectSpace's total liability for indemnification under this Section
9.1 is limited to *.
9.2 BY TIVOLI. If a claim is made against ObjectSpace by a third party
based upon the distribution of Products provided for under this
Agreement, Tivoli will be responsible for and will indemnify
ObjectSpace from any and all damages, settlements, costs, expenses and
liabilities of any type whatsoever regarding such third party claim,
with the exception of those activities for which ObjectSpace bears
responsibility under Section 9.1 of this Agreement, and provided
ObjectSpace gives Tivoli prompt written notice of any such claim,
together with the full authority for and cooperation with such a
defense and any settlement negotiations.
Tivoli's total liability for indemnification under this Section 9.2 is
limited to *.
9.3 In addition to any remedies specified in this Agreement, either party
may pursue any other remedy it may have in law or in equity. Regardless
of the type of claim, neither party is liable to the other for
indirect, incidental, special, or consequential damages including, but
not limited to, lost profits or revenues, under any part of this
Agreement, even if informed that they may occur. This limitation does
not apply to (a) ObjectSpace's liabilities for indemnity above, or (b)
Tivoli's liabilities for indemnity above. Other than with respect to
Tivoli's liability for indemnity above, Tivoli's total liability is
limited to payments due to ObjectSpace under this Agreement; provided,
however, that Tivoli's total liability with respect to a violation of
the license grant set forth in Sections 5.1 or 5.3 is limited to *.
10.0 TERM AND TERMINATION
10.1 This Agreement begins on the Effective Date and has a term of one year
unless terminated sooner under the terms of this Agreement; provided,
however, that this Agreement will be extended automatically for
additional one year periods upon the anniversary of the Effective Date.
10.2 Either party may terminate this Agreement for the other's material
breach by providing the breaching party with a written notice that
describes the breach. The termination will become effective 45 days
after receipt of the notice unless the breach is cured within that 45
day period. However, if the breach (other than a breach for failure to
deliver the Licensed Work) by its nature, cannot be remedied in 45
days, but can be remedied in a reasonable time thereafter, the
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<PAGE>
breaching party will take reasonable and diligent steps to remedy it,
notify the other party of the action plan, progress towards completion,
and complete such remedial action promptly. In such event, the notice
period will be suspended while the breaching party takes these actions.
10.3 Tivoli may, for its convenience, terminate this Agreement on 30 days'
written notice to ObjectSpace. After the Agreement has been in effect
for 4 years from the Effective Date, ObjectSpace may, for its
convenience, terminate this Agreement on twelve months' written notice
to Tivoli.
10.4 Expiration of this Agreement does not affect any licenses granted in
this Agreement for the Licensed Work or Tools. Termination of this
Agreement does not affect any licenses granted in this Agreement for
the Licensed Work or Tools delivered or due to Tivoli prior to the
effective date of termination.
10.5 Subject to Subsection 10.4, any provisions of this Agreement that by
their nature extend beyond termination or expiration will survive in
accordance with their terms. These include Section 5, "LICENSE GRANTS,"
Section 8.0, "REPRESENTATIONS AND WARRANTIES," Section 9.0,
"INDEMNIFICATION AND LIABILITY," and Section 12, "GENERAL." These terms
will apply to either party's successors and assigns.
11.0 COORDINATORS
11.1 Any notice required or permitted to be made by either party to this
Agreement must be in writing. Notices are effective when received by
the appropriate coordinator as demonstrated by reliable written
confirmation (for example, certified mail receipt or facsimile receipt
confirmation sheet).
11.2 The Contract Coordinators responsible to receive all notices and
administer this Agreement are:
FOR TIVOLI: FOR OBJECTSPACE:
Name: Howard Nicholas Name: Laurel Fitzgerald
Title: Manager, Contract Services Title: VP, Operations
Address: 9442 Capital of Texas Address: 14881 Quorum Dr.,
Hwy. No. Suite 400
Austin, TX 78759 Dallas, TX 75013
Phone: (512) 436-8616 Phone: (972) 726-4100
Fax: (512) 436-8461 Fax: (972) 663-9099
11.3 The Technical Coordinators responsible to accept all Deliverables,
coordinate all exchanges of confidential information, and administer
and coordinate the technical matters associated with this Agreement
are:
FOR TIVOLI: FOR OBJECTSPACE:
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<PAGE>
Name: Dave Hart Name: Chris Tarr
Title: Manager Title: Product Manager
Address: 9442 Capital of Texas Address: 14881 Quorum Dr.,
Hwy. No. Suite 400
Austin, TX 78759 Dallas, TX 75013
Phone: (512) 436-8289 Phone: (972) 726-4100
Fax: (512) 794-9929 Fax: (972) 663-9099
Technical Coordinators may propose, accept (by signature or initial),
and implement technical changes to this Agreement that do not change
dollar amounts or materially change Deliverables or the schedules of
this Agreement.
11.4 A party will provide written notice to the other when its coordinators
change.
12.0 GENERAL
12.1 INDEPENDENT CONTRACTOR. Each party is an independent contractor.
Neither party is, nor will claim to be, a legal representative,
partner, franchisee, agent or employee of the other except as
specifically stated in the Subsection entitled "Copyright" below.
Neither party will assume or create obligations for the other. Each
party is responsible for the direction and compensation of its
employees.
12.2 FREEDOM OF ACTION. Each party may have similar agreements with others.
Each party may design, develop, manufacture, acquire or market
competitive products and services, and conduct its business in whatever
way it chooses. Tivoli is not obligated to announce or market any
products or services. Tivoli does not guarantee the success of its
marketing efforts. Tivoli will independently establish prices for its
products and services.
12.3 RELIANCE. Neither party relies on any promises, inducements or
representations made by the other or expectations of more business
dealings, except as expressly provided in this Agreement. This
Agreement accurately states the parties' agreement.
12.4 COMPLIANCE WITH APPLICABLE LAWS. Each party will comply with all
applicable laws and regulations at its expense including, to the extent
applicable, Executive Order 11246 on Equal Employment Opportunity, as
amended, the Occupational Safety and Health Act of 1970, as amended,
and the Americans With Disabilities Act of 1990, as amended. This also
includes all applicable government export and import laws and
regulations.
12.5 CONFIDENTIAL INFORMATION. The parties agree that information exchanged
under this Agreement that is considered by either party to be
confidential information will be subject to the terms of the CDA
referenced on the first page of this Agreement and its Supplements. In
addition, ObjectSpace will not provide Tivoli with any information
which may be considered confidential information of any third party
unless provided under the CDA. The obligations set forth in the CDA
with regard to confidential information will not limit or preclude the
exercise of the licenses granted in this Agreement.
12.6 COPYRIGHT. Any publication by Tivoli of the Licensed Works or a
Derivative Work thereof will contain an appropriate copyright notice,
as determined by Tivoli. Tivoli will retain any copyright notices
ObjectSpace has on the Licensed Work.
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ObjectSpace will enforce and maintain its copyright protection in the
Licensed Works. Tivoli is not responsible for enforcing and maintaining
such copyright protection. However, ObjectSpace authorizes Tivoli to
act as ObjectSpace's agent in the copyright registration of the
Licensed Works. At Tivoli's request, ObjectSpace agrees to provide
Tivoli reasonable assistance in registering any Product.
12.7 ORDER OF PRECEDENCE. If there is a conflict among the terms of this
base License Agreement and its Attachments, the terms of this base
License Agreement prevail over those of the Attachments, unless the
parties expressly indicate in the Attachments that particular terms
within the Attachments prevail. Terms in Tivoli's purchase orders and
ObjectSpace's invoices are void.
12.8 HEADINGS. The headings of this Agreement are for reference only. They
will not affect the meaning or interpretation of this Agreement.
12.9 COUNTERPARTS. This Agreement may be signed in one or more counterparts,
each of which will be considered an original, but all of which together
form one and the same instrument.
12.10 AMENDMENT AND WAIVERS. For a change to this Agreement to be valid, both
parties must sign it. No approval, consent or waiver will be
enforceable unless signed by the granting party. Failure to insist on
strict performance or to exercise a right when entitled does not
prevent a party from doing so later for that breach or a future one.
12.11 ACTIONS. Neither party will bring a legal action relating to the
subject matter of this Agreement, against the other more than 2 years
after the cause of action arose, except in the case of indemnification
for infringement, in which case this period runs for 2 years after the
award or settlement was made.
12.12 DISPUTE RESOLUTION. Both parties will act in good faith to resolve
disputes prior to instituting litigation. Each party waives its rights
to a jury trial in any resulting litigation.
12.13 GOVERNING LAW. This Agreement will be governed by the substantive law
of the State of Texas applicable to contracts executed in and performed
entirely within that State, without regard to choice of law principles,
regulations, or statutes of this or any other jurisdiction. The United
Nations Convention on Contracts for the International Sale of Goods
does not apply. ObjectSpace will, upon written notice from Tivoli,
submit to personal jurisdiction in any forum where Tivoli is sued for
claims related to this Agreement.
14
<PAGE>
LOAN AND SECURITY AGREEMENT
BETWEEN
SILICON VALLEY BANK
AND
OBJECTSPACE, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C> <C>
R E C I T A L S 1
AGREEMENT 1
1. DEFINITIONS AND CONSTRUCTION 1
1.1 Definitions 1
1.2 Accounting and Other Terms 9
2. LOAN AND TERMS OF PAYMENT 10
2.1 Credit Extensions. 11
2.2 Excess Advances. 11
2.3 Interest Rates, Payments, and Calculations 11
2.4 Crediting Payments 13
2.5 Fees 14
2.6 Additional Costs 14
2.7 Term 15
3. CONDITIONS OF LOANS 15
3.1 Conditions Precedent to Initial Credit Extension 15
3.2 Conditions Precedent to all Credit Extensions 16
4. CREATION OF SECURITY INTEREST 16
4.1 Grant of Security Interest 16
4.2 Delivery of Additional Documentation Required 16
4.3 Right to Inspect 16
5. REPRESENTATIONS AND WARRANTIES 17
5.1 Due Organization and Qualification 17
5.2 Due Authorization; No Conflict 17
5.3 No Prior Encumbrances 17
5.4 Bona Fide Eligible Accounts 17
5.5 Merchantable Inventory 17
5.6 Intellectual Property 17
5.7 Name; Location of Chief Executive Office 18
5.8 Litigation 18
5.9 No Material Adverse Change in Financial Statements 18
5.10 Solvency 18
5.11 Regulatory Compliance 18
5.12 Environmental Condition 18
5.13 Taxes 19
5.14 Subsidiaries 19
5.15 Government Consents 19
5.16 Full Disclosure 19
6. AFFIRMATIVE COVENANTS 19
6.1 Good Standing 19
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6.2 Government Compliance 19
6.3 Financial Statements, Reports, Certificates 20
6.4 Inventory; Returns 21
6.5 Taxes 21
6.6 Insurance 21
6.7 Quick Ratio 22
6.8 Debt-Tangible Net Worth Ratio 22
6.9 Tangible Net Worth 22
6.10 Registration of Intellectual Property Rights 22
6.11 Further Assurances 22
6.12 Landlord's Lien Subordination 23
7. NEGATIVE COVENANTS 23
7.1 Dispositions. 23
7.2 Changes in Business, Ownership, Management or Business
Locations 23
7.3 Mergers or Acquisitions 23
7.4 Indebtedness. 23
7.5 Encumbrances. 23
7.6 Distributions. 24
7.7 Investments. 24
7.8 Transactions with Affiliates 24
7.9 Intellectual Property Agreements 24
7.10 Subordinated Debt 24
7.11 Inventory 24
7.12 Compliance 25
7.13 Abandonment of Intellectual Property 25
8. EVENTS OF DEFAULT 25
8.1 Payment Default 25
8.2 Covenant Default 25
8.3 Material Adverse Change 26
8.4 Attachment 26
8.5 Insolvency. 26
8.6 Other Agreements 26
8.7 Subordinated Debt 26
8.8 Judgments 26
8.9 Misrepresentations 27
8.10 Guaranty 27
9. BANK'S RIGHTS AND REMEDIES 27
9.1 Rights and Remedies 27
9.2 Power of Attorney 28
9.3 Accounts Collection 29
9.4 Bank Expenses 29
9.5 Bank's Liability for Collateral 29
9.6 Remedies Cumulative 30
9.7 Demand; Protest 30
10. NOTICES 30
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11. CHOICE OF LAW AND VENUE 30
12. GENERAL PROVISIONS 31
12.1 Successors and Assigns 31
12.2 INDEMNIFICATION 31
12.3 Time of Essence 31
12.4 Severability of Provisions 31
12.5 Amendments in Writing, Integration 32
12.6 Counterparts 32
12.7 Survival 32
12.8 Confidentiality 32
12.9 WAIVER OF JURY TRIAL. 32
12.10 NOTICE OF ORAL AGREEMENT. 33
</TABLE>
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of February 9,
1998, by and between SILICON VALLEY BANK, a California-chartered bank ("Bank")
with its principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054 and with a loan production office located at 9020 Capital of
Texas Highway North, Building 1, Suite 350, Austin, Texas 78759 and
ObjectSpace, Inc., a Delaware corporation ("Borrower").
R E C I T A L S
Borrower wishes to obtain credit from time to time from Bank, and
Bank desires to extend credit to Borrower. This Agreement sets forth the terms
on which Bank will advance credit to Borrower, and Borrower will repay the
amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION1.DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and
hereafter arising accounts, contract rights, and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other
technology) or the rendering of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower and
Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means a loan advance under
the Committed Revolving Line and shall specifically include any Overadvance.
"Affiliate" means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person
that controls or is controlled by or is under common control with such Person,
and each of such Person's senior executive officers, directors, partners and,
for any Person that is a limited liability company, such Person's, managers
and members.
"Bank Expenses" means all reasonable costs or
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the
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preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, (including fees and
expenses of appeal or review, or those incurred in any Insolvency Proceeding)
whether or not suit is brought. "Borrower's Books" means all of Borrower's
books and records including, without limitation: ledgers; records concerning
Borrower's assets or liabilities, the Collateral, business operations or
financial condition; and all computer programs, or tape files, and the
equipment, containing such information.
"Borrowing Base" means an amount equal to (i)
eighty percent (80%) of Eligible Accounts plus (ii) the Overadvance Amount,
each of (i) and (ii) as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.
"Business Day" means any day that is not a
Saturday, Sunday, or other day on which banks in the State of Texas or the
State of California are authorized or required to close.
"Closing Date" means the date of this Agreement.
"Code" means the Uniform Commercial Code as in
effect in the State of Texas from time to time.
"Collateral" means the property described on
EXHIBIT A attached hereto.
"Committed Revolving Line" means a credit extension
of up to Three Million and No/100 Dollars ($3,000,000.00).
"Contingent Obligation" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any indebtedness, lease, dividend, letter of credit
or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determined amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith; provided, however, that such amount shall
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not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
"Copyrights" means any and all copyright rights,
copyright applications, copyright registrations and like protections in each
work or authorship and derivative work thereof, whether published or
unpublished and whether or not the same also constitutes a trade secret, now
or hereafter existing, created, acquired or held.
"Credit Extension" means each Advance, Overadvance,
Letter of Credit, or any other extension of credit by Bank for the benefit of
Borrower hereunder.
"Current Assets" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current
assets on the consolidated balance sheet of Borrower and its Subsidiaries as
at such date.
"Current Liabilities" means, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its
Subsidiaries, as at such date, plus, to the extent not already included
therein, all outstanding Credit Extensions made under this Agreement,
including all Indebtedness that is payable upon demand or within one year from
the date of determination thereof unless such Indebtedness is renewable or
extendable at the option of Borrower or any Subsidiary to a date more than one
year from the date of determination, but excluding Subordinated Debt.
"Eligible Accounts" means those Accounts that arise
in the ordinary course of Borrower's business that comply with all of
Borrower's representations and warranties to Bank set forth in Section 5.4;
PROVIDED, that standards of eligibility may be fixed and revised from time to
time by Bank in Bank's reasonable judgment and upon notification thereof to
Borrower in accordance with the provisions hereof. Unless otherwise agreed to
by Bank in writing, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to
pay within ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor,
fifty percent (50%) of whose Accounts the account debtor has failed to pay
within ninety (90) days of invoice date;
(c) Accounts with respect to an account debtor,
including Affiliates, whose total obligations to Borrower exceed twenty-five
percent (25%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
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(d) Accounts with respect to which the account debtor
does not have its principal place of business in the United States except for
Eligible Foreign Accounts;
(e) Accounts with respect to which the account debtor
is a federal, state, or local governmental entity or any department, agency, or
instrumentality thereof;
(f) Accounts with respect to which Borrower is liable
to the account debtor, but only to the extent of any amounts owing to the
account debtor (sometimes referred to as "contra" accounts, e.g. accounts
payable, customer deposits, credit accounts etc.);
(g) Accounts generated by demonstration or
promotional equipment, or with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other terms
by reason of which the payment by the account debtor may be conditional;
(h) Accounts with respect to which the account debtor
is an Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute (but
only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(j) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with
respect to which the account debtor does not have its principal place of
business in the United States and that are: (1) covered by credit insurance in
form and amount, and by an insurer satisfactory to Bank less the amount of any
deductible(s) which may be or become owing thereon; or (2) supported by one or
more letters of credit either advised or negotiated through Bank or in favor of
Bank as beneficiary, in an amount and of a tenor, and issued by a financial
institution, acceptable to Bank; or (3) that Bank approves on a case-by-case
basis.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended, and the regulations thereunder.
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"GAAP" means generally accepted accounting principles
as in effect in the United States from time to time.
"Guarantor" means any present or future guarantor of
all or part of the Obligations, including, without limitation, David Norris and
Graham Glass.
"Indebtedness" means (a) all indebtedness for
borrowed money or the deferred purchase price of property or services, including
without limitation reimbursement and other obligations with respect to surety
bonds and letters of credit, (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all capital lease obligations and (d) all
Contingent Obligations.
"Insolvency Proceeding" means any proceeding
commenced by or against any Person or entity under any provision of the United
States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means
(a) Copyrights, Trademarks, Patents, and Mask Works;
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower now or
hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights, Patents,
Trademarks, or Mask Works, and all license fees and royalties arising from such
use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights,
Trademarks, Patents, or Mask Works; and
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
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"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above.
"Investment" means any beneficial ownership
(including stock, partnership interest or other securities) of any Person, or
any loan, advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Letter of Credit" means a letter of credit or
similar undertaking issued by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth
in Section 2.1.2.
"Lien" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes that may be executed by Borrower in favor of Bank, and any
other present or future agreement entered into between Borrower and/or for the
benefit of Bank in connection with this Agreement, all as amended, extended or
restated from time to time.
"Mask Works" means all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired;
"Material Adverse Effect" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"Maximum Lawful Rate" means the maximum rate of
interest and the term "Maximum Lawful Amount" means the maximum amount of
interest that are permissible under applicable state or federal law for the type
of loan evidenced by the Loan Documents. If the Maximum Lawful Rate is increased
by statute or other governmental action subsequent to the date of this
Agreement, then the new Maximum
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Lawful Rate shall be applicable to the payments provided for hereunder from
the effective date thereof, unless otherwise prohibited by applicable law.
"Negotiable Collateral" means all of Borrower's
present and future letters of credit of which it is a beneficiary, notes,
drafts, instruments, securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Overadvance" or "Overadvances" means a credit
extension under the Committed Revolving Line that shall not in any case exceed,
in the aggregate and from time to time, Five Hundred Thousand and No/100 Dollars
($500,000.00).
"Overadvance Maturity Date" means June 1, 1998.
"Patents" means all patents, patent applications and
like protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same.
"Payment Date" means the eighth (8th) calendar day of
each month commencing on the first such date after the Closing Date and ending
on the (i) Overadvance Maturity Date with respect to any and all Overadvances
and (ii) Revolving Maturity Date with respect to all credit extensions, other
than the Overadvances, under the Committed Revolving Line.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising
under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the
ordinary course of business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
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(a) Investments existing on the Closing Date
disclosed in the Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America, any State or any
agency or instrumentality thereof maturing within one (1) year from the date of
acquisition thereof, (ii) commercial paper maturing no more than one (1) year
from the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., and (iii) certificates of deposit maturing no more than one (1)
year from the date of investment therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, PROVIDED the same have
no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such Equipment at the time of
its acquisition, PROVIDED that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such Equipment; and
(d) Liens incurred in connection with the extension,
renewal or refinancing of the Indebtedness secured by Liens of the type
described in clauses (a) through (c) above, PROVIDED that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the Indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per
annum, most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
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"Quick Assets" means, as of any applicable date, the
consolidated cash, cash equivalents, accounts receivable and investments with
maturities of fewer than ninety (90) days of Borrower determined in accordance
with GAAP. Bank acknowledges that in calculating the accounts receivables
portion of Quick Assets, Borrower classifies accrued revenue as an account
receivable to the extent, and with respect to the month in which, the work was
performed by Borrower. Bank approves of the foregoing calculation of the
accounts receivable portion of Quick Assets to the extent that such calculation
is in accordance with GAAP.
"Responsible Officer" means each of the Chief
Executive Officer, the President, the Chief Financial Officer and the Controller
of Borrower.
"Revolving Maturity Date" means February 8, 1999.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by
Borrower that is subordinated to the debt owing by Borrower to Bank on terms
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person,
corporation, partnership, company association, joint venture, or any other
business entity of which more than fifty percent (50%) of the voting stock or
other equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.
"Tangible Net Worth" means as of any applicable date,
the consolidated total assets of Borrower and its Subsidiaries MINUS, without
duplication, (i) the sum of any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, patents, trade
and service marks and names, copyrights and research and development expenses
except prepaid expenses, and (c) all reserves not already deducted from assets,
AND (ii) Total Liabilities.
"Total Liabilities" means as of any applicable date,
any date as of which the amount thereof shall be determined, all obligations
that should, in accordance with GAAP be classified as liabilities on the
consolidated balance sheet of Borrower, including in any event all Indebtedness,
but specifically excluding Subordinated Debt.
"Trademarks" means any trademark and servicemark
rights, whether registered or not, applications to register and registrations of
the same and like protections, and the entire goodwill of the business of
Borrower connected with and symbolized by such trademarks.
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1.2 ACCOUNTING AND OTHER TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and
all calculations and determinations made hereunder shall be made in
accordance with GAAP. When used herein, the term "financial statements" shall
include the notes and schedules thereto. The terms "including" and "includes"
shall always be read as meaning "including (or includes) without limitation",
when used herein or in any other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS. Borrower promises to pay to the
order of Bank, in lawful money of the United States of America, the aggregate
unpaid principal amount of all Credit Extensions made by Bank to Borrower
hereunder. Borrower also promises to pay interest on the unpaid principal
amount of such Advances at rates in accordance with the terms hereof.
2.1.1 (a) Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to Borrower in an
aggregate outstanding amount not to exceed (i) the Committed Revolving Line or
the Borrowing Base, whichever is less, minus (ii) the face amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) and any Letter of Credit Reserve. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section 2.1 may be repaid and
reborrowed at any time during the term of this Agreement.
(b) Whenever Borrower desires an Advance,
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. Pacific time, on the Business Day that the Advance is to be made. Each
such notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of EXHIBIT B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer, or without instructions if in
Bank's discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer or a designee thereof, and Borrower shall indemnify and hold Bank
harmless for any damages or loss suffered by Bank as a result of such reliance.
Bank will credit the amount of Advances made under this Section 2.1 to
Borrower's deposit account.
(c) The Committed Revolving Line shall
terminate on the Revolving Maturity Date, at which time all Advances under
this Section 2.1 and other amounts due under this Agreement (except as
otherwise expressly specified herein) shall be immediately due and payable.
Notwithstanding the foregoing, Bank's commitment to make any Overadvance
shall terminate on the Overadvance Maturity Date at which time all
outstanding Overadvance principal plus all accrued interest not yet paid
shall be immediately due and payable.
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2.1.2 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of
this Agreement, Bank agrees to issue or cause to be issued Letters of Credit for
the account of Borrower in an aggregate outstanding face amount not to exceed
(i) the lesser of the Committed Revolving Line or the Borrowing Base minus (ii)
the then outstanding principal balance of the Credit Extensions; PROVIDED that
the face amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve) shall not in
any case exceed One Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00). Each Letter of Credit shall have an expiry date no later than
one hundred eighty (180) days after the Revolving Maturity Date provided that
Borrower's Letter of Credit reimbursement obligation shall be secured by cash on
terms acceptable to Bank at any time after the Revolving Maturity Date if the
term of this Agreement is not extended by Bank. All Letters of Credit shall be,
in form and substance, acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form of standard Application and
Letter of Credit Agreement; provided, that Bank shall not charge any fee in
connection with (x) its reissuance of the three Letters of Credit in the
aggregate face amount of One Million Eighty-Six Thousand Six Hundred Six and
68/100 Dollars ($1,086,606.68), replacing those three Letters of Credit
currently issued for the account of Borrower by a third Person or (y) its
issuance of a Letter of Credit for the account of Borrower in the amount of One
Hundred Fifty-Six Thousand Five Hundred Forty-Five Dollars and No/100 Dollars
($156,545.00).
(b) The obligation of Borrower to
immediately reimburse Bank for drawings made under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and such Letters of Credit, under
all circumstances whatsoever. BORROWER SHALL INDEMNIFY, DEFEND, PROTECT, AND
HOLD BANK HARMLESS FROM ANY AND ALL LOSS, COST, EXPENSE OR LIABILITY, INCLUDING,
WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES, ARISING OUT OF OR IN CONNECTION
WITH ANY LETTERS OF CREDIT.
(c) Borrower may request that Bank issue a
Letter of Credit payable in a currency other than United States Dollars. If a
demand for payment is made under any such Letter of Credit, Bank shall treat
such demand as an Advance to Borrower of the equivalent of the amount thereof
(plus cable charges) in United States currency at the then prevailing rate of
exchange in Austin, Texas for sales of that other currency for cable transfer to
the country of which it is the currency.
(d) Upon the issuance of any letter of
credit payable in a currency other than United States Dollars, Bank shall create
a reserve under the Committed Revolving Line for letters of credit against
fluctuations in currency exchange rates, in an amount equal to ten percent (10%)
of the face amount of such letter of credit ("Letter of Credit Reserve"). The
amount of such reserve may be amended by Bank from time to time to account for
fluctuations in the exchange rate.
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The availability of funds under the Committed Revolving Line shall be reduced
by the amount of such reserve for so long as such letter of credit remains
outstanding.
2.2 EXCESS ADVANCES. If, at any time or for any reason,
the amount of Obligations owed by Borrower to Bank pursuant to Section 2.1.1
and 2.1.2 of this Agreement is greater than the lesser of (i) the Committed
Revolving Line or (ii) the Borrowing Base, Borrower shall immediately pay to
Bank, in cash, the amount of such excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in Section
2.3(b), all Advances, other than Overadvances, shall bear interest, on the
average daily balance thereof, at a per annum rate equal to seventy-five
percentage points (0.75%) above the Prime Rate. Except as set forth in
Section 2.3(b), all Overadvances shall bear interest, on the average daily
balance thereof, at a per annum rate equal to one and one-half percent
percentage points (1.5%) above the Prime Rate.
(b) DEFAULT RATE. All Obligations shall bear interest,
from and after the occurrence of an Event of Default, at the "Default
Interest Rate". The Default Interest Rate shall be, at Bank's option, (i) the
Maximum Lawful Rate, if such Maximum Lawful Rate is established by applicable
law; or (ii) the interest rate applicable immediately prior to the occurrence
of the Event of Default plus five (5) percentage points, if no Maximum Lawful
Rate is established by applicable law; or (iii) eighteen percent (18%) per
annum; or (iv) such lesser rate of interest as Bank in its sole discretion
may choose to charge; but never more than the Maximum Lawful Rate or at a
rate that would cause the total interest contracted for, charged or received
by Bank to exceed the Maximum Lawful Amount.
(c) PAYMENTS. Interest hereunder shall be due and
payable on each Payment Date. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) COMPUTATION.
(i) CHANGES. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest
hereunder shall be increased or decreased effective as of 12:01 a.m. on the
day the Prime Rate is changed, by an amount equal to such change in the Prime
Rate.
(ii) SPREADING OF INTEREST. Because of the
possibility of irregular periodic balances of principal, the fluctuating
nature of the interest rate, or premature payment, the total interest that
will accrue under this Agreement cannot be determined in advance. Bank does
not intend to contract for, charge or receive more than the Maximum Lawful
Rate or Maximum Lawful Amount permitted by applicable state or federal law,
and to prevent such an occurrence Bank and Borrower agree that
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all amounts of interest, whenever contracted for, charged or received by
Bank, with respect to the loan of money evidenced by the Loan Documents,
shall be spread, prorated or allocated over the full period of time the
Obligations are unpaid, including the period of any renewal or extension
thereof. If the maturity of the Obligations is accelerated for any reason
whether as a lawsuit or an Event of Default or otherwise prior to the full
stated term, the total amount of interest contracted for, charged or received
to the time of such demand shall be spread, prorated or allocated along with
any interest thereafter accruing over the full period of time that the
Obligations thereafter remain unpaid for the purpose of determining if such
interest exceeds the Maximum Lawful Amount.
(iii) EXCESS INTEREST. At maturity (whether by
acceleration or otherwise) or on earlier final payment of the Obligations,
Bank shall compute the total amount of interest that has been contracted for,
charged or received by Bank or payable by Borrower hereunder and compare such
amount to the Maximum Lawful Amount that could have been contracted for,
charged or received by Bank. If such computation reflects that the total
amount of interest that has been contracted for, charged or received by Bank
or payable by Borrower exceeds the Maximum Lawful Amount, then Bank shall
apply such excess to the reduction of the principal balance and not to the
payment of interest; or if such excess interest exceeds the unpaid principal
balance, such excess shall be refunded to Borrower. This provision concerning
the crediting or refund of excess interest shall control and take precedence
over all other agreements between Borrower and Bank so that under no
circumstances shall the total interest contracted for, charged or received by
Bank exceed the Maximum Lawful Amount.
(iv) DAILY COMPUTATION OF INTEREST. To the extent
permitted by applicable law, Bank at its option may either (i) calculate the
per diem interest rate or amount based on the actual number of days in the
year (365 or 366, as the case may be), and charge that per diem interest rate
or amount each day, or (ii) calculate the per diem interest rate or amount as
if each year has only 360 days, and charge that per diem interest rate or
amount each day for the actual number of days of the year (365 or 366 as the
case may be). If the Loan Documents call for monthly payments, Bank at its
option may determine the payment amount based on the assumption that each
year has only 360 days and each month has 30 days. In no event shall Bank
compute the interest in a manner that would cause Bank to contract for,
charge or receive interest that would exceed the Maximum Lawful Rate or the
Maximum Lawful Amount.
(v) REVOLVING LOAN ACCOUNTS AND USURY CEILING. In
no event shall Chapter 346 of the Texas Finance Code, as supplemented by the
Texas Credit Title ("Texas Finance Code")(which regulates certain revolving
loan accounts and revolving tri-party accounts) apply to this Agreement or
Borrower's payment obligations hereunder. To the extent that Chapter 303 of
the Texas Finance Code, is applicable to this Agreement, the "weekly ceiling"
specified in such Chapter 303 is the
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applicable ceiling; provided that, if any applicable law permits greater
interest, the law permitting the greatest interest shall apply.
2.4 CREDITING PAYMENTS. Prior to the occurrence of an
Event of Default, Bank shall credit a wire transfer of funds, check or other
item of payment to such deposit account or Obligation as Borrower specifies.
After the occurrence of an Event of Default, the receipt by Bank of any wire
transfer of funds, check, or other item of payment, whether directed to
Borrower's deposit account with Bank or to the Obligations or otherwise,
shall be immediately applied to conditionally reduce Obligations, but shall
not be considered a payment in respect of the Obligations unless such payment
is of immediately available federal funds or unless and until such check or
other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment
received by Bank after 12:00 noon Pacific time shall be deemed to have been
received by Bank as of the opening of business on the immediately following
Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable
for the period of such extension.
2.5 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. A Facility Fee equal to Twenty-Two
Thousand Five Hundred and No/100 Dollars ($22,500.00), which fee shall be due
on the Closing Date and shall be fully earned and non-refundable;
(b) FINANCIAL EXAMINATION AND APPRAISAL FEES. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) BANK EXPENSES. Upon demand from Bank, including,
without limitation, upon the date hereof, all Bank Expenses incurred through
the date hereof, including reasonable attorneys' fees and expenses, and,
after the date hereof, all Bank Expenses, including reasonable attorneys'
fees and expenses, as and when they become due.
2.6 ADDITIONAL COSTS. In case any law, after the date
hereof, any regulation, treaty or official directive or the interpretation or
application thereof by any court or any governmental authority charged with
the administration thereof or the compliance with any guideline or request of
any central bank or other governmental authority (whether or not having the
force of law):
(a) subjects Bank to any tax with respect to payments
of principal or interest or any other amounts payable hereunder by Borrower
or otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net
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income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets
held by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect
to its performance under this Agreement, and the result of any of the
foregoing is to increase the cost to Bank, reduce the income receivable by
Bank or impose any expense upon Bank with respect to the Obligations, Bank
shall notify Borrower thereof within one hundred eighty (180) days of Bank
incurring any such reduced income or increased cost or expense. Borrower
agrees to pay to Bank the amount of such increase in cost, reduction in
income or additional expense as and when such cost, reduction or expense is
incurred or determined, upon presentation by Bank of a statement of the
amount and setting forth Bank's calculation thereof, all in reasonable
detail, which statement shall be deemed true and correct absent manifest
error.
2.7 TERM. Except as otherwise set forth herein, this
Agreement shall become effective on the Closing Date and, subject to Section
12.7, shall continue in full force and effect for a term ending on the
Revolving Maturity Date. Notwithstanding the foregoing, Bank shall have the
right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long
as any Obligations are outstanding.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) an intellectual property security agreement;
(d) guaranties by the Guarantors;
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(e) UCC-1 financing statements covering the Collateral
and UCC-3 termination statements or assignments in favor of Bank from each
Person that has a security interest in the Collateral or any part thereof;
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof;
(h) Certificate of Foreign Qualification (if applicable);
and
(i) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. The
obligation of Bank to make each Credit Extension, including the initial
Credit Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form
as provided in Section 2.1; and
(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit Extension as
to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral and all proceeds thereof, in order to secure
prompt payment of any and all Obligations and in order to secure prompt
performance by Borrower of each of its covenants and duties under the Loan
Documents. Except as set forth in the Schedule, such security interest
constitutes a valid, first priority security interest in the presently
existing Collateral, and will constitute a valid, first priority security
interest in Collateral acquired after the date hereof. Borrower acknowledges
that Bank may place a "hold" on any deposit account pledged as Collateral to
secure the Obligations. Notwithstanding termination of this Agreement, Bank's
Lien on the Collateral shall remain in effect for so long as any Obligations
are outstanding.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower
shall from time to time execute and deliver to Bank, at the request of Bank,
all Negotiable
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Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interest in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 RIGHT TO INSPECT. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice,
from time to time during Borrower's usual business hours, to inspect
Borrower's Books and to make copies thereof and to check, test, and appraise
the Collateral in order to verify Borrower's financial condition or the
amount, condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws
of its state of incorporation and qualified and licensed to do business in,
and is in good standing in Texas, and in any other state in which the conduct
of its business or its ownership of property requires that it be so qualified.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery,
and performance of the Loan Documents are within Borrower's powers, have been
duly authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement to
which Borrower is a party or by which Borrower is bound. Borrower is not in
default under any agreement to which it is a party or by which it is bound,
which default could have a Material Adverse Effect.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 BONA FIDE ELIGIBLE ACCOUNTS. The Eligible Accounts are bona
fide existing obligations. The service or property giving rise to such
Eligible Accounts has been performed or delivered to the account debtor or to
the account debtor's agent for immediate shipment to and unconditional
acceptance by the account debtor. Borrower has not received notice of actual
or imminent Insolvency Proceeding of any account debtor whose accounts are
included in any Borrowing Base Certificate as an Eligible Account.
5.5 MERCHANTABLE INVENTORY. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
5.6 INTELLECTUAL PROPERTY. Borrower is the owner of the
Patents, Trademarks, Copyrights and Mask Works subject to licenses granted by
Borrower to
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its customers in the ordinary course of business. To Borrower's knowledge,
each of the Patents is valid and enforceable, and no part of the Intellectual
Property Collateral has been judged invalid or unenforceable, in whole or in
part, and no claim has been made that any part of the Intellectual Property
Collateral violates the rights of any third party. Except for and upon the
filing with the United States Patent and Trademark Office with respect to the
Patents and Trademarks and the Register of Copyrights with respect to the
Copyrights and Mask Works necessary to perfect the security interests created
hereunder, and except as has been already made or obtained, no authorization,
approval or other action by, and no notice to or filing with, any United
States governmental authority or United States regulatory body is required
either (i) for the grant by Borrower of the security interest granted hereby
or for the execution, delivery or performance of Loan Documents by Borrower in
the United States or (ii) for the perfection in the United States or the
exercise by Bank of its rights and remedies hereunder.
5.7 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as
disclosed in the Schedule, Borrower has not done business and will not without
at least thirty (30) days prior written notice to Bank do business under any
name other than that specified on the signature page hereof. The chief
executive office of Borrower is located at the address indicated in Section 10
hereof.
5.8 LITIGATION. Except as set forth in the Schedule, there
are no actions or proceedings pending, or, to Borrower's knowledge, threatened
by or against Borrower or any Subsidiary before any court or administrative
agency in which an adverse decision could have a Material Adverse Effect on
Borrower's interest or Bank's security interest in the Collateral.
5.9 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material
respects Borrower's consolidated financial condition as of the date thereof
and Borrower's consolidated results of operations for the period then ended.
There has not been a material adverse change in the consolidated financial
condition of Borrower since the date of the most recent of such financial
statements submitted to Bank on or about the Closing Date.
5.10 SOLVENCY. The fair saleable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after
the transactions contemplated by this Agreement; and Borrower is able to pay
its debts (including trade debts) as they mature.
5.11 REGULATORY COMPLIANCE. Borrower and each Subsidiary has
met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from
Borrower's failure to comply with ERISA that is reasonably likely to result in
Borrower's incurring any liability that could have a Material Adverse Effect.
Borrower is not an "investment
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company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulations G, T and U of the Board of Governors of the
Federal Reserve System). Borrower has complied with all the provisions of the
Federal Fair Labor Standards Act. Borrower has not violated any statutes,
laws, ordinances or rules applicable to it, violation of which could have a
Material Adverse Effect.
5.12 ENVIRONMENTAL CONDITION. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release,
or transport, any hazardous waste or hazardous substance other than in
accordance with applicable law; to the best of Borrower's knowledge, none of
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a hazardous waste
or hazardous substance disposal site, or a candidate for closure pursuant to
any environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the release, or other disposition of hazardous waste
or hazardous substances into the environment.
5.13 TAXES. Borrower and each Subsidiary has filed or caused
to be filed all tax returns required to be filed on a timely basis, and has
paid, or has made adequate provision for the payment of, all taxes reflected
therein.
5.14 SUBSIDIARIES. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.15 GOVERNMENT CONSENTS. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all governmental authorities that
are necessary for the continued operation of Borrower's business as currently
conducted.
5.16 FULL DISCLOSURE. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
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6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
all outstanding Obligations, and for so long as Bank may have any commitment
to make a Credit Extension hereunder, Borrower shall do all of the following:
6.1 GOOD STANDING. Borrower shall maintain its and each of
its Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in Texas and every other jurisdiction
in which the failure to so qualify could have a Material Adverse Effect.
Borrower shall maintain in force, and shall cause each of its Subsidiaries to
maintain, to the extent consistent with prudent management of Borrower's
business, all licenses, approvals and agreements, the loss of which could have
a Material Adverse Effect.
6.2 GOVERNMENT COMPLIANCE. Borrower shall meet, and shall
cause each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, noncompliance
with which could have a Material Adverse Effect on the Collateral or the
priority of Bank's Lien on the Collateral.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower
shall deliver to Bank: (a) as soon as available, but in any event within
thirty (30) days after the end of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period, in a form and certified by an officer of Borrower
reasonably acceptable to Bank; (b) as soon as available, but in any event
within one hundred twenty (120) days after the end of each of Borrower's
fiscal years, other than Borrower's fiscal year 1997 for which Borrower shall
have one hundred eighty (180) days, audited consolidated financial statements
of Borrower prepared in accordance with GAAP, consistently applied, together
with an unqualified opinion on such financial statements of an independent
certified public accounting firm reasonably acceptable to Bank; (c) within
five (5) days of filing, copies of all statements, reports and notices sent or
made available generally by Borrower to its security holders or to any holders
of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower
or any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand and No/100 Dollars ($100,000.00) or more;
(e) prompt notice of any material change in the composition of the
Intellectual Property Collateral, including, but not limited to, any
subsequent ownership right of the Borrower in or to any Copyright, Patent or
Trademark not specified in any intellectual property security agreement
between Borrower and Bank or knowledge of an event that materially adversely
effects the value of the Intellectual Property Collateral; and (f) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.
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Borrower shall deliver to Bank a Borrowing Base Certificate signed by
a Responsible Officer in substantially the form of EXHIBIT C hereto, together
with aged listings of accounts receivable and accounts payable (i) within
twenty (20) days after the last day of each month in which no Overadvance is
outstanding or (ii) by 3:00 p.m. Central Time on the last business day of each
week in which an Overadvance is outstanding.
Within thirty (30) days after the last day of each month, Borrower
shall deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in substantially the form of
EXHIBIT D hereto.
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than once every twelve (12) months unless an Event of
Default has occurred and is continuing; notwithstanding the foregoing, and so
long as no Event of Default has occurred and is continuing, Bank may audit
Borrower's Accounts no more often than once every six (6) months if Borrower
has not received at least Five Million and No/100 Dollars ($5,000,000.00)
equity from an issuance of its securities by June 1, 1998.
6.4 INVENTORY; RETURNS. Borrower shall keep all Inventory in
good and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on
the same basis and in accordance with the usual customary practices of
Borrower, as they exist at the time of the execution and delivery of this
Agreement. Borrower shall promptly notify Bank of all returns and recoveries
and of all disputes and claims, where the return, recovery, dispute or claim
involves more than Fifty Thousand and No/100 Dollars ($50,000.00).
6.5 TAXES. Borrower shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all material federal,
state, and local taxes, assessments, or contributions required of it by law,
and will execute and deliver to Bank, on demand, appropriate certificates
attesting to the payment or deposit thereof; and Borrower will make, and will
cause each Subsidiary to make, timely payment or deposit of all material tax
payments and withholding taxes required of it by applicable laws, including,
but not limited to, those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon
request, furnish Bank with proof satisfactory to Bank indicating that Borrower
or a Subsidiary has made such payments or deposits; provided that Borrower or
a Subsidiary need not make any payment if the amount or validity of such
payment is (i) contested in good faith by appropriate proceedings , (ii) is
reserved against (to the extent required by GAAP) by Borrower and (iii) no
Lien other than a Permitted Lien results.
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6.6 INSURANCE.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as are reasonably satisfactory
to Bank. All such policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee thereof and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must
give at least fifteen (15) days notice to Bank before canceling its policy for
any reason. At Bank's request, Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the payments of all premiums
therefor. All proceeds payable under any such policy shall, at the option of
Bank, be payable to Bank to be applied on account of the Obligations.
6.7 QUICK RATIO. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Quick Assets to Current Liabilities
less deferred maintenance revenue of at least 1.25 to 1.0.
6.8 DEBT-TANGIBLE NET WORTH RATIO. Borrower shall maintain,
as of the last day of each calendar month, a ratio of Total Liabilities less
Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not more
than 1.50 to 1.0.
6.9 TANGIBLE NET WORTH. Borrower shall maintain, as of the
last day of each calendar month, a Tangible Net Worth of not less than Three
Million and No/100 Dollars ($3,000,000.00) ("Minimum Tangible Net Worth")
which Minimum Tangible Net Worth shall, automatically and without any further
action by Bank or Borrower, be increased by one-half of the amount of equity
received by Borrower in connection with any issuance of its securities.
6.10 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
(a) Within three (3) days thereof, Borrower shall give
Bank notice of its registration with the United States Patent and Trademark
Office or its filing with the United States Copyright Office, as applicable,
of those intellectual property rights referred to in the Intellectual Property
Security Agreement and exhibits thereto and those additional intellectual
property rights developed or acquired by Borrower from time to time in
connection with any product prior to the sale or licensing of such product to
any third party, including without limitation revisions or
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additions to the intellectual property rights listed in the Intellectual
Property Security Agreement and exhibits thereto.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time and take such further action as
Bank shall reasonably request to enable Bank to perfect Bank's security
interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents, Copyrights, and Mask
Works and (ii) use its best efforts to detect infringements of the Trademarks,
Patents, Copyrights and Mask Works and promptly advise Bank in writing of
material infringements detected.
(d) Bank shall have the right, but not the obligation,
to take, at Borrower's sole expense, any actions that Borrower is required
under this Section 6.10 to take but which Borrower fails to take, after
fifteen (15) days notice to Borrower. BORROWER SHALL REIMBURSE AND INDEMNIFY
BANK FOR ALL REASONABLE COSTS AND REASONABLE EXPENSES INCURRED IN THE
REASONABLE EXERCISE OF ITS RIGHTS UNDER THIS SECTION 6.10.
6.11 FURTHER ASSURANCES. At any time and from time to time,
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes
of this Agreement.
6.12 LANDLORD'S LIEN SUBORDINATION. No later than thirty
(30) days after the date hereof, Borrower shall deliver to Bank a
Subordination of Lien from each Person who leases real property to Borrower in
form and substance acceptable to Bank. Borrower acknowledges and agrees that
no Credit Extensions will be made if such subordinations are not delivered by
the date set forth above.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit
Extension hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Advances, Borrower will not do any of the following:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than Transfers:
(i) of inventory in the ordinary course of business, (ii) of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or
its Subsidiaries in the ordinary course of business; (iii) that constitute
payment of normal and usual operating expenses in the ordinary course of
business; or (iv) of worn-out or obsolete Equipment.
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7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS
LOCATIONS. Engage in any business, or permit any of its Subsidiaries to engage
in any business, other than the businesses currently engaged in by Borrower
and any business substantially similar or related thereto (or incidental
thereto), or suffer a material change in Borrower's ownership or management or
if David Norris or Graham Glass ceases to be an employee or director of
Borrower and replacements reasonably satisfactory to Bank are not made in
within thirty (30) days. Borrower will not, without at least thirty (30) days
prior written notification to Bank, relocate its chief executive office or add
any new offices or business locations.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with or into any other
business organization, or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or suffer to exist
any Lien with respect to any of its property, or assign or otherwise convey
any right to receive income, including the sale of any Accounts, or permit any
of its Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock; provided, Borrower may purchase the Put Shares (as
defined in that certain Stock Purchase Agreement ("Stock Purchase Agreement")
dated August 21, 1996 between David Cook and Borrower) from David Cook under
and as provided in the Stock Purchase Agreement. Borrower will not, without
the prior written consent of Bank, supplement, amend, modify or waive in any
way any provision of the Stock Purchase Agreement. Borrower agrees and
acknowledges that foregoing right of Borrower to purchase the Put Shares is
not a waiver of any Event of Default which might be created by such purchase,
other than the general prohibition on dividends, distributions or other
payments set forth in the first sentence of this Section 7.6 and as otherwise
set forth in Section 7.8 below.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so
to do, other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Other than Borrower's
right to purchase the Put Shares pursuant to and in accordance with Section
7.6 above, directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's
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business, upon fair and reasonable terms that are no less favorable to
Borrower than would be obtained in an arm's length transaction with a
nonaffiliated Person. Borrower agrees and acknowledges that right of Borrower
to purchase the Put Shares pursuant to and in accordance with Section 7.6
above is not a waiver of any Event of Default which might be created by such
purchase, other than the general prohibition on any material transaction with
an Affiliate of Borrower set forth in the first sentence of this Section 7.8
and as otherwise set forth in Section 7.6 above.
7.9 INTELLECTUAL PROPERTY AGREEMENTS. Permit the inclusion
in any material contract to which it becomes a party of any provisions that
could or might in any way prevent the creation of a security interest in
Borrower's rights and interests in any property included within the definition
of the Intellectual Property Collateral acquired under such contracts, except
to the extent that such provisions are necessary in Borrower's exercise of its
reasonable business judgement.
7.10 SUBORDINATED DEBT. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.11 INVENTORY. Store the Inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge of any
warehouse receipt covering such Inventory. Except for Inventory sold in the
ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory only at the location set
forth in Section 10 hereof and such other locations of which Borrower gives
Bank prior written notice and as to which Borrower signs and files a financing
statement where needed to perfect Bank's security interest.
7.12 COMPLIANCE. Become an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Advance for
such purpose; fail to meet the minimum funding requirements of ERISA; permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur;
fail to comply with the Federal Fair Labor Standards Act or violate any other
law or regulation, which violation could have a Material Adverse Effect or a
material adverse effect on the Collateral or the priority of Bank's Lien on
the Collateral; or permit any of its Subsidiaries to do any of the foregoing.
7.13 ABANDONMENT OF INTELLECTUAL PROPERTY. If an Event of
Default has occurred and is continuing, allow any Trademarks, Patents,
Copyrights, or Mask Works to be abandoned, forfeited or dedicated to the
public without the written consent of Bank.
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8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay, within five
(5) calendar days of when due, any of the Obligations.
8.2 COVENANT DEFAULT.
(a) If Borrower fails to perform any obligation under
Sections 6.3, 6.7, 6.8, 6.9 or 6.10 or violates any of the covenants contained
in Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or
observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can
be cured, has failed to cure such default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its
nature be cured within the ten (10) day period or cannot after diligent
attempts by Borrower be cured within such ten (10) day period, and such
default is likely to be cured within a reasonable time, then Borrower shall
have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an
Event of Default (provided that no Advances will be required to be made
during such cure period).
8.3 MATERIAL ADVERSE CHANGE. If there (i) occurs a
material adverse change in the business, operations, or condition (financial
or otherwise) of the Borrower, or (ii) is a material impairment of the
prospect of repayment of any portion of the Obligations or (iii) is a
material impairment of the value or priority of Bank's security interests in
the Collateral;
8.4 ATTACHMENT. If any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver or person
acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within thirty
(30) days, or if Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its
business affairs, or if a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower's assets, or if a notice of
lien, levy, or assessment is filed of record with respect to any of
Borrower's assets by the United States Government, or any department, agency,
or instrumentality thereof, or by any state, county, municipal, or
governmental agency, and the same is not paid within thirty (30) days after
Borrower receives notice thereof, provided that none of the
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foregoing shall constitute an Event of Default where such action or event is
stayed or an adequate bond has been posted pending a good faith contest by
Borrower (provided that no Credit Extensions will be required to be made
during such cure period);
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency
Proceeding is commenced against Borrower and is not dismissed or stayed
within forty-five (45) days (provided that no Credit Extensions will be made
prior to the dismissal of such Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any
agreement to which Borrower is a party with a third party or parties
resulting in the exercise of a right by such third party or parties to
accelerate the maturity of any Indebtedness in an amount in excess of One
Hundred Thousand and No/100 Dollars ($100,000.00) or that could have a
Material Adverse Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment is allowed
under any subordination agreement entered into with Bank;
8.8 JUDGMENTS. If a judgment or judgments for the payment
of money in an amount, individually or in the aggregate, of at least One
Hundred Thousand and No/100 Dollars ($100,000.00) shall be rendered against
Borrower and shall remain unsatisfied and unstayed for a period of ten (10)
days (provided that no Credit Extensions will be made prior to the
satisfaction or stay of such judgment);
8.9 MISREPRESENTATIONS. If any material misrepresentation
or material misstatement exists now or hereafter in any warranty or
representation set forth herein or in any certificate or writing delivered to
Bank by Borrower or any Person acting on Borrower's behalf pursuant to this
Agreement or to induce Bank to enter into this Agreement or any other Loan
Document; or
8.10 GUARANTY. Any guaranty of all or a portion of the
Obligations ceases for any reason to be in full force and effect, or any
Guarantor fails to perform any obligation under any guaranty of all or a
portion of the Obligations, or any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set
forth in any guaranty of all or a portion of the Obligations or in any
certificate delivered to Bank in connection with such guaranty, or any of the
circumstances described in Sections 8.4, 8.5 or 8.8 occur with respect to any
Guarantor.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during
the continuance of an Event of Default, Bank may, at its election, without
notice of its
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election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank
in an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(e) Without notice to or demand upon Borrower, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's premises, Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge in order
to exercise any of Bank's rights or remedies provided herein, at law, in equity,
or otherwise;
(f) Without notice to Borrower, set off and apply to
the Obligations any and all (i) balances and deposits of Borrower held by Bank,
or (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section 9.1,
to use, without charge,
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Borrower's labels, patents, copyrights, mask works, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Bank's exercise of its rights under
this Section 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Bank's benefit;
(h) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to the
Obligations in whatever manner or order it deems appropriate;
(i) Bank may credit bid and purchase at any public
sale, or at any private sale as permitted by law; and
(j) Any deficiency that exists after disposition of
the Collateral as provided above will be paid immediately by Borrower.
(k) Bank shall have a non-exclusive, royalty-free
license to use the Intellectual Property Collateral to the extent reasonably
necessary to permit Bank to exercise its rights and remedies upon the occurrence
of an Event of Default.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence
and during the continuance of an Event of Default, Borrower hereby
irrevocably appoints Bank (and any of Bank's designated officers, or
employees) as Borrower's true and lawful attorney to: (a) send requests for
verification of Accounts or notify account debtors of Bank's security
interest in the Accounts; (b) endorse Borrower's name on any checks or other
forms of payment or security that may come into Bank's possession; (c) sign
Borrower's name on any invoice or bill of lading relating to any Account,
drafts against account debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to account debtors; (d) make, settle,
and adjust all claims under and decisions with respect to Borrower's policies
of insurance; and (e) settle and adjust disputes and claims respecting the
Accounts directly with account debtors, for amounts and upon terms which Bank
determines to be reasonable; (f) modify, in its sole discretion, any
intellectual property security agreement entered into between Borrower and
Bank without first obtaining Borrower's approval of or signature to such
modification by amending Exhibit A, Exhibit B, Exhibit C and Exhibit D,
thereof, as appropriate, to include reference to any right, title or interest
in any Copyrights, Patents, Trademarks, Mask Works acquired by Borrower after
the execution hereof or to delete any reference to any right, title or
interest in any Copyrights, Patents, Trademarks, or Mask Works in which
Borrower no longer has or claims any right, title or interest; (g) file, in
its sole discretion, one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature
of Borrower where permitted by law; and (h) transfer the Intellectual
Property Collateral into the name of Bank or a third party to the extent
permitted under the Code provided Bank may exercise such power of attorney to
sign
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the name of Borrower on any of the documents described in Section 4.2
regardless of whether an Event of Default has occurred. The appointment of
Bank as Borrower's attorney in fact, and each and every one of Bank's rights
and powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
9.3 ACCOUNTS COLLECTION. Upon the occurrence and during
the continuance of an Event of Default, Bank may notify any Person owing
funds to Borrower of Bank's security interest in such funds and verify the
amount of such Account. Borrower shall collect all amounts owing to Borrower
for Bank, receive in trust all payments as Bank's trustee, and if requested
or required by Bank, immediately deliver such payments to Bank in their
original form as received from the account debtor, with proper endorsements
for deposit.
9.4 BANK EXPENSES. If Borrower fails to pay any amounts
or furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of
the following: (a) make payment of the same or any part thereof; (b) set up
such reserves under the Committed Revolving Line as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 6.6 of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at
the then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by
Bank to make similar payments in the future or a waiver by Bank of any Event
of Default under this Agreement.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank
complies with reasonable banking practices, Bank shall not in any way or
manner be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage thereto occurring or arising in any manner or fashion
from any cause; (c) any diminution in the value thereof; or (d) any act or
default of any carrier, warehouseman, bailee, forwarding agency, or other
person whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrower.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Bank shall have all other rights and remedies, not expressly set
forth herein, and as provided under the Code, by law, or in equity. No
exercise by Bank of one right or remedy shall be deemed an election, and no
waiver by Bank of any Event of Default on Borrower's part shall be deemed a
continuing waiver. No delay by Bank shall constitute a waiver, election, or
acquiescence by it. No waiver by Bank shall be effective unless made in a
written document signed on behalf of Bank and then shall be effective only in
the specific instance and for the specific purpose for which it was given.
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9.7 DEMAND; PROTEST. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, notice of intent to accelerate, notice of
acceleration, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be
liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by facsimile to Borrower or to Bank, as the case may be, at its
addresses set forth below:
If to Borrower: ObjectSpace, Inc.
14850 Quorum Drive, Suite 500
Dallas, Texas 75240
Attn: Ms. Deborah A. Thomas, Vice President and Chief Financial
Officer
Fax: 972/715-9002
If to Bank: Silicon Valley Bank
9020 Capital of Texas Highway North
Building 1, Suite 350
Austin, Texas 78759
Attn: Mr. Michael E. Draeken, Assistant Vice President
Fax: 512/794-0855
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
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11. CHOICE OF LAW AND VENUE
THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW AS IF PERFORMED ENTIRELY WITHIN THE STATE OF
TEXAS BY TEXAS RESIDENTS. EACH OF BORROWER AND BANK HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF
TRAVIS, STATE OF TEXAS.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of
each of the parties; PROVIDED, HOWEVER, that neither this Agreement nor any
rights hereunder may be assigned by Borrower without Bank's prior written
consent, which consent may be granted or withheld in Bank's sole discretion.
Bank shall have the right without the consent of or notice to Borrower to
sell, transfer, negotiate, or grant participation in all or any part of, or
any interest in, Bank's obligations, rights and benefits hereunder.
12.2 INDEMNIFICATION. BORROWER SHALL, INDEMNIFY, DEFEND,
PROTECT AND HOLD HARMLESS BANK AND ITS DIRECTORS, OFFICERS, EMPLOYEES, AND
AGENTS AGAINST: (A) ALL OBLIGATIONS, DEMANDS, CLAIMS, AND LIABILITIES CLAIMED
OR ASSERTED BY ANY OTHER PARTY IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS; AND (B) ALL LOSSES OR BANK EXPENSES IN
ANY WAY SUFFERED, INCURRED, OR PAID BY BANK AS A RESULT OF OR IN ANY WAY
ARISING OUT OF, FOLLOWING, OR CONSEQUENTIAL TO TRANSACTIONS BETWEEN BANK AND
BORROWER WHETHER UNDER THE LOAN DOCUMENTS, OR OTHERWISE (INCLUDING WITHOUT
LIMITATION REASONABLE ATTORNEYS' FEES AND EXPENSES), EXCEPT FOR LOSSES CAUSED
BY BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
12.3 TIME OF ESSENCE. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific
provision. If any term, provision, covenant, or condition of this Agreement
is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the provisions shall remain in full force and
effect and shall in no way be affected, impaired, or invalidated and this
Agreement shall be construed as if such invalid, void or unenforceable
provision had never been contained herein.
12.5 AMENDMENTS IN WRITING, INTEGRATION. This Agreement
cannot be amended or terminated except by a writing signed by Borrower and
Bank. All prior agreements, understandings, representations, warranties, and
negotiations between the
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parties hereto with respect to the subject matter of this Agreement, if any,
are merged into this Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an
original, and all of which, when taken together, shall constitute but one and
the same Agreement.
12.7 SURVIVAL. All covenants, representations and
warranties made in this Agreement shall continue in full force and effect so
long as any Obligations remain outstanding. The obligations of Borrower to
indemnify Bank with respect to the expenses, damages, losses, costs and
liabilities described in Section 12.2 shall survive until all applicable
statute of limitations periods with respect to actions that may be brought
against Bank have run.
12.8 CONFIDENTIALITY. In handling any confidential
information of Borrower, Bank shall exercise the same degree of care that it
exercises with respect to its own proprietary information of the same types
to maintain the confidentiality of any non-public information thereby
received or received pursuant to this Agreement except that disclosure of
such information may be made (i) to the Subsidiaries or Affiliates of Bank in
connection with their present or prospective business relations with
Borrower, (ii) to prospective transferees or purchasers of any interest in
the loans, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii)
as required by law, regulation, rule or order, subpoena, judicial order or
similar order, (iv) as may be required in connection with the examination,
audit or similar investigation of Bank, and (v) as Bank may deem appropriate
in connection with the exercise of any remedies hereunder. Confidential
information hereunder shall not include information that either: (a) is in
the public domain or in the knowledge or possession of Bank when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank through
no fault of Bank; or (b) is disclosed to Bank by a third party, provided Bank
does not have actual knowledge that such third party is prohibited from
disclosing such information.
12.9 WAIVER OF JURY TRIAL. BANK AND BORROWER EACH HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
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12.10 NOTICE OF ORAL AGREEMENT. THIS AGREEMENT AND THE
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
OBJECTSPACE, INC.
By: /s/ DEBORAH A. THOMAS
--------------------------------------
Name: Deborah A. Thomas
------------------------------------
Title: Vice President, Cfo
-----------------------------------
SILICON VALLEY BANK
By: /s/ MICHAEL E. DRAEKEN
--------------------------------------
Michael E. Draeken, Assistant Vice
President
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SCHEDULE TO LOAN AND SECURITY AGREEMENT
DATED FECRUARY 9, 1998
SCHEDULE TO LOAN AND SECURITY AGREEMENT PAGE 1 OF 3
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<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
(e) All documents, cash, deposit accounts, securities, investment
property, letters of credit, certificates of deposit, instruments and chattel
paper now owned or hereafter acquired and Borrower's Books relating to the
foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
SCHEDULE TO LOAN AND SECURITY AGREEMENT PAGE 2 OF 3
- -------------------------------------------------------
<PAGE>
(g) All Borrower's Books relating to the foregoing and any and all
claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof.
SCHEDULE TO LOAN AND SECURITY AGREEMENT PAGE 3 OF 3
- -------------------------------------------------------
<PAGE>
SENIOR SUBORDINATED LOAN AND SECURITY AGREEMENT
BETWEEN
SILICON VALLEY BANK
AND
OBJECTSPACE, INC.
DATED AS OF JUNE 16, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
1. DEFINITIONS AND CONSTRUCTION.............................................................................1
1.1 Definitions.....................................................................................1
1.2 Accounting and Other Terms......................................................................6
2. LOAN AND TERMS OF PAYMENT................................................................................6
2.1 Credit Extensions...............................................................................6
2.2 Interest Rates, Payments, and Calculations......................................................7
2.3 Crediting Payments..............................................................................8
2.4 Fees............................................................................................9
2.5 Additional Costs................................................................................9
2.6 Term............................................................................................9
3. CONDITIONS OF LOANS.....................................................................................10
3.1 Conditions Precedent to Initial Credit Extension...............................................10
3.2 Conditions Precedent to all Credit Extensions..................................................10
4.1 Grant of Security Interest.....................................................................11
4.2 Delivery of Additional Documentation Required..................................................11
4.3 Right to Inspect...............................................................................11
5. REPRESENTATIONS AND WARRANTIES..........................................................................11
5.1 Due Organization and Qualification.............................................................11
5.2 Due Authorization: No Conflict................................................................11
5.3 No Prior Encumbrances..........................................................................12
5.4 Merchantable Inventory.........................................................................12
5.5 Intellectual Property..........................................................................12
5.6 Name: Location of Chief Executive Office.......................................................12
5.7 Litigation.....................................................................................12
5.8 No Material Adverse Change in Financial Statements.............................................12
5.9 Solvency.......................................................................................12
5.10 Regulatory Compliance..........................................................................13
5.11 Environmental Condition........................................................................13
5.12 Taxes..........................................................................................13
5.13 Subsidiaries...................................................................................13
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
5.14 Government Consents............................................................................13
5.15 Full Disclosure................................................................................13
6. AFFIRMATIVE COVENANTS...................................................................................14
6.1 Good Standing..................................................................................14
6.2 Government Compliance..........................................................................14
6.3 Financial Statements, Reports, Certificates....................................................14
6.4 Inventory: Returns............................................................................14
6.5 Taxes..........................................................................................15
6.6 Insurance......................................................................................15
6.7 Registration of Intellectual Property Rights...................................................15
6.8 Further Assurances.............................................................................16
6.9 Landlord's Lien Subordination..................................................................16
7. NEGATIVE COVENANTS......................................................................................16
7.1 Dispositions...................................................................................16
7.2 Changes in Business, Ownership, Management or Business Locations...............................16
7.3 Mergers or Acquisitions........................................................................17
7.4 Indebtedness...................................................................................17
7.5 Encumbrances...................................................................................17
7.6 Distributions..................................................................................17
7.7 Investments....................................................................................17
7.8 Transactions with Affiliates...................................................................17
7.9 Intellectual Property Agreements...............................................................17
7.10 Subordinated Debt..............................................................................18
7.11 Inventory......................................................................................18
7.12 Compliance.....................................................................................18
7.13 Abandonment of Intellectual Property...........................................................18
8. EVENTS OF DEFAULT.......................................................................................18
8.1 Payment Default................................................................................18
8.2 Covenant Default...............................................................................18
8.3 Material Adverse Change........................................................................19
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
8.4 Attachment.....................................................................................19
8.5 Insolvency.....................................................................................19
8.6 Other Agreements...............................................................................19
8.7 Subordinated Debt..............................................................................19
8.8 Senior Debt....................................................................................19
8.9 Judgments......................................................................................20
8.10 Misrepresentations.............................................................................20
9. BANK'S RIGHTS AND REMEDIES..............................................................................20
9.1 Rights and Remedies............................................................................20
9.2 Power of Attorney..............................................................................21
9.3 Accounts Collection............................................................................22
9.4 Bank Expenses..................................................................................22
9.5 Bank's Liability for Collateral................................................................22
9.6 Remedies Cumulative............................................................................22
9.7 Demand: Protest................................................................................22
10. NOTICES.................................................................................................22
11. CHOICE OF LAW AND VENUE.................................................................................23
12. GENERAL PROVISIONS......................................................................................23
12.1 Successors and Assigns.........................................................................23
12.2 Indemnification for Negligence of Bank.........................................................23
12.3 Time of Essence................................................................................24
12.4 Severability of Provisions.....................................................................24
12.5 Amendments in Writing; Integration.............................................................24
12.6 Counterparts...................................................................................24
12.7 Survival.......................................................................................24
12.8 Confidentiality................................................................................24
12.9 Waiver Of Jury Trial...........................................................................25
12.10 Notice Of Oral Agreement.......................................................................25
</TABLE>
iii
<PAGE>
SENIOR SUBORDINATED LOAN AND SECURITY AGREEMENT
This SENIOR SUBORDINATED LOAN AND SECURITY AGREEMENT is entered into
as of June 16, 1998, by and between SILICON VALLEY BANK, a
California-chartered bank ("Bank") and OBJECTSPACE, INC., a Delaware
corporation ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and
Bank desires to extend credit to Borrower. This Agreement sets forth the terms
on which Bank will advance credit to Borrower, and Borrower will repay the
amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following definitions:
"ACCOUNTS" means all presently existing and
hereafter arising accounts, contract rights, and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other
technology) or the rendering of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower and
Borrower's Books relating to any of the foregoing.
"AFFILIATE" means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person
that controls or is controlled by or is under common control with such Person,
and each of such Person's senior executive officers, directors, partners and
for any Person that is a limited liability company, such Person's, managers
and members.
"BANK EXPENSES" means all reasonable costs or
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the preparation, negotiation, administration, and enforcement
of the Loan Documents; and Bank's reasonable attorneys' fees and expenses
incurred in amending, enforcing or defending the Loan Documents, (including
fees and expenses of appeal or review, or those incurred in any Insolvency
Proceeding) whether or not suit is brought.
"BORROWER'S BOOKS" means all of Borrower's books
and records including, without limitation: ledgers; records concerning
Borrower's assets or liabilities, the Collateral, business operations or
financial condition; and all computer programs, or tape files, and the
equipment, containing such information.
"BUSINESS DAY" means any day that is not a
Saturday, Sunday, or other day on which banks in the State of California are
authorized or required to close.
1.
<PAGE>
"CLOSING DATE" means the date of this Agreement.
"CODE" means the Uniform Commercial Code as in
effect in the State of California from time to time.
"COLLATERAL" means the property described on
EXHIBIT A attached hereto.
"CONTINGENT OBLIGATION" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any indebtedness, lease, dividend, letter of credit
or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determined amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith: provided, however, that such amount shall not in
any event exceed the maximum amount of the obligations under the guarantee or
other support arrangement.
"COPYRIGHTS" means any and all copyright rights,
copyright applications, copyright registrations and like protections in each
work or authorship and derivative work thereof, whether published or
unpublished and whether or not the same also constitutes a trade secret, now
or hereafter existing, created, acquired or held.
"CREDIT EXTENSION" means the single advance of
Credit under the Term Loan or any other extension of credit by Bank for the
benefit of Borrower hereunder.
"EQUIPMENT" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts
and attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended and the regulations thereunder.
"GAAP" means generally accepted accounting
principles as in effect in the United States from time to time.
"INDEBTEDNESS" means (a) all indebtedness for
borrowed money or the deferred purchase price of property or services,
including without limitation reimbursement and other obligations with respect
to surety bonds and letters of credit, (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all capital lease obligations
and (d) all Contingent Obligations.
2.
<PAGE>
"INSOLVENCY PROCEEDING" means any proceeding
commenced by or against any Person or entity under any provision of the United
States Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency law, including assignments for the benefit of creditors, formal or
informal moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
"INTELLECTUAL PROPERTY COLLATERAL" means Borrower's
interests in any of the following:
(A) Copyrights, Trademarks, Patents, and Mask Works;
(B) Any and all trade secrets, and any and all
intellectual property rights in computer software and computer software
products now or hereafter existing, created, acquired or held;
(C) Any and all design rights which may be
available to Borrower now or hereafter existing, created, acquired or held;
(D) Any and all claims for damages by way of past,
present and future infringement of any of the rights included above, with the
right, but not the obligation, to sue for and collect such damages for said
use or infringement of the intellectual property, rights identified above;
(E) All licenses or other rights to use any of the
Copyrights, Patents, Trademarks, or Mask Works, and all license fees and
royalties arising from such use to the extent permitted by such license or
rights:
(F) All amendments, renewals and extensions of any
of the Copyrights, Trademarks, Patents, or Mask Works; and
(G) All proceeds and products of the foregoing,
including without limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
"INVENTORY" means all present and future inventory,
in which Borrower has any interest, including merchandise, raw materials,
parts, supplies, packing and shipping materials, work in process and finished
products intended for sale or lease or to be furnished under a contract of
service, of every kind and description now or at any time hereafter owned by
or in the custody or possession actual or constructive, of Borrower including
such inventory as is temporarily out of its custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above.
"INVESTMENT" means any beneficial ownership
(including stock, partnership interest or other securities) of any Person, or
any loan, advance or capital contribution to any Person.
3.
<PAGE>
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"LIEN" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.
"LOAN DOCUMENTS" means, collectively, this
Agreement, any note or notes that may be executed by Borrower in favor of Bank
as a part of this Agreement, a warrant subscription agreement, warrant to
purchase stock, registration rights agreement, and any other present or future
agreement entered into between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, extended or restated from time
to time.
"MASK WORKS" means all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired.
"MATERIAL ADVERSE EFFECT" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"MAXIMUM LAWFUL RATE" means the maximum rate of
interest and the term "Maximum Lawful Amount" means the maximum amount of
interest that are permissible under applicable state or federal law for the
type of loan evidenced by the Loan Documents. If .the Maximum Lawful Rate is
increased by statute or other governmental action subsequent to the date of
this Agreement, then the new Maximum Lawful Rate shall be applicable to the
payments provided for hereunder from the effective date thereof, unless
otherwise prohibited by applicable law.
"NEGOTIABLE COLLATERAL" means all of Borrower's
present and future letters of credit of which it is a beneficiary, notes,
drafts, instruments, securities, documents of title, and chattel paper.
"OBLIGATIONS" means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing, or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may
have obtained by assignment or otherwise.
"PATENTS" means all patents, patent applications
and like protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same.
"PAYMENT DATE" means the last calendar day of each
month commencing on the first such date after the Closing Date and ending on
the earlier to occur of (i) repayment in full of all Obligations due under
this Agreement or (ii) the Term Maturity Date.
4.
<PAGE>
"PERMITTED INDEBTEDNESS" means:
(A) Indebtedness of Borrower in favor of Bank
arising under this Agreement or any other Loan Document;
(B) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(C) Subordinated Debt
(D) Indebtedness to trade creditors incurred in the
ordinary course of business; and
(E) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENT" means:
(A) Investments existing on the Closing Date
disclosed in the Schedule: and
(B) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or
instrumentality thereof maturing within one (1) year from the date of
acquisition thereof, (ii) commercial paper maturing no more than one (1) year
from the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., and (iii) certificates of deposit maturing no more than one (1)
year from the date of investment therein issued by Bank.
"PERMITTED LIENS" means the following:
(A) Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;
(B) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in
good faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, provided the same have
no priority over any of Bank's security interests;
(C) Liens (i) upon or in any Equipment acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price of
such Equipment or indebtedness incurred solely for the purpose of financing
the acquisition of such Equipment, or (ii) existing on such Equipment at the
time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
Equipment; and
(D) Liens incurred in connection with the
extension, renewal or refinancing of the Indebtedness secured by Liens of the
type described in clauses (a) through (c) above, provided that any extension,
renewal or replacement Lien shall be limited to the property
5.
<PAGE>
encumbered by the existing Lien and the principal amount of the indebtedness
being extended renewed or refinanced does not increase.
"PERSON" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation firm joint stock company, estate, entity or governmental agency.
"RESPONSIBLE OFFICER" means each of the Chief
Executive Officer, the President, the Chief Financial Officer and the
Controller of Borrower.
"SCHEDULE" means the schedule of exceptions
attached hereto, if any
"SUBORDINATED DEBT" means, with the prior written
consent of Bank to incur such debt, any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"SUBSIDIARY" means with respect to any Person,
corporation, partnership, company association, joint venture, or any other
business entity of which more than fifty percent (50%) of the voting stock or
other equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.
"TERM LOAN" means a Credit Extension of Three
Million and No/100 Dollars ($3,000,000.00).
"TERM MATURITY DATE" means June 16, 2001.
"TRADEMARKS" means any trademark and servicemark
rights, whether registered or not, applications to register and registrations
of the same and like protections, and the entire goodwill of the business of
Borrower connected with and symbolized by such trademarks.
1.2 ACCOUNTING AND OTHER TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including" and "includes" shall always be read
as meaning "including (or includes) without limitation", when used herein or
in any other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS. Borrower promises to pay to the order of Bank,
in lawful money of the United States of America, the aggregate unpaid
principal amount of all Credit Extensions made by Bank to Borrower hereunder.
Borrower also promises to pay interest on the unpaid principal amount of such
Credit Extensions at rates in accordance with the terms hereof.
6.
<PAGE>
(a) Subject to and upon the terms and conditions of
this Agreement, Bank shall make a Term Loan available to Borrower.
(b) When Borrower desires to obtain the Credit
Extension, Borrower will notify Bank by facsimile transmission or telephone no
later than 3:00 p.m. Pacific time, on the Business Day that the Credit
Extension is to be made. The notification shall be promptly confirmed by a
Payment/Advance Form in substantially the form of EXHIBIT B hereto. Bank is
authorized to make the Credit Extension under this Agreement, based upon
instructions received from a Responsible Officer or a designee of a
Responsible Officer. Bank shall be entitled to rely on any telephonic notice
given by a person who Bank reasonably believes to be a Responsible Officer or
a designee thereof, and Borrower shall indemnify and hold Bank harmless for
any damages or loss suffered by Bank as a result of such reliance. Bank will
credit the amount of the Credit Extension made under this SECTION 2.1 to
Borrower's deposit account.
(c) The Term Loan shall terminate on the Term
Maturity Date, at which time all Obligations under this SECTION 2.1 and other
amounts due under this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable.
2.2 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in SECTION
2.2(B), Credit Extensions shall bear interest, on the average daily balance
thereof, at a per annum rate equal to twelve percent (12%).
(b) DEFAULT RATE. All Obligations shall bear
interest, from and after the occurrence of an Event of Default, at the
"Default Interest Rate." The Default Interest Rate shall be, at Bank's option,
(i) the Maximum Lawful Rate, if such Maximum Lawful Rate is established by
applicable law: or (ii) the interest rate applicable immediately prior to the
occurrence of the Event of Default plus five (5) percentage points, if no
Maximum Lawful Rate is established by applicable law: or (iii) eighteen
percent (18%) per annum: or (iv) such lesser rate of interest as Bank's, its
sole discretion may choose to charge: but never more than the Maximum Lawful
Rate or at a rate that would cause the total interest contracted for, charged
or received by Bank to exceed the Maximum Lawful Amount.
(c) PAYMENTS. Interest hereunder shall be due and
payable on each Payment Date. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) COMPUTATION.
(i) SPREADING OF INTEREST. Because of the
possibility of irregular periodic balances of principal, the fluctuating
nature of the interest rate, or premature payment, the total interest that
will accrue under this Agreement cannot be determined in advance. Bank does
not intend to contract for charge or receive more than the Maximum Lawful Rate
or Maximum Lawful Amount permitted by applicable state or federal law, and to
prevent such an occurrence Bank and Borrower agree that all amounts of
interest, whenever contracted for, charged or received by Bank, with respect
to the loan of money evidenced by the Loan
7
<PAGE>
Documents, shall be spread, prorated or allocated over the full period of time
the Obligations are unpaid, including the period of any renewal or extension
thereof. If the maturity of the Obligations is accelerated for any reason
whether as a lawsuit or an Event of Default or otherwise prior to the full
stated term, the total amount of interest contracted for, charged or received
to the time of such demand shall be spread, prorated or allocated along with
any interest thereafter accruing over the full period of time that the
Obligations thereafter remain unpaid for the purpose of determining if such
interest exceeds the Maximum Lawful Amount.
(ii) EXCESS INTEREST. At maturity (whether by
acceleration or otherwise) or on earlier final payment of the Obligations,
Bank shall compute the total amount of interest that has been contracted for,
charged or received by Bank or payable by Borrower hereunder and compare such
amount to the Maximum Lawful Amount that could have been contracted for,
charged or received by Bank. If such computation reflects that the total
amount of interest that has been contracted for, charged or received by Bank
or payable by Borrower exceeds the Maximum Lawful Amount, then Bank shall
apply such excess to the reduction of the principal balance and not to the
payment of interest: or if such excess interest exceeds the unpaid principal
balance, such excess shall be refunded to Borrower. This provision concerning
the crediting or refund of excess interest shall control and take precedence
over all other agreements between Borrower and Bank so that under no
circumstances shall the total interest contracted for, charged or received by
Bank exceed the Maximum Lawful Amount.
(iii) DAILY COMPUTATION OF INTEREST. To the
extent permitted by applicable law, Bank at its option may either (i)
calculate the per diem interest rate or amount based on the actual number of
days in the year (365 or 366, as the case may be), and charge that per diem
interest rate or amount each day, or (ii) calculate the per diem interest rate
or amount as if each year has only 360 days, and charge that per diem interest
rate or amount each day for the actual number of days of the year (365 or 366
as the case may be). If the Loan Documents call for monthly payments, Bank at
its option may determine the payment amount based on the assumption that each
year has only 360 days and each month has 30 days. In no event shall Bank
compute the interest in a manner that would cause Bank to contract for, charge
or receive interest that would exceed the Maximum Lawful Rate or the Maximum
Lawful Amount.
2.3 CREDITING PAYMENTS. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment, whether directed to Borrower's deposit
account with Bank or to the Obligations or otherwise, shall be immediately
applied to conditionally reduce Obligations, but shall not be considered a
payment in respect of the Obligations unless such payment is of immediately
available federal funds or unless and until such check or other item of
payment is honored when presented for payment. Notwithstanding anything to the
contrary contained herein, any wire transfer or payment received by Bank after
12:00 noon Pacific time shall be deemed to have been received by Bank as of
the opening of business on the immediately following Business Day. Whenever
any payment to Bank under the Loan Documents would otherwise be due (except by
reason of acceleration) on a date that is not a Business Day, such payment
shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of
such extension.
8
<PAGE>
2.4 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. A Facility Fee equal to Thirty Thousand
and No/100 Dollars ($30,000), which fee shall be due on the Closing Date and
shall be fully earned and non-refundable;
(b) FINANCIAL EXAMINATION AND APPRAISAL FEES. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) BANK EXPENSES. Upon demand from Bank, including,
without limitation, upon the date hereof, all Bank Expenses incurred through
the date hereof, including reasonable attorneys' fees and expenses, and, after
the date hereof, all Bank Expenses, including reasonable attorneys' fees and
expenses, as and when they become due.
2.5 ADDITIONAL COSTS. In case any law, after the date hereof, any
regulation, treaty or official directive or the interpretation or application
thereof by any court or any governmental authority charged with the
administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force
of law):
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net income of Bank imposed by the United States of
America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank: or
(c) imposes upon Bank any other condition with respect to
its performance under this Agreement, and the result of any of the foregoing
is to increase the cost to Bank, reduce the income receivable by Bank or
impose any expense upon Bank with respect to the Obligations, Bank shall
notify Borrower thereof within one hundred eighty (180) days of Bank incurring
any such reduced income or increased cost or expense. Borrower agrees to pay
to Bank the amount of such increase in cost, reduction in income or additional
expense as and when such cost, reduction or expense is incurred or determined,
upon presentation by Bank of a statement of the amount and setting forth
Bank's calculation thereof, all in reasonable detail, which statement shall be
deemed true and correct absent manifest error.
2.6 TERM. Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to SECTION 12.7, shall
continue in full force and effect for a term ending on the Term Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default.
9
<PAGE>
Notwithstanding termination of this Agreement, Bank's Lien on the Collateral
shall remain in effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) an intellectual property security agreement;
(d) UCC-1 financing statements covering the
Collateral and UCC-3 termination statements or assignments in favor of Bank
from each Person, other than Bank, that has a security interest in the
Collateral or any part thereof;
(e) an opinion of Borrower's counsel;
(f) a warrant subscription agreement by and between
the Borrower, Bank, and certain stockholders named therein (the "WARRANT
SUBSCRIPTION AGREEMENT")
(g) a warrant to purchase stock;
(h) a registration rights agreement;
(i) a subordination agreement;
(j) insurance certificate;
(k) payment of the fees and Bank Expenses then due
specified in SECTION 2.4 hereof;
(l) Certificate of Foreign Qualification (if
applicable); and
(m) such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance
Form as provided in SECTION 2.1; and
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(b) the representations and warranties contained in
SECTION 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit Extension
as to the accuracy of the facts referred to in this SECTION 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired
or arising Collateral and all proceeds thereof, in order to secure prompt
payment of any and all Obligations and in order to secure prompt performance
by Borrower of each of its covenants and duties under the Loan Documents.
Except as set forth in the Schedule, such security interest constitutes a
valid, first priority security interest in the presently existing Collateral,
and will constitute a valid, first priority security interest in Collateral
acquired after the date hereof. Borrower acknowledges that following the
occurrence and during the continuance of an Event of Default hereunder Bank
may place a "hold" on any deposit account pledged as Collateral to secure the
Obligations. Notwithstanding termination of this Agreement, Bank's Lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank to perfect and continue
perfected Bank's security interest in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 RIGHT TO INSPECT. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to
time during Borrower's usual business hours, to inspect Borrower's Books and
to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each Subsidiary
is a corporation duly existing and in good standing under the laws of its
state of incorporation and qualified and licensed to do business in, and is in
good standing in Texas, and in any other state in which the conduct of its
business or its ownership of property requires that it be so qualified where
the failure to so qualify would result in a Material Adverse Effect.
5.2 DUE AUTHORIZATION: NO CONFLICT. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor
will they constitute an event of default under any material
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agreement to which Borrower is a party or by which Borrower is bound. Borrower
is not in default under any agreement to which it is a party or by which it is
bound, which default could have a Material Adverse Effect.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible title
to the Collateral free and clear of Liens, except for Permitted Liens.
5.4 MERCHANTABLE INVENTORY. All Inventory is in all material respects
of good and marketable quality, free from all material defects.
5.5 INTELLECTUAL PROPERTY. Borrower is the owner of the Patents,
Trademarks, Copyrights and Mask Works subject to licenses granted by Borrower
to its customers in the ordinary course of business. To Borrower's knowledge,
each of the Patents is valid and enforceable, and no part of the Intellectual
Property Collateral has been judged invalid or unenforceable, in whole or in
part, and no claim has been made that any part of the Intellectual Property
Collateral violates the rights of any third party. Except for and upon the
filing with the United States Patent and Trademark Office with respect to the
Patents and Trademarks and the Register of Copyrights with respect to the
Copyrights and Mask Works necessary to perfect the security interests created
hereunder, and except as has been already made or obtained, no authorization,
approval or other action by, and no notice to or filing with, any United
States governmental authority or United States regulatory body is required
either (i) for the grant by Borrower of the security interest granted hereby
or for the execution, delivery or performance of Loan Documents by Borrower in
the United States or (ii) for the perfection in the United States or the
exercise by Bank of its rights and remedies hereunder.
5.6 NAME: LOCATION OF CHIEF EXECUTIVE OFFICE. Except as disclosed in
the Schedule, Borrower has not done business and will not without at least
thirty (30) days prior written notice to Bank do business under any name other
than that specified on the signature page hereof. The chief executive office
of Borrower is located at the address indicated in SECTION 10 hereof.
5.7 LITIGATION. Except as set forth in the Schedule, there are no
actions or proceedings pending, or, to Borrower's knowledge, threatened by or
against Borrower or any Subsidiary before any court or administrative agency
in which an adverse decision could have a Material Adverse Effect on
Borrower's interest or Bank's security interest in the Collateral.
5.8 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material
respects Borrower's consolidated financial condition as of the date thereof
and Borrower's consolidated results of operations for the period then ended.
There has not been a material adverse change in the consolidated financial
condition of Borrower since the date of the most recent of such financial
statements submitted to Bank on or about the Closing Date.
5.9 SOLVENCY. The fair saleable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities;
the Borrower is not left with
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unreasonably small capital after the transactions contemplated by this
Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.
5.10 REGULATORY COMPLIANCE. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940. Borrower is
not engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations G, T and U of the Board of Governors
of the Federal Reserve System). Borrower has complied with all the provisions
of the Federal Fair Labor Standards Act. Borrower has not violated any
statutes, laws, ordinances or rules applicable to it, violation of which could
have a Material Adverse Effect.
5.11 ENVIRONMENTAL CONDITION. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to
the best of Borrower's knowledge, by previous owners or operators, in the
disposal of, or to produce, store, handle, treat, release, or transport, any
hazardous waste or hazardous substance other than in accordance with
applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the release, or other disposition of hazardous waste
or hazardous substances into the environment.
5.12 TAXES. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed on a timely basis, and has paid, or
has made adequate provision for the payment of, all taxes reflected therein.
5.13 SUBSIDIARIES. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.14 GOVERNMENT CONSENTS. Borrower and each Subsidiary has obtained
all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted.
5.15 FULL DISCLOSURE. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates
or statements not misleading.
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6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to
make a Credit Extension hereunder, Borrower shall do all of the following:
6.1 GOOD STANDING. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in Texas and every other jurisdiction
in which the failure to so qualify could have a Material Adverse Effect.
Borrower shall maintain in force, and shall cause each of its Subsidiaries to
maintain, to the extent consistent with prudent management of Borrower's
business, all licenses, approvals and agreements, the loss of which could have
a Material Adverse Effect.
6.2 GOVERNMENT COMPLIANCE. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect on the Collateral or the priority
of Bank's Lien on the Collateral.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES Borrower shall
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each month, a company prepared consolidated balance
sheet and income statement covering Borrower's consolidated operations during
such period, in a form and certified by an officer of Borrower reasonably
acceptable to Bank; (b) as soon as available, but in any event within one
hundred twenty (120) days after the end of each of Borrower's fiscal years,
other than Borrower's fiscal year 1997 for which Borrower shall have one
hundred and eighty (180) days, audited consolidated financial statements of
Borrower prepared in accordance with GAAP, consistently applied together with
an unqualified opinion on such financial statements of an independent
certified public accounting firm reasonably acceptable to Bank; (c) within
five (5) days of filing, copies of all statements, reports and notices sent or
made available generally by Borrower to its security holders or to any holders
of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower
or any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand and No/100 Dollars (S100,000.00) or more;
(e) prompt notice of any material change in the composition of the
Intellectual Property Collateral including, but not limited to, any subsequent
ownership right of the Borrower in or to any Copyright, Patent or Trademark
not specified in any intellectual property security agreement between Borrower
and Bank or knowledge of an event that materially adversely effects the value
of the Intellectual Property Collateral: and (f) such budgets, sales
projections, operating plans or other financial information as Bank may
reasonably request from time to time.
6.4 INVENTORY: RETURNS. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances,
if any, as between Borrower and its account debtors shall be on the same basis
and in accordance with the usual customary
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practices of Borrower, as they exist at the time of the execution and delivery
of this Agreement. Borrower shall promptly notify Bank of all returns and
recoveries and of all disputes and claims, where the return, recovery, dispute
or claim involves more than Fifty Thousand and No/100 Dollars ($50,000.00).
6.5 TAXES. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with
proof satisfactory to Bank indicating that Borrower or a Subsidiary has made
such payments or deposits; provided that Borrower or a Subsidiary need not
make any payment if the amount or validity of such payment is (i) contested in
good faith by appropriate proceedings, (ii) is reserved against (to the extent
required by GAAP) by Borrower and (iii) no Lien other than a Permitted Lien
results.
6.6 INSURANCE.
(a) Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in-such amounts, as
ordinarily insured against by other owners in similar businesses conducted in
the locations where Borrower's business is conducted on the date hereof.
Borrower shall also maintain insurance relating to Borrower's ownership and
use of the Collateral in amounts and of a type that are customary, to
businesses similar to Borrower's.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as are reasonably satisfactory
to Bank. All such policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee thereof and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must
give at least fifteen (15) days notice to Bank before canceling its policy for
any reason. At Bank's request, Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the payments of all premiums
therefor. All proceeds payable under any such policy shall, at the option of
Bank, be payable to Bank to be applied on account of the Obligations.
6.7 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
(a) Within three (3) days thereof, Borrower shall
give Bank notice of its registration with the United States Patent and
Trademark Office or its filing with the United States Copyright Office, as
applicable, of those intellectual property rights referred to in the
Intellectual Property Security Agreement and exhibits thereto and those
additional intellectual property rights developed or acquired by Borrower from
time to time in connection with any product prior to the sale or licensing of
such product to any third party, including without limitation revisions or
additions to the intellectual property rights listed in the Intellectual
Property Security Agreement and exhibits thereto.
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(b) Borrower shall execute and deliver such
additional instruments and documents from time to time and take such further
action as Bank shall reasonably request to enable Bank to perfect Bank's
security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain
the validity and enforceability of the Trademarks, Patents, Copyrights, and
Mask Works and (ii) use commercially reasonable efforts to detect
infringements of the Trademarks, Patents, Copyrights and Mask Works and
promptly advise Bank in writing of material infringements detected.
(d) Bank shall have the right, but not the
obligation, to take, at Borrower's sole expense, any actions that Borrower is
required under this SECTION 6.7 to take but which Borrower fails to take,
after fifteen (15) days notice to Borrower. BORROWER SHALL REIMBURSE AND
INDEMNIFY BANK FOR ALL REASONABLE COSTS AND REASONABLE EXPENSES INCURRED IN
THE REASONABLE EXERCISE OF ITS RIGHTS UNDER THIS SECTION 6.7.
6.8 FURTHER ASSURANCES. At any time and from time to time, Borrower
shall execute and deliver such further instruments and take such further
action as may reasonably be requested by Bank to effect the purposes of this
Agreement.
6.9 LANDLORD'S LIEN SUBORDINATION. No later than thirty (30) days
after the date hereof, Borrower shall deliver to Bank a Subordination of Lien
from each Person who leases real property to Borrower in form and substance
acceptable to Bank. Borrower acknowledges and agrees that no Credit Extensions
will be made if such subordinations are not delivered by the date set forth
above.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Credit
Extensions, Borrower will not do any of the following:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than Transfers:
(i) of inventory in the ordinary course of business, (ii) of licenses and
similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; (iii) that constitute payment
of normal and usual operating expenses in the ordinary course of business; or
(iv) of worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in any business, or permit any of its Subsidiaries to engage in any
business, other than the businesses currently engaged in by Borrower and any
business substantially similar or related thereto (or incidental thereto), or
suffer a material change in Borrower's ownership or management or if David
Norris or Graham Glass ceases to be an employee or director of Borrower and
replacements reasonably satisfactory to Bank are not made in within thirty
(30) days. Borrower will not, without at least fifteen (15) days prior written
notification to Bank, relocate its chief executive office or add any new
offices or business locations.
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7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right
to receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any
capital stock: provided, Borrower may purchase (i) the Put Shares (as defined
in that certain Stock Purchase Agreement ("Stock Purchase Agreement") dated
August 21, 1996 between David Cook and Borrower) from David Cook under and as
provided in the Stock Purchase Agreement and (ii) the Put (as defined in that
certain Warrant Subscription Agreement ("Subscription Agreement") between
Bank, Borrower, and Borrower's shareholders of even date herewith) from Bank
and as provided in the Subscription Agreement. Borrower will not, without the
prior written consent of Bank, supplement, amend, modify or waive in any way
any provision of the Stock Purchase Agreement. Borrower agrees and
acknowledges that the foregoing right of Borrower to purchase the Put Shares
is not a waiver of any Event of Default which might be created by such
purchase, other than the general prohibition on dividends, distributions or
other payments set forth in the first sentence of this SECTION 7.6 and as
otherwise set forth in SECTION 7.8 below.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Other than Borrower's right to
purchase the Put Shares pursuant to and in accordance with SECTION 7.6 above
and any other existing contractual rights existing on the date hereof and
previously disclosed to the Bank in Section 4.1(e) of the Warrant Subscription
Agreement, directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an arm's
length transaction with a nonaffiliated Person. Borrower agrees and
acknowledges that right of Borrower to purchase the Put Shares pursuant to and
in accordance with SECTION 7.6 above is not a waiver of any Event of Default
which might be created by such purchase, other than the general prohibition on
any material transaction with an Affiliate of Borrower set forth in the first
sentence of this SECTION 7.8 and as otherwise set forth in SECTION 7.6 above.
7.9 INTELLECTUAL PROPERTY AGREEMENTS. Permit the inclusion in any
material contract to which it becomes a party of any provisions that could or
might in any way prevent the creation of a security interest in Borrower's
rights and interests in any property included within the definition of the
Intellectual Property Collateral acquired under such contracts, except to the
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extent that such provisions are necessary in Borrower's exercise of its
reasonable business judgement.
7.10 SUBORDINATED DEBT. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.11 INVENTORY. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory, sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in SECTION 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.12 COMPLIANCE. Become an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Credit
Extension for such purpose; fail to meet the minimum funding requirements of
ERISA; permit a Reportable Event or Prohibited Transaction, as defined in
ERISA to occur; fail to comply with the Federal Fair Labor Standards Act or
violate any other law or regulation, which violation could have a Material
Adverse Effect or a material adverse effect on the Collateral or the priority
of Bank's Lien on the Collateral; or permit any of its Subsidiaries to do any
of the foregoing.
7.13 ABANDONMENT OF INTELLECTUAL PROPERTY. If an Event of Default
has occurred and is continuing, allow any Trademarks, Patents, Copyrights, or
Mask Works to be abandoned, forfeited or dedicated to the public without the
written consent of Bank.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay, within five (5)
calendar days of when due, any of the Obligations.
8.2 COVENANT DEFAULT.
(a) If Borrower fails to perform any obligation
under SECTIONS 6.3, or 6.7 or violates any of the covenants contained in
Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep,
or observe any other material term, provision, condition, covenant, or
agreement contained in this Agreement, in any of the Loan Documents, or in any
other present or future agreement between Borrower and Bank and as to any
default under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure such default within ten (10) days after
the occurrence thereof;
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provided, however, that if the default cannot by its nature be cured within
the ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within
a reasonable time, then Borrower shall have an additional reasonable period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to have cured such
default shall not be deemed an Event of Default (provided that no Credit
Extensions will be required to be made during such cure period).
8.3 MATERIAL ADVERSE CHANGE. If there (i) occurs a material adverse
change in the business, operations, or condition (financial or otherwise) of
the Borrower, or (ii) is a material impairment of the prospect of repayment of
any portion of the Obligations or (iii) is a material impairment of the value
or priority of Bank's security interests in the Collateral;
8.4 ATTACHMENT. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or
levy has not been removed, discharged or rescinded within thirty (30) days, or
if Borrower is enjoined, restrained, or in any way prevented by court order
from continuing to conduct all or any material part of its business affairs,
or if a judgment or other claim becomes a lien or encumbrance upon any
material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any of Borrower's assets by the
United States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, and the
same is not paid within thirty (30) days after Borrower receives notice
thereof, provided that none of the foregoing shall constitute an Event of
Default where such action or event is stayed or an adequate bond has been
posted pending a good faith contest by Borrower (provided that no Credit
Extensions will be required to be made during such cure period).
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is
commenced against Borrower and is not dismissed or stayed within forty-five
(45) days (provided that no Credit Extensions will be made prior to the
dismissal of such Insolvency Proceeding).
8.6 OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in the exercise of
a right by such third party or parties to accelerate the maturity of any
Indebtedness in an amount in excess of One Hundred Thousand and No/100 Dollars
($100,000.00) or that could have a Material Adverse Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 SENIOR DEBT. If an Event of Default (as such term is defined in
that certain Loan and Security Agreement by and between Bank and Borrower,
dated as of February 9, 1998 (the "Senior Loan Agreement")) occurs under the
Senior Loan Agreement;
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8.9 JUDGMENTS. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least One Hundred Thousand
and No/100 Dollars ($100,000.00) shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of ten (10) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or
8.10 MISREPRESENTATIONS. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice
of its election and without demand, do any one or more of the following, all
of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable (provided that upon the occurrence of an Event of Default
described in SECTION 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank:
(c) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble
the Collateral if Bank so requires, and to make the Collateral available to
Bank as Bank may designate. Borrower authorizes Bank to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Bank's determination appears to be
prior or superior to its security interest and to pay all expenses incurred
in connection therewith. With respect to any of Borrower's premises, Borrower
hereby grants Bank a license to enter such premises and to occupy the same,
without charge in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(e) Without notice to Borrower, set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank,
or (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Skip, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Bank is hereby granted a non-exclusive,
royalty-free license or other right, solely pursuant to the provisions of
this SECTION 9.1, to use, without charge, Borrower's labels, patents,
copyrights,
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mask works, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production
of, advertising for sale, and selling any Collateral and, in connection with
Bank's exercise of its rights under this SECTION 9.1, Borrower's rights under
all licenses and all franchise agreements shall inure to Bank's benefit;
(g) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or
on terms, in such manner and at such places (including Borrower's premises)
as Bank determines is commercially reasonable, and apply the proceeds thereof
to the Obligations in whatever manner or order it deems appropriate;
(h) Bank may credit bid and purchase at any public sale,
or at any private sale as permitted by law; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
(j) Bank shall have a non-exclusive, royalty-free
license to use the Intellectual Property Collateral to the extent reasonably
necessary, to permit Bank to exercise its rights and remedies upon the
occurrence of an Event of Default.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the Accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; (f) modify, in its sole
discretion, any intellectual property security agreement entered into between
Borrower and Bank without first obtaining Borrower's approval of or signature to
such modification by amending Exhibit A, Exhibit B, Exhibit C and Exhibit D,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents, Trademarks, Mask Works acquired by Borrower after the
execution hereof or to delete any reference to any right, title or interest in
any Copyrights, Patents, Trademarks, or Mask Works in which Borrower no longer
has or claims any right, title or interest; (g) file, in its sole discretion,
one or more financing or continuation statements and amendments thereto,
relative to any of the Collateral without the signature of Borrower where
permitted by law; and (h) transfer the Intellectual Property Collateral into the
name of Bank or a third party to the extent permitted under the Code provided
Bank may exercise such power of attorney to sign the name of Borrower on any of
the documents described in SECTION 4.2 regardless of whether an Event of Default
has occurred. The appointment of Bank as Borrower's attorney in fact, and each
and every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide Credit Extensions hereunder is terminated.
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<PAGE>
9.3 ACCOUNTS COLLECTION. Upon the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank's security interest in such funds and verify the amount of
such Account. Borrower shall collect all amounts owing to Borrower for Bank,
receive in trust all payments as Bank's trustee, and if requested or required
by Bank, immediately deliver such payments to Bank in their original form as
received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Term Loan as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in SECTION 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so
paid or deposited by Bank shall constitute Bank Expenses, shall be
immediately due and payable, and shall bear interest at the then applicable
rate hereinabove provided, and shall be secured by the Collateral. Any
payments made by Bank shall not constitute an agreement by Bank to make
similar payments in the future or a waiver by Bank of any Event of Default
under this Agreement.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause;
(c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other person whomsoever.
All risk of loss, damage or destruction of the Collateral shall be borne by
Borrower.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies, not expressly set forth
herein, and as provided under the Code, by law, or in equity. No exercise by
Bank of one right or remedy shall be deemed an election, and no waiver by
Bank of any Event of Default on Borrower's part shall be deemed a continuing
waiver. No delay by Bank shall constitute a waiver, election, or acquiescence
by it. No waiver by Bank shall be effective unless made in a written document
signed on behalf of Bank and then shall be effective only in the specific
instance and for the specific purpose for which it was given.
9.7 DEMAND: PROTEST. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, notice of intent to accelerate, notice of
acceleration, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be
liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized
22
<PAGE>
overnight delivery service, by certified mail, postage prepaid, return
receipt requested, or by facsimile to Borrower or to Bank, as the case may
be, at its addresses set forth below:
If to Borrower: ObjectSpace, Inc.
14850 Quorum Drive, Suite 500
Dallas, Texas 75240
Attn: Ms. Deborah A. Thomas
Fax: 972/715-9002
with a copy to:
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, TX 75202
Attn: Paul H. Amiel
Fax: 214/200-0555
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn: Mezzanine Finance, NC472
Fax: 408/969-6501
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE
THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW AS IF PERFORMED ENTIRELY WITHIN THE STATE OF CALIFORNIA BY
CALIFORNIA RESIDENTS. EACH OF BORROWER AND BANK HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF SANTA
CLARA, STATE OF CALIFORNIA.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank
shall have the right without the consent of or notice to Borrower to sell,
transfer, negotiate, or grant participation in all or any part of, or any
interest in Bank's obligations, rights and benefits hereunder.
12.2 INDEMNIFICATION FOR NEGLIGENCE OF BANK. BORROWER SHALL
INDEMNIFY, DEFEND, PROTECT AND HOLD HARMLESS BANK AND ITS DIRECTORS,
OFFICERS,
23
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EMPLOYEES, AND AGENTS AGAINST: (A) ALL OBLIGATIONS, DEMANDS, CLAIMS, AND
LIABILITIES CLAIMED OR ASSERTED BY ANY OTHER PARTY IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS INCLUDING THOSE BASED UPON OR
ARISING FROM THE NEGLIGENCE OF THE BANK; AND (B) ALL LOSSES OR BANK EXPENSES
IN ANY WAY SUFFERED, INCURRED, OR PAID BY BANK AS A RESULT OF OR IN ANY WAY
ARISING OUT OF, FOLLOWING, OR CONSEQUENTIAL TO TRANSACTIONS BETWEEN BANK AND
BORROWER WHETHER UNDER THE LOAN DOCUMENTS, OR OTHERWISE (INCLUDING WITHOUT
LIMITATION ANY AND ALL CLAIMS ARISING UNDER THE COMPREHENSIVE ENVIRONMENTAL
RESPONSE, COMPENSATION AND LIABILITY ACT, AS AMENDED, THE RESOURCE
CONSERVATION AND RECOVERY ACT, AS AMENDED, OR ANY OTHER FEDERAL, STATE OR
LOCAL LAW, AND THE REGULATIONS PROMULGATED THEREUNDER, FOR THE PROTECTION OF
HEALTH AND THE ENIVORNMENT, AND REASONABLE ATTORNEYS' FEES AND EXPENSES),
EXCEPT FOR LOSSES CAUSED BY BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
12.3 TIME OF ESSENCE. Time is of the essence for the performance of
all obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the
purpose of determining the legal enforceability of any specific provision. If
any term, provision, covenant, or condition of this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the provisions shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated and this Agreement shall be
construed as if such invalid, void or unenforceable provision had never been
contained herein.
12.5 AMENDMENTS IN WRITING; INTEGRATION. This Agreement cannot be
amended or terminated except by a writing signed by Borrower and Bank. All
prior agreements, understandings, representations, warranties, and
negotiations between the parties hereto with respect to the subject matter of
this Agreement, if any, are merged into this Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
12.7 SURVIVAL. All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities
described in SECTION 12.2 shall survive until All applicable statute of
limitations periods with respect to actions that may be brought against Bank
have run.
12.8 CONFIDENTIALITY. In handling any confidential information of
Borrower, Bank shall exercise the same degree of care that it exercises with
respect to its own proprietary
24
<PAGE>
information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this
Agreement except that disclosure of such information may be made (i) to the
Subsidiaries or Affiliates of Bank in connection with their present or
prospective business relations with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans, provided that they have entered
into a comparable confidentiality agreement in favor of Borrower and have
delivered a copy to Borrower, (iii) as required by law, regulation, rule or
order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank, and
(v) as Bank may deem appropriate in connection with the exercise of any
remedies hereunder. Confidential information hereunder shall not include
information that either: (a) is in the public domain or in the knowledge or
possession of Bank when disclosed to Bank, or becomes part of the public
domain after disclosure to Bank through no fault of Bank; or (b) is disclosed
to Bank by a third party, provided Bank does not have actual knowledge that
such third party is prohibited from disclosing such information.
12.9 WAIVER OF JURY TRIAL. BANK AND BORROWER EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIMS OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12.10 NOTICE OF ORAL AGREEMENT. THIS AGREEMENT AND THE LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
OBJECTSPACE, INC.
By: /s/ DEBORAH A. THOMAS
------------------------------------
Name: Deborah A. Thomas
----------------------------------
Title: Vice President - Finance
---------------------------------
SILICON VALLEY BANK
By: /s/ LAURITA J. HERNANDEZ
------------------------------------
Name: Laurita J. Hernandez
----------------------------------
Title: Vice President
---------------------------------
26
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EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter
acquired, including, without limitation, all machinery, fixtures, vehicles
(including motor vehicles and trailers), and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, wherever
located;
(b) All inventory, now owned or hereafter acquired,
including, without limitation, all merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished
products including such inventory as is temporarily out of Borrower's custody
or possession or in transit and including any returns upon any accounts or
other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing and any documents of title representing
any of the above;
(c) All contract rights and general intangibles now
owned or hereafter acquired, including, without limitation, goodwill,
trademarks, servicemarks, trade styles, trade names, patents, patent
applications, leases, license agreements, franchise agreements, blueprints,
drawings, purchase orders, customer lists, route lists, infringements, claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, design rights, income tax refunds, payments of insurance and rights
to payment of any kind;
(d) All now existing and hereafter arising
accounts, contract rights, royalties, license rights and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods, the
licensing of technology or the rendering of services by Borrower, whether or
not earned by performance, and any and all credit insurance, guaranties, and
other security therefor, as well as all merchandise returned to or reclaimed
by Borrower;
(e) All documents, cash, deposit accounts,
securities, investment property, letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's
Books relating to the foregoing;
(f) All copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work thereof, whether published or unpublished, now owned or
hereafter acquired; all trade secret rights, including all rights to
unpatented inventions, know-how, operating manuals, license rights and
agreements and confidential information, now owned or hereafter acquired: all
mask work or similar rights available for the protection of semiconductor
chips, now owned or hereafter acquired: all claims for damages by way of any
past, present and future infringement of any of the foregoing; and
(g) All Borrower's Books relating to the foregoing
and any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
1
<PAGE>
CONSULTING AGREEMENT
This Consulting Agreement (this "Agreement") is made and entered into
as of February 1, 2000 (the "Effective Date"), between ObjectSpace, Inc., a
Delaware corporation (the "Company"), and Graham Glass, an individual residing
in the State of Texas (the "Consultant").
BACKGROUND:
A. The Consultant is the former Chief Technology Officer of the
Company, and has extensive knowledge of the business, operations and affairs
of the Company.
B. The Company desires to obtain the services of the Consultant and
the Consultant is willing to furnish his personal services upon the terms and
conditions set forth in this agreement.
AGREEMENTS:
In consideration of the mutual promises set forth in this Agreement,
the parties agree as follows:
1. CONSULTING SERVICES. The Company agrees to retain the Consultant
as an independent contractor and not as an employee of the Company in an
advisory and consultative capacity during the term of this Agreement (the
"Consulting Period"). During the Consulting Period, the Consultant will
consult with the Company and use his efforts to assist the Company by
performing such tasks as designated by the Company's President, from time to
time. The parties anticipate that these tasks will be similar to those tasks
Consultant performed while employed by the Company. Consultant acknowledges
that he will be provided with updated confidential and proprietary information
and trade secrets of the Company during the course of his performing his
services as a Consultant and after the execution of this Agreement.
The obligation of the Consultant to perform services for the Company
will not preclude the Consultant from engaging in any business, employment or
occupation not expressly prohibited by SECTION 7 below, and the Company will
schedule the Consultant's performance of his obligations under this Agreement
to accommodate such other business, employment or occupation. The Consultant
agrees not to enter into contracts on behalf of the Company, or bind the
Company to future commitments without the written approval of the President of
the Company.
2. CONSULTING PERIOD. The Consulting Period will begin on the
Effective Date and will terminate on January 31, 2001 (the "Expiration Date"),
unless otherwise extended or terminated pursuant to the terms of this
Agreement.
3. COMPENSATION. As compensation for services rendered to the
Company, the Company agrees to pay to the Consultant a retainer of 14,583.33
per month, payable on the fifteenth and last business day of each month during
the term (the "Consulting Payment").
<PAGE>
4. PRIMARY LOCATION OF CONSULTANT'S PERFORMANCE; OFFICE. The parties
contemplate that the Consultant's performance hereunder will require the
Consultant's presence primarily in Dallas, Texas.
6. EXPENSES. The Company agrees to pay or reimburse the Consultant
for reasonable expenses incurred or paid by the Consultant, upon presentation
of expense statements or vouchers and such other information as the Company
may reasonably require; PROVIDED that such expenses have been approved, orally
or in writing and in advance, by the Company.
7. INVENTIONS. The Consultant agrees to disclose promptly, completely
and in writing to the Company any invention, discovery, process, design,
diagram, method, apparatus or improvement, whether patentable or not, whether
implemented or not, which the Consultant develops or discovers individually or
with others during the performance of his services for the Company, or using
or influenced by the Company's time, data, facilities or materials
("Inventions"). The Consultant agrees that all Inventions are the Company's
exclusive property, whether or not patent applications are filed on them.
The Consultant agrees to assist the Company at any time, during or
after the Consulting Period, at the Company's expense (including payment for
the Consultant's time at the rate set forth in Section 3 above), in the
preparation, execution and delivery of any disclosures, patent applications or
papers required to obtain patents for Inventions, and in connection with any
other proceedings that may be necessary to enforce the Company's rights in
Inventions against others or to vest title to them in the Company.
The Company and the Consultant acknowledge and agree that any
invention, discovery, process, design, diagram, method, apparatus or
improvement, whether patentable or not, whether implemented or not, that is
developed or discovered by the Consultant independent of the Company, its
agents and employees, and its time, data, facilities or materials, are
expressly excluded from the definition of Inventions, and will be the
exclusive property of the Consultant ("Consultant's Property").
The Company agrees to document in writing each topic discussed with
the Consultant, and Consultant agrees that such document will be conclusive
evidence of the Company's rights in any Inventions relating to or developed
from those discussions or topics.
8. COPYRIGHTS. The Consultant agrees that the Company will be the
copyright proprietor in all copyrightable works created or developed by the
Consultant individually or with other pursuant to the Consulting Services.
The Consultant further agrees, if so requested and at no further
expense to the Company, to execute in writing any acknowledgements or
assignment of copyright ownership of works within this Agreement as may be
necessary for the preservation of the worldwide proprietorship in the Company
of such copyrights.
<PAGE>
9. PROTECTION OF THE COMPANY'S INTEREST.
(a) Non-Compete. During the Consulting Period, the Consultant
agrees that he will not own or have any interest in, or act as a
manager, officer, director, executive, consultant, agent or
representative of, or assist in any way or in any capacity, any
person, firm, association, partnership, corporation, limited
liability company, or other entity that (i) manufactures, distribute
or sells products in competition with the Company's Products (as
hereinafter defined), anywhere within North America, or (ii) solicit
business in competition with the Company from (y) any of the
Company's customers who transacted business with the Company during
the one year period prior to the Effective Date with whom the
Consultant or his direct reports had contact while Consultant was
employed by the Company, or (z) any of the Company's potential
customers with whom the Consultant or his direct reports had contact
while Consultant was employed by the Company. As used herein,
"Company's Products" means the same or similar products or services
as the Company currently provides, including, but not limited to a
line of "middleware" products known as "Voyager" and object-oriented
consulting and training services. The Consultant acknowledges and
agrees that the Company sells the Company's Products throughout North
America and , therefore, the geographic scope of the restriction
contained herein is both reasonable and necessary under the
circumstances.
(b) Non-Solicitation. During the Consulting Period and for a
one year period thereafter, the Consultant will not directly or
indirectly, whether for himself or any other person or entity, employ,
hire, solicit or try to entice away any person who (i) was an employee
or independent contractor of the Company during Consultant's prior
employment with the Company, or (ii) was employed by any of the
Company's customers and with whom the Consultant or his direct reports
had contact while Consultant was employed by the Company.
(c) Confidential Information. The Consultant acknowledges
that the Company's trade secretes, proprietary information and
know-how are valuable, special and unique assets of the Company's
business, access to and knowledge of which are essential to the
performance of the Consulting Services hereunder. The Consultant
agrees to keep confidential, except as the President of the Company
may otherwise consent in writing, and not to disclose, or may any use
of except for the benefit of the Company, at any time either during
or after the Consulting Period, any trade secrets, proprietary
information or know-how of the Company, including, but not limited
to, that which relates to the Company or the Company's research,
services, development, processes, designs, formulas, test data,
purchasing, accounting, customer lists, business plans, marketing
plans and strategies, pricing strategies, internal operating
procedures, written materials provided to third parties by agreement,
implementation techniques of the Company's programs, or other subject
matter pertaining to any business of the Company or any of its
clients, customers, consultants, licensees, or affiliates that the
Consultant may produce, obtain or otherwise acquire during the
Consulting Period, except as provided herein. The Consultant further
agrees not to deliver or allow to be delivered trade secrets,
proprietary information or know-
<PAGE>
how to third parties without the consent of an authorized
representative of the President of the Company.
10. INJUNCTIVE RELIEF. In the event of a breach or threatened breach
by the Consultant of the provisions of SECTION 9 of this Agreement, the
Consultant acknowledges and agrees that such a breach or threatened breach
will cause irreparable injury to the Company for which an adequate remedy is
not available at law. Therefore, the parties hereto agree that the Company
shall be entitled, without the posting of any bond, to an injunction
restraining the Consultant, in whole or in part, from such breach or
threatened breach. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company for such
breach or threatened breach at law or in equity, including the recovery of
damages from the Consultant. The Consultant acknowledges that the possible
restrictions on his activities which may occur as a result of the performance
of his obligations under SECTION 9 of this Agreement are reasonably required
for the protection of the Company and its investments.
11. EMPLOYMENT AGREEMENT. The Consultant acknowledges and agrees that
the terms and conditions of this Agreement do not modify or amend the
continuing obligations of the Consultant under that certain Employment
Agreement dated as of December 30, 1998, between the Company and the
Consultant.
12. PAYMENT DEFAULT; INTEREST. Any past due consulting compensation
shall accrue interest beginning thirty days after such payment becomes past
due at a rate equal to one and one-half percent of such past due amount per
month. Interest shall be calculated on the basis of 30-day months and a
360-day year. In the event the Company fails to pay the consulting fee within
30 days after such fee is due, Consultant may declare to be due all consulting
fees payable during the remainder of the Consulting Period.
13. MISCELLANEOUS.
(a) NOTICES. All notices, requests or other communications
with respect to this Agreement must be in writing and personally
delivered or mailed, postage prepaid, certified or registered mail, or
delivered by a nationally recognized express courier service, charges
prepaid, to the following addresses (or such other addresses as the
parties may specify from time to time in accordance with this
Section):
Company: ObjectSpace, Inc.
14850 Quorum Drive, Suite 500
Dallas, Texas 75240
Attention: David Norris
Fax No: (972) 715-9000
Consultant: Graham Glass
<PAGE>
Any such notice will, when sent in accordance with the preceding
sentence, be deemed to have been given and received (i) on the day
personally delivered, (ii) on the third day following the date mailed,
or (iii) on the first business day following shipment by such courier
service.
(b) ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements between the Company or any affiliate of the Company
and the Consultant regarding the Consultant's services and contains
all of the covenants and agreements between such parties with respect
to such matters. Any modification of this Agreement will be effective
only if it is in writing signed by each of the parties hereto.
(c) WAIVER. The waiver by the Company of a breach of any
provision of this Agreement by the Consultant shall not operate or be
construed as a waiver of any subsequent breach by the Consultant. The
waiver by the Consultant of a breach of any provisions of this
Agreement by the Company shall not operate or be construed as a waiver
of any subsequent breach by the Company.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without
regard to principles of conflicts of laws.
(e) SEVERABILITY. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be
judicially unenforceable or invalid by a court of competent
jurisdiction, in whole or in part, the remaining provisions will
nevertheless be binding, enforceable and in full force and effect.
Furthermore, in lieu of such unenforceable or invalid provision there
will be added automatically as a part of this Agreement a provision as
similar in terms to such provision as may be possible and be legal,
valid and enforceable.
(f) ASSIGNABILITY. The Consultant may not, without the prior
written consent of the Company, assign, transfer, or convey this
Agreement or any interest herein. This Agreement and all rights and
obligations of the Company are binding upon and inure to the benefit
of its successors and assigns.
(g) ATTORNEY'S FEES. In the event that one of the parties
brings suit against the other party based upon or arising out of a
breach of this Agreement, the parties agree that the party who is
successful on the merits, upon final adjudication from which no
further appeal can be taken or is taken within the time allowed by
law, will be entitled to recover his or its reasonable attorney's fees
and expenses from the party that is not successful.
<PAGE>
The undersigned parties have executed this Agreement as of the day and
year first above written.
OBJECTSPACE, INC.
By: /s/ DAVID NORRIS
---------------------------
David Norris, President
/s/ GRAHAM GLASS
----------------------------
Graham Glass
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED. ASTERISKS DENOTE THESE OMISSIONS.
September 30, 1999
Ken Overton
ObjectSpace
14850 Quorum Drive, Suite 500
Dallas, Texas 75240
ATTENTION: Ken Overton
SUBJECT: License Agreement Amendment for Contract / Supplement OEM9700287
("License") License of ObjectSpace Voyager Transactions and
ObjectSpace Voyager ORB Professional
This amendment between the parties includes the following Attachments and
Exhibits
- Certificate of Originality
- Attachment - Escrow Agreement
- Attachment - Amendment to the Description of Licensed Work
- Attachment - ObjectSpace Warranty Terms
This document serves as Amendment No. One to the above subject Agreement which
the parties thereto do mutually agree to amend as follows:
SECTION 1-DEFINITIONS
Licensed Work is amended to further include (1) ObjectSpace Voyager ORB
Professional, in both Object Code and Source Code format, and (2) ObjectSpace
Voyager Transactions in Object Code including any other material described in or
that conforms to the description in the Attachment entitled "Description of
Licensed Work," or that is delivered to Buyer as the Licensed Work, including
(but not limited to) Code, associated documentation, and Externals, and (3)
Error Corrections and Enhancements.
SECTION 2-RESPONSIBILITIES OF SUPPLIER
Object Space will provide the following Deliverables to Buyer as soon as
commercially practical but no later than 30 days from the Effective Date.
a. one complete Set of the ObjectSpace Voyager Transactions
Product in Object Code format as described in the Attachment
entitled "Description of Licensed Work."
b. A completed certificate of originality with the Licensed Work,
and with each Enhancement to the Licensed Work, in the form
specified in the Attachment entitled "Certificate of
Originality."
Buyer may suspend payments to Supplier for the Licensed
Work if Supplier does not provide a properly completed
certificate. Payment will resume after Buyer receives and
accepts the certificate.
SECTION 5-LICENSE GRANTS
Supplier grants the following license provisions:
5.1 All license rights and privileges Supplier previously granted to Buyer for
the ObjectSpace Voyager Product are now additionally granted for the
ObjectSpace Voyager ORB Professional Product and are also granted for
ObjectSpace Voyager Transactions Product, however the grants for the latter
are for object code only.
1
<PAGE>
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS DOCUMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF
THE SECURITIES ACT OF 1933, AS AMENDED. ASTERISKS DENOTE THESE OMISSIONS.
SECTION 6-PAYMENT
a. For the rights and licenses received, Buyer will pay Supplier a prepaid
royalty in the amount of *. The prepaid royalties will be applicable to the
first 3 months of shipments of the Tivoli product codenamed Millennium after the
product has reached GA. After these 3 months, the royalties will be considered
paid in full.
b. Upon shipment of the ObjectSpace Voyager Transactions Product, Supplier will
invoice Buyer in the amount of * payable within 45 days after receipt of the
invoice.
c. Yearly support fee will cover the ObjectSpace Voyager Transactions Product at
no additional charge (note this includes delivery of major and minor
enhancements).
CUSTOMER SUPPORT - Tivoli was provided Support*. Tivoli will use this number
when communicating with ObjectSpace via email to support @objectspace.com < mail
to: [email protected] >. On a weekly basis (Friday afternoon), a summary
list of outstanding issues will be sent to designated Tivoli personnel detailing
the last action taken on a particular issue.
If escalation is required on an incident, the request can be made through the
support email address, the engineer assigned to the incident, or directly to the
Director of Customer Support at ObjectSpace (John Patoskie). Email addresses and
phone numbers are:
Phone: 972.726.4442
Fax: 972.715.9012
Email: *@objectspace.com
ObjectSpace will schedule quarterly engineering meetings with Kendall Locke,
Millennium Program Manager at Tivoli. During these meetings ObjectSpace will
present their current product roadmap. The roadmap will include the content of
enhancements and major releases. Tivoli understands that this roadmap is subject
to change. ObjectSpace will reasonable effort to include Tivoli's requests in
future releases.
RELEASE MECHANISM:
The following login/password has been setup for Tivoli's use:
System: *
Login: *
Password: *
New releases and patches will be placed in this Tivoli accessible directory.
ObjectSpace will ensure that the source code therein could be compiled or
otherwise processed by Tivoli to produce a binary version of those portions of
the Licensed Work, that in all important aspects match the supplied (JAR)
file(s) in this Tivoli accessible directory.
The parties acknowledge that they have read this Amendment, understand it, and
agree to be bound by its terms and conditions. Further, they agree that this
Amendment, its attachments and exhibits and the subject Agreement are the
complete and exclusive statement of the agreement between the parties,
superseding all proposals or other prior agreement, oral or written, and all
other communications between the parties relating to this subject.
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<PAGE>
Please have your authorized representative indicate acceptance thereof by
signing both copies of the Amendment and returning one copy to the attention of
Rhonda Middleton (Contract Admin) at the address below or at fax number (512)
436-1666.
Agreed To: Agreed To:
ObjectSpace Inc. Tivoli Systems Inc.
By: /s/ KENNETH J. OVERTON By: /s/ RHONDA MIDDLETON
---------------------------------- ----------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
Name: KENNETH J. OVERTON Name: RHONDA MIDDLETON
----------------------------- --------------------------
Date: 10-1-99 Date: October 5, 1999
----------------------------- --------------------------
Attachments.
3
<PAGE>
FIRST AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This First Amendment to Loan and Security Agreement (this
"Amendment") is entered into as of March 5, 1998 by and between Silicon Valley
Bank ("Bank") and ObjectSpace, Inc. ("Borrower").
RECITALS
Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of February 9, 1998 (the "Agreement"). Borrower and Bank
desire to make certain changes to the Agreement, subject to the terms of this
Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Bank and Borrower agree that the accounts receivable shown on
Borrower's monthly financial statements, prepared as of the last day of the
calendar month, and delivered to Bank in accordance with the Agreement, shall
not include accrued revenue. Further, the definition of "Quick Assets" is
hereby deleted in its entirety and replaced with the following:
"Quick Assets" means, as of any applicable date, the
consolidated cash, cash equivalents, accounts receivable and
investments with maturities of fewer than ninety (90) days of
Borrower determined in accordance with GAAP. Accrued revenue
will not be classified as an account receivable for purposes
of calculating Quick Assets.
2. Bank and Borrower agree that the Borrowing Base Certificate and
the aged listings of accounts receivable and accounts payable delivered to
Bank by Borrower in accordance with and pursuant to Section 6.3 of the
Agreement will include, as accounts receivable, that accrued revenue for
services that were performed by Borrower during the previous month and billed
within ten (10) days after the last day of the month in which the services
were performed. Therefore, pursuant to Section 6.3 of the Agreement, if no
Overadvance is outstanding, Borrower shall deliver to Bank the Borrowing Base
Certificate, together with aged listings of accounts receivable and accounts
payable within twenty (20) days after the last day of each month; provided,
however, the cut-off for the calculation of accounts receivable and accounts
payable shall be the tenth (10th) day of the month in which the Borrowing Base
Certificate and aged listing of accounts receivable and accounts payable are
delivered to Bank by Borrower.
3. Unless otherwise defined, all capitalized terms in this Amendment
shall be as defined in the Agreement. As amended hereby, the Agreement remains
in full force and effect.
4. Borrower represents and warrants that the Representations and
Warranties contained in the Agreement are true and correct as of the date of
this Amendment.
<PAGE>
5. This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one instrument.
6. As a condition to the effectiveness of this Amendment, Borrower
shall reimburse Bank for the Bank Expenses incurred in connection with this
Amendment.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the first date above written.
OBJECTSPACE, INC.
By: /s/ DEBORAH A. THOMAS
-----------------------------------
Name: Deborah A. Thomas
---------------------------------
Title: Vice President
--------------------------------
SILICON VALLEY BANK
By: /s/ MIKE DRAEKEN
-----------------------------------
Name: Mike Draeken
---------------------------------
Title: Assistant Vice President
--------------------------------
<PAGE>
SECOND AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This Second Amendment to Loan and Security Agreement (this
"Amendment") is entered into as of September 11, 1998, by and between Silicon
Valley Bank ("Bank") and ObjectSpace, Inc. ("Borrower").
RECITALS
Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of February 9, 1998, as amended by that certain First
Amendment to Loan and Security Agreement dated as of March 5, 1998 (the
"Agreement"). Borrower and Bank desire to make certain changes to the
Agreement, subject to the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Bank waives Borrower's obligation to comply with Section 6.7 of
the Agreement for the month ending May 31, 1998 only. Such waiver does not
constitute a waiver (i) of compliance with that section as of any other date,
(ii) of any other failure by Borrower to comply with the Agreement or any
other Events of Default, now existing or hereafter arising, or (iii) Bank's
right to require compliance at all times with the terms and conditions of the
Agreement. Bank reserves all rights under the Agreement and under applicable
law.
2. Bank waives Borrower's obligation to comply with Section 6.9 of
the Agreement for the month ending May 31, 1998 only. Such waiver does not
constitute a waiver (i) of compliance with that section as of any other date,
(ii) of any other failure by Borrower to comply with the Agreement or any
other Events of Default, now existing or hereafter arising, or (iii) Bank's
right to require compliance at all times with the terms and conditions of the
Agreement. Bank reserves all rights under the Agreement and under applicable
law.
3. Each of Bank and Borrower agree and acknowledge that the
Overadvance portion of the Committed Revolving Line has matured and that all
Overadvance principal and interest thereon have been paid in full by the
Borrower and that Bank's commitment to make any Overadvance is and was
satisfied and terminated in full as of the Overadvance Maturity Date. Bank
has no existing, ongoing or continuing obligation of any kind to make any
Overadvance to Borrower.
4. Section 6.7 of the Agreement is hereby deleted in its entirety
and replaced with the following:
6.7 QUICK RATIO. Borrower shall maintain, as of the
last day of each calendar month, a ratio of Quick Assets to
Current Liabilities less deferred maintenance revenue of at
least 1.50 to 1.0.
<PAGE>
5. Section 6.9 of the Agreement is hereby deleted in its entirety and
replaced with the following:
6.9 TANGIBLE NET WORTH. Borrower shall maintain, as
of the last day of each calendar month, a Tangible Net Worth of
not less than Three Million and No/100 Dollars ($3,000,000.00)
("Minimum Tangible Net Worth") which Minimum Tangible Net Worth
shall, automatically and without any further action by Bank or
Borrower, be increased by twenty-five percent (25%) of the amount
of equity received by Borrower in connection with any issuance of
its securities or otherwise.
6. Section 6.10(c) of the Agreement is hereby deleted in its entirety
and replaced with the following:
(c) Borrower shall (i) protect, defend and maintain the validity
and enforceability of the Trademarks, Patents, Copyrights, and
Mask Works and (ii) use commercially reasonable efforts to detect
infringements of the Trademarks, Patents, Copyrights and Mask
Works and promptly advise Bank in writing of material
infringements detected.
7. Section 7.1 of the Agreement is hereby deleted in its entirety and
replaced with the following:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or
otherwise dispose of (collectively, a "Transfer"), or permit
any of its Subsidiaries to Transfer, all or any part of its
business or property, other than Transfers: (i) of inventory in
the ordinary course of business, (ii) of licenses and similar
arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; (iii) that
constitute payment of normal and usual operating expenses in the
ordinary course of business; or (iv) of worn-out or obsolete
Equipment.
8. Unless otherwise defined herein, all capitalized terms in this
Amendment shall be as defined in the Agreement. As amended hereby, the Agreement
remains in full force and effect.
9. Borrower represents and warrants that the representations and
warranties contained in the Agreement are true and correct as of the date of
this Amendment and Borrower acknowledges that Bank is relying on the
representation and warranty of Borrower set forth in this Section 9 in entering
into this Amendment.
10. This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one instrument.
11. As a condition to the effectiveness of this Amendment, Borrower
shall reimburse Bank for all Bank Expenses incurred in connection with this
Amendment.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the first date above written.
OBJECTSPACE, INC.
By: /s/ DEBORAH A. THOMAS
----------------------------------------------
Name: Deborah A. Thomas
-------------------------------------------
Title: Vice President
------------------------------------------
SILICON VALLEY BANK
By: /s/ MICHAEL E. DRAEKEN
----------------------------------------------
Michael E. Draeken, Assistant Vice President
3
