<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 2000
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SYNQUEST, INC.
(Exact name of registrant as specified in its charter)
------------------------------
<TABLE>
<S> <C> <C>
GEORGIA 7372 14-1683872
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
3500 PARKWAY LANE
SUITE 555
NORCROSS, GEORGIA 30092
(770) 325-2000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
JOSEPH TRINO
CHIEF EXECUTIVE OFFICER
SYNQUEST, INC.
3500 PARKWAY LANE
SUITE 555
NORCROSS, GEORGIA 30092
(770) 325-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
STACEY K. GEER, ESQ. JULIE M. ALLEN, ESQ.
KING & SPALDING PROSKAUER ROSE LLP
191 PEACHTREE STREET 1585 BROADWAY
ATLANTA, GEORGIA 30303-1763 NEW YORK, NEW YORK 10036
(404) 572-4600 (212) 969-3000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If any 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, as amended (the "Securities Act"), 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,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED OFFERING PRICE(1) FEE
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<S> <C> <C>
Common Stock, par value $.01 per share.............. $75,000,000 $19,800
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</TABLE>
(1) Includes shares subject to the underwriters' over-allotment option.
Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
------------------------------
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 OR UNTIL THIS 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> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MAY , 2000
PROSPECTUS
SHARES
(SYNQUEST LOGO)
COMMON STOCK
------------------------------
This is an initial public offering of shares of our common stock.
We are selling all of the shares of common stock offered under this prospectus.
There is currently no public market for our shares. The initial public offering
price of our common stock is expected to be between $ and
$ per share. We will apply to list our common stock on The Nasdaq
National Market under the symbol "SYNQ."
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5 TO READ ABOUT RISKS YOU SHOULD CONSIDER BEFORE BUYING SHARES
OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------------
<TABLE>
<CAPTION>
PER
SHARE TOTAL
------- -------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to us............................ $ $
</TABLE>
------------------------------
We have granted the underwriters a 30-day option to purchase up to an additional
shares of common stock from us at the initial public offering price less
the underwriting discount. The underwriters expect to deliver the shares on
, 2000.
------------------------------
BEAR, STEARNS & CO. INC.
J.P. MORGAN & CO.
WIT SOUNDVIEW
The date of this prospectus is , 2000.
<PAGE> 3
PROSPECTUS SUMMARY
This summary highlights information found in greater detail elsewhere in
this prospectus. In addition to this summary, we urge you to read the entire
prospectus carefully, especially the risks of investing in our common stock
discussed under "Risk Factors" and the financial statements and the notes to
those statements, before you decide to buy our common stock.
SYNQUEST, INC.
OUR BUSINESS
We provide advanced e-business solutions designed to optimize supply chain
performance. Our SynQuest One2One suite of software solutions enables our
clients to fulfill each order they receive in the most profitable manner by
analyzing relevant variables that affect the entire supply chain, whether
traditional or web-based, including materials supply, transportation,
manufacturing, distribution and customer service. By improving supply chain
processes, our solutions enable our clients to improve their financial and
operational performance, increase market share and enhance customer service. We
target traditional bricks and mortar companies with annual revenues between $100
million and $2 billion, web-based companies and market exchanges. As of April
30, 2000, we had implemented our solutions for over 100 customers. Our clients
include The B.F. Goodrich Company, Ford Motor Company, Herman Miller, Inc.,
Nordstrom.com, Pioneer Electronic Corp., Reynolds Metals Company,
STMicroelectronics, and Titleist and Footjoy Worldwide.
The key features that differentiate our solutions are as follows:
Financial optimization. Each product in our SynQuest One2One suite of
solutions is designed to achieve a single goal: financial optimization. This
means that our solutions enable our clients to determine the extent to which a
potential order will be profitable before they accept it, and to fulfill each
order they accept in the manner that maximizes financial return from that order.
As a result, our clients typically recover their investments in our products
quickly and achieve substantial ongoing financial benefits.
Real-time management. Our solutions plan, coordinate and control each
order to facilitate fast and reliable fulfillment. After analyzing all relevant
variables and selecting the financially optimal means of fulfillment, our
software creates a time-stamped operational plan for fulfillment of each order
that is disseminated for execution throughout the supply chain. As execution
occurs, our software analyzes the events of the supply chain in real-time,
publishes the impact of the events on order delivery, and re-plans as necessary
to keep the orders on schedule. Our solutions analyze real-time changes in
fulfillment constraints and re-determine the optimal means of fulfillment. By
improving the efficiencies of the supply chain, our solutions often allow our
clients to fulfill more orders with the same resources.
Turnkey solutions. Our turnkey solutions are easy to deploy, interface
readily with most existing enterprise systems and e-commerce platforms, and
require little or no custom programming to implement. After easily linking to
our clients' systems, our solutions use customer supply chain data to generate
financially optimal fulfillment plans. In addition, we believe the turnkey
nature of our solutions is a competitive advantage because we can demonstrate,
with little advance preparation and set-up, a prospective client's ability to
realize significant bottom-line savings and incremental revenue opportunities
with our solutions.
Comprehensive, high-performance solutions. Our solutions are comprehensive
and operate robustly in a variety of environments. Our solutions cover the
entire array of supply chain issues that arise from both short, vertical supply
chains contained largely within a single enterprise to distributed, complex
supply chains crossing numerous enterprises. Our products are built to address
the performance requirements of the largest, most complex supply chains and the
demands of business-to-business e-commerce, and to operate in mission-critical
situations. As a result, our products are well suited for the most traditional
industrial companies as well as newer web-based businesses and market exchanges.
1
<PAGE> 4
OUR MARKET OPPORTUNITY
The supply chain management software and services market is projected to
grow at a 47% compounded annual rate from $3.7 billion in 1999 to $25.7 billion
by 2004, according to AMR Research, Inc., an independent market research
company. In addition, we expect that as business-to-business e-commerce
develops, supply chain management solutions will gain share in e-commerce
application budgets. We believe that this will further increase the size of the
potential market for supply chain management solutions. The e-commerce
applications market is estimated to grow at a 65% compounded annual rate from
$1.7 billion in 1999 to $20.0 billion by 2004, according to AMR Research.
We believe that several trends will drive the projected growth in the
e-business solutions market. First, competitive pressures arising from the
Internet will continue to force businesses to extract efficiencies from their
supply chains. Second, the projected rapid growth in business-to-business
e-commerce will necessitate e-business solutions that can support high-volume
activity. Third, as customers increasingly demand products that are tailored to
their specific requirements and that are delivered rapidly, businesses will seek
solutions that enable their supply chains to produce mass customized goods in
less time. Fourth, the rapidly growing class of market exchanges will require
supply chain management solutions as they attempt to position themselves at the
center of business-to-business e-commerce. Finally, increasing market
globalization is creating more diffuse, complex supply chains.
OUR STRATEGY
Our strategy to become the leading provider of advanced e-business
solutions that optimize supply chain performance consists of the following key
elements:
- Increase our brand awareness through new marketing campaigns and
additional strategic partnerships;
- Expand and deepen our market coverage by increasing our direct sales
force and developing strategic alliances to support indirect sales
activities;
- Broaden and enhance our suite of products to increase their
competitiveness;
- Target additional vertical markets by hiring industry experts and
expanding our products to address the specific challenges presented by
each new market; and
- Pursue strategic acquisition opportunities to accelerate any of the
foregoing elements of our strategy.
OUR OFFICES
Our principal executive offices are located at 3500 Parkway Lane, Suite
555, Norcross, Georgia 30092, and our telephone number at that address is (770)
325-2000. Our website address is www.synquest.com. Information contained on our
website is not incorporated by reference into this prospectus and should not be
considered a part of this prospectus. We were incorporated as Factory Automation
& Computer Technologies, Inc. in New York in July 1986. In 1997, we were
reincorporated in Georgia under the name SynQuest, Inc.
SynQuest(R) is a registered trademark of SynQuest. This prospectus also
includes trademarks, service marks, trade names and references to intellectual
property owned by other companies.
2
<PAGE> 5
THE OFFERING
<TABLE>
<S> <C>
Common stock offered......................... shares
Common stock outstanding after this shares
offering...................................
Use of proceeds.............................. We intend to use approximately $ million
of the net proceeds of this offering to repay
outstanding indebtedness and the balance for
general corporate purposes. We may also use a
portion of the proceeds to expand our
business through strategic alliances and
acquisitions.
Proposed Nasdaq National Market symbol....... SYNQ
</TABLE>
- ---------------
The number of shares of common stock outstanding after this offering is
based on shares of our common stock outstanding as of April 30, 2000. This
calculation:
- includes shares of common stock to be issued upon conversion
of all of our outstanding redeemable preferred stock, plus accrued and
unpaid dividends as of , 2000, payable in common stock,
assuming an initial offering price of $ per share, less
underwriting discounts and commissions, at the completion of this
offering;
- includes shares of common stock to be issued at the
completion of this offering upon conversion of our outstanding
subordinated promissory notes in the aggregate principal amount of $15.0
million, plus accrued interest as of , 2000, held by E.M.
Warburg, Pincus & Co., our principal shareholder, assuming an initial
offering price of $ per share, less underwriting discounts
and commissions;
- includes shares of common stock to be issued upon the
exercise of warrants held by E.M. Warburg, Pincus, which E.M. Warburg,
Pincus has agreed to exercise upon completion of this offering, assuming
an initial offering price of $ per share, less underwriting discounts
and commissions;
- excludes 4,043,180 shares of common stock to be issued upon the exercise
of options outstanding at April 30, 2000, that have a weighted average
exercise price of $2.65 per share; and
- excludes 400,000 shares of common stock to be issued upon the exercise of
warrants outstanding at May 19, 2000, except those held by E.M. Warburg,
Pincus, that have a weighted average exercise price of $8.00 per share.
CONVENTIONS WHICH APPLY TO THIS PROSPECTUS
Unless we indicate otherwise, all information in this prospectus reflects
the following:
- the conversion of all of our outstanding redeemable preferred stock, plus
accrued and unpaid dividends as of , 2000, payable in common
stock, into shares of our common stock upon completion of
this offering, assuming an initial offering price of $ per share,
less underwriting discounts and commissions;
- the conversion of our outstanding subordinated promissory notes in the
aggregate principal amount of $15.0 million, plus accrued interest as of
April 30, 2000, held by E.M. Warburg, Pincus into shares
of our common stock, assuming an initial offering price of
per share, less underwriting discounts and commissions;
- the exercise by E.M. Warburg, Pincus of warrants to purchase
shares of common stock upon completion of this offering, assuming an
initial offering price of per share, less underwriting
discounts and commissions; and
- no exercise by the underwriters of their over-allotment option to
purchase up to additional shares of common stock.
3
<PAGE> 6
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following tables set forth summary financial data for our company. You
should read this information together with the financial statements and the
notes to those statements appearing elsewhere in this prospectus and the
information under "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
------------------------------------- ------------------------
1997 1998 1999 1999 2000
---------- ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Software license fees...................... $ 4,333 $ 10,392 $ 10,521 $ 6,993 $ 7,721
Services................................... 3,887 8,014 12,760 9,246 9,429
---------- ---------- ----------- ---------- -----------
Total revenue....................... 8,220 18,406 23,281 16,239 17,150
Operating expenses:
Cost of license fees....................... 11 524 576 477 415
Cost of services........................... 4,419 6,714 9,308 6,535 5,869
Research and development................... 6,320 9,368 10,179 7,614 7,689
Purchased in-process research and
development.............................. 2,083 -- -- -- --
Sales and marketing........................ 6,344 9,485 13,731 10,248 10,077
General and administrative................. 5,263 4,357 5,603 3,889 4,389
---------- ---------- ----------- ---------- -----------
Total operating expenses............ 24,440 30,448 39,397 28,763 28,439
---------- ---------- ----------- ---------- -----------
Operating loss............................... (16,220) (12,042) (16,116) (12,524) (11,289)
Other income (expense)....................... (1,507) (3,487) (3,444) (3,032) (1,913)
---------- ---------- ----------- ---------- -----------
Loss before income taxes..................... (17,727) (15,529) (19,560) (15,556) (13,202)
---------- ---------- ----------- ---------- -----------
Net loss............................ (17,727) (15,529) (19,560) (15,556) (13,202)
Accretion of redeemable preferred stock...... (1,309) (1,833) (2,534) (1,607) (2,766)
---------- ---------- ----------- ---------- -----------
Net loss attributable to common stock........ $ (19,036) $ (17,362) $ (22,094) $ (17,163) $ (15,968)
========== ========== =========== ========== ===========
Basic and diluted net loss per common
share...................................... $ (16.02) $ (13.98) $ (15.21) $ (11.85) $ (10.52)
========== ========== =========== ========== ===========
Weighted average number of shares used in
computing basic and diluted net loss per
common share............................... 1,188,204 1,242,381 1,452,363 1,447,808 1,517,734
Pro forma basic and diluted net loss per
share (unaudited).......................... $ (1.83) $ (0.91)
=========== ===========
Weighted average number of shares used in
computing pro forma basic and diluted net
loss per share (unaudited)................. 10,690,338 14,513,090
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
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PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 193
Working capital............................................. (35,655)
Total assets................................................ 6,898
Long-term debt, less current portion........................ 129
Redeemable preferred stock.................................. 60,022
Shareholders' deficit....................................... (93,366)
</TABLE>
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(1) Reflects the conversion of all of our outstanding redeemable preferred stock
into shares of common stock.
(2) Reflects (a) the conversion of all of our outstanding redeemable preferred
stock, plus accrued and unpaid dividends as of , 2000, payable in
common stock, into shares of our common stock, assuming an initial
offering price of $ per share, less underwriting discounts and
commissions, upon completion of this offering, (b) the conversion of our
outstanding subordinated promissory notes in the aggregate principal amount
of $15.0 million, plus accrued interest as of April 30, 2000, held by E. M.
Warburg, Pincus into shares of our common stock, assuming an initial
offering price of $ per share, less underwriting discounts and
commissions, and (c) the exercise by E. M. Warburg, Pincus of warrants to
purchase shares of common stock upon completion of this offering,
assuming an initial offering price of $ per share, less underwriting
discounts and commissions.
(3) As adjusted to reflect the sale of shares of our common stock in this
offering at an assumed initial public offering price of $ per share,
after deducting underwriting discounts and commissions and estimated
offering expenses payable by us.
4
<PAGE> 7
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following information about these risks, together
with the other information contained in this prospectus, before you decide
whether to buy our common stock. If any of the following risks actually occur,
our business, results of operation and financial condition would likely suffer.
In any such case, the market price of our common stock could decline and you may
lose all or part of the money you paid to buy our common stock.
The risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties, including those not presently known to us or
that we currently deem immaterial, may also result in decreased revenues,
increased expenses or other events which could result in a decline in the market
price of our common stock.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE HAVE A LIMITED OPERATING HISTORY IN THE E-COMMERCE MARKET, IT IS
DIFFICULT TO EVALUATE OUR BUSINESS AND PROSPECTS.
Although we were founded in July 1986, most of the products in our SynQuest
One2One suite of solutions were introduced in the last 18 months. You should
consider the risks and difficulties we may encounter as an early stage company
in the new and rapidly evolving e-commerce market. The recent introduction of
our products in the e-commerce market may make it difficult for you to evaluate
the success of our business to date and to assess future viability. We cannot be
certain that our business strategy will be successful. These risks apply
particularly to us because the supply chain management business is a rapidly
evolving market characterized by technological advances. The uncertainty of our
future performance increases the risk that the value of your investment will
decline.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO EXPERIENCE LOSSES IN THE FUTURE, WHICH
COULD RESULT IN A DECLINE IN THE MARKET PRICE OF OUR COMMON STOCK.
We incurred net losses of $13.2 million for the nine months ended March 31,
2000, $19.6 million for the fiscal year ended June 30, 1999, $15.5 million for
the fiscal year ended June 30, 1998 and $17.7 million for the fiscal year ended
June 30, 1997. As of March 31, 2000, we had an accumulated deficit of $97.7
million. We have not been profitable on a quarterly or annual basis, and we
anticipate that we will incur net losses for the foreseeable future. We expect
to continue to incur significant product development, sales and marketing and
administrative expenses. As a result, we will need to generate significant
quarterly revenues to achieve and maintain profitability. Our business strategy
may not be successful, and we may not generate significant revenues or achieve
profitability. Any failure to significantly increase our revenues as we
implement our product and distribution strategies would also harm our ability to
achieve and maintain profitability. If we do achieve profitability in the
future, we may not be able to sustain or increase profitability on a quarterly
or annual basis. Any failure to achieve or maintain profitability could
negatively impact the market price of our common stock.
OUR QUARTERLY RESULTS ARE SUBJECT TO FLUCTUATION, AND WE MAY FAIL TO MEET
SHAREHOLDER EXPECTATIONS, WHICH MAY CAUSE OUR STOCK PRICE TO DECLINE.
Historically, we have derived a substantial portion of our revenues from
large individual license transactions, which can cause substantial variances in
quarterly license fee revenue. In addition, we typically enter into a
significant portion of our new license contracts in the last two weeks of each
quarter, which makes us susceptible to shortfalls in revenues without
significant advance warning if expected orders fail to materialize. We
anticipate similar licensing patterns in the future. Delivery lead times for our
5
<PAGE> 8
products are very short and, consequently, a significant portion of our license
fee revenue in each quarter results from orders received in that quarter. As a
result, revenues for future quarters are difficult to forecast. Further, we have
generally realized lower revenues in our first and second fiscal quarters than
in our third and fourth fiscal quarters. We believe that these fluctuations are
caused primarily by customer budgeting and purchasing patterns and by our sales
commission policies, which compensate personnel for meeting or exceeding annual
and other performance quotas.
A substantial portion of our operating expense level, particularly
personnel and facilities costs, are based, in part, on our expectations as to
future revenue and are relatively fixed in advance of any particular quarter. As
a result, if revenues are below expectations, our quarterly operating results
and financial condition will be adversely affected. Our quarterly operating
results may fail to meet expectations due to many factors, including:
- the volume of orders;
- competitor activities;
- changes in strategic relationships;
- customer budget constraints;
- the mix of products sold; and
- general economic conditions.
If any of these or other factors occur, we could fail to meet expectations for
revenue generation, and our stock price could be materially adversely affected.
THE BUSINESS-TO-BUSINESS E-COMMERCE AND SUPPLY CHAIN MANAGEMENT SOLUTIONS
INDUSTRIES ARE EXPERIENCING RAPID TECHNOLOGICAL CHANGE AND EVOLVING STANDARDS,
AND IF WE DO NOT EFFECTIVELY RESPOND TO THESE CHANGES, OUR REVENUES MAY FAIL TO
GROW OR DECLINE.
The market for our solutions is characterized by rapidly changing
technology and evolving industry standards. Our success will depend to a
substantial degree upon the continued evolution of the business-to-business
e-commerce market. The development of advanced new technologies and enhancements
is a complex and uncertain process requiring high levels of innovation, as well
as the accurate anticipation of technological and market trends. The
business-to-business e-commerce industry may not develop as anticipated or, if
the industry changes more rapidly than we expect, we may not be able to
identify, develop, market or support new technologies or enhancements that will
gain market acceptance. Consequently, our products may be superseded. Further,
we may be unable to respond effectively to technological changes and emerging
industry standards.
Our future results depend on continued market acceptance of supply chain
management software and services as well as our ability to continue to adapt and
modify this software to meet our customers' changing needs. Adoption of supply
chain management software solutions, particularly by those businesses that
historically have relied on traditional means of commerce and communication,
will require a broad acceptance of new and substantially different methods of
conducting business and exchanging information. These products and services
introduce new tools in managing and communicating across their supply chains
and, as a result, we may have to dedicate intensive marketing and sales efforts
to educate prospective customers on the uses and advantages of our products to
generate demand. Any reduction in demand or increase in competition in the
market for supply chain management software products could have a material
adverse effect on our ability to sell our solutions.
6
<PAGE> 9
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO RAPIDLY ADAPT TO NEW PRICING
MODELS.
Due to customer demand, many technology companies have recently shifted
from a license fee model to a subscription pricing model. Supply chain
management companies generally have not moved towards subscription pricing. If
potential clients begin to require subscription pricing and we are not able to
quickly accommodate them, our revenues could be adversely affected. Further, a
shift to subscription pricing could adversely affect the timing of our
recognition of revenues. The success of a subscription pricing model would
depend on our ability to set subscription fees for our solutions at rates that
will allow us to achieve profitability.
Market exchanges typically charge for their services on a per-transaction
basis. Accordingly, market exchanges may require that we charge them for the use
of our solutions on a per-transaction basis. The success of a per-transaction
pricing model would depend on our ability to set fees for our solutions at rates
that will allow us to achieve profitability. If we are not able to quickly
accommodate the clients who demand a per-transaction pricing model, our revenues
could be adversely affected.
OUR BUSINESS MAY BE HARMED IF PAST DUE ACCOUNTS RECEIVABLE INCREASE.
We recently have experienced an increase in the percentage of past due
accounts receivable. As of March 31, 2000, approximately $1.6 million of our
accounts receivable were 120 days or more past due out of our total accounts
receivable of $5.4 million. Since older accounts receivable have a higher
probability of never being collected, we have established a reserve for doubtful
or uncollectible accounts of $1.5 million as of March 31, 2000. However, a
reserve for doubtful accounts is only an estimate of collectibility. If our
actual experience in collecting existing or future accounts receivable is more
difficult than expected, we may be required to record a provision for additional
reserves or increase the rate at which we reserve.
WE ARE SUBJECT TO INTENSE COMPETITION THAT COULD HARM OUR BUSINESS.
The market for business applications software is highly competitive, and a
number of products directly compete with the SynQuest One2One suite of software
solutions. We compete primarily with supply chain planning vendors, including i2
and Manugistics; enterprise resource planning vendors, such as SAP, PeopleSoft,
Baan, Oracle and J.D. Edwards; traditional software vendors and web-based
solutions vendors. Some of our current and potential competitors have greater
name recognition, significantly greater financial, marketing, technical and
other resources, a broader range of products, and a larger established base of
customers than we do. These factors may enable them to adapt more quickly to new
or emerging technologies and changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products. In
addition, other companies could develop new products or incorporate additional
functionality into their existing products, directly competing with our products
or making them obsolete. Furthermore, cooperative relationships among our
competitors could increase the ability of their products to address the supply
chain management needs of our prospective customers and could enable them to
rapidly acquire significant market share. We may not compete successfully
against existing or new competitors, which may result in loss of market share.
WE MAY BE UNABLE TO CONTINUE TO ATTRACT QUALIFIED PERSONNEL TO SUPPORT THE
EXPANSION OF OUR BUSINESS.
Our growth depends on our ability to continue to attract qualified
personnel. Specifically, we must increase the size and scope of our direct sales
force, both domestically and internationally. In fiscal 1999, we licensed
substantially all of our products through our direct sales organization which,
as of April 30, 2000, consisted of 25 direct sales representatives. Moreover, we
believe that the complexity of our products and the potential for large-scale
deployment by our customers could require a number of highly trained service and
support personnel. As of April 30, 2000, our service and support organizations
included 43 individuals. We will also need to hire additional qualified
financial and accounting personnel to manage our growth. Competition for sales
representatives, service personnel, accounting and financial personnel and
7
<PAGE> 10
other skilled employees is intense, and we may fail to attract, assimilate or
retain qualified personnel in the future. If we are unable to hire according to
our needs, our business and expansion plans could be seriously harmed.
WE ARE DEPENDENT UPON OUR KEY PERSONNEL, AND THE LOSS OF THESE PERSONNEL COULD
DISRUPT OUR OPERATIONS AND RESULT IN REDUCED REVENUE.
Our success depends on the continued services and performance of our senior
management staff, in particular, Joseph Trino, our Chief Executive Officer,
Timothy Harvey, our President and Chief Operating Officer, and John Bartels, our
Executive Vice President, Finance and Administration. The loss of the services
of one or more of our executive officers or key employees could seriously impair
our ability to operate and achieve our objectives, which could reduce our
revenue. We do not maintain key person life insurance. We cannot guarantee that
we will be able to retain our key personnel.
WE ARE DEPENDENT UPON OUR RELATIONSHIPS WITH ALLIANCE PARTNERS FOR LEAD
GENERATION.
Our future success is dependent upon establishing and expanding
relationships with alliance partners, including systems integrators, and other
software vendors. New customer leads generated through our relationship with
J.D. Edwards accounted for approximately 30% of our license fees revenue during
the nine months ended March 31, 2000, approximately 23% during fiscal 1999 and
approximately 20% during fiscal 1998. A decrease in the market demand for the
products of our partners could reduce our revenues. We may not be able to market
our products effectively through our established partners. Furthermore, our
arrangements with these organizations are not exclusive and, in many cases, may
be terminated by either party for any reason without any advance notice or
penalties. In addition, our alliance partners may not continue their involvement
with us and our products. We may not be able to attract additional distribution
partners on mutually agreeable terms. Our likely strategic partners are actual
or potential competitors, which may impair the viability of these relationships.
Some enterprise resource planning system vendors have acquired supply chain
management software companies, products or functionality or have announced plans
to develop new products or incorporate additional functionality into their
current products that would compete with our products.
WE MAY HAVE DIFFICULTY MANAGING OUR INTERNAL GROWTH, WHICH COULD LIMIT OUR
ABILITY TO EFFECTIVELY IMPLEMENT OUR BUSINESS STRATEGIES.
We recently experienced a period of rapid growth in revenues that placed
significant strains upon our management systems and resources. Our ability to
compete effectively and to manage future growth, if any, requires us to continue
to improve our financial and management controls, reporting systems and
procedures on a timely basis. To expand our business, we must increase the total
number of employees and train and manage our employee work force in a timely and
effective manner. If we are unable to hire according to our needs, we may be
unable to compete for new projects or complete existing projects satisfactorily.
THE SALES CYCLES FOR OUR PRODUCTS ARE LENGTHY, WHICH MAKES SALES DIFFICULT TO
PREDICT.
Our sales cycles vary by customer and are generally from six to nine
months. Larger transactions typically have a longer sales cycle than smaller
transactions. Because the licensing of our products generally involves a
significant capital expenditure by the customer, our sales process is subject to
lengthy approval processes and delays. We often devote significant time and
resources to a prospective customer, including costs associated with multiple
site visits, product demonstrations and feasibility studies, without any
assurance that the prospective customer will decide to license our products.
Operating results for a given period would suffer if we fail to close the larger
transactions that we targeted for that period.
8
<PAGE> 11
IF WE DO NOT SUCCESSFULLY EXPAND OUR PRODUCT LINE, WE COULD LOSE MARKET SHARE.
As enterprises increasingly focus on decision support for supply chain
management challenges, they are requiring greater levels of functionality and
broader product offerings from their application software vendors. Our future
success will depend upon our ability to continue to enhance our current product
line, develop and introduce new products that keep pace with technological
developments, satisfy increasingly sophisticated customer requirements and
achieve market acceptance. We may not successfully develop and market product
enhancements or new products on a timely and cost-effective basis. Any new
products we introduce may not achieve market acceptance. Our failure to
successfully develop and market product enhancements or new products could cause
our market share to fail to grow or decline.
WE RELY HEAVILY ON LICENSE REVENUES FROM A SINGLE PRODUCT, AND IF THE DEMAND FOR
THAT PRODUCT DECREASES, OUR REVENUES WILL BE REDUCED.
A substantial portion of our license revenues are derived from Virtual
Production Engine and predecessor products. We derived 63% of our license
revenues from licenses of Virtual Production Engine and predecessor products
during the nine months ended March 31, 2000, 89% during fiscal 1999 and 91%
during fiscal 1998. We expect that revenues from this product will continue to
account for a significant portion of our revenues for the foreseeable future. As
a result, our future operating results are dependent upon continued market
acceptance of Virtual Production Engine and enhancements to that product. This
product may not achieve continued market acceptance. A decline in demand for, or
market acceptance of, Virtual Production Engine as a result of competition,
technological change or other factors would have a material adverse effect on
our business, operating results and financial condition.
OUR INTERNATIONAL OPERATIONS, WHICH WE PLAN TO EXPAND, ARE SUBJECT TO HEIGHTENED
RISKS THAT COULD HARM OUR BUSINESS.
We currently conduct business in a number of foreign countries, and we plan
to conduct business in additional regions outside of the United States.
Conducting business outside of the United States may require significant
management attention and financial resources and could adversely affect our
operating margins. We may not be able to generate, maintain or increase demand
for our products in new geographic markets. During fiscal 1999, we derived 18%
of our license revenues from customers outside North America. We anticipate that
the proportion of our revenues denominated in foreign currencies will increase.
A decrease in the value of foreign currencies relative to the U.S. dollar could
result in losses from foreign currency translations. In international markets
where we set prices in U.S. dollars, currency fluctuations could make our
products and services less price competitive. In addition, our international
sales and operations could be adversely affected by the imposition of government
controls, changes in financial currencies, such as the unified currency known as
the European Monetary Unit, political and economic instability, difficulties in
staffing and managing international operations and general economic and currency
exchange rate conditions in foreign countries.
OUR PRODUCTS MAY HAVE DEFECTS, WHICH MAY NEGATIVELY AFFECT THE LEVEL OF CUSTOMER
SATISFACTION WITH OUR PRODUCTS AND DAMAGE OUR BUSINESS AND REPUTATION.
Our products are complex and might contain undetected software errors or
failures when new versions are released. Despite testing by us and by current
and prospective customers, we may find errors in existing products, new products
or product enhancements after commercial release. Such errors may result in loss
or delay of market acceptance, lawsuits, or damage to our reputation. Contract
provisions in license agreements limiting exposure and our general liability
insurance may be inadequate to protect us from all liabilities.
9
<PAGE> 12
WE MAY FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY
RIGHTS, AND WE COULD FACE CLAIMS OF INTELLECTUAL PROPRIETY INFRINGEMENT.
Our software is proprietary and is protected by trade secret, copyright and
trademark laws, license agreements, confidentiality agreements with employees,
nondisclosure and other contractual requirements imposed on our customers,
consulting partners and others. We cannot guarantee that these protections will
adequately protect our proprietary rights or that our competitors will not
independently develop products that are substantially equivalent or superior to
our products. In addition, the laws of certain countries in which our products
are or may be licensed do not protect our products and intellectual property
rights to the same extent as the laws of the United States. As the number of
products and competitors continues to grow, the functionality of products in
different industry segments is increasingly overlapping. As a result, we
increasingly may be subject to claims of intellectual property infringement.
Although we are not aware that any of our products infringe upon the proprietary
rights of third parties, third parties may make such claims about our current or
future products. Any infringement claims, with or without merit, could be
time-consuming, result in costly litigation or damages, cause product shipment
delays or the loss or deferral of sales, or require us to enter into royalty or
licensing agreements. If we enter into royalty or licensing agreements in
settlement of any litigation or claims, these agreements may not be on terms
acceptable to us. Although we believe that our products, trademarks and other
proprietary rights do not infringe upon the proprietary rights of third parties,
we cannot guarantee that third parties will not assert infringement claims
against us. If they do, we will have to spend time and money to defend against
these claims, which will divert management's attention.
WE MAY MAKE FUTURE ACQUISITIONS, WHICH MAY NOT BE SUCCESSFUL AND WHICH COULD
DIVERT MANAGEMENT'S ATTENTION FROM OUR DAY-TO-DAY OPERATIONS.
Since September 1995, we have acquired four companies, and we continue to
evaluate potential business combinations on an opportunistic basis. Failure to
successfully integrate the operations and products of acquired companies into
our operations and products could have a material adverse effect on our
business, operating results and financial condition. In the future, we may
pursue additional acquisitions of businesses, products and technologies, or
enter into joint venture arrangements. The negotiation of potential acquisitions
or joint ventures as well as the integration of an acquired business, product or
technology could divert management's time and resources. Future acquisitions
could cause us to issue dilutive equity securities, incur debt and contingent
liabilities, assume liabilities that were not identified or underestimated and
amortize goodwill and other intangibles, research and development write-offs and
other acquisition-related expenses. Further, we cannot guarantee we will
successfully integrate any acquired business with our operations or that we will
receive the intended benefits of the acquisition. Future acquisitions could
damage our business, operating results and financial condition.
OUR GROWTH IS DEPENDENT ON INCREASED USE OF THE INTERNET FOR
BUSINESS-TO-BUSINESS TRANSACTIONS, AND A MATERIAL CHANGE IN INTERNET USE MAY
ADVERSELY AFFECT OUR BUSINESS MODEL.
We intend to target companies engaged in business-to-business e-commerce as
a potential client base. If use of the Internet for commerce and communication
does not increase as we anticipate, we may not successfully penetrate this
category of potential clients and our business could suffer. Rapid growth in the
use of the Internet is a recent phenomenon. As a result, acceptance and use may
not continue to develop at historical rates, and a sufficiently broad base of
businesses may not adopt or continue to use the Internet as a medium of
commerce. Demand and market acceptance for recently introduced services and
products over the Internet are subject to a high level of uncertainty, and few
proven services and products exist. Our business could be seriously harmed if
potential clients do not need our solutions because:
- use of the Internet and other online services does not continue to
increase or increases more slowly than expected;
10
<PAGE> 13
- the necessary communication and computer network technology underlying
the Internet and other online services does not effectively support any
expansion that may occur;
- new standards and protocols are not developed or adopted in a timely
manner; or
- for any other reason, such as concerns about security, reliability, cost,
ease of use, accessibility or quality of service, the Internet does not
create a viable commercial marketplace, or inhibits the development of
e-commerce thereby reducing the need for, and desirability of, our
products and services.
WE SUB-LICENSE THIRD-PARTY SOFTWARE INCLUDED WITH THE SALE OF OUR PRODUCTS, AND
SUCH SUB-LICENSES MAY NOT BE AVAILABLE TO US ON COMMERCIALLY REASONABLE TERMS.
Our inability to maintain or obtain third-party licenses may delay or
reduce our product shipments until we can identify, license and integrate
equivalent software. Any loss of these licenses or delay or reduction in product
shipments could harm our business, operating results and financial condition.
RISKS ASSOCIATED WITH THIS OFFERING
OUR MANAGEMENT HAS BROAD DISCRETION TO SPEND THE NET PROCEEDS OF THIS OFFERING
AND MAY SPEND THE PROCEEDS IN WAYS WITH WHICH YOU MAY NOT AGREE.
Our management will retain broad discretion to expend a significant portion
of the net proceeds of this offering. Because of the number and variability of
factors that will determine the use of these proceeds, our actual allocation of
the proceeds may vary substantially from our current intentions. If management
fails to use the proceeds effectively, our operating results could suffer.
THERE HAS BEEN NO PUBLIC MARKET FOR OUR COMMON STOCK, AND YOU MAY NOT BE ABLE TO
RESELL SHARES OF OUR COMMON STOCK FOR A PROFIT.
Currently there is no public market for our common stock, and an active
trading market may not develop or be sustained after this offering. The initial
public offering price will be determined through negotiation between us and
representatives of the underwriters and may not be indicative of the market
price for our common stock after this offering. The market price of our common
stock could fluctuate significantly as a result of:
- actual or anticipated quarterly variations in our operating results;
- changes in expectations as to our future financial performance or changes
in financial estimates, if any, of public market analysts;
- announcements relating to our business or the business of our
competitors;
- conditions generally affecting the Internet or supply chain management
software industries;
- the success of our operating strategy; and
- the operating and stock price performance of other comparable companies.
FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.
A total of , or % of our total outstanding shares after the
offering are restricted from immediate resale, but may be sold into the market
in the near future. This could cause the market price of our common stock to
drop significantly, even if our business is performing well. Sales of
substantial amounts of our common stock in the public market after this
offering, or the perception that these sales may occur, could reduce the
prevailing market price for our common stock. Of the shares
11
<PAGE> 14
of common stock that will be outstanding upon the closing of this offering, the
shares sold in this offering will be freely tradeable without
restriction, other than shares purchased by our officers, directors or other
affiliates within the meaning of Rule 144 under the Securities Act of 1933,
which will be restricted from sale until 180 days after the date of this
prospectus under lock-up agreements with the underwriters. In addition,
shares of our common stock will become eligible for resale in the
public market at various times after the expiration of the lock-up agreements
with the underwriters.
THE MARKET PRICES OF TECHNOLOGY STOCKS HAVE BEEN VOLATILE, AND OUR STOCK PRICE
MAY FLUCTUATE SIGNIFICANTLY OR DECLINE FOLLOWING THIS OFFERING.
Many technology stocks have experienced extreme price and volume
fluctuations. These fluctuations have often been unrelated or disproportionate
to the operating performance of these companies. The trading price of our stock
is likely to be highly volatile and may be significantly affected by factors
including actual or anticipated fluctuations in our operating results, new
products introduced by us or our competitors, conditions and trends in the
software, Internet or e-commerce industries, changes in financial estimates by
public market analysts, general market conditions and other factors. Any
negative change in the public perception of the prospects of software, Internet
or e-commerce companies in general could also depress our stock price regardless
of our business, prospects or operating results. We believe there are relatively
few companies comparable to us that have publicly-traded equity securities. This
may also negatively affect the trading price of our common stock after this
offering.
PURCHASERS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE DILUTION AND WILL
EXPERIENCE FURTHER DILUTION WITH THE FUTURE EXERCISE OF STOCK OPTIONS.
If you purchase common stock in this offering, you will pay more for your
shares than the amount paid by shareholders who purchased their shares from us
prior to this offering. As a result, you will experience immediate and
substantial dilution of approximately $ per share, representing the
difference between our net tangible book value per share after this offering and
the initial public offering price. Additionally, you will experience further
dilution as holders of our stock options and warrants to purchase common stock
exercise those options and warrants. As of April 30, 2000, we had outstanding
options to purchase 4,043,180 shares of our common stock. These options
generally vest one-third each year, commencing one year from the date of grant.
PROVISIONS IN OUR ARTICLES OF INCORPORATION AND BYLAWS MAY DISCOURAGE TAKEOVER
ATTEMPTS, EVEN IF A CHANGE OF CONTROL WOULD BENEFIT OUR SHAREHOLDERS.
Provisions of our articles of incorporation and bylaws could delay or
prevent a third party from acquiring us, even if a change in control would be
beneficial to our shareholders. These provisions could make it more difficult
for a third party to acquire us, even if doing so would benefit our
shareholders. Furthermore, following this offering, our directors and executive
officers will beneficially own approximately % of our outstanding common
stock. As a result, our directors and executive officers will have sufficient
voting power to prevent any third party from acquiring us.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH MAY DIFFER FROM ACTUAL
EVENTS.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. These statements may
include words such as "anticipate," "estimate," "expect," "project," "intend,"
"plan," "believe" and other words and terms of similar meaning in connection
with any discussion of future operations or financial performance. In
particular, these include statements relating to our strategy, dividend policy,
projected capital expenditures, other costs and expenses, revenue, the adequacy
of our capital resources and our market. Other factors besides those listed here
could also adversely affect us.
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<PAGE> 15
Any or all of our forward-looking statements in this prospectus may prove
to be inaccurate. They can be affected by mistaken assumptions we might make or
by known or unknown risks and uncertainties. Many factors mentioned in this
prospectus, including the risks outlined under "Risk Factors," will be important
in determining future results. Actual future results may vary materially. We
undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise.
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<PAGE> 16
USE OF PROCEEDS
We estimate that our net proceeds from this offering of common stock will
be approximately $ , assuming an initial offering price of
$ per share, after deducting underwriting discounts and commissions and
estimated offering expenses payable by us. If the underwriters' over-allotment
option is exercised in full, we estimate that the net proceeds we receive will
be approximately $ million.
We intend to use the net proceeds of this offering as follows:
- to repay in full outstanding indebtedness under our credit facility with
Greyrock Business Credit Corporation, which was $11.6 million at April
30, 2000, matures on December 31, 2000, bore interest at 11.3% as of
April 30, 2000 and was primarily used to fund working capital and
operating losses; and
- the remainder for working capital, including funding of operating losses
and other general corporate purposes.
We believe that opportunities may exist from time to time to expand our
current business through strategic alliances or through acquisitions of
complementary companies, products or technologies. We may use a portion of the
proceeds for these purposes. We currently have no understandings, arrangements
or agreements with respect to any potential acquisitions.
Our management will have significant flexibility in applying the net
proceeds of the offering. Pending the uses described above, we intend to invest
the net proceeds in high-quality, short-term, interest-bearing securities or
guaranteed obligations of the U.S. government or its agencies.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate declaring
or paying any cash dividends in the foreseeable future.
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<PAGE> 17
CAPITALIZATION
The following table sets forth our cash and capitalization as of March 31,
2000:
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- ------------ --------------
(UNAUDITED)(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................. $ 193 $ $
======== ========== =======
Short-term indebtedness:
Subordinated promissory notes, plus accrued interest.... $ 20,524 $
Line of credit.......................................... 10,896
Current portion of long-term debt and capital lease
obligations.......................................... 177
-------- ---------- -------
Total short-term indebtedness................... $ 31,597 $
======== ========== =======
Long-term debt and capital lease obligations, less current
portion................................................. $ 129 $ $
Redeemable preferred stock:
Series B -- 540,016 shares authorized; 540,016 issued
and outstanding actual; no shares issued and
outstanding, pro forma and pro forma as adjusted..... 1,856
Series C -- 2,376,651 shares authorized; 2,376,651
issued and outstanding actual; no shares issued and
outstanding, pro forma and pro forma as adjusted..... 8,168
Series D -- 4,000,000 shares authorized, 3,692,618
issued and outstanding actual; no shares issued and
outstanding, pro forma and pro forma as adjusted..... 11,089
Series F -- 750,000 shares authorized; 750,000 issued
and outstanding actual; no shares issued and
outstanding, pro forma and pro forma as adjusted..... 3,834
Series G -- 5,636,071 shares authorized; 5,636,071
issued and outstanding actual; no shares issued and
outstanding, pro forma and pro forma as adjusted..... 35,075
-------- ---------- -------
Total redeemable preferred stock................ 60,022
Shareholders' equity (deficit):
Common stock, $.01 par value; 26,000,000 shares
authorized actual and 100,000,000 shares authorized
pro forma and pro forma as adjusted; 1,627,459 shares
issued and outstanding actual; shares and
shares issued and outstanding pro forma and pro forma
as adjusted, respectively............................ 16
Additional paid-in capital.............................. 4,613
Accumulated deficit..................................... (97,720)
Equity adjustment from foreign currency translation..... (275)
-------- ---------- -------
Total shareholders' equity (deficit)............ (93,366)
-------- ---------- -------
Total capitalization....................... $(33,215) $
======== ========== =======
</TABLE>
- ---------------
(1) Reflects (a) the conversion of all of our outstanding redeemable preferred
stock, plus accrued and unpaid dividends as of , 2000, payable
in common stock, into shares of our common stock, assuming an initial
offering price of $ per share,less underwriting discounts and
commissions, upon completion of this offering; (b) the conversion of our
outstanding subordinated promissory notes in the aggregate principal amount
of $15.0 million, plus accrued interest as of April 30, 2000, held by E.M.
Warburg, Pincus into shares of our common stock, assuming an initial
offering price of $ per share, less underwriting discounts and
commissions; and (c) the exercise by E.M. Warburg, Pincus of warrants to
purchase shares of our common stock upon completion of this
offering, assuming an initial offering price of $ per share, less
underwriting discounts and commissions.
(2) Reflects the sale of shares of our common stock in this offering at an
assumed initial public offering price of $ per share, after deducting
underwriting discounts and commissions and estimated offering expenses
payable by us.
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<PAGE> 18
DILUTION
Our pro forma net tangible book value (deficit) as of March 31, 2000 was
$( ) million, or $( ) per share of common stock. Pro forma net
tangible book value per share is determined by dividing our net tangible book
value, which is our total tangible assets less total liabilities, by the number
of outstanding shares of our common stock, assuming the conversion of our
outstanding redeemable preferred stock and subordinated promissory notes and the
exercise of warrants held by E.M. Warburg, Pincus into common stock. After
giving effect to the receipt of the net proceeds from this offering and after
deducting underwriting discounts and commissions and estimated offering expenses
payable by us, our pro forma as adjusted net tangible book value as of March 31,
2000 would be approximately $ million, or $ per share. This
represents an immediate increase in net tangible book value of $ per
share to existing shareholders and an immediate dilution of $ per share
to new investors purchasing shares at the initial public offering price. The
following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of March
31, 2000...............................................
Increase per share attributable to this offering..........
------
Pro forma as adjusted net tangible book value per share
after this offering.......................................
------
Net tangible book value dilution per share to new
investors................................................. $
======
</TABLE>
The following table sets forth, on a pro forma as adjusted basis as of
March 31, 2000, the number of shares of common stock purchased from us by
existing shareholders and by the new investors, together with the total price
and average price per share paid by each of these groups, assuming an initial
public offering price of $ per share, before deducting underwriting
discounts and commissions and estimated offering expenses:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
---------------- ---------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders............................ % $ % $
New investors....................................
----- ----- ------ -----
Total.................................. 100% $ 100%
===== ===== ====== =====
</TABLE>
The data in the table above assumes the following:
- the conversion of all of our outstanding redeemable preferred stock, plus
accrued and unpaid dividends as of , 2000, payable in
common stock, into shares of our common stock upon completion of
this offering, assuming an initial offering price of $ per share,
less underwriting discounts and commissions;
- the conversion of our outstanding subordinated promissory notes in the
aggregate principal amount of $15.0 million, plus accrued interest as of
April 30, 2000, held by E.M. Warburg, Pincus into shares
of our common stock, assuming an initial offering price of
$ per share, less underwriting discounts and commissions;
and
- the exercise by E.M. Warburg, Pincus of warrants to purchase
shares of our common stock upon completion of this offering, assuming an
initial offering price of $ per share, less underwriting
discounts and commissions.
The data in the table above excludes 4,043,180 shares of common stock
issuable upon exercise of options outstanding as of April 30, 2000 with a
weighted exercise price of $2.65 per share and warrants to purchase 400,000
shares of common stock outstanding as of May 19, 2000, except those held by E.M.
16
<PAGE> 19
Warburg, Pincus, that have a weighted average exercise price of $8.00 per share.
If any of these options and warrants are exercised, there will be further
dilution to the new investors.
17
<PAGE> 20
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
You should read the following selected financial data in conjunction with
the financial statements and the notes to those statements appearing elsewhere
in this prospectus and the information under "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The statement of
operations data for the fiscal years ended June 30, 1997, 1998 and 1999 and the
balance sheet data as of June 30, 1998 and 1999 are derived from our audited
financial statements appearing elsewhere in this prospectus. The statement of
operations data for the years ended June 30, 1995 and 1996 and the balance sheet
data as of June 30, 1995, 1996 and 1997 are derived from our audited financial
statements not included in this prospectus. Interim results for the periods
ended March 31, 1999 and 2000 and the balance sheet data as of March 31, 2000
are derived from our unaudited financial statements appearing elsewhere in this
prospectus which, in the opinion of management, reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of that data. Historical results are not indicative of the results
to be expected in the future.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
---------------------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Software license fees..... $ 903 $ 4,813 $ 4,333 $ 10,392 $ 10,521 $ 6,993 $ 7,721
Services.................. 688 1,702 3,887 8,014 12,760 9,246 9,429
-------- -------- ---------- ---------- ---------- ---------- ----------
Total revenue...... 1,591 6,515 8,220 18,406 23,281 16,239 17,150
Operating expenses:
Cost of license fees...... -- -- 11 524 576 477 415
Cost of services.......... 668 1,194 4,419 6,714 9,308 6,535 5,869
Research and
development............. 1,233 5,193 6,320 9,368 10,179 7,614 7,689
Purchased in-process
research and
development............. -- 5,568 2,083 -- -- -- --
Sales and marketing....... 2,316 3,553 6,344 9,485 13,731 10,248 10,077
General and
administrative.......... 801 2,160 5,263 4,357 5,603 3,889 4,389
-------- -------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses......... 5,018 17,668 24,440 30,448 39,397 28,763 28,439
-------- -------- ---------- ---------- ---------- ---------- ----------
Operating loss.............. (3,427) (11,153) (16,220) (12,042) (16,116) (12,524) (11,289)
Other income (expense):
Interest income........... 90 72 66 51 50 32 35
Interest expense.......... (78) (658) (1,501) (3,539) (3,526) (3,080) (1,969)
Other income (expense).... 121 (2) (72) 1 32 16 21
-------- -------- ---------- ---------- ---------- ---------- ----------
Loss before income taxes.... (3,294) (11,741) (17,727) (15,529) (19,560) (15,556) (13,202)
-------- -------- ---------- ---------- ---------- ---------- ----------
Net loss........... (3,294) (11,741) (17,727) (15,529) (19,560) (15,556) (13,202)
Accretion of redeemable
preferred stock........... (569) (790) (1,309) (1,833) (2,534) (1,607) (2,766)
-------- -------- ---------- ---------- ---------- ---------- ----------
Net loss attributable to
common stock.............. $ (3,863) $(12,531) $ (19,036) $ (17,362) $ (22,094) $ (17,163) $ (15,968)
======== ======== ========== ========== ========== ========== ==========
Basic and diluted net loss
per common share.......... $ (7.15) $ (18.77) $ (16.02) $ (13.98) $ (15.21) $ (11.85) $ (10.52)
======== ======== ========== ========== ========== ========== ==========
Weighted average number of
shares used in computing
basic and diluted net loss
per common share
(unaudited)............... 540,116 667,492 1,188,204 1,242,381 1,452,363 1,447,808 1,517,734
Pro forma basic and diluted
net loss per share
(unaudited)............... $ (1.83) $ (0.91)
========== ==========
Weighted average number of
shares used in computing
pro forma basic and
diluted net loss per share
(unaudited)............... 10,690,338 14,513,090
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
AS OF JUNE 30,
-------------------------------------------------- AS OF
1995 1996 1997 1998 1999 MARCH 31, 2000
------ -------- -------- -------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $1,499 $ 296 $ 700 $ 900 $ 638 $ 193
Working capital........................... (512) (5,231) (19,560) (35,012) (22,423) (35,655)
Total assets.............................. 2,406 4,761 6,532 9,844 11,656 6,898
Long-term debt, less current portion...... 163 369 389 224 266 129
Redeemable preferred stock................ 7,544 15,334 20,706 22,051 57,256 60,022
Shareholders' deficit..................... (7,844) (19,968) (38,546) (55,411) (77,523) (93,366)
</TABLE>
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of our company should be read in conjunction with the "Selected
Financial Data" and the accompanying financial statements and the notes to those
statements appearing elsewhere in this prospectus. The following discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those discussed in
these forward-looking statements. Factors that could cause or contribute to such
differences include but are not limited to, those discussed below and elsewhere
in this prospectus, particularly under the caption "Risk Factors."
COMPANY BACKGROUND
We develop, market and support supply chain management software that
enables enterprises to optimize financial and operational performance across
their supply chains. Since early 1999, we have begun to leverage our core
competencies in supply chain management software by developing additional
e-business products, as well as web-enabling our current products for use across
customer supply chains. The addition of e-business products to our SynQuest
One2One suite of solutions enables us to offer products that integrate and
financially optimize a customer's web-enabled supply chain.
We were incorporated as Factory Automation & Computer Technologies, Inc. in
New York in July 1986. E.M. Warburg, Pincus, our principal shareholder, first
invested in our company in May 1994. Our primary business initially consisted of
developing, licensing and servicing sophisticated scheduling and workflow
software, which enabled manufacturers to implement flexible and cost-effective
manufacturing techniques. We have moved our product line beyond the
manufacturing execution market toward integrated supply chain management, both
through internal development and several key acquisitions. In 1995, we acquired
Mandis International, a Dutch supply chain software vendor, to build a base of
operations in Europe and to add product functionality. In 1996, we acquired
Log'In, S.A., a French developer of modeling, simulation and optimization
software, to add advanced optimization functionality to our products. We also
acquired Manufacturing Execution Systems Associates, Inc., a Pennsylvania-based
systems integration firm specializing in manufacturing and logistics software
environments, to link our supply chain management software with shop floor and
production equipment control systems. In 1997, we were reincorporated in Georgia
under the name SynQuest, Inc. In addition, we acquired Bender Management
Consultants Inc. to broaden our supply chain solutions and offer strategic and
tactical logistics planning functionality.
OVERVIEW
Our fiscal year end is June 30. We generate revenues from two principal
sources:
- license fees derived from software products; and
- professional services fees and maintenance and support fees derived from
consulting, implementation, training and maintenance services and other
technical support related to our software products.
Software License Fees. Customers typically pay a one-time fee for a
perpetual license to use our software products. The amount of the fee is based
on the number of licensed sites, users and products. We require a written
software license contract that typically provides for an initial payment upon
execution of the license contract, followed by one or more periodic payments on
dates specified in the contract. Payments are required to be made within one
year of the contract date. Our initial software license arrangements with
customers typically provide a fee for the first year of maintenance and support
services. We often negotiate contracts for specific implementation and training
services following the initial software license contract.
20
<PAGE> 23
Our software licenses have principally been the result of direct sales to
customers, and we expect that direct sales will continue to represent our
principal selling method in the future. However, we have used and expect to
continue to use independent resellers of our products in geographic areas where
we do not believe it is cost-effective to establish a direct sales force. We
rely on third parties such as business process improvement consultants,
implementers of software systems and complementary software application
providers to provide us with leads for potential new customers. Prior to
mid-1999, we primarily depended on J.D. Edwards for our leads. During the past
nine months, we entered into relationships with several new lead sources,
substantially reducing our dependence on any single lead source.
The sales cycle for our products is typically six to nine months, and
software license revenues for a particular period are substantially dependent on
orders received in that period. Furthermore, we have experienced, and expect to
continue to experience, significant variation in the size of individual
licensing transactions.
We recognize software license revenue when a signed contract is obtained,
shipment of the product has occurred, the license fee is fixed and determinable,
collectibility is probable, and remaining obligations under the license
agreement are insignificant. If a software arrangement includes multiple
elements, such as multiple software products, specified upgrades, maintenance
and support and/or other services, we allocate the total software arrangement
fee among each element of the arrangement. The total arrangement fee is
allocated based on the relative fair value of each of the elements with the fair
value being based on our own objective evidence. Our revenue recognition is in
accordance with the American Institute of Certified Public Accountants Statement
of Position No. 97-2, "Software Revenue Recognition," as amended by Statement of
Position Nos. 98-4 and 98-9. Prior to fiscal 1999, we recognized software
license revenue in accordance with Statement of Position No. 91-1, meaning that
we then recognized software license revenue upon shipment, provided we had a
signed contract, that we had no remaining significant obligations to perform and
that collection of payment was probable. Our adoption of the new standards in
fiscal 1999 has not had a material effect on our revenue recognition.
Services Revenue. Our services revenue consists principally of revenue
derived from professional services associated with implementing our products and
educating and training our customers' employees on the use of our products. In
addition and to a lesser extent, our services revenue includes fees for ongoing
maintenance and support, consisting primarily of customer technical support
services and product upgrades and enhancements.
Our implementation and training services are typically delivered on a
time-and-materials basis or occasionally on a fixed-price basis. We recognize
revenue from the services delivered on a time-and-materials basis as the
services are performed. Revenue from fixed-price arrangements are recognized
using a percentage-of-completion method based upon the cost incurred to date as
a percentage of the total expected cost. Out-of-pocket expenses incurred by our
personnel performing professional services are reimbursed by the customer.
Implementation and training services are generally completed four to nine months
following execution of the license contract. However, implementations for
customers licensing multiple products for numerous locations may take place over
a longer period of time.
As part of our maintenance and support services, we provide our customers
with product upgrades and enhancements as well as user and technical support
services for an annual fee. Most of our maintenance and support contracts are
invoiced annually in advance, are renewable at the discretion of the customer
and allow for future fee increases. The revenue from our maintenance and support
services is recognized ratably over the term of the maintenance and support
contract, which is generally 12 months. While a 90-day warranty is included in
the initial software license, our maintenance and support contracts typically
are entered into as of the date of the initial software license. Warranty claims
are typically not material and customers are charged for support during the
warranty period.
Cost of License Fees. Our cost of license fees consists primarily of
commissions or finder fees which we pay to third parties for providing us with a
new customer lead and sub-license fees paid by us to third parties for software
owned by a third party which we have licensed along with our products. Also
included
21
<PAGE> 24
is the amortization of software acquired through business acquisition. We
believe that our continued expansion of strategic alliances for sales lead
generation may increase the future cost of license fees over historical levels
both in dollars and as a percentage of total revenue.
Cost of Services. Our cost of services consists primarily of personnel
costs, including third-party consultants, and travel associated with providing
consulting, implementation, training and maintenance and support services
associated with our products.
Research and Development. Our research and development costs consist
primarily of personnel costs, travel, training and office facilities costs. We
maintain a development staff to enhance our products and to develop new
products. In accordance with Statement of Financial Accounting Standards No. 86,
we expense software costs as incurred until technological feasibility of the
software is determined and the recovery of the cost can reasonably be expected,
after which any additional costs are capitalized. To date, we have expensed all
software development costs because development costs incurred subsequent to the
establishment of both technological feasibility and the reasonable expectations
of cost recovery have been minimal.
Sales and Marketing. Our sales and marketing expenses consist primarily of
personnel costs, commissions to employees, travel, promotional events such as
trade shows, seminars and technical conferences and advertising and public
relations programs.
General and Administrative. Our general and administrative expenses
consist primarily of personnel and other costs of our finance and human
resources activities, as well as legal and audit fees, depreciation and other
general corporate expenses.
Backlog. Our product delivery lead times are very short and, consequently,
substantially all of our license fee revenue in each quarter may result from
contracts entered into in that quarter. Accordingly, we generally only maintain
a significant backlog for our professional services and maintenance and support
activities.
22
<PAGE> 25
RESULTS OF OPERATIONS
The following table sets forth selected statement of operations data
expressed as a percentage of our total revenue for the respective periods.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED ENDED
JUNE 30, MARCH 31,
------------------------ --------------
1997 1998 1999 1999 2000
------ ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Software license fees........................... 52.7% 56.5% 45.2% 43.1% 45.0%
Services........................................ 47.3 43.5 54.8 56.9 55.0
------ ----- ----- ----- -----
Total revenue........................... 100.0 100.0 100.0 100.0 100.0
Operating expenses:
Cost of license fees............................ 0.1 2.8 2.5 2.9 2.4
Cost of services................................ 53.7 36.5 40.0 40.2 34.2
Research and development........................ 76.9 50.9 43.7 46.9 44.8
Purchased in-process research and development... 25.3 -- -- -- --
Sales and marketing............................. 77.2 51.5 59.0 63.1 58.8
General and administrative...................... 64.1 23.7 24.0 24.0 25.6
------ ----- ----- ----- -----
Total operating expenses................ 297.3 165.4 169.2 177.1 165.8
------ ----- ----- ----- -----
Operating loss.................................... (197.3) (65.4) (69.2) (77.1) (65.8)
Other income (expense):
Interest income................................. 0.8 0.3 0.2 0.2 0.2
Interest expense................................ (18.3) (19.3) (15.1) (19.0) (11.5)
Other income (expense).......................... (0.9) -- 0.1 0.1 0.1
------ ----- ----- ----- -----
Total other income (expense)............ (18.4) (19.0) (14.8) (18.7) (11.2)
------ ----- ----- ----- -----
Loss before income taxes.......................... (215.7) (84.4) (84.0) (95.8) (77.0)
------ ----- ----- ----- -----
Net loss................................ (215.7)% (84.4)% (84.0)% (95.8)% (77.0)%
====== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO NINE MONTHS ENDED MARCH 31, 1999
Software License Fees Revenue. Revenue from software license fees
increased 10.4% to $7.7 million in the nine months ended March 31, 2000 from
$7.0 million in the nine months ended March 31, 1999. The increase was due to
increased market acceptance of our software solutions, as well as the expansion
of our sales force. However, during the first six of the nine months ended March
31, 2000, we believe that our software license revenue was negatively impacted
by the following factors:
- our traditional sources of customer leads did not meet our growth
expectations during the period of transition to other lead-generation
sources and
- during calendar 1999 potential customers' short-term focus of financial
and manpower resources on Year 2000 issues postponed some potential
customers' licensing decisions.
In order to increase the quantity and quality of customer leads, we have
entered into and continue to pursue relationships with third-party lead sources
such as business process improvement consultants, implementers of software
systems and complementary software application providers. As of March 31, 2000,
these efforts have resulted in an increase in the quantity and quality of
customer leads. We believe the increases in our partner relationships with
third-party lead sources and the elimination of Year 2000 issues will continue
to have a positive effect on our future revenues.
Services Revenue. Revenue from services increased 2.0% to $9.4 million in
the nine months ended March 31, 2000 from $9.2 million in the nine months ended
March 31, 1999. This increase was the result
23
<PAGE> 26
of an increase in maintenance and support revenue resulting from license
contracts entered into during the past year and was partially offset by a
decrease in revenue from implementation and training services due to delays by
two customers in the implementation of our licensed software. We expect these
two customers to begin their implementations during the three months ending June
30, 2000.
Total Revenue. Total revenue increased 5.6% to $17.2 million in the nine
months ended March 31, 2000 from $16.2 million in the nine months ended March
31, 1999.
Cost of License Fees. Cost of license fees decreased 13.2% to $414,000 in
the nine months ended March 31, 2000 from $477,000 in the nine months ended
March 31, 1999. This decrease resulted from a decrease in sub-license fees paid
to third parties as a result of fewer products sub-licensed to our customers
that were owned by third parties.
Cost of Services. Cost of services decreased 10.2% to $5.9 million in the
nine months ended March 31, 2000 from $6.5 million in the nine months ended
March 31, 1999. This decrease in cost of services was due to our decreased use
of higher cost third-party consultants for implementation services.
Research and Development. Research and development expenses were $7.7
million in the nine months ended March 31, 2000, which is approximately equal to
the $7.6 million in the nine months ended March 31, 1999. Although we have been
developing additional e-business products and web-enabling our existing products
over the past nine months, our research and development expenses have not
increased. We utilized existing resources and core competencies of our employees
to develop these new products and enhancements.
Sales and Marketing. Sales and marketing expenses were approximately $10.1
million in the nine months ended March 31, 2000 and approximately $10.2 million
in the nine months ended March 31, 1999.
General and Administrative. General and administrative expenses increased
12.9% to $4.4 million in the nine months ended March 31, 2000 from $3.9 million
in the nine months ended March 31, 1999. This increase was the result of higher
costs associated with the increase in our business activities and expected
growth.
Operating Loss. As a result of the above factors, our operating loss
decreased 9.9% to $11.3 million in the nine months ended March 31, 2000 from
$12.5 million in the nine months ended March 31, 1999.
Other Income (Expense). Other income (expense) decreased 36.9% to $1.9
million in the nine months ended March 31, 2000 from $3.0 million in the nine
months ended March 31, 1999. Other income (expense) consists almost entirely of
interest expense. This decrease was due to lower average borrowings during the
nine months ended March 31, 2000 as a result of the use of a portion of the
proceeds from the sale of Series G preferred stock in March 1999 to reduce debt
under our credit facility.
Income Taxes. During the nine months ended March 31, 2000 and 1999, we
reported losses for both financial reporting and income tax purposes. As a
result, we made no significant provision for income taxes in either period.
Net Loss. As a result of the above factors, our net loss for the nine
months ended March 31, 2000 decreased 15.1% to $13.2 million compared to $15.6
million for the nine months ended March 31, 1999.
FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998
Software License Fees Revenue. Revenue from software license fees were
$10.5 million in fiscal 1999 and $10.4 million in fiscal 1998. While our
software license fee revenue increased in the first two quarters of fiscal 1999
compared to fiscal 1998, we experienced a decline in license fees in the last
two quarters of fiscal 1999. We believe this decline in license fee revenue in
the last half of fiscal 1999 was due in large part to our traditional sources of
customer leads not increasing during the period of transition to other
24
<PAGE> 27
lead-generation sources and postponement of some potential customers' licensing
decisions due to Year 2000 issues.
Services Revenue. Revenue from services increased 59.2% to $12.8 million
in fiscal 1999 from $8.0 million in fiscal 1998. This increase was primarily the
result of an increase in revenue from customer implementations and an increase
in support revenue, both resulting from the increase in new licenses during the
fourth quarter of fiscal 1998 and the first two quarters of fiscal 1999.
Total Revenue. Total revenue increased 26.5% to $23.3 million in fiscal
1999 from $18.4 million in fiscal 1998. The increase was due to the increase in
services revenue described above.
Cost of License Fees. Cost of license fees increased 9.9% to $576,000 in
fiscal 1999 from $524,000 in fiscal 1998. This increase was due to higher
third-party finder fees partially offset by a decrease in sub-license fees paid
to third parties as a result of a reduction in the number of products owned by
third parties that we sub-licensed to our customers.
Cost of Services. Cost of services increased 38.6% to $9.3 million in
fiscal 1999 from $6.7 million in fiscal 1998. The increase resulted from
increased costs associated with the addition of personnel, including the
increased use of higher cost third-party consultants necessary to provide our
implementation services.
Research and Development. Research and development expenses increased 8.7%
to $10.2 million in fiscal 1999 from $9.4 million in fiscal 1998. This increase
resulted from greater costs associated with additional personnel required to
support our product development activities and plans.
Sales and Marketing. Sales and marketing expenses increased 44.8% to $13.7
million in fiscal 1999 from $9.5 million in fiscal 1998. This increase resulted
from increased costs associated with additional personnel in our sales and
marketing organization, including additional direct sales and marketing
personnel.
General and Administrative. General and administrative expenses increased
28.6% to $5.6 million in fiscal 1999 from $4.4 million in fiscal 1998. This
increase resulted from increased costs associated with the addition of personnel
and other costs related to the increase in business activity over the past year.
Operating Loss. As a result of the above factors, our operating loss
increased 33.8% to $16.1 million in fiscal 1999 compared to $12.0 million in
fiscal 1998.
Other Income (Expense). Other income (expense), which consists primarily
of interest expense, was $3.4 million in fiscal 1999, approximately equal to the
$3.5 million in fiscal 1998. Although interest expense decreased in the fourth
quarter of fiscal 1999 as result of the use of a portion of the proceeds from
the sale of our Series G preferred stock in March 1999 to reduce borrowings
under our credit facility, the decrease was offset by increased borrowings
during the first three quarters of fiscal 1999.
Income Taxes. During fiscal 1999 and fiscal 1998 we reported losses for
both financial reporting and income tax purposes. As a result, we made no
significant provision for income taxes in either year. At the end of fiscal
1999, we had net operating loss carryforwards of approximately $61.0 million and
tax credits of approximately $929,000 that expire principally in years 2001
through 2014. Total net operating loss carryforwards at June 30, 1999 includes
approximately $9.6 million of net operating losses related to our foreign
operations that may be carried forward indefinitely.
Net Loss. As a result of the above factors, our net loss increased 26.0%
to $19.6 million in fiscal 1999 compared to $15.5 million in fiscal 1998.
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
Software License Fees Revenue. Revenue from software license fees
increased 139.8% to $10.4 million in fiscal 1998 from $4.3 million in fiscal
1997. This increase was due to the continued market
25
<PAGE> 28
acceptance of our products, the introduction in the three months ended March 31,
1998 of Manufacturing Manager version 5.0, which is the predecessor to our
current Virtual Production Engine, and our acquisition of all of the outstanding
shares of Bender Management Consultants Inc., a company that develops supply
chain software and provides consulting services, in June 1997. The Bender
Management acquisition enabled us to broaden our overall supply chain product
solutions.
Services Revenue. Services revenue increased 106.1% to $8.0 million in
fiscal 1998 from $3.9 million in fiscal 1997. This increase was primarily the
result of a 100.0% increase in revenue from customer implementations and a
144.2% increase in support revenue, both resulting from the increase in new
licenses during fiscal 1998 compared to fiscal 1997.
Total Revenue. Total revenue increased 123.9% to $18.4 million in fiscal
1998 from $8.2 million in fiscal 1997. This increase was due to the increase in
revenue from both software license fees and services.
Cost of License Fees. Cost of license fees increased to $524,000 in fiscal
1998 from $11,000 in fiscal 1997, reflecting $393,000 in third-party finders
fees incurred in fiscal 1998 and $131,000 of amortization of software acquired
through the acquisition of a business.
Cost of Services. Cost of services increased 51.9% to $6.7 million in
fiscal 1998 from $4.4 million in fiscal 1997. This increase resulted from
increased costs associated with the addition of personnel necessary to provide
the implementation and support services associated with the increase in new
licenses.
Research and Development. Research and development expenses increased
48.2% to $9.4 million in fiscal 1998 from $6.3 million in fiscal 1997.
Approximately $2.4 million of this increase was due to the cost of additional
personnel acquired in the Bender Management acquisition. The remaining increase
resulted from increased costs associated with additional personnel to enable a
concentrated development effort associated with the release of Manufacturing
Manager version 5.0.
Purchased In-process Research and Development. In June 1997, we acquired
the Bender Management operations for approximately $2.2 million, consisting of
750,000 shares of preferred stock valued at $2.1 million and acquisition costs
of $126,000. The acquisition was accounted for under the purchase method of
accounting and, accordingly, the results of operations were included in the
accompanying consolidated statements of operations beginning June 1, 1997, the
date the acquisition was recorded for accounting purposes. The purchase price
was allocated among identifiable assets and liabilities based on their
respective fair values. Approximately $393,000 was determined to be the value of
completed software products. The value assigned to in-process research and
development with no alternative future use was approximately $2.1 million. Such
value was determined using the discounted cash flow of earnings expected in
future years from products to be derived from the in-process research and
development. In accordance with generally accepted accounting principles, this
amount was expensed at the acquisition date. At the acquisition date, Bender
Management had not capitalized any software development costs. Through
additional research and development expenditures principally over the 18 months
following our acquisition of Bender Management, we derived our current Supply
Chain Design Engine, Tactical Planning Engine, Open Demand Engine, and Dynamic
Sourcing Engine from the in-process research and development of Bender
Management at the date of acquisition.
Sales and Marketing. Sales and marketing expenses increased 49.5% to $9.5
million in fiscal 1998 from $6.3 million in fiscal 1997. This increase was due
to a $1.6 million increase in our personnel costs as the number of new license
contracts increased and we established new domestic and international sales
offices as we expanded our direct sales force, and a $1.1 million increase in
advertising and promotional activities relating to the announcement of new
product enhancements.
General and Administrative. General and administrative expenses decreased
17.2% to $4.4 million in fiscal 1998 from $5.3 million in fiscal 1997. This
decrease was due to a decrease in the provision for uncollectible accounts
receivable. In fiscal 1997, following our initiation of legal action, we settled
the remaining outstanding accounts receivable balance with a customer resulting
in a write-off of
26
<PAGE> 29
approximately $540,000. In addition, during fiscal 1997 we provided
approximately $420,000 for a negotiated settlement of outstanding accounts
receivable balance with another customer.
Operating Loss. As a result of the above factors, our operating loss
decreased 25.8% to $12.0 million in fiscal 1998 compared to $16.2 million in
fiscal 1997.
Other Income (Expense). Other income (expense), which consists primarily
of interest expense, increased 131.5% to $3.5 million in fiscal 1998 from $1.5
million in fiscal 1997. This increase was a result of additional borrowings
under our credit facility as well as additional borrowings from our principal
shareholder.
Income Taxes. During fiscal 1998 and fiscal 1997, we reported losses for
both financial reporting and income tax purposes. As a result, we made no
provision for income taxes in either year.
Net Loss. As a result of the above factors, our net loss decreased 12.4%
to $15.5 million in fiscal 1998 compared to $17.7 million in fiscal 1997.
QUARTERLY RESULTS OF OPERATIONS
The following table contains quarterly financial information. The unaudited
consolidated financial statements have been prepared on substantially the same
basis as the audited consolidated financial statements contained in this
prospectus. They include all adjustments, consisting only of normal recurring
accruals, that we consider necessary to present fairly this information when
read in conjunction with our consolidated financial statements and the related
notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1998 1998 1999 1999 1999 1999 2000
--------- -------- -------- -------- --------- -------- --------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software license fees......... $ 1,900 $ 4,000 $ 1,093 $ 3,528 $ 253 $ 3,563 $ 3,905
Services...................... 2,708 2,874 3,664 3,514 3,304 2,899 3,226
------- ------- ------- ------- ------- ------- -------
Total revenue......... 4,608 6,874 4,757 7,042 3,557 6,462 7,131
Operating expenses:
Cost of license fees.......... 33 397 47 99 125 42 248
Cost of services.............. 1,910 2,224 2,401 2,773 2,227 1,755 1,887
Research and development...... 2,469 2,470 2,675 2,565 2,591 2,591 2,507
Sales and marketing........... 3,126 3,524 3,598 3,483 3,228 3,480 3,369
General and administrative.... 1,189 1,352 1,348 1,714 1,485 1,562 1,342
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 8,727 9,967 10,069 10,634 9,656 9,430 9,353
Operating loss.................. (4,119) (3,093) (5,312) (3,592) (6,099) (2,968) (2,222)
Other income (expense):
Interest income............... 9 10 13 18 11 14 10
Interest expense.............. (980) (1,141) (959) (446) (568) (721) (680)
Other income (expense)........ (3) 4 15 16 18 2 1
------- ------- ------- ------- ------- ------- -------
Total other income
(expense)........... (974) (1,127) (931) (412) (539) (705) (669)
------- ------- ------- ------- ------- ------- -------
Loss before income taxes........ (5,093) (4,220) (6,243) (4,004) (6,638) (3,673) (2,891)
------- ------- ------- ------- ------- ------- -------
Net loss.............. $(5,093) $(4,220) $(6,243) $(4,004) $(6,638) $(3,673) $(2,891)
======= ======= ======= ======= ======= ======= =======
</TABLE>
27
<PAGE> 30
Our quarterly operating results have varied in the past and may vary
significantly in the future depending on many factors including:
- the volume of orders;
- competitor activities;
- changes in strategic relationships;
- customer budget constraints;
- the mix of products sold; and
- general economic conditions.
Historically, we have experienced very large individual license
transactions, which can cause substantial variances in quarterly license fee
revenue. In addition, we typically enter into a significant portion of our new
license contracts in the last two weeks of the quarter. Furthermore, we believe
that the purchase of our products is relatively discretionary and generally
involves a significant commitment of capital. As a result, purchases of our
products may be deferred or canceled in the event of a downturn in any potential
customer's business or in the economy in general, or any potential customer's
focus of financial and manpower resources on other areas such as Year 2000
issues.
Historically, we have recognized greater revenue from license fees in the
fourth quarter of each fiscal year than in each of the preceding quarters, and
the first quarter license fees revenue typically has declined from such revenue
in the fourth quarter of the preceding year. We believe that this concentration
of licensing activity is caused primarily by our sales commission policies,
which compensate sales personnel for meeting or exceeding annual performance
quotas. Any change in these policies could result in a change in this pattern of
licensing activity and, therefore, the portion of annual revenue reported in
each quarter of the year. Furthermore, because we generally ship our software
products within a few days after receipt of a contract, we typically do not have
a material backlog of unfilled software orders and license fees revenue in any
quarter is generally substantially dependent on orders received and shipped in
that quarter.
A substantial portion of our operating expense level, particularly
personnel and facilities costs, is based in part on our expectations as to
future revenue and is relatively fixed in advance of any particular quarter. As
a result of the foregoing factors, we believe that our quarterly revenue,
expenses and operating results likely will vary significantly in the future, and
period-to-period comparisons of its operating results may not be meaningful and,
in any event, such comparisons should not be relied upon as indicators of future
performance.
Revenue from software license fees declined in the quarters ended March 31,
1999 and September 30, 1999 due in part to our potential customers' focus on
Year 2000 issues. In addition, in the quarter ended September 30, 1999, three
new license agreements were delayed due to our potential customers' delay in
making a decision to purchase J.D. Edwards software. As a result of these
reduced software license fees, implementation services revenue has declined
since the quarter ended March 31, 1999.
Cost of services increased in the quarter ended June 30, 1999 due to the
use of higher priced third-party consultants to perform a portion of the
services and declined thereafter as we reduced the number of third-party
consultants as implementation services declined. Sales and marketing expenses
have varied from quarter to quarter depending generally on the timing of
advertising and promotion expenses and commissions on new software licenses.
General and administrative expenses increased in the quarter ended June 30, 1999
primarily as a result of an increase in the reserve for loss on an uncollectible
accounts receivable from the prior year. Interest expense declined in the
quarters ended March 31, 1999 and June 30, 1999 as a result of the use of a
portion of the proceeds from the sale of our Series G preferred stock in March
1999 to repay our borrowings under our credit facility. Borrowings under our
credit facility since the quarter ended March 31, 1999 have caused our interest
expense to increase.
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<PAGE> 31
LIQUIDITY AND CAPITAL RESOURCES
Since 1994, we have primarily financed our operations and our capital
expenditures through funds generated from operations, sales of our preferred
stock and borrowings from Greyrock Business Credit Corporation and E.M. Warburg,
Pincus, our principal shareholder. At April 30, 2000, our primary sources of
liquidity consisted of a $20.0 million credit facility with Greyrock, which is
secured by substantially all of our assets, and cash totaling approximately $1.3
million. Our credit facility with Greyrock bears interest at the highest LIBOR
rate in effect each month, plus 5.125% per annum, which was 11.3% as of March
31, 2000, provided that the interest rate in effect each month is not less than
9% per annum. It provides for borrowings not to exceed the lesser of $20.0
million or an amount equal to the sum of the following: (1) 80% of qualifying
receivables, as defined, (2) an additional loan of $5.0 million and (3) a term
loan of $5.0 million. Our credit facility will renew on December 31, 2000 for a
term of one year unless terminated by us or Greyrock. At April 30, 2000,
approximately $11.6 million was outstanding and $1.1 million was available for
additional borrowings under our credit facility.
Cash used in our operating activities was $6.9 million for the nine months
ended March 31, 2000 compared to $14.7 million for the same period in the prior
fiscal year. The cash used in operating activities for the nine months ended
March 31, 2000 resulted primarily from our net losses of $13.2 million partially
offset by a $4.2 million decrease in accounts receivable, a $952,000 increase in
depreciation and amortization expense, and a $789,000 increase in accrued
expenses. The cash used in operating activities for the nine months ended March
31, 1999 resulted primarily from our $15.6 million net loss during that period.
The reduction in cash used in operating activities during the nine months ended
March 31, 2000, as compared to the same period in the prior fiscal year, was due
to a $6.2 million decrease in accounts receivable and a $2.4 million reduction
in our net loss, partially offset by a $1.3 million reduction in accrued
expenses.
Cash used in our investing activities was approximately $888,000 in the
nine months ended March 31, 2000 as compared to $1.0 million for the same period
in the prior fiscal year. The cash used in investing activities was principally
used for purchases of computer hardware and software for internal use to support
our growth during the previous year as well as for furniture and fixtures.
Cash provided by our financing activities amounted to approximately $7.4
million in the nine months ended March 31, 2000 as compared to $15.4 million for
the same period in the prior fiscal year. During the nine months ended March 31,
2000, $7.3 million was provided from net borrowings under our credit facility.
During the same period in the prior fiscal year, $32.7 million, net of issuance
costs, was provided in March 1999 from the sale of Series G preferred stock, of
which $26.9 million was used to repay borrowings under our credit facility and
$5.0 million was used for the conversion of a note from E.M. Warburg, Pincus
into Series G preferred stock. Net of borrowings, the outstanding balance of our
credit facility during the nine months ended March 31, 1999 was reduced by $17.1
million.
We believe that the cash provided by this offering, our existing cash
balance, borrowings under our credit facility and cash flow from operations will
be sufficient to meet our working capital and capital expenditure requirements
for the next twelve months. However, the termination of our credit facility, any
material variance of our operating results from our projections or the
acquisitions of complementary businesses, products or technologies could require
us to obtain additional equity or debt financing. Required financing may not be
available on acceptable terms, if at all.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS No.
131 requires that an enterprise disclose certain information about operating
segments. The Company adopted SFAS No. 131 effective with its fiscal year ending
June 30, 1999.
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<PAGE> 32
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended, is effective for quarters beginning after June 15, 2000. We do not
currently utilize derivative financial instruments and, therefore, we do not
expect that the adoption of SFAS No. 133 will have a material impact on our
results of operations or financial position.
In December 1999, the Securities and Exchange Commission Staff released
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," which clarified some provisions of current standards related to
software revenue recognition. The adoption of SAB No. 101 did not have a
material impact on our revenue recognition policies or results of operations for
financial position.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation," an interpretation of APB
Opinion No. 25, which is referred to as "FIN 44". FIN 44 establishes guidance
for the accounting for stock option grants or modifications to existing stock
option awards and is effective for option grants made after June 30, 2000. FIN
44 also establishes guidance for the repricing of stock options and determining
whether a grantee is an employee, for which the guidance was effective after
December 15, 1998 and modifying a fixed option to add a reload feature, for
which the guidance was effective after January 12, 2000. The adoption of certain
of the provisions of FIN 44 prior to March 31, 2000 did not have a material
effect on the financial statements. We do not expect that the adoption of the
remaining provisions will have a material effect on the financial statements.
YEAR 2000 COMPUTER ISSUES
We did not experience any computer or systems problems relating to Year
2000. Upon review of our internal and external systems during 1999, we
determined that we did not have any material exposure to such computer problems
and that the software and systems required to operate our business and the then
current versions of our software products were Year 2000 compliant. As a result,
during 1999 we did not incur, and do not expect to incur, any material
expenditures relating to Year 2000 remediation of our internal systems or our
software products.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Our interest expense is sensitive to changes in the general level of U.S.
interest rates. We are exposed to changes in interest rates primarily from our
subordinated debt with E.M. Warburg, Pincus and our credit facility with
Greyrock, the interest rates of which are tied to U.S. market interest rates. We
do not currently utilize derivative financial instruments to manage exposure to
interest rate changes. Based on the weighted average outstanding debt balances,
a one percent increase in the general level of U.S. interest rates would have
produced approximately $340,000 in additional interest expense in the fiscal
year ended June 30, 1999. We do not expect to have a significant amount of
outstanding debt following this offering.
We develop products in the United States and market our products in North
America, South America and Europe. As a result our financial results could be
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in foreign markets. All sales are currently made in both
U.S. dollars and local currencies. A strengthening of the U.S. dollar or
weakening of these local currencies could make our products less competitive in
foreign markets.
We expect to invest our cash only in debt obligations issued by the U.S.
government or its agencies with maturities of less than two years.
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<PAGE> 33
BUSINESS
OVERVIEW
We provide advanced e-business solutions designed to optimize the financial
and operational performance of the supply chain. Our SynQuest One2One suite of
software solutions enables our customers to fulfill each order they receive in
the most profitable manner and to enhance competitiveness through improved
customer service. Our solutions consider the relevant variables that affect the
performance of the entire supply chain, including materials supply,
manufacturing, distribution, transportation and trading partners. We help our
clients improve their business performance, increase market share and enhance
customer service by:
- providing real-time management of every customer order to help achieve
fast and reliable fulfillment; and
- selecting the financially optimal, or profit maximizing, means of order
fulfillment within the supply chain constraints and customer
requirements.
Our scalable solutions are designed for business-to-business e-commerce. We
target traditional bricks and mortar companies with annual revenues between $100
million and $2 billion, web-based companies and market exchanges. We believe
these companies face complex supply chain management challenges, but their
limited resources and expertise require them to select solutions that are easy
to use and quick to deploy. Our turnkey suite of products can be quickly
implemented, to deliver bottom-line savings and incremental revenue
opportunities for customers. Our solutions readily interface with a broad range
of our clients' existing enterprise applications, as well as the platforms of
their web-based trading partners. As of April 30, 2000, we had implemented our
solutions for over 100 customers. Our clients include BF Goodrich, Ford Motor
Company, Herman Miller, Nordstrom.com, Pioneer Electronics, Reynolds Metals, ST
Microelectronics, and Titleist and Footjoy Worldwide.
MARKET OPPORTUNITY
OUR ADDRESSABLE MARKET
The supply chain management software and services market is projected to
grow from $3.7 billion in 1999 to $25.7 billion by 2004, according to AMR
Research, Inc., an independent market research company. In addition, we expect
that as the business-to-business e-commerce develops, supply chain management
solutions will gain share in e-commerce application budgets. This will further
increase the size of the potential market for supply chain management solutions.
The e-commerce applications market is estimated to grow from $1.7 billion in
1999 to $20.0 billion by 2004 at a compounded annual rate of 65%, according to
AMR Research.
TRENDS DRIVING THE IMPORTANCE OF SUPPLY CHAIN MANAGEMENT IN THE E-BUSINESS
SOLUTIONS MARKET
Competitive pressure driven by the Internet. The Internet has allowed new
competitors to emerge and existing competitors to compete in new ways. Today's
increasingly competitive business environment and shareholder expectations have
forced many companies to become more efficient while improving their flexibility
and responsiveness to changing market conditions. In addition to facing higher
product standards for quality, variety and price, businesses also recognize the
need to shorten lead times, adjust production for frequent changes in customer
requirements and quote more accurate and reliable delivery dates. Many companies
seek to achieve growth through new distribution channels and superior customer
service, rather than through product innovation. In response to these market
forces, many companies are implementing supply chain management software
solutions to improve the efficiency of their business processes.
Growth of direct materials transactions through e-commerce. The volume of
nonfinancial goods and services sold through business-to-business e-commerce is
expected to reach $7.3 trillion worldwide in 2004
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according to the GartnerGroup, a technology consulting and research firm. We
believe that approximately 80% of this e-commerce will consist of direct
materials, which are mission-critical materials, parts or components that are an
element of an enterprise's finished product. Buyers of direct materials
generally seek to exchange information with sellers across the life cycle of
their relationship. For example, buyers may need to assess a supplier's ability
to support potential business scenarios, such as the ability to meet volumes and
delivery dates, before committing to purchase a product. These customers seek to
make sourcing decisions that result in the lowest total delivered cost, which
involves many factors other than price, and to easily ascertain the current
status of each order. A typical manufacturing, distribution or retail company
executes thousands of direct materials buy and sell transactions annually, many
of which require coordinated execution. The supply chain management solutions
used today by the majority of companies do not readily support high volume
direct materials e-commerce.
The need for mass customization. As customers increasingly demand goods
tailored to their requirements, businesses seek to grow revenue by producing
unique goods on a large scale. However, manufacturers often cannot
cost-effectively maintain large inventory levels to meet anticipated demand. In
addition, customers are demanding that mass customized products be delivered
reliably and in less time, especially as the Internet raises expectations of
delivery speed. To achieve fast, reliable and profitable mass customization,
manufacturers will need to implement supply chain management solutions that can
address each order and manage it profitably in real-time.
The growth of market exchanges. Market exchanges, which are on-line
intermediaries that connect fragmented buyers and sellers, represent a new and
rapidly growing class of customers for supply chain management solutions. As of
April 2000, there were over 600 market exchanges, which are expected to grow to
10,000 by 2003, according to NetMarketMakers.com, a market research firm.
According to the GartnerGroup, 37% of the expected $7.3 trillion of
business-to-business e-commerce transactions, or $2.7 trillion, will occur
through market exchanges in 2004. As market exchanges move further into high
volume direct materials transactions, they will face increasing supply chain
coordination and customer satisfaction issues.
Globalization. Several factors are increasing the globalization of
markets, including the continued reduction in trade barriers, the Internet's
ability to make market information available worldwide, increasing
specialization and continued pressure to reduce costs and quickly penetrate new
markets to sell existing products. Globalization will lead to companies
interacting with more trading partners and a higher degree of outsourcing,
resulting in larger and more varied supply chains. This shift will place more
emphasis on the importance of supply chain management solutions that provide
visibility and control.
LIMITATIONS OF EXISTING SUPPLY CHAIN MANAGEMENT SOLUTIONS
We believe that existing supply chain management solutions do not fully
address the business imperatives arising from the foregoing trends. We believe
the primary limitations of existing solutions include the following:
- Limited financial optimization capability. Most supply chain management
solutions have limited capability to consider the financial impacts of
supply chain decisions. Typically, these solutions consider financial
impacts at an aggregate level, not on an order-by-order basis, and
therefore do not select a financially optimal result.
- Lack of real-time management capability. Most supply chain management
solutions address planning and execution as two separate activities. This
limits effective decision-making over the supply chain and does not
account for real-time events which impact the plan and, therefore,
optimal execution.
- Difficulty of deployment. The adoption of most supply chain management
solutions has been limited due to the complexity of its implementation
process. Successful implementation of these
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solutions often requires programming by operations research experts,
which few companies have in-house.
THE SYNQUEST SOLUTION
Our software solutions are designed to address the limitations of current
supply chain management solutions and provide a comprehensive platform for our
clients to address the trends shaping their businesses. The key elements of our
solutions are as follows:
Financial optimization. Each product in our SynQuest One2One suite of
solutions is designed to achieve a single goal: financial optimization. Our
solutions carry this financial optimization principle from developing a supply
chain management strategy down to the individual order level and allow our
clients to determine the profit margin contribution of each potential order
before they accept it. This focus typically allows our clients to recover their
investment in our products quickly.
Real-time management. Our solutions are designed to create the plan,
coordinate the execution and continuously control each order to facilitate fast
and reliable fulfillment. After analyzing all relevant variables and selecting
the financially optimal means of fulfillment, our software creates time-stamped
operational plans that are disseminated for execution throughout the supply
chain. As execution occurs, our software analyzes the events of the supply chain
in real-time, publishes the impact of the events on order delivery, and re-plans
as necessary to keep the orders on schedule. Our solutions analyze real-time
changes in fulfillment constraints to redetermine the optimal means of
fulfillment.
Turnkey solutions. We offer turnkey solutions that are easy to deploy,
interface readily with most existing enterprise systems and e-commerce
platforms, and require little or no custom programming to implement. After
easily linking to our clients' systems, our solutions use existing customer
supply chain data to generate financially optimal fulfillment plans. In
addition, the turnkey nature of our solutions is a competitive advantage because
we can demonstrate, with little advance preparation and set-up, a prospective
client's ability to realize significant bottom-line savings with our solutions.
Comprehensive, high-volume, high-performance solutions. Our solutions are
comprehensive and operate robustly in a variety of environments. Our solutions
cover the entire array of supply chain issues that arise from both short,
vertical supply chains contained largely within a single enterprise to
distributed, complex supply chains crossing numerous enterprises. As a result,
our products are well suited for the most traditional industrial companies as
well as newer web-based businesses and market exchanges. Our products are built
to address the performance requirements of large, complex supply chains and
business-to-business e-commerce, and to operate in mission-critical situations.
We combine advanced computing technologies, such as mixed integer programming
and genetic algorithms, with multiple modeling techniques designed to maximize
profitability and responsiveness.
OUR STRATEGY
Our objective is to become the leading provider of advanced e-business
solutions that optimize supply chain performance. We seek to enable our clients
to successfully transform their businesses to maximize profitability and
competitiveness. Our strategy to achieve this goal includes the following key
elements:
Increase our brand awareness. We focus on three types of customers: bricks
and mortar companies, web-based companies and market exchanges. We plan to boost
awareness of our company and our solutions through new marketing campaigns and
additional strategic partnerships. Marketing campaigns may include advertising
or public relations programs designed to reach our target audiences effectively.
We will cultivate strategic partnerships with complementary business-to-business
e-commerce companies, such as software solutions providers and systems
integrators, to stimulate sales lead generation and offer more comprehensive
solutions.
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<PAGE> 36
Expand and deepen market coverage. We plan to expand our market coverage
by increasing our direct sales force and building strategic alliances. We intend
to increase our coverage of existing markets and to penetrate new geographic
areas throughout Europe, Asia and the Pacific Rim. In certain markets, we plan
to partner with resellers to expand our presence and support indirect sales
efforts. We will also continue to market our software products aggressively to
businesses that have already licensed one or more of our products. We believe
that, as a result of the return on investment that we deliver to our clients,
they will encourage the use of our products throughout their enterprises and
supply chains.
Broaden and enhance our suite of products. We intend to leverage our
expertise in supply chain management to build additional functionality into our
products, increase their competitiveness and broaden their applicability for
existing and new markets. We also plan to continue to build new solutions that
address emerging trends in supply chain management and business-to-business
e-commerce.
Target additional vertical markets. We plan to further penetrate our
current target industries and leverage our existing products' capabilities into
new vertical markets. We intend to support these new verticals by hiring
industry experts and expanding our products to address the specific challenges
presented by each new market. We also expect that successful implementations in
our existing vertical industries will present significant opportunities to
license our products to our clients' trading partners in other vertical markets.
Pursue strategic acquisition opportunities. We may pursue strategic
acquisitions of complementary businesses, technologies, or products that will
accelerate any of the elements of our strategy. We currently have no
understandings, arrangements or agreements with respect to any potential
acquisitions.
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CORE FUNCTIONALITY OF OUR SOLUTIONS
All of our solutions share a core functionality, the two key features of
which are financial optimization and real-time management.
FINANCIAL OPTIMIZATION
Our products' financial optimization capability provides our customers with
the ability to maximize profitability of each individual order or minimize costs
while meeting order fulfillment constraints. Our clients view their supply
chains as beginning with their customers and ending with suppliers. Those supply
chains have many elements, including manufacturing plants, warehouses, suppliers
and modes of transportation. Each supply chain element has certain capabilities,
limitations and costs. When an order is placed, our solutions dynamically search
through the supply chain to determine what combination of warehouses, plants,
suppliers and transportation methods meets the delivery requirements of the
order, taking into account the capabilities and limitations of each supply chain
element and the impact of existing orders on those elements. That dynamic search
includes assessing alternative paths through the supply chain to find the single
path that meets the delivery requirements with the lowest combined warehousing,
manufacturing, transportation and supplier costs. The diagram below illustrates
financial optimization.
FINANCIAL OPTIMIZATION OF AN ORDER
The order sourcing route is dynamically chosen based upon the capacity,
lead time and cost of all of the supply chain's resources.
(CHART A)
[Diagram of an order being sourced through the supply chain, from the
ultimate consumer through various warehouses, plants and suppliers.]
Result: The order is sourced for the required or best possible delivery
date and the lowest total delivered cost.
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REAL-TIME MANAGEMENT
Real-time management means planning, execution and control. The real-time
management capability of our solutions allows our clients to create the plan,
coordinate the execution and continuously control an order to facilitate its
fulfillment with the highest reliability in the shortest possible time. After an
order is dynamically sourced, all required actions, timing and
interrelationships are established and tracked throughout the supply chain. As
events in the supply chain occur, they are compared in real-time to the planned
events to detect any deviations from the sourcing plan. As deviations are
detected, our solutions project the impact of a deviation on the delivery of the
order. For instance, if a supplier were expected to deliver 100 input materials
on a particular date but actually delivered only 50, our solution would project
the impact on the order and automatically determine its new delivery date. Our
solutions can quickly re-plan orders and select alternate paths or sequences
through the supply chain in order to maintain the delivery schedule if possible.
By constantly tracking the order through its life cycle, real-time management
also improves the speed of an order by minimizing order idle time. The diagram
below illustrates real-time management.
REAL-TIME MANAGEMENT OF AN ORDER
Our solutions track execution of the order, analyze performance deviations
for their impact on the delivery date, and re-plan, if necessary, to place the
impacted order back on schedule.
(CHART B)
[Diagram of an order moving through the supply chain, including through
various suppliers, plants and warehouses, to the ultimate consumer.]
Result: Orders are reliably delivered within the shortest possible time.
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OUR SYNQUEST ONE2ONE SOLUTIONS
<TABLE>
<CAPTION>
PRODUCT PRIMARY BENEFIT FEATURES/FUNCTIONALITY
<S> <C> <C>
SUPPLY CHAIN DESIGN Designed to assemble supply - Determines the supply chain
ENGINE chains to optimize delivery network and product flow
performance and - Optimizes on-time delivery
profitability and demand fulfillment
profitability
- Considers trade-offs between
capital investment and
operational costs
INBOUND PLANNING ENGINE Designed to determine how - Considers supplier,
to move inbound materials transportation and customer
through the supply chain to constraints and costs
result in the lowest total - Creates a transportation plan
delivered cost that minimizes the
combination of
transportation, inventory and
customer handling costs
- Synchronizes inbound
logistics with production or
outbound distribution
requirements
TACTICAL PLANNING ENGINE Designed to produce a plan - Models costs, capacities and
that maximizes margin lead times throughout the
contribution across the supply chain
supply chain - Determines what combination
of products should be sold to
maximize margin contribution
- Selects suppliers and
allocates supply chain's
resources to support the
sales plan
OPEN DEMAND ENGINE Designed to generate an - Manages multiple demand
accurate, unified customer streams, including
demand forecast for sales, collaboration with web-
marketing, manufacturing, enabled trading partners
distribution, finance and - Maintains unconstrained and
trading partners profit-constrained sales
forecasts
- Monitors sales activities
against forecasts and tracks
forecasting accuracy
</TABLE>
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<PAGE> 40
<TABLE>
<CAPTION>
PRODUCT PRIMARY BENEFIT FEATURES/FUNCTIONALITY
<S> <C> <C>
DYNAMIC SOURCING ENGINE Designed to manage multiple - Models supply chain wide
orders across the supply costs, inventories,
chain capacities and lead times
- Dynamically selects the most
cost-efficient path across
the supply chain for each
customer order
- Tracks the progress of an
order through the supply
chain
- Allows trading partners to
allocate capacity, inventory,
set pricing, receive
commitments and respond with
actual performance over the
Internet
ORDER PROMISING ENGINE Designed to determine the - Considers the availability of
fastest and lowest total materials, manufacturing,
cost way to deliver an distribution, transportation
order capacity, costs and lead
times and finished goods
inventories
- Allows customers via the web
to determine delivery dates
for orders
- Allows manufacturers to
understand the potential
margin of that order before
making commitments
VIRTUAL PRODUCTION Designed to provide - Creates and publishes to-
ENGINE real-time management of the-second production
production orders schedules that optimize order
fulfillment based on cost,
on-time shipment and total
order cycle time
- Monitors and projects the
impact of production events
as they occur, on order
shipment
- Re-plans instantly, to put
order shipment times back on
track
CUSTOMER SERVICE ENGINE Designed to provide - Accesses and translates up-
real-time visibility to to-the-second supply chain
customer order status information into customer
across the supply chain information
- Create personalized views of
the supply chain information
for individual customers
</TABLE>
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PROFESSIONAL SERVICES
IMPLEMENTATION METHODOLOGY
We use an implementation methodology that we call the SynQuest Optimal
Performance Path. Our methodology consists of an end-to-end framework that
enables our customers to identify, maximize and take advantage of significant
opportunities for business improvement through supply chain management. We begin
the Optimal Performance Path program at the first meeting with each prospective
customer, and we continue it until our customers have achieved their desired
business results. We believe the continuity of our approach helps our customers
achieve measurable benefits quickly.
The initial phase of the Optimal Performance Path process centers around a
Value Opportunity Assessment, which is a formal analysis of the potential
improvements in each prospective customer's supply chain. Our industry
consultants conduct a site visit with the prospect, evaluate current conditions
and produce a report that outlines a value proposition specific to each
prospect's business goals. The value proposition specifically identifies
achievable financial and operations improvements, including how our software
will address the business issues, how to proceed with the actual implementation
and how to measure the delivered performance improvements. By using this
approach, we are able to ensure that we understand and agree upon our prospect's
opportunities for improvement as well as the solutions that are necessary to
produce the anticipated results. After we finalize the sale, the opportunities
identified in the Value Opportunity Assessment become the benchmark goals for
implementation, the second phase of the Optimal Performance Path process.
The implementation phase is designed to rapidly achieve the agreed upon
business objectives. We use two teams, an implementation team and a performance
team, working together to achieve the business objectives. The implementation
team installs and integrates the software and trains users on the new business
processes and how to use the software to support the new business processes. The
performance team consists of senior management of the customer, our partners and
ourselves and addresses business issues that arise to keep the implementation
progressing as quickly as possible. This two team process continues until we
have achieved the business goals that were identified during the Value
Opportunity Assessment. Because of our implementation process, we are able to
install the software and produce results in as little as 90 days.
MAINTENANCE AND OTHER SERVICES
Maintenance. We provide full maintenance and support of our solutions to
our clients who choose to purchase an annual maintenance agreement. As long as a
maintenance agreement is in effect, our clients will receive all software fixes
and release enhancements as agreed upon in the contract documents and license
agreements. The maintenance program also includes up to 24-hour customer service
support to answer technical questions, assist in solving technical issues,
report product discrepancies, or request enhancements. Standard customer service
support is available during normal business hours. An extended customer service
support option is available which includes seven-day, 24-hour customer service.
Strategic Consulting. Our consultants are available to work on select
strategic supply chain projects. We can help our clients develop custom supply
chain network plans to achieve their business goals. We apply these resources as
necessary to solve a wide range of complex supply chain problems.
CUSTOMERS
We target three types of customers: bricks and mortar companies, web-based
companies and market exchanges.
- Bricks and mortar companies typically attempt to differentiate themselves
from their competitors through responsiveness and reliability while
achieving a competitive cost advantage. Targeted bricks and mortar
companies have complex products or supply chain processes, such as
multiple suppliers,
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<PAGE> 42
plants and warehouses, complex orders, significant inventory carrying
costs and alternative transportation modes. They are also producing or
distributing mass customized products.
- Web-based companies have a strong web presence and accept orders over the
Internet but rely heavily on the supply chain assets of other companies.
Targeted web-based companies have complex order requirements and seek to
fulfill orders as profitably as possible. They must have intimate
knowledge of the capabilities and current status of the supply chain
assets of their trading partners to profitably service their customers.
- Market exchanges are typically businesses that have a web presence and
offer direct materials procurement services to buyers and sellers using
their exchange. Targeted market exchanges offer services for coordination
of complex orders, sourcing of materials for lowest total delivered costs
and/or have sellers that seek to sell excess capacity.
As of April 30, 2000, we had over 100 customers, operating in vertical
markets such as automotive and aerospace, electronics and electrical,
fabrication and assembly, printing and packaging, industrial and general
business industries. The following chart highlights representative customers in
these industries:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
AUTOMOTIVE/AEROSPACE ELECTRONICS/ELECTRICAL FABRICATION/ASSEMBLY
-------------------- ---------------------- ----------------------------
<S> <C> <C>
The B.F. Goodrich Company Pioneer Electronic Corp. Eaton Corporation
Ford Motor Company Ryobi North America, Inc. Herman Miller, Inc.
Reynolds Metals Company STMicroelectronics Ingersoll-Rand Company
Sagem SA State Industries, Inc. Irwin Seating Company
Tenneco Automotive Inc. Sauder Woodworking Co.
<CAPTION>
--------------------------------------------------------------------------------------------
PRINTING/PACKAGING INDUSTRIAL GENERAL BUSINESS
------------------ ---------- ----------------
<S> <C> <C>
CCL Custom Manufacturing, Inc. Commonwealth Industries, Inc. AmBev
Chesapeake Corporation Pfaudler, Inc. Cara Operations Limited
Crane Plastics Company Wolverine Tube, Inc. Kellogg Company
Graphics Packaging Corporation Nordstrom.com
Titleist and Footjoy Worldwide Sara Lee Corporation
United Parcel Service, Inc.
--------------------------------------------------------------------------------------------
</TABLE>
CASE STUDIES
The following case studies illustrate the benefits that our solutions have
provided to sample customers.
HERMAN MILLER'S SQA DIVISION
Company Background. Herman Miller's SQA Division manufactures and
distributes custom office furniture. The typical delivery time in the custom
office furniture industry is four to eight weeks, with little on-time
reliability. Herman Miller's SQA Division had already achieved delivery times of
as little as two weeks using streamlined methods and the deployment of a
PC-based order configuration system.
Issue. Herman Miller's SQA Division receives an average of 300 customer
orders daily, which results in more than 3,000 work orders for production.
Manufacturing companies typically perform work sequentially, with a product
moving from department to department until it is completed. This method of
manufacturing wastes time as products are moved from station to station with
idle time at each station. Herman Miller realized that to reduce lead times
significantly, it needed to coordinate assembly and reduce product idle time.
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<PAGE> 43
SynQuest Solution. To accomplish these tasks, Herman Miller's SQA Division
selected our Virtual Production Engine in 1996 to enable it to keep pace with
growing demand for its products and to create a paperless, real-time environment
for improved manufacturing flexibility. Herman Miller's SQA Division implemented
our software at its Holland, Michigan facility within 28 weeks. A second
implementation was deployed in Rocklin, California eight weeks later. In 1999,
Herman Miller's SQA Division used the Internet to integrate its suppliers with
Virtual Production Engine to speed delivery of materials to its production
facilities.
Results. During the first 18-month period of live use, Herman Miller's SQA
Division gained the following performance improvements:
- On-time shipment reliability increased from 87% to over 99%;
- Average order cycle time dropped from 16 hours to five hours;
- Herman Miller's SQA Division ranked first in the furniture industry for
quick and complete delivery, delivery when promised and service,
according to an independent survey referenced by Supply Chain Management
Review, an industry publication;
- Annual inventory turns increased by approximately 250% to over 50; and
- Herman Miller's SQA Division reduced its direct materials lead-time to
four hours prior to use in production.
CHESAPEAKE DISPLAY AND PACKAGING COMPANY
Company Background. Chesapeake Display and Packaging Company, or CD&P, is
a provider of global merchandising services and a wholly owned subsidiary of
Chesapeake Corporation, a specialty packaging and merchandising service
provider. The company converts paperboard and other materials into displays,
produces packaging products and offers merchandising services such as
fulfillment. Since 1990, CD&P has experienced double-digit growth annually while
adding services and facilities. The company's network of sales, design,
manufacturing, custom packaging and fulfillment facilities is strategically
positioned across the United States, Canada and Western Europe to ensure
responsiveness and efficiency.
Issue. CD&P's retail customers began to dictate not only what the company
should deliver, but when and how it should make these deliveries, CD&P began the
search for a supply chain software vendor to help reduce inventory, accommodate
last-minute customer changes and maintain its competitive advantage.
SynQuest Solution. To accomplish these tasks, CD&P purchased our Virtual
Production Engine, Tactical Planning Engine and Dynamic Sourcing Engine in early
1998 for three manufacturing facilities, two sub-assembly facilities and six
fulfillment facilities.
Results. Using our software, CD&P has reduced cycle times, inventory and
work-in-process, and is linking to its suppliers via the Internet. For example,
the company builds ahead of time some of the displays and individualizes them
after the customer order is received. It does this at multiple sites in multiple
states and regions. Its previous system could not provide inventory status on
work-in-process, making inventory difficult to manage. Prior to implementing our
solution, the company's inventory covered one million square feet. By reducing
work in process and finished goods inventory, the company has been able to close
four warehouses, resulting in a substantial reduction of overhead.
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<PAGE> 44
Additional improvements include:
- CD&P cut manufacturing cycle time by up to 50%; and
- CD&P improved scheduling of work centers and reduced overrun quantities
by up to 50%.
SALES AND MARKETING
As of April 30, 2000, our sales and marketing organization consisted of 65
individuals, of whom 52 were based in North America and 13 were based in Europe.
Our 25 direct sales representatives are supported by a team of 22 pre-sales
consultants for business, product and technical expertise throughout the sales
cycle. The majority of our direct sales force is organized by geographic areas.
Consistent with our strategy to focus on vertical markets, we intend to continue
to assign some of our sales representatives to specific industries. Our North
American sales offices are located in Atlanta and Chicago. Our European sales
and marketing office is headquartered in London, with an additional sales office
in Paris.
We will continue our initiatives to sell and support our software through
resellers and distributors for specified product types and in multiple
geographic regions. We have established distributor relationships in Latin
America and Eastern Europe.
Our marketing efforts focus on two categories of lead generation programs:
programs that are jointly planned, funded and executed with our strategic
partners; and programs that are designed and implemented by our in-house
marketing team. An advertising agency and a public relations firm assist our
internal team.
Both types of lead generation programs are used to target audiences
throughout North America and Europe. Specific tactics used in these marketing
initiatives include public relations, advertising, trade shows, alliance
programs, seminars, direct mail and telemarketing. In addition, an internal and
external website, product collateral, case studies, white papers and
presentations are available to support the marketing programs.
STRATEGIC RELATIONSHIPS
We are building and maintaining significant working relationships with
complementary vendors. We believe this will contribute considerably to our
success through lead generation and improving our implementation capabilities.
We are an IBM Business Partner, working with multiple organizations within
IBM. We have marketing relationships with the Global Midmarket Business unit and
the AS/400 Server Group, through jointly funded lead generation and awareness
programs. The IBM Manufacturing Industry Solutions Unit develops, installs and
supports a SynQuest/J.D. Edwards World integration product. IBM Global Services
has built an implementation and consulting practice for our products with more
than ten trained and deployed IBM consultants. We are also in the process of
developing additional relationships with other IBM organizations.
We have entered into formal strategic partnership agreements with leading
systems integrators and consulting companies including Deloitte & Touche
Management Solutions and BORN Information Services. These companies complement
our expertise in integrating and implementing SynQuest One2One e-business
solutions. We expect that these companies may become implementation partners in
the future.
We have been a business partner of J.D. Edwards for over three years and,
as of September 1999, we were named its preferred advanced planning and
scheduling partner for discrete manufacturing. We have also created a joint
offering with IBM and J.D. Edwards for the industrial fabrication and assembly
market called Supply Chain Advantage. With J.D. Edwards, we have developed
standard integration for its OneWorld solution and our SynQuest One2One
solutions.
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We have relationships with several enterprise resource planning vendors and
are a certified SAP Complementary Software Partner and a member of the Oracle
Partner Program. Our solution has been certified for integration compliance with
SAP R/3, an enterprise resource planning system. Participation in the Oracle
Partner Program entitles us to benefits that reach beyond basic development
capabilities and product support. In addition to the technical aspect of our
relationship, we have access to a large number of Oracle resources such as
discounted education, training and sales and marketing tools. We are an
authorized reseller of Oracle Application Specific Database products, which
further enhances our ability to sell a complete solution to our customers.
As we increasingly work with web-based companies and market exchanges, we
seek to partner with companies that can strengthen our market position. We have
joint marketing relationships with InterWorld, a web-based sell side solution,
BEA Systems, an Internet infrastructure provider, Arborex, a packaging materials
market exchange, and WebPLAN, a high-tech electronics supply chain solution
vendor.
COMPETITION
The e-business supply chain management solutions market is relatively new
and growing rapidly. We generally differentiate ourselves from our competitors
through our explicit ability to optimize financial performance, our real-time
management and ease of deployment.
We compete primarily with supply chain management solutions vendors,
including i2 and Manugistics, both of which are significantly larger than us. i2
provides customers with software solutions for supply chain management, customer
management and product life cycle management. i2 competes across a broad range
of vertical markets. Manugistics offers a wide range of supply chain management
products targeted towards consumer products companies.
A large number of traditional software vendors, including Demantra,
Descartes and Manhattan Associates, provide specialized applications that
generally fall into the broad category of supply chain management. This includes
vendors of full function demand forecasting, transportation planning and
management, warehouse management and other logistics related applications.
Others provide finite capacity scheduling, geared either to process or discrete
manufacturers. Some of these solutions, such as warehouse management, are
complementary and we have plans to expand our partnerships in those areas. We
believe that most customers prefer to have a broader set of applications that
can solve an entire business process.
A number of web-based solution vendors, including Commerce One and Ariba,
have entered the supply chain management market. We believe that these vendors
fall into three categories, competitors, potential partners and prospects.
Web-based competitors face the same issue as enterprise resource planning
vendors, acquiring domain expertise. We believe that many of the emerging
web-based supply chain management solutions represent strong opportunities for
partnerships that can provide more value to our customers and prospects. These
same vendors are also potential users of our solutions to expand their
capabilities. Further, some companies have relied on in-house development to
satisfy their needs for supply chain management solutions. Typically, these
companies have focused on developing specialized supply chain solutions, not a
broad suite of capabilities. We believe that the number of companies pursuing
in-house development of supply chain management solutions will become
insignificant, as companies seek to deploy a broad range of supply chain
capabilities and do not have the required domain expertise.
In addition, most of the major enterprise resource planning vendors offer,
or have announced plans to offer, advanced planning and supply chain
functionality into their solutions. SAP, PeopleSoft, Baan, Oracle and J.D.
Edwards rely on supply chain management software to enhance their product
offerings. Their supply chain planning products are designed for integration
with their transaction applications and not for the heterogeneous application
environments of our prospective customers. These companies have very large
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<PAGE> 46
installed customer bases and they have substantially greater financial,
technical and marketing resources than we do.
RESEARCH AND DEVELOPMENT
As of April 30, 2000, we employed 79 individuals in our research and
development groups located in Clifton Park, New York and Arlington, Virginia
including a core group of operations research specialists focused on new and
better technologies for solving supply chain problems. As of April 30, 2000, we
had 32 employees with post-graduate or advanced degrees in operations research
or related fields. In addition, we use outside programming resources to
supplement our base staff from time to time. We spent $10.2 million on research
and development expenses in fiscal year 1999, $9.4 million in fiscal year 1998
and $6.3 million in fiscal year 1997.
Through a combination of investments in internal development, outsourcing
and alliances, we have significantly expanded the scope of our products over the
past 18 months. Due to the evolving nature of the market, we intend to continue
to maintain a high level of investment in new product development and
enhancements, either internally or through external sources. Periodically, we
undertake advanced development projects, which may be partially or wholly funded
by customers that wish to deploy technology that sets them apart from their
competition. These projects have led to breakthroughs that emerge as new
standard products for the broader market, such as the Inbound Planning Engine,
which we developed in conjunction with Ford Motor Company.
We adhere to industry standard methods whenever possible. Our products are
built to support standards such as J2EE and Microsoft COM. We use industry
standard languages such as Java, Microsoft Visual C++ and Visual Basic. We rely
on component and object oriented engineering methodologies to develop our
products.
We are an innovative technology provider in several areas within the supply
chain management market, including product architecture and communications. We
use a multi-tier, component based architecture for scalability and ease of
deployment. Our architecture separates data, business logic and
presentation/communication services to make distribution of the systems across
multiple entities easier. All communications with the business logic is
conducted through applications programming interfaces. These interfaces allow us
to offer our customers the ability to use one solution to interact through
browsers and Microsoft Windows-based interfaces, as well as connect to legacy
applications and web-based business-to-business e-commerce solutions. Along with
the industry standards, we use proprietary technology where necessary to provide
added value. For example, we have developed our own code generation technology
that allows us to rapidly build a large number of application programming
interfaces simultaneously supporting XML and C-based communications.
Our products operate on IBM RS/6000 AIX, IBM AS/400, HP-UX, Sun Solaris
and/or Microsoft NT servers and browsers or networked PC clients with Microsoft
Windows 95(R) and NT(R), although not every product is yet available for all
platforms. The Oracle Corporation and the IBM Corporation provide relational
database support.
INTELLECTUAL PROPERTY
Our success and ability to compete are dependent upon continuous
improvements of our existing product portfolio and the continued development of
new solutions. To protect our technology, we rely primarily on copyright, trade
secret and trademark laws. In the ordinary course of business, we enter into
confidentiality or license agreements with our employees, consultants and
corporate partners that control access to and distribution of our software,
documentation and other proprietary information. In addition, we license our
products to end users in object code, machine-readable format and our license
agreements generally allow the use of our products solely by the customer for
internal purposes without the right to sublicense or transfer the products.
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EMPLOYEES
As of April 30, 2000, we had 202 full-time employees, of whom 79 were
engaged in research and development, 65 in sales and marketing, 43 in service
and support and 15 in finance, administration and operations. None of our
employees are represented by a labor union. As of April 30, 2000, we had 179
employees located in North America and 23 employees located in Europe. We
believe that our employee relations are satisfactory.
FACILITIES
We lease 18,452 square feet of office space for our executive offices in
Norcross, Georgia under a lease that expires in January 2006. We also lease
office space in Clifton Park, New York; Chicago, Illinois; York, Pennsylvania;
Arlington, Virginia; Paris, France; London, England; and Gorinchem, Netherlands.
LEGAL PROCEEDINGS
We currently are not a party to any litigation that we believe could have a
material adverse effect on us or our business.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table provides information regarding our executive officers
and directors as of April 30, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Joseph Trino............................... 51 Chief Executive Officer and Director
Timothy Harvey............................. 43 President and Chief Operating Officer
Paul Bender................................ 64 President, Bender Consulting Division and
Director
John Bartels............................... 55 Executive Vice President, Finance and
Administration
Christopher Jones.......................... 41 Executive Vice President, Corporate
Development and Marketing
Mark Simcoe................................ 43 Chief Financial Officer and Treasurer
Fred Brown................................. 47 Senior Vice President, Field Services
Henry Kressel.............................. 66 Director
Joseph Landy............................... 38 Director
Edward Scott, Jr........................... 61 Director
</TABLE>
Joseph Trino has been our Chief Executive Officer since July 1996 and a
director since May 1994. He was our President from May 1994 to December 1999.
From April 1992 to December 1993, Mr. Trino was President of Kaseworks, Inc. an
Atlanta-based provider of application development tools. From January 1980 to
April 1992, he was employed at Dun & Bradstreet Software Inc. From December 1988
to April 1992, Mr. Trino was President of Dun & Bradstreet Software's
Manufacturing Systems Business Unit. Mr. Trino received a B.S. in Finance and
Administration from Syracuse University.
Timothy Harvey has been our Chief Operating Officer since July 1998 and our
President since December 1999. From July 1996 to June 1998, he served as our
Executive Vice President, Field Operations. From March 1988 to June 1996, Mr.
Harvey was Vice President of worldwide field operations at Datalogix
International, an enterprise resource planning vendor. From November 1982 to
March 1988, Mr. Harvey held various positions at Management Science America,
Inc., an enterprise applications provider in Atlanta, Georgia, later acquired by
Dun & Bradstreet Software. Mr. Harvey also served for four years as an officer
in the United States Marine Corps. Mr. Harvey received a B.S. in Business
Administration from the University of Florida.
Paul Bender has been President of Bender Consulting, a consulting division
of our company, since June 1997 and a director since March 1998. From 1982 to
June 1997, Dr. Bender was President of Bender Management, which was the
predecessor to Bender Consulting. He is a founding member of the Council of
Logistics Management and the Institute of Management Consultants. Dr. Bender
received a B.A. and an M.S. in Electrical Engineering and a Ph.D. in Mathematics
from the Swiss Institute of Technology.
John Bartels has been our Executive Vice President, Finance and
Administration since November 1997. He is responsible for our worldwide
financial operations, including investor relations and human resources. From
November 1995 to October 1997, Mr. Bartels was Senior Vice President and Chief
Financial Officer of TSW International, Inc., an enterprise asset management
software company that has since been acquired by Indus International, Inc. From
1993 until October 1995, he was Chief Financial Officer of Boral, Inc., a
manufacturer of construction materials. From March 1974 to June 1991, Mr.
Bartels was employed at Fuqua Industries, Inc., a diversified holding company,
as its Senior Vice President
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and Chief Financial Officer. He is a certified public accountant. Mr. Bartels
received a B.S. in Accounting and an M.B.A. from Florida State University.
Christopher Jones has been our Executive Vice President, Marketing and
Corporate Development since January 2000. From September 1998 to January 2000,
he was our Senior Vice President, Marketing and Corporate Development. From May
1994 to September 1998, Mr. Jones was Vice President of enterprise applications,
manufacturing and logistics research for Gartner Group, Inc., a provider of
information technology advisory services. From July 1981 to May 1994, he was
employed by Kraft Foods in a variety of information technology and management
roles. Mr. Jones received a B.S. in Electrical Engineering from Lehigh
University.
Mark Simcoe has been our Chief Financial Officer and Treasurer since July
1994. From April 1994 to June 1994, Mr. Simcoe was a consultant to us in the
role of acting chief financial officer. From May 1992 to April 1994, Mr. Simcoe
served as Executive Vice President and Chief Financial Officer of Kaseworks,
Inc. He is a certified public accountant. Mr. Simcoe received a B.S. in
Accounting, an M.B.A. and an M.S. in Tax Accounting from the University of
Florida.
Fred Brown has been our Senior Vice President, Field Services since January
2000. From November 1996 to December 1999, he was our Vice President, Field
Services. From December 1991 to September 1996, Mr. Brown was Vice President,
Pre-Sales at Datalogix. Mr. Brown attended North Carolina State University.
Henry Kressel has served on our board of directors since May 1994. Dr.
Kressel has been employed by E.M. Warburg, Pincus & Co., LLC, an investment
firm, since 1983 and has been a Managing Director of E.M. Warburg, Pincus since
1985. Prior to 1983, Dr. Kressel was Staff Vice President for research and
development in solid state technology at RCA Corporation. Dr. Kressel also
serves as a director of Alysis Technologies Inc., a software development
company; EarthWeb, Inc., a business portal for the information technology
industry; Nova Information Systems, Inc., a credit card processing company; and
several privately-held companies. Dr. Kressel received a B.A. from Yeshiva
University, an M.S. in Applied Physics from Harvard University, a Ph.D. in
Engineering from the University of Pennsylvania and an M.B.A. from The Wharton
School of Business at the University of Pennsylvania.
Joseph Landy has served on our board of directors since August 1994. Since
1985, Mr. Landy has been employed by E.M. Warburg, Pincus and has been a
Managing Director of E.M. Warburg, Pincus since 1994. Mr. Landy currently runs
the Internet Group at E.M. Warburg, Pincus, and he has focused primarily on
investments in the information technology industry throughout his tenure at
Warburg, Pincus. He also serves as a director of Indus International, The Cobalt
Group and several privately-held companies. He also serves on the board of The
New York Venture Capital Forum. Mr. Landy received a B.S. in Economics from The
Wharton School of Business at the University of Pennsylvania and an M.B.A. from
the Stern School of Business of New York University.
Edward Scott, Jr. has served on our board of directors since February 2000.
Mr. Scott founded BEA Systems, Inc., an e-commerce transactions company, with
two other individuals in early 1995. Mr. Scott served as Executive Vice
President for BEA's Worldwide Field Operations from April 1995 to September
1999, where he supervised BEA's sales, marketing and services operations. From
September 1990 to April 1995, Mr. Scott was Executive Vice President in charge
of Worldwide Sales and Marketing at Pyramid Technology. Mr. Scott was a founder
of Sun Microsystems' federal division, Sun Federal. Mr. Scott was an executive
in the U.S. Federal Government for 17 years. In his last two government
assignments, he served as Deputy Assistant Attorney General in the U.S.
Department of Justice and as Assistant Secretary for Administration in the U.S.
Department of Transportation. Mr. Scott has a B.A. in Communication Arts and an
M.A. in Political Science from Michigan State University, and a B.A. in
Philosophy, Politics and Economics from Oxford University in England.
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BOARD OF DIRECTORS
We currently have five directors, and we expect to add at least one new
independent director following completion of this offering. Our bylaws provide
that the authorized number of directors may be changed by an amendment to the
bylaws adopted by our board of directors or by the shareholders. In addition,
our articles of incorporation and our bylaws provide that, in general, vacancies
on the board may be filled by a majority of directors in office, although less
than a quorum.
COMMITTEES OF THE BOARD
Following completion of this offering, we intend to establish an audit
committee. The audit committee will review, act on and report to our board of
directors on various auditing and accounting matters, including the selection of
our independent accountants, the scope of our annual audits, fees to be paid to
the independent accountants, the performance of our independent accountants and
our accounting practices.
Following completion of this offering, we intend to establish a
compensation committee. Our compensation committee will establish salaries,
incentives and other forms of compensation for officers and other employees.
This committee will also administer our incentive compensation and benefit
plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the completion of this offering, all compensation matters were
managed by the full board of directors, including members of management serving
on our board.
Two members of our board of directors are officers and employees of our
company. No interlocking relationship exists between our board of directors and
the board of directors or compensation committee of any other company, nor has
any interlocking relationship existed in the past.
DIRECTOR COMPENSATION
Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable and necessary expenses for
attending board and board committee meetings.
Members of the board who are not our employees, or employees of any parent,
subsidiary or affiliate of our company, will be eligible to participate in our
stock option plan unless they are representatives of venture capital funds or
corporate investors. The option grants under the plan will be automatic and
nondiscretionary and the exercise price of the options will be the fair market
value of our common stock on the date of grant.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth the compensation that we paid our chief
executive officer and our four other most highly compensated executive officers
for services rendered during fiscal 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS/SARS
- --------------------------- --------- -------- ------------
<S> <C> <C> <C>
Joseph Trino.......................................... $220,000 $ -- 129,000
Chief Executive Officer
Timothy Harvey........................................ 185,000 50,000 102,000
President and Chief Operating Officer
Paul Bender........................................... 150,000 -- --
President, Bender Consulting Division
John Bartels.......................................... 200,000 35,000 17,000
Executive Vice President, Finance and Administration
Fred Brown............................................ 125,000 20,000 68,000
Senior Vice President, Field Services
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to our chief executive officer and our four other most highly compensated
executive officers during fiscal 1999:
<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZABLE
SHARES OF % OF VALUE AT ASSUMED
COMMON TOTAL ANNUAL RATES OF STOCK
STOCK OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES EXERCISE EXPIRATION -----------------------
NAME GRANTED IN 1999 PRICE DATE 5%($) 10%($)
- ---- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joseph Trino............... 129,000 12.0% $3.00 08/24/08 $243,382 $616,778
Timothy Harvey............. 102,000 9.5 3.00 08/24/08 192,442 487,685
Paul Bender................ -- -- -- -- -- --
John Bartels............... 17,000 1.6 3.00 08/24/08 32,074 81,281
Fred Brown................. 68,000 6.3 3.00 08/24/08 128,295 325,123
</TABLE>
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE TABLE
The following table shows information concerning stock option values as of
the fiscal year ended June 30, 1999 for each of our chief executive officer and
our four other most highly compensated executive officers. The value of
unexercised in-the-money options is determined by subtracting the exercise price
from the fair market value of the common stock on June 30, 1999, which is
assumed to be $ , the assumed initial offering price, for the purposes of
this table only, and multiplying the result by the number of shares underlying
the options. None of our executive officers exercised any stock options in
fiscal 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Joseph Trino............................. 658,527 447,930
Timothy Harvey........................... 117,323 211,662
Paul Bender.............................. -- --
John Bartels............................. 89,000 195,000
Fred Brown............................... 31,667 106,333
</TABLE>
EMPLOYMENT AGREEMENTS
On November 1, 1997, we entered into employment agreements with Messrs.
Trino and Bartels. The agreements are terminable at will by either party and
contain two-year confidentiality provisions, a one-year non-competition
provision and a one-year non-solicitation provision. In the event of Mr. Trino's
termination without cause, he is entitled to a lump-sum severance payment equal
to 100% of his then-current base salary. In the event of Mr. Bartels'
termination without cause, he is entitled to a lump-sum severance payment equal
to the greater of $220,000 or 100% of his then current base salary.
On August 15, 1996, we entered into an employment agreement with Mr.
Harvey. The agreement had an initial term ending on August 15, 1999, but it is
automatically extended for successive one-year periods unless either party gives
90 days prior written notice. The agreement is terminable by us for cause or by
Mr. Harvey if there is a material change in his position or duties. The
agreement contains an indefinite confidentiality provision, a two-year
non-competition provision and a two-year non-interference provision. In the
event of Mr. Harvey's termination without cause, he is entitled to a severance
payment of up to $120,000, payable in increments in accordance with our ordinary
payroll practices, until the earlier of the first anniversary of the termination
date or the date that Mr. Harvey commences other employment. If Mr. Harvey's
base salary in his new position is less than $120,000, we must pay the
difference between $120,000 and his base salary until the first anniversary of
the termination date.
On June 16, 1997, we entered into an employment agreement with Dr. Bender.
The agreement terminates on June 30, 2000 and is automatically extended for
successive one-year periods until either party gives at least 90 days written
notice before the expiration of the then-current term. The agreement is
terminable by us for cause or by Dr. Bender if there is a material change in his
position or duties. The agreement contains a two-year confidentiality provision
and a one-year non-competition provision. In the event of Dr. Bender's
termination without cause, he is entitled to a lump sum severance payment equal
to 200% of his then-current base salary. We also have the discretion to pay Dr.
Bender an annual amount equal to 200% of his then-current salary for a period of
up to two years following the first anniversary of the date of termination. The
annual amount is payable in equal monthly installments. During the period that
Dr. Bender receives this annual amount, he is prohibited from engaging in any
activity associated with computer software, manufacturing or supply chain
management. In addition, the non-competition provisions of Dr. Bender's
employment agreement are automatically extended to cover the entire period
during which this annual amount is paid.
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On September 1, 1998, we entered into an employment agreement with Mr.
Jones. The agreement is terminable by either party at will and contains a
two-year confidentiality provision, a one-year non-solicitation provision and a
one-year non-competition provision. In the event of Mr. Jones' termination
without cause, he is entitled to a severance payment equal to the greater of
$75,000 or 50% of his then-current base salary.
On November 1, 1999, we entered into a severance agreement with Mr. Simcoe.
In the event of Mr. Simcoe's termination without cause, he is entitled to a
severance payment equal to six months of his then-current base salary. If
requested, Mr. Simcoe will execute a standard form of release then being used by
us for other terminated employees.
STOCK OPTION PLANS
Our 1987 and 1997 stock option plans provide that we can grant either
incentive stock options or non-qualified options to purchase shares of our
common stock in order to provide incentives to our employees and directors. Our
1987 plan has expired, and under our 1997 plan we currently are authorized to
issue up to 3,800,000 options to purchase our common stock. The 1997 plan allows
participants to purchase our common stock at prices set by the board of
directors, but in the case of incentive stock options, the price is not less
than the fair market value at the date the option is granted or, if the
incentive stock option is granted to an eligible key employee who is a 10%
shareholder, not less than 110% of the fair market value at the date the option
is granted. Outstanding options typically vest one-third each year commencing
one year from the date of grant. Unexercised options typically expire 10 years
after the date of grant. As of April 30, 2000, there were outstanding options to
purchase 4,043,180 shares of common stock pursuant to the 1987 and 1997 plans.
In addition, all options granted under the 1987 and 1997 plans vest upon a
change of control, which includes issuance of our capital stock in any public
offering that causes existing shareholders to own less than 51% of our total
issued and outstanding capital stock.
401(K) PLAN
We have a 401(k) profit sharing plan for the benefit of eligible employees
and their beneficiaries. Substantially all employees are eligible to participate
in the plan. Our contributions to the plan are discretionary. We made no
contributions to the plan during 1997, 1998, 1999, or the nine months ended
March 31, 2000.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our articles of incorporation limit the liability of directors to the
fullest extent permitted by Georgia law. In addition, our articles of
incorporation and bylaws provide that we will indemnify our directors and
officers to the fullest extent permitted by Georgia law.
These provisions may have the effect of preventing changes in the
management. Prior to the completion of this offering, we intend to enter into
indemnification agreements with each of our current directors and officers to
give them additional contractual assurances regarding the scope of the
indemnification set forth in our articles of incorporation and bylaws and to
provide additional procedural protections. At present, there is no pending
litigation or proceeding involving any of our directors, officers or employees
for which indemnification from us is sought. We are not aware of any threatened
litigation against our directors, officers or employees that may result in
claims for indemnification from us.
We currently have liability insurance for our directors and officers, and
we intend to extend that coverage for public securities matters.
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<PAGE> 54
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of April 30, 2000 by:
- each person known to be a beneficial owner of more than five percent of
our outstanding common stock;
- each director or director nominee;
- our five most highly compensated executive officers; and
- all of our directors and executive officers as a group.
Unless otherwise indicated in the footnotes to this table and subject to
community property laws where applicable, we believe that each of the
shareholders named in this table has sole voting and investment power with
respect to the shares indicated as beneficially owned. Unless otherwise
indicated, the address for each person set forth in the table is c/o SynQuest,
Inc., 3500 Parkway Lane, Suite 555, Norcross, Georgia 30092.
The number of shares beneficially owned by each person assumes (a)
conversion of all of our outstanding redeemable preferred stock, plus accrued
and unpaid dividends as of , 2000, payable in common stock, into
shares of our common stock, assuming an initial offering price of $ per
share, less underwriting discounts and commissions, and (b) includes shares that
may be acquired by that person through the exercise of stock options on or prior
to June 29, 2000. In calculating the percentage owned by each person, we assumed
that all shares issuable upon the exercise of options on or prior to June 29,
2000 are issued to that person. The total number of shares outstanding used in
calculating the percentage owned assumes no exercise of options held by other
persons.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
-------------------------
NUMBER OF SHARES PRIOR TO AFTER
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING(1) OFFERING(2)
- ------------------------ ------------------ ----------- -----------
<S> <C> <C> <C>
Executive Officers and Directors:
Joseph Trino(3).......................................... 868,124 5.6%
Timothy Harvey(4)........................................ 246,985 1.7
Paul Bender(5)........................................... 750,000 5.1
John Bartels(6).......................................... 361,227 2.4
Fred Brown(7)............................................ 77,667 *
Henry Kressel(8)(9)...................................... 13,202,543 64.7
Joseph Landy(8)(9)....................................... 13,202,543 64.7
Edward Scott, Jr.(10).................................... -- --
All executive officers and directors as a group (10
persons)(11)........................................... 15,623,212 71.4
Five Percent Shareholder:
Warburg, Pincus Investors, L.P.(8)....................... 13,202,543 64.7
</TABLE>
- ---------------
* Less than 1%.
(1) Based on an aggregate of 1,633,779 shares of common stock and 12,995,356
shares of preferred stock issued and outstanding as of April 30, 2000.
(2) Assumes the issuance of shares of common stock in this
offering.
(3) Represents shares issuable upon the exercise of outstanding options. Mr.
Trino has pledged the shares issuable upon the exercise of the first
300,000 of such options to Warburg, Pincus Investors pursuant to a stock
pledge agreement dated June 19, 1998 as collateral for a promissory note
dated June 19, 1998 in the amount of $138,750 held by Warburg, Pincus
Investors.
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<PAGE> 55
(4) Including shares issuable upon the exercise of outstanding options to
purchase 226,985 shares of common stock.
(5) Represents 750,000 shares of Series F preferred stock, including 150,000
shares held in escrow by First Union National Bank, N.A. as escrow agent
under the Escrow Agreement dated June 16, 1997 among us, Paul Bender and
First Union National Bank as escrow agent.
(6) Includes shares issuable upon the exercise of outstanding options to
purchase 183,667 shares of common stock. The remainder of these shares are
pledged to Warburg, Pincus Investors as collateral for a promissory note
dated November 5, 1997 in the amount of $268,290 held by Warburg, Pincus
Investors.
(7) Represents shares issuable upon the exercise of outstanding options.
(8) The stockholder is Warburg, Pincus Investors, L.P. Warburg, Pincus & Co. is
the sole general partner of Warburg, Pincus Investors. Warburg, Pincus
Investors is managed by E.M. Warburg, Pincus & Co., LLC. Lionel I. Pincus
is the managing partner of Warburg, Pincus & Co. and the managing member of
E.M. Warburg, Pincus & Co., LLC and may be deemed to control both entities.
Includes (x) shares issuable upon the (a) exercise of 5,788,105 warrants,
(b) conversion of 540,016 shares of Series B preferred stock, (c)
conversion of 2,376,651 shares of Series C preferred stock, (d) conversion
of 3,692,618 shares of Series D preferred stock and (e) conversion of
805,153 shares of Series G preferred stock, and (y) accrued and unpaid
dividends as of , 2000, payable in common stock, into
shares of our common stock, assuming an initial offering price of
$ per share, less underwriters discounts and commissions. The address
of the Warburg, Pincus entities is 466 Lexington Avenue, New York, New York
10017.
(9) Messrs. Landy and Kressel are general partners of Warburg, Pincus & Co. and
managing directors and members of E.M. Warburg, Pincus & Co., LLC. All
shares indicated as owned by Messrs. Landy and Kressel are included because
of their affiliation with the Warburg, Pincus entities. Messrs. Landy and
Kressel disclaim beneficial ownership of all shares owned by the Warburg,
Pincus entities.
(10) Mr. Scott purchased 112,500 shares of our common stock in May 2000.
(11) Includes (x) shares of common stock issuable upon the (a) exercise of
options to purchase 1,473,109 shares of common stock, (b) exercise of
5,788,105 warrants, (c) conversion of 540,016 shares of Series B preferred
stock, (d) conversion of 2,376,651 shares of Series C preferred stock, (e)
conversion of 3,692,618 shares of Series D preferred stock, (f) conversion
of 750,000 shares of Series F preferred stock and (g) conversion of 805,153
shares of Series G preferred stock, and (y) accrued and unpaid dividends as
of , 2000, payable in common stock, into shares of
our common stock, assuming an initial offering price of $ per share,
less underwriters discounts and commissions.
53
<PAGE> 56
RELATED PARTY TRANSACTIONS
Other than compensation agreements and other arrangements, which are
described under the heading "Management," and the transactions described below,
there has not been, nor is there currently proposed, any transaction or series
of similar transactions to which we were or will be a party:
- in which the amount involved exceeded or will exceed $60,000; and
- in which any director, executive officer, holder of more than five
percent of our common stock or any member of their immediate family had
or will have a direct or indirect material interest.
E.M. WARBURG, PINCUS
In May 1994, Warburg, Pincus Investors, L.P., an affiliate of E.M. Warburg,
Pincus, purchased 540,016 shares of Series B preferred stock and 2,376,651
shares of Series C preferred stock from Factory Automation & Computer
Technologies, Inc., our predecessor, for $2.40 per share. The aggregate purchase
price for these shares was $7.0 million. Factory Automation & Computer
Technologies, Inc. used the proceeds from the sale of the shares to purchase all
of its then outstanding convertible Class A preferred stock, warrants to
purchase Series A preferred stock, voting common stock and options to purchase
voting common stock. Following completion of these transactions, Warburg, Pincus
Investors was our sole shareholder.
In 1996, Warburg, Pincus Investors purchased, in three separate
transactions, an aggregate of 3,870,178 shares of Series D preferred stock from
Factory Automation & Computer Technologies, Inc. Of these, 3,070,178 shares were
purchased at a price of $2.28 per share and 800,000 shares were purchased at a
price of $2.50 per share. The aggregate purchase price for these shares was $9.0
million.
We issued eight subordinated promissory notes to Warburg, Pincus Investors
from May 1995 to July 1997. The notes have an aggregate principal amount of
$15.0 million and accrued interest at prime plus 2% annually, adjusted
bi-annually from the date of issuance. Interest and principal are payable on
demand.
In connection with the subordinated promissory notes, we issued warrants to
purchase common stock to Warburg, Pincus Investors. The warrants may be
exercised at any time before their expiration dates. Under the terms of the
warrant agreements, the warrant holder is protected from future dilution of our
common stock. The date and amount of each note and the terms of warrants issued
and outstanding related to each note are summarized as follows:
<TABLE>
<CAPTION>
WARRANTS TO EXERCISE
AMOUNT PURCHASE PRICE OF EXPIRATION DATE
DATE OF NOTE OF NOTE COMMON STOCK WARRANTS OF WARRANT
------------ ----------- ------------ -------- ------------------
<S> <C> <C> <C> <C>
May 10, 1995.................... $ 2,000,000 1,301,696 $1.80 May 9, 2005
September 19, 1995.............. 2,000,000 681,213 2.94 September 18, 2005
November 5, 1996................ 1,500,000 545,455 2.75 November 4, 2006
December 9, 1996................ 1,000,000 363,636 2.75 December 9, 2006
February 17, 1997............... 2,500,000 909,091 2.75 February 17, 2007
April 15, 1997.................. 1,500,000 545,455 2.75 April 15, 2007
May 20, 1997.................... 2,000,000 727,273 2.75 May 20, 2007
July 20, 1997................... 2,500,000 714,286 3.50 July 20, 2007
----------- ----------
Outstanding at April 30, 2000... $15,000,000 5,788,105
=========== ==========
</TABLE>
In addition, in November 1998 we issued a subordinated promissory note to
Warburg, Pincus Investors in an aggregate principal amount of $5.0 million. On
March 1, 1999, Warburg, Pincus Investors converted the outstanding principal
amount of the note into 805,153 shares of Series G preferred stock.
In April 2000, we received a $2.5 million loan from E.M. Warburg, Pincus.
54
<PAGE> 57
The aggregate 7,414,438 shares of redeemable preferred stock owned by
Warburg, Pincus Investors will automatically convert into shares of common
stock upon completion of this offering. In addition, on May 15, 2000, the board
of directors declared a dividend on the redeemable preferred stock at the
initial offering price. This dividend will be paid in shares of common
stock upon completion of this offering, at an assumed initial public offering
price of $ per share, less underwriting discounts and commissions. In
connection with this dividend, Warburg, Pincus Investors will receive
shares of common stock. In addition, upon the closing of this offering, we
and Warburg, Pincus Investors have agreed that the aggregate principal amount of
$15.0 million in indebtedness, plus accrued interest, held by Warburg, Pincus
Investors will be converted into shares of common stock, at an assumed
initial public offering price of $ per share, less underwriting discounts
and commissions. Finally, we have agreed that the aggregate 5,788,105 warrants
held by Warburg, Pincus Investors will be exercised for an aggregate of
shares of common stock upon the closing of this offering on a cashless
basis valuing the shares of common stock at the assumed initial public offering
price, less underwriting discounts and commissions.
EXECUTIVE OFFICERS AND DIRECTORS
On November 5, 1997, Mr. Bartels purchased from Warburg, Pincus Investors
177,560 shares of Series D preferred stock, which he subsequently converted into
shares of common stock. As consideration for the shares, Mr. Bartels issued
Warburg, Pincus Investors a promissory note in the aggregate principal amount of
$268,290. The note, which was payable in full on November 5, 1998, has been
extended to November 5, 2001.
In June 1998, Mr. Trino borrowed $138,750 from Warburg, Pincus Investors.
The loan matures on June 30, 2000. As collateral for the loan and pursuant to a
stock pledge agreement dated June 19, 1998, he pledged the shares of common
stock issuable upon the exercise of the first 300,000 of his stock options to
Warburg, Pincus Investors.
In May 2000, we sold 112,500 shares of our common stock to Edward Scott,
Jr., a member of our board of directors, for $900,000.
55
<PAGE> 58
DESCRIPTION OF CAPITAL STOCK
Our articles of incorporation authorize common stock and preferred stock as
set forth in the following table:
<TABLE>
<CAPTION>
OUTSTANDING AS OF NUMBER OF
AUTHORIZED APRIL 30, 2000 HOLDERS(1)
----------- ----------------- ----------
<S> <C> <C> <C>
Common stock, par value $0.01 per share......... 100,000,000 1,633,779 68
Preferred stock, par value $0.01 per share...... 16,000,000
Designated in series as follows:
Series B preferred stock...................... 540,016 540,016 1
Series C preferred stock...................... 2,376,651 2,376,651 1
Series D preferred stock...................... 4,000,000 3,692,618 1
Series E preferred stock...................... 1,000,000 -- --
Series F preferred stock...................... 750,000 750,000 1
Series G preferred stock...................... 5,636,071 5,636,071 146
----------- -----------
Total preferred stock designated in
series.............................. 14,302,738 12,995,356
----------- -----------
Total capital stock................... 116,000,000 14,629,135
=========== ===========
</TABLE>
- ---------------
(1) Some holders own shares of more than one class of our capital stock.
COMMON STOCK
The holders of our common stock are entitled to one vote per share on all
matters to be voted upon by the shareholders, subject to voting preferences of
any outstanding preferred stock. The holders of our common stock are entitled to
receive cash dividends when and as declared by the board of directors out of
legally available funds, subject to the rights and preferences of any
outstanding preferred stock. In the event of any liquidation, dissolution, or
winding up of our company, after payment to the holders of any outstanding
preferred stock, the holders of common stock will be entitled to receive all
remaining assets available for distribution to shareholders on a pro rata basis.
PREFERRED STOCK
Our board of directors is authorized, subject to limitations prescribed by
Georgia law, to issue preferred stock in one or more series, to establish from
time to time the number of shares to be included in each series, to fix the
rights, preferences and privileges of the shares of each wholly unissued series
and to fix any of its qualifications, limitations or restrictions. The board can
also increase or decrease the number of shares of any series to no fewer than
the number of shares of that series then outstanding, without any further vote
or action by the shareholders. Our board of directors may authorize the issuance
of preferred stock with voting or conversion rights that could adversely affect
the voting power or other rights of the holders of our common stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in control of our
company and may adversely affect the market price of our common stock and the
voting and other rights of the holders of our common stock. All of our
outstanding shares of preferred stock will automatically convert to common stock
upon completion of this offering. In addition, accrued and unpaid dividends on
our preferred stock as of , 2000, will be payable in shares of
common stock.
REGISTRATION RIGHTS
The holders of 8,552,738 shares of common stock issuable upon conversion of
our Series B, C and G preferred stock have waived their registration rights with
respect to the registration of their shares under the Securities Act in
connection with this offering. If we subsequently propose to register any of our
56
<PAGE> 59
securities under the Securities Act, either for our own account or for the
account of other security holders, the holders of those shares are entitled to
notice of the registration and are entitled to include shares of their common
stock in that registration statement. Additionally, the holders are entitled to
demand registration rights pursuant to which they may require us to file a
registration statement under the Securities Act at our expense with respect to
their shares of common stock, and we are required to use commercially reasonable
efforts to effect that registration. We are not required to effect more than two
of these demand registrations and these rights do not apply until six months
after completion of this offering. In addition, the holders of those shares are
entitled to demand registration rights pursuant to which they may require us to
file a registration statement under the Securities Act on Form S-3 at our
expense with respect to their shares of common stock, and we are required to use
commercially reasonable efforts to effect that registration. We are not required
to effect more than one of these Form S-3 demand registrations in any 12-month
period. All of these registration rights are subject to conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares included in such registration and our right to delay any
registration if we are in possession of material non-public information that we
have a bona fide business purpose for preserving as confidential.
ANTI-TAKEOVER PROVISIONS
Our articles of incorporation and bylaws contain a number of provisions
that could have the effect of delaying, preventing or discouraging a change of
control of our company. These include the following provisions:
- our shareholders are generally unable to fill any interim vacancy on our
board of directors;
- our bylaws provide that special meetings may be called at any time by the
board of directors, the chairman of the board of directors, the chief
executive officer, or by one or more shareholders holding shares in the
aggregate entitled to cast 10% or more of the vote of any class of shares
entitled to a vote at the meeting; and
- shareholders must follow specified procedures in order to properly submit
any business before a shareholder meeting.
These provisions are designed to reduce our vulnerability to an unsolicited
acquisition proposal and, accordingly, could discourage potential acquisition
proposals and could delay or prevent a change in control. These provisions also
are intended to discourage tactics that may be used in proxy fights but could,
however, dissuade others from making tender offers for our shares. Consequently,
these provisions may also inhibit fluctuations in the market price for our
shares that could result from actual or rumored takeover attempts and may also
discourage changes in our management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is .
NASDAQ NATIONAL MARKET LISTING
We will apply for our common stock to be quoted on The Nasdaq National
Market under the trading symbol "SYNQ."
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<PAGE> 60
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock, including shares issued
upon the exercise of outstanding options and warrants in the public market could
adversely affect prevailing market prices. Sales of substantial amounts of our
common stock in the public market after contractual restrictions lapse could
adversely affect the prevailing market price and our ability to raise capital in
the future.
Upon completion of this offering, we will have outstanding
shares of common stock, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options or warrants. Of these shares, the
shares of common stock sold in this offering will be freely tradable
without restriction under the Securities Act unless purchased by our
"affiliates." Based on shares outstanding as of , 2000, the remaining
shares will become eligible for public sale as follows:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
SHARES ELIGIBLE
DATE FOR FUTURE SALE COMMENT
- ---- --------------- -------
<S> <C> <C>
Date of this prospectus.......................
180 days after the date of this prospectus....
Lock-up released. These shares may
be sold under Rule 144.
One year after the date of this prospectus....
Two years after the date of this prospectus...
</TABLE>
LOCK-UP AGREEMENTS WITH THE UNDERWRITERS
Each of our executive officers, directors and other shareholders holding
one percent or more of our outstanding shares on a fully diluted basis have
signed lock-up agreements under which they agreed not to sell, transfer or
dispose of, directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for shares of common stock
without the prior consent of Bear, Stearns & Co. Inc., for a period of 180 days
after the date of this prospectus.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of: (1)
one percent of the number of shares of our common stock then outstanding, which
will equal approximately shares immediately after this offering;
or (2) the average weekly trading volume of our common stock on The Nasdaq
National Market during the four calendar weeks preceding the filing of a notice
on Form 144. Sales under Rule 144 are also subject to manner of sale provisions
and notice requirements and to the availability of current public information
about us.
RULE 144(K)
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years is entitled to sell those
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
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<PAGE> 61
STOCK OPTIONS
Following this offering, we intend to file a registration statement on Form
S-8 under the Securities Act to register shares of common stock which have been
reserved for issuance under our stock option plans. As of April 30, 2000,
options to purchase 4,043,180 shares of our common stock were issued and
outstanding.
The registration statement on Form S-8 is expected to be filed
approximately six months after the effective date of this offering. Accordingly,
shares registered under the registration statement on Form S-8 will be available
for sale in the open market immediately after the expiration of any applicable
lock-up agreements, except to the extent the shares remain subject to vesting
provisions and Rule 144 volume limitations applicable to our affiliates.
59
<PAGE> 62
UNDERWRITING
UNDERWRITING AGREEMENT
Subject to the terms and conditions of an underwriting agreement dated
, 2000, each of the underwriters named below, through their
representatives Bear, Stearns & Co. Inc., J.P. Morgan Securities Inc. and Wit
SoundView Corporation, has severally agreed to purchase from us the aggregate
number of shares of common stock set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- -----------------
<S> <C>
Bear, Stearns & Co. Inc. ...................................
J.P. Morgan Securities Inc. ................................
Wit SoundView Corporation...................................
---------
Total.............................................
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters are subject to approval of various legal matters by their counsel
and to various other conditions, including delivery of legal opinions by our
counsel, the delivery of a letter by our independent auditors and the accuracy
of the representations and warranties made by us in the underwriting agreement.
The underwriters are committed to purchase and pay for all of the above shares
of our common stock if any are purchased.
PUBLIC OFFERING PRICE
The underwriters propose to offer the shares of our common stock directly
to the public at the offering price located on the cover page of this prospectus
and at that price less a concession not in excess of $ per share of
common stock to other dealers who are members of the National Association of
Securities Dealers, Inc. The underwriters may allow and those dealers may
reallow concessions not in excess of $ per share of common stock to
certain other dealers. After this offering, the offering price, concessions and
other selling terms may be changed by the underwriters. Our common stock is
offered subject to receipt and acceptance by the underwriters and subject to
other conditions, including the right to reject orders in whole or in part. The
underwriters have informed us that the underwriters do not expect to confirm
sales of common stock to any accounts over which they exercise discretionary
authority.
We have granted a 30-day over-allotment option to the underwriters to
purchase up to an aggregate of additional shares of our common
stock exercisable at the offering price less the underwriting discounts and
commissions, each as set forth on the cover page of this prospectus. If the
underwriters exercise this option in whole or in part, then each of the
underwriters will be obligated to purchase additional shares of common stock in
proportion to their respective purchase commitments as shown in the table set
forth above, subject to various conditions.
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<PAGE> 63
The following table summarizes the per share and total public offering
price of the shares of common stock in this offering, the underwriting
compensation to be paid to the underwriters by us and the proceeds of the
offering, before expenses, to us. The information presented assumes either no
exercise or full exercise by the underwriters of their over-allotment option.
<TABLE>
<CAPTION>
TOTAL
-------------------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Initial public offering price.....................
Underwriting discounts and commissions payable by
us..............................................
Proceeds, before expenses, to us..................
</TABLE>
The underwriting discount and commission per share is equal to the public
offering price per share of our common stock less the amount paid by the
underwriters to us per share of common stock. We estimate total expenses payable
by us in connection with this offering, other than the underwriting discounts
and commissions referred to above, will be approximately $ .
INDEMNIFICATION AND CONTRIBUTION
The underwriting agreement provides that we will indemnify the underwriters
against liabilities specified in the underwriting agreement under the Securities
Act and liabilities resulting from breaches of representations and warranties
contained in the Underwriting Agreement or will contribute to payments that the
underwriters may be required to make in respect of those liabilities.
LOCK-UP AGREEMENTS
Our executive officers, directors and shareholders holding one percent or
more of our shares on a fully diluted basis have agreed that they will not
offer, sell or agree to sell, directly or indirectly, or otherwise dispose of
any shares of common stock in the public market without the prior written
consent of Bear, Stearns & Co. Inc. for a period of 180 days from the date of
this prospectus. In addition, we have agreed that for a period of 180 days from
the date of this prospectus, we will not, without the prior written consent of
Bear, Stearns & Co. Inc., offer, sell or otherwise dispose of any shares of
common stock, except that we may issue and grant options to purchase shares of
common stock under the 1997 Stock Plan. In addition, we may issue shares of
common stock in connection with any acquisition of, or strategic relationship
with, another company if the terms of such issuance provide that such common
stock shall not be resold prior to the expiration of the 180-day period
referenced in the preceding sentence.
NASDAQ NATIONAL MARKET QUOTATION
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial offering price for the common stock was
determined by negotiations between us and the representatives of the
underwriters. Among the factors considered in those negotiations, the primary
factors were our results of operations in recent periods, estimates of our
prospects and the industry in which we compete, an assessment of our management,
the general state of the securities markets at the time of this offering and the
prices of similar securities of generally comparable companies. We will apply to
have the common stock listed for quotation on The Nasdaq National Market, under
the symbol "SYNQ." We cannot assure you, however, that an active or orderly
trading market will develop for the common stock or that the common stock will
trade in the public market subsequent to this offering at or above the initial
offering price.
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<PAGE> 64
STABILIZATION, SYNDICATE SHORT POSITION AND PENALTY BIDS
In order to facilitate this offering, certain persons participating in this
offering may engage in transactions that stabilize, maintain or otherwise affect
the price of the common stock during and after this offering. Specifically, the
underwriters may over-allot or otherwise create a short position in the common
stock for their own account by selling more shares of common stock than we have
actually sold to them. The underwriters may elect to cover any such short
position by purchasing shares of common stock in the open market and may impose
penalty bids, under which selling concessions allowed to syndicate members or
other broker-dealers participating in this offering are reclaimed if shares of
common stock previously distributed in this offering are repurchased in
connection with stabilization transactions or otherwise. The effect of these
transactions may be to stabilize or maintain the market price at a level above
that which might otherwise prevail in the open market. The imposition of a
penalty bid may also affect the price of the common stock to the extent that it
discourages resales thereof. No representation is made as to the magnitude or
effect of any such stabilization or other transactions. Such transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
RESERVED SHARE PROGRAM
At our request, the underwriters have reserved for sale at the initial
public offering price up to shares of common stock to be sold in
this offering for sale to our directors, officers, employees, business
associates, vendors and related persons. Purchases of reserved shares are to be
made through an account at Bear, Stearns & Co. Inc. in accordance with Bear,
Stearns & Co. Inc.'s procedures for opening an account and transacting in
securities. The number of shares available for sale to the general public will
be reduced to the extent that any reserved shares are purchased. Any reserved
shares not purchased by our directors, officers, employees, business associates,
vendors and related persons will be offered by the underwriters to the general
public on the same terms as the other shares offered by this prospectus.
ELECTRONIC PROSPECTUS
A prospectus in electronic format is being made available on Internet sites
maintained by one or more of the lead underwriters of this offering, including
Wit SoundView Corporation's affiliate, Wit Capital Corporation, and may be made
available on websites maintained by other underwriters. Other than the
prospectus in electronic format, the information on any underwriter's website
and any information contained in any other website maintained by an underwriter
is not part of the prospectus or the registration statement of which this
prospectus forms a part, has not been approved and/or endorsed by us or any
underwriter in its capacity as underwriter and should not be relied upon by
investors.
LEGAL MATTERS
King & Spalding, Atlanta, Georgia, will pass upon the validity of the
shares of common stock offered by this prospectus. Proskauer Rose LLP, New York,
New York, will pass upon certain legal matters in connection with this offering
for the underwriters.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at June 30, 1998 and 1999, and for each of the three years
in the period ended June 30, 1999, as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
62
<PAGE> 65
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form S-1, including the exhibits and schedules thereto, under the
Securities Act of 1933, as amended, with respect to the common stock offered by
this prospectus. This prospectus does not contain all of the information
contained in the registration statement and the exhibits and schedules to the
registration statement. Some items are omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. For further information
about SynQuest and the common stock offered by this prospectus, you should
review the registration statement and the exhibits and schedules filed as a part
of the registration statement. Descriptions of contracts or other documents
referred to in this prospectus are not necessarily complete. You should be aware
that when we discuss these contracts or documents in the prospectus, we are
assuming that you will read the exhibits to the registration statement for a
more complete understanding of the contract or document. The registration
statement and its exhibits and schedules may be inspected without charge at the
public reference facilities maintained by the Securities and Exchange Commission
in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549
and the Securities and Exchange Commission's regional offices located at 500
West Madison Street, Suite 1400, Chicago, Illinois, 60661 and Seven World Trade
Center, 13th Floor, New York, New York, 10048. Copies of all or any portion of
the registration statement may be obtained from the Public Reference Securities
and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549, or by calling the Securities and Exchange Commission at
1-800-SEC-0330, at prescribed rates. The Securities and Exchange Commission also
maintains a website at www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants, such as SynQuest, that
make electronic filings with the Securities and Exchange Commission.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Act of 1934 and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the Securities and Exchange Commission. Such periodic reports,
proxy statements and other information will be available for inspection and
copying at the Securities and Exchange Commission's public reference rooms, and
the website of the Securities and Exchange Commission referred to above.
63
<PAGE> 66
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of June 30, 1998, 1999, and
March 31, 2000 (unaudited)................................ F-3
Consolidated Statements of Operations for the >years ended
June 30, 1997, 1998, and 1999 and for the nine months
ended March 31, 1999 and 2000 (unaudited)................. F-4
Consolidated Statements of Changes in Redeemable Preferred
Stock, Common Stock and Other Shareholders' Deficit for
the years ended June 30, 1997, 1998, and 1999 and the nine
months ended March 31, 2000 (unaudited)................... F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1998, and 1999 and the nine months ended
March 31, 1999 and 2000 (unaudited)....................... F-7
Notes to Consolidated Financial Statements.................. F-9
</TABLE>
F-1
<PAGE> 67
REPORT OF INDEPENDENT AUDITORS
Board of Directors
SynQuest, Inc.
We have audited the accompanying consolidated balance sheets of SynQuest,
Inc. and subsidiaries as of June 30, 1998 and 1999, and the related consolidated
statements of operations, changes in redeemable preferred stock, common stock
and other shareholders' deficit, and cash flows, for each of the three years in
the period ended June 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of SynQuest, Inc.
and subsidiaries at June 30, 1998 and 1999, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
August 23, 1999, except for
Note 14, as to which
the date is May 17, 2000
F-2
<PAGE> 68
SYNQUEST, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
JUNE 30, SHAREHOLDERS'
--------------------------- MARCH 31, DEFICIT AS OF
1998 1999 2000 MARCH 31, 2000
------------ ------------ ------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash................................................... $ 899,674 $ 638,213 $ 192,988
Accounts receivable (net of allowances of $962,000,
$1,238,000 and $1,477,000 (unaudited) in 1998, 1999
and March 31, 2000, respectively).................... 6,510,758 8,170,490 3,941,440
Other receivables...................................... 332,029 103,327 64,731
Prepaid expenses....................................... 224,763 321,685 258,942
------------ ------------ ------------
Total current assets............................. 7,967,224 9,233,715 4,458,101
Property and equipment:
Leasehold improvements................................. 127,102 158,014 195,937
Furniture and fixtures................................. 567,405 781,934 797,258
Equipment.............................................. 2,199,876 3,505,798 4,341,916
------------ ------------ ------------
2,894,383 4,445,746 5,335,111
Less accumulated depreciation and amortization......... (1,471,484) (2,316,293) (3,132,862)
------------ ------------ ------------
Net property and equipment............................... 1,422,899 2,129,453 2,202,249
Other assets............................................. 147,569 164,953 215,846
Intangible assets (net of accumulated amortization of
$251,000, $429,000 and $535,000 (unaudited) in 1998,
1999 and March 31, 2000, respectively)................. 306,132 127,634 21,830
------------ ------------ ------------
Total assets..................................... $ 9,843,824 $ 11,655,755 $ 6,898,026
============ ============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Subordinated notes payable and accrued interest payable
to related party..................................... $ 17,708,162 $ 19,372,745 $ 20,523,911
Borrowings under line of credit agreement.............. 17,827,659 3,563,219 10,896,028
Accounts payable....................................... 1,314,185 889,803 904,797
Accrued expenses....................................... 4,062,523 5,316,385 4,954,063
Deferred revenue....................................... 1,774,414 2,281,916 2,657,164
Current portion of notes payable and obligations under
capital leases....................................... 292,463 232,399 176,910
------------ ------------ ------------
Total current liabilities........................ 42,979,406 31,656,467 40,112,873
Notes payable and obligations under capital leases, less
current portion........................................ 224,084 265,801 129,140
Preferred Stock, in series, $0.01 par value; redeemable
and convertible:
Authorized shares -- 16,000,000
Issued and outstanding shares --
7,359,285, 12,995,356 and 12,995,356 (unaudited) at
June 30, 1998, 1999 and March 31, 2000, respectively
Liquidation preference of $62,110,892 and $63,933,594
(unaudited) at June 30, 1999 and March 31, 2000,
respectively......................................... 22,050,839 57,256,365 60,022,218 $ --
Shareholders' deficit:
Common Stock, $0.01 par value; 26,000,000 shares
authorized; 1,439,457, 1,492,522 and 1,627,459
(unaudited) shares issued and outstanding at June 30,
1998, 1999 and March 31, 2000, respectively, and
14,622,815 pro forma................................. 14,395 14,925 16,275 146,228
Class A Common Stock, $0.01 par value; convertible,
non-voting; 7,000,000 shares authorized, none
issued............................................... -- -- -- --
Additional paid-in-capital............................. 4,272,054 4,357,452 4,612,633 64,504,898
Accumulated deficit.................................... (59,658,025) (81,751,679) (97,720,035) (97,720,035)
Equity adjustment from foreign currency translation.... (38,929) (143,576) (275,078) (275,078)
------------ ------------ ------------ ------------
Total shareholders' deficit...................... (55,410,505) (77,522,878) (93,366,205) (33,343,987)
------------ ------------ ------------ ------------
Total liabilities and shareholders' deficit...... $ 9,843,824 $ 11,655,755 $ 6,898,026 $ 6,898,026
============ ============ ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 69
SYNQUEST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED JUNE 30, ENDED MARCH 31,
------------------------------------------ ---------------------------
1997 1998 1999 1999 2000
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Software license fees.................... $ 4,332,872 $ 10,392,229 $ 10,521,571 $ 6,992,836 $ 7,720,539
Services................................. 3,887,578 8,014,146 12,759,849 9,246,508 9,429,897
------------ ------------ ------------ ------------ ------------
Total revenue...................... 8,220,450 18,406,375 23,281,420 16,239,344 17,150,436
Operating expenses:
Cost of license fees..................... 10,915 523,682 576,049 476,786 414,403
Cost of services......................... 4,419,159 6,713,808 9,308,436 6,535,796 5,869,896
Research and development................. 6,320,080 9,368,312 10,179,517 7,614,018 7,688,589
Purchased in-process research and
development............................ 2,083,138 -- -- -- --
Sales and marketing...................... 6,344,119 9,485,157 13,730,177 10,247,525 10,077,263
General and administrative............... 5,263,251 4,357,373 5,603,637 3,888,769 4,388,789
------------ ------------ ------------ ------------ ------------
Total operating expenses........... 24,440,662 30,448,332 39,397,816 28,762,894 28,438,940
Operating loss............................. (16,220,212) (12,041,957) (16,116,396) (12,523,550) (11,288,504)
Other income (expense):
Interest income.......................... 65,898 50,472 50,374 32,157 34,885
Interest expense......................... (1,501,060) (3,539,237) (3,526,242) (3,081,314) (1,969,944)
Other income (expense)................... (71,601) 1,345 32,154 16,880 21,060
------------ ------------ ------------ ------------ ------------
(1,506,763) (3,487,420) (3,443,714) (3,032,277) (1,913,999)
------------ ------------ ------------ ------------ ------------
Loss before income taxes................... (17,726,975) (15,529,377) (19,560,110) (15,555,827) (13,202,503)
Income taxes............................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss................................... (17,726,975) (15,529,377) (19,560,110) (15,555,827) (13,202,503)
Accretion of redeemable convertible
preferred stock.......................... (1,309,279) (1,833,158) (2,533,544) (1,607,128) (2,765,853)
------------ ------------ ------------ ------------ ------------
Net loss attributable to common stock...... $(19,036,254) $(17,362,535) $(22,093,654) $(17,162,955) $(15,968,356)
============ ============ ============ ============ ============
Basic and diluted net loss per common
share.................................... $ (16.02) $ (13.98) $ (15.21) $ (11.85) $ (10.52)
============ ============ ============ ============ ============
Weighted average number of shares used in
computing basic and diluted net loss per
common share............................. 1,188,204 1,242,381 1,452,363 1,447,808 1,517,734
============ ============ ============ ============ ============
Pro forma basic and diluted net loss per
share (unaudited)........................ $ (1.83) $ (0.91)
============ ============
Weighted average number of shares used in
computing pro forma basic and diluted net
loss per share (unaudited)............... 10,690,338 14,513,090
============ ============
Comprehensive loss:
Net loss................................. $(17,726,975) $(15,529,377) $(19,560,110) $(15,555,827) $(13,202,503)
Other comprehensive loss:
Foreign currency translation
adjustments.......................... (11,531) (57,716) (104,647) (72,606) (131,502)
------------ ------------ ------------ ------------ ------------
Comprehensive loss....................... $(17,738,506) $(15,587,093) $(19,664,757) $(15,628,433) $(13,334,005)
============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 70
SYNQUEST, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE PREFERRED STOCK,
COMMON STOCK AND OTHER SHAREHOLDERS' DEFICIT
YEARS ENDED JUNE 30, 1997, 1998, AND 1999 AND THE NINE MONTHS ENDED
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
REDEEMABLE PREFERRED STOCK
-----------------------------------------------------------------------
SERIES B SERIES C SERIES D
-------------------- ---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996............... 540,016 $1,502,233 2,376,651 $6,611,397 3,070,178 $ 7,220,562
Issuance of common stock pursuant to
exercise of stock options.......... -- -- -- -- -- --
Purchase and retirement of common
stock.............................. -- -- -- -- -- --
Sale of common stock to an employee
for $1.80 per share in cash........ -- -- -- -- -- --
Issuance of Series D preferred stock
at $2.50 per share................. -- -- -- -- 800,000 2,000,000
Issuance of Series F preferred stock
for purchase of BMC at $2.75 per
share.............................. -- -- -- -- -- --
Issuance of common stock for services
at $2.75 per share................. -- -- -- -- -- --
Issuance of warrants to purchase
common stock....................... -- -- -- -- -- --
Accretion of cumulative preferred
stock dividends and stock issuance
costs.............................. -- 105,440 -- 464,058 -- 721,613
Equity adjustment from foreign
currency translation............... -- -- -- -- -- --
Net loss............................. -- -- -- -- -- --
------- ---------- --------- ---------- --------- -----------
Balance at June 30, 1997............... 540,016 1,607,673 2,376,651 7,075,455 3,870,178 9,942,175
Issuance of common stock pursuant to
exercise of stock options.......... -- -- -- -- -- --
Issuance of common stock pursuant to
conversion of preferred stock...... -- -- -- -- (177,560) (488,290)
Issuance of common stock for services
at $2.75 per share................. -- -- -- -- -- --
Accretion of cumulative preferred
stock dividends and stock issuance
costs.............................. -- 105,440 -- 464,058 -- 743,074
Equity adjustment from foreign
currency translation............... -- -- -- -- -- --
Net loss............................. -- -- -- -- -- --
------- ---------- --------- ---------- --------- -----------
Balance at June 30, 1998............... 540,016 1,713,113 2,376,651 7,539,513 3,692,618 10,196,959
Issuance of common stock pursuant to
exercise of stock options.......... -- -- -- -- -- --
Issuance of common stock for services
at $3.25 per share................. -- -- -- -- -- --
Issuance of Series G preferred stock
at $6.21 per share less issuance
costs of $2,328,010................ -- -- -- -- -- --
Accretion of cumulative preferred
stock dividends and stock issuance
costs.............................. -- 92,766 -- 408,269 -- 652,226
Equity adjustment from foreign
currency translation............... -- -- -- -- -- --
Net loss............................. -- -- -- -- -- --
------- ---------- --------- ---------- --------- -----------
Balance at June 30, 1999............... 540,016 1,805,879 2,376,651 7,947,782 3,692,618 10,849,185
Issuance of common stock pursuant to
exercise of stock options
(unaudited)........................ -- -- -- -- -- --
Accretion of cumulative preferred
stock dividends and stock issuance
costs (unaudited).................. -- 50,055 -- 220,290 -- 239,903
Equity adjustment from foreign
currency translation (unaudited)... -- -- -- -- -- --
Net loss (unaudited)................. -- -- -- -- -- --
------- ---------- --------- ---------- --------- -----------
Balance at March 31, 2000
(unaudited).......................... 540,016 $1,855,934 2,376,651 $8,168,072 3,692,618 $11,089,088
======= ========== ========= ========== ========= ===========
</TABLE>
F-5
<PAGE> 71
<TABLE>
<CAPTION>
----------------------------------------------
SERIES F SERIES G COMMON STOCK ADDITIONAL FOREIGN
-------------------- ----------------------- ------------------- PAID-IN ACCUMULATED CURRENCY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TRANSLATION
------- ---------- --------- ----------- --------- ------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- $ -- -- $ -- 1,182,871 $11,829 $3,025,387 $(23,035,486) $ 30,318
-- -- -- -- 14,500 145 3,480 -- --
-- -- -- -- (125,000) (1,250) -- (223,750) --
-- -- -- -- 40,000 400 71,600 -- --
-- -- -- -- -- -- -- -- --
750,000 2,062,500 -- -- -- -- -- -- --
-- -- -- -- 77,500 775 212,350 -- --
-- -- -- -- -- -- 406,118 -- --
-- 18,168 -- -- -- -- -- (1,309,279) --
-- -- -- -- -- -- -- -- (11,531)
-- -- -- -- -- -- -- (17,726,975) --
------- ---------- --------- ----------- --------- ------- ---------- ------------ ---------
750,000 2,080,668 -- -- 1,189,871 11,899 3,718,935 (42,295,490) 18,787
-- -- -- -- 57,026 570 25,505 -- --
-- -- -- -- 177,560 1,776 486,514 -- --
-- -- -- -- 15,000 150 41,100 -- --
-- 520,586 -- -- -- -- -- (1,833,158) --
-- -- -- -- -- -- -- -- (57,716)
-- -- -- -- -- -- -- (15,529,377) --
------- ---------- --------- ----------- --------- ------- ---------- ------------ ---------
750,000 2,601,254 -- -- 1,439,457 14,395 4,272,054 (59,658,025) (38,929)
-- -- -- -- 38,065 380 36,798 -- --
-- -- -- -- 15,000 150 48,600 -- --
-- -- 5,636,071 32,671,990 -- -- -- -- --
-- 650,838 -- 729,437 -- -- -- (2,533,544) --
-- -- -- -- -- -- -- -- (104,647)
-- -- -- -- -- -- -- (19,560,110) --
------- ---------- --------- ----------- --------- ------- ---------- ------------ ---------
750,000 3,252,092 5,636,071 33,401,427 1,492,522 14,925 4,357,452 (81,751,679) (143,576)
-- -- -- -- 134,937 1,350 255,181 -- --
-- 581,585 -- 1,674,020 -- -- -- (2,765,853) --
-- -- -- -- -- -- -- -- (131,502)
-- -- -- -- -- -- -- (13,202,503)
------- ---------- --------- ----------- --------- ------- ---------- ------------ ---------
750,000 $3,833,677 5,636,071 $35,075,447 1,627,459 $16,275 $4,612,633 $(97,720,035) $(275,078)
======= ========== ========= =========== ========= ======= ========== ============ =========
</TABLE>
See accompanying notes.
F-6
<PAGE> 72
SYNQUEST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------------------------------ ---------------------------
1997 1998 1999 1999 2000
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................. $(17,726,975) $(15,529,377) $(19,560,110) $(15,555,827) $(13,202,503)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization........ 512,796 798,067 1,103,108 792,930 951,626
Purchased in-process research and
development costs.................. 2,083,138 -- -- -- --
Non-cash stock compensation.......... 206,250 41,250 48,750 48,750 --
Accretion of discount on subordinated
notes payable...................... 286,423 426,338 -- -- --
Loss on disposal of equipment........ 12,570 -- -- -- --
Changes in operating assets and
liabilities:
Accounts receivable.............. 606,993 (2,474,083) (1,622,084) (2,022,985) 4,151,295
Other assets..................... (215,701) 192,190 (117,220) (291,481) 7,386
Accounts payable................. 232,872 (1,351,844) (423,564) (451,221) 25,093
Accrued expenses................. 1,484,311 3,431,473 2,959,597 2,098,102 789,058
Deferred revenue................. 189,085 (563,084) 527,477 644,840 387,158
------------ ------------ ------------ ------------ ------------
Net cash used in operating
activities......................... (12,328,238) (15,029,070) (17,084,046) (14,736,892) (6,890,887)
INVESTING ACTIVITIES
Acquisition of business, net of cash
deficit assumed.................... (359,218) -- -- -- --
Purchases of property and
equipment.......................... (365,929) (463,485) (1,326,186) (1,001,662) (887,786)
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities......................... (725,147) (463,485) (1,326,186) (1,001,662) (887,786)
FINANCING ACTIVITIES
Issuance of redeemable preferred
stock.............................. 2,000,000 -- 35,000,000 35,000,000 --
Payment of preferred issuance
costs.............................. -- -- (2,328,010) (2,256,801) --
Principal payments on loans.......... (522,233) (17,437) (14,333) (13,831) --
Net borrowings (repayments) under
line of credit..................... 4,318,600 13,509,059 (14,264,440) (17,073,666) 7,332,809
Proceeds from borrowings from related
party, net of repayments........... 8,500,000 2,500,000 -- -- --
Repurchase of common stock........... (225,000) -- -- -- --
Proceeds from issuance of common
stock.............................. 75,625 26,075 37,178 29,497 256,531
Repayment of loan from shareholder... (371,780) -- -- -- --
Repayment of obligations under
capital leases..................... (226,317) (352,297) (347,911) (265,250) (202,471)
------------ ------------ ------------ ------------ ------------
Net cash provided by financing
activities......................... 13,548,895 15,665,400 18,082,484 15,419,949 7,386,869
Effect of exchange rate changes on
cash............................... (91,340) 26,608 66,287 2,311 (53,421)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash...... 404,170 199,453 (261,461) (316,294) (445,225)
Cash at beginning of period.......... 296,051 700,221 899,674 899,674 638,213
------------ ------------ ------------ ------------ ------------
Cash at end of period................ $ 700,221 $ 899,674 $ 638,213 $ 583,380 $ 192,988
============ ============ ============ ============ ============
</TABLE>
F-7
<PAGE> 73
SYNQUEST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------------------------------ ---------------------------
1997 1998 1999 1999 2000
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest........................... $ 460,000 $ 1,169,000 $ 2,006,000 $ 1,782,000 $ 714,000
============ ============ ============ ============ ============
Income taxes....................... $ -- $ -- $ -- $ -- $ --
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Capital lease obligations incurred to
acquire equipment.................. $ 447,771 $ 154,867 $ 319,320 $ 319,320 $ 42,000
============ ============ ============ ============ ============
Fair value of Series F redeemable
preferred stock issued to acquire
business........................... $ 2,062,500 $ -- $ -- $ -- $ --
============ ============ ============ ============ ============
Fair value of common stock issued in
acquisition of business............ $ 6,875 $ -- $ -- $ -- $ --
============ ============ ============ ============ ============
Indebtedness assumed in connection
with acquisition................... $ 371,780 $ -- $ -- $ -- $ --
============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
F-8
<PAGE> 74
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1998 AND 1999
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
1. DESCRIPTION OF BUSINESS
SynQuest, Inc. (the "Company") is principally involved in developing,
selling and servicing computer software designed to optimize supply chain
performance. The Company operates principally in the United States and Europe.
During the Company's fiscal year ended June 30, 1997 ("1997"), the Company
changed its name to SynQuest, Inc. and changed its state of incorporation from
New York to Georgia. From incorporation in 1986 through the fiscal year ended
June 30, 1996 ("1996"), the Company was named Factory Automation & Computer
Technologies, Inc.
All of the outstanding shares of the Company's Series B, C, and D Preferred
Stock and 805,153 shares of Series G Preferred Stock are owned by Warburg,
Pincus Investors, L.P. (the "Preferred Shareholder"). The Preferred Shareholder
has committed to providing additional funding, if necessary, to sustain the
Company's operations through at least June 30, 2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company considers its cash, accounts receivable, accounts payable,
subordinated notes payable, line of credit borrowings and other notes payable
and capital lease obligations to be its only significant financial instruments
and believes that the carrying amounts of these instruments approximate their
fair values based on the short-term nature of these instruments.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany accounts and transactions have been eliminated. The Company has
subsidiaries in France, the Netherlands, and the United Kingdom.
Foreign Currency Translation
For foreign subsidiaries, the balance sheet accounts are translated at the
year-end exchange rates and income statement items are translated at the average
exchange rates for the period. Resulting translation adjustments are made
directly to a separate component of shareholders' deficit. Foreign currency
gains and losses resulting from transactions are included in net loss. Foreign
currency realized and unrealized gains and losses for the periods presented were
not material.
F-9
<PAGE> 75
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
Revenue Recognition
In October 1997 the American Institute of Certified Public Accountants
issued SOP 97-2, "Software Revenue Recognition." The Company adopted SOP 97-2
for transactions entered into beginning July 1, 1998. Prior year transactions
have been accounted for in accordance with SOP 91-1, the SOP in effect during
those years. The adoption of the SOP 97-2 has not had a significant impact on
the Company's financial statements.
In accordance with SOP 97-2, as amended by SOP 98-9, the Company allocates
the total software arrangement fee among each element of the arrangement where
the arrangement with a customer includes rights to multiple software products,
specified upgrades, postcontract support and/or other services. The arrangement
fee is allocated using the residual method. The arrangement fee is recognized by
deferring the fair value of all undelivered elements, as determined based on
vendor-specific objective evidence, and recognizing as revenue the balance of
the arrangement fee as attributable to the delivered elements.
The Company recognizes the revenue allocable to software licenses and
specified upgrades upon delivery of the software product or upgrade to the end
user and when a signed and executed contract is obtained unless the fee is not
fixed or determinable or collectibility is not probable. The Company considers
all arrangements with payment terms extending beyond twelve months not to be
fixed or determinable. If the fee is not fixed or determinable, revenue is
recognized as payments become due from the customer. If collectibility is not
considered probable, revenue is recognized when the fee is collected. Revenue on
arrangements with customers who are not the ultimate users (distributors, other
resellers, etc.) is not recognized until the software is delivered to an end
user.
Postcontract customer support services include telephone support, bug
fixes, and rights to upgrades on a when-and-if-available basis. Revenue
allocable to postcontract support is recognized on a straight-line basis over
the period the support is provided.
Other software services include consulting, implementation, training and
other services related to the software and its usage. Arrangements which include
software services are evaluated to determine whether those services are
essential to the functionality of other elements of the arrangement. When
software services are not considered essential to the functionality of other
elements, the revenue allocable to the software services is recognized as the
services are performed.
When software services are considered essential to the functionality of
other elements, including customization or modification of the software, revenue
from the services and related elements is recognized using contract accounting.
Contract accounting is also used to recognize software services revenue when the
services are performed for a fixed fee. Under contract accounting, the
applicable revenue from these software arrangements is recognized on a
percentage-of-completion method with progress-to-completion measured based upon
labor costs incurred.
Internally Developed Software
Costs related to internally developed software are accounted for in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed." No amounts related to internally developed software were capitalized
at June 30, 1998 or 1999. Web-site development costs of approximately $125,000
were capitalized in the nine months ended March 31, 2000.
F-10
<PAGE> 76
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives (ranging from 3 to 7 years) of the assets and includes amortization
of assets under capital leases. Depreciation expense for 1997, 1998 and 1999 was
approximately $453,000 $612,000, $904,000, respectively. Depreciation expense
for the nine months ended March 31, 1999 and 2000 was approximately $657,000 and
$846,000, respectively.
Intangible Assets
Intangible assets arose from the acquisitions of businesses (see Note 3)
and represent the value of the assembled work forces acquired as well as certain
completed software products. These assets are being amortized using the
straight-line method over a period of three years. Amortization expense amounted
to approximately $60,000, $186,000, $178,000 in 1997, 1998 and 1999,
respectively. Amortization expense amounted to approximately $42,000 and $8,000
for the nine months ended March 31, 1999 and 2000, respectively.
Concentration of Credit Risk and Major Customers
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of accounts receivable. Accounts receivable
represent billed and unbilled receivables primarily for license fees and related
services. The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Although due
dates of receivables vary based on contract terms, credit losses have been
within management's estimates in determining the level of allowance for doubtful
accounts. Bad debt expense, classified in general and administrative expenses,
was approximately $1,600,000, $373,000, and $753,000 in 1997, 1998 and 1999,
respectively. Bad debt expense was approximately $276,000 and $596,000 in the
nine months ended March 31, 1999 and 2000, respectively. Write-offs of
uncollectible accounts in the years ended June 30, 1997, 1998 and 1999 were
$738,000, $474,000, and $477,000, respectively. Write-offs of uncollectible
accounts in the periods ended March 31, 1999 and 2000 were $472,000 and $358,000
respectively.
In 1999 one customer accounted for 20% of the company's total revenues, in
1998 one customer accounted for 17% of the Company's total revenues, and in 1997
three customers each accounted for 12%, 13%, and 14% of the Company's total
revenues. For the nine months ended March 31, 2000 two customers accounted for
13% and 11% of the Company's total revenues.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," provides an
alternative to APB Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), in accounting for stock-based compensation issued to employees. The
Company adopted the disclosure alternative of the impact of applying SFAS No.
123 and accounts for stock option grants in accordance with APB 25.
Impairment of Long-Lived Assets
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
F-11
<PAGE> 77
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of.
Advertising Costs
Advertising costs are charged to expense in the period the costs are
incurred. Advertising expense was approximately $276,000, $486,000, and $741,000
in 1997, 1998 and 1999, respectively. Advertising expense was approximately
$560,000 and $144,000, for the nine months ended March 31, 1999 and 2000,
respectively.
Basic and Diluted Net Loss per Share
Basic net loss per common share is computed based on the weighted average
number of common shares outstanding during each year. Diluted net loss per
common share is computed based on the weighted average number of common shares
outstanding during each year, plus potentially dilutive common shares
outstanding during the year, in accordance with SFAS No. 128, "Earnings Per
Share."
All convertible preferred shares, outstanding stock options, and warrants
have been excluded from the calculation of the diluted net loss per common share
because these securities are anti-dilutive for all periods presented. The total
number of shares related to the outstanding convertible preferred stock, options
and warrants excluded from the calculations of diluted net loss per common share
was 14,295,443, 16,220,436, 22,712,333, 22,709,545, and 22,839,308 for the years
ended June 30, 1997, 1998, 1999 and for the nine months ended March 31, 1999 and
2000, respectively.
Basic and diluted pro forma net loss per share, as presented in the
statements of operations, has been calculated as described above and also gives
effect to the automatic conversion of the convertible preferred stock into
common stock that will occur upon the closing of the offering contemplated by
this prospectus (using the as-if converted method).
The following table presents the calculation of pro forma basic and diluted
net loss per share:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
JUNE 30, ENDED MARCH 31,
1999 2000
------------ ---------------
<S> <C> <C>
Net loss................................................. $(19,560,110) $(13,202,503)
============ ============
Pro forma:
Shares used in computing basic and diluted net loss per
common share........................................ 1,452,363 1,517,734
Effect of assumed conversion of convertible preferred
stock (unaudited)................................... 9,237,975 12,995,356
------------ ------------
Shares used in computing pro forma basic and diluted
net loss per share (unaudited)...................... 10,690,338 14,513,090
============ ============
Pro forma basic and diluted net loss per share
(unaudited)............................................ $ (1.83) $ (0.91)
============ ============
</TABLE>
Unaudited Pro Forma Shareholders' Deficit
If the offering contemplated by this prospectus is consummated, all of the
convertible preferred shares outstanding will automatically be converted into
common shares. Unaudited pro forma shareholders' equity
F-12
<PAGE> 78
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
at March 31, 2000, as adjusted for the assumed conversion of those shares
outstanding at March 31, 2000, is disclosed on the balance sheet.
Reclassification
Certain amounts reported in the 1998 and 1999 financial statements have
been reclassified to conform to the current financial statement presentation.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS No.
131 requires that an enterprise disclose certain information about operating
segments. The Company adopted SFAS No. 131 effective with its fiscal year ending
June 30, 1999.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended, is effective for quarters beginning after June 15, 2000. We do not
currently utilize derivative financial instruments and therefore we do not
expect that the adoption of SFAS No. 133 will have a material impact on our
results of operations or financial position.
In December 1999, the Securities and Exchange Commission Staff released
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," which clarified some provisions of current standards related to
software revenue recognition. The adoption of SAB No. 101 did not have a
material impact on our revenue recognition policies or results of operations for
financial position.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation," an interpretation of APB
Opinion No. 25 ("FIN 44"). FIN 44 establishes guidance for the accounting for
stock option grants or modifications to existing stock option awards and is
effective for option grants made after June 30, 2000. FIN 44 also establishes
guidance for the repricing of stock options and determining whether a grantee is
an employee, for which the guidance was effective after December 15, 1998 and
modifying a fixed option to add a reload feature, for which the guidance was
effective after January 12, 2000. The adoption of certain of the provisions of
FIN 44 prior to March 31, 2000 did not have a material effect on the financial
statements. We do not expect that the adoption of the remaining provisions will
have a material effect on the financial statements.
Unaudited Information
The consolidated financial statements include the unaudited consolidated
balance sheet as of March 31, 2000 and the unaudited consolidated statements of
operations and cash flows for the nine months ended March 31, 1999 and 2000. In
management's opinion, this information has been prepared on the same basis as
the audited consolidated financial statements and reflects all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the financial information, in accordance with generally accepted accounting
principles for interim financial information, for the period presented. Results
for interim periods are not necessarily indicative of the results to be expected
for the entire year.
F-13
<PAGE> 79
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
3. ACQUISITIONS OF BUSINESSES
Effective November 1, 1996, the Company acquired the assets of and assumed
certain liabilities of Manufacturing Execution Systems Associates, Inc.
("MESAi"), a software development company, for approximately $778,440,
(consisting of $400,000 of cash plus assumption of liabilities and acquisition
costs totaling $378,440). The acquisition was accounted for under the purchase
method of accounting and, accordingly, the results of operations were included
in the accompanying consolidated statements of operations beginning November 1,
1996. The purchase price was allocated among identifiable assets and liabilities
based on their respective fair values. The Company assigned $53,000 of the
purchase price to in-process research and development with no alternative future
use, which was expensed at the acquisition date, and $54,000 to the assembled
work force acquired. In connection with the acquisition, the Company entered
into employment agreements with the three selling shareholders and key employees
of MESAi under which each employee is entitled to a base salary, bonus, certain
other benefits and up to 35,000 shares of the Company's Common Stock. The
Company issued 25,000 shares of Common Stock to each of the three employees on
January 1, 1997 and expensed the value of the shares issued at that date. Each
employee received fifty percent of the additional 10,000 shares on each of
January 1, 1998 and 1999.
On June 16, 1997, the Company acquired all the outstanding shares of Bender
Management Consultants Inc. ("BMC"), a company involved in developing supply
chain software and consulting, for approximately $2,188,000 (consisting of
750,000 shares of the Company's Series F Preferred Stock valued at $2,062,500
and acquisition costs of $126,000). The acquisition was accounted for under the
purchase method and, accordingly, the results of operations were included in the
accompanying consolidated statements of operations beginning June 1, 1997, the
date the acquisition was recorded for accounting purposes. The purchase price
was allocated among identifiable assets and liabilities based on their
respective fair values. The approximate $2 million value assigned to in-process
research and development with no alternative future use, the value of which was
estimated using the discounted cash flow of earnings expected in future years
from products to be derived from the in-process research and development, was
expensed at the acquisition date. Approximately $393,000 was assigned to
completed software products. The Company assumed a loan payable to the former
owner of BMC approximating $372,000. The loan was repaid in full during 1997.
The following table represents the unaudited pro forma results of
operations for 1997 as if the acquisitions described above had been consummated
on July 1, 1996:
<TABLE>
<S> <C>
Total revenue............................................... $ 10,615,000
Net loss.................................................... (18,030,000)
Net loss per common share................................... (16.28)
</TABLE>
4. SUBORDINATED NOTES PAYABLE TO RELATED PARTY
The Company has entered into eight Subordinated Promissory Note agreements
with the Preferred Shareholder at various dates from May 10, 1995 to July 20,
1997. The notes accrue interest at prime plus 2% annually, adjusted biannually
from the date of issuance (10.5%, 9.75% and 11.0% and at June 30, 1998, 1999 and
March 31, 2000, respectively). Interest and principal are payable on demand.
In conjunction with entering into the Subordinated Promissory Notes, the
Company issued warrants to purchase Common Stock to the Preferred Shareholder.
The warrants may be exercised at any time before their expiration dates. Under
the terms of the warrant agreements, the warrant holder is protected
F-14
<PAGE> 80
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
from future dilution of the Company's Common Stock. The date and amount of each
note and the terms of warrants issued and outstanding related to each note are
summarized as follows:
<TABLE>
<CAPTION>
WARRANTS VALUE
TO PURCHASE EXERCISE EXPIRATION ASSIGNED
AMOUNT OF COMMON PRICE OF DATE OF TO
DATE OF NOTE NOTE STOCK WARRANTS WARRANT WARRANTS
- ------------ ----------- ----------- -------- ------------------ --------
<S> <C> <C> <C> <C> <C>
May 10, 1995..................... $ 2,000,000 1,301,696 $1.80 May 9, 2005 $475,680
September 19, 1995............... 2,000,000 681,213 2.94 September 18, 2005 --
November 5, 1996................. 1,500,000 545,455 2.75 November 4, 2006 85,421
December 9, 1996................. 1,000,000 363,636 2.75 December 9, 2006 53,780
February 17, 1997................ 2,500,000 909,091 2.75 February 17, 2007 119,917
April 15, 1997................... 1,500,000 545,455 2.75 April 15, 2007 68,987
May 20, 1997..................... 2,000,000 727,273 2.75 May 20, 2007 78,013
July 20, 1997.................... 2,500,000 714,286 3.50 July 20, 2007 --
----------- ---------
Outstanding at June 30, 1999..... $15,000,000 5,788,105
=========== =========
</TABLE>
The Company allocated a portion of the proceeds from each note to the value
of the warrants issued as disclosed above. The resulting discount on the debt
was amortized to interest expense over the expected life of the debt. The
discount on the debt was fully amortized at June 30, 1998. Amortization expense
was $426,000 and $286,000 in 1998 and 1997, respectively. The resulting weighted
average effective interest rate on the outstanding Subordinated Promissory Notes
was 11.1%, 15.5%, and 16.5% in 1999, 1998 and 1997, respectively.
5. LINE OF CREDIT AGREEMENT
On July 10, 1996, the Company entered into a Loan and Security Agreement
(the "Agreement") with a financing company. The Agreement, as amended, provides
the Company with a line of credit not to exceed the lesser of $25 million or an
amount equal to the sum of the following: 80% of qualifying receivables, as
defined, an additional loan of $10 million, and the amount outstanding under the
Term Loan in the original principal amount of $5 million. Virtually all assets
of the Company have been pledged as collateral under these loan facilities.
Interest accrues at the highest LIBOR rate in effect each month, plus 5.125% per
annum, provided that the interest rate in effect each month is not less than 9%
per annum. The interest rate in effect under the Agreement was 10.5% at June 30,
1999 and 11.3% at March 31, 2000. The maturity date of the Agreement is December
31, 1999; however, the Agreement renews for one year unless terminated by either
party. The Company is subject to certain covenants under the Agreement. The
Company has continued to borrow under the Agreement even though the Company was
in violation of certain of these covenants (principally covenants pertaining to
periodic reporting, pre-approval of new offices and advances to subsidiaries) at
June 30,1999. These covenant violations have been waived by the financing
company.
6. NOTES PAYABLE AND CAPITAL LEASES
The Company leases various equipment under capital leases with a total cost
of approximately $1,230,000, $968,000 and $700,000, and accumulated amortization
of approximately $774,000, $596,000 and $407,000 at June 30, 1998, 1999, and
March 31, 2000, respectively.
F-15
<PAGE> 81
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
The Company's French subsidiary received a loan from a government
organization in order to promote development in their region. The interest rate
on the loan is 6%. The outstanding balance was approximately $41,000, $26,000
and $13,000 at June 30, 1998, 1999, and March 31, 2000, respectively.
Future minimum payments under these capital leases and future principal
payments due under notes payable are as follows:
<TABLE>
<CAPTION>
NOTES CAPITAL
PAYABLE LEASES
------- --------
<S> <C> <C>
Year ending June 30, 2000................................... $13,000 $312,000
2001................................................... 13,000 175,000
2002................................................... -- 45,000
2003................................................... -- --
------- --------
Total obligations under notes payable and minimum lease
payments under capital leases............................. 26,000 532,000
Less amount representing interest........................... -- 65,000
------- --------
Present value of minimum capital lease payments............. -- 467,000
Less amounts due within one year............................ 13,000 219,000
------- --------
Long-term obligations under notes payable and capital
leases.................................................... $13,000 $248,000
======= ========
</TABLE>
7. REDEEMABLE PREFERRED STOCK
The Company is authorized to issue up to 16 million shares of Preferred
Stock. At June 30, 1999 and March 31, 2000, the Company had established six
series of Preferred Stock: Series B, C, D, E, F and G, the terms of which are
summarized below.
At June 30, 1998, 1999, and March 31, 2000 the Company had 540,016
authorized, issued and outstanding shares of Series B Preferred Stock. Each
share of Series B Preferred Stock entitles its holder to receive an annual cash
dividend of $.12 ($0.192 prior to March 1, 1999) per share; to convert it into
one share of Common Stock , as adjusted in the event of future dilution; to
receive $2.40 per share plus accrued dividends in the event of involuntary or
voluntary liquidation; and to receive $2.40 per share plus accrued dividends,
subject to adjustment in the event of future dilution, upon mandatory redemption
by the Company on December 31, 2003. In the event the Company breaches or
violates certain warranties, representations, or covenants as stipulated in the
Stock Purchase Agreement dated May 10, 1994 and the Certificate of
Incorporation, holders of Series B Preferred Stock are granted certain special
voting rights. Such voting rights may be limited by the terms of the
Shareholders Agreement as described in more detail below.
At June 30, 1998, 1999, and March 31, 2000, the Company had 2,376,651
authorized, issued and outstanding shares of Series C Preferred Stock. Each
share of Series C Preferred Stock entitles its holder to receive an annual cash
dividend of $0.12 ($.192 prior to March 1, 1999) per share; to convert it into
one share of Class A Common Stock, as adjusted in the event of future dilution;
to receive $2.40 per share plus accrued dividends in the event of involuntary or
voluntary liquidation; and to receive $2.40 per share plus accrued dividends,
subject to adjustment in the event of future dilution, upon redemption by the
Company on December 31, 2003. Holders of Series C Preferred Stock are not
entitled to voting rights.
The Company has 4,000,000 authorized shares of Series D Preferred Stock, of
which 3,692,618 were issued and outstanding at June 30, 1998, 1999 and March 31,
2000. Each share of Series D Preferred Stock entitles its holder to receive an
annual cash dividend of $0.12 ($0.192 prior to March 1, 1999) per
F-16
<PAGE> 82
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
share; to convert it into one share of Common Stock, as adjusted in the event of
future dilution; to receive $2.28 per share plus accrued dividends in the event
of involuntary or voluntary liquidation; and to receive $2.28 per share plus
accrued dividends, subject to adjustment in the event of future dilution, upon
mandatory redemption by the Company on December 31, 2003. Holders of Series D
Preferred Stock are not entitled to voting rights.
The Company has 1,000,000 authorized shares of Series E Preferred Stock.
There were no shares of Series E Preferred Stock outstanding at June 30, 1998,
1999 or March 31, 2000.
At June 30, 1998, 1999, and March 31, 2000, the Company had 750,000
authorized, issued and outstanding shares of Series F Preferred Stock, all of
which were issued during 1997 in conjunction with the purchase of BMC (see Note
3). Each share of Series F Preferred Stock entitles its holder to receive
non-cumulative cash dividends at an annual rate of $0.192 per share before
dividends may be paid to holders of Common Stock; to convert it into one share
of Common Stock, as adjusted in the event of future dilution; and to receive $8
per share in the event of involuntary or voluntary liquidation. Shares of Series
F Preferred Stock have voting rights equivalent to those of Common Stock plus
the right to designate one member of the board of directors as long as the
shares are held by the seller of BMC. Under the terms of an investor's agreement
with the holder of Series F Preferred Stock, the holder may elect to put, at $8
per share, up to 20% of the Series F Preferred Stock back to the Company each
year in the five year period beginning June 16, 2000. The put rights expire upon
the closing of an underwritten public offering of the Company's Common Stock.
In March 1999 the Company designated 5,636,071 of its authorized Preferred
Stock as Series G Preferred Stock and sold the shares in a private offering for
net proceeds of approximately $32.7 million. Each share of Series G Preferred
Stock entitles its holder to receive an annual cash dividend of $0.3105 per
share; to convert it into one share of Common Stock, as adjusted in the event of
future dilution; to receive $6.21 per share plus accrued dividends in the event
of involuntary or voluntary liquidation; and to receive $6.21 per share plus
accrued dividends, subject to adjustment in the event of future dilution, upon
redemption, at the option of the Series G Preferred Stock shareholder, on or
after December 31, 2003. Shares of Series G Preferred Stock have voting rights
equivalent to those of Common Stock plus, under certain circumstances, the right
to pre-approve certain actions of the Company as specified in the Certificate of
Designation.
Dividends on outstanding shares of Series B, Series C, Series D and Series
G Preferred Stock are cumulative and must be paid in the event of liquidation
and before any distribution to holders of Common Stock. Aggregate cumulative
dividends in arrears on preferred stock were approximately $3,977,000,
$5,598,379 and $7,514,424 at June 30, 1998, 1999 and March 31, 2000,
respectively. Dividends on the Series F Preferred Stock are not cumulative
except that if, in any year, accrued dividends from prior years are paid on
Series B, Series C, Series D and Series G Preferred Stock, then dividends will
be paid on the Series F Preferred Stock.
The difference between the carrying amount and the amount at which
Preferred Stock may be redeemed or put to the Company is being accreted through
periodic adjustments to the balance of preferred stock and the accumulated
deficit over the period from issuance to the redemption or put date.
Each share of Series B, Series E, Series F and Series G Preferred Stock
shall automatically be converted into shares of Common Stock and each share of
Series C and Series D Preferred Stock shall be automatically converted into
shares of Class A Common Stock at the then applicable conversion price at any
time upon the closing of an underwritten public offering of the Company's Common
Stock meeting certain criteria.
F-17
<PAGE> 83
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
On May 11, 1994, the Company entered into a Shareholder's Agreement with
the Preferred Shareholder and a former employee whereby the parties agreed to
certain matters relating to the operations of the Company and disposition and
issuance of shares of capital stock of the Company. On November 16, 1997, the
Company amended and restated the original Shareholder's Agreement with the
Preferred Shareholder. The Agreement, as amended, includes provisions giving the
Preferred Shareholder certain rights to subscribe for securities. The Agreement
also includes a provision which limits the voting rights of the Preferred
Shareholder to the extent of the number of votes represented by all outstanding
shares of the Company's capital stock not owned directly or indirectly by the
Preferred Shareholder (Maximum Number of Votes). All shares held by the
Preferred Shareholder which represent a number of votes in excess of the Maximum
Number of Votes will be deemed to be nonvoting shares. Nonvoting shares will
have no right to vote upon the election of directors or any other matter
submitted to shareholder vote.
8. COMMON STOCK
The Company is authorized to issue up to 26 million shares of Common Stock
and seven million shares of Class A Common Stock. Holders of Common Stock and
Class A Common Stock are entitled to dividends declared by the Board of
Directors out of legally available funds. Holders of Common Stock are entitled
to one vote per share. Holders of Class A Common Stock are not entitled to vote.
Subject to certain restrictions, Class A Common Stock is fully convertible into
Common Stock at the option of the holder. The Preferred Shareholder has the
right, exercisable at any time, to exchange shares of Common Stock for Class A
Common Stock on a share for share basis. At June 30, 1998, 1999 and March 31,
2000 there were no shares of Class A Common Stock outstanding and the Preferred
Shareholder owned no Common Stock.
In July 1996, the Company repurchased 125,000 shares of Common Stock from
the former Chairman of the Board and CEO for $225,000. The Company subsequently
offered a member of management the option to purchase 125,000 shares for $1.80
per share as part of his employment agreement. The employee purchased 40,000
shares under this option during 1997 and the option to purchase the remaining
shares expired.
The Company has reserved a total of 22,711,333 shares of Common Stock for
future issuance upon conversion of Series B, Series F and Series G Preferred
Stock, exercise of warrants and options to purchase Common Stock, and conversion
of Class A common stock. The Company has reserved a total of 6,069,269 shares of
Class A Common Stock for future issuance upon conversion of Series C and D
Preferred Stock.
See Notes 3, 4, 7, and 9 for additional information with respect to Common
Stock.
9. STOCK OPTION PLANS
The Company's 1987 and 1997 stock option plans provide for the granting of
either incentive stock options or non-qualified options to purchase shares of
the Company's Common Stock in order to provide incentives to certain employees
and directors. The Company's 1987 plan has expired and the Company is
authorized, as of June 30, 1999, to issue up to 2,500,000 options to purchase
Common Stock under its 1997 plan. These plans allow participants to purchase
Common Stock of the Company at prices set by the Board of Directors, but in the
case of incentive stock options not less than fair market value at the date the
option is granted. Unless otherwise specified, outstanding options vest
one-third each year. Unexercised options expire ten years after the date of
grant unless otherwise specified by the Board of Directors.
F-18
<PAGE> 84
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
Stock option activity is shown below:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
STOCK OPTIONS OF SHARES EXERCISE PRICE
- ------------- --------- ----------------
<S> <C> <C>
Outstanding at June 30, 1996............................... 1,201,972 $1.53
Granted.................................................. 527,141 2.26
Exercised................................................ (14,500) 0.25
Lapsed or canceled....................................... (29,834) 1.80
---------
Outstanding at June 30, 1997............................... 1,684,779 1.79
Granted.................................................. 1,491,200 2.75
Exercised................................................ (57,026) 0.46
Lapsed or canceled....................................... (45,907) 2.43
---------
Outstanding at June 30, 1998............................... 3,073,046 2.27
Granted.................................................. 1,071,250 3.12
Exercised................................................ (38,064) 0.98
Lapsed or canceled....................................... (177,360) 2.61
---------
Outstanding at June 30, 1999............................... 3,928,872 2.50
Granted.................................................. 528,516 3.75
Exercised................................................ (134,937) 1.90
Lapsed or canceled....................................... (266,604) 2.96
---------
Outstanding at March 31, 2000 4,055,847 2.65
=========
Exercisable at June 30, 1997............................... 823,236 1.48
Exercisable at June 30, 1998............................... 1,168,359 1.75
Exercisable at June 30, 1999............................... 1,832,336 2.05
Available for grant at June 30, 1999....................... 235,567
</TABLE>
The following table summarizes the range of exercise prices, weighted
average exercise prices, and weighted average remaining contractual lives for
options outstanding and exercisable as of June 30, 1999:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
----------------------------------- --------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
RANGE OF NUMBER AVERAGE REMAINING NUMBER AVERAGE
EXERCISE OF EXERCISE CONTRACTUAL OF EXERCISE
PRICES SHARES PRICE LIFE SHARES PRICE
- -------- ---------- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.25 88,500 $0.25 4 88,500 $0.25
1.80 1,195,373 1.80 6 1,118,092 1.80
2.75 1,609,599 2.75 8 625,494 2.75
3.00 768,500 3.00 9 -- 3.00
3.25 154,750 3.25 9 250 3.25
3.75 112,150 3.75 10 -- 3.75
---------- ----- --------- -----
3,928,872 $2.50 8 1,832,336 $2.05
========== ===== ========= =====
</TABLE>
F-19
<PAGE> 85
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals or exceeds the estimated
fair value of the underlying stock on the date of grant, generally no
compensation expense is recognized.
Pro forma information regarding net loss is required by SFAS No. 123, which
also requires that the information be determined as if the Company had accounted
for its employee stock options granted subsequent to July 1, 1996 under the fair
value method of that Statement. The fair value for these options was estimated
at the date of grant using the Black-Scholes model with the following weighted
average assumptions for fiscal 1997, 1998 and 1999: risk-free interest rate of
6.6%, 5.7% and 5.0%, a dividend yield of 0%, volatility factor of the expected
market price of the Company's Common Stock of .01, and an expected life of the
option of 5 years, 5 years and 4 years, respectively. The weighted average
grant-date fair value of options granted in 1997, 1998 and 1999 was $0.62, $0.70
and $0.58 per share, respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Pro forma net
loss for 1997, 1998 and 1999 was $17,800,000, $15,900,000 and $20,079,000,
respectively. Pro forma net loss per common share for 1997, 1998 and 1999 was
($16.08), ($14.27), and ($15.57), respectively. Because SFAS No. 123 is
applicable only to options granted subsequent to June 30, 1995, its pro forma
effect was not fully reflected until 1998.
10. OPERATING LEASES
The Company rents office space, office equipment, and vehicles under
operating lease agreements. Rent expense for 1997, 1998 and 1999 and the nine
months ended March 31, 2000 was approximately $741,000, $737,000, $1,460,000 and
$1,118,000, respectively. Future minimum payments under all non-cancelable
operating leases at June 30, 1999 are summarized below:
<TABLE>
<S> <C>
Year ending June 30,
2000...................................................... $516,000
2001...................................................... 224,000
2002...................................................... 11,000
2003...................................................... 1,000
--------
Total future minimum lease payments............... $752,000
========
</TABLE>
11. INCOME TAXES
At June 30, 1999, the Company has net operating loss carryforwards of
approximately $61 million and tax credits of approximately $929,000 for income
tax purposes that expire principally in years 2001 through 2014. Included in the
total net operating loss carryforwards at June 30, 1999 are approximately $9.6
F-20
<PAGE> 86
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
million of net operating losses related to the Company's foreign operations
which may be carried forward indefinitely.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
JUNE 30,
---------------------------
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 16,085,000 $ 23,225,000
Allowance for doubtful accounts........................... 366,000 444,000
Accrued liabilities....................................... 1,025,000 1,377,000
Research and development credit........................... 729,000 929,000
Purchased software and other intangibles.................. 269,000 --
------------ ------------
Total deferred tax assets......................... 18,474,000 25,975,000
Valuation allowance......................................... (18,474,000) (25,975,000)
Net deferred tax assets........................... -- --
------------ ------------
Net deferred taxes................................ $ -- $ --
============ ============
</TABLE>
Based on an assessment of available evidence as of June 30, 1998 and 1999,
management concluded that the deferred income tax assets should be reduced by a
valuation allowance equal to the amount of the net deferred income tax assets.
A reconciliation of the statutory U.S. income tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Tax (benefit) at statutory federal rate................. $(6,027,000) $(5,259,000) $(6,650,000)
State taxes net of federal benefit...................... (709,000) (619,000) (782,000)
Research and development credit......................... (302,000) (238,000) (200,000)
Purchased in-process research and development costs..... 771,000 -- --
Meals and entertainment................................. 29,000 81,000 68,000
Other, net.............................................. (318,000) 48,000 63,000
Change in valuation allowance........................... 6,556,000 5,987,000 7,501,000
----------- ----------- -----------
Total income tax expense...................... $ -- $ -- $ --
=========== =========== ===========
</TABLE>
12. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Profit Sharing Plan for the benefit of eligible
employees and their beneficiaries. Essentially all employees are eligible to
participate in the Plan and are fully vested. The Company's contributions to the
Plan are discretionary. No contributions were made to the Plan during 1997,
1998, 1999 or the nine months ended March 31, 2000.
F-21
<PAGE> 87
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
13. SEGMENT AND GEOGRAPHIC INFORMATION
The Company is organized around geographic areas. Synquest's operations in
the United States and Europe represent their two reportable segments. Europe is
comprised of operations in the United Kingdom, France, Germany and the
Netherlands. The accounting policies as described in the summary of significant
accounting policies are applied consistently across the segments.
Segment information for the years ended June 30, 1997, 1998, 1999 and for
the nine months ended March 31, 2000 are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------ NINE MONTHS ENDED
1997 1998 1999 MARCH 31, 2000
------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C>
REVENUE
United States
Software license fees.............. $ 3,368,452 $ 9,026,723 $ 8,994,040 $ 7,389,222
Services........................... 3,475,123 6,766,732 11,344,645 8,108,274
------------ ------------ ------------ ------------
Total United States.................. 6,843,575 15,793,455 20,338,685 15,497,496
Europe
Software license fees.............. 964,420 1,365,506 1,527,531 331,317
Services........................... 412,455 1,247,414 1,415,204 1,321,623
------------ ------------ ------------ ------------
Total Europe......................... 1,376,875 2,612,920 2,942,735 1,652,940
Total...................... $ 8,220,450 $ 18,406,375 $ 23,281,420 $ 17,150,436
============ ============ ============ ============
NET LOSS
United States........................ $(15,648,932) $(13,275,436) $(16,010,136) $(10,466,622)
Europe............................... (2,078,043) (2,253,941) (3,549,974) (2,735,881)
------------ ------------ ------------ ------------
Total...................... $(17,726,975) $(15,529,377) $(19,560,110) $(13,202,503)
============ ============ ============ ============
TOTAL ASSETS
United States........................ $ 16,795,865 $ 22,313,871 $ 20,664,958
Europe............................... 2,384,594 3,115,856 4,020,029
Eliminations....................... (9,336,635) (13,773,972) (17,786,961)
------------ ------------ ------------
Total...................... $ 9,843,824 $ 11,655,755 $ 6,898,026
============ ============ ============
</TABLE>
All revenue was generated from external customers.
The elimination within total assets represents the Company's investment in
the Europe segment and funding provided for operations.
Export sales from the United States were approximately $315,000,
$1,671,000, $1,597,000 and $707,000 for the years ended June 30, 1997, 1998, and
1999, and the nine months ended March 31, 2000, respectively.
F-22
<PAGE> 88
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
14. SUBSEQUENT EVENTS
Stock Options
On November 9, 1999, the board of directors approved an increase in the
authorized common shares issuable under the Company's 1997 Stock Option Plan to
a total of 3,800,000 shares.
Line of Credit
On March 29, 2000, the Company amended the Loan and Security Agreement. The
Loan and Security Agreement, as amended, provides the Company with a line of
credit not to exceed the lesser of $20 million or an amount equal to the sum of
the following: 80% of qualifying receivables, as defined, an additional loan of
$5 million, and the amount outstanding under the term loan in the original
principal amount of $5 million.
Loan Payable
In April 2000, the Preferred Shareholder loaned the Company $2.5 million
with no stated terms.
Sale of Common Stock
In May 2000, the Company sold 112,500 shares of common stock to a member of
the board of directors for $900,000.
Initial Public Offering
On May 15, 2000 the board of directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with a proposed Initial Public Offering
("IPO"). If the offering is consummated under the terms presently anticipated,
all of the outstanding convertible preferred stock as of March 31, 2000, will
convert to 12,995,356 shares of common stock upon the closing of the IPO. The
effect of this conversion has been reflected as unaudited pro forma
shareholders' equity in the accompanying consolidated balance sheet at March 31,
2000.
Additionally, the board of directors authorized an increase in the
authorized number of shares of common stock to 100,000,000 shares, amended
Series C Preferred Stock to make each share convertible into one share of common
stock, and eliminated Class A common stock.
Conversion of Subordinated Debt and Preferred Dividends to Common Stock
On May 15, 2000 the board of directors authorized the conversion of $15
million of Subordinated Promissory Notes plus all accrued, and unpaid interest
on such notes into shares of common at the price of the initial public offering.
Additionally, the board of directors approved the payment of all accrued and
unpaid dividends on the outstanding preferred stock of the Company in common
shares at the price of the initial public offering.
F-23
<PAGE> 89
SYNQUEST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the nine months ended March 31, 1999 and 2000 is unaudited.)
Warrants
On May 17, 2000 the Company issued a warrant to purchase 400,000 shares of
its common stock at an exercise price of $8 per share in connection with a
software license agreement. Except under circumstances defined in the agreement,
the warrant expires in May 2003.
F-24
<PAGE> 90
- ------------------------------------------------------
- ------------------------------------------------------
Prospective investors may rely only on the information contained in this
prospectus. Neither SynQuest, Inc. nor any underwriter has authorized anyone to
provide prospective investors different or additional information. This
prospectus is not an offer to sell nor is it seeking an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted. The
information contained in this prospectus is accurate only as of the date of the
prospectus, regardless of the time of delivery of this prospectus or of any sale
of these securities.
No action is being taken in any jurisdiction outside the United States to
permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe the restrictions of that jurisdiction
related to this offering and the distribution of this prospectus.
---------------------------------
TABLE OF CONTENTS
---------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 5
Use of Proceeds.................... 14
Dividend Policy.................... 14
Capitalization..................... 15
Dilution........................... 16
Selected Financial Data............ 17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 19
Business........................... 30
Management......................... 46
Principal Shareholders............. 52
Related Party Transactions......... 54
Description of Capital Stock....... 56
Shares Eligible for Future Sale.... 58
Underwriting....................... 60
Legal Matters...................... 62
Experts............................ 62
Where You Can Find More
Information...................... 63
Index to Consolidated Financial
Statements....................... F-1
</TABLE>
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
SHARES
(LOGO)
COMMON STOCK
--------------------
PROSPECTUS
--------------------
BEAR, STEARNS & CO. INC.
J.P. MORGAN & CO.
WIT SOUNDVIEW
, 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee and NASD filing fee, all amounts are estimates.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 19,800
NASD filing fee............................................. 8,000
Nasdaq National Market listing fee.......................... 95,000
Accounting fees and expenses................................ 300,000
Legal fees and expenses..................................... 150,000
Blue Sky fees and expenses (including counsel fees)......... 15,000
Printing and engraving expenses............................. 100,000
Transfer Agent and Registrar fees and expenses.............. 30,000
Miscellaneous expenses...................................... 72,200
--------
Total............................................. $790,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Georgia Business Corporation Code permits a corporation to eliminate or
limit the personal liability of a director to the corporation or its
shareholders for monetary damages for breach of duty of care or other duty as a
director, provided that no provision shall eliminate or limit the liability of a
director: (A) for any appropriation, in violation of his duties, of any business
opportunity of the corporation; (B) for acts or omissions which involve
intentional misconduct or a knowing violation of law; (C) for unlawful corporate
distributions; or (D) for any transaction from which the director received an
improper personal benefit. This provision pertains only to breaches of duty by
directors in their capacity as directors (and not in any other corporate
capacity, such as officers) and limits liability only for breaches of fiduciary
duties under Georgia corporate law (and not for violation of other laws, such as
the Federal securities laws). Our Second Amended and Restated Articles of
Incorporation (the "Restated Articles") exonerate our directors from monetary
liability to the extent permitted by this statutory provision.
Our Bylaws (the "Bylaws") also provide that we shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including any action by or in the right of the
Company), by reason of the fact that such person is or was a director or officer
of our company, or is or was serving at our request as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including reasonable attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of our company(and with respect to any criminal action or
proceeding, if such person had no reasonable cause to believe such person's
conduct was unlawful), to the maximum extent permitted by, and in the manner
provided by, the Georgia Business Corporation Code. In addition, our Bylaws
provide that we will advance to its directors or officers reasonable expenses of
any such proceeding.
Notwithstanding any provision of our Restated Articles and Bylaws to the
contrary, the Georgia Business Corporation Code provides that we shall not
indemnify a director or officer for any liability incurred in a proceeding in
which the director is adjudged liable to our company or is subjected to
injunctive relief in favor of our company: (1) for any appropriation, in
violation of his duties, of any business opportunity of our company; (2) for
acts or omissions which involve intentional misconduct or a
II-1
<PAGE> 92
knowing violation of law; (3) for unlawful corporate distributions; (4) for any
transaction from which the director or officer received an improper personal
benefit.
The Underwriting Agreement filed as Exhibit 1.1 hereto also contains
certain provisions pursuant to which certain officers, directors and controlling
persons of our company may be entitled to be indemnified by the underwriters
named therein.
We have purchased insurance with respect to, among other things, any
liabilities that may accrue under the statutory provisions referred to above.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration statement, we
have issued the following securities that were not registered under the
Securities Act:
(A) Issuances of Capital Stock.
In June 1997, we issued and sold an aggregate of 750,000 shares of Series F
preferred stock to the former stockholder of Bender Management Consultants, Inc.
in consideration of all of the issued and outstanding shares of common stock of
Bender Management Consultants, Inc.
In June 1997, we issued 2,500 shares of our common stock to a former
independent consultant in consideration of the execution and delivery of a
Release and Covenant Not to Sue.
In January 1998, we issued 15,000 shares of our common stock to the
shareholders of Manufacturing Execution Systems Associates, Inc. in
consideration of their continued employment with us.
In January 1999, we issued 15,000 shares of our common stock to the
shareholders of Manufacturing Execution Systems Associates, Inc. in
consideration of their continued employment with us.
In March 1999, we issued and sold an aggregate of 5,636,071 shares of our
Series G preferred stock to several accredited and institutional investors for
an aggregate offering price of $35.0 million. Deutsche Bank Alex. Brown
(formerly BT Alex. Brown Incorporated) served as the exclusive placement agent
for this offering. As consideration for its services, we paid Deutsche Bank
Alex. Brown $2.2 million.
In May 2000, we issued and sold an aggregate of 112,500 shares of our
common stock to Edward Scott, Jr., a member of our board of directors, for an
aggregate purchase price of $900,000.
No underwriters were used in the foregoing transactions. All sales of
securities described above were made in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act and/or Regulation D
promulgated thereunder for transactions by an issuer not involving a public
offering.
(B) Issuances of Notes and Warrants.
On May 20, 1997, we issued and sold a $2.0 million subordinated promissory
note and a warrant to purchase an aggregate of 727,273 shares of our common
stock to Warburg, Pincus Investors, L.P. at an exercise price of $2.75 per
share.
On July 20, 1997, we issued and sold a $2.5 million subordinated promissory
note and a warrant to purchase an aggregate of 714,286 shares of our common
stock to Warburg, Pincus Investors, L.P. at an exercise price of $3.50 per
share.
In November 1998, we issued and sold a subordinated promissory note to
Warburg, Pincus Investors, L.P. in an aggregate principal amount of $5.0
million. In accordance with its terms, the note was converted into an aggregate
of 805,153 shares of Series G preferred stock upon the closing of the sale of
the Series G preferred stock discussed at (A) above.
On May 17, 2000 the Company issued a warrant to purchase 400,000 shares of
its common stock at an exercise price of $8.00 per share in connection with a
software license agreement.
II-2
<PAGE> 93
No underwriters were used in the foregoing transactions. All sales of
securities described above were made in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act and/or Regulation D
promulgated thereunder for transactions by an issuer not involving a public
offering.
(C) Grants and Exercises of Stock Options.
Since May 19, 1997, we have granted stock options to purchase an aggregate
of 3,240,966 shares of common stock with exercise prices ranging from $2.75 to
$3.75 per share, to employees, directors and consultants pursuant to our 1997
stock option plan. Of the options granted pursuant to our 1987 and 1997 stock
option plans, 433,494 have been exercised for an aggregate consideration of
$384,694 as of April 30, 2000. The issuance of common stock upon exercise of the
options was exempt either pursuant to Rule 701, as a transaction pursuant to a
compensatory benefit plan, or pursuant to Section 4(2), as a transaction by an
issuer not involving a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) Exhibits.
We agree to furnish a copy of all agreements relating to long-term debt
upon request of the Securities and Exchange Commission.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1* -- Form of Underwriting Agreement
3.1 -- Second Amended and Restated Articles of Incorporation of
SynQuest, Inc.
3.2 -- Bylaws of SynQuest, Inc.
4.1* -- Specimen common stock certificate
5.1* -- Opinion of King & Spalding as to the legality of the common
stock being registered
10.1 -- Employment Agreement by and between SynQuest, Inc. and
Joseph Trino dated as of November 1, 1997
10.2 -- Employment Agreement by and between SynQuest, Inc. and
Timothy Harvey dated as of August 15, 1996
10.3 -- Employment Agreement by and between SynQuest, Inc. and John
Bartels dated as of November 1, 1997
10.4 -- Employment Agreement by and between SynQuest, Inc. and Paul
Bender dated as of June 16, 1997
10.5 -- Employment Agreement by and between SynQuest, Inc. and
Christopher Jones dated as of September 1, 1998
10.6 -- Severance Agreement Letter by and between SynQuest, Inc. and
Mark Simcoe dated as of November 1, 1999
10.7 -- 1997 Stock Option Plan dated as of November 9, 1999
10.8 -- Loan and Security Agreement by and between Factory
Automation & Computer Technology, Inc. and Greyrock Business
Credit dated as of July 10, 1996
10.9 -- Amended Schedule to Loan and Security Agreement by and
between SynQuest, Inc. and Greyrock Business Credit dated as
of June 30, 1997
10.10 -- Second Amendment to Loan Documents by and between SynQuest,
Inc. and Greyrock Business Credit dated as of September 24,
1997
10.11 -- Extension Agreement by and between SynQuest, Inc. and
Greyrock Business Credited dated as of May 20, 1998
10.12 -- Amendment Agreement by and between SynQuest, Inc. and
Greyrock Capital dated as of January 13, 1999
10.13 -- Amendment Agreement by and between SynQuest, Inc. and
Greyrock Capital dated as of December 14, 1999
</TABLE>
II-3
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.14 -- Amendment Agreement by and between SynQuest, Inc. and
Greyrock Capital dated as of March 15, 2000
10.15 -- Amendment Agreement by and between SynQuest, Inc. and
Greyrock Capital dated as of March 29, 2000
10.16 -- Lease Agreement by and between SynQuest, Inc. and Acquiport
Peachtree Ridge, Inc. dated as of January 12, 2000
10.17* -- Preferred Stock Purchase Agreement dated as of March 3, 1999
21.1 -- List of subsidiaries
23.1* -- Consent of King & Spalding (contained in Exhibit 5.1)
23.2 -- Consent of Ernst & Young LLP
24.1 -- Powers of Attorney (contained in signature page)
27.1 -- Financial Data Schedule (for SEC filing purposes only)
27.2 -- Financial Data Schedule (for SEC filing purposes only)
</TABLE>
- ---------------
* To be filed by amendment.
(B) Financial Statement Schedules.
All financial statement schedules not listed are omitted because they are
inapplicable or the requested information is shown in the financial statements
of the registrant or in the related notes to the financial statements.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered 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 and will be governed by the final adjudication
of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 95
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on May 19, 2000.
SYNQUEST, INC.
By: /s/ JOSEPH TRINO
------------------------------------
Joseph Trino
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Joseph Trino and John Bartels and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, from such person and in each person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to the Registration Statement and to file
the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission and to sign and file any other
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, granting
unto said attorneys-in-fact and agents, full power and authority to do and
perform each and every act and thing requisite and necessary to be done as fully
to all said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on May 19, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JOSEPH TRINO Chief Executive Officer and Director
- ----------------------------------------------------- (Principal Executive Officer)
Joseph Trino
/s/ JOHN BARTELS Executive Vice President, Finance and
- ----------------------------------------------------- Administration
John Bartels (Principal Financial Officer)
/s/ PAUL BENDER President, Bender Consulting Division and
- ----------------------------------------------------- Director
Paul Bender
/s/ HENRY KRESSEL Director
- -----------------------------------------------------
Henry Kressel
/s/ JOSEPH LANDY Director
- -----------------------------------------------------
Joseph Landy
/s/ EDWARD SCOTT, JR. Director
- -----------------------------------------------------
Edward Scott, Jr.
</TABLE>
II-5
<PAGE> 1
EXHIBIT 3.1
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SYNQUEST, INC.
ARTICLE I.
The name of the corporation (the "Corporation") is SynQuest,
Inc.
ARTICLE II.
The purposes for which this Corporation is to be formed are as
follows:
To engage in any lawful act or activity for which corporations
may be organized under the Georgia Business Corporation Code provided that the
Corporation is not formed to engage in any act or activity which requires the
consent or approval of any state official, department, board, agency or other
body without such approval first being obtained.
ARTICLE III.
The Corporation's initial registered office is located in
Gwinnett County at Waterford Centre, 5555 Triangle Parkway, Suite 350, Norcross,
Georgia 30092. The Corporation's initial registered agent at that office is Mark
R. Simcoe.
ARTICLE IV.
[INTENTIONALLY OMITTED]
ARTICLE V.
The mailing address of the initial principal office of the
Corporation is Waterford Centre, 5555 Triangle Parkway, Suite 350, Norcross,
Georgia 30092.
ARTICLE VI.
(a) The aggregate number of shares which the Corporation
shall have the authority to issue:
(i) 100,000,000 shares of Common Stock, $0.01
par value (the "Common Stock"), such shares to have such
rights as are enumerated in Article VII of these Articles of
Incorporation; and
<PAGE> 2
(ii) 16,000,000 shares of Preferred Stock, $0.01
par value (the "Preferred Stock"), such shares to have such
rights as are enumerated in Article VII of these Articles of
Incorporation.
(b) Subject to the limitations and in the manner
provided by law, shares of Preferred Stock may be issued from time to
time in series. In addition to the series of Preferred Stock
established and designated in these Articles of Incorporation, as
amended, the Board of Directors of the Corporation is hereby empowered
and authorized to establish and designate additional series, to fix the
number of shares constituting each such additional series, and to fix
the designations and the relative rights, preferences and limitations
of the shares of each such additional series in accordance with Section
14-2-602 of the Georgia Business Corporation Code. In such regard, the
Board of Directors of the Corporation is expressly authorized, at any
time, by adopting resolutions providing for the issuance of, or
providing for a change in the number of, shares of any particular
series of Preferred Stock and, if and to the extent from time to time
required by law, by filing a certificate of amendment which is
effective without shareholder action to increase or decrease the number
of shares included in each series of Preferred Stock, but not below the
number of shares then issued, and to set or change in any one or more
respects the designations, preferences, conversions or other rights,
voting powers, restrictions, limitations as to dividends,
qualifications, or terms and conditions of redemption relating to the
shares of each such series. Notwithstanding the foregoing, the Board of
Directors of the Corporation shall not be authorized to change the
right of holders of the Common Stock of the Corporation to vote one
vote per share on all matters submitted for shareholder action.
ARTICLE VII.
(a) A series of Preferred Stock consisting of 540,016
shares is hereby established, such series to be designated the Series B
Preferred Stock, $0.01 par value (the "Series B Preferred Stock"), and
such series to have such rights, preferences and limitations as are
hereinafter enumerated under the heading "OLD PREFERRED STOCK" in this
Article VII.
(b) A Series of Preferred Stock consisting of 2,376,651
shares is hereby established, such series to be designated the Series C
Preferred Stock, $0.01 par value (the "Series C Preferred Stock"), and
such series to have such rights, preferences and limitations as are
hereinafter enumerated under the heading "OLD PREFERRED STOCK" in this
Article VII.
(c) A series of Preferred Stock consisting of 4,000,000
shares is hereby established, such series to be designated the Series D
Preferred Stock, $0.01 par value (the "Series D Preferred Stock"), and
such series to have such rights, preferences and limitations as are
hereinafter enumerated under the heading "OLD PREFERRED STOCK" in this
Article VII.
- 2 -
<PAGE> 3
(d) A series of Preferred Stock consisting of 1,000,000
shares is hereby established, such series to be designated the Series E
Preferred Stock, $0.01 par value (the "Series E Preferred Stock"), and
such series to have such rights, preferences and limitations as are
hereinafter enumerated under the heading "OLD PREFERRED STOCK" in this
Article VII.
(e) A series of Preferred Stock consisting of 750,000
shares is hereby established, such series to be designated the Series F
Preferred Stock, $0.01 par value (the "Series F Preferred Stock"), and
such series to have such rights, preferences and limitations as are
hereinafter enumerated under the heading "SERIES F PREFERRED STOCK" in
this Article VII.
(f) A series of Preferred Stock consisting of 5,636,071
shares is hereby established, such series to be designated the Series G
Preferred Stock, $0.01 par value (the "Series G Preferred Stock"), and
such series to have such rights, preferences and limitations as are
hereinafter enumerated under the heading "SERIES G PREFERRED STOCK" in
this Article VII.
Definitions.
"Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Corporation.
"Old Preferred Stock" shall mean the Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, and Series E Preferred Stock.
COMMON STOCK
The rights, preferences and limitations of the Common Stock are as
follows:
1. Dividends.
Subject to the preferences and other rights of any series of the
Preferred Stock, the holders of Common Stock shall be entitled to receive
dividends when and as declared by the Board of Directors out of funds legally
available therefor.
2. Liquidation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after payment or provision for payment to the holders of any series
of Preferred Stock of the amounts to which they may be entitled, the remaining
assets and funds of the Corporation available for distribution to its
stockholders shall be distributed equally per share to the holders of Common
Stock irrespective of class.
3. Voting Rights.
- 3 -
<PAGE> 4
Except as otherwise provided herein or by law, each holder of Common
Stock shall be entitled to one vote in respect of each share of Common Stock
held of record on all matters submitted to a vote of stockholders.
4. [INTENTIONALLY OMITTED].
5. [INTENTIONALLY OMITTED].
- 4 -
<PAGE> 5
OLD PREFERRED STOCK
The rights, preferences and limitations of the Old Preferred Stock are
as follows:
1. Dividends.
(a) Subject to the rights of series of Preferred Stock which may
from time to time be created by the Board of Directors, the holders of shares of
Old Preferred Stock shall be entitled to receive, when and as declared, out of
funds legally available therefor, dividends at the rate of $0.120 per share of
Old Preferred Stock per annum, payable as the Board of Directors may determine,
before any dividends shall be set apart for or paid upon the Common Stock or any
other stock ranking on liquidation junior to the Old Preferred Stock (such stock
being referred to hereinafter collectively as "Junior Stock") in any year. All
dividends declared upon the Old Preferred Stock shall be declared pro rata per
share.
(b) Dividends on the Old Preferred Stock shall be cumulative,
whether or not in any fiscal year there shall be funds legally available for the
payment of dividends in such fiscal year, so that if in any fiscal year or
years, dividends in whole or in part are not declared or paid upon the Old
Preferred Stock, unpaid dividends shall accrue and accumulate as against the
holders of the Junior Stock and sums in a later year or years shall be paid to
the holders of the Old Preferred Stock with respect to any prior year or years
when dividends were not paid.
(c) For so long as the Old Preferred Stock remains outstanding,
the Corporation shall not pay any dividend upon the Junior Stock, whether in
cash or other property (other than shares of Junior Stock), or purchase, redeem
or otherwise acquire any such Junior Stock unless, in addition to the payment of
the dividend to the holders of the Old Preferred Stock as described above, the
Corporation has redeemed all shares of Old Preferred Stock which it would
theretofore have been required to redeem under Section 7 hereof.
2. Liquidation, Dissolution or Winding Up
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Old
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, after and subject to
the payment in full of all amounts required to be distributed to the holders of
any other Preferred Stock of the Corporation ranking on liquidation prior and in
preference to the Old Preferred Stock (such preferred stock being referred to
hereinafter as "Senior Preferred Stock") upon such liquidation, dissolution or
winding up, but before any payment shall be made to the holders of Junior Stock,
an amount equal to $2.40 per share of Series B Preferred Stock and per share of
Series C Preferred Stock, plus an amount equal to all dividends thereon accrued
but unpaid (subject to adjustment in the event of any stock dividend, stock
split, stock distribution or combination with respect to such shares), and an
amount equal to $2.28 per share of Series D Preferred Stock and Series E
Preferred Stock, plus an amount equal to all dividends thereon accrued but
unpaid (subject to adjustment in the event of any stock dividend, stock split,
stock distribution or combination with respect to such shares).
- 5 -
<PAGE> 6
If upon any such liquidation, dissolution or winding up of the
Corporation, the remaining assets of the Corporation available for the
distribution to holders of Old Preferred Stock and any class or series of stock
ranking on liquidation on a parity with the Old Preferred Stock then outstanding
("Parity Stock") after payment in full of amounts required to be paid or
distributed to holders of Senior Preferred Stock shall be insufficient to pay
the holders of shares of Old Preferred Stock and Parity Stock the full amount to
which they shall be entitled, the holders of shares of Old Preferred Stock and
Parity Stock shall share ratably in any distribution of the remaining assets and
funds of the Corporation in proportion to the respective amounts which would
otherwise be payable in respect to the shares held by them upon such
distribution if all amounts payable on or with respect to said shares were paid
in full.
(b) After the payment of all preferential amounts required to be
paid to the holders of Senior Preferred Stock, Old Preferred Stock, Parity Stock
and any other series of preferred stock upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Common Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders, the holders of
shares of Common Stock sharing ratably in such assets.
(c) For purposes of this Section 2, a merger or consolidation of
the Corporation with or into any other corporation or corporations in which the
stockholders of the Corporation immediately prior to the merger or consolidation
do not own more than fifty percent (50%) of the outstanding voting power
(assuming conversion of all convertible securities and the exercise of all
outstanding options and warrants) of the surviving corporation, or the sale of
all or substantially all of the assets of the Corporation, shall be treated as a
liquidation, dissolution or winding up of the Corporation.
3. Voting Rights
3.1 Voting Rights of the Series B Preferred Stock.
(a) Subject to the rights of series of Preferred Stock
which may from time to time be created by the Board of Directors, each
issued and outstanding share of Series B Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common
Stock in to which each such share of Series B Preferred Stock is
convertible (as adjusted from time to time pursuant to Section 5 hereof
and with any fractional shares determined on an aggregate conversion
basis being rounded to the nearest whole share), at each meeting of
stockholders of the Corporation with respect to any and all matters
presented to the stockholders of the Corporation for their action or
consideration except that upon the occurrence and during the
continuation of any of the events specified in (b)(i) through (b)(iii)
below, the rights of the holders of the Series B Preferred Stock with
respect to the election of directors shall be governed by the
provisions set forth in paragraph (b). Except as provided by law, by
the provisions of paragraphs (b) and (c) below or by the provisions
establishing any other series of preferred stock, holders of Series B
Preferred Stock shall vote together with the holders of Common Stock as
a single class. The provisions of this Section 3.1 shall apply to any
actin of the
- 6 -
<PAGE> 7
stockholders, whether at a meeting or by written consent without a
meeting in accordance with Georgia law.
(b) In the event that (i) the Corporation breaches any
of the representations or warranties made in that certain Stock
Purchase Agreement, dated on or about May 10, 1994, by and among the
Corporation, Warburg and Craig Skevington, as the same may be amended
from time to time (the "Stock Purchase Agreement"), (ii) the
Corporation fails to comply with any of the covenants contained in the
Stock Purchase Agreement; or (iii) the Corporation fails to redeem any
shares of Old Preferred Stock as required by Section 7 hereof then,
upon twenty (20) days prior written notice to the Corporation given by
the holders of the Series B Preferred Stock, the holders of the Series
B Preferred Stock shall as a class become entitled to Special Voting
Rights (as defined below). The Special Voting Rights of the holders of
the Series B Preferred Stock shall continue until the Corporation shall
have cured the breach of any representation or warranty contained in
the Stock Purchase Agreement, cured its failure to comply with the
covenants contained in the Stock Purchase Agreement and/or all
redemptions in arrears with respect to the Old Preferred Stock shall
have been paid, whereupon all Special Voting Rights of the holders of
the Series B Preferred Stock shall cease, subject to being again
revived from time to time upon the reoccurrence of any of the events
above described. Failure by the holders of the Series B Preferred Stock
to exercise their Special Voting Rights promptly upon the occurrence of
any of the events described above shall not be deemed to be a waiver of
such rights, such rights being exercisable at any time that such events
shall have occurred or be continuing.
The term "Special Voting Rights" shall mean the right of the
holders of the Series B Preferred Stock to elect a majority of the
members of the Board of Directors upon the occurrence and during the
continuance of any of the events specified in subparagraphs (i), (ii)
or (iii) above.
Immediately upon the accrual of the Special Voting Rights of
the holders of the Series B Preferred Stock, the number of directors of
the Corporation shall, ipso facto, be increased such that the holders
of the Series B Preferred Stock may elect a majority of the directors
and the directors of the Corporation shall thereupon be divided into
two classes, one of such classes shall consist of the new directors who
shall be known as the "Series B Special Directors" and the other class
shall consist of the remaining directors. The Series B Special
Directors shall be elected only by vote of the holders of the Series B
Preferred Stock, voting as a class. The number of directors may
thereafter be further increased or decreased in such manner as may be
permitted by the Bylaws and without the vote of the holders of the
Series B Preferred Stock, provided that no such action shall impair the
right of the holders of the Series B Preferred Stock to elect a
majority of the members of the Board of Directors. The holders of the
Series B Preferred Stock may at their option at any time exercise the
Special Voting Rights by written consent without a meeting in
accordance with Georgia law.
The Series B Special Directors shall serve for a term of one
year and until their successors are elected and qualified, or until the
earlier termination of the Special Voting
- 7 -
<PAGE> 8
Rights of the holders of the Series B Preferred Stock. So long as the
holders of the Series B Preferred Stock are entitled to exercise the
Special Voting Rights, any vacancy among the Series B Special Directors
may be filled only by the holders of the Series B Preferred Stock. The
Series B Special Directors may, during their term of office, be removed
at any time, with or without cause, by and only by the affirmative
votes, at a special meeting of holders of the Series B Preferred Stock
called for such purpose, or the written consent of the holders of
record of a majority of the outstanding shares of the Series B
Preferred Stock. Any vacancy created by such removal may also be filled
at such meeting or by such consent. Upon the termination of the Special
Voting Rights of the holders of the Series B Preferred Stock, the terms
of the Series B Special Directors shall forthwith terminate and the
number of directors of the Corporation shall thereupon be appropriately
decreased.
(c) Subject to the rights of series of Preferred Stock
which may from time to time be created by the Board of Directors, in
addition to any other rights provided by law, the Corporation shall
not, without first obtaining the affirmative vote or written consent of
the holders of a majority of the then outstanding Series B Preferred
Stock:
(i) amend or repeal any provision of the
Corporation's Articles of Incorporation or Bylaws or alter or
repeal the preferences, special rights or other powers of the
Series B Preferred Stock so as to affect adversely the Series
B Preferred Stock. For this purpose, the authorization or
issuance of any series of Preferred Stock with preference to
priority over, or being on a parity with the Series B
Preferred Stock as to the right to receive either dividends or
amounts distributable upon liquidation, dissolution or winding
up of the Corporation, shall be deemed to affect adversely the
Series B Preferred Stock;
(ii) authorize or effect the payment of dividends
or other distributions or the redemption or repurchase of any
capital stock of the Corporation (other than the redemption of
the Old Preferred Stock in accordance with Section 7 hereof
and the redemption of Common Stock and Preferred Stock
described in the Stock Purchase Agreement) or rights to
acquire capital stock of the Corporation;
(iii) authorize or effect the issuance by the
Corporation of any shares of capital stock or rights to
acquire capital stock that is pari passu or senior to the
Series B Preferred Stock;
(iv) authorize the creation of any stock option,
stock purchase, stock bonus or stock incentive plans for
employees, consultants or directors of the Corporation;
(v) authorize or effect (a) any sale, lease,
transfer or other disposition of all or substantially all the
assets of the Corporation; (b) any merger or consolidation or
other reorganization of the Corporation with or into another
corporation; (c) the acquisition by the Corporation of another
corporation by means of a purchase of all or substantially all
the assets of such corporation,
- 8 -
<PAGE> 9
merger, consolidation or other reorganization; or (d) a
liquidation, winding up, dissolution or adoption of any plan
of the same;
(vi) engage in any business not described in the
Corporation's "business plan," amend the Corporation's
"business plan" or adopt a new "business plan;" or
(vii) authorize (a) the incurrence of indebtedness
for borrowed money in an amount in excess of $250,000 or (b)
the making of any single capital expenditure or series of
capital expenditures in excess of $100,000.
3.2 Voting Rights of the Series C Preferred Stock.
(a) Except as otherwise provided by law, the holders of
the Series C Preferred Stock shall not be entitled to notice of, or to
vote at, any meeting of the stockholders of the Corporation nor to vote
upon any matter relating to the business or affairs of the Corporation.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series C Preferred
Stock so as to affect adversely the Series C Preferred Stock, without
the written consent or affirmative vote of the holders of a majority of
the then outstanding Series C Preferred Stock, given in writing or by
vote at a meeting, consenting or voting (as the case may be) separately
as a class. For this purpose, the authorization or issuance of any
series of preferred stock with preference or priority over, or being on
a parity with the Series C Preferred Stock as to the right to receive
either dividends or amounts distributable upon liquidation, dissolution
or winding up of the Corporation shall be deemed to affect adversely
the Series C Preferred Stock.
3.3 Voting Rights of the Series D Preferred Stock and E Preferred
Stock.
(a) Subject to the rights of series of Preferred Stock
which may from time to time be created by the Board of Directors, each
issued and outstanding share of Series D Preferred Stock and Series E
Preferred Stock shall be entitled to the number of votes equal to the
number of shares of Common Stock into which each such share is
convertible (as adjusted from time to time pursuant to Section 5 hereto
and with any fractional shares determined on an aggregate conversion
basis being rounded to the nearest whole share), at each meeting of
stockholders of the Corporation for their action or consideration.
Except as provided by law or by the provisions establishing any other
series of preferred stock, holders of Series D Preferred Stock and
Series E Preferred Stock shall vote together with the holders of Common
Stock as a single class. The provisions of this Section 3.3 shall apply
to any action of the stockholders, whether at a meeting or by written
consent without a meeting in accordance with Georgia law.
(b) Subject to the rights of series of Preferred Stock
which may from time to time be created by the Board of Directors, in
addition to any other rights provided by law, the Corporation shall
not, without first obtaining the affirmative vote or written consent
- 9 -
<PAGE> 10
of the holders of a majority of each of the then outstanding Series D
Preferred Stock and Series E Preferred Stock:
(i) amend or repeal any provision of the
Corporation's Articles of Incorporation or Bylaws or alter or
repeal the preferences, special rights or other powers of the
Series D Preferred Stock or Series E Preferred Stock so as to
affect adversely the Series D Preferred Stock and or Series E
Preferred Stock, as the case may be. For this purpose, the
authorization or issuance of any series of Preferred Stock
with preference or priority over, or being on a parity with
the Series D Preferred Stock or Series E Preferred Stock as to
the right to receive either dividends or amounts distributable
upon liquidation, dissolution or winding up of the Corporation
shall be deemed to affect adversely the Series D Preferred
Stock or Series E Preferred Stock, as the case may be.
(ii) authorize or effect the payment of dividends
or other distributions or the redemption or repurchase of any
capital stock of the Corporation (other than the redemption of
the Old Preferred Stock in accordance with Section 7 hereof)
or rights to acquire capital stock of the Corporation;
(iii) authorize or effect the issuance by the
Corporation of any shares of capital stock or rights to
acquire capital stock that is pari passu or senior to the
Series D Preferred Stock or Series E Preferred Stock;
(iv) authorize the creation of any stock option,
stock purchase, stock bonus or stock incentive plans for
employees, consultants or directors of the Corporation;
(v) authorize or effect (a) any sale, lease,
transfer or other disposition of all or substantially all the
assets of the Corporation; (b) any merger or consolidation or
other reorganization of the Corporation with or into another
corporation; (c) the acquisition by the Corporation of another
corporation by means of a purchase of all or substantially all
of the assets of such corporation, merger, consolidation or
other reorganization; or (d) a liquidation, winding up,
dissolution or adoption of any plan for the same;
(vi) engage in any business not described in the
Corporation's "business plan," amend the Corporation's
"business plan" or adopt a new "business plan;" or
(vii) authorize (a) the incurrence of indebtedness
for borrowed money in an amount in excess of $250,000 or (b)
the making of any single capital expenditure or series of
capital expenditures in excess of $100,000.
4. Optional Conversion. Subject to the rights of series of
Preferred Stock which may from time to time be created by the Board of
Directors, (i) each share of Series B Preferred Stock may be converted at any
time, at the option of the holder thereof, in the manner hereinafter
- 10 -
<PAGE> 11
provided, into fully-paid and nonassessable shares of Common Stock at the
conversion price then in effect for Series B Preferred Stock, (ii) each share of
Series C Preferred Stock may be converted at any time, at the option of the
holder thereof, in the manner hereinafter provided, into fully-paid and
nonassessable shares of Common Stock at the conversion price then in effect for
Series C Preferred Stock, (iii) each share of Series D Preferred Stock may be
converted at any time, at the option of the holder thereof, in the manner
hereinafter provided, into fully-paid and nonassessable shares of Common Stock
at the conversion price then in effect for Series D Preferred Stock, and (iv)
each share of Series E Preferred Stock may be converted at any time, at the
option of the holder thereof, in the manner hereinafter provided, into
fully-paid and nonassessable shares of Common Stock at the conversion price then
in effect for Series E Preferred Stock (the conversion prices for Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock are hereafter collectively referred to as the "Conversion
Price"); provided, however, that on any redemption of any Old Preferred Stock or
any liquidation of the Corporation, the right of conversion shall terminate at
the close of business on the full business day next preceding the date fixed for
such redemption or for the payment of any amounts distributable on liquidation
to the holders of Old Preferred Stock.
(a) The initial conversion rate for the Series B
Preferred Stock shall be one share of Common Stock for each one share
of Series B Preferred Stock surrendered for conversion, the initial
conversion rate for the Series C Preferred Stock shall be one share of
Common Stock for each one share of Series C Preferred Stock surrendered
for conversion, the initial conversion rate for the Series D Preferred
Stock shall be one share of Common Stock for each one share of Series D
Preferred Stock surrendered for conversion, and the initial conversion
rate for the Series E Preferred Stock shall be one share of Common
Stock for each one share of Series E Preferred Stock surrendered for
conversion, in each case representing an initial conversion price for
Series B Preferred Stock and for Series C Preferred Stock (for purposes
of Section 5) of $2.40 per share of the Corporation's Common Stock,
and the initial conversion price for Series D Preferred Stock and
Series E Preferred Stock (for purposes of Section 5) of $2.28 per share
of the Corporation's Common Stock. The applicable conversion rate and
Conversion Price from time to time in effect is subject to adjustment
as hereinafter provided.
(b) The Corporation shall not issue any fractional shares
of Common Stock upon conversion of Old Preferred Stock or script in
lieu thereof (with any fractional shares being determined on an
aggregate conversion basis). If any fractional share of Common Stock
would, except for the provisions of this paragraph (b), be issuable
upon conversion of any Old Preferred Stock, the Corporation shall in
lieu thereof pay to the person entitled thereto an amount in cash equal
to the current value of such fraction, calculated to the nearest
one-thousandth (1/1000) of a share, to be computed (i) if the Common
Stock is listed on any national securities exchange on the basis of the
last sales price of the Common Stock on such exchange (or the quoted
closing bid price if there shall have been no sales) on the date of
conversion, or (ii) if the Common Stock shall not be listed, on the
basis of the mean between the closing bid and asked prices for the
Common Stock on the date of conversion as reported by the Nasdaq Stock
Market, or its successor, and if there are not such closing bid and
asked prices, on the basis of the fair market value per share of Common
Stock, as determined by the Board of Directors of the Corporation.
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<PAGE> 12
(c) Whenever the conversion rate and Conversion Price
shall be adjusted as provided in Section 5 hereof, the Corporation
shall forthwith file at each office designated for the conversion of
Old Preferred Stock, a statement, signed by the Chairman of the Board,
the President, any Vice President or Treasurer of the Corporation,
showing in reasonable detail the facts requiring such adjustment and
the conversion rate and Conversion Price that will be effective after
such adjustment. The Corporation shall also cause a notice setting
forth any such adjustments to be sent by mail, first class, postage
prepaid, to each record holder of Old Preferred Stock at his or its
address appearing on the stock register. If such notice relates to an
adjustment resulting from an event referred to in paragraph 5(g), such
notice shall be included as part of the notice required to be mailed
and published under the provisions of paragraph 5(g) hereof.
(d) In order to exercise the conversion privilege, the
holder of any share of Old Preferred Stock to be converted shall
surrender his or its certificate or certificates therefore to the
principal office of the transfer agent for the Old Preferred Stock (or
if no transfer agent be at the time appointed, then the Corporation at
its principal office), and shall give written notice to the Corporation
at such office that the holder elects to convert the Old Preferred
Stock represented by such certificates, or any number thereof. Such
notice shall also state the name or names (with address) in which the
certificate or certificates for shares of Common Stock, which shall be
issuable on such conversion shall be issued, subject to any
restrictions on transfer relating to shares of Old Preferred Stock or
shares of Common Stock upon conversion thereof. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed
or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly authorized in writing. The
date of receipt by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) of the certificates and
notice shall be the conversion date. As soon as practicable after
receipt of such notice and the surrender of the certificate or
certificates for Old Preferred Stock as aforesaid, the Corporation
shall cause to be issued and delivered at such office to such holder,
or on his or its written order, a certificate or certificates for the
number of full shares of Common Stock issuable on such conversion in
accordance with the provisions hereof and cash as provided in paragraph
(b) of this Section 4 in respect of any fractional share otherwise
issuable upon such conversion.
(e) The Corporation shall at all times when the Old
Preferred Stock shall be outstanding reserve and keep available out of
its authorized but unissued stock, for the purposes of effecting the
conversion of the Old Preferred Stock, such number of its duly
authorized shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock. Before taking any action which would cause an
adjustment reducing the Conversion Price below the then par value of
the shares of Common Stock issuable upon conversion of the Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock, the Corporation will take any corporate
action which may, in the opinion of its counsel, be necessary in
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<PAGE> 13
order that the Corporation may validly and legally issue fully paid and
nonassessable shares at such adjusted Conversion Price.
(f) Upon any such conversion, no adjustment to the
conversion rate shall be made for accrued and unpaid dividends on the
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock surrendered for conversion or on the
Common Stock delivered.
(g) All shares of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
which shall have been surrendered for conversion as herein provided
shall no longer be deemed to be outstanding and all rights with respect
to such shares, including the rights, if any, to receive notices and to
vote, shall forthwith cease and terminate except only the right of the
holder thereof to receive shares of Common Stock in exchange therefor.
Any shares of Old Preferred Stock so converted shall be retired and
canceled and shall not be reissued, and the Corporation may from time
to time take such appropriate action as may be necessary to reduce the
authorized Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock accordingly.
5. Anti-dilution Provisions. (a) In order to prevent dilution of
the rights granted hereunder, the Conversion Price of each share of Old
Preferred Stock shall be subject to adjustment from time to time in accordance
with this paragraph 5(a). At any given time the Conversion Price, whether as the
initial conversion price for Series B Preferred Stock or Series C Preferred
Stock ($2.40 per share), the initial conversion price for Series D Preferred
Stock or Series E Preferred Stock ($2.28 per share) or the Conversion Price as
last adjusted, shall be that dollar (or part of a dollar) amount the payment of
which shall be sufficient at the given time to acquire one share of the
Corporation's Common Stock upon conversion of shares of Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock, respectively. Upon each adjustment of the Conversion Price pursuant to
this Section 5, the registered holder of shares of Old Preferred Stock shall
thereafter be entitled to acquire upon exercise, at the Conversion Price
resulting from such adjustment, the number of shares of the Corporation's Common
Stock obtainable by multiplying the Conversion Price in effect immediately prior
to such adjustment by the number of shares of the Corporation's Common Stock
acquirable immediately prior to such adjustment and dividing the product thereof
by the Conversion Price resulting from such adjustment. For purposes of this
Section 5, the term "Number of Common Shares Deemed Outstanding" at any given
time shall mean the sum of (x) the number of shares of the Corporation's Common
Stock outstanding at such time, (y) the number of shares of the Corporation's
Common Stock issuable assuming conversion at such time of the Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock and (z) the number of shares of the Corporation's Common Stock deemed to
be outstanding under subparagraphs 5(b)(1) to (9), inclusive, at such time.
(b) Except as provided in paragraph 5(c) or 5(f) below,
if and whenever on or after the date of initial issuance of the Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock (the "Initial Issuance Date"), the
Corporation shall issue or sell, or shall in accordance with
subparagraphs 5(b)(1) to (9),
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<PAGE> 14
inclusive, be deemed to have issued or sold any shares of its Common
Stock for a consideration per share less than the Conversion Price in
effect immediately prior to the time of such issue or sale, then
forthwith upon such issue or sale (the "Triggering Transaction"), the
Conversion Price shall, subject to subparagraphs (1) to (9) of this
paragraph 5(b), be reduced to the Conversion Price (calculated to the
nearest tenth of a cent) determined by dividing:
(i) an amount equal to the sum of (x) the
product derived by multiplying the Number of Common Shares
Deemed Outstanding immediately prior to such Triggering
Transaction by the Conversion Price then in effect, plus (y)
the consideration, if any, received by the Corporation upon
consummation of such Triggering Transaction, by
(ii) an amount equal to the sum of (x) the Number
of Common Shares Deemed Outstanding immediately prior to such
Triggering Transaction, plus (y) the number of shares of
Common Stock issued (or deemed to be issued in accordance with
subparagraphs 5(b)(1) to (9)) in connection with the
Triggering Transaction.
For purposes of determining the adjusted Conversion Price
under this paragraph 5(b), the following subsections (1) to (9),
inclusive, shall be applicable:
(1) In case the Corporation at any time shall in
any manner grant (whether directly or by assumption in a
merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or
any stock or other securities convertible into or exchangeable
for Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"),
whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately
exercisable and the price per share for which the Common Stock
is issuable upon exercise, conversion or exchange (determined
by dividing (x) the total amount, if any, received or
receivable by the Corporation as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon the
exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon
the conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities) shall be less than the Conversion Price in effect
immediately prior to the time of the granting of such Option,
then the total maximum amount of Common Stock issuable upon
the exercise of such Options or in the case of Options for
Convertible Securities, upon the conversion or exchange of
such Convertible Securities shall (as of the date of granting
of such options) be deemed to be outstanding and to have been
issued and sold by the Corporation for such price per share.
No adjustment of the
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<PAGE> 15
Conversion Price shall be made upon the actual issue of such
shares of Common Stock or such Convertible Securities upon the
exercise of such Options, except as otherwise provided in
subparagraph (3) below.
(2) In case the Corporation at any time shall in
any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert thereunder
are immediately exercisable, and the price per share for which
Common Stock is issuable upon such conversion or exchange
(determined by dividing (x) the total amount received or
receivable by the Corporation as consideration for the issue
or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable
to the Corporation upon the conversion or exchange thereof, by
(y) the total maximum number of shares of Common Stock
issuable upon the Conversion or exchange of all such
Convertible Securities) shall be less than the Conversion
Price in effect immediately prior to the time of such issue or
sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed to be outstanding and to
have been issued and sold by the Corporation for such price
per share. No adjustment of the Conversion Price shall be made
upon the actual issue of such Common Stock upon exercise of
the rights to exchange or convert under such Convertible
Securities, except as otherwise provided in subparagraph (3)
below.
(3) If the purchase price provided for in any
Options referred to in subparagraph (1), the additional
consideration, if any, payable upon the conversion or exchange
of any convertible Securities referred to in subparagraphs (1)
or (2), or the rate at which any convertible Securities
referred to in subparagraph (1) or (2) are convertible into or
exchangeable for Common Stock shall change at any time (other
than under or by reason of provisions designed to protect
against dilution of the type set forth in paragraphs 5(b) or
5(d)), the Conversion Price in effect at the time of such
change shall forthwith be readjusted to the Conversion Price
which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted,
issued or sold. If the purchase price provided for in any
Option referred to in subparagraph (1) or the rate of which
any Convertible Securities referred to in subparagraphs (1) or
(2) are convertible into or exchangeable for Common Stock ,
shall be reduced at any time under or by reason of provisions
with respect thereto designed to protect against dilution,
then in case of the delivery of Common Stock upon the exercise
of any such Option or upon conversion or exchange of any such
Convertible Security, the Conversion Price then in effect
hereunder shall forthwith be adjusted to such respective
amount as would have been obtained had such Option or
Convertible Security never been issued as to such Common Stock
and had adjustments been made upon the issuance of the shares
of Common Stock delivered as aforesaid, but
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<PAGE> 16
only if as a result of such adjustment of Conversion Price
then in effect hereunder is hereby reduced.
(4) On the expiration of any Option or the
termination of any right to convert or exchange any
Convertible Securities, the Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price
which would have been in effect at the time of such expiration
or termination had such Option or Convertible Securities to
the extent outstanding immediately prior to such expiration or
termination, never been issued.
(5) In case any options shall be issued in
connection with the issue or sale of other securities of the
Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options
by the parties thereto, such options shall be deemed to have
been issued without consideration.
(6) In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold or deemed to
have been issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the
Corporation therefore. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for
a consideration other than cash, the amount of the
consideration other than cash received by the Corporation
shall be the fair value of such consideration as determined by
the Corporation's Board of Directors. In case any shares of
Common Stock, Options or Convertible Securities shall be
issued in connection with any merger in which the Corporation
is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value of such portion
of the net assets and business of the non-surviving
corporation as shall be attributable to such Common Stock,
Options or Convertible Securities, as the case may be, as
determined by the Board of Directors of the Corporation.
(7) The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any
shares so owned or held shall be considered an issue or sale
of Common Stock for the purpose of this paragraph 5(b).
(8) In case the Corporation shall declare a dividend
or make any other distribution upon the stock of the
Corporation payable in Common Stock, Options or Convertible
Securities, such issuance shall be covered by paragraph 5(d)
below.
(9) For purposes of this paragraph 5(b), in case the
Corporation shall take a record of the holders of its Common
stock for the purpose of entitling them (x) to receive a
dividend or other distribution payable in Common Stock,
Options or in Convertible Securities, or (y) to subscribe for
or purchase Common Stock,
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<PAGE> 17
Options or Convertible Securities, then such record date shall
be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other
distribution or the date of the granting of such right or
subscription or purchase, as the case may be.
(c) In the event the Corporation shall declare a dividend
upon the Common Stock (other than a dividend payable in Common Stock
covered by paragraph 5(d)) payable otherwise than out of earnings or
earned surplus, determined in accordance with generally accepted
accounting principles, including the making of appropriate deductions
for minority interest, if any, in subsidiaries (herein referred to as
"Liquidating Dividends"), then as soon a possible after the conversion
of any Old Preferred Stock the Corporation shall pay to the person
converting such Old Preferred Stock an amount equal to the aggregate
value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Stock which would have been
issued at the time of such earlier exercise and all other securities
which would have been issued with respect to such Common Stock by
reason of stock splits, stock dividends, mergers or reorganizations, or
for any other reason). For the purposes of this paragraph 5(c), a
dividend other than in cash shall be considered payable out of earnings
or earned surplus only to the extent that such earnings or earned
surplus are charged an amount equal to the fair value of such dividend.
(d) In case the Corporation shall at any time subdivide
its outstanding shares of Common Stock into a greater number of shares,
or declare a dividend or make any other distribution upon the stock of
the Corporation payable in Common Stock, Options or Convertible
Securities, the Conversion Price in effect immediately prior to such
subdivision or stock dividend shall be proportionately reduced, and,
conversely, in case the outstanding shares of Common Stock of the
Corporation shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall
be proportionately increased.
(e) If any capital reorganization or reclassification of
the capital stock of the Corporation, or consolidation or merger of the
Corporation with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be
effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities, cash or other property with respect to or
in exchange for Common Stock , then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful
and adequate provision shall be made whereby the holders of the Old
Preferred Stock shall have the right to acquire and receive upon
conversion of the Old Preferred Stock, which right shall be prior to
the rights of the holders of Junior Stock, such shares of stock
securities, cash or other property issuable or payable (as part of the
reorganization, reclassification, consolidation, merger or sale) with
respect to or in exchange for such number of outstanding shares of the
Corporation's Common Stock as would have been received upon conversion
of the Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock, respectively, at the
Conversion Price then in effect. The Corporation will not effect any
such consolidation, merger or
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<PAGE> 18
sale, unless prior to the consummation thereof of the successor
corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume by written instrument mailed or delivered to the holders of the
Old Preferred Stock at the last address of each such holder appearing
on the books of the Corporation, the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to purchase,
if a purchase, tender or exchange offer is made to and accepted by the
holders of more than 50% of the outstanding shares of Common Stock of
the Corporation, the Corporation shall not effect any consolidation,
merger or sale with the person having made such offer or with any
Affiliate of such person, unless prior to the consummation of such
consolidation, merger or sale the holders of the Old Preferred Stock
shall have been given a reasonable opportunity then to elect to receive
upon the conversion of the Old Preferred Stock either the stock,
securities or assets then issuable with respect to the Common Stock of
the Corporation or the stock, securities, or assets, or the equivalent,
issued to previous holders of the Common Stock in accordance with such
offer. For purposes hereof the term "Affiliate" with respect to any
given person shall mean any person controlling, controlled by or under
common control with the given person.
(f) The provisions of this Section 5 shall not apply to
any Common Stock issued, issuable or deemed outstanding under
subparagraphs 5(b)(1) to (9) inclusive: (i) to any person pursuant to
any stock option, stock purchase or similar plan or arrangement for the
benefit of officers, directors and employees of or consultants to the
Corporation or its subsidiaries in effect on the Initial Issuance Date
or thereafter adopted by the Board of Directors of the Corporation,
consented to by the holders of a majority of the then outstanding Old
Preferred Stock, (ii) on conversion of the Old Preferred Stock or (iii)
pursuant to the exercise of the rights of subscription pursuant to
Section 3 and the right of first refusal pursuant to Section 4 of the
Shareholders' Agreement dated on or about May 10, 1994, among the
Corporation, Warburg and Craig Skevington; as the same may be amended
from time to time.
(g) In the event that:
(1) the Corporation shall declare any cash
dividend upon its Common Stock, or
(2) the Corporation shall declare any dividend
upon its Common Stock payable in stock or make any special
dividend or other distribution to the holders of its Common
Stock, or
(3) the Corporation shall offer for subscription
pro rata to the holders of its Common Stock any additional
shares of stock of any class or other rights, or
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation,
including any subdivision or combination of its
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<PAGE> 19
outstanding shares of Common Stock, or consolidation or
merger of the Corporation with, or sale of all or
substantially all of its assets to, another corporation, or
(5) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in connection with such event, the Corporation shall
give to the holders of the Old Preferred Stock;
(i) at least 20 days prior written notice of the
date on which the books of the Corporation shall close or a
record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or
winding up; and
(ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least 20 days prior written
notice of the date when the same shall take place. Such notice
in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common
Stock shall be entitled thereto, and such notice in accordance
with the foregoing clause (b) shall also specify the date on
which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification
consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Each such written notice shall
be given by first class mail, postage prepaid, addressed to
holders of the Old Preferred Stock at the address of each such
holder as shown on the books of the Corporation.
(h) If at any time or from time to time on or after the
Initial Issuance Date, the Corporation shall grant, issue or sell any
Options, Convertible Securities or rights to purchase property (the
"Purchase Rights") pro rata to the record holders of any class of
common stock of the Corporation and such grants, issuances or sales do
not result in an adjustment of the Conversion Price under paragraph
5(b) hereof, then each holder of Old Preferred Stock shall be entitled
to acquire (within thirty days after the later to occur of the initial
exercise date of such Purchase Rights or receipt by such holder of the
notice concerning Purchase Rights to which such holder shall be
entitled under paragraph 5(g)) and upon the terms applicable to such
Purchase Rights either:
(I) the aggregate Purchase Rights which such
holder could have acquired if it had held
the number of shares of Common Stock
acquirable upon conversion of the Old
Preferred Stock immediately before the
grant, issuance or sale of such Purchase
Rights; provided that if any Purchase Rights
were distributed to holders of Common Stock
without the payment of additional
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<PAGE> 20
consideration by such holders, corresponding
Purchase Rights shall be distributed to the
exercising holders of the Old Preferred
Stock as soon as possible after such
exercise and it shall not be necessary for
the exercising holder of the Old Preferred
Stock specifically to request delivery of
such rights; or
(II) in the event that any such Purchase Rights
shall have expired or shall expire prior to
the end of said thirty day period, the
number of shares of Common Stock or the
amount of property which such holder could
have acquired upon such exercise at the time
or times at which the Corporation granted,
issued or sold such expired Purchase Rights.
(i) If any event occurs as to which, in the opinion of
the Board of Directors of the Corporation, the provisions of this
Section 5 are not strictly applicable or if strictly applicable would
not fairly protect the rights of the holders of the Old Preferred Stock
in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in the
application of such provision, in accordance with such essential intent
and principles, so as to protect such rights as aforesaid, but in no
event shall any adjustment have the effect of increasing the Conversion
Price as otherwise determined pursuant to any of the provisions of this
Section 5 except in the case of a combination of shares of a type
contemplated in paragraph 5(d) or the expiration of Options or
Convertible Securities as set forth in paragraph 5(b)(4), and then in
no event to an amount larger than the Conversion Price as adjusted
pursuant to paragraph 5(d) or paragraph 5(b)(4), respectively.
6. Mandatory Conversion.
(a) Each share of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
shall automatically be converted into shares of Common Stock at the
then applicable and effective Conversion Price at any time upon the
closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the
Corporation to the public generally at a price to the public which
places upon the Corporation a value (prior to the receipt of proceeds
of such offering) of at least $35 million and in which the net proceeds
to the Corporation are not less than $15 million.
(b) All holders of record of shares of Old Preferred
Stock will be given at least 10 days prior written notice of the date
fixed and the place designated for mandatory conversion of all of such
shares of Old Preferred Stock pursuant to this Section 6. Such notice
will be sent by mail, first class, postage prepaid, to each record
holder of shares of Old Preferred Stock at such holder's address
appearing on the stock register. On or before the date fixed for
conversion, each holder of shares of Old Preferred Stock shall
surrender his or its certificate or certificates for all such shares to
the Corporation at the place designated in such notice, and shall
thereafter receive certificates for the number of shares of Common
Stock to which such holder is entitled pursuant to this Section 6.
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<PAGE> 21
On the date fixed for conversion, all rights with respect to
the Old Preferred Stock so converted will terminate, except only the
rights of the holders thereof, upon surrender of their certificate or
certificates therefore, to receive certificates for the number of
shares of Common Stock into which such Old Preferred Stock has been
converted. If so required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by written instrument
or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or by his attorneys duly
authorized in writing. All certificates evidencing shares of Old
Preferred Stock which are required to be surrendered for conversion in
accordance with the provisions hereof shall, from and after the date
such certificates are so required to be surrendered, be deemed to have
been retired and canceled and the shares of Old Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. As soon as
practicable after the date of such mandatory conversion and the
surrender of the certificate or certificates for Old Preferred Stock as
aforesaid, the Corporation shall cause to be issued and delivered to
such holder, or on his or its written order, a certificate or
certificates for the number of full shares of Common Stock issuable on
such conversion in accordance with the provisions hereof and cash as
provided in paragraph (b) of Section 4 in respect of any fraction of a
share of Common Stock otherwise issuable upon such conversion.
7. Redemption.
(a) On December 31, 2003, the Corporation shall redeem
(to the extent that such redemption shall not violate any applicable
provisions of the laws of the State of Georgia) all of the then
outstanding shares of Old Preferred Stock at a price of $2.40 per share
of Series B Preferred Stock and per share of Series C Preferred Stock
and at a price of $2.28 per share of Series D Preferred Stock and
Series E Preferred Stock (subject to adjustment in the event of any
stock dividend, stock split, stock distribution or combination with
respect to such shares), plus an amount equal to any dividends accrued
but unpaid thereon (such amount is hereinafter referred to as the
"Redemption Price"). If the Corporation is unable to redeem any shares
of Old Preferred Stock then to be redeemed because such redemption
would violate the applicable laws of the State of Georgia, then the
Corporation shall redeem such shares as soon thereafter as redemption
would not violate such laws.
(b) No later than December 1, 2003, the Corporation shall
mail written notice to each holder of record of Old Preferred Stock at
his or its address last shown on the records of the Corporation,
notifying such holder of the date of redemption (the "Redemption Date")
and the date on which such holder's conversion rights (pursuant to
Section 4 hereof) as to such shares terminate and calling upon such
holder to surrender to the Corporation, in the manner and at the place
designated, his or its certificate or certificates representing the
shares to be redeemed (such notice is hereinafter referred to as the
"Redemption Notice"). On or prior to the Redemption Date, each holder
of Old Preferred Stock to be redeemed shall surrender his or its
certificate or certificates representing such shares to the
Corporation, in the manner and at the place designated in
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<PAGE> 22
the Redemption Notice, and thereupon the Redemption Price of such
shares shall be payable to the order of the person whose name appears
on such certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. From and after the
Redemption Date, unless there shall have been a default in payment of
the Redemption Price, all rights of the holders of the Old Preferred
Stock designated for redemption in the Redemption Notice as holders of
Old Preferred Stock of the Corporation (except the right to receive the
Redemption Price without interest upon surrender of their certificate
or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
(c) Except as provided in paragraph (a) above, the
Corporation shall have no right to redeem the shares of Old Preferred
Stock. Any shares of Old Preferred Stock redeemed in accordance with
such paragraph shall be permanently retired, shall no longer be deemed
outstanding and shall not under any circumstances be reissued, and the
Corporation may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock accordingly. Nothing herein contained shall prevent or
restrict the purchase by the Corporation, from time to time either at
public or private sale, of the whole or any part of the Old Preferred
Stock at such price or prices as the Corporation may determine, subject
to the provision of applicable law.
SERIES F PREFERRED STOCK
The rights, preferences, and limitations of the Series F Preferred
Stock are as follows:
1. Dividends.
(a) Subject to the rights of series of Preferred Stock
which may from time to time be created by the Board of Directors, the
holders of shares of Series F Preferred Stock shall be entitled to
receive, when and as declared, out of funds legally available therefor,
dividends at the rate of $0.192 per share of Series F Preferred Stock
per annum, payable as the Board of Directors may determine, before any
dividends shall be set apart for or paid upon the Common Stock or any
other stock ranking on liquidation junior to the Series F Preferred
Stock (such stock being referred to hereinafter collectively as "Series
F Junior Stock" in any year). All dividends declared upon the Series F
Preferred Stock shall be declared pro rata per share. Such dividends
will be payable, if, and only if, dividends are declared and paid on
shares of Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, or Series E Preferred Stock (or any other series of
Preferred Stock ranking on liquidation on parity with the Series F
Preferred Stock), and then any such dividend will be payable pari passu
on all such shares of parity Preferred Stock. If the amount of the
dividend declared and paid on shares of Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, or Series E
Preferred Stock (or any other series of Preferred Stock ranking on
liquidation on parity with the Series F Preferred Stock) in any year
exceeds the amount of the dividend payable in the current
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<PAGE> 23
year (and therefore includes accrued and unpaid dividends from one or
more prior years), then the dividends paid on Series F Preferred Stock
will include only unpaid dividends on the Series F Preferred Stock from
prior years to the same extent, so that the amount of the dividend paid
on each share of Series F Preferred Stock will be the same amount as
the dividend paid on each share of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, or Series E Preferred Stock
(or any other series of Preferred Stock ranking on liquidation on
parity with the Series F Preferred).
(b) For so long as the Series F Preferred Stock remains
outstanding, the Corporation shall not pay any dividend upon the Series
F Junior Stock, whether in cash or other property (other than shares of
Series F Junior Stock), or purchase, redeem or otherwise acquire any
such Series F Junior Stock.
2. Liquidation, Dissolution or Winding Up.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders
of shares of Series F Preferred Stock will be entitled to be paid out
of the assets of the Corporation available for distribution to its
stockholders, after and subject to the payment in full of all amounts
required to be distributed to the holders of any other Preferred Stock
ranking on liquidation prior and in preference to the Series F
Preferred Stock (such preferred stock being referred to hereinafter as
"Series F Senior Preferred Stock") upon such liquidation, dissolution
or winding up, but before any payment shall be made to the holders of
Series F Junior Stock, an amount equal to $8.00 per share of Series F
Preferred Stock (subject to adjustment in the event of any stock
dividend, stock split, stock distribution or combination with respect
to such shares).
If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for the
distribution to holders of Series F Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the Series F
Preferred Stock then outstanding ("Series F Parity Stock") after
payment in full of amounts required to be paid or distributed to
holders of Series F Senior Preferred Stock shall be insufficient to pay
the holders of shares of Series F Preferred Stock, Series F Parity
Stock and Old Preferred Stock the full amount to which they shall be
entitled, the holders of shares of Series F Preferred Stock, Old
Preferred Stock and Series F Parity Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in
proportion to the respective amounts which would otherwise be payable
in respect to the shares held by them upon such distribution if all
amounts payable on or with respect to said shares were paid in full,
except that the holders of Series F Parity Stock and the Series F
Preferred Stock will be paid collectively $2.00 for every $1.00 paid to
holders of Old Preferred Stock until the holders of the Series F Parity
Stock and Series F Preferred Stock have received in full the respective
amounts which would otherwise by payable with respect to said shares.
(b) After the payment of all preferential amounts
required to be paid to the holders of Series F Senior Preferred Stock,
Series F Preferred Stock, Series F Parity
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<PAGE> 24
Stock and any other series of preferred stock upon the dissolution,
liquidation or winding up of the Corporation, the holders of shares of
Common Stock then outstanding shall be entitled to receive the
remaining assets and funds of the Corporation available for
distribution to its stockholders, the holders of shares of Common
Stock sharing ratably in such assets.
(c) For purposes of this Section 2, a merger or
consolidation of the Corporation with or into any other corporation or
corporations in which the stockholders of the Corporation immediately
prior to the merger or consolidation do not own more than fifty
percent (50%) of the outstanding voting power (assuming conversion of
all convertible securities and the exercise of all outstanding options
and warrants) of the surviving corporation, or the sale of all or
substantially all of the assets of the Corporation, shall be treated
as a liquidation, dissolution or winding up of the Corporation.
3. Voting Rights.
(a) Subject to the rights of series of Preferred Stock
which may from time to time be created by the Board of Directors, each
issued and outstanding share of Series F Preferred Stock shall be
entitled to the number of votes equal to the number of shares of
Common Stock into which each such share of Series F Preferred Stock is
convertible (as adjusted from time to time pursuant to Section 5 below
and with any fractional shares determined on an aggregate conversion
basis being rounded to the nearest whole share), at each meeting of
stockholders of the Corporation with respect to any and all matters
presented to the stockholders of the Corporation for their action or
consideration. Except as provided by law or by the provisions
establishing any other series of Preferred Stock, holders of Series F
Preferred Stock shall vote together with the holders of Common Stock
and the holders of shares of other series of Preferred Stock entitled
to vote, as a single class. The provisions of this Section 3 shall
apply to any action of the stockholders, whether at a meeting or by
written consent without a meeting in accordance with Georgia law.
(b) The holders of the Series F Preferred Stock as a
class shall have the right (the "Series F Special Voting Right") to
designate one member of the Board of Directors (the "Series F
Director"); provided, however, that the Special Voting Right may only
be exercised for so long as Paul Bender owns all of the 750,000 shares
of Series F Preferred Stock issued to Bender pursuant to the Merger
Agreement, dated June 16, 1997, between the Corporation, Paul Bender,
Bender Consulting, Inc. and Bender Management Consultants, Inc. The
holder of the Series F Preferred Stock may at his option at any time
exercise the Series F Special Voting Right by written consent without
a meeting in accordance with Georgia law. The Series F Special Voting
Right will automatically terminate if Paul Bender no longer owns all
of the 750,000 shares of Series F Preferred Stock issued to Bender
pursuant to the Merger Agreement, dated June 16, 1997, between the
Corporation, Paul Bender, Bender Consulting, Inc. and Bender
Management Consultants, Inc.
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<PAGE> 25
The Series F Director shall serve for a term of one year and
until his or her successor is elected and qualified, or until the
earlier termination of the Series F Special Voting Right. So long as
the holder of the Series F Preferred Stock is entitled to exercise the
Series F Special Voting Right, any vacancy of the Series F Director
may be filled only by the holder of the Series F Preferred Stock. The
Series F Director may, during his or her term of office, be removed at
any time, with or without cause, by and only by the affirmative
written consent of the holder of the Series F Preferred Stock. Upon
the termination of the Series F Special Voting Right of the holder of
the Series F Preferred Stock, the term of office of the Series F
Director shall forthwith terminate and the number of directors of the
Corporation shall thereupon be appropriately decreased.
(c) Subject to the rights of series of Preferred Stock
which may from time to time be created by the Board of Directors, in
addition to any other rights provided by law, the Corporation shall
not, without first obtaining the affirmative vote or written consent
of the holders of a majority of the then outstanding Series F
Preferred Stock, amend or repeal any provision of the Corporation's
Articles of Incorporation or Bylaws or alter or repeal the
preferences, special rights or other powers of the Series F Preferred
Stock so as to affect adversely the Series F Preferred Stock in any
material respect. For this purpose, the authorization or issuance of
any series of Preferred Stock with preference or priority over the
Series F Preferred Stock as to the right to receive either dividends
or amounts distributable upon liquidation, dissolution or winding up
of the Corporation shall be deemed to affect adversely the Series F
Preferred Stock, but the authorization or issuance of any series of
Preferred Stock on parity with, or junior to, the Series F Preferred
Stock as to the right to receive dividends and amounts distributable
on liquidation, dissolution or winding up of the Corporation shall not
be deemed to affect adversely the Series F Preferred Stock.
4. Optional Conversion. Subject to the rights of series of
Preferred Stock which may from time to time be created by the Board of
Directors, each share of Series F Preferred Stock may be converted at any time,
at the option of the holder thereof, in the manner hereinafter provided, into
fully-paid and nonassessable shares of Common Stock at the conversion price of
$8.00 per share (the "Series F Conversion Price"); provided, however, that on
any redemption of any Series F Preferred Stock or any liquidation of the
Corporation, the right of conversion shall terminate at the close of business
on the full business day next preceding the date fixed for such redemption or
for the payment of any amounts distributable on liquidation to the holders of
Series F Preferred Stock.
(a) The initial conversion rate for the Series F
Preferred Stock shall be one share of Common Stock for each one share
of Series F Preferred Stock surrendered for conversion. The applicable
conversion rate and Series F Conversion Price are subject to
adjustment as hereinafter provided.
(b) The Corporation shall not issue any fractional
shares of Common Stock upon conversion of Series F Preferred Stock or
script in lieu thereof (with any fractional shares being determined on
an aggregate conversion basis). If any fractional share of Common
Stock would, except for the provisions of this paragraph (b), be
issuable upon
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<PAGE> 26
conversion of any Series F Preferred Stock, the Corporation shall in
lieu thereof pay to the person entitled thereto an amount in cash
equal to the current value of such fraction, to be computed (i) if the
Common Stock is listed on any national securities exchange, on the
basis of the last sales price of the Common Stock on such exchange (or
the quoted closing bid price if there shall have been no sales) on the
date of conversion, or (ii) if the Common Stock shall not be so
listed, on the basis of the mean between the closing bid and asked
prices for the Common Stock on the date of conversion as reported by
the Nasdaq Stock Market, or its successor, and if there are not such
closing bid and asked prices, on the basis of the fair market value
per share of Common Stock as determined by the Board of Directors of
the Corporation.
(c) Whenever the conversion rate and Series F Conversion
Price shall be adjusted as provided in Section 5 below, the
Corporation shall forthwith file at each office designated for the
conversion of Series F Preferred Stock, a statement, signed by the
Chairman of the Board, the President, any Vice President or Treasurer
of the Corporation, showing in reasonable detail the facts requiring
such adjustment and the conversion rate and Series F Conversion Price
that will be effective after such adjustment. The Corporation shall
also cause a notice setting forth any such adjustments to be sent by
mail, first class, postage prepaid, to each record holder of Series F
Preferred Stock at his or its address appearing on the stock register.
If such notice relates to an adjustment resulting from an event
referred to in Section 5(g) below, such notice shall be included as
part of the notice required to be mailed and published under the
provisions of Section 5(g).
(d) In order to exercise the conversion privilege, the
holder of any share of Series F Preferred Stock to be converted shall
surrender his or its certificate or certificates therefore to the
principal office of the transfer agent for the Series F Preferred
Stock (or if no transfer agent be at the time appointed, then the
Corporation at its principal office), and shall give written notice to
the Corporation at such office that the holder elects to convert the
Series F Preferred Stock represented by such certificates, or any
number thereof. Such notice shall also state the name or names (with
address) in which the certificate or certificates for shares of Common
Stock which shall be issuable on such conversion shall be issued,
subject to any restrictions on transfer relating to shares of Series F
Preferred Stock or shares of Common Stock upon conversion thereof. If
so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly
authorized in writing. The date of receipt by the transfer agent (or
by the Corporation if the Corporation serves as its own transfer
agent) of the certificates and notice shall be the conversion date. As
soon as practicable after receipt of such notice and the surrender of
the certificate or certificates for Series F Preferred Stock as
aforesaid, the Corporation shall cause to be issued and delivered at
such office to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common
Stock issuable on such conversion in accordance with the provisions
hereof and cash as provided in paragraph (b) of this Section 4 in
respect of any fractional share otherwise issuable upon such
conversion.
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<PAGE> 27
(e) The Corporation shall at all times, when the Series
F Preferred Stock shall be outstanding, reserve and keep available out
of its authorized but unissued stock, for the purposes of effecting
the conversion of the Series F Preferred Stock, such number of its
duly authorized shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series F
Preferred Stock. Before taking any action which would cause an
adjustment reducing the Series F Conversion Price below the then par
value of the shares of Common Stock issuable upon conversion of the
Series F Preferred Stock, the Corporation will take any corporate
action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and
nonassessable shares at such adjusted Series F Conversion Price.
(f) All shares of Series F Preferred Stock, which shall
have been surrendered for conversion as herein provided shall no
longer be deemed to be outstanding and all rights with respect to such
shares, including the rights, if any, to receive notices and to vote,
shall forthwith cease and terminate except only the right of the
holder thereof to receive shares of Common Stock in exchange therefor.
Any shares of Series F Preferred Stock so converted shall be retired
and canceled and shall not be reissued, and the Corporation may from
time to time take such appropriate action as may be necessary to
reduce the authorized Series F Preferred Stock accordingly.
5. Anti-Dilution Provisions.
(a) In order to prevent dilution of the rights granted
hereunder, the Series F Conversion Price of each share of Series F
Preferred Stock shall be subject to adjustment from time to time in
accordance with this Section 5. At any given time the Series F
Conversion Price shall be that dollar (or part of a dollar) amount the
payment of which shall be sufficient at the given time to acquire one
share of the Corporation's Common Stock upon conversion of shares of
Series F Preferred Stock. Upon each adjustment of the Series F
Conversion Price pursuant to this Section 5, the registered holder of
shares of Series F Preferred Stock shall thereafter be entitled to
acquire upon exercise, at the Series F Conversion Price resulting from
such adjustment, the number of shares of the Corporation's Common
Stock obtainable by multiplying the Series F Conversion Price in
effect immediately prior to such adjustment by the number of shares of
the Corporation's Common Stock acquirable immediately prior to such
adjustment and dividing the product thereof by the Series F Conversion
Price resulting from such adjustment. For purposes of this Section 5,
the term "Number of Common Shares Deemed Outstanding" at any given
time shall mean the sum of (1) the number of shares of the
Corporation's Common Stock outstanding at such time, (2) the number of
shares of the Corporation's Common Stock issuable assuming conversion
at such time of the Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, and Series
F Preferred Stock, (3) the number of shares of the Corporation's
Common Stock issuable upon exercise of an aggregate of 4,346,546
warrants to purchase shares issued to Warburg, Pincus Investors, L.P.
prior to the Initial Issuance Date (as defined below), and (4) the
number of shares of the Corporation's Common Stock deemed to be
outstanding under subparagraphs (b)(1) to (9), inclusive, at such
time.
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<PAGE> 28
(b) Except as provided in paragraph (c) or (f) below, if
and whenever on or after the date of initial issuance of the Series F
Preferred Stock (the "Initial Issuance Date"), the Corporation shall
issue or sell, or shall in accordance with subparagraphs (b)(1) to
(9), inclusive, be deemed to have issued or sold any shares of its
Common Stock for a consideration per share less than $2.75, then
forthwith upon such issue or sale (the "Triggering Transaction"), the
Series F Conversion Price shall, subject to subparagraphs (b)(1) to
(b)(9), be reduced by an amount equal to the "Adjusted Amount." The
Adjusted Amount equals $2.75, minus the amount determined by dividing:
(i) an amount equal to the sum of (x) the
product derived by multiplying the Number of Common Shares
Deemed Outstanding immediately prior to such Triggering
Transaction by $2.75, plus (y) the consideration, if any,
received by the Corporation upon consummation of such
Triggering Transaction, by
(ii) an amount equal to the sum of (x) the
Number of Common Shares Deemed Outstanding immediately prior
to such Triggering Transaction plus (y) the number of shares
of Common Stock issued (or deemed to be issued in accordance
with subparagraphs (b)(1) to (9)) in connection with the
Triggering Transaction.
For purposes of determining the adjusted Series F Conversion
Price under this paragraph (b), the following subsections (1) to (9),
inclusive, shall be applicable:
(1) In case the Corporation at any time after
the Initial Issuance Date shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any
Options or Convertible Securities, whether or not such
Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable and the
price per share for which the Common Stock is issuable upon
exercise, conversion or exchange (determined by dividing (x)
the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of
all such Options, plus, in the case of such Options which
relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the exercise
of such Options or the conversion or exchange of such
Convertible Securities) shall be less than $2.75, then the
total maximum amount of Common Stock issuable upon the
exercise of such Options or in the case of Options for
Convertible Securities, upon the conversion or exchange of
such Convertible Securities shall (as of the date of granting
of such options) be deemed to be outstanding and to have been
issued and sold by the Corporation for such price per share.
No adjustment of the Series F Conversion Price shall be made
upon the actual issue of such shares of Common Stock or such
Convertible Securities upon the exercise of such Options,
except as otherwise provided in subparagraph (3) below.
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<PAGE> 29
(2) In case the Corporation at any time after
the Initial Issuance Date shall in any manner issue (whether
directly or by assumption in a merger or otherwise) or sell
any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (x)
the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less
than $2.75, then the total maximum number of shares of Common
Stock issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date of the issue or
sale of such Convertible Securities) be deemed to be
outstanding and to have been issued and sold by the
Corporation for such price per share. No adjustment of the
Series F Conversion Price shall be made upon the actual issue
of such Common Stock upon exercise of the rights to exchange
or convert under such Convertible Securities, except as
otherwise provided in subparagraph (3) below.
(3) If the purchase price provided for in any
Options referred to in subparagraph (1), the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
subparagraphs (1) or (2), or the rate at which any
Convertible Securities referred to in subparagraph (1) or (2)
are convertible into or exchangeable for Common Stock shall
change at any time (other than under or by reason of
provisions designed to protect against dilution of the type
set forth in paragraphs 5(b) or 5(d)), the Series F
Conversion Price in effect at the time of such change shall
forthwith be readjusted to the Series F Conversion Price
which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially
granted, issued or sold. If the purchase price provided for
in any Option referred to in subparagraph (1) or the rate at
which any Convertible Securities referred to in subparagraphs
(1) or (2) are convertible into or exchangeable for Common
Stock shall be reduced at any time under or by reason of
provisions with respect thereto designed to protect against
dilution, then in case of the delivery of Common Stock upon
the exercise of any such Option or upon conversion or
exchange of any such Convertible Security, the Series F
Conversion Price then in effect hereunder shall forthwith be
adjusted to such respective amount as would have been
obtained had such Option or Convertible Security never been
issued as to such Common Stock and had adjustments been made
upon the issuance of the shares of Common Stock delivered as
aforesaid, but only if as a result of such adjustment the
Series F Conversion Price then in effect hereunder is hereby
reduced.
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<PAGE> 30
(4) On the expiration of any Option or the
termination of any right to convert or exchange any
Convertible Securities, the Series F Conversion Price then in
effect hereunder shall forthwith be increased to the Series F
Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or
Convertible Securities to the extent outstanding immediately
prior to such expiration or termination, never been issued.
(5) In case any options shall be issued in
connection with the issue or sale of other securities of the
Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options
by the parties thereto, such options shall be deemed to have
been issued without consideration.
(6) In case any shares of Common Stock, Options
or Convertible Securities shall be issued or sold or deemed
to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received
by the Corporation therefor. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation
shall be the fair value of such consideration as determined
by the Corporation's Board of Directors. In case any shares
of Common Stock, Options or Convertible Securities shall be
issued in connection with any merger in which the Corporation
is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value of such portion
of the net assets and business of the non-surviving
corporation as shall be attributable to such Common Stock,
Options or Convertible Securities, as the case may be, as
determined by the Board of Directors of the Corporation.
(7) The number of shares of Common Stock
outstanding at any given time shall not include shares owned
or held by or for the account of the Corporation, and the
disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock for the purpose
of this paragraph 5(b).
(8) In case the Corporation shall declare a
dividend or make any other distribution upon the stock of the
Corporation payable in Common Stock, Options, or Convertible
Securities, such issuance shall be covered by paragraph 5(d)
below.
(9) For the purposes of this paragraph 5(b), in
case the Corporation shall take a record of the holders of
its Common Stock for the purpose of entitling them (x) to
receive a dividend or other distribution payable in Common
Stock, Options, or in Convertible Securities, or (y) to
subscribe for or purchase Common Stock, Options, or
Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such
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<PAGE> 31
other distribution or the date of the granting of such right
or subscription or purchase, as the case may be.
(c) In the event the Corporation shall declare a
Liquidating Dividend, then as soon as possible after the conversion of
any Series F Preferred Stock the Corporation shall pay to the person
converting such Series F Preferred Stock an amount equal to the
aggregate value at the time of such exercise of all Liquidating
Dividends (including but not limited to the Common Stock which would
have been issued at the time of such earlier exercise and all other
securities which would have been issued with respect to such Common
Stock by reason of stock splits, stock dividends, mergers or
reorganizations, or for any other reason). For the purposes of this
paragraph (c), a dividend other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that such
earnings or earned surplus are charged an amount equal to the fair
value of such dividend.
(d) In case the Corporation shall at any time subdivide
its outstanding shares of Common Stock into a greater number of
shares, or declare a dividend or make any other distribution upon the
stock of the Corporation payable in Common Stock, Options or
Convertible Securities, the Series F Conversion Price in effect
immediately prior to such subdivision or stock dividend shall be
proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of
shares, the Series F Conversion Price in effect immediately prior to
such combination shall be proportionately increased.
(e) If any capital reorganization or reclassification of
the capital stock of the Corporation, or consolidation or merger of
the Corporation with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be
effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities, cash or other property with respect to
or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale,
lawful and adequate provision shall be made whereby the holders of the
Series F Preferred Stock shall have the right to acquire and receive
upon conversion of the Series F Preferred Stock, which right shall be
prior to the rights of the holders of Series F Junior Stock, such
shares of stock, securities, cash or other property issuable or
payable (as part of the reorganization, reclassification,
consolidation, merger or sale) with respect to or in exchange for such
number of outstanding shares of the Corporation's Common Stock as
would have been received upon conversion of the Series F Preferred
Stock at the Series F Conversion Price then in effect. The Corporation
will not effect any such consolidation, merger or sale, unless prior
to the consummation thereof the successor corporation (if other than
the Corporation) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument
mailed or delivered to the holders of the Series F Preferred Stock at
the last address of each such holder appearing on the books of the
Corporation, the obligation to deliver to each such holder such shares
of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase, if a purchase,
tender or exchange offer is made to and accepted by the holders of
more than fifty percent (50%) of the
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<PAGE> 32
outstanding shares of Common Stock of the Corporation, the Corporation
shall not effect any consolidation, merger or sale with the person
having made such offer or with any Affiliate of such person, unless
prior to the consummation of such consolidation, merger or sale the
holders of the Series F Preferred Stock shall have been given a
reasonable opportunity then to elect to receive upon the conversion of
the Series F Preferred Stock either the stock, securities or assets
then issuable with respect to the Common Stock of the Corporation or
the stock, securities or assets, or the equivalent, issued to previous
holders of the Common Stock in accordance with such offer. For
purposes hereof the term "Affiliate" with respect to any given person
shall mean any person controlling, controlled by or under common
control with the given person.
(f) The provisions of this Section 5 shall not apply to
any Common Stock issued, issuable or deemed outstanding under
subparagraphs (b)(1) to (9) inclusive: (i) to any person pursuant to
any stock option, stock purchase or similar plan or arrangement for
the benefit of officers, directors and employees of or consultants to
the Corporation or its subsidiaries in effect on the Initial Issuance
Date or thereafter adopted by the Board of Directors of the
Corporation, consented to by the holders of a majority of the then
outstanding Series F Preferred Stock, (ii) on conversion of the Series
F Preferred Stock or (iii) pursuant to the exercise of the rights of
subscription pursuant to Article VI of the Investor's Agreement, dated
June 16, 1997, between the Corporation and Paul Bender.
(g) In the event that:
(i) the Corporation shall declare any cash
dividend upon its Common Stock (if any shares are
outstanding), or
(ii) the Corporation shall declare any dividend
upon its Common Stock (if any shares are outstanding) payable
in stock or make any special dividend or other distribution
to the holders of its Common Stock (if any shares are
outstanding), or
(iii) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock (if
any shares are outstanding) any additional shares of stock of
any class or other rights, or
(iv) there shall be any capital reorganization
or reclassification of the capital stock of the Corporation,
including any subdivision or combination of its outstanding
shares of Common Stock or consolidation or merger of the
Corporation with, or sale of all or substantially all of its
assets to, another corporation, or
(v) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in connection with such event, the Corporation shall
give to the holders of the Series F Preferred Stock:
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<PAGE> 33
(1) at least twenty (20) days prior written
notice of the date on which the books of the Corporation
shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights
to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up; and
(2) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least twenty (20) days prior
written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution
or subscription rights, the date on which the holders of
Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (b) shall also specify
the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization,
reclassification consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Each such
written notice shall be given by first class mail, postage
prepaid, addressed to the holders of the Series F Preferred
Stock at the address of each such holder as shown on the
books of the Corporation.
(h) If at any time or from time to time on or after the
Initial Issuance Date, the Corporation shall grant, issue or sell any
Purchase Rights pro rata to the record holders of any class of common
stock of the Corporation and such grants, issuances or sales do not
result in an adjustment of the Series F Conversion Price under
paragraph (b), then each holder of Series F Preferred Stock shall be
entitled to acquire (within thirty (30) days after the later to occur
of the initial exercise date of such Purchase Rights or receipt by
such holder of the notice concerning Purchase Rights to which such
holder shall be entitled under paragraph (g)) and upon the terms
applicable to such Purchase Rights either:
(I) the aggregate Purchase Rights which such
holder could have acquired if it had held
the number of shares of Common Stock
acquirable upon conversion of the Preferred
Stock immediately before the grant,
issuance or sale of such Purchase Rights;
provided that if any Purchase Rights were
distributed to holders of Common Stock
without the payment of additional
consideration by such holders,
corresponding Purchase Rights shall be
distributed to the exercising holders of
the Series F Preferred Stock as soon as
possible after such exercise and it shall
not be necessary for the exercising holder
of the Series F Preferred Stock
specifically to request delivery of such
rights; or
(II) in the event that any such Purchase Rights
shall have expired or shall expire prior to
the end of said thirty day period, the
number of shares of Common Stock or the
amount of property which such
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<PAGE> 34
holder could have acquired upon such
exercise at the time or times at which the
Corporation granted, issued or sold such
expired Purchase Rights.
(i) If any event occurs as to which, in the opinion of
the Board of Directors of the Corporation, the provisions of this
Section 5 are not strictly applicable or if strictly applicable would
not fairly protect the rights of the holders of the Series F Preferred
Stock in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in
the application of such provisions, in accordance with such essential
intent and principles, so as to protect such rights as aforesaid, but
in no event shall any adjustment have the effect of increasing the
Series F Conversion Price as otherwise determined pursuant to any of
the provisions of this Section 5 except in the case of a combination
of shares of a type contemplated in paragraph (d) or the expiration of
Options or Convertible Securities as set forth in paragraph (b)(4),
and then in no event to an amount larger than the Series F Conversion
Price as adjusted pursuant to paragraph (d) or paragraph (b)(4),
respectively.
6. Mandatory Conversion.
(a) Each share of Series F Preferred Stock shall
automatically be converted into shares of Common Stock at the then
applicable and effective Series F Conversion Price at any time upon
the closing of an underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the account
of the Corporation to the public generally.
(b) All holders of record of shares of Series F
Preferred Stock will be given at least ten (10) days' prior written
notice of the date fixed and the place designated for mandatory
conversion of all of such shares of Series F Preferred Stock pursuant
to this Section 6. Such notice will be sent by mail, first class,
postage prepaid, to each record holder of shares of Series F Preferred
Stock at such holder's address appearing on the stock register. On or
before the date fixed for conversion, each holder of shares of Series
F Preferred Stock shall surrender his or its certificates or
certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates
for the number of shares of Common Stock to which such holder is
entitled pursuant to this Section 6. On the date fixed for conversion,
all rights with respect to the Series F Preferred Stock so converted
will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefore, to receive
certificates for the number of shares of Common Stock into which such
Series F Preferred Stock has been converted. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed
or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered
holder or by his attorneys duly authorized in writing. All
certificates evidencing shares of Series F Preferred Stock which are
required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the date such certificates are
so required to be surrendered, be deemed to have been retired and
canceled and the shares of Series F
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<PAGE> 35
Preferred Stock represented thereby converted into Common Stock for
all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. As
soon as practicable after the date of such mandatory conversion and
the surrender of the certificate or certificates for Series F
Preferred Stock as aforesaid, the Corporation shall cause to be issued
and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common
Stock issuable on such conversion in accordance with the provisions
hereof and cash as provided in paragraph (b) of Section 3 in respect
of any fraction of a share of Common Stock otherwise issuable upon
such conversion.
SERIES G PREFERRED STOCK
The rights, preferences, and limitations of the Series G Preferred
Stock are as follows:
1. Dividends.
(a) Subject to the rights of series of Preferred Stock
which may from time to time be created by the Board of Directors, the
holders of shares of Series G Preferred Stock shall be entitled to
receive, when and as declared, out of funds legally available
therefor, dividends at the rate of $0.3105 per share of Series G
Preferred Stock per annum, payable as the Board of Directors may
determine, before any dividends shall be set apart for or paid upon
the Common Stock, the Class A Common Stock or any other stock ranking
on liquidation junior to the Series G Preferred Stock (such stock
being referred to hereinafter collectively as "Series G Junior Stock")
in any year. All dividends declared upon the Series G Preferred Stock
shall be declared pro rata per share. Such dividends will be payable
if, and only if, dividends are declared and paid on shares of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock (or any other
series of Preferred Stock ranking on liquidation on parity with the
Series G Preferred Stock), and then any such dividend will be paid on
all such shares of parity Preferred Stock on a pro rata basis per
share. If the amount of the dividends declared and paid on shares of
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock (or any
other series of Preferred Stock ranking on liquidation on parity with
the Series G Preferred Stock) in any year exceeds the amount of the
dividend payable in the current year (and therefore includes accrued
but unpaid dividends from one or more prior years), then the dividends
paid on the Series G Preferred Stock will include only accrued and
unpaid dividends on the Series G Preferred Stock from prior years to
the same extent, so that the amount of dividend paid on each share of
Series G Preferred Stock will be the same proportionate amount as the
dividend paid on each share of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, and Series E Preferred
Stock and Series F Preferred Stock (or any other series of Preferred
Stock ranking on liquidation on parity with the Series G Preferred
Stock).
(b) Dividends on the Series G Preferred Stock shall be
cumulative, whether or not in any fiscal year there shall be funds
legally available for the payment of dividends
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<PAGE> 36
in such fiscal year, so that if in any fiscal year or years, dividends
in whole or in part are not declared or paid upon the Series G
Preferred Stock, unpaid dividends shall accrue and accumulate as
against the holders of the Series G Junior Stock and sums in a later
year or years shall be paid to the holders of the Series G Preferred
Stock with respect to any prior year or years when dividends were not
paid.
(c) For so long as the Series G Preferred Stock remains
outstanding, the Corporation shall not pay any dividend upon the
Series G Junior Stock, whether in cash or other property (other than
shares of Series G Junior Stock), unless an equal dividend has been
declared and paid upon the Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock and Series G Preferred Stock.
2. Liquidation, Dissolution or Winding Up.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders
of shares of Series G Preferred Stock shall be entitled to be paid out
of the assets of the Corporation available for distribution to its
stockholders, after and subject to the payment in full of all amounts
required to be distributed to the holders of any other Preferred Stock
of the Corporation ranking on liquidation prior and in preference to
the Series G Preferred Stock (such preferred stock being referred to
hereinafter as "Series G Senior Preferred Stock") upon such
liquidation, dissolution or winding up, but before any payment shall
be made to the holders of Series G Junior Stock, an amount equal to
$6.21 per share of Series G Preferred Stock, plus an amount equal to
all dividends thereon accrued but unpaid (subject to adjustment in the
event of any stock dividend, stock split, stock distribution or
combination with respect to such shares).
If upon any such liquidation, dissolution or winding up of
the Corporation the remaining assets of the Corporation available for
the distribution to holders of Series G Preferred Stock and any class
or series of stock ranking on liquidation on parity with the Series G
Preferred Stock then outstanding ("Series G Parity Stock") after
payment in full of amounts required to be paid or distributed to
holders of Series G Senior Preferred Stock shall be insufficient to
pay the holders of shares of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock and Series G Parity
Stock the full amount to which they shall be entitled, the holders of
shares of Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock and Series G Parity Stock shall share ratably
in any distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which would
otherwise be payable in respect to the shares held by them upon such
distribution if all amounts payable on or with respect to said shares
were paid in full, except that the holders of the Series F Preferred
Stock and Series G Preferred Stock will be paid collectively $2.00 for
every $1.00 paid to the holders of the Series B Preferred Stock, the
Series C Preferred Stock, and Series D Preferred Stock until the
holders of the
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<PAGE> 37
Series G Preferred Stock and Series F Preferred Stock have received in
full the respective amounts which would otherwise be payable with
respect to said shares.
(b) After the payment of all preferential amounts
required to be paid to the holders of Series G Senior Preferred Stock,
Series G Preferred Stock, Series G Parity Stock and any other series
of preferred stock upon the dissolution, liquidation or winding up of
the Corporation, the holders of shares of Common Stock and Class A
Common Stock then outstanding shall be entitled to receive the
remaining assets and funds of the Corporation available for
distribution to its stockholders, the holders of shares of Common
Stock and Class A Common Stock sharing ratably in such assets.
(c) For purposes of this Section 2, a merger or
consolidation of the Corporation with or into any other corporation or
corporations in which the Corporation is not the surviving entity, or
the sale of all or substantially all of the assets of the Corporation,
shall be treated as a liquidation, dissolution or winding up of the
Corporation.
3. Voting Rights.
Subject to the rights of series of Preferred Stock which may from time
to time be created by the Board of Directors, each issued and outstanding share
of Series G Preferred Stock shall be entitled to the number of votes equal to
the number of shares of Common Stock into which each such share of Series G
Preferred Stock is convertible (as adjusted from time to time pursuant to
Section 5 hereof and with any fractional shares determined on an aggregate
conversion basis being rounded to the nearest whole share), at each meeting of
stockholders of the Corporation with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration.
Except as provided by law or by the provisions establishing any other series of
preferred stock, holders of Series G Preferred Stock shall vote together with
the holders of Common Stock as a single class. The provisions of this Section 3
shall apply to any action of the stockholders whether at a meeting or by
written consent without a meeting in accordance with Georgia law.
(a) Subject to the rights of series of Preferred Stock
which may from time to time be created by the Board of Directors in
addition to any other rights provided by law, and as long as 20% or
more of the Series G Preferred Stock originally issued is outstanding,
the Corporation shall not without first obtaining the affirmative vote
or written consent of the holders of a majority of the then
outstanding Series G Preferred Stock:
(b) amend or repeal any provision of the Corporation's
Articles of Incorporation or Bylaws or alter or repeal the
preferences, special rights or other powers of the Series G Preferred
Stock so as to affect adversely the Series G Preferred Stock as a
class. For this purpose, the authorization or issuance of any series
of Preferred Stock with preference or priority over, or being on
parity with the Series G Preferred Stock as to the right to receive
either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation shall be deemed to affect
adversely the Series G Preferred Stock;
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<PAGE> 38
(c) authorize or effect the redemption or repurchase of
any capital stock of the Corporation or rights to acquire capital
stock of the Corporation except for (i) the redemption of the Series
B, Series C, Series D, and Series E Preferred Stock in accordance with
the Corporation's Articles of Incorporation, as amended, and (ii)
capital stock or rights to acquire capital stock held by any employee,
officer, director, consultant or affiliate that is subject to
repurchase rights or rights of first refusal in favor of the
Corporation;
(d) authorize or effect the issuance by the Corporation
of any shares of capital stock or rights to acquire capital stock that
is pari passu or senior to the Series G Preferred Stock with respect
to payment upon liquidation, dissolution or a winding up of the
Corporation;
(e) enter into any agreement that would restrict the
Corporation's ability to perform under the Stock Purchase Agreement
among the Corporation and the holders of the Series G Preferred Stock
(the "Stock Purchase Agreement"); or
(f) authorize or effect the payment of dividends or
other distributions on any capital stock of the Corporation.
4. Optional Conversion.
Subject to the rights of series of Preferred Stock which may from time
to time be created by the Board of Directors, (i) each share of Series G
Preferred Stock may be converted at any time, at the option of the holder
thereof, in the manner hereinafter provided, into fully-paid and nonassessable
shares of Common Stock at the conversion price then in effect for Series G
Preferred Stock (the "Series G Conversion Price"); provided, however, that on
any redemption of Series G Preferred Stock or any liquidation of the
Corporation, the right of conversion shall terminate at the close of business
on the full business day next preceding the date fixed for such redemption or
for the payment of any amounts distributable on liquidation to the holders of
the Series G Preferred Stock.
(a) The initial conversion rate for the Series G
Preferred Stock shall be one share of Common Stock for each share of
Series G Preferred Stock surrendered for conversion, representing an
initial conversion price for Series G Preferred Stock of $6.21 per
share of the Common Stock. The applicable conversion rate and Series G
Conversion Price from time to time in effect is subject to adjustment
as hereinafter provided.
(b) The Corporation shall not issue any fractional
shares of Common Stock upon conversion of Series G Preferred Stock or
script in lieu thereof (with any fractional shares being determined on
an aggregate conversion basis). If any fractional share of Common
Stock would, except for the provisions of this paragraph (b), be
issuable upon conversion of any Series G Preferred Stock, the
Corporation shall in lieu thereof pay to the person entitled thereto
an amount in cash equal to the current value of such fraction,
calculated to the nearest one-thousandth (1/1000) of a share, to be
computed (I) if the Common Stock is listed on any national securities
exchange, equal to the last sales price of the Common Stock on such
exchange (or the quoted closing bid price if there shall
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<PAGE> 39
have been no sales) on the date of conversion, or (II) if the Common
Stock is not listed on any national security exchange, equal to the
mean between the closing bid and asked prices for the Common Stock on
the date of conversion as reported by The Nasdaq Stock Market, or its
successor, and if there are not such closing bid and asked prices, on
the basis of the fair market value per share of Common Stock as
determined by the Board of Directors.
(c) Whenever the conversion rate and Series G Conversion
Price are adjusted as provided in Section 5 hereof, the Corporation
shall file at each office designated for the conversion of Series G
Preferred Stock, a statement, signed by the Chairman of the Board of
Directors, the President, and any Vice President or Treasurer of the
Corporation, showing in reasonable detail the facts requiring such
adjustment and the conversion rate and Series G Conversion Price that
will be effective after such adjustment. The Corporation shall also
cause a notice setting forth any such adjustments to be sent by mail,
first class, postage prepaid, to each record holder of Series G
Preferred Stock at his or its address appearing on the stock register.
If such notice relates to an adjustment resulting from an event
referred to in paragraph 5(g), such notice shall be included as part
of the notice required to be mailed and published under the provisions
of paragraph 5(g) hereof.
(d) In order to exercise the conversion privilege, the
holder of any share of Series G Preferred Stock to be converted shall
surrender his or its certificate or certificates representing the
share of Series G Preferred Stock to the principal office of the
transfer agent for the Series G Preferred Stock (or if no transfer
agent be at the time appointed, then the Corporation at its principal
office), and shall give written notice to the Corporation at such
office that the holder elects to convert all of the shares of Series G
Preferred Stock represented by such certificates, or any portion of
such shares. Such notice shall also state the name or names (with
address) in which the certificate or certificates for shares of Common
Stock which shall be issuable on such conversion shall be issued,
subject to any restrictions on transfer relating to shares of Series G
Preferred Stock or shares of Common Stock upon conversion thereof. If
required by the Corporation, certificates surrendered for conversion
shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly
authorized in writing. The date of receipt by the transfer agent (or
by the Corporation if the Corporation serves as its own transfer
agent) of the certificates and notice shall be the conversion date. As
soon as practicable after receipt of such notice and the surrender of
the certificate or certificates for Series G Preferred Stock as
aforesaid, the Corporation shall cause to be issued and delivered at
such office to such holder, or on his or its written order, a
certificate or certificates for the number of shares of Common Stock
issuable on such conversion in accordance with the provisions hereof
and cash as provided in paragraph (b) of this Section 4 in respect of
any fractional share otherwise issuable upon such conversion.
(e) The Corporation shall at all times when the Series G
Preferred Stock is outstanding reserve and keep available out of its
authorized but unissued stock, for the purposes of effecting the
conversion of the Series G Preferred Stock, such number of its duly
authorized shares of Common Stock as shall from time to time be
sufficient to effect
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<PAGE> 40
the conversion of all outstanding Series G Preferred Stock. Before
taking any action which would cause an adjustment reducing the Series
G Conversion Price below the then par value of the shares of Common
Stock issuable upon conversion of the Series G Preferred Stock, the
Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly
and legally issue fully paid and nonassessable shares at such adjusted
Series G Conversion Price.
(f) Upon any such conversion, no adjustment to the
conversion rate shall be made for accrued and unpaid dividends on the
Series G Preferred Stock.
(g) All shares of Series G Preferred Stock which shall
have been surrendered for conversion as herein provided shall no
longer be deemed to be outstanding and all rights with respect to such
shares, including the rights, if any, to receive notices and to vote,
shall cease and terminate except only the right of the holder thereof
to receive shares of Common Stock, as applicable, in exchange for the
Series G Preferred Stock. Any shares of Series G Preferred Stock so
converted shall be retired and canceled and shall not be reissued, and
the Corporation may from time to time take such appropriate action as
may be necessary to reduce the authorized Series G Preferred Stock
accordingly.
5. Anti-Dilution Provisions.
(a) In order to prevent dilution of the rights granted
hereunder, the Series G Conversion Price of each share of Series G
Preferred Stock is subject to adjustment from time to time in
accordance with this paragraph 5(a). At any given time, the Series G
Conversion Price shall be that dollar (or part of a dollar) amount the
payment of which shall be sufficient at the given time to acquire one
share of the Corporation's Common Stock upon conversion of shares of
Series G Preferred Stock. Upon each adjustment of the Series G
Conversion Price pursuant to this Section 5, the registered holder of
shares of Series G Preferred Stock shall thereafter be entitled to
acquire upon exercise, at the Series G Conversion Price resulting from
such adjustment, the number of shares of the Corporation's Common
Stock obtainable by multiplying the Series G Conversion Price in
effect immediately prior to such adjustment by the number of shares of
the Corporation's Common Stock acquirable immediately prior to such
adjustment and dividing the product thereof by the Series G Conversion
Price resulting from such adjustment. For purposes of this Section 5,
the term "Number of Common Shares Deemed Outstanding" at any given
time shall mean the sum of (1) the number of shares of the
Corporation's Common Stock and Class A Common Stock outstanding at
such time, (2) the number of shares of the Corporation's Common Stock
and Class A Common Stock issuable assuming conversion at such time of
the Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
and Series G Preferred Stock, (3) the number of shares of the
Corporation's Common Stock issuable upon the exercise of an aggregate
of 5,788,105 warrants to purchase shares issued to Warburg, Pincus
Investors, L.P. prior to the Initial Issuance Date (as defined below),
(4) the number of shares of the Corporation's Common Stock issuable
upon the exercise of 3,911,230 options to purchase shares issued prior
to the Initial Issuance Date, and (5) the number of shares of the
Corporation's Common Stock and Class A Common Stock
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<PAGE> 41
deemed to be outstanding under subparagraphs 4(b)(1) to (9),
inclusive, at such time. In the event that any series of Preferred
Stock (or any other class of the capital stock) of the Corporation
existing as of the Initial Issuance Date (as defined below) is
entitled to receive anti-dilution protection pursuant to the
Corporation's Articles of Incorporation along with the Series G
Preferred Stock by virtue of the same Triggering Transaction (as
defined below), then, for purposes of making the adjustments to the
Series G Conversion Price, the anti-dilution computations shall be
made in one iteration for each such series of preferred stock, first
to the series (or multiple series, if they have the same conversion
price) of preferred stock with the lowest conversion price then in
effect through the series (or multiple series, if they have the same
conversion price) of preferred stock with the highest conversion price
then in effect.
(b) (i) Except as provided in paragraph 5(c) or (f)
below, if and whenever on or after the date of initial issuance of the
Series G Preferred Stock (the "Series G Initial Issuance Date") for a
period of twelve (12) months, the Corporation shall issue or sell, or
shall in accordance with subparagraphs (b)(1) to (9), inclusive, be
deemed to have issued or sold any shares of its Common Stock, for a
consideration per share less than the Series G Conversion Price in
effect immediately prior to such issue or sale, then upon such issue
or sale (the "Series G Triggering Transaction"), the Series G
Conversion Price shall, subject to subparagraphs (1) to (9) of this
paragraph (b), be subject to adjustment as follows:
(A) if the consideration per share for which
the Common Stock is issued, sold or deemed to have been
issued or sold is equal to or greater than $3.50, the Series
G Conversion Price shall be reduced to such consideration per
share;
(B) if the consideration per share for which
the Common Stock is issued, sold or deemed to have been
issued or sold is less than $3.50:
The Series G Conversion Price shall first
be reduced to $3.50; the Number of Common
Shares Deemed Outstanding will be adjusted
to reflect this Series G Conversion Price
reduction; and the Series G Conversion
Price will then be additionally reduced to
a price determined by dividing:
(x) an amount equal to the sum of
(a) the product derived by
multiplying $3.50 times
the Number of Common
Shares Deemed
Outstanding immediately
prior to such Series G
Triggering Transaction
as adjusted in this
subsection (B), plus
(b) the consideration, if
any, received by or
deemed to have been
received by the
Corporation upon such
Series G Triggering
Transaction, by
(y) an amount equal to the sum of
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<PAGE> 42
(a) the Number of Common
Shares Deemed
Outstanding immediately
prior to such Series G
Triggering Transaction
as adjusted in this
subsection (B), plus
(b) the number of shares of
Common Stock issued (or
deemed to have been
issued in accordance
with subparagraphs
(b)(1) to (9) in
connection with the
Series G Triggering
Transaction).
(ii) Except as provided in paragraph
(c) or (f) below, if and whenever on or after the
date that is one year after the Closing Date (as
defined in the Preferred Stock Purchase Agreement
pursuant to which the shares of Series G Preferred
Stock will be sold), upon the occurrence of a Series
G Triggering Transaction, the Series G Conversion
Price shall, subject to subparagraphs (1) to (9) of
this paragraph (b), be reduced to a price determined
by dividing:
(x) an amount equal to the sum of
(a) the product derived by
multiplying the Series G
Conversion Price in
effect immediately prior
to such Series G
Triggering Transaction
by the Number of Common
Shares Deemed
Outstanding immediately
prior to such Series G
Triggering Transaction,
plus
(b) the consideration, if
any, received by or
deemed to have been
received by the
Corporation upon such
Series G Triggering
Transaction, by
(y) an amount equal to the sum of
(a) the Number of Common
Shares Deemed
Outstanding immediately
prior to such Series G
Triggering Transaction,
plus
(b) the number of shares of
Common Stock issued (or
deemed to be issued in
accordance with
subparagraphs (b)(1) to
(9)) in connection with
the Series G Triggering
Transaction.
For purposes of determining the adjusted Series G Conversion Price
under this paragraph (b), the following subsections (1) to (9), inclusive,
shall be applicable:
(1) In case the Corporation at any time after the Series
G Initial Issuance Date shall in any manner grant
(whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to
purchase, or any options for
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<PAGE> 43
the purchase of, Common Stock or any stock or other
securities convertible into or exchangeable for
Common Stock (such rights or options being, herein
called "Options" and such convertible or
exchangeable stock or securities being, herein
called "Convertible Securities"), whether or not
Such Options or the right to convert or exchange any
such Convertible Securities are immediately
exercisable and the price per share for which the
Common Stock is issuable upon exercise, conversion
or exchange (determined by dividend, (x) the total
amount, if any, received or receivable by the
Corporation as consideration for the granting of
such Options plus the minimum aggregate amount of
additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the
case of such Options which relate to Convertible
Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and
upon the conversion or exchange thereof, by (y) the
total maximum number of shares of Common Stock
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities) shall be less than the Series G
Conversion Price in effect immediately prior to the
time of the granting of such Option, then the total
maximum amount of Common Stock issuable upon the
exercise of such Options or in the case of Options
for Convertible Securities, upon the conversion or
exchange of such Convertible Securities shall (as of
the date of granting of such options) be deemed to
be outstanding and to have been issued and sold by
the Corporation for such price per share. No
adjustment of the Series G Conversion Price shall be
made upon the actual issue of such shares of Common
Stock or such Convertible Securities upon the
exercise of such Options, except as otherwise
provided in subparagraph (3) below.
(2) In case the Corporation at any time after the Series
G Initial Issuance Date shall in any manner issue
(whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable
upon such conversion or exchange (determined by
dividing (x) the total amount received or receivable
by the Corporation as consideration for the issue or
sale of such Convertible Securities, plus the
minimum aggregate amount of additional
consideration, if any, payable to the Corporation
upon the conversion or exchange thereof, by (y) the
total maximum number of shares of Common Stock
issuable upon the Conversion or exchange of all such
Convertible Securities) shall be less than the
Series G Conversion Price in effect immediately
prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date of the
issue or sale of such Convertible Securities) be
deemed to be outstanding and to have been issued and
sold by the Corporation for such price per share. No
adjustment of the Series G Conversion Price shall be
made
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<PAGE> 44
upon the actual issue of such Common Stock upon
exercise of the rights to exchange or convert under
such Convertible Securities, except as otherwise
provided in subparagraph (3) below.
(3) If the purchase price provided for in any Options
referred to in subparagraph (1), the additional
consideration, if any, payable upon the conversion
or exchange of any Convertible Securities referred
to in subparagraphs (1) or (2), or the rate at which
any Convertible Securities referred to in
subparagraph (1) or (2) are convertible into or
exchangeable for Common Stock shall change at any
time (other than under or by reason of provisions
designed to protect against dilution of the type set
forth in paragraphs (b) or (d)), the Series G
Conversion Price in effect at the time of such
change shall forthwith be readjusted to the Series G
Conversion Price which would have been in effect at
such time had such Options or Convertible Securities
still outstanding provided for such changed purchase
price, additional consideration or conversion rate,
as the case may be, at the time initially granted,
issued or sold. If the purchase price provided for
in any Option referred to in subparagraph (1) or the
rate at which any Convertible Securities referred to
in subparagraphs (1) or (2) are convertible into or
exchangeable for Common Stock shall be reduced at
any time under or by reason of provisions with
respect thereto designed to protect against
dilution, then in case of the delivery of Common
Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible
Security, the Series G Conversion Price then in
effect hereunder shall forthwith be adjusted to such
respective amount as would have been obtained had
such Option or Convertible Security never been
issued as to such Common Stock and had adjustments
been made upon the issuance of the shares of Common
Stock delivered as aforesaid, but only if as a
result of such adjustment the Series G Conversion
Price then in effect hereunder is hereby reduced.
(4) On the expiration of any Option or the termination
of any right to convert or exchange any Convertible
Securities, the Series G Conversion Price then in
effect hereunder shall forthwith be increased to the
Series G Conversion Price which would have been in
effect at the time of such expiration or termination
had such Option or Convertible Securities, to the
extent outstanding immediately prior to such
expiration or termination, never been issued.
(5) In case any Option shall be issued in connection
with the issue or sale or other securities of the
Corporation, together comprising one integral
transaction in which no specific consideration is
allocated to such Options by the parties thereto,
such Options shall be deemed to have been issued
without consideration.
(6) In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold or
deemed to have been issued or sold for cash, the
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<PAGE> 45
consideration received therefor shall be deemed to
be the amount received by the Corporation therefor.
In case any shares or Common Stock, Options or
Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the
consideration other than cash received by the
Corporation shall be the fair value of such
consideration as determined by the Corporation's
Board of Directors. In case any shares of Common
Stock, Options or Convertible Securities shall be
issued in connection with any merger in which the
Corporation is the surviving corporation, the amount
of consideration therefor shall be deemed to be the
fair value of such portion of the net assets and
business of the non-surviving corporation as shall
be attributable to such Common Stock, Options or
Convertible Securities, as the case may be, as
determined by the Board of Directors.
(7) The number of shares of Common Stock outstanding at
any given time shall not include shares owned or
held by or for the account of the Corporation, and
the disposition of any shares so owned or held shall
be considered an issue or sale of Common Stock for
the purpose of this paragraph 5(b).
(8) In case the Corporation shall declare a dividend or
make any other distribution upon the stock of the
Corporation payable in Common Stock, Class A Common
Stock, Options, or Convertible Securities, such
issuance shall be covered by paragraph 5(d) below.
(9) For the purposes of this paragraph 5(b), in case the
Corporation shall take a record of the holders of
its Common Stock for the purpose of entitling them
(x) to receive a dividend or other distribution
payable in Common Stock, Class A Common Stock,
Options, or in Convertible Securities, or (y) to
subscribe for or purchase Common Stock, Options, or
Convertible Securities, then such record date shall
be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the
making of such other distribution or the date of the
granting of such right or subscription or purchase,
as the case may be.
(c) In the event the Corporation shall declare a
dividend upon the Common Stock (other than a dividend payable in
Common Stock covered by paragraph 5(d)) payable otherwise than as a
Liquidating Dividend, then as soon as possible after the conversion of
any Series G Preferred the Corporation shall pay to the person
converting such Series G Preferred an amount equal to the aggregate
value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Stock which would have been
issued at the time of such earlier exercise and all other securities
which would have been issued with respect to such Common Stock by
reason of stock splits, stock dividends, mergers or reorganizations,
or for any other reason). For the purposes of this paragraph (c), a
dividend other than in cash shall be considered payable
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<PAGE> 46
out of earnings or earned surplus only to the extent that such
earnings or earned surplus are charged an amount equal to the fair
value of such dividend.
(d) In case the Corporation shall at any time subdivide
its outstanding shares of Common Stock into a greater number of
shares, or declare a dividend or make any other distribution upon the
stock of the Corporation payable in Common Stock, Class A Common
Stock, Options or Convertible Securities, the Series G Conversion
Price in effect immediately prior to such subdivision or stock
dividend shall be proportionately reduced, and, conversely, in case
the outstanding shares of Common Stock shall be combined into a
smaller number of shares, the Series G Conversion Price in effect
immediately prior to such combination shall be proportionately
increased.
(e) If any capital reorganization or reclassification of
the capital stock of the Corporation, or consolidation or merger of
the Corporation with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be
effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities, cash or other property with respect to
or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale,
lawful and adequate provision shall be made whereby the holders of the
Series G Preferred shall have the right to acquire and receive upon
conversion of the Series G Preferred, which right shall be prior to
the rights of the holders of Series G Junior Stock, such shares of
stock, securities, cash or other property issuable or payable (as part
of the reorganization, reclassification, consolidation, merger or
sale) with respect to or in exchange for such number of outstanding
shares of the Corporation's Common Stock as would have been received
upon conversion of the Series G Preferred at the Series G Conversion
Price then in effect. The Corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation
thereof the successor corporation (if other than the Corporation)
resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument mailed or
delivered to the holders of the Series G Preferred at the last address
appearing on the books of the Corporation, the obligation to deliver
to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled
to purchase, if a purchase, tender or exchange offer is made to and
accepted by the holders of more than fifty percent (50%) of the
outstanding shares of Common Stock of the Corporation, the Corporation
shall not effect any consolidation, merger or sale with the person
having made such offer or with any Affiliate of such person, unless
prior to the consummation of such consolidation, merger or sale the
holders of the Series G Preferred shall have been given a reasonable
opportunity then to elect to receive upon the conversion of the Series
G Preferred either the stock, securities or assets then issuable with
respect to the Common Stock of the Corporation or the stock,
securities or assets, or the equivalent, issued to previous holders of
the Common Stock in accordance with such offer. For purposes hereof
the term "Affiliate" with respect to any given person shall mean any
person controlling, controlled by or under common control with the
given person.
(f) The provisions of this Section 5 will not apply to
any Common Stock issued, issuable or deemed outstanding under
subparagraphs (b)(1) to (9), inclusive: (i) to any person pursuant to
any stock option, stock purchase or similar plan or arrangement
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<PAGE> 47
for the benefit of officers, directors and employees of or consultants
to the Corporation or its subsidiaries in effect on the Series G
Initial Issuance Date or thereafter adopted by the Board of Directors,
consented to by the holders of a majority of the then outstanding
Series G Preferred, (ii) on conversion of the Series G Preferred,
(iii) pursuant to the exercise of the rights of subscription as
described in Section 1 of the Amended and Restated Shareholders
Agreement, dated November 16, 1997, between the Corporation and
Warburg, Pincus Investors, L.P., a Delaware limited partnership, as
the same may be amended form time to time, and (iv) upon the exercise
of preemptive rights pursuant to the Shareholders' Agreement between
the Corporation and the holders of Series G Preferred.
(g) In the event that:
(i) the Corporation shall declare any cash
dividend upon its Common Stock (if any
shares are outstanding), or
(ii) the Corporation shall declare any dividend
upon its Common Stock (if any shares are
outstanding) payable in stock or make any
special dividend or other distribution to
the holders of its Common Stock (if any
shares are outstanding), or
(iii) the Corporation shall offer for
subscription pro rata to the holders of its
Common Stock (if any shares are
outstanding) any additional shares of stock
of any class or other rights, or
(iv) there shall be any capital reorganization
or reclassification of the capital stock of
the Corporation, including any subdivision
or combination of its outstanding shares of
Common Stock or consolidation or merger of
the Corporation with, or sale of all or
substantially all of its assets to, another
corporation, or
(v) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of
the Corporation;
then, in connection with such event, the Corporation shall give to the holders
of the Series G Preferred:
(1) at least twenty (20) days' prior written
notice of the date on which the books of
the Corporation shall close or a record
shall be taken for such dividend,
distribution or subscription rights or for
determining rights to vote in respect of
any such reorganization, reclassification,
consolidation, merger, sale, dissolution,
liquidation or winding up; and
(2) in the case of any such reorganization,
reclassification, consolidation, merger,
sale, dissolution, liquidation or winding
up, at least twenty (20) days' prior
written notice of the date when the same
shall take place. Such notice in accordance
with the
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<PAGE> 48
foregoing clause (a) shall also specify, in
the case of any such dividend, distribution
or subscription rights, the date on which
the holders of Common Stock shall be
entitled thereto, and such notice in
accordance with the foregoing clause (b)
shall also specify the date on which the
holders of Common Stock shall be entitled
to exchange their Common Stock for
securities or other property deliverable
upon such reorganization, reclassification
consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may
be. Each such written notice shall be given
by first class mail, postage prepaid,
addressed to the holders of the Series G
Preferred at the address of each such
holder as shown on the books of the
Corporation.
(h) If at any time or from time to time on or after the
Series G Initial Issuance Date, the Corporation shall grant, issue or
sell any Purchase Rights pro rata to the record holders of any class
of common stock of the Corporation and such grants, issuances or sales
do not result in an adjustment of the Series G Conversion Price under
paragraph (b) hereof, then each holder of Series G Preferred shall be
entitled to acquire (within thirty (30) days after the later to occur
of the initial exercise date of such Purchase Rights or receipt by
such holder the notice concerning Purchase Rights to which such holder
shall be entitled under paragraph (g) and upon the terms applicable to
such Purchase Rights) either:
(i) the aggregate Purchase Rights which such
holder could have acquired if it had held
the number of shares of Common Stock
acquirable upon conversion of the Series G
Preferred immediately before the grant,
issuance or sale of such Purchase Rights;
provided that if any Purchase Rights were
distributed to holders of Common Stock
without the payment of additional
consideration by such holders,
corresponding Purchase Rights shall be
distributed to the exercising holders of
the Series G Preferred as soon as possible
after such exercise and it shall not be
necessary for the exercising holder of the
Series G Preferred specifically to request
delivery of such rights; or
(ii) in the event that any such Purchase Rights
shall have expired or shall expire prior to
the end of said thirty-day period, the
number of shares of Common Stock or the
amount of property which such holder could
have acquired upon such exercise at the
time or times at which the Corporation
granted, issued or sold such expired
Purchase Rights.
(i) If any event occurs as to which, in the opinion of
the Board of Directors, the provisions of this Section are not
strictly applicable or if strictly applicable would not fairly protect
the rights of the holders of the Series G Preferred in accordance with
the essential intent and principles of such provisions, then the Board
of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential
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<PAGE> 49
intent and principles, so as to protect such rights as aforesaid, but
in no event shall any adjustment have the effect of increasing the
Series G Conversion Price as otherwise determined pursuant to any of
the provisions of this Section except in the case of a combination of
shares of a type contemplated in paragraph (d) or the expiration of
Options or Convertible Securities as set forth in paragraph (b)(4),
and then in no event to an amount larger than the Series G Conversion
Price as adjusted pursuant to paragraph (d) or paragraph (b)(4),
respectively.
6. Mandatory Conversion.
(a) Each share of Series G Preferred Stock shall
automatically be converted into shares of Common Stock at the Series G
Conversion Price then in effect at any time upon (i) the closing of an
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the
offer and sale of Common Stock for the account of the Corporation to
the public generally at a price to the public per share of Common
Stock greater than or equal to 130% of the Series G Conversion Price
then in effect and in which the gross proceeds to the Corporation are
not less than $15 million, or (2) the written consent of the holders
of a majority of the Series G Preferred then outstanding.
(b) All holders of record of shares of Series G
Preferred Stock will be given at least 10 days' prior written notice
of the date fixed and the place designated for mandatory conversion of
all of such shares of Series G Preferred Stock pursuant to this
Section 6. Such notice will be sent by mail, first class, postage
prepaid, to each record holder of shares of Series G Preferred Stock
at such holder's address appearing on the stock register. On or before
the date fixed for conversion, each holder of shares of Series G
Preferred Stock shall surrender his or its certificates or
certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates
for the number of shares of Common Stock to which such holder is
entitled pursuant to this Section 6.
On the date fixed for conversion, all rights with respect to
the Series G Preferred Stock so converted will terminate, except only
the rights of the holders thereof, upon surrender of their certificate
or certificates therefor, to receive certificates for the number of
shares of Common Stock into which such Series G Preferred Stock has
been converted. If so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his
attorneys duly authorized in writing. All certificates evidencing
shares of Series G Preferred Stock which are required to be
surrendered for conversion in accordance with the provisions hereof
shall, from and after the date such certificates are so required to be
surrendered, be deemed to have been retired and canceled and the
shares of Series G Preferred Stock represented thereby converted into
Common Stock for all purposes, notwithstanding the failure of the
holder or holders thereof to surrender such certificates on or prior
to such date. As soon as practicable after the date of such mandatory
conversion and the surrender of the certificate or certificates for
Series G Preferred Stock as aforesaid, the Corporation shall cause to
be issued and delivered to such holder or on his or its written
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<PAGE> 50
order, a certificate or certificates for the number of full shares of
Common Stock issuable on such conversion in accordance with the
provisions hereof and cash as provided in paragraph (b) of Section 4
in respect of any fraction of a share of Common Stock or Class A
Common Stock otherwise issuable upon such conversion.
7. Redemption.
(a) At any time and from time to time on and after
December 31, 2003, the holders of a majority of the outstanding shares
of Series G Preferred Stock may elect to have the Corporation redeem
(to the extent that such redemption shall not violate any applicable
provisions of the laws of the State of Georgia) all or a portion of
the then outstanding shares of Series G Preferred Stock at a price of
$6.21 per share of Series G Preferred Stock (subject to adjustment in
the event of any stock dividend, stock split, stock distribution or
combination with respect to such shares), plus an amount equal to any
dividends accrued but unpaid thereon (such amount is hereinafter
referred to as the "Series G Redemption Price"). If the Corporation is
unable to redeem any shares of Series G Preferred Stock then to be
redeemed because such redemption would violate the applicable laws of
the State of Georgia, then the Corporation shall redeem such shares as
soon thereafter as redemption would not violate such laws.
(b) In the event of any redemption of only a part of the
then outstanding Series G Preferred Stock, the Corporation shall
effect such redemption pro rata among the holders thereof (based on
the number of shares of Series G Preferred Stock held on the date of
the notice of redemption).
(c) Within thirty days after the holders of the Series G
Preferred Stock elect to have the Corporation redeem such stock in
accordance with paragraph 7(a), written notice shall be mailed,
postage prepaid, to each holder of record of Series G Preferred Stock
to be redeemed, at his or its address last shown on the records of the
Corporation, notifying such holder of the number of shares so to be
redeemed, specifying the date of redemption (the "Series G Redemption
Date") and the date on which such holder's conversion rights (pursuant
to Section 4 hereof) as to such shares terminate and calling upon such
holder to surrender to the Corporation, in the manner and at the place
designated, his or its certificate or certificates representing the
shares to be redeemed (such notice is hereinafter referred to as the
"Series G Redemption Notice"). On or prior to the Series G Redemption
Date, each holder of Series G Preferred Stock to be redeemed shall
surrender his or its certificate or certificates representing such
shares to the Corporation, in the manner and at the place designated
in the Series G Redemption Notice, and thereupon the Series G
Redemption Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be canceled. In
the event less than all the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the
unredeemed shares. From and after the Series G Redemption Date, unless
there shall have been a default in payment of the Series G Redemption
Price, all rights of the holders of the Series G Preferred Stock
Designated for redemption in the Series G Redemption Notice as holders
of Series G Preferred Stock of the Corporation (except the right to
receive the Series G Redemption Price without interest upon
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<PAGE> 51
surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
(d) Except as provided in paragraph (a) above, the
Corporation shall have no right to redeem the shares of Series G
Preferred Stock. Any shares of Series G Preferred Stock redeemed in
accordance with such paragraph shall be permanently retired, shall no
longer be deemed outstanding and shall not under any circumstances be
reissued, and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce the
authorized Series G Preferred Stock accordingly. Nothing herein
contained shall prevent or restrict the purchase by the Corporation,
from time to time either at public or private sale, of the whole or
any part of the Series G Preferred Stock at such price or prices as
the Corporation may determine, subject to the provisions of applicable
law.
ARTICLE VIII.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or
repeal the Bylaws of the Corporation upon a vote of 80% of the members of the
Board then sitting.
ARTICLE IX.
(a) It is the intent of the provisions of this Article
that the Corporation grant to its officers and directors
indemnification to the fullest extent permitted by Georgia law,
including Section 14-2-856 of the Georgia Business Corporation Code.
In the event of any ambiguity, the following provisions shall be
construed as liberally as possible, in order that the directors and
officers of the Corporation may be so indemnified to the maximum
extent permitted by law.
(b) Each person who is or was a director or officer of
the Corporation, and each person who is or was a director or officer
of the Corporation and who at the request of the Corporation is
serving or has served as an officer, director, partner, joint venturer
or trustee of another corporation, partnership, joint venture, trust
or other enterprise, shall be indemnified by the Corporation against
those expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement which are allowed to be paid or reimbursed
by the Corporation under the laws of the State of Georgia and which
are actually and reasonably incurred in connection with any action,
suit, or proceeding, pending or threatened, whether civil, criminal,
administrative or investigative, in which such person may be involved
by reason of his being or having been a director or officer of this
Corporation or of such other enterprises. As a condition to any such
right of indemnification, the Corporation may require that it be
permitted to participate in the defense of any such action or
proceeding through legal counsel designated by the Corporation and at
the expense of the Corporation.
ARTICLE X.
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<PAGE> 52
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in the Articles of Incorporation in the manner now
or hereafter prescribed by statute, and all rights conferred upon the
shareholders herein are granted subject to this reservation.
ARTICLE XI.
The persons comprising the Board of Directors of the Corporation shall
not have any liability to the Corporation or to the shareholders for damages
for any breach of duty of care or other duty as a director, provided that this
provision shall not eliminate or limit the liability of any director: (1) for
any appropriation, in violation of his duties, of any business opportunity of
the Corporation; (2) for acts or omissions which involve intentional misconduct
or a knowing violation of law; (3) for the types of liability set for in
Section 14-2-832 of the Georgia Business Corporation Code; or (4) for any
transaction from which the director received an improper personal benefit. If
the Georgia Business Corporation Code is amended, after this Article becomes
effective, to authorize corporate action further eliminating or limiting
personal liability of directors, then, without further corporate action, the
liability of each director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Georgia Business Corporation Code, as so
amended. Neither the amendment or repeal of this Article nor the adoption of
any provision of these Articles of Incorporation inconsistent with this Article
shall eliminate or adversely affect any right or protection of any director of
the Corporation existing immediately prior to such amendment, repeal or
adoption.
ARTICLE XII.
The amendments to the Corporation's Articles of Incorporation contained
in these Amended and Restated Articles of Incorporation were approved by the
Board of Directors of the Corporation on May 1, 2000, and by the shareholders of
the Corporation in accordance with Section 14-2-1003 of the Georgia Business
Corporation Act on May 17, 2000.
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<PAGE> 53
IN WITNESS WHEREOF, the Corporation has caused these Amended and
Restated Articles of Incorporation to be signed by the undersigned duly
authorized officer this 17th day of May, 2000.
SYNQUEST, INC.
/s/ John Bartles
John Bartles
Executive Vice President,
Fin. & Adm.
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
SYNQUEST, INC.
(A GEORGIA CORPORATION)
SECTION 1: NAME AND LOCATION
1.1 Name. The name of this corporation (the "Corporation") shall
be SynQuest, Inc.
1.2 Principal Office. The Corporation will at all times maintain a
registered office in the state of Georgia and a registered agent at that office.
The principal office of the Corporation (which shall also be the initial
registered office) shall be in Gwinnett County at 3500 Parkway Lane, Suite 555,
Norcross, Georgia 30092.
1.3 Place of Business. The Corporation may also have offices at
such other places both within and without the State of Georgia as the board of
directors of the Corporation (the "Board of Directors") may from time to time
determine or the business of the Corporation may require.
SECTION 2: ARTICLES OF INCORPORATION
The purposes of the Corporation shall be as set forth in the Articles
of Incorporation. These Bylaws, the powers of the Corporation and of its
Directors and shareholders ("Shareholders"), or of any class of Shareholders if
there shall be more than one class of stock, and all matters concerning the
conduct and regulation of the business and affairs of the Corporation shall be
subject to such provisions in regard thereto, if any, as are set forth in the
Articles of Incorporation, as the same may be amended from time to time.
SECTION 3: CORPORATE SEAL
The seal of the Corporation shall be in such form as the Board of
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time, the signature of the Corporation followed by the
word "Seal" enclosed in parentheses or scroll shall be deemed the seal of the
Corporation. The seal shall be in the custody of the Secretary and affixed by
him or by his assistants on the certificates of stock and other appropriate
papers.
SECTION 4: FISCAL YEAR
The fiscal year of the Corporation shall be from July 1 to
June 30 of each year, except as from time to time otherwise provided by the
Board of Directors.
<PAGE> 2
SECTION 5: CAPITAL STOCK
5.1 Amount. The amount of authorized capital stock of the
Corporation, with or without par value, shall be as is set forth in the Articles
of Incorporation, as the same may be amended from time to time.
5.2 Division into Classes. If the capital stock is divided into
one or more classes, the description of such classes, including the terms upon
which they are created, and the voting rights of each class shall be as set
forth in the Articles of Incorporation, as the same may be amended from time to
time.
5.3 Stock Certificate. Each Shareholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
be prescribed from time to time by the Board of Directors. Such certificate
shall be signed by the Chairman of the Board, the Chief Executive Officer, the
Chief Operating Officer, the President or a Vice-President and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary, and may be
sealed with the seal of the Corporation or a facsimile thereof. Any or all of
the signatures on the certificate may be a facsimile. In case any officer who
has signed or whose facsimile signature has been placed on such certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer at
the time of its issue.
5.4 Transfer of Shares of Stock. Transfers of stock shall be made
only in the manner prescribed by law. Only persons registered on the books of
the Corporation as the owners of shares and their personal representatives shall
be entitled to receive dividends and to vote as such owners; and furthermore,
the Corporation, for the purposes of levying calls and assessments, may treat
such persons so registered on its books as the owners of the shares registered
in their names. Upon delivery and surrender to the Corporation of a stock
certificate endorsed as by law required to transfer title, or accompanied by a
written assignment or power of attorney to sell, assign or transfer the same or
the shares represented thereby, properly executed, the Secretary shall, subject
to any valid restrictions on transfer, register the transferee as the owner of
the shares so transferred.
5.5 Record Date. The Board of Directors may in advance fix a date
not more than seventy days (or such other longer period as may be permitted by
law hereafter) preceding the date of any meeting of Shareholders or the date for
the payment of any dividend or the making of any distribution to Shareholders,
or the last day on which the consent or dissent of Shareholders may be
effectively expressed for any purpose, as the record date for determining the
Shareholders having the right to notice of and to vote at such meeting, and any
adjournment thereof, or the right to receive such dividend or distribution or
the right to give such consent or dissent. In such case only Shareholders of
record on such date shall have such right, notwithstanding any transfer of stock
on the books of the Corporation after the record date.
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5.6 Loss of Certificates. In the event of the loss or destruction
of any certificates of stock issued by the Corporation, the owner thereof shall
be entitled to have a new certificate of the same number of shares of stock
issued in lieu of said certificate so lost or destroyed, upon satisfactory proof
of ownership and upon the giving of such bond or security to the Corporation to
indemnify it against any loss, cost, damage or expense which may accrue to it by
reason of the issue of said certificate in lieu of the certificate so lost or
destroyed, as the Directors may deem necessary or convenient.
5.7 Transfer Agent and Registrar. The Board of Directors may from
time to time appoint one or more transfer agents for any class or classes of
stock; to provide that stock certificates shall not be valid unless
countersigned by such transfer agent(s) and to give such transfer agent(s) such
powers and authority as may from time to time be deemed by the Board of
Directors necessary or advisable.
SECTION 6: SHAREHOLDERS
6.1 Voting and Proxies. Shareholders entitled to vote may vote
either in person or by written proxy at all meetings, provided that such proxies
are valid under applicable law.
6.2 Annual and Special Meetings. A meeting of the Shareholders of
the Corporation shall be held annually for the election of Directors and the
transaction of such other business as may come before the meeting. The annual
meeting shall be held at the principal office of the Corporation, at any place
of business of the Corporation, at the office of the Corporation's legal
counsel, or at such other place within or without the State of Georgia as the
Board of Directors may designate, on such dates as the Board of Directors may
determine. Special meetings of the Shareholders shall be called and notice
thereby shall be given by the President, the Secretary, or the holders of not
less than one-tenth of any class of shares entitled to vote at the meeting.
6.3 Notice. Notice of the place, day and hour of the annual and of
each special meeting of the Shareholders shall be given in accordance with law.
6.4 Quorum. At any meeting of the Shareholders, a quorum shall
consist of a majority in interest of all stock issued and outstanding and
entitled to vote at the meeting; except that if two or more classes or series of
stock are entitled to vote as separate classes or series, then in the case of
each such class or series a quorum shall consist of a majority in interest of
all stock of that class or series issued and outstanding; except when a larger
quorum is required by law, by the Articles of Incorporation or by these Bylaws.
Stock owned directly or indirectly by the Corporation, if any, shall not be
deemed outstanding for this purpose nor shall any such shares be voted. Nothing
contained herein shall be construed as limiting the right of the Corporation to
vote stock, including but not limited to its own stock, held in a fiduciary
capacity. Any meeting may be adjourned from time to time by a majority of the
shares entitled to vote and present in person or by proxy, whether or not a
quorum is present and the meeting may be held as adjourned without further
notice. Directors shall, except as otherwise required by law or by the Bylaws or
Articles of Incorporation be elected by a plurality of the votes cast at a
meeting of
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Shareholders by the holders of shares entitled to vote in the election. Action
on any other matter by a voting group is approved if the votes cast within the
voting group favoring the action exceed the votes cast opposing the action,
unless the Articles of Incorporation, a Bylaw adopted by the Shareholders under
Section 14-2-1021 of the Georgia Business Corporation Code, or applicable law
requires a greater number of affirmative votes.
6.5 Action Without a Meeting. Any action required or permitted to
be taken at a meeting of Shareholders by these Bylaws, may be taken without a
meeting if all of the Shareholders entitled to vote thereon consent to such
action in writing. Whenever action is taken pursuant to this section, the
written consents of the Shareholders consenting to such actions shall be filed
with the minutes of the meetings of the Shareholders.
SECTION 7: BOARD OF DIRECTORS
7.1 Number. The Board of Directors shall be composed of four (4)
Directors or such other number as may be fixed by a majority of the entire Board
from time to time.
7.2 Tenure. After the initial appointment of Directors as set
forth in the Articles of Incorporation, Directors shall be elected at each
annual meeting of the Shareholders and shall serve for a term of one year and
until their successors are elected or until their earlier death, resignation,
removal, ineligibility or disqualification. Despite the expiration of a
Director's term he shall continue to serve until his successor is elected and
qualifies or until there is a decrease in the number of Directors, or unless he
is removed under Section 7.3 below.
7.3 Removal. Any Director may be removed with or without cause by
the Shareholders at any time, or by the Directors with cause at any time, except
that any director who is elected by any class or series of shares which vote as
a class may be removed only by the applicable vote of the holders of such
shares, voting as a class. A director may be removed by the Shareholders only at
a meeting called for the purpose of removing him and the meeting notice must
state that the purpose, or one of the purposes, of the meeting is removal of the
Director.
7.4 Resignations. Any Director may resign his office at any time,
such resignation to be made in writing, delivered to the Board of Directors, its
Chairman or to the Corporation and to take effect from the time of its delivery,
unless some other but later time be fixed in the resignation, and then from that
time. The acceptance of a resignation shall not be required to make such
resignation effective.
7.5 Vacancies. The Directors may fill the place of any Director
which may become vacant prior to the expiration of his term, such appointment by
the Directors to continue until the expiration of the term of the Director whose
place has become vacant, or may fill any directorship created by reason of an
increase in the number of Directors, such appointment by the Directors to
continue for a term of office until the next election of Directors by the
Shareholders and until the election of the successor.
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7.6 Powers. Except as reserved to the Shareholders, by law, by the
Articles of Incorporation or by these Bylaws, the business of the Corporation
shall be managed by the Board of Directors, who shall have and may exercise all
the powers of the Corporation.
7.7 Committees. The Board of Directors may, by vote of majority of
the Directors then in office, elect from their number an executive committee and
other committees and delegate to such committees, some or all of the powers of
the Directors, except those powers which by law, by the Articles of
Incorporation or by these Bylaws they are prohibited from delegating. Except as
the Board of Directors may otherwise determine, any such committee may make
rules for the conduct of its business, but unless otherwise provided by the
Board of Directors or such rules, its business shall be conducted as nearly as
may be in the same manner as is provided by these Bylaws for the conduct of
business by the Board of Directors. Notwithstanding anything to the contrary
herein, committees established by the Board shall not have the power: (1) to
approve or propose to Shareholders action that is required by the Code or these
Bylaws to be approved by Shareholders (including, but not limited to,
fundamental corporate changes such as merger, share exchange, dissolution and
asset sales); (2) to fill vacancies on the Board of Directors or any of its
committees; (3) to amend the Articles of Incorporation or these Bylaws; or (4)
to approve a plan of merger not requiring shareholder approval.
7.8 Regular and Special Meetings. The annual meeting, regular and
special meetings of the Board of Directors for the election of officers and/or
the transaction of such other business as may come before the Board of Directors
shall be held at such place, within or without the State of Georgia, as may be
determined by the Board of Directors. The annual meeting shall be held as soon
as is convenient after the meeting of the Shareholders at which the Board of
Directors is elected and after each annual meeting of the Shareholders.
7.9 Meetings by Telephone Conference Call. Meetings of the Board
of Directors may be held by telephone conference call in accordance with the
provisions of law.
7.10 Action Without a Meeting. Any action which may be taken or is
required to be taken at a meeting of the Board of Directors may be taken without
a meeting if a consent in writing, setting forth the action to be taken, shall
be signed before or after such action by all of the Directors.
7.11 Meetings of the Board; Notice of Meetings; Waiver of Notice.
The Board of Directors may by resolution provide for the time and place of
regular meetings and no notice of such regular meetings need be given. Special
meetings of the Board of Directors may be called by the Chief Executive Officer
or by any two directors unless the Board consists of one director, in which case
special meetings may be called by the sole director. Written notice of the time
and place of such meetings shall be given to each director by first class mail,
air mail, telephone, telegraph, telecopy or in person at least two (2) days
before the meeting. Any director may execute a waiver of notice, either before
or after any meeting, and shall be deemed to have
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waived notice if he is present at such meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of the Board of Directors need be
stated in the notice or waiver of notice of such meeting. Any meeting may be
held at any place within or without the State of Delaware.
7.12 Quorum. A majority of the number of Directors then holding
office shall constitute a quorum for the transaction of business. The act of the
majority of Directors present at a meeting at which a quorum is present shall be
the act of the Board of Directors unless the act of a greater number is required
by the Articles of Incorporation of these Bylaws.
SECTION 8: OFFICERS AND AGENTS
8.1 Enumeration; Qualification. The officers of the Corporation
shall be a Chief Executive Officer, a Chief Operating Officer, a President, a
Treasurer, a Secretary, and such other officers, including a Chairman of the
Board of Directors, Vice-Presidents, Assistant Treasurers and Assistant
Secretaries, as the Directors from time to time may, in their discretion, elect
or appoint. The Corporation may also have such agents, if any, as the Directors
from time to time may, in their discretion, appoint. Any officer may be but need
not be a Director or Shareholder. Any two or more offices may be held by the
same person. Any officer may be required by the Directors to give bond for the
faithful performance of his duties to the Corporation in such amount and with
such sureties as the Directors may determine.
8.2 Powers. Subject to the law, the Articles of Incorporation and
the other provisions of these Bylaws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as the Directors
may from time to time designate.
8.3 Election. The Chief Executive Officer, the Chief Operating
Officer, the President, the Treasurer and the Secretary shall be elected
annually by the Directors at their first meeting following the annual meeting of
the Shareholders, unless a vacancy occurs, in which event such vacancy may be
filled at any time by the Directors. Other officers, if any, may be elected or
appointed by the Directors at said meeting or at any other time.
8.4 Tenure. The Chief Executive Officer, the Chief Operating
Officer, the President, the Treasurer, and the Secretary shall hold office until
the first meeting of the Directors following the next annual meeting of the
Shareholders and until their respective successors are chosen and qualified, and
each other officer shall hold office until the first meeting of the Directors
following the next annual meeting of the Shareholders, unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until his earlier death, resignation, removal or disqualification.
Each agent shall retain his authority at the pleasure of the Directors.
8.5 Chairman. The Chairman of the Board of Directors shall preside
at all meetings of the Directors.
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8.6 Chief Executive Officer, Chief Operating Officer, President
and Vice-Presidents. The Chief Executive Officer shall report to the Board of
Directors and, subject to the control of the Directors, shall have general
charge and supervision of the business of the Corporation. The Chief Operating
Officer of the Corporation shall also be the President and shall report to the
Chief Executive Officer. Subject to the provisions of the Articles of
Incorporation, the Georgia Business Corporation Code and any agreements between
the Corporation and the Chief Executive Officer and the Chief Operating Officer,
the Board of Directors shall fix the specific duties, responsibilities and
authority of the Chief Executive Officer and the Chief Executive Officer shall
fix the specific duties and responsibilities and authority of the Chief
Operating Officer and President.
8.7 Treasurer and Assistant Treasurer. The Treasurer shall be the
chief financial and accounting officer of the Corporation and shall be in charge
of its funds and valuable papers, books of account and accounting records, and
shall have such other duties and powers as may be designated from time to time
by the Directors or by the President. Any Assistant Treasurers shall have such
duties and powers as shall be designated from time to time by the Directors.
8.8 Secretary and Assistant Secretary. The Secretary shall record
all proceedings of the Shareholders in a book or series of books to be kept
therefor, which book or books shall be kept at the principal office of the
Corporation, at the office of its transfer agent or of its Secretary, or at the
office of its legal counsel, and shall be open at all reasonable times to the
inspection of any shareholder. In the absence of the Secretary from any meeting
of the Shareholders, an Assistant Secretary, or, if there be none or he is
absent, a temporary Secretary chosen at the meeting, shall record the
proceedings thereof in the aforesaid book. Unless a transfer agent has been
appointed, the Secretary shall keep or cause to be kept the stock and transfer
records of the Corporation, which shall contain the names and record addresses
of all Shareholders and the amount of stock held by each. The Secretary shall
keep a true record of the proceedings of all meetings of the Directors and, in
his absence from any such meeting, an Assistant Secretary, or, if there be none
or he is absent, a temporary Secretary chosen at the meeting, shall record the
proceedings thereof. The Secretary shall be responsible for authenticating the
records of the Corporation. Any Assistant Secretary shall have such duties and
powers as shall be designated from time to time by the Directors.
8.9 Resignations. Any officer may resign at any time by delivering
his resignation in writing to the Corporation. Such resignation shall be
effective when the notice is delivered unless specified to be effective at some
other later time, at which date it shall become effective. The acceptance of a
resignation shall not be required to make it effective.
SECTION 9: INDEMNIFICATION
9.1 Construction and Intent. It is the intent of the provisions of
this Section 9 that the Corporation grant to its officers and Directors
indemnification to the fullest extent permitted by law. In the event of any
ambiguity, the following provisions shall be construed as liberally as
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possible, in order that the Directors and officers of the Corporation may be so
indemnified to the maximum extent permitted by law.
9.2 Basic Provisions. Each person who is or was a Director or
officer of the Corporation, and each person who is or was a Director or officer
of the Corporation and who at the request of the Corporation is serving or has
served as an officer, director, partner, joint venturer or trustee of another
corporation, partnership, joint venture, trust or other enterprise shall be
indemnified by the Corporation against those expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement which are allowed to be
paid or reimbursed by the Corporation under the laws of the State of Georgia and
which are actually and reasonably incurred in connection with any action, suit,
or proceeding, pending or threatened, whether civil, criminal, administrative or
investigative, in which such person may be involved by reason of his being or
having been a director or officer of this Corporation or of such other
enterprises. Such indemnification shall be made only in accordance with the laws
of the State of Georgia and subject to the conditions prescribed therein.
In any instance where the laws of the State of Georgia permit
indemnification to be provided to persons who are or have been an officer or
Director of the Corporation or who are or have been an officer, director,
partner, joint venturer or trustee of any such other enterprise only on a
determination that certain specified standards of conduct have been met, upon
application for indemnification by any such person, the Corporation shall
promptly cause such determination to be made. If the determination is to be made
by a vote of the Shareholders, shares owned by or voted under the control of
Directors who are at the time parties to the proceeding may not be voted on the
determination.
As a condition to any such right of indemnification, the Corporation
may require that it be permitted to participate in the defense of any such
action or proceeding through legal counsel designated by the Corporation and at
the expense of the Corporation.
The Corporation may purchase and maintain insurance on behalf of any
such persons whether or not the Corporation would have the power to indemnify
such officers and directors against any liability under the laws of the State of
Georgia. If any expenses or other amounts are paid by way of indemnification,
other than by court order, action by Shareholders or by an insurance carrier,
the Corporation shall provide notice of such payment to the Shareholders in
accordance with the provisions of the laws of the State of Georgia.
SECTION 10: EXECUTION OF PAPERS
Unless in a particular case the Directors may also authorize others to
do so, all contracts, mortgages, leases, deeds, transfer and other conveyances
of the real or personal property of the Corporation, all promissory notes,
acceptances, checks, drafts, orders or other obligations of the Corporation for
the payment of money, all bonds, licenses, returns, reports, applications, and
all other instruments or writings of any nature, shall be signed, executed,
acknowledged, and
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delivered for and on behalf of the Corporation by the Chief Executive Officer,
the Chief Operating Officer, the President, any Vice-President or the Treasurer.
SECTION 11: AMENDMENTS
These Bylaws may be amended by majority vote of the Board of Directors
of the Corporation or by majority vote of the Shareholders, provided that the
Shareholders may provide by resolution that any Bylaw provision repealed,
amended, adopted or altered by them may not be repealed, amended, adopted or
altered by the Board of Directors.
ATTEST:
/s/ Joseph Trino
Secretary
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated November 1, 1997, is
between SynQuest, Inc. ("SynQuest") and Joseph Trino ("Executive").
The parties agree as follows:
1. Employment. SynQuest hereby employs Executive and Executive
hereby accepts employment, subject to the terms and conditions of this
Agreement. Executive will serve as President and Chief Executive Officer of
SynQuest and will have the duties, rights and responsibilities customarily
associated with that position, as well as any other reasonable duties relating
to the operation of the business of SynQuest and SynQuest's subsidiaries that
the Board of Directors of SynQuest (the "Board") may from time to time assign to
Executive. Executive will devote his full business time, skills and best efforts
to rendering services on behalf of SynQuest and will exercise such care as is
customarily required by employees undertaking similar duties for companies
similar to SynQuest.
Executive's employment under this Agreement may be terminated at any
time by either party, at will, subject to the obligations of the Company under
Section 6.6.
2. Compensation; Expenses; Additional Employment Benefits
2.1 Salary. During the term of Executive's employment under this
Agreement, SynQuest will pay Executive an annual base salary equal to $220,000
(the "Base Salary"), which will be payable to Executive in accordance with
SynQuest's payroll procedures in effect with respect to other officers of
SynQuest, less all applicable withholding taxes. The Base Salary will be
reviewed annually by the Board and, based on the Board's review, the Base Salary
may be increased (at the sole discretion of the Board).
2.2 Bonus. During the term of Executive's employment under this
Agreement, Executive will be entitled to receive (if earned) an annual bonus
("Bonus"). The terms and conditions under which the Bonus will be earned
(including corporate and individual goals and objectives upon which payment of
the Bonus may be based) will be established annually in accordance with
SynQuest's bonus plan for key executive personnel.
2.3 Executive Stock Option Plan. Executive will be eligible for
consideration for grants of stock options in accordance with the terms and
conditions of SynQuest's Stock Option Plan (or successor stock option plan
adopted by SynQuest during the term of this Agreement). The decision as to
whether to grant options under the plan to Executive (and, if so, how many) will
be solely within the discretion of the Board, and such grants, if any, will be
subject to any terms and conditions imposed thereon by the Board.
2.4 Reimbursement of Business Expenses. SynQuest will reimburse
Executive for all reasonable business-related expenses incurred by Executive in
the performance of his duties
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under this Agreement, provided that Executive presents vouchers for such
expenses or other evidence thereof to SynQuest in accordance with SynQuest's
general reimbursement policy in effect for SynQuest's executives.
2.5 Participation in Benefit Plans. Executive will be eligible to
participate in SynQuest's existing benefit plans and any other compensation,
welfare, insurance and other benefit plans as SynQuest may maintain from time to
time for the benefit of SynQuest's key executive personnel, on the terms and
subject to the conditions set forth in those plans.
2.6 Vacation. Executive will receive four weeks paid vacation each
year during the term of Executive's employment.
2.7 Additional Benefits and Prerequisites. Executive will have
additional benefits and prerequisites authorized from time to time for Executive
in accordance with SynQuest's policies then in effect with respect to other
SynQuest executives.
3. Termination of Employment. Executive's employment under this
Agreement may be terminated upon the occurrence of any of the following events:
3.1 Death. Executive's death (a "Death Termination Event").
3.2 Disability. If the Board determines in good faith, based on
medical evidence considered by the Board to be reliable and after giving
Executive an opportunity to present evidence on his own behalf, that as a result
of a medically determinable physical or mental impairment Executive has become
substantially unable to perform his duties under this Agreement at the principal
executive offices of SynQuest for any period of six (6) consecutive months, or
nine (9) months in any twelve (12) month period, then Executive will be deemed
to be disabled for the purposes of this Agreement and the Board may terminate
Executive's employment under this Agreement (a "Disability Termination Event").
All determinations by the Board pursuant to this Section 3.2 will be final and
binding upon Executive.
3.3 Termination for Cause. The Board may terminate Executive's
employment under this Agreement for cause upon: (i) the determination by the
Board that Executive has failed to perform his duties under this Agreement
(other than as a result of Executive's incapacity due to physical or mental
illness or injury), and such failure is a result of an intentional and/or
extended neglect of Executive's duties under this Agreement; (ii) conviction of
Executive for a felony or any crime involving theft, fraud or moral turpitude;
(iii) commission by Executive of any act involving dishonesty or fraud against
SynQuest or SynQuest's subsidiaries; (iv) failure by Executive to comply with a
reasonable written order of the Board; (v) a misrepresentation made willfully,
recklessly or in bad faith by Executive to SynQuest's stockholders or the Board,
which causes injury to SynQuest or SynQuest's subsidiaries or SynQuest's
stockholders; or (vi) a material breach by Executive of his obligations under
Sections 9 through 13 (a "Good Cause Termination Event").
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3.4 Termination Without Cause.
(a) The Board may terminate Executive's employment under
this Agreement without cause at any time by delivering to Executive a Notice of
Termination (as defined in Section 4 below).
(b) Executive may terminate his employment by delivering
to the Board a Notice of Termination, and such termination will be considered to
be without cause if there occurs a material change in the position held by
Executive or in the duties of Executive, without Executive's consent, such that
Executive's position or duties are not comparable to Executive's position and
duties prior to such material change (Both termination events described in
Subsections (a) and (b) are referred to individually in this Agreement as a "No
Cause Termination Event").
3.5 Voluntary Termination. Executive may voluntarily terminate his
employment under this Agreement at any time by delivering to the Board a Notice
of Termination as specified in Section 5(e) below (a "Voluntary Termination
Event"); provided, however, that (1) if at the time of such voluntary
termination by Executive, Executive could be terminated as a result of a Good
Cause Termination Event, Executive will be deemed to have been terminated as a
result of a Good Cause Termination Event instead of a Voluntary Termination
Event, (2) if Executive resigns under the circumstances described under Section
3.4, the termination will be deemed to have been resulted from a No Cause
Termination Event.
4. Notice of Termination. Any termination by the Board pursuant
to Sections 3.2, 3.3 or 3.4(a) of this Agreement will be communicated to
Executive by a Notice of Termination. Any termination by Executive pursuant to
Sections 3.4(b) or 3.5 of this Agreement will be communicated by Notice of
Termination to the Board. For purposes of this Agreement, a "Notice of
Termination" means a notice that indicates the specific termination provision in
this Agreement relied upon for such termination, and if delivered pursuant to
Sections 3.2, 3.3 or 3.4(a) of this Agreement, sets forth the basis for
termination of Executive's employment under the provisions indicated.
5. Date of Termination. "Date of Termination" means:
(a) If Executive's employment is terminated as a result of a
Death Termination Event, the date of Executive's death;
(b) If Executive's employment is terminated as a result of a
Disability Termination Event, thirty (30) days after Notice of Termination is
given;
(c) If Executive's employment is terminated by the Board as a
result of a Good Cause Termination Event or a No Cause Termination Event, the
date the Notice of Termination is given (or such later date as may be specified
by the Board in the Notice of Termination);
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(d) If Executive's employment is terminated by Executive as a
result of a No Cause Termination Event, the date the Notice of Termination is
given; and
(e) If Executive's employment is terminated as a result of a
Voluntary Termination Event, sixty (60) days after Notice of Termination is
given (or such shorter period of time as the Board may specify in the Board's
sole discretion after receiving Executive's Notice of Termination).
6. Compensation upon Termination or During Disability.
6.1 No Further Obligation. Upon any termination of employment,
SynQuest and SynQuest's subsidiaries will have no further obligation to
Executive except to pay Executive (or Executive's estate in the case of
Executive's death) the compensation and other benefits provided in this Section
6. Amounts payable pursuant to this Section 6 are in lieu of any severance pay
that would otherwise be payable to Executive upon termination of Executive's
employment with SynQuest under SynQuest's severance pay policies.
6.2 Death. If Executive's employment is terminated as a result of
a Death Termination Event, SynQuest will pay to Executive's estate any Base
Salary and Bonus earned but unpaid and any other amounts due to Executive from
SynQuest (whether pursuant to benefit plans or otherwise) through the date of
Executive's death.
6.3 Disability. If Executive's employment is terminated as a
result of a Disability Termination Event, Executive will continue to receive
payment of any Base Salary and Bonus earned but unpaid and any other amounts due
to Executive from SynQuest (whether pursuant to benefit plans or otherwise)
through the Date of Termination. After payment of amounts set forth in this
Section 6.3, Executive's compensation will be paid in accordance with SynQuest's
long-term disability plans, if any, that may then be in effect with respect to
Executive.
6.4 Good Cause. If Executive's employment is terminated as a
result of a Good Cause Termination Event, Executive will receive payment of any
Base Salary earned but unpaid and any other amounts due to Executive from
SynQuest (whether pursuant to benefit plans or otherwise) through the Date of
Termination.
6.5 Voluntary Termination. If Executive's employment is terminated
as a result of a Voluntary Termination Event, Executive will receive payment of
any Base Salary and Bonus earned but unpaid and any other amounts due to
Executive from SynQuest (whether pursuant to benefit plans or otherwise) through
the Date of Termination.
6.6 No Cause Termination. If Executive's employment is terminated
as a result of a No Cause Termination Event, then SynQuest will pay Executive
(i) within fifteen (15) days after the Date of Termination, any Base Salary and
Bonus earned but unpaid and any other amounts due to Executive from SynQuest
(whether pursuant to benefit plans or otherwise) through the
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Date of Termination, and (ii) one hundred percent (100%) of Executive's
then-current Base Salary.
7. Employment Rights. Nothing in this Agreement confers on
Executive any right to continue in the employ of SynQuest or SynQuest's
subsidiaries, or to interfere in any way with the right of the Board to
terminate Executive's employment at any time.
8. Scope of Duties.
8.1 Employment by SynQuest as Sole Occupation. Executive agrees to
devote Executive's full business time, attention, skill, and effort exclusively
to the performance of the duties that SynQuest may assign Executive from time to
time. Executive may not engage in any business activities or render any services
of a business, commercial, or professional nature for compensation for the
benefit of anyone other than SynQuest, unless SynQuest consents in writing, it
being agreed that SynQuest will not withhold its consent to any activity which
is not competitive with SynQuest's business and does not interfere with the
performance by Executive of Executive's duties and obligations to SynQuest under
this Agreement. It is the policy of SynQuest never to allow its personnel to
work for any competitive enterprise during their employment, including after
hours, on weekends, or during vacation time, even if only organizational
assistance or limited consultation is involved. This Agreement does not prohibit
the investment of a reasonable part of Executive's assets in the stock of a
company whose stock is traded on a national stock exchange.
8.2 Noninterference With Third-Party Rights. SynQuest is employing
Executive with the understanding that (i) Executive is free to enter into
employment with SynQuest and (ii) only SynQuest is entitled to the benefit of
Executive's work. SynQuest has no interest in using any other person's patents,
copyrights, trade secrets, or trademarks in an unlawful manner. Executive should
be careful not to misapply proprietary rights that SynQuest has no right to use.
9. Ownership of Executive Developments.
9.1 Ownership of Work Product.
(a) SynQuest will own all Work Product (as defined below
in Section 9.1(e)). All Work Product will be considered work made for hire by
Executive and owned by SynQuest.
(b) If any of the Work Product may not, by operation of
law, be considered work made for hire by Executive for SynQuest, or if ownership
of all right, title, and interest of the intellectual property rights therein
may not otherwise vest exclusively in SynQuest, Executive agrees to assign, and
upon creation thereof automatically assigns, without further consideration, the
ownership of all Trade Secrets (as defined below in Section 10.2), U.S. and
international copyrights, patentable inventions, and other intellectual property
rights therein to SynQuest, its successors and assigns.
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(c) SynQuest, its successors and assigns, will have the
right to obtain and hold in its or their own name copyright registrations,
trademark registrations, patents and any other protection available in the
foregoing.
(d) Executive agrees to perform, upon the reasonable
request of SynQuest, during or after Executive's employment, such further acts
as may be necessary or desirable to transfer, perfect, and defend SynQuest's
ownership of the Work Product. When requested, Executive will:
(1) Execute, acknowledge, and deliver any
requested affidavits and documents of
assignment and conveyance with respect to
any Work Product;
(2) Assist in the preparation, prosecution,
procurement, maintenance and enforcement of
copyrights and, if applicable, patents with
respect to the Work Product in any
countries;
(3) Provide testimony in connection with any
proceeding affecting the right, title, or
interest of SynQuest in any Work Product;
and
(4) Perform any other acts deemed necessary or
desirable to carry out the purposes of this
Agreement.
SynQuest will reimburse all reasonable out-of-pocket
expenses incurred by Executive at SynQuest's request in connection with the
foregoing, including (unless Executive is otherwise being compensated at the
time) a reasonable per diem or hourly fee for services rendered following
termination of Executive's employment.
(e) For purposes hereof, "Work Product" means all
intellectual property rights, including all Trade Secrets, U.S. and
international copyrights, patentable inventions, discoveries and improvements,
and other intellectual property rights, in any programming, documentation,
technology, or other Work Product that relates to the business and interests of
SynQuest and that Executive conceives, develops, or delivers to SynQuest at any
time during the term of Executive's employment. "Work Product" does not include
Executive's "Residual Knowledge." "Residual Knowledge" means prior or existing
knowledge or skills obtained by Employee during the course of his employment, to
the extent retained in Employee's human memory (and not in any other form, such
as written form or electronic form, such as magnetic storage media). Residual
Knowledge will not include any Trade Secrets or other proprietary information of
SynQuest (or its subsidiaries or affiliates). Executive hereby irrevocably
relinquishes for the benefit of SynQuest and its assigns, and hereby agrees to
waive and never to assert, any moral rights in the Work Product recognized by
applicable law.
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9.2 Clearance Procedure for Proprietary Rights Not Claimed by
SynQuest. If Executive ever wishes to create or develop, on Executive's own time
and with Executive's own resources, anything that may be considered Work Product
but as to which Executive believes Executive should be entitled to the personal
benefit, Executive is required to follow the clearance procedure set forth in
this Section 9.2 in order to ensure that SynQuest has no claim to the
proprietary rights that may arise.
Before Executive begins any development work on Executive's own time,
Executive must give SynQuest advance written notice of Executive's plans and
supply a description of the development under consideration. SynQuest will hold
in confidence and not disclose any proprietary and confidential information
contained in the description submitted by Executive. SynQuest will determine, in
good faith, within thirty (30) days after Executive has fully disclosed
Executive's plans to SynQuest, whether the development is claimed by SynQuest as
Work Product. If SynQuest determines that it does not claim such development,
Executive will be notified in writing and may retain ownership of the
development to the extent of what has been disclosed to SynQuest. Executive
should submit for further clearance any significant improvement, modification,
or adaptation so that it can be determined whether the improvement,
modification, or adaptation relates to the business or interests of SynQuest.
Clearance under this procedure does not relieve Executive of the need
to obtain the written consent of SynQuest pursuant to Section 8.1 before
engaging in business activities or rendering business, commercial, or
professional services for the benefit of anyone other than SynQuest (subject to
the provisions of Section 8.1). SynQuest thus reserves the right to exercise
greater control over development work that Executive might consider doing for
profit after hours, as opposed to mere hobby work pursued in Executive's spare
time.
10. Confidentiality.
10.1 Consequences of Entrustment With Sensitive Information.
Executive's position with SynQuest requires considerable responsibility and
trust. Relying on Executive's ethical responsibility and undivided loyalty,
SynQuest expects to entrust Executive with highly sensitive confidential,
restricted, and proprietary information involving Trade Secrets (as defined in
Section 10.2) and Confidential Information (as defined in Section 10.4).
Executive is legally and ethically responsible for protecting and preserving
SynQuest's proprietary rights for use only for SynQuest's benefit, and these
responsibilities may impose unavoidable limitations on Executive's ability to
pursue some kinds of business opportunities that might interest Executive during
or after Executive's employment.
10.2 Trade Secrets Defined. For purposes of this Agreement, "Trade
Secrets" means information, without regard to form, including, but not limited
to, (i) technical or nontechnical data, formulas, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans relating to or reflected in SynQuest's computer
software products, or (ii) a list of actual or potential customers or suppliers
of SynQuest that: (A) derive economic value, actual or potential, from not being
generally known
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to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from their disclosure or use; and (B) are the subject
of efforts that are reasonable under the circumstances to maintain their
secrecy. The term "Trade Secret" will not include any information which
constitutes Confidential Information (as defined below in Section 10.4).
Trade Secrets do not include information that Executive can show by
competent proof (i) was known to Executive prior to disclosure by SynQuest; (ii)
was generally known to the public at the time SynQuest disclosed the information
to Executive; (iii) became generally known to the public after disclosure to
Executive by the SynQuest through no act or omission of Executive; or (iv) was
disclosed to Executive by a third party having a bona fide right both to possess
the information and to disclose the information to Executive.
10.3 Restrictions on Use and Disclosure of Trade Secrets. Executive
must hold in confidence at all times after the date of this Agreement all Trade
Secrets of SynQuest and must not disclose, publish or make use at any time after
the date of this Agreement of Trade Secrets without the prior consent of
SynQuest.
10.4 Confidential Information Defined. For purposes of this
Agreement, "Confidential Information" means any data or information, other than
Trade Secrets, which (i) is valuable to SynQuest, (ii) is not generally known or
available to competitors of SynQuest, and (iii) is treated as confidential by
SynQuest.
10.5 Use or Disclosure of Confidential Information. Executive
agrees that during the term of Executive's employment by SynQuest, and for a
period of two (2) years following termination of Executive's employment,
Executive will hold in confidence all Confidential Information and will not
disclose, publish or make use of Confidential Information without the prior
written consent of SynQuest.
10.6 Screening of Public Releases of Information. In addition, and
without any intention of limiting Executive's other obligations under this
Agreement in any way, Executive should not, during Executive's employment,
reveal any non-public information concerning the technology pertaining to the
proprietary products and manufacturing processes of SynQuest (particularly
technology under current development or improvement), unless Executive has
obtained approval from SynQuest in advance. In that connection, Executive should
submit to SynQuest for review any proposed scientific and technical articles and
the text of any public speeches relating to work done for SynQuest before they
are released or delivered. SynQuest has the right to disapprove and prohibit, or
delete any parts of, such articles or speeches that might disclose SynQuest's
Trade Secrets or other Confidential Information or otherwise be contrary to
SynQuest's business interests.
10.7 SynQuest's Rights Under Applicable Trade Secret Law. Nothing
in this Agreement is intended to, nor will it, diminish the SynQuest's rights
regarding the protection of SynQuest's trade secrets pursuant to applicable
Georgia law.
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11. Return of Materials. Upon the request of SynQuest and, in any
event, upon the termination of Executive's employment, Executive must return to
SynQuest and leave at SynQuest's disposal all memoranda, notes, records,
drawings, manuals, computer programs, documentation, diskettes, computer tapes,
and other documents or media pertaining to the business of SynQuest or
Executive's specific duties for SynQuest, including all copies of such
materials. Executive must also return to SynQuest and leave at SynQuest's
disposal all materials involving any Trade Secrets of SynQuest. This Section 11
is intended to apply to all materials made or compiled by Executive, as well as
to all materials furnished to Executive by anyone else in connection with
Executive's employment.
12. Non-interference with Personnel Relations. During Executive's
employment with SynQuest and for a period of one (1) year afterwards, Executive
will not knowingly solicit, entice or persuade any other Executives of SynQuest
to leave the services of SynQuest for any reason.
13. Non-competition Agreement.
13.1 Definitions. For the purposes of this Section 13, the
following definitions will apply:
(a) "SynQuest Activities" means all activities of the type
conducted, authorized, offered, or provided by Executive within one (1) year
prior to termination of Executive's employment. For purposes of reference, such
activities at the date of this Agreement include the business of producing,
marketing, promoting and distributing computer software programs that have as
their primary content manufacturing or supply chain management material. The
term "SynQuest Activities" includes (without limitation) the production,
marketing and distribution of computer software programs which compete directly
with any of the computer software programs distributed by SynQuest on the date
of termination of Executive's employment.
(b) "Noncompete Period" or "Nonsolicitation Period" means the
period beginning on the date of this Agreement and ending one (1) year after the
Termination Date.
(c) "Territory" means any country throughout the world where
SynQuest is engaged in SynQuest Activities as of the Termination Date,
including, without limitation, the United States of America, its territories and
possessions.
13.2 Trade Name. Executive agrees that during the Noncompete
Period, Executive must not, directly or by assisting others, own, manage,
operate, join, control or participate in the ownership, management, operation or
control of any business conducted under any corporate or trade name of SynQuest
or name similar thereto without the prior written consent of SynQuest.
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13.3 Noncompetition.
(a) Coverage. The parties acknowledge that Executive will
conduct SynQuest Activities throughout the Territory. Executive acknowledges
that to protect adequately the interests of SynQuest in the business of
SynQuest, it is essential that any noncompete covenant with respect thereto
cover all SynQuest Activities and the entire Territory.
(b) Covenant. Executive hereby agrees that Executive must not,
during the Noncompete Period, in any manner (other than as an Executive of or as
a consultant to SynQuest), directly or by assisting others, conduct SynQuest
Activities in the Territory, without the prior express written consent of the
Board of Directors of SynQuest. It is specifically understood and agreed that
accepting employment with, or acting as a consultant to, any company that
competes directly with SynQuest would constitute a breach of this covenant.
Notwithstanding this Section 13.3(b), Executive will be permitted to (i) acquire
up to five percent (5%) of any competitor of SynQuest whose common stock is
publicly traded on a national securities exchange or in the over-the-counter
market; or (ii) own shares of stock of SynQuest.
13.4 Nonsolicitation. Executive hereby agree that Executive must
not, during the Nonsolicitation Period, in any manner (other than as an
Executive of or a consultant to SynQuest), directly or by assisting others:
(a) solicit or attempt to solicit, any business from any of
SynQuest's customers, including actively sought prospective customers, with whom
Executive had material contact during Executive's employment under for purposes
of providing products or services that are competitive with those provided by
SynQuest; or
(b) solicit or attempt to solicit for employment, on
Executive's behalf or on behalf of any other person, firm or corporation, any
other Executive of SynQuest or its affiliates with whom Executive had material
contact during Executive's employment under this Agreement.
13.5 Severability. If a judicial determination is made that any of
the provisions of this Section 13 constitute an unreasonable or otherwise
unenforceable restriction against Executive, the provisions of this Section 13
may be rendered void only to the extent that such judicial determination finds
such provisions to be unreasonable or otherwise unenforceable. In this regard,
Executive and SynQuest hereby agree that any judicial authority construing this
Agreement may be empowered to sever any portion of the Territory, any prohibited
business activity, or any time period from the coverage of this Section 13, and
to apply the provisions of this Section 13 to the remaining portion of the
Territory, the remaining business activities, and the remaining time period not
so severed by such judicial authority. Moreover, notwithstanding the fact that
any provision of this Section 13 is determined not to be specifically
enforceable, SynQuest will nevertheless be entitled to recover monetary damages
as a result of Executive's breach of such provision. The time period during
which the prohibitions set forth in this Section 13 will apply may be tolled and
suspended for a period equal to the aggregate quantity of time during which
Executive violates such prohibitions in any respect.
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14. Miscellaneous.
14.1 Survival of Terms; Injunction. The covenants in Sections 9
through 13 of this Agreement will survive the execution and delivery of this
Agreement and the termination of Executive's employment, regardless of who
causes the termination and under what circumstances the termination occurred.
The covenants contained in Sections 9 through 13 are reasonably necessary to
protect the legitimate business interests of SynQuest and will not create undue
hardship for Executive in the event of termination of Executive's employment.
Executive acknowledges that damages for the violation of any such covenants will
not give full and sufficient relief to SynQuest. In the event of any violation
of any such covenants, SynQuest will be entitled to injunctive relief against
the continued violation thereof, in addition to any other rights which SynQuest
may have by reason of such violation.
14.2 Related Parties; Non-assignability. This Agreement will be
binding upon and inure to the benefit of and will be enforceable by, Executive
and SynQuest, their respective heirs, executors, administrators, successors and
assigns. In the event of any assignment of this Agreement by SynQuest, by
operation of law or otherwise, SynQuest will remain primarily liable for
SynQuest's obligations under this Agreement. This Agreement is not assignable by
Executive, by operation of law or otherwise.
14.3 Choice of Law. This Agreement will be governed by and enforced
under the laws of Georgia.
14.4 Notices. Every notice or other communication required or
permitted to be given under this Agreement must be in writing and must be
delivered by messenger, transmitted by facsimile, sent by next-day air courier
or mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to Executive at the last address on
SynQuest's records, and if to SynQuest, at SynQuest, Inc., 5555 Triangle
Parkway, Suite 350, Norcross, GA or to such other address as any party may have
furnished to the other in writing in accordance with this Section.
14.5 Modifications; Termination; Waiver. This Agreement may not be
changed, terminated, modified or waived orally. Any change, termination or
modification must be signed by Executive and SynQuest. Any waiver must be signed
by the parties thereto and must be denominated as a waiver. No waiver by either
party of any provision of this Agreement will constitute a waiver of such
provision in any other instance or a waiver of any other provision.
14.6 Severability. The covenants in this Agreement will be
construed as covenants independent of one another and as obligations distinct
from any other contract between Executive and SynQuest. Any claim that Executive
may have against SynQuest will not constitute a defense to enforcement of this
Agreement by SynQuest.
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14.7 Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter contained in
this Agreement and supersedes any and all prior agreements and understandings
with respect to the employment of Executive by SynQuest. To the extent any terms
contained in this Agreement are in conflict with or are inconsistent with the
terms of any other agreement to which Executive or Executive and SynQuest are
parties, the terms of this Agreement will govern.
14.8 Headings. The section headings in this Agreement are for
reference only and do not affect in any way the meaning or interpretation of
this Agreement.
14.9 Construction of Agreement. No provision of this Agreement or
any related document may be construed against or interpreted to the disadvantage
of any party hereto by any court or other government or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
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The parties have caused this Agreement to be duly executed as of
November 1, 1997.
SynQuest:
SYNQUEST, INC.
By: /s/ Joseph Landy
-----------------------------
Name: Joseph Landy
Title: Director
Executive:
/s/ Joseph Trino
--------------------------------
Joseph Trino
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<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of August 15, 1996 (the "Agreement"), between
SynQuest, Inc., a New York corporation (the "Corporation"), and Timothy M.
Harvey (the "Executive") residing at 211 Southern Hill Drive, Duluth, Georgia
30136.
WHEREAS, the parties hereto desire to establish and set forth the terms
of the Executive's employment by the Corporation.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained the parties do hereby agree as follows:
1. Employment. The Corporation hereby employs the Executive and
the Executive hereby accepts employment all upon the terms and conditions set
forth herein. The Executive shall serve as Vice President Field Operations of
the Corporation and shall perform such duties and exercise such supervision and
powers over and with regard to the business of the Corporation customarily
associated with such position, as well as such other services for the
Corporation and its subsidiaries as the Board of Directors of tile Corporation
(the "Board") shall from time to time assign.
2. Term. The initial term of this Agreement shall be
from August 15,. 1996 through August 15, 1999 unless the Executive's employment
is sooner terminated as hereinafter provided in Section 9 hereof. After the
initial term, the term of employment hereunder shall automatically be extended
on the same terms and conditions contained herein for successive one-year
periods, except that if the Executive gives notice in writing to the Board or
the Board gives notice in writing to the Executive not less than 90 days prior
to the date on which such term of employment would otherwise have been renewed
indicating such party's intent to terminate this Agreement at the end of the
period in which such notice is given, then this Agreement shall terminate on the
date such period expires. The initial term of employment and the renewal periods
are each referred to herein as a "Period of Employment".
3. Compensation: Grant of Stock Options.
(a) During the first year of employment, the Corporation shall pay
the Executive a base salary of $120,000 per annum payable in accordance with the
Corporation's payroll practice as from time to time in effect (the "Base
Salary").
(b) Executive shall be paid a draw against bonus of $65,000 paid
by the Corporation in 24 equal installments annually.
(c) Executive shall be paid an annual bonus of $80,000 based on
mutually acceptable objectives.
(d) On the date hereof, the Corporation will grant to the
Executive options (the "Options") to purchase 108,487 shares of common Stock,
par value $.01 per share, of the
<PAGE> 2
Corporation pursuant to a stock option agreement between the Executive and the
Corporation as follows:
(i) The Options shall be granted under the Corporation's
Incentive Stock Option Plan, as amended (the "Option Plan");
(ii) 36,162 Options shall vest on each of the first and second
anniversaries of the date of grant and 36,163 Options shall vest on the third
anniversary of the date of grant;
(iii) Each of the Options shall have a exercise Price; and
(iv) The issuance of the Options shall be conditioned upon the
Option Plan being amended by the Corporation's shareholders to increase the
number of shares available for issuance under the Option Plan to cover the
Options.
(e) The company hereby grants to the executive the option to
purchase 125,000 shares of common stock at $1.80 per share. This option expires
90 days following the execution of this agreement.
4. Reimbursement of Business Expenses. The Corporation shall
reimburse the Executive for all reasonable business expenses incurred by the
Executive in the performance of his duties hereunder, provided that the
Executive presents vouchers therefor or other evidence thereof to the
Corporation in accordance with the Corporation's general reimbursement policy as
in effect from time to time for executives of the Corporation.
5. Additional Benefits and Perquisites. The Executive shall have
those additional benefits and perquisites from time to time hereafter authorized
for the Executive in accordance with the Corporation's policies in effect from
time to time.
6. Participation in Group Plans: Life Insurance. The
Executive shall be eligible to participate in the Corporation's existing benefit
plans and any other employee compensation, welfare, insurance and other benefit
plans that may from time to time be provided by the Corporation to key executive
personnel.
7. Vacation. The Executive shall be entitled to paid vacation in
accordance with the Corporation's policies in effect from time to time.
8. Termination of Employment.
(a) Death. The Executive's employment hereunder shall terminate
upon his death.
(b) Disability. If the Board determines in good faith, based on
medical evidence considered by it to be reliable and after giving the Executive
an opportunity to present evidence on his own behalf, that as a result of a
medically determinable physical or mental impairment the Executive has become
substantially unable to perform his duties hereunder at the principal executive
offices of the Corporation for any period of six consecutive months, or nine
months in any 12-month period, then the Executive shall be deemed to be disabled
for the purposes of this Agreement and the Board may give the Executive a Notice
of Termination (as hereinafter
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defined) and terminate the Executive's employment hereunder. The Executive's
compensation, title and status shall continue during any such period of
disability until the Date of Termination (as hereinafter defined). All
determinations by the Board pursuant to this Section 9 9b) shall be final and
binding upon the Executive.
(c) Termination for Cause. The Board may terminate the Executive's
employment hereunder for Cause. For the purpose of this Agreement, the Board
shall have "Cause" to terminate the Executive's employment hereunder upon: (i)
tile determination by the Board that Executive has ceased to perform his duties
hereunder (other than as a result of his incapacity due to physical or mental
illness or injury), which failure amounts to an intentional and extended neglect
of his duties hereunder; (ii) conviction of the Executive for a felony or any
crime involving theft, fraud or moral turpitude; (iii) commission by the
Executive of any act involving dishonesty or fraud against the Corporation or
its subsidiaries, or which adversely affects the .Corporation or its
subsidiaries; (iv) failure by the Executive to comply with a reasonable, written
order of the Board; (v) a misrepresentation made willfully, recklessly or in bad
faith by the Executive to the stockholders of the Corporation or the Board which
causes injury to the Corporation or its subsidiaries or the stockholders or the
Corporation; or (vi) a material breach by the Executive of his obligations under
Sections 11 or 12 hereof. The Executive's employment shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
the Executive a Notice of termination specifying the particulars thereof in
reasonable detail.
(d) Termination Without Cause.
(i) The Board may terminate the Executive's employment without
Cause at any time by delivering to the Executive a Notice of Termination.
(ii) The Executive shall be permitted to terminate his
employment, as hereinafter provided, and such employment shall be considered to
have been constructively terminated without Cause if there occurs a material
change in the position held by the Executive, or in the duties of the Executive,
without the Executive's consent such that the position held by the Executive or
the duties of the Executive shall not be comparable to the position and duties
of the Executive prior to such change.
(e) Voluntary Termination. The Executive may effect a Voluntary
Termination (as hereinafter defined) of his employment hereunder at any time by
delivering to the Board a Notice of Termination at least 60 days (or such
shorter period of time as the Board shall specify in its sole discretion after
receiving such Notice of Termination) before the effective date of such
termination. For the purposes of this Agreement, "Voluntary Termination" means
the termination by the Executive of his employment with Corporation for any
reason other than death or disability or as permitted by Section 9(d) hereof;
provided, however, that if at the time of such Voluntary Termination the
Executive could be terminated by the Board for Cause, the Executive shall be
deemed to have been terminated for Cause.
(f) Notice of Termination. Any termination by the Board pursuant
to Sections 9(b), (c) or (d) hereof shall be communicated by Notice of
Termination to the Executive. Any termination by the Executive pursuant to
sections 9((1) or (e) hereof shall be communicated by Notice of Termination to
the Board. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice that shall indicate the specific termination provision in this
Agreement relied upon and, if delivered pursuant to Sections 9(b), (c) or (d)
hereof, shall set forth the basis for
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termination of the Executive's employment under the provisions
indicated and, if delivered by the Board pursuant to Sections 9(c ) or (d)
hereof or by the Executive pursuant to Section 9(e) hereof, shall specify the
effective date of termination.
(g) Date of Termination. "Date of Termination" shall mean:
(i) If the Executive's employment is terminated by reason of
death pursuant to Section 9(a) hereof, the date of death;
(ii) If the Executive's employment is terminated for
disability pursuant to Section 9(b) hereof, 30 days after Notice of Termination
is given;
(iii) If the Executive's employment is terminated by the Board
pursuant to Sections 9(c ) or (d) hereof, the date specified in the Notice of
Termination;
(iv) If the Executive's employment is terminated by the
Executive pursuant to Section 9(d) hereof, the date of the Notice of Termination
is given; and
(v) If the Executive effects a Voluntary Termination pursuant
to Section 9(e) hereof, 60 days after Notice of Termination is given (or such
shorter period of time as the Board shall specify in its discretion after
receiving such Notice of Termination).
(h) Employment Rights. Nothing in this Agreement shall confer on
the Executive any right to continue in the employ of the Corporation or its
subsidiaries, or to interfere in any way with the right of the Board to
terminate the Executive's employment at any time.
(i) Survival of Terms. The rights and obligations of the
Corporation and the Executive pursuant to Sections 11, 12 and 13 of this
Agreement shall survive the expiration or earlier termination of this Agreement.
9. Compensation upon Termination or During Disability.
(a) No Further Obligation. Upon any termination of employment, the
Corporation and its subsidiaries shall have no further obligation to the
Executive except to pay the Executive (or his estate in the case of death) the
compensation and other benefits provided in this Section 10.
(b) Death. If the Executive's employment shall be terminated by
reason of his death, the Corporation shall pay to his estate his Base Salary and
any other amounts due to the Executive from the Corporation (whether pursuant to
benefit plans or otherwise) through the Date of Termination.
(c) Disability. During any period that the Executive fails to
perform his duties hereunder as a result of disability referred to in Section
9(b) hereof, the Executive shall continue to receive payment of his Base Salary
earned and any other amounts due to the Executive from the Corporation (whether
pursuant to benefit plans or otherwise) through the Date of Termination. After
payment of amounts set forth in this Section 10(c), the Executive's
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compensation shall be in accordance with such long-term disability plans, if
any, of the Corporation as may then be in effect with respect to the Executive.
(d) Cause: Voluntary Termination. If the Executive's employment is
terminated for Cause or if the Executive effects a Voluntary termination of his
employment, he shall receive payment of his Base Salary earned and any other
amounts due to him from the Corporation (whether pursuant to benefit plans or
otherwise) through the Date of Termination.
(e) Termination Without Cause. If the Executive's employment is
terminated without Cause pursuant to Section 9(d) hereof, then if the Executive
is not then in violation of the provisions of the Section 11 or 12 hereof, (I)
within 15 days after the Date of Termination, the Corporation shall pay the
Executive his Base Salary earned and any other amounts due to him from the
Corporation (whether pursuant to benefit plans or otherwise) through the Date of
Termination; and (ii) the Corporation shall pay to the Executive $120,000 in
accordance with the Corporation's payroll practice as then in effect over the
applicable period of time specified below and shall permit the Executive to
participate in the Corporation's group benefit plans on the same basis that the
Executive participated before termination, in each case until the earlier off
(A) the first anniversary of the Date of Termination, or (B) the date the
Executive accepts other employment, including, without limitation, employment as
a full time consultant in any enterprise. Notwithstanding the foregoing, if the
Executive accepts other employment prior to the first anniversary of the Date of
Termination and the total annual compensation for the Executive under such new
position is less than $120,000 the Corporation shall only pay the Executive, for
the period from the date the Executive accepts such other employment until the
first anniversary of the Date of Termination, the difference between the annual
compensation payable from such other employment and $120,000 prorated over such
remaining period.
10. Confidential Information: Inventions.
(a) Confidential Information. The Executive recognizes and
acknowledges that the Confidential Information (as hereinafter defined) are
valuable, special and unique assets of the Corporation's business, access to and
'knowledge of which are essential to the performance of the Executive's duties
hereunder. The Executive shall not, while employed by the Corporation or at any
time thereafter, for any reason or purpose whatsoever, disclose to any Person
(as hereinafter defined) any Confidential Information (except as such disclosure
may be required in the course of the performance of his duties hereunder during
the term of his employment and except as such disclosure may be required by law
after reasonable notice to the Corporation), and shall not use for his own
purposes or for the benefit of any other Person (except the Corporation and its
subsidiaries) any Confidential Information under any circumstances. Ail records,
files, memoranda, reports, business plans, customer lists and other property
relating to the Business of the Corporation (as hereinafter defined) which he
will use, prepare or come into contact with, will be and remain the sole
property of the Corporation, as applicable, will be returned by him to the
Corporation upon the termination of his employment and will not be copied or
used by him (except to the extent required in the course of his employment by
the Corporation).
(b) Inventions. The Executive shall disclose promptly and make
available to the Corporation all information, details and data pertaining to all
Inventions (as hereinafter defined) conceived, made or acquired by him, jointly
or severally, during tile term of his employment. All
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inventions which he may conceive, make or acquire during the term of his
employment shall remain the exclusive property of the Corporation, and the
Executive hereby sells, transfers and assigns to the Corporation, or to any
Person designated by the Corporation, the entire right, title and interest of
the Executive in and to all such Inventions. The Executive shall execute and
deliver to the Corporation such documents, formal transfers and assignments as
may be necessary or required to transfer such Inventions to the Corporation or
any Person designated by the Corporation, and to permit the Corporation or any
Person designated by the Corporation to file and prosecute patent applications,
and, as to copyrightable material, to obtain copyright thereof, including
patent, trademark and copyright applications and assignments, and shall deliver
to the Corporation any and all codes, documentation, facts, sketches, drawings,
models, figures and other information with respect to such Inventions. Any
Invention disclosed by the Executive within one year following termination of
his employment shall be deemed to fall within the provisions of this Section 11
(b) unless proved to have been first conceived and made following such
termination.
(c) Definitions. As used herein, the following terms shall have
the meanings set forth below:
(i) "Business of the Corporation" means the business of
developing, manufacturing, execution and scheduling software for large
discrete-part manufacturers and all other products, services, and business
activities attendant thereto or in which the Corporation or its subsidiaries
engages, or which are under consideration or in development, at any time during
the term of the Executive's employment.
(ii) "Confidential Information" means any and all trade
secrets, know-how and proprietary or confidential business data of the
Corporation and its subsidiaries, including, without limitation, customer lists,
customer activity, business plans or projections and other information of the
Corporation and its subsidiaries not generally known in the industry in which
the Corporation and its subsidiaries are engaged.
(iii) "Inventions" means any and all discoveries, concepts,
software codes, ideas, designs, applications, processes, disclosures,
(pound)ormulae, know-how, methods, inventions and/or improvements whether
patented or unpatented, or patentable or unpatentable, and copyrighted or
copyrightable material which relate to, or have application with respect to, the
products, processes or services, sold, leased, used or under consideration or
development by the Corporation or its subsidiaries, or which otherwise arise
from the efforts of the Executive during the course of his employment hereunder.
11. Interference with Relationships with Employees, Suppliers and
Customers: Non-Competition.
(a) Non-Interference. During the term of his employment by the
Corporation and for the greater of the remaining portion of the applicable
Period of Employment or two years following the termination of such employment,
the Executive shall not, for himself or on behalf of any other Person, directly
or indirectly, entice or in any other manner persuade or induce, or attempt to
persuade or induce, any employee, customer, principal, supplier of, lessor,
lessee, partner or other person with any material business relationship with
the Corporation or its
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subsidiaries to discontinue and/or reduce such relationship, and shall not
interfere with, disrupt or attempt to disrupt any such relationship.
(b) Non-Competition. During the term of his employment with the
Corporation and for the greater of the remaining portion of the applicable
Period of Employment or two years following the termination of such employment,
the Executive shall not, directly or indirectly, engage, and shall not be
interested as a partner, trustee, director, officer, employee, shareholder,
option holder, consultant or other direct or indirect participant or beneficiary
in any Person that is a direct competitor of the Corporation or a customer of
the Corporation. Not withstanding the foregoing, the ownership for investment
purposes as a passive investor of common stock constituting not more than 2% of
the outstanding common stock of a Person which is traded on the New York Stock
Exchange or the American Stock Exchange or which is authorized to be quoted on
the Nasdaq National Market, even though that Person is a competitor of the
Corporation, shall not be prohibited by this Section 12.
(c) Specific Performance. It is the desire and intent of the
parties that the provisions of this Section 12 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
portion of this Section 12 shall be adjudicated to be invalid or unenforceable,
this Section 12 shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of this Section 12 in the particular jurisdiction in
which such adjudication is made.
12. Miscellaneous.
(a) The covenants contained in Sections 11 and 12 hereof are
reasonably necessary to protect the legitimate business interests of the
Corporation and will not create undue hardship for the Executive in the event of
termination of employment. The Executive acknowledges that damages for the
violation of any such covenants will not give full and sufficient relief to the
Corporation. In the event of any violation of any such covenants, the
Corporation shall be entitled to injunctive relief against the continued
violation thereof, in addition to any other rights which the Corporation may
have by reason of such violation.
(b) This Agreement shall be binding upon and inure to the benefit
of, and shall be enforceable by, the Executive and the Corporation, their
respective heirs, executors, administrators, successors and assigns. In the
event of any assignment of this Agreement by the Corporation, by operation of
law or otherwise, the Corporation, as applicable, shall remain primarily liable
for its obligations hereunder. This Agreement shall not be assignable by the
Executive.
(c) This Agreement shall for all purposes be construed as an
Agreement made within and to be wholly performed within the State of New York,
it being the intention of the parties that the substantive law of that state
control the construction and enforcement hereof.
(d) Every notice or other communication required or permitted to
be given hereunder shall be in writing and shall be delivered by messenger,
transmitted by facsimile, sent by next-
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day air courier or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
(i) If to the Executive:
Timothy M. Harvey
211 Southern Hills Drive
Duluth, GA 30136
(ii) If to the Corporation:
SynQuest, Inc.
5555 Triangle Parkway, Suite 350
Norcross, GA 30092
Attention: Board of Directors
Facsimile: (770) 447-4995
or to such other address as any party may have furnished to the other in writing
in accordance herewith. All such notices and communications shall be deemed to
have been duly given: when delivered by hand, if personally delivered; when
receipt is acknowledged if by facsimile; one business day after being sent by
next-day air courier; and two business days after being deposited in the mail,
postage prepaid, if mailed, except that notices of change of address shall be
effective only upon receipt.
(e) This Agreement may not be changed, terminated, modified or
waived orally. Any change or termination must be signed by the Executive and the
Corporation. Any waiver must be signed by the parties thereto and must be
denominated as a waiver. No waiver of any provision in one instance shall be a
waiver of such provision in any other instance or be a waiver of any other
provision.
(f) This Agreement shall be construed and interpreted so as to be
enforceable to the fullest extent permitted by law and to the extent it shall be
deemed unenforceable or invalid in any jurisdiction, such invalidity and
unenforceability shall not affect its validity or enforceability or validity of
any other jurisdiction, nor shall it affect the enforceability or validity of
any provision hereof.
(g) Words of the masculine gender used herein shall include import
words of the feminine or neuter gender where appropriate.
(h) The term "Person" as used herein shall mean a natural person,
or any partnership, proprietorship, association, corporation or other entity.
(i) The term "affiliate" as used herein shall mean with respect to
any Person, any other Person that directly or indirectly, by itself or through
one or more intermediaries, controls, or is controlled by, or is under direct or
indirect common control with, such person.
(j) This Agreement sets forth the entire agreement among the
parties hereto in respect of the subject matter hereof and supersedes any and
all prior agreements and understandings with respect tot he employment of the
Executive by the Corporation. To the extent any terms contained herein are in
conflict with or are inconsistent with the terms of any
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other agreement to which the Executive or the Executive and the Corporation are
parties, the terms of this Agreement shall govern.
(k) The Corporation shall deduct from all amounts payable under
this Agreement all Federal, state, local and other taxes required by law to be
withheld with respect to such payments.
(l) The section headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect any provision hereof.
Accepted and Approved:
/s/ Timothy M. Harvey /s/ Joseph T. Trino
- ---------------------------------- ----------------------------------
By: Timothy M. Harvey By: Joseph T. Trino
Title: President
Date: Date:
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated November 1, 1997, is
between SynQuest, Inc. ("SynQuest") and John Bartels ("Executive").
The parties agree as follows:
1. Employment. SynQuest hereby employs Executive and Executive
hereby accepts employment, subject to the terms and conditions of this
Agreement. Executive will serve as Executive Vice-President - Finance and
Administration of SynQuest and will have the duties, rights and responsibilities
customarily associated with that position, as well as any other reasonable
duties relating to the operation of the business of SynQuest and SynQuest's
subsidiaries that the Board of Directors of SynQuest (the "Board") may from time
to time assign to Executive. Executive will devote his full business time,
skills and best efforts to rendering services on behalf of SynQuest and will
exercise such care as is customarily required by employees undertaking similar
duties for companies similar to SynQuest.
Executive's employment under this Agreement will commence on November
1, 1997, and may be terminated at any time by either party, at will, subject to
the obligations of the Company under Section 6.6.
2. Compensation; Expenses; Additional Employment Benefits
2.1 Salary. During the term of Executive's employment under this
Agreement, SynQuest will pay Executive an annual base salary equal to $200,000
(the "Base Salary"), which will be payable to Executive in accordance with
SynQuest's payroll procedures in effect with respect to other officers of
SynQuest, less all applicable withholding taxes. The Base Salary will be
reviewed annually by the Board and, based on the Board's review, the Base Salary
may be increased (at the sole discretion of the Board).
2.2 Bonus. During the term of Executive's employment under this
Agreement, Executive will be entitled to receive (if earned) an annual bonus
("Bonus"). The terms and conditions under which the Bonus will be earned
(including corporate and individual goals and objectives upon which payment of
the Bonus may be based) will be established annually in accordance with
SynQuest's bonus plan for key executive personnel.
2.3 Signing Bonus. The Company will pay to Executive a "Signing
Bonus" of Twenty Thousand Dollars ($20,000), less all applicable withholdings,
which will be paid monthly for 12 months. The Signing Bonus will be in addition
to any Bonus earned as contemplated under Section 2.2 above.
2.4 Executive Stock Option Plan. Executive will be eligible for
consideration for grants of stock options in accordance with the terms and
conditions of SynQuest's Stock Option Plan (or successor stock option plan
adopted by SynQuest during the term of this
<PAGE> 2
Agreement). The decision as to whether to grant options under the plan to
Executive (and, if so, how many) will be solely within the discretion of the
Board, and such grants, if any, will be subject to any terms and conditions
imposed thereon by the Board. An initial grant of options will be made effective
as November 1, 1997.
2.5 Reimbursement of Business Expenses. SynQuest will reimburse
Executive for all reasonable business-related expenses incurred by Executive in
the performance of his duties under this Agreement, provided that Executive
presents vouchers for such expenses or other evidence thereof to SynQuest in
accordance with SynQuest's general reimbursement policy in effect for SynQuest's
executives.
2.6 Participation in Benefit Plans. Executive will be eligible to
participate in SynQuest's existing benefit plans and any other compensation,
welfare, insurance and other benefit plans as SynQuest may maintain from time to
time for the benefit of SynQuest's key executive personnel, on the terms and
subject to the conditions set forth in those plans.
2.7 Vacation. Executive will receive four weeks paid vacation each
year during the term of Executive's employment.
2.8 Additional Benefits and Prerequisites. Executive will have
additional benefits and prerequisites authorized from time to time for Executive
in accordance with SynQuest's policies then in effect with respect to other
SynQuest executives.
3. Termination of Employment. Executive's employment under this
Agreement may be terminated upon the occurrence of any of the following events:
3.1 Death. Executive's death (a "Death Termination Event").
3.2 Disability. If the Board determines in good faith, based on
medical evidence considered by the Board to be reliable and after giving
Executive an opportunity to present evidence on his own behalf, that as a result
of a medically determinable physical or mental impairment Executive has become
substantially unable to perform his duties under this Agreement at the principal
executive offices of SynQuest for any period of six (6) consecutive months, or
nine (9) months in any twelve (12) month period, then Executive will be deemed
to be disabled for the purposes of this Agreement and the Board may terminate
Executive's employment under this Agreement (a "Disability Termination Event").
All determinations by the Board pursuant to this Section 3.2 will be final and
binding upon Executive.
3.3 Termination for Cause. The Board may terminate Executive's
employment under this Agreement for cause upon: (i) the determination by the
Board that Executive has failed to perform his duties under this Agreement
(other than as a result of Executive's incapacity due to physical or mental
illness or injury), and such failure is a result of an intentional and/or
extended neglect of Executive's duties under this Agreement; (ii) conviction of
Executive for a felony or any crime involving theft, fraud or moral turpitude;
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(iii) commission by Executive of any act involving dishonesty or fraud against
SynQuest or SynQuest's subsidiaries; (iv) failure by Executive to comply with a
reasonable written order of the Board; (v) a misrepresentation made willfully,
recklessly or in bad faith by Executive to SynQuest's stockholders or the Board,
which causes injury to SynQuest or SynQuest's subsidiaries or SynQuest's
stockholders; or (vi) a material breach by Executive of his obligations under
Sections 9 through 13 (a "Good Cause Termination Event").
3.4 Termination Without Cause.
(a) The Board may terminate Executive's employment under this
Agreement without cause at any time by delivering to Executive a Notice of
Termination (as defined in Section 4 below).
(b) Executive may terminate his employment by delivering to
the Board a Notice of Termination, and such termination will be considered to be
without cause if (1) there occurs a material change in the position held by
Executive or in the duties of Executive, without Executive's consent, such that
Executive's position or duties are not comparable to Executive's position and
duties prior to such material change, or (2) Executive's principal place of
employment (or that of the key members of the staff reporting to the Chief
Financial Officer of SynQuest ) is relocated to a location other than the
metropolitan Atlanta, Georgia area (Both termination events described in
Subsections (a) and (b) are referred to individually in this Agreement as a "No
Cause Termination Event").
3.5 Voluntary Termination. Executive may voluntarily terminate his
employment under this Agreement at any time by delivering to the Board a Notice
of Termination as specified in Section 5(e) below (a "Voluntary Termination
Event"); provided, however, that (1) if at the time of such voluntary
termination by Executive, Executive could be terminated as a result of a Good
Cause Termination Event, Executive will be deemed to have been terminated as a
result of a Good Cause Termination Event instead of a Voluntary Termination
Event, (2) if Executive resigns under the circumstances described under Section
3.4, the termination will be deemed to have been resulted from a No Cause
Termination Event.
4. Notice of Termination. Any termination by the Board pursuant
to Sections 3.2, 3.3 or 3.4(a) of this Agreement will be communicated to
Executive by a Notice of Termination. Any termination by Executive pursuant to
Sections 3.4(b) or 3.5 of this Agreement will be communicated by Notice of
Termination to the Board. For purposes of this Agreement, a "Notice of
Termination" means a notice that indicates the specific termination provision in
this Agreement relied upon for such termination, and if delivered pursuant to
Sections 3.2, 3.3 or 3.4(a) of this Agreement, sets forth the basis for
termination of Executive's employment under the provisions indicated.
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5. Date of Termination. "Date of Termination" means:
(a) If Executive's employment is terminated as a result of a
Death Termination Event, the date of Executive's death;
(b) If Executive's employment is terminated as a result of a
Disability Termination Event, thirty (30) days after Notice of Termination is
given;
(c) If Executive's employment is terminated by the Board as a
result of a Good Cause Termination Event or a No Cause Termination Event, the
date the Notice of Termination is given (or such later date as may be specified
by the Board in the Notice of Termination);
(d) If Executive's employment is terminated by Executive as a
result of a No Cause Termination Event, the date the Notice of Termination is
given; and
(e) If Executive's employment is terminated as a result of a
Voluntary Termination Event, sixty (60) days after Notice of Termination is
given (or such shorter period of time as the Board may specify in the Board's
sole discretion after receiving Executive's Notice of Termination).
6. Compensation upon Termination or During Disability.
6.1 No Further Obligation. Upon any termination of employment,
SynQuest and SynQuest's subsidiaries will have no further obligation to
Executive except to pay Executive (or Executive's estate in the case of
Executive's death) the compensation and other benefits provided in this Section
6. Amounts payable pursuant to this Section 6 are in lieu of any severance pay
that would otherwise be payable to Executive upon termination of Executive's
employment with SynQuest under SynQuest's severance pay policies.
6.2 Death. If Executive's employment is terminated as a result of
a Death Termination Event, SynQuest will pay to Executive's estate any Base
Salary and Bonus earned but unpaid and any other amounts due to Executive from
SynQuest (whether pursuant to benefit plans or otherwise) through the date of
Executive's death.
6.3 Disability. If Executive's employment is terminated as a
result of a Disability Termination Event, Executive will continue to receive
payment of any Base Salary and Bonus earned but unpaid and any other amounts due
to Executive from SynQuest (whether pursuant to benefit plans or otherwise)
through the Date of Termination. After payment of amounts set forth in this
Section 6.3, Executive's compensation will be paid in accordance with SynQuest's
long-term disability plans, if any, that may then be in effect with respect to
Executive.
6.4 Good Cause. If Executive's employment is terminated as a
result of a Good Cause Termination Event, Executive will receive payment of any
Base Salary earned but unpaid and any other amounts due to Executive from
SynQuest (whether pursuant to
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benefit plans or otherwise) through the Date of Termination.
6.5 Voluntary Termination. If Executive's employment is terminated
as a result of a Voluntary Termination Event, Executive will receive payment of
any Base Salary and Bonus earned but unpaid and any other amounts due to
Executive from SynQuest (whether pursuant to benefit plans or otherwise) through
the Date of Termination.
6.6 No Cause Termination. If Executive's employment is terminated
as a result of a No Cause Termination Event, then SynQuest will pay Executive
(i) within fifteen (15) days after the Date of Termination, any Base Salary and
Bonus earned but unpaid and any other amounts due to Executive from SynQuest
(whether pursuant to benefit plans or otherwise) through the Date of
Termination, and (ii) one hundred percent (100%) of Executive's then-current
Base Salary, but in no event less than $220,000.00.
7. Employment Rights. Nothing in this Agreement confers on
Executive any right to continue in the employ of SynQuest or SynQuest's
subsidiaries, or to interfere in any way with the right of the Board to
terminate Executive's employment at any time.
8. Scope of Duties.
8.1 Employment by SynQuest as Sole Occupation. Executive agrees to
devote Executive's full business time, attention, skill, and effort exclusively
to the performance of the duties that SynQuest may assign Executive from time to
time. Executive may not engage in any business activities or render any services
of a business, commercial, or professional nature for compensation for the
benefit of anyone other than SynQuest, unless SynQuest consents in writing, it
being agreed that SynQuest will not withhold its consent to any activity which
is not competitive with SynQuest's business and does not interfere with the
performance by Executive of Executive's duties and obligations to SynQuest under
this Agreement. It is the policy of SynQuest never to allow its personnel to
work for any competitive enterprise during their employment, including after
hours, on weekends, or during vacation time, even if only organizational
assistance or limited consultation is involved. This Agreement does not prohibit
the investment of a reasonable part of Executive's assets in the stock of a
company whose stock is traded on a national stock exchange.
8.2 Noninterference With Third-Party Rights. SynQuest is employing
Executive with the understanding that (i) Executive is free to enter into
employment with SynQuest and (ii) only SynQuest is entitled to the benefit of
Executive's work. SynQuest has no interest in using any other person's patents,
copyrights, trade secrets, or trademarks in an unlawful manner. Executive should
be careful not to misapply proprietary rights that SynQuest has no right to use.
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9. Ownership of Executive Developments.
9.1 Ownership of Work Product.
(a) SynQuest will own all Work Product (as defined below in
Section 9.1(e)). All Work Product will be considered work made for hire by
Executive and owned by SynQuest.
(b) If any of the Work Product may not, by operation of law,
be considered work made for hire by Executive for SynQuest, or if ownership of
all right, title, and interest of the intellectual property rights therein may
not otherwise vest exclusively in SynQuest, Executive agrees to assign, and upon
creation thereof automatically assigns, without further consideration, the
ownership of all Trade Secrets (as defined below in Section 10.2), U.S. and
international copyrights, patentable inventions, and other intellectual property
rights therein to SynQuest, its successors and assigns.
(c) SynQuest, its successors and assigns, will have the right
to obtain and hold in its or their own name copyright registrations, trademark
registrations, patents and any other protection available in the foregoing.
(d) Executive agrees to perform, upon the reasonable request
of SynQuest, during or after Executive's employment, such further acts as may be
necessary or desirable to transfer, perfect, and defend SynQuest's ownership of
the Work Product. When requested, Executive will:
(1) Execute, acknowledge, and deliver any
requested affidavits and documents of
assignment and conveyance with respect to
any Work Product;
(2) Assist in the preparation, prosecution,
procurement, maintenance and enforcement of
copyrights and, if applicable, patents with
respect to the Work Product in any
countries;
(3) Provide testimony in connection with any
proceeding affecting the right, title, or
interest of SynQuest in any Work Product;
and
(4) Perform any other acts deemed necessary or
desirable to carry out the purposes of this
Agreement.
SynQuest will reimburse all reasonable out-of-pocket expenses
incurred by Executive at SynQuest's request in connection with the foregoing,
including (unless Executive is otherwise being compensated at the time) a
reasonable per diem or hourly fee for services rendered following termination of
Executive's employment.
(e) For purposes hereof, "Work Product" means all intellectual
property
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rights, including all Trade Secrets, U.S. and international copyrights,
patentable inventions, discoveries and improvements, and other intellectual
property rights, in any programming, documentation, technology, or other Work
Product that relates to the business and interests of SynQuest and that
Executive conceives, develops, or delivers to SynQuest at any time during the
term of Executive's employment. "Work Product" does not include Executive's
"Residual Knowledge." "Residual Knowledge" means prior or existing knowledge or
skills obtained by Employee during the course of his employment, to the extent
retained in Employee's human memory (and not in any other form, such as written
form or electronic form, such as magnetic storage media). Residual Knowledge
will not include any Trade Secrets or other proprietary information of SynQuest
(or its subsidiaries or affiliates). Executive hereby irrevocably relinquishes
for the benefit of SynQuest and its assigns, and hereby agrees to waive and
never to assert, any moral rights in the Work Product recognized by applicable
law.
9.2 Clearance Procedure for Proprietary Rights Not Claimed by
SynQuest. If Executive ever wishes to create or develop, on Executive's own time
and with Executive's own resources, anything that may be considered Work Product
but as to which Executive believes Executive should be entitled to the personal
benefit, Executive is required to follow the clearance procedure set forth in
this Section 9.2 in order to ensure that SynQuest has no claim to the
proprietary rights that may arise.
Before Executive begins any development work on Executive's own time,
Executive must give SynQuest advance written notice of Executive's plans and
supply a description of the development under consideration. SynQuest will hold
in confidence and not disclose any proprietary and confidential information
contained in the description submitted by Executive. SynQuest will determine, in
good faith, within thirty (30) days after Executive has fully disclosed
Executive's plans to SynQuest, whether the development is claimed by SynQuest as
Work Product. If SynQuest determines that it does not claim such development,
Executive will be notified in writing and may retain ownership of the
development to the extent of what has been disclosed to SynQuest. Executive
should submit for further clearance any significant improvement, modification,
or adaptation so that it can be determined whether the improvement,
modification, or adaptation relates to the business or interests of SynQuest.
Clearance under this procedure does not relieve Executive of the need
to obtain the written consent of SynQuest pursuant to Section 8.1 before
engaging in business activities or rendering business, commercial, or
professional services for the benefit of anyone other than SynQuest (subject to
the provisions of Section 8.1). SynQuest thus reserves the right to exercise
greater control over development work that Executive might consider doing for
profit after hours, as opposed to mere hobby work pursued in Executive's spare
time.
10. Confidentiality.
10.1 Consequences of Entrustment With Sensitive Information.
Executive's position with SynQuest requires considerable responsibility and
trust. Relying on
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Executive's ethical responsibility and undivided loyalty, SynQuest expects to
entrust Executive with highly sensitive confidential, restricted, and
proprietary information involving Trade Secrets (as defined in Section 10.2) and
Confidential Information (as defined in Section 10.4). Executive is legally and
ethically responsible for protecting and preserving SynQuest's proprietary
rights for use only for SynQuest's benefit, and these responsibilities may
impose unavoidable limitations on Executive's ability to pursue some kinds of
business opportunities that might interest Executive during or after Executive's
employment.
10.2 Trade Secrets Defined. For purposes of this Agreement, "Trade
Secrets" means information, without regard to form, including, but not limited
to, (i) technical or nontechnical data, formulas, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans relating to or reflected in SynQuest's computer
software products, or (ii) a list of actual or potential customers or suppliers
of SynQuest that: (A) derive economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from their disclosure or use; and
(B) are the subject of efforts that are reasonable under the circumstances to
maintain their secrecy. The term "Trade Secret" will not include any information
which constitutes Confidential Information (as defined below in Section 10.4).
Trade Secrets do not include information that Executive can show by
competent proof (i) was known to Executive prior to disclosure by SynQuest; (ii)
was generally known to the public at the time SynQuest disclosed the information
to Executive; (iii) became generally known to the public after disclosure to
Executive by the SynQuest through no act or omission of Executive; or (iv) was
disclosed to Executive by a third party having a bona fide right both to possess
the information and to disclose the information to Executive.
10.3 Restrictions on Use and Disclosure of Trade Secrets. Executive
must hold in confidence at all times after the date of this Agreement all Trade
Secrets of SynQuest and must not disclose, publish or make use at any time after
the date of this Agreement of Trade Secrets without the prior consent of
SynQuest.
10.4 Confidential Information Defined. For purposes of this
Agreement, "Confidential Information" means any data or information, other than
Trade Secrets, which (i) is valuable to SynQuest, (ii) is not generally known or
available to competitors of SynQuest, and (iii) is treated as confidential by
SynQuest.
10.5 Use or Disclosure of Confidential Information. Executive
agrees that during the term of Executive's employment by SynQuest, and for a
period of two (2) years following termination of Executive's employment,
Executive will hold in confidence all Confidential Information and will not
disclose, publish or make use of Confidential Information without the prior
written consent of SynQuest.
10.6 Screening of Public Releases of Information. In addition, and
without any
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intention of limiting Executive's other obligations under this Agreement in any
way, Executive should not, during Executive's employment, reveal any non-public
information concerning the technology pertaining to the proprietary products and
manufacturing processes of SynQuest (particularly technology under current
development or improvement), unless Executive has obtained approval from
SynQuest in advance. In that connection, Executive should submit to SynQuest for
review any proposed scientific and technical articles and the text of any public
speeches relating to work done for SynQuest before they are released or
delivered. SynQuest has the right to disapprove and prohibit, or delete any
parts of, such articles or speeches that might disclose SynQuest's Trade Secrets
or other Confidential Information or otherwise be contrary to SynQuest's
business interests.
10.7 SynQuest's Rights Under Applicable Trade Secret Law. Nothing
in this Agreement is intended to, nor will it, diminish the SynQuest's rights
regarding the protection of SynQuest's trade secrets pursuant to applicable
Georgia law.
11. Return of Materials. Upon the request of SynQuest and, in any
event, upon the termination of Executive's employment, Executive must return to
SynQuest and leave at SynQuest's disposal all memoranda, notes, records,
drawings, manuals, computer programs, documentation, diskettes, computer tapes,
and other documents or media pertaining to the business of SynQuest or
Executive's specific duties for SynQuest, including all copies of such
materials. Executive must also return to SynQuest and leave at SynQuest's
disposal all materials involving any Trade Secrets of SynQuest. This Section 11
is intended to apply to all materials made or compiled by Executive, as well as
to all materials furnished to Executive by anyone else in connection with
Executive's employment.
12. Non-interference with Personnel Relations. During Executive's
employment with SynQuest and for a period of one (1) year afterwards, Executive
will not knowingly solicit, entice or persuade any other Executives of SynQuest
to leave the services of SynQuest for any reason.
13. Non-competition Agreement.
13.1 Definitions. For the purposes of this Section 13, the
following definitions will apply:
(a) "SynQuest Activities" means all activities of the type
conducted, authorized, offered, or provided by Executive within one (1) year
prior to termination of Executive's employment. For purposes of reference, such
activities at the date of this Agreement include the business of producing,
marketing, promoting and distributing computer software programs that have as
their primary content manufacturing or supply chain management material. The
term "SynQuest Activities" includes (without limitation) the production,
marketing and distribution of computer software programs which compete directly
with any of the computer software programs distributed by SynQuest on the date
of termination of Executive's employment.
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(b) "Noncompete Period" or "Nonsolicitation Period" means the
period beginning on the date of this Agreement and ending one (1) year after the
Termination Date.
(c) "Territory" means any country throughout the world where
SynQuest is engaged in SynQuest Activities as of the Termination Date,
including, without limitation, the United States of America, its territories and
possessions.
13.2 Trade Name. Executive agrees that during the Noncompete
Period, Executive must not, directly or by assisting others, own, manage,
operate, join, control or participate in the ownership, management, operation or
control of any business conducted under any corporate or trade name of SynQuest
or name similar thereto without the prior written consent of SynQuest.
13.3 Noncompetition.
(a) Coverage. The parties acknowledge that Executive will
conduct SynQuest Activities throughout the Territory. Executive acknowledges
that to protect adequately the interests of SynQuest in the business of
SynQuest, it is essential that any noncompete covenant with respect thereto
cover all SynQuest Activities and the entire Territory.
(b) Covenant. Executive hereby agrees that Executive must not,
during the Noncompete Period, in any manner (other than as an Executive of or as
a consultant to SynQuest), directly or by assisting others, conduct SynQuest
Activities in the Territory, without the prior express written consent of the
Board of Directors of SynQuest. It is specifically understood and agreed that
accepting employment with, or acting as a consultant to, any company that
directly competes with SynQuest during the Noncompete Period would constitute a
breach of this covenant. Notwithstanding this Section 13.3(b), Executive will be
permitted to (i) acquire up to five percent (5%) of any competitor of SynQuest
whose common stock is publicly traded on a national securities exchange or in
the over-the-counter market; or (ii) own shares of stock of SynQuest.
13.4 Nonsolicitation. Executive hereby agree that Executive must
not, during the Nonsolicitation Period, in any manner (other than as an
Executive of or a consultant to SynQuest), directly or by assisting others:
(a) solicit or attempt to solicit, any business from any of
SynQuest's customers, including actively sought prospective customers, with whom
Executive had material contact during Executive's employment under for purposes
of providing products or services that are competitive with those provided by
SynQuest; or
(b) solicit or attempt to solicit for employment, on
Executive's behalf or on behalf of any other person, firm or corporation, any
other Executive of SynQuest or its affiliates with whom Executive had material
contact during Executive's employment under this Agreement.
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13.5 Severability. If a judicial determination is made that any of
the provisions of this Section 13 constitute an unreasonable or otherwise
unenforceable restriction against Executive, the provisions of this Section 13
may be rendered void only to the extent that such judicial determination finds
such provisions to be unreasonable or otherwise unenforceable. In this regard,
Executive and SynQuest hereby agree that any judicial authority construing this
Agreement may be empowered to sever any portion of the Territory, any prohibited
business activity, or any time period from the coverage of this Section 13, and
to apply the provisions of this Section 13 to the remaining portion of the
Territory, the remaining business activities, and the remaining time period not
so severed by such judicial authority. Moreover, notwithstanding the fact that
any provision of this Section 13 is determined not to be specifically
enforceable, SynQuest will nevertheless be entitled to recover monetary damages
as a result of Executive's breach of such provision. The time period during
which the prohibitions set forth in this Section 13 will apply may be tolled and
suspended for a period equal to the aggregate quantity of time during which
Executive violates such prohibitions in any respect.
14. Miscellaneous.
14.1 Survival of Terms; Injunction. The covenants in Sections 9
through 13 of this Agreement will survive the execution and delivery of this
Agreement and the termination of Executive's employment, regardless of who
causes the termination and under what circumstances the termination occurred.
The covenants contained in Sections 9 through 13 are reasonably necessary to
protect the legitimate business interests of SynQuest and will not create undue
hardship for Executive in the event of termination of Executive's employment.
Executive acknowledges that damages for the violation of any such covenants will
not give full and sufficient relief to SynQuest. In the event of any violation
of any such covenants, SynQuest will be entitled to injunctive relief against
the continued violation thereof, in addition to any other rights which SynQuest
may have by reason of such violation.
14.2 Related Parties; Non-assignability. This Agreement will be
binding upon and inure to the benefit of and will be enforceable by, Executive
and SynQuest, their respective heirs, executors, administrators, successors and
assigns. In the event of any assignment of this Agreement by SynQuest, by
operation of law or otherwise, SynQuest will remain primarily liable for
SynQuest's obligations under this Agreement. This Agreement is not assignable by
Executive, by operation of law or otherwise.
14.3 Choice of Law. This Agreement will be governed by and enforced
under the laws of Georgia.
14.4 Notices. Every notice or other communication required or
permitted to be given under this Agreement must be in writing and must
be delivered by messenger, transmitted by facsimile, sent by next-day
air courier or mailed by United States registered or certified mail,
return receipt requested, postage prepaid, addressed to Executive at
the last address on SynQuest's records, and if to SynQuest, at
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SynQuest, Inc., 5555 Triangle Parkway, Suite 350, Norcross, GA or to
such other address as any party may have furnished to the other in writing in
accordance with this Section.
14.5 Modifications; Termination; Waiver. This Agreement may not be
changed, terminated, modified or waived orally. Any change, termination or
modification must be signed by Executive and SynQuest. Any waiver must be signed
by the parties thereto and must be denominated as a waiver. No waiver by either
party of any provision of this Agreement will constitute a waiver of such
provision in any other instance or a waiver of any other provision.
14.6 Severability. The covenants in this Agreement will be
construed as covenants independent of one another and as obligations distinct
from any other contract between Executive and SynQuest. Any claim that Executive
may have against SynQuest will not constitute a defense to enforcement of this
Agreement by SynQuest.
14.7 Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter contained in
this Agreement and supersedes any and all prior agreements and understandings
with respect to the employment of Executive by SynQuest. To the extent any terms
contained in this Agreement are in conflict with or are inconsistent with the
terms of any other agreement to which Executive or Executive and SynQuest are
parties, the terms of this Agreement will govern.
14.8 Headings. The section headings in this Agreement are for
reference only and do not affect in any way the meaning or interpretation of
this Agreement.
14.9 Construction of Agreement. No provision of this Agreement or
any related document may be construed against or interpreted to the disadvantage
of any party hereto by any court or other government or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
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The parties have caused this Agreement to be duly executed as of
November 1, 1997.
SynQuest:
SYNQUEST, INC.
By: /s/ Joseph Landy
-----------------------------
Name: Joseph Landy
Title: Director
Executive:
/s/ John Bartels
--------------------------------
John Bartels
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated June 16, 1997, is
between SynQuest, Inc. ("SynQuest") and Paul S. Bender ("Executive").
The parties agree as follows:
1. Employment. SynQuest hereby employs Executive and Executive
hereby accepts employment subject to the terms and conditions of this
Agreement. Executive will serve as President of Bender Consulting, Inc. and
will have the duties, rights and responsibilities customarily associated with
such position, as well as such other reasonable duties relating to the
operation of the business of SynQuest and SynQuest's subsidiaries (including
Bender Consulting, Inc. ("BCI")) as the Board of Directors of SynQuest (the
"Board") may from time to time assign to Executive. Executive's official title
will be "President of Bender Consulting, Inc., a member of the SynQuest family
of companies" so long as BCI continues to exist as a separate corporate entity.
If and when BCI no longer exists, then the parties will mutually agree on a new
position and title for Executive. Executive will devote his full business time,
skills and best efforts to rendering services on behalf of SynQuest and will
exercise such care as is customarily required by employees undertaking similar
duties for companies similar to SynQuest.
2. Term of Employment. Executive's employment under this
Agreement will commence on June 16, 1997, and will continue until June 30,
2000, unless Executive's employment is sooner terminated as provided in Section
5 below (the "Initial Term"). After the Initial Term, the term of employment
under this Agreement will automatically be extended on the same terms and
conditions contained in this Agreement for successive one (1) year periods
("Renewal Terms"), unless (i) either party gives the other written notice of
non-renewal at least ninety (90) days prior to the expiration of the
then-current term, or (ii) sooner terminated as provided in Section 5 below
(the Initial Term and the Renewal Terms are collectively referred to as a
"Period of Employment").
3. Compensation; Expenses; Additional Employment Benefits
3.1. Salary. During the term of Executive's employment
under this Agreement, SynQuest will pay Executive an annual base salary equal
to $150,000 (the "Base Salary"), which will be payable to Executive in
accordance with SynQuest's payroll procedures in effect with respect to other
officers of SynQuest, less all applicable withholding taxes. The Base Salary
will be reviewed annually by the Board and, based on the Board's review, the
Base Salary may be increased (at the sole discretion of the Board).
3.2. Bonus. During the term of Executive's employment
under this Agreement, Executive will be entitled to receive (if earned) an
annual bonus ("Bonus") up to an
<PAGE> 2
amount equal to 100% of Executive's then-current Base Salary. The terms and
conditions under which the Bonus will be earned (including corporate and
individual goals and objectives upon which payment of the Bonus will be based)
will be established annually in accordance with SynQuest's bonus plan for key
executive personnel; provided, however, that Executive and SynQuest agree that
for purposes of the fiscal year starting July 1, 1997 (the "1997 Fiscal Year"),
Executive's bonus (the "1997 Fiscal Year Bonus") will be equal to the sum of
(i) twenty-five percent (25%) of amounts actually received by BCI or SynQuest
with respect to Executive's billings for work provided by Executive to clients
of either SynQuest or BCI during the 1997 Fiscal Year, plus (ii) five percent
(5%) of the license fees actually received by BCI or SynQuest during the 1997
Fiscal Year for all worldwide sales of software owned by BCI on the date of
this Agreement, as set forth in Attachment 1. The total amount of the 1997
Fiscal Year Bonus, however, may not exceed $150,000.
3.3. Executive Stock Option Plan. Executive will be
eligible for consideration for grants of stock options in accordance with the
terms and conditions of SynQuest's Stock Option Plan (or successor stock option
plan adopted by SynQuest during the term of this Agreement). The decision as to
whether to grant options under the plan to Executive (and, if so, how many)
will be solely within the discretion of the Board, and such grants, if any,
will be subject to any terms and conditions imposed thereon by the Board.
3.4. Reimbursement of Business Expenses. SynQuest will
reimburse Executive for all reasonable business-related expenses incurred by
Executive in the performance of his duties under this Agreement, provided that
Executive presents vouchers for such expenses or other evidence thereof to
SynQuest in accordance with SynQuest's general reimbursement policy in effect
for SynQuest's executives.
3.5. Participation in Benefit Plans. Executive will be
eligible to participate in SynQuest's existing benefit plans and any other
compensation, welfare, insurance and other benefit plans as SynQuest may
maintain from time to time for the benefit of SynQuest's key executive
personnel, on the terms and subject to the conditions set forth in those plans.
In addition to the normal disability coverages provided under SynQuest's
benefit plans, SynQuest will use its good faith efforts to obtain disability
coverage providing Executive with a total annual benefit of $250,000 through
age 71, so long as the annual premium cost does not exceed $15,000. (If the
annual premium cost to SynQuest exceeds $15,000, then the excess amount will be
offset against Executive's earned Bonus).
3.6. Vacation. Executive will receive paid vacation each
year during the term of Executive's employment in accordance with SynQuest's
vacation policy then in effect.
3.7. Additional Benefits and Prerequisites. Executive will
have additional benefits and prerequisites authorized from time to time for
Executive in accordance with SynQuest's policies then in effect with respect to
other SynQuest executives.
4. Relocation of Executive. If BCI moves its headquarters from
the Washington,
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D.C. metropolitan area, Executive hereby covenants that he will, if requested
by the Board, (i) relocate his primary office to the city where BCI moves its
headquarters; provided, however, that SynQuest already has an established
office in the new location prior to the Board's request for Executive's
relocation, (ii) conduct his day-to-day corporate business from the new
location, and (iii) relocate his primary residence and his family to the new
location within a reasonable period of time after BCI has completed its
relocation; provided, however, that such period must not exceed twelve (12)
months. Payment of Executive's relocation expenses incurred under this section
will be made by SynQuest to Executive in accordance with SynQuest's relocation
policy in effect.
5. Termination of Employment. Executive's employment under this
Agreement may be terminated upon the occurrence of any of the following events:
5.1. Death. Executive's death (a "Death Termination
Event").
5.2. Disability. If the Board determines in good faith,
based on medical evidence considered by the Board to be reliable and after
giving Executive an opportunity to present evidence on his own behalf, that as
a result of a medically determinable physical or mental impairment Executive
has become substantially unable to perform his duties under this Agreement at
the principal executive offices of BCI for any period of six (6) consecutive
months, or nine (9) months in any twelve (12) month period, then Executive will
be deemed to be disabled for the purposes of this Agreement and the Board may
terminate Executive's employment under this Agreement (a "Disability
Termination Event"). All determinations by the Board pursuant to this Section
5.2 will be final and binding upon Executive.
5.3. Termination for Cause. The Board may terminate
Executive's employment under this Agreement for cause upon: (i) the
determination by the Board that Executive has failed to perform his duties
under this Agreement (other than as a result of Executive's incapacity due to
physical or mental illness or injury), and such failure is a result of an
intentional and/or extended neglect of Executive's duties under this Agreement;
(ii) conviction of Executive for a felony or any crime involving theft, fraud
or moral turpitude; (iii) commission by Executive of any act involving
dishonesty or fraud against SynQuest or SynQuest's subsidiaries, or which
adversely affects SynQuest or SynQuest's subsidiaries; (iv) failure by
Executive to comply with a reasonable written order of the Board; (v) a
misrepresentation made willfully, recklessly or in bad faith by Executive to
SynQuest's stockholders or the Board, which causes injury to SynQuest or
SynQuest's subsidiaries or SynQuest's stockholders; or (vi) a material breach
by Executive of his obligations under Sections 11 through 15 (a "Good Cause
Termination Event").
5.4. Termination Without Cause.
(a) The Board may terminate Executive's
employment under this Agreement without cause at any time by delivering to
Executive a Notice of Termination (as defined in Section 6 below).
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(b) Executive may terminate his employment by
delivering to the Board a Notice of Termination, and such termination will be
considered to be without cause if there occurs a material change in the
position held by Executive or in the duties of Executive, without Executive's
consent, such that Executive's position or duties are not comparable to
Executive's position and duties prior to such material change (Both termination
events described in Subsections (a) and (b) are referred to individually in
this Agreement as a "No Cause Termination Event").
5.5. Voluntary Termination. Executive may voluntarily
terminate his employment under this Agreement at any time by delivering to the
Board a Notice of Termination as specified in Section 7(e) below (a "Voluntary
Termination Event"); provided, however, if at the time of such voluntary
termination by Executive, Executive could be terminated as a result of a Good
Cause Termination Event, Executive will be deemed to have been terminated as a
result of a Good Cause Termination Event instead of a Voluntary Termination
Event.
6. Notice of Termination. Any termination by the Board pursuant
to Sections 5.2, 5.3 or 5.4(a) of this Agreement will be communicated to
Executive by a Notice of Termination. Any termination by Executive pursuant to
Sections 5.4(b) or 5.5 of this Agreement will be communicated by Notice of
Termination to the Board. For purposes of this Agreement, a "Notice of
Termination" means a notice that indicates the specific termination provision
in this Agreement relied upon for such termination, and if delivered pursuant
to Sections 5.2, 5.3 or 5.4(a) of this Agreement, sets forth the basis for
termination of Executive's employment under the provisions indicated.
7. Date of Termination. "Date of Termination" means:
(c) If Executive's employment is terminated as
a result of a Death Termination Event, the date of Executive's death;
(d) If Executive's employment is terminated as
a result of a Disability Termination Event, thirty (30) days after Notice of
Termination is given;
(e) If Executive's employment is terminated by
the Board as a result of a Good Cause Termination Event or a No Cause
Termination Event, the date the Notice of Termination is given (or such later
date as may be specified by the Board in the Notice of Termination);
(f) If Executive's employment is terminated by
Executive as a result of a No Cause Termination Event, the date the Notice of
Termination is given; and
(g) If Executive's employment is terminated as
a result of a Voluntary Termination Event, sixty (60) days after Notice of
Termination is given (or such shorter period
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of time as the Board may specify in the Board's sole discretion after receiving
Executive's Notice of Termination).
8. Compensation upon Termination or During Disability.
8.1. No Further Obligation. Upon any termination of
employment, SynQuest and SynQuest's subsidiaries will have no further
obligation to Executive except to pay Executive (or Executive's estate in the
case of Executive's death) the compensation and other benefits provided in this
Section 8. Amounts payable pursuant to this Section 8 are in lieu of any
severance pay that would otherwise be payable to Executive upon termination of
Executive's employment with SynQuest under SynQuest's severance pay policies.
8.2. Death. If Executive's employment is terminated as a
result of a Death Termination Event, SynQuest will pay to Executive's estate
any Base Salary and Bonus earned but unpaid and any other amounts due to
Executive from SynQuest (whether pursuant to benefit plans or otherwise)
through the date of Executive's death.
8.3. Disability. If Executive's employment is terminated
as a result of a Disability Termination Event, Executive will continue to
receive payment of any Base Salary and Bonus earned but unpaid and any other
amounts due to Executive from SynQuest (whether pursuant to benefit plans or
otherwise) through the Date of Termination. After payment of amounts set forth
in this Section 8.3, Executive's compensation will be paid in accordance with
SynQuest's long-term disability plans, if any, that may then be in effect with
respect to Executive.
8.4. Good Cause. If Executive's employment is terminated
as a result of a Good Cause Termination Event, Executive will receive payment
of any Base Salary earned but unpaid and any other amounts due to Executive
from SynQuest (whether pursuant to benefit plans or otherwise) through the Date
of Termination.
8.5. Voluntary Termination. If Executive's employment is
terminated as a result of a Voluntary Termination Event, Executive will receive
payment of any Base Salary and Bonus earned but unpaid and any other amounts
due to Executive from SynQuest (whether pursuant to benefit plans or otherwise)
through the Date of Termination.
8.6. No Cause Termination. If Executive's employment is
terminated as a result of a No Cause Termination Event, then SynQuest will pay
Executive (i) within fifteen (15) days after the Date of Termination, any Base
Salary and Bonus earned but unpaid and any other amounts due to Executive from
SynQuest (whether pursuant to benefit plans or otherwise) through the Date of
Termination, and (ii) two hundred percent (200%) of Executive's then-current
Base Salary for the period beginning on the Date of Termination and ending on
the later of (x) the second anniversary of the date of this Agreement or (y)
the first anniversary of the Date of Termination. In addition, for a period of
up to two (2) years following the later to occur of (i) the second anniversary
of the date of this Agreement, or (ii) the first anniversary of the
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Date of Termination, SynQuest may, in its sole discretion, elect to pay
Executive an annual amount (the "Annual Payment") equal to two hundred percent
(200%) of Executive's then-current Base Salary. The Annual Payment will be
payable in equal monthly installments. During the period Executive receives the
Annual Payment, Executive is prohibited from engaging in any SynQuest
Activities (as described below in Section 15). The Annual Payment may be
terminated by the Board upon (i) the date Executive accepts other employment
(other than pursuant to Section 10.2), including, without limitation,
employment as a full-time consultant in any enterprise, or (ii) at any time
with six (6) months written notice to Executive.
9. Employment Rights. Nothing in this Agreement confers on
Executive any right to continue in the employ of SynQuest or SynQuest's
subsidiaries, or to interfere in any way with the right of the Board to
terminate Executive's employment at any time.
10. Scope of Duties.
10.1. Employment by SynQuest as Sole Occupation. Executive
agrees to devote Executive's full business time, attention, skill, and effort
exclusively to the performance of the duties that SynQuest may assign Executive
from time to time. Executive may not engage in any business activities or
render any services of a business, commercial, or professional nature for
compensation for the benefit of anyone other than SynQuest, unless SynQuest
consents in writing in advance, it being agreed that SynQuest will not withhold
its consent to any activity which is not competitive with SynQuest's business
and does not interfere with the performance by Executive of Executive's duties
and obligations to SynQuest under this Agreement. It is the policy of SynQuest
never to allow its personnel to work for any competitive enterprise during
their employment, including after hours, on weekends, or during vacation time,
even if only organizational assistance or limited consultation is involved.
This Agreement does not prohibit the investment of a reasonable part of
Executive's assets in the stock of a company whose stock is traded on a
national stock exchange.
10.2. Separate Company. Executive is entitled to create
and own a company with a maximum of two (2) employees, which employees may only
consist of Executive and Executive's spouse; provided, however, that any
separate company so established by Executive (i) does not require substantial
services from Executive and does not detract from, or interfere in any way
with, the performance by Executive of his duties to SynQuest or its
subsidiaries, and (ii) does not engage in any SynQuest Activities (as defined
below in Section 15).
10.3. Noninterference With Third-Party Rights. SynQuest is
employing Executive with the understanding that (i) Executive is free to enter
into employment with SynQuest and (ii) only SynQuest is entitled to the benefit
of Executive's work. SynQuest has no interest in using any other person's
patents, copyrights, trade secrets, or trademarks in an unlawful manner.
Executive should be careful not to misapply proprietary rights that SynQuest
has no right to use.
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11. Ownership of Executive Developments.
11.1. Ownership of Work Product.
(a) SynQuest will own all Work Product (as
defined below in Section 11.1(e)). All Work Product will be considered work
made for hire by Executive and owned by SynQuest.
(b) If any of the Work Product may not, by
operation of law, be considered work made for hire by Executive for SynQuest,
or if ownership of all right, title, and interest of the intellectual property
rights therein may not otherwise vest exclusively in SynQuest, Executive agrees
to assign, and upon creation thereof automatically assigns, without further
consideration, the ownership of all Trade Secrets (as defined below in Section
12.2), U.S. and international copyrights, patentable inventions, and other
intellectual property rights therein to SynQuest, its successors and assigns.
(c) SynQuest, its successors and assigns, will
have the right to obtain and hold in its or their own name copyright
registrations, trademark registrations, patents and any other protection
available in the foregoing.
(d) Executive agrees to perform, upon the
reasonable request of SynQuest, during or after Executive's employment, such
further acts as may be necessary or desirable to transfer, perfect, and defend
SynQuest's ownership of the Work Product. When requested, Executive will:
(1) Execute, acknowledge, and deliver
any requested affidavits and
documents of assignment and
conveyance with respect to any
Work Product;
(2) Assist in the preparation,
prosecution, procurement,
maintenance and enforcement of
copyrights and, if applicable,
patents with respect to the Work
Product in any countries;
(3) Provide testimony in connection
with any proceeding affecting the
right, title, or interest of
SynQuest in any Work Product; and
(4) Perform any other acts deemed
necessary or desirable to carry
out the purposes of this
Agreement.
SynQuest will reimburse all reasonable out-of-pocket expenses
incurred by Executive at SynQuest's request in connection with the foregoing,
including (unless Executive is otherwise being compensated at the time) a
reasonable per diem or hourly fee for services rendered following termination
of Executive's employment.
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(e) For purposes hereof, "Work Product" means
all intellectual property rights, including all Trade Secrets, U.S. and
international copyrights, patentable inventions, discoveries and improvements,
and other intellectual property rights, in any programming, documentation,
technology, or other Work Product that relates to the business and interests of
SynQuest and that Executive conceives, develops, or delivers to SynQuest at any
time during the term of Executive's employment. "Work Product" does not include
Executive's "Residual Knowledge." "Residual Knowledge" means prior or existing
knowledge or skills obtained by Employee during the course of his employment,
to the extent retained in Employee's human memory (and not in any other form,
such as written form or electronic form, such as magnetic storage media).
Residual Knowledge will not include any Trade Secrets or other proprietary
information of SynQuest (or its subsidiaries or affiliates). Executive hereby
irrevocably relinquishes for the benefit of SynQuest and its assigns, and
hereby agrees to waive and never to assert, any moral rights in the Work
Product recognized by applicable law.
11.2. Clearance Procedure for Proprietary Rights Not
Claimed by SynQuest. If Executive ever wishes to create or develop, on
Executive's own time and with Executive's own resources, anything that may be
considered Work Product but as to which Executive believes Executive should be
entitled to the personal benefit, Executive is required to follow the clearance
procedure set forth in this Section 11.2 in order to ensure that SynQuest has
no claim to the proprietary rights that may arise.
Before Executive begins any development work on Executive's own time,
Executive must give SynQuest advance written notice of Executive's plans and
supply a description of the development under consideration. SynQuest will hold
in confidence and not disclose any proprietary and confidential information
contained in the description submitted by Executive. SynQuest will determine,
in good faith, within thirty (30) days after Executive has fully disclosed
Executive's plans to SynQuest, whether the development is claimed by SynQuest
as Work Product. If SynQuest determines that it does not claim such
development, Executive will be notified in writing and may retain ownership of
the development to the extent of what has been disclosed to SynQuest. Executive
should submit for further clearance any significant improvement, modification,
or adaptation so that it can be determined whether the improvement,
modification, or adaptation relates to the business or interests of SynQuest.
Clearance under this procedure does not relieve Executive of the need
to obtain the written consent of SynQuest pursuant to Section 10.1 before
engaging in business activities or rendering business, commercial, or
professional services for the benefit of anyone other than SynQuest (subject to
the provisions of Section 10.1). SynQuest thus reserves the right to exercise
greater control over development work that Executive might consider doing for
profit after hours, as opposed to mere hobby work pursued in Executive's spare
time.
12. Confidentiality.
12.1. Consequences of Entrustment With Sensitive
Information. Executive's position with SynQuest requires considerable
responsibility and trust. Relying on Executive's
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ethical responsibility and undivided loyalty, SynQuest expects to entrust
Executive with highly sensitive confidential, restricted, and proprietary
information involving Trade Secrets (as defined in Section 12.2) and
Confidential Information (as defined in Section 12.4). Executive is legally and
ethically responsible for protecting and preserving SynQuest's proprietary
rights for use only for SynQuest's benefit, and these responsibilities may
impose unavoidable limitations on Executive's ability to pursue some kinds of
business opportunities that might interest Executive during or after
Executive's employment.
12.2. Trade Secrets Defined. For purposes of this
Agreement, "Trade Secrets" means information, without regard to form,
including, but not limited to, (i) technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans relating to or
reflected in SynQuest's computer software products, or (ii) a list of actual or
potential customers or suppliers of SynQuest that: (A) derive economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from their disclosure or use; and (B) are the subject of efforts that are
reasonable under the circumstances to maintain their secrecy. The term "Trade
Secret" will not include any information which constitutes Confidential
Information (as defined below in Section 12.4).
Trade Secrets do not include information that Executive can show by
competent proof (i) was known to Executive prior to disclosure by SynQuest;
(ii) was generally known to the public at the time SynQuest disclosed the
information to Executive; (iii) became generally known to the public after
disclosure to Executive by the SynQuest through no act or omission of
Executive; or (iv) was disclosed to Executive by a third party having a bona
fide right both to possess the information and to disclose the information to
Executive.
12.3. Restrictions on Use and Disclosure of Trade Secrets.
Executive must hold in confidence at all times after the date of this Agreement
all Trade Secrets of SynQuest and must not disclose, publish or make use at any
time after the date of this Agreement of Trade Secrets without the prior
consent of SynQuest.
12.4. Confidential Information Defined. For purposes of
this Agreement, "Confidential Information" means any data or information, other
than Trade Secrets, which (i) is valuable to SynQuest, (ii) is not generally
known or available to competitors of SynQuest, and (iii) is treated as
confidential by SynQuest.
12.5. Use or Disclosure of Confidential Information.
Executive agrees that during the term of Executive's employment by SynQuest,
and for a period of two (2) years following termination of Executive's
employment, Executive will hold in confidence all Confidential Information and
will not disclose, publish or make use of Confidential Information without the
prior written consent of SynQuest.
12.6. Screening of Public Releases of Information. In
addition, and without any intention of limiting Executive's other obligations
under this Agreement in any way, Executive
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<PAGE> 10
should not, during Executive's employment, reveal any non-public information
concerning the technology pertaining to the proprietary products and
manufacturing processes of SynQuest (particularly technology under current
development or improvement), unless Executive has obtained approval from
SynQuest in advance. In that connection, Executive should submit to SynQuest
for review any proposed scientific and technical articles and the text of any
public speeches relating to work done for SynQuest before they are released or
delivered. SynQuest has the right to disapprove and prohibit, or delete any
parts of, such articles or speeches that might disclose SynQuest's Trade
Secrets or other Confidential Information or otherwise be contrary to
SynQuest's business interests.
12.7. SynQuest's Rights Under Applicable Trade Secret Law.
Nothing in this Agreement is intended to, nor will it, diminish the SynQuest's
rights regarding the protection of SynQuest's trade secrets pursuant to
applicable Georgia law.
13. Return of Materials. Upon the request of SynQuest and, in any
event, upon the termination of Executive's employment, Executive must return to
SynQuest and leave at SynQuest's disposal all memoranda, notes, records,
drawings, manuals, computer programs, documentation, diskettes, computer tapes,
and other documents or media pertaining to the business of SynQuest or
Executive's specific duties for SynQuest, including all copies of such
materials. Executive must also return to SynQuest and leave at SynQuest's
disposal all materials involving any Trade Secrets of SynQuest. This Section 13
is intended to apply to all materials made or compiled by Executive, as well as
to all materials furnished to Executive by anyone else in connection with
Executive's employment.
14. Non-interference with Personnel Relations. During Executive's
employment with SynQuest and for a period of one (1) year afterwards, Executive
will not knowingly solicit, entice or persuade any other Executives of SynQuest
to leave the services of SynQuest for any reason.
15. Non-competition Agreement.
15.1. Definitions. For the purposes of this Section 15,
the following definitions will apply:
(a) "SynQuest Activities" means all activities
of the type conducted, authorized, offered, or provided by Executive within one
(1) year prior to termination of Executive's employment. For purposes of
reference, such activities at the date of this Agreement include the business
of producing, marketing, promoting and distributing computer software programs
that have as their primary content manufacturing or supply chain management
material. The term "SynQuest Activities" includes (without limitation) the
production, marketing and distribution of computer software programs which
compete directly with any of the computer software programs distributed by
SynQuest as of the date of this Agreement or on the date of termination of
Executive's employment.
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<PAGE> 11
(b) "Noncompete Period" or "Nonsolicitation
Period" means the period beginning on the date of this Agreement and ending on
the later of (i) the second anniversary of the date of the Agreement, or (ii)
one (1) year after the Termination Date. However, if SynQuest exercises its
rights under Section 8.6 to extend the Noncompete Period and Nonsolicitation
Period by paying Executive the Annual Payment, then the Noncompete Period and
Nonsolicitation Period will be extended up to two (2) additional years (or such
earlier date on which SynQuest is no longer making payments of the Additional
Payments in accordance with Section 8.6).
(c) "Territory" means any country throughout
the world where SynQuest is engaged in SynQuest Activities as of the
Termination Date, including, without limitation, the United States of America,
its territories and possessions.
15.2. Trade Name. Executive agrees that during the
Noncompete Period, Executive must not, directly or by assisting others, own,
manage, operate, join, control or participate in the ownership, management,
operation or control of any business conducted under any corporate or trade
name of SynQuest or name similar thereto without the prior written consent of
SynQuest.
15.3. Noncompetition.
(a) Coverage. The parties acknowledge that
Executive will conduct SynQuest Activities throughout the Territory. Executive
acknowledges that to protect adequately the interests of SynQuest in the
business of SynQuest, it is essential that any noncompete covenant with respect
thereto cover all SynQuest Activities and the entire Territory.
(b) Covenant. Executive hereby agrees that
Executive must not, during the Noncompete Period, in any manner (other than as
an Executive of or as a consultant to SynQuest), directly or by assisting
others, conduct SynQuest Activities in the Territory. It is specifically
understood and agreed that accepting employment with, or acting as a consultant
to, any one of the following companies during the Noncompete Period would
constitute a breach of this covenant: any company presently developing or
marketing simulation and optimization technology based on genetic algorithms,
neural networks, or related search techniques in the Territory, including Red
Pepper Software, 12 Technologies, Numetrix, and Chesapeake Systems, or any
other actual competitors of SynQuest where fifty percent (50%) or more of such
competitor's revenues are derived from computer software programs which have as
their primary content manufacturing or supply chain management material or
business application software companies whose products compete directly with
existing product lines of SynQuest, for whom simulation optimization technology
would be a competitive addition for their solutions, such as American Software,
Avalon Software, Manugistics, Inc., SAP, Baan, Computer Associates, SSA, J.D.
Edwards, Marcam, Dun & Bradstreet Software, Ross Systems, and Effective
Management Systems, Inc. (such companies are referred to as "Designated
Competitors").
Notwithstanding this Section 15.3(b), Executive will
be permitted to (i) acquire up to five percent (5%) of any competitor of
SynQuest whose common stock is publicly
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traded on a national securities exchange or in the over-the-counter market; or
(ii) own shares of stock of SynQuest.
15.4. Nonsolicitation. Executive hereby agree that
Executive must not, during the Nonsolicitation Period, in any manner (other
than as an Executive of or a consultant to SynQuest), directly or by assisting
others:
(a) solicit or attempt to solicit, any business
from any of SynQuest's customers, including actively sought prospective
customers, with whom Executive had material contact during Executive's
employment under for purposes of providing products or services that are
competitive with those provided by SynQuest; or
(b) solicit or attempt to solicit for
employment, on Executive's behalf or on behalf of any other person, firm or
corporation, any other Executive of SynQuest or its affiliates with whom
Executive had material contact during Executive's employment under this
Agreement.
15.5. Severability. If a judicial determination is made
that any of the provisions of this Section 15 constitute an unreasonable or
otherwise unenforceable restriction against Executive, the provisions of this
Section 15 may be rendered void only to the extent that such judicial
determination finds such provisions to be unreasonable or otherwise
unenforceable. In this regard, Executive and SynQuest hereby agree that any
judicial authority construing this Agreement may be empowered to sever any
portion of the Territory, any prohibited business activity, or any time period
from the coverage of this Section 15, and to apply the provisions of this
Section 15 to the remaining portion of the Territory, the remaining business
activities, and the remaining time period not so severed by such judicial
authority. Moreover, notwithstanding the fact that any provision of this
Section 15 is determined not to be specifically enforceable, SynQuest will
nevertheless be entitled to recover monetary damages as a result of Executive's
breach of such provision. The time period during which the prohibitions set
forth in this Section 15 will apply may be tolled and suspended for a period
equal to the aggregate quantity of time during which Executive violates such
prohibitions in any respect.
15.6. Termination of Noncompete Obligations. Executive's
obligations under Section 15.3 (Noncompetition) will terminate if SynQuest
breaches any material payment obligation to Executive under this Agreement or
under Article V (Put Right) of the Investor's Agreement, dated June 16, 1997,
among Executive, SynQuest and Warburg, Pincus Investors L.P., and SynQuest
fails to cure such breach within thirty (30) days following receipt by SynQuest
of written notice of default by Executive.
16. Miscellaneous.
16.1. Survival of Terms; Injunction. The covenants in
Sections 11 through 15 of this Agreement will survive the execution and
delivery of this Agreement and the termination of Executive's employment,
regardless of who causes the termination and under what circumstances the
termination occurred. The covenants contained in Sections 11 through 15 are
reasonably necessary to protect the legitimate business interests of SynQuest
and will not create undue
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hardship for Executive in the event of termination of Executive's employment.
Executive acknowledges that damages for the violation of any such covenants
will not give full and sufficient relief to SynQuest. In the event of any
violation of any such covenants, SynQuest will be entitled to injunctive relief
against the continued violation thereof, in addition to any other rights which
SynQuest may have by reason of such violation.
16.2. Related Parties; Non-assignability. This Agreement
will be binding upon and inure to the benefit of and will be enforceable by,
Executive and SynQuest, their respective heirs, executors, administrators,
successors and assigns. In the event of any assignment of this Agreement by
SynQuest, by operation of law or otherwise, SynQuest will remain primarily
liable for SynQuest's obligations under this Agreement. This Agreement is not
assignable by Executive, by operation of law or otherwise.
16.3. Choice of Law. This Agreement will be governed by
and enforced under the laws of Georgia.
16.4. Notices. Every notice or other communication
required or permitted to be given under this Agreement must be in writing and
must be delivered by messenger, transmitted by facsimile, sent by next-day air
courier or mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to Executive:
Paul S. Bender
1801 Crystal Dr.
Arlington, VA 22202
Facsimile:
(b) If to SynQuest:
SynQuest, Inc.
5555 Triangle Parkway, Suite 350
Norcross, GA 30092
Attention: Board of Directors
Facsimile: (770) 447-4995
or to such other address as any party may have furnished to
the other in writing in accordance with this Section. All such notices and
communications will be deemed to have been duly given when delivered by hand,
if personally delivered, when receipt is acknowledged if by facsimile, one (1)
business day after being sent by next-day air courier, and two (2) business
days after being deposited in the mail, postage prepaid, except that notices of
change of address will be effective only upon receipt.
16.5. Modifications; Termination; Waiver. This Agreement
may not be changed, terminated, modified or waived orally. Any change,
termination or modification must be signed
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<PAGE> 14
by Executive and SynQuest. Any waiver must be signed by the parties thereto and
must be denominated as a waiver. No waiver by either party of any provision of
this Agreement will constitute a waiver of such provision in any other instance
or a waiver of any other provision.
16.6. Severability. The covenants in this Agreement will
be construed as covenants independent of one another and as obligations
distinct from any other contract between Executive and SynQuest. Any claim that
Executive may have against SynQuest will not constitute a defense to
enforcement of this Agreement by SynQuest.
16.7. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter contained in
this Agreement and supersedes any and all prior agreements and understandings
with respect to the employment of Executive by SynQuest. To the extent any
terms contained in this Agreement are in conflict with or are inconsistent with
the terms of any other agreement to which Executive or Executive and SynQuest
are parties, the terms of this Agreement will govern.
16.8. Headings. The section headings in this Agreement are
for reference only and do not affect in any way the meaning or interpretation
of this Agreement.
16.9. Construction of Agreement. No provision of this
Agreement or any related document may be construed against or interpreted to
the disadvantage of any party hereto by any court or other government or
judicial authority by reason of such party having or being deemed to have
structured or drafted such provision.
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<PAGE> 15
The parties have caused this Agreement to be duly executed as of June
16, 1997.
SynQuest:
SYNQUEST, INC.
By: /s/ Joseph Trino
--------------------------------
Name: Joseph Trino
---------------------------
Title: President
--------------------------
Executive:
/s/ Paul S. Bender
-----------------------------------
Paul S. Bender
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<PAGE> 16
Attachment 1
BCI Software
<TABLE>
<S> <C>
1. PHYDIAS (PHYsical DIstribution Analysis System)
2. ODAS (Optimum Demand Allocation System)
3. SPADES (Statistical Projection and DElphi System)
4. SATRAPS (SAles TRacking And Projection System)
5. OVERS (Optimum VEhicle Routing System)
6. VESPOS (VEhicle Stowage Planning Optimizer System)
7. LOOPS (Linehaul Optimization & OPerating System)
8. OASIS (Optimum Assignment System for International Shipping)
9. CUSSEMS (CUstomer SErvice Management System)
10. DEMPROS (DEMand PROcessing System)
11. CAIMANS (Computer Aided Inventory MANagement System)
12. TOPPS (Tactical Optimum Production Planning System)
13. OOPSS (Optimum Operational Production Scheduling System)
14. CAPCOS (Computer Aided Production COntrol System)
15. LAOS (Logistic Asset Optimization System)
16. PUMAS (PUrchasing MAnagement System)
17. OPUSS (Optimum PUrchasing Strategy System)
18. WARMANS (WARhouse MANagement System)
19. OSLOS (Optimum Stock LOcator System)
20. OMAHAS (Optimum Materials HAndling System)
21. LOCUS (Load & Order Consolidation & Utilization System)
22. CARMANS (CARier MANagement System)
23. SALMANS (SALes MANagement System)
24. PECOS (PErformance COntrol System)
25. PAPOS (PAper Production Optimization System)
26. TRIOS (TRIm Optimization System)
27. SOAPS (Strategic Optimization And Planning System)
</TABLE>
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<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated September 1, 1998,
is between SynQuest, Inc. ("SynQuest") and Christopher Jones ("Executive").
The parties agree as follows:
1. Employment. SynQuest hereby employs Executive and Executive
hereby accepts employment subject to the terms and conditions of this
Agreement. Executive will serve as Vice-President -Corporate Development of
SynQuest and will have the duties, rights and responsibilities customarily
associated with that position, as well as any other reasonable duties relating
to the operation of the business of SynQuest and SynQuest's subsidiaries that
the Board of Directors of SynQuest (the "Board") may have from time to time
assign to Executive. Executive will devote his full business time, skills and
best efforts to rendering services on behalf of SynQuest and will exercise such
care as is customarily required by employees undertaking similar duties for
companies similar to SynQuest.
Executive's employment under this Agreement will commence on September
1, 1998, and may be terminated at any time by either party, at will, subject to
the obligations of the Company under Section 6.6.
2. Compensation; Expenses; Additional Employment Benefits.
2.1 Salary. During the first three years of Executive's
employment under this Agreement, SynQuest will pay Executive an annual base
salary equal to $120,000 (the "Base Salary"), which will be payable to
Executive in accordance with SynQuest's payroll procedures in effect with
respect to other officers of SynQuest, less all applicable withholding taxes.
During years four and thereafter, Executive's Base Salary shall not be less
than $150,000 per year. The Base Salary will be reviewed annually by the Board
and, based on the Board's review, the Base Salary may be increased (at the sole
discretion of the Board).
2.2 Bonus. During the term of Executive's employment under this
Agreement, Executive will be entitled to receive (if earned) an annual bonus
("Bonus"). The terms and conditions under which the Bonus will be earned
(including corporate and individual goals and objectives upon which payment of
the Bonus may be based) will be established annually in accordance with
SynQuest's bonus plan for key executive personnel. Executive will be eligible
for a bonus for the fiscal year ended June 30, 1999 of up to $25,000 and up to
$25,000 stock options.
2.3 Signing Bonus. The Company will pay to Executive a "Signing
Bonus" of $30,000 per year for three years (a total of $90,000), less all
applicable withholdings, which will be paid monthly for 36 months. The Signing
Bonus will be in addition to any Bonus earned as contemplated under Section 2.2
above.
2.4 Executive Stock Option Plan. Executive will be eligible for
consideration for grants of stock options in accordance with the terms and
conditions of SynQuest's Stock Option
<PAGE> 2
Plan (or successor stock option plan adopted by SynQuest during the term of
this Agreement). The decision as to whether to grant options under the plan to
Executive (and, if so, how many) will be solely within the discretion of the
Board, and such grants, if any, will be subject to any terms and conditions
imposed thereon by the Board. On August 24, 1998 the Board approved the grant
of an option to the Executive in the amount of 100,000 shares of common stock
of SynQuest, exercisable at $3.00 per share. The option will become effective
on the first day of employment under the terms of this agreement.
2.5 Reimbursement of Business Expenses. SynQuest will reimburse
Executive for all reasonable business-related expenses incurred by Executive in
the performance of his duties under this Agreement, provided that Executive
presents vouchers for such expenses or other evidence thereof to SynQuest in
accordance with SynQuest's general reimbursement policy in effect for
SynQuest's executives.
2.6 Participation in Benefit Plans. Executive will be eligible to
participate in SynQuest's existing benefit plans and any other compensation,
welfare, insurance and other benefit plans as SynQuest may maintain from time
to time for the benefit of SynQuest's key executive personnel, on the terms and
subject tot he conditions set forth in those plans.
2.7 Vacation. Executive will receive no less than three (3) weeks
paid vacation each year during the term of Executive's employment.
2.8 Relocation. Executive agrees to relocate to Atlanta, Georgia
within a reasonable period following the date of this Agreement. SynQuest will
reimburse Executive up to a total of $50,000 for reasonable relocation expenses
incurred (including any tax consequences due to this reimbursement) as a result
of such relocation.
2.9 Additional Benefits and Prerequisites. Executive will have
additional benefits and prerequisites authorized from time to time for
Executive in accordance with SynQuest's policies then in effect with respect to
other SynQuest executives.
3. Termination of Employment. Executive's employment under this
Agreement may be terminated upon the occurrence of any of the following events:
3.1 Death. Executive's death (a "Death Termination Event").
3.2 Disability. If the Board determines in good faith, based on
medical evidence considered by the Board to be reliable and after giving
Executive an opportunity to present evidence on his own behalf, that as a
result of a medically determinable physical or mental impairment Executive has
become substantially unable to perform his duties under this Agreement at the
principal executive offices of SynQuest for any period of six (6) consecutive
months, or nine (9) months in any twelve (12) month period, the Executive will
be deemed to be disabled for the purposes of this Agreement and the Board may
terminate Executive's employment under this Agreement (a "Disability
Termination Event"). All determinations by the Board pursuant to this Section
3.2 will be final and binding upon Executive.
3.3 Termination for Cause. The Board may terminate Executive's
employment under this Agreement for cause upon: (i) the determination by the
Board that Executive has failed to
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<PAGE> 3
materially perform his duties under this Agreement (other than as a result of
Executive's incapacity due to physical or mental illness or injury), and such
failure is a result of an intentional and/or extended neglect of Executive's
duties under this Agreement; (ii) conviction of Executive for a felony or any
crime involving theft, fraud or moral turpitude; (iii) commission by Executive
of any act involving dishonesty or fraud against SynQuest or SynQuest's
subsidiaries; (iv) failure by Executive to comply with a reasonable written
order of the Board; (v) a misrepresentation made willfully, recklessly or in
bad faith by Executive to SynQuest's stockholders or the Board, which causes
injury to SynQuest or SynQuest's subsidiaries or SynQuest's stockholders; or
(vi) a material breach by Executive of his obligations under Sections 9 through
13 (a "Good Cause Termination Event").
3.4 Termination Without Cause.
(a) The Board may terminate Executive's employment under
this Agreement without cause at any time by delivering to Executive Notice of
Termination (as defined in Section 4 below).
(b) Executive may terminate his employment by delivering
to the Board a Notice of Termination, and such termination will be considered
to be without cause if there occurs a material change in the position held by
Executive or in the duties of Executive, without Executive's consent, such that
Executive's position or duties are not comparable to Executive's position and
duties prior to such material change. The termination of employment as a result
of a Death Termination Event will be considered to be without cause. (Both
termination events described in Subsections (a) and (b) are referred to
individually in this Agreement as a "No Cause Termination Event").
3.5 Voluntary Termination. Executive may voluntarily terminate
his employment under this Agreement at any time by delivering to the Board a
Notice of Termination as specified in Section 5(e) below (a "Voluntary
Termination Event"); provided, however, that (1) if at the time of such
voluntary termination by Executive, Executive could be terminated as a result
of a Good Cause Termination Event, Executive will be deemed to have been
terminated as a result of a Good Cause Termination Event instead of a Voluntary
Termination Event, (2) if Executive resigns under the circumstances described
under Section 3.4, the termination will be deemed to have been resulted from a
No Cause Termination Event.
4. Notice of Termination. Any termination by the Board pursuant
to Sections 3.2, 3.3 or 3.4(a) of this Agreement will be communicated to
Executive by a Notice of Termination. Any termination by Executive pursuant to
Sections 3.4(b) or 3.5 of this Agreement will be communicated by Notice of
Termination of the Board. For purposes of this Agreement, a "Notice of
Termination" means a notice that indicates the specific termination provision
in this Agreement relied upon for such termination, and if delivered pursuant
to Sections 3.2, 3.3 or 3.4(a) of this Agreement, sets forth the basis for
termination of Executive's employment under the provisions indicated.
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<PAGE> 4
5. Date of Termination. "Date of Termination" means:
(a) If Executive's employment is terminated as a result
of a Death Termination Event, the date of Executive's death;
(b) If Executive's employment is terminated as a result
of a Disability Termination Event, thirty (30) days after Notice of Termination
is given;
(c) If Executive's employment is terminated by the Board
as a result of a good Cause Termination Event or a No Cause Termination Event,
the date the Notice of Termination is given (or such later date as may be
specified by the Board in the Notice of Termination);
(d) If Executive's employment is terminated by Executive
as a result of a No Cause Termination Event, the date the Notice of Termination
is given; and
(e) If Executive's employment is terminated as a result
of a Voluntary Termination Event, sixty (60) days after Notice of Termination
is given (or such shorter period of time as the Board may specify in the
Board's sole discretion after receiving Executive's Notice of Termination).
6. Compensation upon Termination or During Disability.
6.1 No Further Obligation. Upon any termination of employment,
SynQuest and SynQuest's subsidiaries will have no further obligation to
Executive except to pay Executive (or Executive's estate in the case of
Executive's death) the compensation and other benefits provided in this Section
6. Amounts payable pursuant to this Section 6 are in lieu of any severance pay
that would otherwise be payable to Executive upon termination of Executive's
employment with SynQuest under SynQuest's severance pay policies.
6.2 Death. If Executive's employment is terminated as a result of
a Death Termination Event, SynQuest will pay to Executive's estate any Base
Salary and Bonus earned but unpaid and any other amounts due to Executive from
SynQuest (whether pursuant to benefit plans or otherwise) through the date of
Executive's death.
6.3 Disability. If Executive's employment is terminated as a
result of a Disability Termination Event, Executive will continue to receive
payment of any Base Salary and Bonus earned but unpaid and any other amounts
due to Executive from SynQuest (whether pursuant to benefit plans or otherwise)
through the Date of Termination. After payment of amounts set forth in this
Section 6.3, Executive's compensation will be paid in accordance with
SynQuest's long-term disability plans, if any, that may then be in effect with
respect to Executive.
6.4 Good Cause. If Executive's employment is terminated as a
result of a Good Cause Termination Event, Executive will receive payment of any
Base Salary earned but unpaid and any other amounts due to Executive from
SynQuest (whether pursuant to benefit plans or otherwise) through the Date of
Termination.
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<PAGE> 5
6.5 Voluntary Termination. If Executive's employment is
terminated as a result of a Voluntary Termination Event, Executive will receive
payment of any Base Salary and Bonus earned but unpaid and any other amounts
due to Executive from SynQuest (whether pursuant to benefits plan or otherwise)
through the Date of Termination.
6.6 No Cause Termination. If Executive's employment is terminated
as a result of a No Cause Termination Event, then SynQuest will pay Executive
(i) within fifteen (15) days after the Date of Termination, any Base Salary and
Bonus earned but unpaid and any other amounts due to Executive from SynQuest
(whether pursuant to benefit plans or otherwise) through the Date of
Termination, and (ii) fifty percent (50%) of Executive's then-current Base
Salary, but in no event less than $75,000.
7. Employment Rights. Nothing in this Agreement confers on
Executive any right to continue in the employ of SynQuest or SynQuest's
subsidiaries, or to interfere in any way with the right of the Board to
terminate Executive's employment at any time.
8. Scope of Duties.
8.1 Employment by SynQuest as Sole Occupation. Executive agrees
to devote Executive's full business time, attention, skill, and effort
exclusively to the performance of the duties that SynQuest may assign Executive
from time to time. Executive may not engage in any business activities or
render any services of a business, commercial, or profession nature for
compensation for the benefit of anyone other than SynQuest, unless SynQuest
consents in writing, it being agreed that SynQuest will not withhold its
consent to any activity which is not competitive with SynQuest's business and
does not interfere with the performance by Executive of Executive's duties and
obligations to SynQuest under this Agreement. It is the policy of SynQuest
never to allow its personnel to work for any competitive enterprise during
their employment, including after hours, on weekends, or during vacation time,
even if only organization assistance or limited consultation is involved. This
Agreement does not prohibit the investment of a reasonable part of Executive's
assets in the stock of a company whose stock is traded on a national stock
exchange.
8.2 Noninterference with Third-Party Rights. SynQuest is
employing Executive with the understanding that (i) Executive is free to enter
into employment with SynQuest and (ii) only SynQuest is entitled to the benefit
of Executive's work. SynQuest has no interest in using any other person's
patents, copyrights, trade secrets, or trademarks in an unlawful manner.
Executive should be careful not to misapply proprietary rights that SynQuest
has no right to use.
9. Ownership of Executive Developments.
9.1 Ownership of Work Product.
(a) SynQuest will own all Work Products (as defined
below in Section 9.1(e)). All Work Products will be considered work made for
hire by Executive and owned by SynQuest.
(b) If any of the Work Products may not, by operation of
law, be considered work made for hire by Executive for SynQuest, or if
ownership of all right, title, and interest of
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<PAGE> 6
the intellectual property rights therein may not otherwise vest exclusively in
SynQuest, Executive agrees to assign, and upon creation thereof automatically
assigns, without further consideration, the ownership of all Trade Secrets (as
defined below in Section 10.2), U.S. and international copyrights, patentable
inventions, and other intellectual property rights therein to SynQuest, its
successors and assigns.
(c) SynQuest, its successors and assigns, will have the
right to obtain and hold in its or their own name copyright registrations,
trademark registrations, patents and any other protection available in the
foregoing.
(d) Executive agrees to perform, upon the reasonable
request of SynQuest, during or after Executive's employment, such further acts
as may be necessary or desirable to transfer, perfect, and defend SynQuest's
ownership of the Work Product. When requested, Executive will:
(1) Execute, acknowledge, and deliver any
requested affidavits and documents of
assignment and conveyance with respect to
any Work Product;
(2) Assist in the preparation, prosecution,
procurement, maintenance and enforcement of
copyrights and, if applicable, patents with
respect to the Work Product in any
countries;
(3) Provide testimony in connection with any
proceeding affecting the right, title, or
interest of SynQuest in any Work Product;
and
(4) Perform any other acts deemed necessary or
desirable to carry out the purposes of this
Agreement.
SynQuest will reimburse all reasonable out-of-pocket expenses incurred
by Executive at SynQuest's request in connection wit the foregoing, including
(unless Executive is otherwise being compensated at the time) a reasonable per
diem or hourly fee for services rendered following termination of Executive's
employment.
(e) For purposes hereof, "Work Product" means all
intellectual property rights, including all Trade Secrets, U.S. and
international copyrights, patentable inventions, discoveries and improvements,
and other intellectual property rights, in any programming, documentation,
technology, or other Work Product that relates to the business and interests of
SynQuest and that Executive conceives, develops, or delivers to SynQuest at any
time during the term of Executive's employment. "Work Product" does not include
Executive's "Residual Knowledge." "Residual Knowledge" means prior or existing
knowledge or skills obtained by Employee during the course of his employment,
to the extent retained in Employee's human memory (and not in any other form,
such as written form or electronic form, such as magnetic storage media).
Residual Knowledge will not include any Trade Secrets or other proprietary
information of SynQuest (or its subsidiaries or affiliates). Executive hereby
irrevocably relinquishes for the benefit of SynQuest and its assigns, and
hereby agrees to waive and never to assert, any moral rights in the Work
Product recognized by applicable law.
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<PAGE> 7
9.2 Clearance Procedure for Proprietary Rights Not Claimed by
SynQuest. If Executive ever wishes to create or develop, on Executive's own
time and with Executive's own resources, anything that may be considered Work
Product but as to which Executive believes Executive should be entitled to the
personal benefit, Executive is required to follow the clearance procedure set
forth in this Section 9.2 in order to ensure that SynQuest has no claim to the
proprietary rights that may arise.
Before executive begins any development work on Executive's own time,
Executive must give SynQuest advance written notice of Executive's plans and
supply a description of the development under consideration. SynQuest will hold
in confidence and not disclose any proprietary and confidential information
contained in the description submitted by Executive. SynQuest will determine,
in good faith, within thirty (30) days after Executive has fully disclosed
Executive's plans to SynQuest, whether the development is claimed by SynQuest
as Work Product. If SynQuest determines that it does not claim such
development, Executive will be notified in writing and may retain ownership of
the development to the extent of what has been disclosed to SynQuest. Executive
should submit for further clearance any significant improvement, modification,
or adaptation so that it can be determined whether the improvement,
modification or adaptation relates to the business or interests of SynQuest.
Clearance under this procedure does not relieve Executive of the need
to obtain the written consent of SynQuest pursuant to Section 8.1 before
engaging in business activities or rendering business, commercial, or
professional services for the benefit of anyone other than SynQuest (subject to
the provisions of Section 8.1). SynQuest thus reserves the right to exercise
greater control over development work that Executive might consider doing for
profit after hours, as opposed to mere hobby work pursued in Executive's spare
time.
10. Confidentiality.
10.1 Consequences of Entrustment With Sensitive Information.
Executive's position with SynQuest requires considerable responsibility and
trust. Relying on Executive's ethical responsibility and undivided loyalty,
SynQuest expects to entrust Executive with highly sensitive, confidential,
restricted, and proprietary information involving Trade Secrets (as defined in
Section 10.2) and Confidential Information (as defined in Section 10.4).
Executive is legally and ethically responsible for protecting and preserving
SynQuest's proprietary rights for use only for SynQuest's benefit, and these
responsibilities may impose unavoidable limitations on Executive's ability to
pursue some kinds of business opportunities that might interest Executive
during or after Executive's employment.
10.2 Trade Secrets Defined. For purposes to this Agreement, "Trade
Secrets" means information, without regard to form, including, but not limited
to, (i) technical or nontechnical data, formulas, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans relating to or reflected in SynQuest's computer
software products, or (ii) a list of actual or potential customers or suppliers
of SynQuest that: (A) derive economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by proper means
by, other persons who can obtain economic value from their disclosure or use;
and (B) are the subject of efforts that are reasonable
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<PAGE> 8
under the circumstances to maintain their secrecy. The term "Trade Secret" will
not include any information which constitutes Confidential Information (as
defined below in Section 10.4).
Trade Secrets do not include information that Executive can show by
competent proof (i) was known to Executive prior to disclosure by SynQuest;
(ii) was generally known to the public at the time SynQuest disclosed the
information to Executive; (iii) became generally known to the public after
disclosure to Executive by SynQuest through no act or omission of Executive; or
(iv) was disclosed to Executive by a third party having bona fide right both to
possess the information and to disclose the information to Executive.
10.3 Restrictions on Use and Disclosure of Trade Secrets.
Executive must hold in confidence at all times after the date of this Agreement
all Trade Secrets of SynQuest and must not disclose, publish or make use at any
time after the date of this Agreement of Trade Secrets without the prior
consent of SynQuest.
10.4 Confidential Information Defined. For purposes of this
Agreement, "Confidential Information" means any data or information, other than
Trade Secrets, which (i) is valuable to SynQuest, (ii) is not generally known
or available to competitors of SynQuest, and (iii) is treated as confidential
by SynQuest.
10.5 Use of Disclosure of Confidential Information. Executive
agrees that during the term of Executive's employment by SynQuest, and for a
period of two (2) years following termination of Executive's employment,
Executive will hold in confidence all Confidential Information and will not
disclose, publish or make use of Confidential Information without the prior
written consent of SynQuest.
10.6 Screening of Public Releases of Information. In addition, and
without any intention of limiting Executive's other obligations under this
Agreement in any way, Executive should not, during Executive's employment,
reveal any non-public information concerning the technology pertaining to the
proprietary products and manufacturing processes of SynQuest (particularly
technology under current development or improvement), unless Executive has
obtained approval from SynQuest in advance. In that connection, Executive
should submit to SynQuest for review any proposed scientific and technical
articles and the test of any public speeches relating to work done for SynQuest
before they are released or delivered. SynQuest has the right to disapprove and
prohibit, or delete any parts of, such articles or speeches that might disclose
SynQuest's Trade Secrets or other Confidential Information or otherwise be
contrary to SynQuest's business interests.
10.7 SynQuest's Rights Under Applicable Trade Secret Law. Nothing
in this Agreement is intended to, nor will it, diminish SynQuest's rights
regarding the protection of SynQuest's trade secrets pursuant to applicable
Georgia law.
11. Return of Materials. Upon the request of SynQuest and, in any
event, upon the termination of Executive's employment, Executive must return to
SynQuest and leave at SynQuest's disposal all memoranda, notes, records,
drawings, manuals, computer programs, documentation, diskettes, computer tapes,
and other documents or media pertaining to the business of SynQuest or
Executive's specific duties for SynQuest, including all copies of such
-8-
<PAGE> 9
materials. Executive must also return to SynQuest and leave at SynQuest's
disposal all materials involving any Trade Secrets of SynQuest. This Section 11
is intended to apply to all materials made or compiled by Executive, as well as
to all materials furnished to Executive by anyone else in connection with
Executive's employment.
12. Non-interference with Personnel Relations. During Executive's
employment with SynQuest and for a period of one (1) year afterwards, Executive
will not knowingly solicit, entice or persuade any other Executives of SynQuest
to leave the services of SynQuest for any reason.
13. Non-competition Agreement.
13.1 Definitions. For the purposes of this Section 13, the
following definitions will apply:
(a) "SynQuest Activities" means all activities of the
type conducted, authorized, offered, or provided by Executive within one (1)
year prior to termination of Executive's employment. For purposes of reference,
such activities at the date of this Agreement include the business of
producing, marketing, promoting and distributing computer software programs
that have as their primary content shop floor control and supply chain planning
material. The term "SynQuest Activities" includes (without limitation) the
production, marketing and distribution of computer software programs, which
compete directly with any of the computer software programs, distributed by
SynQuest on the date of termination of Executive's employment.
(b) "Noncompete Period" or "Nonsolicitation Period"
means the period beginning on the date of this Agreement and ending one (1)
year after the Termination Date.
(c) "Territory" means any country throughout the world
where SynQuest is engaged in SynQuest Activities as of the Termination Date,
including, without limitation, the United States of America, its territories
and possessions.
13.2 Trade Name. Executive agrees that during the Noncompete
Period, Executive must not, directly or by assisting others, own, manage,
operate, join, control or participate in the ownership, management, operation
or control of any business conducted under any corporate or trade name of
SynQuest or name similar thereto without the prior written consent of SynQuest.
13.3 Noncompetition.
(a) Coverage. The parties acknowledge that Executive
will conduct SynQuest business activities throughout the Territory. Executive
acknowledges that to protect adequately the interests of SynQuest in the
business of SynQuest, it is essential that any noncompete covenant with respect
thereto cover all SynQuest Activities and the entire Territory.
(b) Covenant. Executive hereby agrees that Executive
must not, during the Noncompete Period, in any manner (other than as an
Executive of or as a consultant to SynQuest), directly or by assisting others,
conduct SynQuest Activities in the Territory, without the prior express written
consent of the Board of Directors of SynQuest. It is specifically
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<PAGE> 10
understood and agreed that accepting employment with, or acting as a consultant
to, any company that directly competes with SynQuest during the Noncompete
Period would constitute a breach of this covenant. Notwithstanding this Section
13.3(b), Executive will be permitted to (i) acquire up to five percent (5%) of
any competitor of SynQuest whose common stock is publicly traded on a national
securities exchange or in the over-the-counter market; or (ii) own shares of
stock of SynQuest.
13.4 Nonsolicitation. Executive hereby agrees that Executive must
not, during the Nonsolicitation Period, in any manner (other than as an
Executive of or a consultant to SynQuest), directly or by assisting others:
(a) Solicit or attempt to solicit, any business from any
of SynQuest's customers, including actively sought prospective customers, with
whom Executive had material contact during Executive's employment under for
purposes of providing products or services that are competitive with those
provided by SynQuest; or
(b) solicit or attempt to solicit for employment, on
Executive's behalf or on behalf of any other person, firm or corporation, any
other Executive of SynQuest or its affiliates with whom Executive had material
contact during Executive's employment under this Agreement.
13.5 Severability. If a judicial determination is made that any of
the provisions of this Section 13 constitute an unreasonable or otherwise
unenforceable restriction against Executive, the provisions of this Section 13
may be rendered void only to the extent that such judicial determination finds
such provisions to be unreasonable or otherwise unenforceable. In this regard,
Executive and SynQuest hereby agree that any judicial authority construing this
Agreement may be empowered to sever any portion of the Territory, any
prohibited business activity, or any time period from the coverage of this
Section 13, and to apply the provisions of this Section 13 to the remaining
portion of the Territory, the remaining business activities, and the remaining
time period not so severed by such judicial authority. Moreover,
notwithstanding the fact that any provision of this Section 13 is determined
not to be specifically enforceable, SynQuest will nevertheless be entitled to
recover monetary damages as a result of Executive's breach of such provision.
The time period during which the prohibitions set forth in this Section 13 will
apply may be tolled and suspended for a period equal to the aggregate quantity
of time during which Executive violates such prohibitions in any respect.
14. Miscellaneous.
14.1 Survival of Terms; Injunction. The covenants in Sections 9
through 13 of this Agreement will survive the execution and delivery of this
Agreement and the termination of Executive's employment, regardless of who
causes the termination and under what circumstances the termination occurred.
The covenants contained in Sections 9 through 13 are reasonably necessary to
protect the legitimate business interests of SynQuest and will not create undue
hardship for Executive in the event of termination of Executive's employment.
Executive acknowledges that damages for the violation of any such covenants
will not give gull and sufficient relief to SynQuest. In the event of any
violation of any such covenants, SynQuest will
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<PAGE> 11
be entitled to injunctive relief against the continued violation thereof, in
addition to any other rights, which SynQuest may have by reason of such
violation.
14.2 Related Parties; Non-assignability. This Agreement will be
binding upon and inure to the benefit of and will be enforceable by, Executive
and SynQuest, their respective heirs, executors, administrators, successors and
assigns. In the event of any assignment of this Agreement by SynQuest, by
operation of law or otherwise, SynQuest will remain primarily liable for
SynQuest's obligations under this Agreement. This Agreement is not assignable
by Executive, by operation of law or otherwise.
14.3 Choice of Law. This Agreement will be governed by and
enforced under the laws of Georgia.
14.4 Notices. Every notice or other communication required or
permitted to be given under this Agreement must be in writing and must be
delivered by messenger, transmitted by facsimile, sent by next-day air courier
or mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to Executive at the last address on
SynQuest's records, and if to SynQuest, at SynQuest, Inc., 3500 Parkway Lane,
Suite 555, Norcross, GA 30092 or to such other address as any party may have
furnished to the other in writing in accordance with this Section.
14.5 Modifications; Termination; Waiver. This Agreement may not be
changed, terminated, modified or waived orally. Any change, termination or
modification must be signed by Executive and SynQuest. Any waiver must be
signed by the parties thereto and must be denominated as a waiver. No waiver by
either party of any provision of this Agreement will constitute a waiver of
such provision in any other instance or a waiver of any other provision.
14.6 Severability. The covenants in this Agreement will be
construed as covenants independent of one another and as obligations distinct
from any other contract between Executive and SynQuest. Any claim that
Executive may have against SynQuest will not constitute a defense to
enforcement of this Agreement by SynQuest. 14.7 Entire Agreement. This
Agreement contains the entire understanding of the parties with respect to the
subject matter contained in this Agreement and supersedes any and all prior
agreements and understandings with respect to the employment of Executive by
SynQuest. To the extent any terms contained in this Agreement are in conflict
with or are inconsistent with the terms of any other agreement to which
Executive or Executive and SynQuest are parties, the terms of this Agreement
will govern.
14.8 Headings. The section headings in this Agreement are for
reference only and do not affect in any way the meaning or interpretation of
this Agreement.
14.9 Construction of Agreement. No provision of this Agreement or
any related document may be construed against or interpreted to the
disadvantage of any party hereto by any court or other government or judicial
authority by reason of such party having or being deemed to have structured or
drafted such provision.
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<PAGE> 12
The parties have caused this Agreement to be duly executed as of
September 1, 1998.
SynQuest:
SYNQUEST, INC.
By:
/s/ Joe Trino
--------------------------------
Name: Joe Trino
Title: CEO and President
Executive:
/s/ Christopher Jones
-----------------------------------
Christopher Jones
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<PAGE> 1
EXHIBIT 10.6
November 1, 1999
Mark Simcoe
3500 Parkway Lane
Suite 555
Norcross, GA 30092
Dear Mark,
This letter is to clarify the verbal agreement between you and SynQuest, Inc. in
the event of that SynQuest terminates your employment. If SynQuest terminates
your employment without cause you will be entitled to receive six (6) months of
your then current base salary as severance compensation, provided that, if
requested, you execute a standard release of the company in the form of release
then being used by the company for other terminated employees.
You are not entitled to any severance compensation in the event you voluntarily
terminate your employment with the SynQuest, or in the event your employment is
terminated by SynQuest for cause.
SynQuest, Inc.
By: /s/ John Bartels
------------------------
John Bartels
Agreed:
/s/ Mark Simcoe
- -------------------------
Mark Simcoe
<PAGE> 1
CONFORMED COPY
EFFECTIVE 11/9/99
EXHIBIT 10.7
SYNQUEST. INC.
1997 STOCK OPTION PLAN
DATED JUNE 4. 1997
AS AMENDED OCTOBER 29. 1997 JANUARY 23. 1998
AUGUST 24. 1998
OCTOBER 1. 1998
AND NOVEMBER 9. 1999
<PAGE> 2
TABLE OF CONTENTS
ss.1. PURPOSE
ss.2. DEFINITIONS
2.1. "Board"
2.2. "Change in Control"
2.3. "Code"
2.4. "Director"
2.5. "Fair Market Value"
2.6. "ISO"
2.7. "Key Employee"
2.8. "1933 Act"
2.9. "NQO"
2.10. "Option"
2.11. "Option Agreement"
2.12. "Option Price"
2.13. "Parent"
2.14. "Plan"
2.15. "Stock"
2.16. "Subsidiary"
2.17. "SynQuest"
2.18. "Ten Percent Shareholder"
ss.3. SHARES SUBJECT TO OPTIONS
ss.4. EFFECTIVE DATE
ss.5. ADMINISTRATION
ss.6. ELIGIBILITY
ss.7. GRANT OF OPTIONS
7.1. Grant
7.2. $100,000 Limit
ss.8. OPTION PRICE
ss.9. EXERCISE PERIOD
ss.10. NONTRANSFERABILITY
<PAGE> 3
ss.11. SECURITIES REGISTRATION AND RESTRICTIONS
11.1. Investment Representation
11.2. Registration or Qualification of Shares
ss.12. LIFE OF PLAN
ss.13. ADJUSTMENT
ss.14. CHANGE IN CONTROL
ss.15. AMENDMENT OR TERMINATION
ss.16. MISCELLANEOUS
16.1. No Shareholder Rights
16.2. Employment
16.3. Shareholder Agreement
16.4. Withholding
16.5. Construction
<PAGE> 4
SS. 1.
PURPOSE
The purpose of this Plan is to promote the interests of
SynQuest and its related companies by granting Options to purchase Stock to Key
Employees and Directors in order (a) to encourage a sense of proprietorship on
the part of Key Employees and Directors who will be largely responsible for the
continued growth of SynQuest, (b) to furnish such Key Employees and Directors
with further incentive to develop and promote the business and financial success
of SynQuest and (c) to induce such Key Employees and Directors to continue in
the service of SynQuest, by providing a means whereby such selected individuals
may purchase stock in SynQuest.
SS. 2.
DEFINITIONS
Each term set forth in this ss. 2 shall have the meaning set
forth opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.
2.1. "BOARD" -- means the Board of Directors of SynQuest.
2.2. "CHANGE IN CONTROL" -- means (a) the sale of all or
substantially all of the assets of SynQuest, whether in a single transaction or
in a series of transactions occurring within any single 12 month period, (b) the
sale by one or more shareholders of SynQuest, in a single transaction or in
series of transactions occurring within any single 12 month period, of more than
50% of the issued and outstanding capital stock of SynQuest to any individual,
corporation, trust or other entity which is not a shareholder, or is not
controlled by a shareholder, of SynQuest as of
<PAGE> 5
the date of grant of an Option; (c) a merger, reorganization, exchange of
stock or other securities, or other business combination between SynQuest and
another corporation, trust or other business entity which results in the present
shareholders of SynQuest owning less than 51% of the total issued and
outstanding capital stock of the surviving entity; or (d) the issuance of
capital stock of SynQuest after the date of grant of an Option, whether by
private placement or public offering or pursuant to the exercise of warrants,
options or conversion rights, which causes the existing shareholders of SynQuest
to own less than 51% of the total issued and outstanding capital stock of
SynQuest.
2.3. "CODE" -- means the Internal Revenue Code of 1986, as amended.
2.4. "DIRECTOR" -- means any member of the Board who is not any
employee of SynQuest or a Parent or Subsidiary.
2.5. "FAIR MARKET VALUE" -- means as of any date (a) the price that
the Board acting in good faith determines through any reasonable valuation
method that a share of Stock might change hands between a willing buyer and a
willing seller, neither being under any compulsion to buy or to sell and both
having reasonable knowledge of the relevant facts; provided, however, if the
Stock is publicly traded on such date, "Fair Market Value" means (b) the closing
price on such date for a share of Stock as reported by The Wall Street Journal
under the quotation system under which such closing price is reported or, if The
Wall Street Journal does not report such closing price, such closing price as
reported by a newspaper or trade journal selected by the Board or, if no such
closing price is available on such date, (c)such closing price as so reported in
accordance with ss. 2.5(b) for the immediately preceding business day or, if no
newspaper or trade journal reports such closing price or if no such price
quotation is available, (d) the price as determined in accordance with ss.
2.5(a).
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<PAGE> 6
2.6. "ISO" -- means an option granted under this Plan to purchase
Stock that is intended to satisfy the requirements of ss. 422 of the Code.
2.7. "KEY EMPLOYEE" -- means an employee of SynQuest or any Parent
or Subsidiary, or a non-employee consultant retained by SynQuest or any Parent
or Subsidiary, who, in the judgment of the Board acting in its absolute
discretion, is a key to the success of SynQuest or a Parent or Subsidiary.
2.8. "1933 ACT" -- means the Securities Act of 1933, as amended.
2.9. "NQO" -- means an option granted under this Plan to purchase
stock that by its terms provides that it will not be treated as an incentive
stock option under ss. 422 of the Code or that fails to satisfy the requirements
of ss. 422 of the Code.
2.10. "OPTION" -- means an ISO or a NQO.
2.11. "OPTION AGREEMENT" -- means the written agreement or
instrument that sets forth the terms of an Option granted to a Key Employee or
Director under this Plan.
2.12. "OPTION PRICE" -- means the price that shall be paid to
purchase one share of Stock upon the exercise of an Option granted under this
Plan.
2.13. "PARENT" -- means any corporation that is a parent corporation
(within the meaning of ss. 424(e) of the Code) of SynQuest.
2.14. "PLAN" -- means this SynQuest, Inc. 1997 Stock Option Plan as
mended from time to time thereafter.
2.15. "STOCK" -- means the $.01 par value Common Stock of SynQuest.
2.16. "SUBSIDIARY" -- means any corporation that is a subsidiary
corporation (within the meaning of ss. 424 (f) of the Code) of SynQuest.
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<PAGE> 7
2.17. "SYNQUEST" -- means SynQuest, Inc. and any successor to such
corporation.
2.18. "TEN PERCENT SHAREHOLDER" -- means a person who owns (after
taking into account the attribution roles of ss. 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of either
SynQuest, a Parent or a Subsidiary.
SS. 3.
SHARES SUBJECT TO OPTIONS
There shall be 3,800,000 shares of Stock reserved for use
under this Plan. Such shares of Stock shall he reserved to the extent that the
Board deems appropriate from authorized but unissued shares of Stock and from
shares of Stock that have been reacquired by SynQuest. Any shares of Stock
subject to an Option that remain unissued after the cancellation, expiration or
exchange of such Option for another Option shall again become available for use
under this Plan, but any shares of Stock used to satisfy a withholding
obligation under ss. 16.4 of this Plan shall not again be available for use
under this Plan.
SS. 4.
EFFECTIVE DATE
The effective date of this Plan shall be the date the Plan is
adopted by the Board, provided SynQuest's shareholders (acting at a duly called
meeting of such shareholders) approve the establishment of this Plan within 12
months after the date the Board adopts this Plan. Any Option granted before such
shareholder approval automatically shall be granted subject to such
4
<PAGE> 8
approval. If there is no such approval by SynQuest's shareholders, this Plan
shall not go into effect and the grant of any Options under this Plan shall be
null and void.
SS. 5.
ADMINISTRATION
This Plan shall be administered by the Board. The Board,
acting in its absolute discretion, shall exercise such powers and take such
action as expressly called for under this Plan and, further, the Board shall
have the power to interpret this Plan, and the respective Option Agreements
entered into hereunder, and to take such other action in the administration and
operation of this Plan as the Board deems equitable under the circumstances,
which action shall be final and binding on SynQuest, on each affected Key
Employee and Director and on each other person directly or indirectly affected
by such action.
SS. 6.
ELIGIBILITY
Key Employees and Directors shall be eligible for the grant of
NQOs under this Plan. Only Key Employees who are current employees of SynQuest
or a Parent or Subsidiary shall be eligible for the grant of ISOs under this
Plan.
SS. 7.
GRANT OF OPTIONS
7.1. Grant. The Board acting in its absolute discretion shall grant
Options to Key Employees and Directors under this Plan from time to time to
purchase shares of Stock and,
5
<PAGE> 9
further, shall have the right to grant new Options in exchange for the
cancellation of outstanding Options that have a higher or lower option Price.
Each grant of an option shall be evidenced by an Option Agreement, and each
Option Agreement shall
(a) specify whether the Option is an ISO or NQO, and
(b) incorporate such other terms and conditions as the Board
acting in its absolute discretion deems consistent with the
terms of this Plan, including (without limitation) a
limitation on the number of shares subject to the Option which
first become exercisable during any particular period.
To the extent the Board grants an Option that SynQuest intends to constitute an
incentive stock option under ss. 422 of the Code but such Option fails to
satisfy the requirements under ss. 422 of the Code, such Option shall be treated
as a NQO. If the Board grants an ISO and a NQO to an eligible Key Employee on
the same date, the right of the Key Employee to exercise the ISO shall not be
conditioned on his or her failure to exercise the NQO.
7.2. $100,000 Limit. The aggregate Fair Market Value of the shares
of Stock subject to ISOs and other incentive stock options (that satisfy the
requirements under ss. 422 of the Code) granted to an eligible Key Employee
under this Plan and under any other stock option plan adopted by SynQuest, a
Parent or a Subsidiary that first become exercisable in any calendar year shall
not exceed $100,000. Such Fair Market Value figure shall be determined by the
Board on the date the ISO or other incentive stock option is granted. The Board
shall interpret and administer the limitation set forth in this ss. 7.2 in
accordance with ss. 422(d) of the Code, and the Board shall treat this ss. 7.2
as in effect only for those periods for which ss. 422(d) of the Code is in
effect.
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<PAGE> 10
SS. 8.
OPTION PRICE
The Option Price for each share of Stock subject to an ISO
shall be set by thc Board at the time the Option is granted, but such price
shall not be set at less than the Fair Market Value of a share of Stock on the
date the ISO is granted or, if the ISO is granted to an eligible Key Employee
who is a Ten Percent Shareholder, the Option Price for each share of Stock
subject to such ISO shall be no less than 110% of the Fair Market Value of a
share of Stock on the date the ISO is granted. The Option Price for a NQO may be
less than the Fair Market Value of a share of Stock on the date the NQO is
granted but shall under no circumstances be less than adequate consideration (as
determined by the Board) for such a share. The option Price shall be payable in
full upon the exercise of any Option, and an option Agreement at the discretion
of the Board may provide for the payment of the Option Price either in cash or
in Stock held by the Key Employee or Director or in any combination of cash and
such Stock. If an Option Agreement allows the payment of the Option Price in
whole or in part in Stock, such payment shall be made in Stock acceptable to the
Board which the Key Employee or Director has held for at least 6 months. Any
payment made in Stock shall be treated as equal to the Fair Market Value of such
Stock as of the date the properly endorsed certificate for such Stock is
delivered to the Board.
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<PAGE> 11
SS. 9.
EXERCISE PERIOD
Each Option granted under this Plan shall be exercisable in
whole or in part at such time or times as set forth in the related Option
Agreement, but no Option Agreement shall make an option exercisable on or after
the earlier of
(a) the date that is the fifth anniversary of the date the Option
is granted, if the option is an ISO and the eligible Key
Employee is a Ten Percent Shareholder on the date the Option
is granted, or
(b) the date that is the tenth anniversary of the date the Option
is granted, if the option is a NQO or if the option is an ISO
and is granted to an eligible Key Employee who is not a Ten
Percent Shareholder on the date the Option is granted.
An Option Agreement may provide for the exercise of an option after the
employment of a Key Employee or the service of a Director has terminated for any
reason whatsoever, including death or disability; provided, however, to the
extent an ISO remains or becomes exercisable on or after the last day of the 3
consecutive month period that immediately follows the last day of a Key
Employee's continuous period of employment by SynQuest, a Parent or a Subsidiary
(other than as a result of death or disability), the Option after such date no
longer will qualify for any special income tax benefits under ss. 422 of the
Code.
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<PAGE> 12
SS. 10.
NONTRANSFERABILITY
No option granted under this Plan shall be transferable by a
Key Employee or Director, and such option shall be exercisable during the
lifetime of a Key Employee or Director only by such Key Employee or Director,
except that (1) an Option may be transferred by will or by the laws of descent
and distribution, and the person or persons to whom an Option is transferred by
will or by the laws of descent and distribution will be treated as the Key
Employee or Director under this Plan, and (2) in the case of an NQO only, a Key
Employee or Director may transfer the NQO (whether by gift or sale), in whole or
in part, to an entity (including without limitation a partnership, limited
partnership, corporation, limited liability company, or trust), if (and only if)
all of the beneficial interests of the transferee entity are held by the Key
Employee or Director, the Key Employee's or Director's spouse, and/or the Key
Employee's or Director's direct lineal descendants, and the entity to which the
NQO is so transferred will be treated as the Key Employee or Director under this
Plan.
SS. 11.
SECURITIES REGISTRATION AND RESTRICTIONS
11.1. Investment Representation. Each Option Agreement shall provide
that, if so requested by SynQuest, the Key Employee or Director shall make a
written representation to SynQuest that he or she will not sell or offer for
sale any of such Stock unless a registration statement shall be in effect with
respect to such Stock under the 1933 Act and any applicable state securities law
or he or she shall have furnished to SynQuest an opinion in form and substance
satisfactory to SynQuest of legal counsel satisfactory to SynQuest that such
9
<PAGE> 13
registration is not required. Certificates representing the Stock transferred
upon the exercise of an Option may, at the discretion of SynQuest, bear a legend
to the effect that the Key Employee or Director agrees to hold such Stock for
investment and not with a view to resale or distribution to the public and that
such Stock has not been registered under the 1933 Act or any applicable state
securities law and that such Stock cannot be sold or offered for sale in the
absence of an effective registration statement as to such Stock under the 1933
Act and any applicable state securities law or an opinion in form and substance
satisfactory to SynQuest of legal counsel satisfactory to SynQuest that such
registration is not required.
11.2. Registration or Qualification of Shares. If the Board
determines that registration or qualification of shares is necessary or
desirable, SynQuest shall, at its expense, take such action as may be required
to effect such registration or qualification.
SS. 12.
LIFE OF PLAN
No Option shall be granted under this Plan on or after the
earlier of (a) the tenth anniversary of the effective date of this Plan (as
determined under ss. 4 of this Plan), in which event this Plan shall continue in
effect thereafter until all outstanding Options have been exercised in full or
no longer are exercisable, or (b) the date on which all of the Stock reserved
under ss. 3 of this Plan has (as a result of the exercise of options) been
issued or no longer is available for use under this Plan, in which event this
Plan also shall terminate on such date.
10
<PAGE> 14
SS. 13.
ADJUSTMENT
The number, kind or class (or any combination thereof) of
shares of Stock reserved under ss. 3 of this Plan and the number, kind or class
(or any combination thereof) of shares of Stock subject to options granted under
this Plan and the option Price of such Options shall be adjusted by the Board in
an equitable manner to reflect any change in the capitalization of SynQuest,
including, but not limited to, such changes as stock dividends or stock splits.
Furthermore, the Board shall have the right to adjust (in a manner which
satisfies the requirements of ss. 424(a) of the Code) the number, kind or class
(or any combination thereof) of shares of Stock reserved under ss. 3 of this
Plan and the number, kind or class (or any combination thereof) of shares
subject to Options granted under this Plan and the Option Price of such options
in the event of any corporate transaction described in ss. 424(a) of the Code,
which provides for the substitution or assumption of such Options in order to
take into account on an equitable basis the effect of such transaction. If any
adjustment under this ss. 13 would create a fractional share of Stock or a right
to acquire a fractional share of Stock, such fractional share shall be
disregarded and the number of shares of Stock reserved under this Plan and the
number subject to any Options granted under this Plan shall be the next lower
number of shares of Stock, rounding all fractions downward. An adjustment made
under this ss. 13 by the Board shall be conclusive and binding on all affected
persons and, further, shall not constitute an increase in "the number of shares
reserved under ss. 3" within the meaning of ss. 15(a) of this Plan.
11
<PAGE> 15
SS. 14.
CHANGE IN CONTROL
If there is a Change in Control, SynQuest shall notify each
Key Employee or Director who has an Option outstanding and each such Key
Employee or Director thereafter shall have the right to exercise in full any
option previously granted to him or her that is then outstanding
(notwithstanding that such Option may not otherwise have fully vested under the
terms of the applicable option Agreement).
SS. 15.
AMENDMENT OR TERMINATION
Plan may be amended by the Board from time to time to the
extent that the Board deems necessary or appropriate; provided, however, no such
amendment shall be made absent the proper approval of the shareholders of
SynQuest (a) to increase the number of shares reserved under ss. 3 of this Plan,
(b) to change the class of employees eligible for options under ss. 6 of this
Plan, or (c) to comply with applicable provisions of the Code, state law or NASD
or exchange listing rules, which require such shareholder approval. The Board
also may suspend the granting of Options under this Plan at any time and may
terminate this Plan at any time; provided, however, the Board shall not have the
right unilaterally to modify, amend or cancel any Option granted before such
suspension or termination unless (i) the Key Employee or Director consents in
writing to such modification, amendment or cancellation or (ii) there is a
dissolution or liquidation of SynQuest or a transaction described in ss. 13 or
ss. 14 of this Plan.
12
<PAGE> 16
SS. 16.
MISCELLANEOUS
16.1. No Shareholder Rights. No Key Employee or Director shall have
any rights as a shareholder of SynQuest as a result of the grant of an Option to
him or to her under this Plan or his or her exercise of such Option pending the
actual delivery of Stock subject to such Option to such Key Employee or
Director.
16.2. Employment. The grant of an Option to a Key Employee or
Director under this Plan shall not constitute a contract of employment or a
right to continue to serve on the Board and shall not confer on a Key Employee
or Director any rights upon his or her termination of employment or services as
a Director in addition to those rights, if any, expressly set forth in the
Option Agreement that evidences his or her Option.
16.3. Shareholder Agreement. SynQuest shall have the right to
require a Key Employee or Director to enter into such employment, shareholder,
buy-sell, right of first refusal or other agreement or agreements that SynQuest
deems appropriate under the circumstances as a condition to the grant or to the
exercise of any Option.
16.4. Withholding. Each Option grant shall be made subject to the
condition that the Key Employee or Director consents to whatever action the
Board directs to satisfy the federal and state tax withholding requirements, if
any, that the Board in its discretion deems applicable to the exercise of such
option. The Board also shall have the right to provide, in an option Agreement,
that a Key Employee or Director may elect to satisfy federal and state tax
withholding requirements through a reduction in the number of shares of Stock
actually transferred to him or to her under this Plan.
13
<PAGE> 17
16.5. Construction. This Plan shall be construed under the laws of
the State of Georgia. The headings in this Plan are for convenience of reference
purposes only.
14
<PAGE> 18
IN WITNESS WHEREOF, SynQuest, Inc. has caused its duly
authorized officer to execute this Plan, as amended this 1st day of February,
1998 to evidence its adoption of this Plan, as amended.
SYNQUEST, INC.
/s/ Joe Trino
By: Joe Trino
Title: Chief Executive Officer
15
<PAGE> 1
EXHIBIT 10.8
GREYROCK
BUSINESS
CREDIT
A NATIONSBANK COMPANY
LOAN AND SECURITY AGREEMENT
BORROWER: FACTORY AUTOMATION & COMPUTER TECHNOLOGIES, INC.
ADDRESS: WATERFORD CENTER
5555 TRIANGLE PARKWAY, SUITE 350
NORCROSS, GEORGIA 30092
DATE: JULY 10, 1996
This Loan and Security Agreement is entered into on the above date between
GREYROCK BUSINESS CREDIT, a Division of NationsCredit Commercial Corporation
("GBC"), whose address is 300 North Continental Blvd., Suite 200, El Segundo,
California 90245 and the borrower named above ("Borrower"), whose chief
executive office is located at the above address ("Borrower's Address"). The
Schedule to this Agreement (the "Schedule") being signed concurrently is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
1. LOANS.
1.1. LOANS. GBC will make loans to Borrower (the "Loans") up to the
amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event
of Default has occurred and is continuing. If at any time or for any reason the
total of all outstanding Loans and all other Obligations exceeds the Credit
Limit, Borrower shall immediately pay the amount of the excess to GBC, without
notice or demand.
1.2. INTEREST. All Loans and all other monetary Obligations shall
bear interest at the rate shown on the Schedule, except where expressly set
forth to the contrary in this Agreement or in another written agreement signed
by GBC and Borrower. Interest shall be payable monthly, on the last day of the
month. Interest may, in GBC's discretion, be charged to Borrower's loan account,
and the same shall thereafter bear interest at the same rate as the other Loans.
1.3. FEES. Borrower shall pay GBC the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to GBC and are not
refundable.
2. SECURITY INTEREST.
2.1. SECURITY INTEREST. To secure the payment and performance of
all of the Obligations when due, Borrower hereby grants to GBC a security
interest in all of Borrower's interest in the following, whether now owned or
hereafter acquired, and wherever located (collectively, the "Collateral"): All
Inventory, Equipment, Receivables, and General Intangibles,
<PAGE> 2
including, without limitation, all of Borrower's Deposit Accounts, all money,
all collateral in which GBC is granted a security interest pursuant to any other
present or future agreement, all property now or at any time in the future in
GBC's possession, and all proceeds (including proceeds of any insurance
policies, proceeds of proceeds and claims against third parties), all products
of the foregoing, and all books and records related to any of the foregoing.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce GBC to enter into this Agreement and to make Loans,
Borrower represents and warrants to GBC as follows, and Borrower covenants that
the following representations will continue to be true,* and that Borrower will
at all times comply with all of the following covenants:
* (EXCEPT AS EXPRESSLY PROVIDED BELOW FOR CHANGES PURSUANT TO WRITTEN NOTICE BY
BORROWER TO GBC)
3.1. CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation,
is and will continue to be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Borrower is
and will continue to be qualified and licensed to do business in all
jurisdiction of its incorporation. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would have a material adverse effect on Borrower. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors' rights generally), (iii) do not violate
Borrower's articles or certificates of incorporation, or Borrower's by-laws, or
any law or any material agreement or instrument which is binding upon Borrower
or its property, and (iv) do not constitute grounds for acceleration of any
material indebtedness or obligation under any material agreement or instrument
which is binding upon Borrower or its property.
3.2. NAME; TRADE NAMES AND STYLES. The name of Borrower set forth
in the heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give GBC 30 days' prior written notice before changing its name
or doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3. PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set
forth in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule*. Borrower will give GBC at least 30 days'
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral** other than
Borrower's Address or one of the locations set forth on the Schedule*.
2
<PAGE> 3
* (EXCEPT FOR SALES OFFICES AT WHICH NOT MORE THAN $50,000 OF
COLLATERAL IS LOCATED)
** TO ANY NEW LOCATION NOT PREVIOUSLY REPORTED TO GBC
3.4. TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and
will at all times in the future be, the sole owner of all the Collateral, except
for items of Equipment which are leased by Borrower. The Collateral now is and
will remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. GBC now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend GBC and the Collateral against all claims of
others*. Borrower is not and will not become a lessee under any real property
lease pursuant to which the lessor may obtain any rights in any of the
Collateral** and no such lease now prohibits, restrains, impairs or will
prohibit, restrain or impair Borrower's right to remove any Collateral from the
leased premises**. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by GBC,
use its*** best efforts to cause such third party to execute and deliver to GBC,
in form acceptable to GBC, such waivers and subordinations as GBC shall specify,
so as to ensure that GBC's rights in the Collateral are, and will continue to
be, superior to the rights of any such third party. Borrower will keep in full
force and effect, and will comply with all the**** terms of, any lease of real
property where any of the Collateral now or in the future may be located+.
* WITH RESPECT TO THE COLLATERAL (EXCEPT FOR THOSE HOLDING PERMITTED
LIENS)
** (UNLESS BORROWER PROVIDES GBC WITH A LANDLORD WAIVER WITH RESPECT
THERETO IN FORM AND SUBSTANCE SATISFACTORY TO GBC, IF SO REQUESTED BY GBC, OR
UNLESS THE SAME IS A SALES OFFICE AT WHICH NOT MORE THAN $50,000 OF COLLATERAL
IS LOCATED)
*** REASONABLE
**** MATERIAL
+ EXCEPT FOR LEASES OF SALES OFFICES AT WHICH NOT MORE THAN $50,000 OF
COLLATERAL IS LOCATED
3.5. MAINTENANCE OF COLLATERAL. Borrower will maintain the
*Collateral in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose. Borrower will
immediately advise GBC in writing of any material loss of damage to the
Collateral.*
* EQUIPMENT AND OTHER TANGIBLE
3
<PAGE> 4
* BORROWER WILL MAINTAIN THE VALIDITY OF, AND OTHERWISE MAINTAIN,
PRESERVE AND PROTECT, ITS PATENTS, TRADEMARKS, COPYRIGHTS AND OTHER INTELLECTUAL
PROPERTY IN ACCORDANCE WITH PRUDENT BUSINESS PRACTICES.
3.6. BOOKS AND RECORDS. Borrower has maintained and will maintain
at Borrower's Address books and records,* an accounting system in accordance
with generally accepted accounting principles.
* WHICH ARE COMPLETE AND ACCURATE IN ALL MATERIAL RESPECTS AND WHICH
COMPRISE
3.7. FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to GBC have been, and will be,
prepared in conformity with generally accepted accounting principles and now and
in the future will fairly reflect the financial condition of Borrower, at the
times and for the periods therein stated. Between the last date covered by any
such statement provided to GBC and the date hereof, there has been no material
adverse change in the financial condition or business of Borrower. Borrower is
now and will continue to be solvent*.
* AS USED HEREIN, "SOLVENT" MEANS, AS TO ANY PERSON AT ANY TIME, THAT
(A) THE FAIR VALUE OF THE PROPERTY OF SUCH PERSON IS GREATER THAN THE AMOUNT OF
SUCH PERSON'S LIABILITIES AS SUCH VALUE IS ESTABLISHED AND LIABILITIES EVALUATED
FOR PURPOSES OF SECTION 101(31) OF THE BANKRUPTCY REFORM ACT OF 1978 AND, IN THE
ALTERNATIVE, FOR PURPOSES OF THE APPLICABLE FRAUDULENT TRANSFER OR CONVEYANCE
STATUTE IN EFFECT IN THE STATE OF GEORGIA; (B) THE PRESENT FAIR SALEABLE VALUE
OF THE PROPERTY OF SUCH PERSON IS NOT LESS THAN THE AMOUNT THAT WILL BE REQUIRED
TO PAY THE PROBABLE LIABILITY OF SUCH PERSON ON ITS DEBTS AS THEY BECOME
ABSOLUTE AND MATURED; (C) SUCH PERSON IS ABLE TO REALIZE UPON ITS PROPERTY AND
PAY ITS DEBTS AND OTHER LIABILITIES (INCLUDING DISPUTED, CONTINGENT AND
UNLIQUIDATED LIABILITIES) AS THEY MATURE IN THE NORMAL COURSE OF BUSINESS; (D)
SUCH PERSON DOES NOT INTEND TO, AND DOES NOT BELIEVE THAT IT WILL, INCUR DEBTS
OR LIABILITIES BEYOND SUCH PERSON'S ABILITY TO PAY AS SUCH DEBTS AND LIABILITIES
BEYOND SUCH PERSON'S ABILITY TO PAY AS SUCH DEBTS AND LIABILITIES MATURE; AND
(E) SUCH PERSON IS NOT ENGAGED IN BUSINESS OR A TRANSACTION, AND IS NOT ABOUT TO
ENGAGE IN BUSINESS OR A TRANSACTION, AND IS NOT ABOUT TO ENGAGE IN BUSINESS OR A
TRANSACTION, FOR WHICH SUCH PERSON'S PROPERTY WOULD CONSTITUTE UNREASONABLY
SMALL CAPITAL.
3.8. TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed, and will timely file, all tax returns and reports required by
applicable law, and Borrower has timely paid, and will timely pay, all
applicable taxes, assessments, deposits and contributions now or in the future
owed by Borrower*. Borrower may, however, defer payment of any contested taxes,
provided that Borrower (i) in good faith contests Borrower's obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies GBC in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid, and shall continue to pay all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
and will not withdraw
4
<PAGE> 5
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency. Borrower shall, at all
times, utilize the services of an outside payroll service providing for the
automatic deposit of all payroll taxes payable by Borrower.
* (EXCEPT WHERE FAILURE TO DO SO WOULD NOT HAVE A MATERIAL ADVERSE
EFFECT ON BORROWER AND WOULD NOT RESULT IN A LIEN ON ANY OF THE COLLATERAL, BUT
ONLY SO LONG AS BORROWER MAINTAINS ADEQUATE RESERVES WITH RESPECT TO SUCH
LIABILITIES IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
CONSISTENTLY APPLIED)
3.9. COMPLIANCE WITH LAW. Borrower has complied, and will comply,
in all material respects, with all provisions of all applicable laws and
regulations, including, but not limited to, those relating to Borrower's
ownership of real or personal property, the conduct and licensing of Borrower's
business, and all environmental matters.
3.10. LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which* result, either separately or in the aggregate, in any material
adverse change in the financial condition or business of Borrower, or in any
material impairment in the ability of Borrower to carry on its business in
substantially the same manner as it is now being conducted. Borrower will
promptly inform GBC in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against Borrower.**
* IS REASONABLY LIKELY TO
** WHICH, IF DETERMINED ADVERSELY TO THE BORROWER, WOULD BE REASONABLY
LIKELY TO RESULT IN (I) A JUDGMENT, LOSS OR PAYMENT OF $50,000 OR MORE, OR
$100,000 OR MORE IN THE AGGREGATE, OR (II) A MATERIAL ADVERSE CHANGE IN THE
BUSINESS OR CONDITION OF BORROWER, OR A MATERIAL IMPAIRMENT IN THE ABILITY OF
BORROWER TO CARRY ON ITS BUSINESS IN SUBSTANTIALLY THE SAME MANNER AS IT IS NOW
BEING CONDUCTED.
3.11. USE OF PROCEEDS. All proceeds of all Loans shall be used
solely for lawful business purposes.
4. RECEIVABLES.
4.1. REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents
and warrants to GBC as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed, bona fide, existing, unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods* or the
rendition of services, in the ordinary course of Borrower's business**, and (ii)
meet the Minimum Eligibility Requirements set forth in Section 8 below.
* , THE LICENSING OF SOFTWARE,
** (EXCEPT AS DISCLOSED TO AND APPROVED BY GBC)
5
<PAGE> 6
4.2. REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to GBC as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall comply
with all applicable laws and governmental rules and regulations. All signatures
and endorsements on all documents, instruments, and agreements relating to all
Receivables are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
4.3. SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower
shall deliver to GBC transaction reports and loan requests, schedules and
assignments of all Receivables, and schedules of collections, all on GBC's
standard forms; provided, however, that Borrower's failure to execute and
deliver the same shall not affect or limit GBC `s security interest and other
rights in all of Borrower's Receivables, nor shall GBC's failure to advance or
lend against a specific Receivable affect or limit GBC's security interest and
other rights therein. Together with each such schedule and assignment, or later
if requested by GBC, Borrower shall furnish GBC with copies (or, at GBC's
request, originals) of all contracts, orders, invoices, and other similar
documents, and all original shipping instructions, delivery receipts, bills of
lading, and other evidence of delivery, for any goods the sale or disposition of
which gave rise to such Receivables, and Borrower warrants the genuineness of
all of the foregoing. Borrower shall also furnish to GBC an aged accounts
receivable trial balance in such form and at such intervals as GBC shall*
request**. In addition, Borrower shall deliver to GBC the originals of all
instruments, chattel paper, security agreements, guarantees and other documents
and property evidencing or securing any Receivables, immediately upon receipt
thereof and in the same form as received, with all necessary endorsements.
* REASONABLY
**, PROVIDED THAT IF NO EVENT OF DEFAULT EXISTS, GBC MAY NOT REQUEST
THE FOREGOING MORE THAN TWICE IN ONE MONTH
4.4. COLLECTION OF RECEIVABLES. Borrower shall have the right to
collect all Receivables, unless and until a Default or an Event of Default has
occurred. Borrower shall hold all payments on, and proceeds of, Receivables in
trust for GBC, and Borrower shall deliver all such payments and proceeds to GBC,
within one business day after receipt of the same, in their original form, duly
endorsed, to be applied to the Obligations in such order as GBC shall determine.
4.5. DISPUTES. Borrower shall notify GBC promptly of all disputes*
or claims relating to Receivables on the regular reports to GBC. Borrower shall
not forgive, or settle any Receivable for less than payment in full, or agree to
do any of the foregoing, except that Borrower may do so, provided that: (i)
Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to GBC on the regular reports provided to GBC; (ii) no Default or Event
of Default
6
<PAGE> 7
has occurred and is continuing; and (iii) taking into account all such
settlements and forgiveness, the total outstanding Loans and other Obligations
will not exceed the Credit Limit.
* IN EXCESS OF $50,000
4.6. RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount (sending a copy to GBC). In the event any attempted
return occurs after the occurrence of any Event of Default, Borrower shall (i)
not accept any return without GBC's prior written consent, (ii) hold the
returned Inventory in trust for GBC, (iii) segregate all returned Inventory from
all of Borrower's other property, (iv) conspicuously label the returned
Inventory as GBC's property, and (v) immediately notify GBC of the return, the
location and condition of the returned Inventory, and on GBC's request deliver
such returned Inventory to GBC.
4.7. VERIFICATION. GBC may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower or GBC or such other name as GBC may choose, and GBC or its designee
may, at any time, notify Account Debtors that it has a security interest in the
Receivables.*
** IF NO EVENT OF DEFAULT EXISTS, GBC WILL PROVIDE BORROWER WITH ONE
WEEK'S PRIOR WRITTEN NOTICE OF ANY SUCH VERIFICATION.
4.8. NO LIABILITY. GBC shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall GBC be deemed to be responsible for any of Borrower's
obligations under any contract or agreement giving rise to a Receivable. Nothing
herein shall, however, relieve GBC from liability for its own gross negligence
or willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1. INSURANCE. Borrower shall, at all times, insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to GBC, in such form and amounts as GBC may
reasonably require, and Borrower shall provide evidence of such insurance to
GBC, so that GBC is satisfied that such insurance is, at all time, in full force
and effect. All such insurance policies shall name GBC as an additional loss
payee, and shall contain a lenders loss payee endorsement in form reasonably
acceptable to GBC. Upon receipt of the proceeds of any such insurance, GBC shall
apply such proceeds in reduction of the Obligations as GBC shall determine in
its sole discretion, except that, provided no Default or Event of Default has
occurred and is continuing, GBC shall release to Borrower* insurance proceeds
with respect to Equipment totaling less than $100,000, which shall be utilized
by Borrower for the replacement of the Equipment with respect to which the
insurance proceeds
7
<PAGE> 8
were paid**. GBC may require reasonable assurance that the insurance proceeds so
released will be so used. If Borrower fails to provide or pay for any insurance,
GBC may, but is not obligated to, obtain the same at Borrower's expense.
Borrower shall promptly deliver to GBC copies of all*** reports made to
insurance companies.
* (I)
** AND (II) INSURANCE PROCEEDS WITH RESPECT TO INVENTORY TOTALING LESS
THAN $100,000, WHICH SHALL BE UTILIZED BY BORROWER FOR THE REPLACEMENT OF THE
INVENTORY WITH RESPECT TO WHICH THE INSURANCE PROCEEDS WERE PAID.
*** MATERIAL
5.2. REPORTS. Borrower, at its expense, shall provide GBC with the
written reports set forth in the Schedule, and such other written reports set
forth in the Schedule, and such other written reports with respect to Borrower
(including budgets, sales projections, operating plans and other financial
documentation), as GBC shall from time to time reasonably specify.
5.3. ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times,
and on one business day's notice, GBC, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records*. GBC shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but GBC shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $600 per person per day (or such higher amount as shall represent GBC's
then current standard charge for the same), plus reasonable out-of-pockets
expenses. Borrower shall not be charged more than $3,000 per audit (plus
reasonable out-of-pocket expenses), nor shall audits be done more frequently
than four times per calendar year**, provided that the foregoing limits shall
not apply after the occurrence of a Default or Event of Default, nor shall they
restrict GBC's right to conduct audits at its own expense (whether or not a
Default or Event of Default has occurred). Borrower will not enter into any
agreement with any accounting firm, service bureau or third party to store
Borrower's books or records at any location other than Borrower's Address,
without first obtaining GBC's written consent, which may be conditioned upon
such accounting firm, service bureau or other third party agreeing to give GBC
the same rights with respect to access to books and records and related rights
as GBC has under this Agreement.
* ANY SUCH INSPECTION SHALL BE CONDUCTED BY GBC, OR ITS AGENTS, WITHOUT
MATERIAL HINDRANCE OR INTERRUPTION OF BORROWER'S BUSINESS.
** OR MORE THAN ONCE DURING ANY TWO MONTH PERIOD IN ANY CALENDAR YEAR
5.4. REMITTANCE OF PROCEEDS. All proceeds arising from the sale or
other disposition of any Collateral shall be delivered, in kind, by Borrower to
GBC* in the original form in which received by Borrower not later than the
following business day after receipt by Borrower**, to be applied to the
Obligations in such order as GBC shall determine; provided that, if no Default
or Event of Default has occurred and is continuing, then Borrower shall not be
obligated to remit to GBC the proceeds of the sale of Equipment which is sold in
the ordinary course of business, in
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<PAGE> 9
a good-faith arm's length transaction***. Except for the proceeds of the sale of
Equipment as set forth above, Borrower shall not commingle proceeds of
Collateral with any of Borrower's other funds or property, and shall hold such
proceeds separate and apart from such other funds and property and in an express
trust for GBC. Nothing in this Section limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
* (OR, AT GBC'S REQUEST, INTO A LOCKBOX ACCOUNT, OR OTHER BLOCKED ACCOUNT,
ESTABLISHED PURSUANT TO AN AGREEMENT ACCEPTABLE TO GBC, AND WITH A BANK SELECTED
BY BORROWER WHICH IS ACCEPTABLE TO GBC)
** (EXCEPT WIRE TRANSFER REMITTANCES RECEIVED BY BORROWER SHALL BE
TRANSMITTED TO GBC IN TOTAL THE DAY FOLLOWING POSTING TO BORROWER'S BANK
ACCOUNT)
*** NOR SHALL BORROWER BE OBLIGATED TO REMIT TO GBC ANY SUCH PROCEEDS
UNLESS THE AGGREGATE AMOUNT THEREOF RECEIVED AND HELD BY THE BORROWER EQUALS OR
EXCEEDS $25,000
5.5. NEGATIVE COVENANTS. Except as may be permitted in the
Schedule, Borrower shall not, without GBC's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity*; (ii)
acquire any assets, except in the ordinary course of business**; (iii) enter
into any***(iv) sell or transfer any Collateral, except that, provided no
Default or Event of Default has occurred and is continuing, Borrower may (a)
sell finished Inventory in the ordinary course of Borrower's business, (b) sell
Equipment in the ordinary course of business, in good-faith arm's length
transactions****; (v) store any Inventory or other Collateral with any
warehouseman or other third party*****; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets+, (viii) incur any debts, outside
the ordinary course of business, which would have a material, adverse effect on
Borrower or on the prospect of repayment of the Obligations++; (ix) guaranty or
otherwise become liable with respect to the obligations of another party or
entity+++; (x) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower)++++; (xi) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's
stock+++++; (xii) make any change in Borrower's capital structure which would
have a material adverse effect on Borrower or on the prospect of repayment of
the Obligations; or (xiii) dissolve or elect to dissolve; or (xiv) agree to do
any of the foregoing.
* (EXCEPT IN A TRANSACTION IN WHICH (A) THE CURRENT MAJORITY
SHAREHOLDERS OF THE BORROWER HOLD AT LEAST 51% OF THE COMMON STOCK AND ALL OTHER
CAPITAL STOCK OF THE SURVIVING CORPORATION IMMEDIATELY AFTER SUCH MERGER OR
CONSOLIDATION, (B) THE BORROWER IS THE SURVIVING CORPORATION AND (C) NO DEFAULT
OR EVENT OF DEFAULT SHALL EXIST EITHER IMMEDIATELY PRIOR TO OR AFTER GIVING
EFFECT TO THE TRANSACTION, AND EXCEPT THAT BORROWER MAY MERGE INTO ANOTHER
CORPORATION FOR PURPOSES OF EFFECTING A REINCORPORATION INTO ANOTHER STATE AFTER
GBC HAS NOTIFIED BORROWER IN WRITING THAT ALL STEPS NECESSARY TO PROTECT THE
VALIDITY AND PERFECTION OF GBC'S FIRST-PRIORITY SECURITY INTEREST IN THE
COLLATERAL, SUBJECT TO PERMITTED LIENS, HAVE BEEN TAKEN)
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<PAGE> 10
** (EXCEPT IN A TRANSACTION OR A SERIES OF TRANSACTIONS NOT INVOLVING
THE PAYMENT OF AN AGGREGATE AMOUNT IN EXCESS OF $100,000, PROVIDED THAT NO
DEFAULT OR EVENT OF DEFAULT SHALL EXIST EITHER IMMEDIATELY PRIOR TO OR AFTER
GIVING EFFECT TO THE TRANSACTION)
*** BUSINESS SUBSTANTIALLY DIFFERENT FROM THAT PRESENTLY ENGAGED IN
**** AND (C) LICENSE OR SUBLICENSE INTELLECTUAL PROPERTY IN THE
ORDINARY COURSE OF BORROWER'S BUSINESS
***** , UNLESS SUCH WAREHOUSEMAN OR OTHER THIRD PARTY ENTERS INTO A
BAILEE AGREEMENT WITH GBC ON TERMS SATISFACTORY TO GBC IN ITS SOLE DISCRETION
+ , EXCEPT (A) ADVANCES TO SUBSIDIARIES OF THE BORROWER AND CUSTOMERS
OR SUPPLIERS, IN EACH CASE, IF CREATED, ACQUIRED OR MADE IN THE ORDINARY COURSE
OF BUSINESS, OB) TRAVEL ADVANCES IN THE ORDINARY COURSE OF BUSINESS, (C)
EMPLOYEE RELOCATION LOANS IN THE ORDINARY COURSE OF BUSINESS, (D) OTHER EMPLOYEE
LOANS AND ADVANCES IN THE ORDINARY COURSE OF BUSINESS, (E) LOANS TO EMPLOYEES,
OFFICERS AND DIRECTORS FOR THE PURPOSE OF PURCHASING EQUITY SECURITIES OF THE
BORROWER, (F) OTHER LOANS TO OFFICERS AND EMPLOYEES APPROVED BY THE BOARD OF
DIRECTORS OF THE BORROWER AND (G) OTHER LOANS OR EXTENSIONS OF CREDIT NOT
OTHERWISE PERMITTED HEREUNDER, PROVIDED THAT THE AGGREGATE AMOUNT OF ALL OF THE
FOREGOING ITEMS SET FORTH IN (A), (B), (D), (E), (F) AND (G) SHALL NOT EXCEED
$1,000,000 AT ANY ONE TIME OUTSTANDING EXCEPT THAT ANY LOANS MADE PRIOR TO THE
DATE HEREOF PURSUANT TO ITEM (A) SHALL NOT BE INCLUDED IN SAID $1,000,000 LIMIT,
AND PROVIDED, FURTHER, THAT NO DEFAULT OR EVENT OF DEFAULT SHALL EXIST EITHER
IMMEDIATELY PRIOR TO OR AFTER GIVING EFFECT TO THE MAKING OF ANY OF THE
FOREGOING ADVANCES, LOANS OR OTHER EXTENSIONS OF CREDIT IN CLAUSES (A) THROUGH
(G)
++ ; PROVIDED THAT BORROWER MAY IN ANY CASE INCUR DEBT IN THE FORM OF
EQUIPMENT LEASES IN AN AMOUNT NOT TO EXCEED $350,000 IN ANY FISCAL YEAR
+++ EXCEPT THAT BORROWER MAY ISSUE GUARANTEES OF ITS SUBSIDIARIES'
OBLIGATIONS IN THE ORDINARY COURSE OF ITS BUSINESS IN AN AGGREGATE AMOUNT AT ANY
ONE TIME OUTSTANDING NOT TO EXCEED $250,000
++++ AND EXCEPT THAT BORROWER MAY PAY AND DECLARE DIVIDENDS UPON THE
BORROWER'S PREFERRED STOCK IN ACCORDANCE WITH THE PROVISIONS OF SAID PREFERRED
STOCK
+++++ (EXCEPT THAT BORROWER MAY REPURCHASE OR REDEEM SHARES OF ITS
CAPITAL STOCK (A) PURSUANT TO EMPLOYEE OPTION PLANS FOR AN AGGREGATE PURCHASE
PRICE NOT TO EXCEED $100,000 PER FISCAL YEAR, ON A NON-CUMULATIVE BASIS AND OB)
IF A CAPITAL CONTRIBUTION TO BORROWER HAS BEEN MADE PRIOR TO ANY SUCH PURCHASE
OR REDEMPTION IN AN AGGREGATE AMOUNT AT LEAST EQUAL TO THE AMOUNT OF THE
PURCHASE OR REDEMPTION)
5.6. LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against GBC with respect to any Collateral or in
any manner relating to Borrower, Borrower shall, without expense to GBC, make
available Borrower and its officers, employees and agents, and Borrower's books
and records, without charge, to the extent that GBC may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
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<PAGE> 11
5.7. NOTIFICATION OF CHANGES. Borrower will promptly notify GBC in
writing of any change in its* directors, the opening of any new bank account or
other deposit account, and any material adverse change in the business or
financial affairs of Borrower.
* EXECUTIVE OFFICERS OR
5.8. FURTHER ASSURANCES. Borrower agrees, at its expense, on
request by GBC, to execute all documents and take all actions, as GBC may deem
reasonably necessary or useful in order to perfect and maintain GBC's perfected
security interest in the Collateral, and in order to fully consummate the
transactions contemplated by this Agreement.
5.9. INDEMNITY. Borrower hereby agrees to indemnify GBC and hold
GBC harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses (including
attorneys' fees), of every nature, character and description, which GBC may
sustain or incur based upon or arising out of any of the Obligations, any actual
or alleged failure to collect and pay over any withholding or other tax relating
to Borrower or its employees, any relationship or agreement between GBC and
Borrower, any actual or alleged failure of GBC to comply with any writ of
attachment or other legal process relating to Borrower or any of its property,
or any other matter, cause or thing whatsoever occurred, done, omitted or
suffered to be done by GBC relating to Borrower or the Obligations (except any
such amounts sustained or incurred as the result of the gross negligence or
willful misconduct of GBC or any of its directors, officers, employees, agents,
attorneys, or any other person affiliated with or representing GBC).
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.
6. TERM.
6.1. MATURITY DATE. This Agreement shall continue in effect until
the maturity date set forth on the Schedule (the `Maturity Date"); provided that
the Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
6.2. EARLY TERMINATION. This Agreement may be terminated prior to
the Maturity Date as follows: (i) by Borrower, effective three business days
after written notice of termination is given to GBC; or (ii) by GBC at any time
after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower OR BY GBC under this
Section 6.2, Borrower shall pay to GBC a termination fee (the "Termination Fee")
in the amount shown on the Schedule. The Termination Fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the highest rate applicable to any of the Obligations.
6.3. PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are
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<PAGE> 12
otherwise then due and payable. Without limiting the generality of the
foregoing, if on the Maturity Date, or on any earlier effective date of
termination, there are any outstanding letters of credit issued based upon an
application, guarantee, indemnity or similar agreement on the part of GBC, then
on such date Borrower shall provide to GBC cash collateral in an amount equal to
110% of the face amount of all such letters of credit plus all interest, fees
and costs due or (in GBC's estimation) likely to become due in connection
therewith, to secure all of the Obligations relating to said letters of credit,
pursuant to GBC's then standard form cash pledge agreement. Notwithstanding any
termination of this Agreement, all of GBC's security interests in all of the
Collateral and all of the terms and provisions of this Agreement shall continue
in full force and effect until all Obligations have been paid and performed in
full; provided that, without limiting the fact that Loans are subject to the
discretion of GBC, GBC may, in its sole discretion, refuse to make any further
Loans after termination. No termination shall in any way affect or impair any
right or remedy of GBC, nor shall any such termination relieve Borrower of any
Obligation to GBC, until all of the Obligations have been paid and performed in
full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, GBC shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be reasonably required to terminate GBC's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default' under this Agreement, and Borrower
shall give GBC immediate written notice thereof: (a) Any warranty,
representation, statement, report or certificate made or delivered to GBC by
Borrower or any of Borrower's officers, employees or agents, now or in the
future, shall be untrue or misleading in a material respect; or (b) Borrower
shall fail to pay when due any Loan or any interest thereon or any other
monetary Obligation; or (c) the total Loans and other Obligations outstanding at
any time shall exceed the Credit Limit; or (d) Borrower shall fail to perform
any non-monetary Obligation which by its nature cannot be cured; or (e) Borrower
shall fail to perform any other non-monetary Obligation, which failure is not
cured within* business days after the date performance is due; or (f) any levy,
assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made on all or any part of the Collateral which is not cured within 10
days after the occurrence of the same; or (g) any default or event of default
occurs under any obligation secured by a Permitted Lien, which is not cured
within any applicable cure period or waived in writing by the holder of the
Permitted Lien; or (h) Borrower breaches any material contract or obligation,
which has or may reasonably be expected to have a material adverse effect on
Borrower's business or financial condition; or (i) dissolution, termination of
existence, insolvency Or business failure of Borrower or any Guarantor; or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any proceeding by Borrower or any Guarantor under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect;
or (j) the commencement of any proceeding against Borrower or any Guarantor
under any reorganization, bankruptcy, insolvency, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, now or in
the future in effect, which is not cured by the dismissal thereof within 45 days
after the date commenced; or (k) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations or any attempt to do
any of the foregoing; or (1) revocation or termination of, or limitation or
denial of liability upon,
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<PAGE> 13
any pledge of any certificate of deposit, securities or other property or asset
pledged by any third party to secure any or `all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (m) Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligation* other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations terminates or in any way limits or terminates its subordination
agreement; or (n) there shall be a change in the record or beneficial
ownership**; or (o) Borrower shall generally not pay its debts as they become
duo, or Borrower shall conceal, remove or transfer any part of its property,
with intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or (p) there shall be a material adverse
change in Borrower's business or financial condition. GBC may cease making any
Loans hereunder during any of the above cure periods, and thereafter if an Event
of Default has occurred.
* 10
** (WITHIN THE MEANING OF RULE 13D-3 UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934) OF SECURITIES OF THE BORROWER REPRESENTING EFFECTIVE CONTROL OVER
THE ELECTION OF A MAJORITY OF THE BOARD OF DIRECTORS OF THE BORROWER;
7.2. REMEDIES. Upon the occurrence of any Event of Default, and at
any time thereafter*, GBC, at its option, and without notice or demand of any
kind (all of which are hereby expressly waived by Borrower), may do any one or
more of the following**: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes GBC without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as GBC deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should GBC seek to take possession of any of
the Collateral by Court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that GBC retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to GBC
at places designated by GBC which are reasonably convenient to GBC and Borrower,
and to remove the Collateral to such locations as GBC may deem advisable; (e)
Complete the processing, manufacturing or repair of any Collateral prior to a
disposition thereof and, for such purpose and for the purpose of removal, GBC
shall have the right to use Borrower's premises, vehicles, hoists, lifts,
cranes, equipment and all other property without charge; (f) Sell, lease or
otherwise dispose of any of the Collateral, in its condition at the time GBC
obtains possession of it or after further manufacturing, processing or repair,
at one or
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<PAGE> 14
more public and/or private sales, in lots or in bulk, for cash, exchange or
other property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for sale. GBC
shall have the right to conduct such disposition on Borrower's premises without
charge, for such time or times as GBC deems reasonable, or on GBC's premises, or
elsewhere and the Collateral need not be located at the place of disposition.
GBC may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under applicable
law, at any private disposition. Any sale or other disposition of Collateral
shall not relieve Borrower of any liability Borrower may have if any Collateral
is defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes GBC to endorse or sign Borrower's name on all collection, receipts,
instruments and other documents, to take possession of and open mail addressed
to Borrower and remove therefrom payments made with respect to any item of the
Collateral or proceeds thereof, and, in GBC's sole discretion, to grant
extensions of time to pay, compromise claims and settle Receivables, General
Intangibles and the like for less than face value; and (h) Demand and receive
possession of any of Borrower's federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto. All
reasonable attorneys' fees, expenses, costs, liabilities and obligations
incurred by GBC with respect to the foregoing shall be added to and become part
of the Obligations, shall be due on demand, and shall bear interest at a rate
equal to the highest interest rate applicable to any of the Obligations. Without
limiting any of GBC's rights and remedies, from and after the occurrence of any
Event of Default, the interest rate applicable to the Obligations shall be
increased by an additional four percent per annum.
* WHILE SUCH EVENT OF DEFAULT IS CONTINUING
** (EXCEPT THAT, PRIOR TO OR CONCURRENTLY WITH THE TAKING OF THE FIRST
OF ANY OF THE FOLLOWING ACTIONS, GBC SHALL GIVE BORROWER ONE GENERAL WRITTEN
NOTICE STATING THAT GBC IS "PROCEEDING TO EXERCISE ITS RIGHTS AND REMEDIES" OR
WORDS TO THAT EFFECT)
7.3. STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower
and GBC agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least* days prior to the sale, and, in the case of a public sale,
notice of the sale is published at least* days before the sale in a newspaper of
general circulation in the county where the sale is to be conducted; (ii) Notice
of the sale describes the collateral in general, non-specific terms; (iii) The
sale is conducted at a place designated by GBC, with or without the Collateral
being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00
p.m; (v) Payment of the purchase price in cash or by cashier's check or wire
transfer is required; (vi) With respect to any sale of any of the Collateral,
GBC may (but is not obligated to) direct any prospective purchaser to ascertain
directly from Borrower any and all information concerning the same. GBC shall be
free to employ other methods of noticing and selling the Collateral, in its
discretion, if they are commercially reasonable.
*TEN
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7.4. POWER OF ATTORNEY. Upon the occurrence of any Event of
Default, without limiting GBC's other rights and remedies, Borrower grants to
GBC an irrevocable power of attorney coupled with an interest, authorizing and
permitting GBC (acting through any of its employees, attorneys or agents) at any
time*, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but GBC agrees to exercise the following powers in
a commercially reasonable manner: (ii) Execute on behalf of Borrower any
documents that GBC may, in its sole discretion, deem advisable in order to
perfect and maintain GBC's security interest in the Collateral, or in order to
exercise a right of Borrower or GBC, or in order to fully consummate all the
transactions contemplated under this Agreement, and all other present and future
agreements; (b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or to lease (as lessor or lessee) any real or personal property which is part of
GBC's Collateral or in which GBC has an interest; (c) Execute on behalf of
Borrower, any invoices relating to any Receivable, any draft against any Account
Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy,
any Notice of Lien, claim of mechanic's, materialman's or other lien, or
assignment or satisfaction of mechanic's, materialman's or other lien; (d) Take
control in any manner of any cash or non-cash items of payment or proceeds of
Collateral; endorse the name of Borrower upon any instruments, or documents,
evidence of payment or Collateral that may come into GBC's possession; (e)
Endorse all checks and other forms of remittances received by GBC; (f) Pay,
contest or settle any lien, charge, encumbrance, security interest and adverse
claim in or to any of the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; (g) Grant
extensions of time to pay, compromise claims and settle Receivables and General
Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give GBC the same rights of access and other rights with respect
thereto as GBC has under this Agreement; and (k) Take any action or pay any sum
required of Borrower pursuant to this Agreement and any other present or future
agreements. Any and all reasonable sums paid and any and all reasonable costs,
expenses, liabilities, obligations and reasonable attorneys' fees incurred by
GBC with respect to the foregoing shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the Obligations. In no event
shall GBC's rights under the foregoing power of attorney or any of GBC's other
rights under this Agreement be deemed to indicate that GBC is in control of the
business, management or properties of Borrower.
* DURING THE CONTINUANCE OF SUCH EVENT OF DEFAULT
7.5. APPLICATION OF PROCEEDS. All proceeds realized as the result
of any sale or other disposition of the Collateral shall be applied by GBC first
to the reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GBC in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as GBC shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to GBC for any deficiency. If, GBC, in its sole
discretion, directly or indirectly enters into a deferred
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<PAGE> 16
payment or other credit transaction with any purchaser at any sale of
Collateral, GBC shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by GBC of the cash therefor.
7.6. REMEDIES CUMULATIVE. In addition to the rights and remedies
set forth in this Agreement, GBC shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or in
the future entered into between GBC and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
GBC of one or more of its rights or remedies shall not be deemed an election,
nor bar GBC from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of GBC to exercise any rights or remedies shall
not operate as a waiver thereof, but all rights and remedies shall continue in
full force and effect until all of the Obligations have been fully paid and
performed.
8. DEFINITIONS. As used in this Agreement, the following terms
have the following meanings:
"Account Debtor" means the obligation a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,*
shareholder, director,** officer, of such Person, or any parent or subsidiary of
such Person, or any Person controlling, controlled by or under common control
with such Person.
* FIVE PERCENT
** OR
"Agreement" and "this Agreement" means this Loan and Security Agreement
and all modifications and amendments thereto, extensions thereof, and
replacements therefor.
"Business Day" means a day on which GBC is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the
Code.
"Eligible Receivables" means unconditional Receivables arising in the
ordinary course of Borrower's business from the sale of goods or rendition of
services*, which GBC, in its sole judgment, shall deem eligible for borrowing,
based on such considerations as GBC may from time to time deem appropriate.
16
<PAGE> 17
* OR THE LICENSING OF SOFTWARE
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
patents, patent applications, trademarks and the goodwill of the business
symbolized thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against GBC, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including life insurance, key man
insurance, credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and tape
files, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature (other than Receivables).
"Guarantor" means any Person who has guaranteed any of the Obligations.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including all raw
materials, work in process, finished goods and goods in transit), and all
materials and supplies of every kind, nature and description which are or might
be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"LIBOR Rate" means (i) the one-month London Interbank Offered Rate for
deposits in U.S. dollars, as shown each day in The Wall Street Journal (Eastern
Edition) under the caption `Money Rates - London Interbank Offered Rates
(LIBOR)"; or (ii) if the Wall Street Journal does not publish such rate, the
offered one-month rate for deposits in U.S. dollars which appears on the Reuters
Screen LIBO Page as of 10:00 a.m., New York time, each day, provided that if at
least two rates appear on the Reuters Screen LIBO Page on any day, the "LIBOR
Rate" for such day shall be the arithmetic mean of such rates; or (`,ii) if the
Wall Street Journal does not publish such rate on a particular day and no such
rate appears on the Reuters Screen LIBO Page on such day, the rate per annum at
which deposits in U.S. dollars are offered to the principal London
17
<PAGE> 18
office of The Chase Manhattan Bank, N.A. in the London interbank market at
approximately 11:00 A.M., London time, on such day in an amount approximately
equal to the outstanding principal amount of the Loans, for a period of one
month, in each of the foregoing cases as determined in good faith by GBC, which
determination shall be conclusive absent manifest error.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to GBC, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct Or indirect (including, without
limitation, those acquired by assignment and any participation by GBC in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, loan fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument or
agreement between Borrower and GBC.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes*; (iv) additional security interests and liens
which are subordinate to the security interest in favor of GBC and are consented
to in writing by GBC (which consent shall not be unreasonably withheld); (v)
security interests being terminated substantially concurrently with this
Agreement; (vi) liens of materialmen, mechanics, warehousemen, carriers, or
other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent**; (vii) liens incurred in connection with
the extension, renewal or refinancing of the indebtedness secured by liens of
the type described above in clauses (i) or (ii) above, provided that any
extension, renewal or replacement lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (viii) Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods***. GBC will have the right to require, as a condition
to its consent under subparagraph (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on GBC's then standard
form, acknowledge that the security interest is subordinate to the security
interest in favor of GBC, and agree not to take any action to enforce its
subordinate security interest so long as any Obligations remain outstanding, and
that Borrower agree that any uncured default in any obligation secured by the
subordinate security interest shall also constitute an Event of Default under
this Agreement.
* , OR GOVERNMENTAL FEES, ASSESSMENTS OR OTHER GOVERNMENTAL CHARGES OR
LEVIES, EITHER NOT DELINQUENT OR BEING CONTESTED IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS, PROVIDED THE SAME HAVE NO PRIORITY OVER ANY OF GBC'S SECURITY
INTERESTS AND THE BORROWER MAINTAINS ADEQUATE RESERVES THEREFOR IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED.
** MORE THAN 30 DAYS, OR ARE BEING CONTESTED IN GOOD FAITH (PROVIDED
SUCH LIEN IS NOT FORECLOSED)
18
<PAGE> 19
*** ;(IX) ANY JUDGMENT, ATTACHMENT OR SIMILAR LIEN, UNLESS THE JUDGMENT
IT SECURES IS NOT FULLY COVERED BY INSURANCE AND HAS NOT BEEN DISCHARGED OR
EXECUTION THEREOF EFFECTIVELY STAYED AND BONDED AGAINST PENDING APPEAL WITHIN 30
DAYS OF THE ENTRY THEREOF PROVIDED THAT, IF THE JUDGMENT IS NOT FULLY COVERED BY
INSURANCE OR EXECUTION THEREOF HAS NOT BEEN SO STAYED AND BONDED, GBC SHALL NOT
BE REQUIRED TO MAKE ANY LOANS OR OTHERWISE EXTEND CREDIT TO OR FOR THE BENEFIT
OF BORROWER; (X) LICENSES OR SUBLICENSES GRANTED TO OTHERS NOT INTERFERING IN
ANY MATERIAL RESPECT WITH THE BUSINESS OF BORROWER; AND (XI) LIENS WHICH
CONSTITUTE RIGHTS OF SET-OFF OF A CUSTOMARY NATURE OR BANKER'S LIENS ON AMOUNTS
ON DEPOSIT, WHETHER ARISING BY CONTRACT OR BY OPERATION OF LAW, IN CONNECTION
WITH ARRANGEMENTS ENTERED INTO WITH DEPOSITORY INSTITUTIONS IN THE ORDINARY
COURSE OF BUSINESS
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
fights, chattel paper, instruments, securities, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all rights
of stoppage in transit and all other rights or remedies of an unpaid vendor,
lienor or secured party.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently applied. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1. INTEREST COMPUTATION. In computing interest on the
Obligations, all checks, wire transfers and other items of payment received by
GBC (including proceeds of Receivables and payment of the Obligations in full)
shall be deemed applied by GBC on account of the Obligations three Business Days
after receipt by GBC of immediately available funds. GBC shall not, however, be
required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to GBC in its discretion, and GBC may charge Borrower's
Loan account for the amount of any item of payment which is returned to GBC
unpaid.
9.2. APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied, and in GBC's sole discretion reversed and reapplied,
to the Obligations, in such order and manner as GBC shall determine in its sole
discretion.
9.3. CHARGES TO ACCOUNT. GBC may, in its discretion, require that
Borrower pay monetary Obligations in cash to GBC, or charge them to Borrower's
Loan account, in which event they will bear interest at the same rate applicable
to the Loans.
9.4. MONTHLY ACCOUNTINGS. GBC shall provide Borrower monthly with
an account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall
19
<PAGE> 20
be deemed correct, accurate and binding on Borrower and an account stated
(except for reverses and reapplications of payments made and corrections of
errors discovered by GBC), unless Borrower notifies GBC in writing to the
contrary within sixty days after each account is rendered, describing the nature
of any alleged errors or admissions.
9.5. NOTICES. All notices to be given under this Agreement shall be
in writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to GBC or Borrower at the addresses shown in the heading to
this Agreement, or at any other address designated in writing by one party to
the other party. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, or at the expiration of one business
day following delivery to the private delivery service, or*
* UPON DELIVERY IN THE CASE OF NOTICES SENT BY MAIL
9.6. SEVERABILITY. Should any provision of this Agreement be held
by any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in full
force and effect.
9.7. INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and GBC and supersede all
prior and contemporaneous negotiations and oral representations and agreements,
all of which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
9.8. WAIVERS. The failure of GBC at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and GBC shall not waive or
diminish any right of GBC later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to GBC shall be deemed to have been waived by
any act or knowledge of GBC or its agents or employees, but only by a specific
written waiver signed by an authorized officer of GBC and delivered to Borrower.
Borrower waives demand, protect, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, General
Intangible, document or guaranty at any time held by GBC on which Borrower is or
may in any way be liable, and notice of any action taken by GBC, unless
expressly required by this Agreement.
9.9. AMENDMENT. The terms and provisions of this Agreement may not
be waived or amended, except in a writing executed by Borrower and a duly
authorized officer of GBC.
9.10. TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
20
<PAGE> 21
9.11. ATTORNEY'S FEES AND COSTS. Borrower shall reimburse GBC for
all reasonable attorneys' fees and all filing, recording, search, title
insurance, appraisal, audit, and other reasonable costs incurred by GBC,
pursuant to, or in connection with, or relating to this Agreement (whether or
not a lawsuit is filed), including, but not limited to, any reasonable
attorneys' fees and costs GBC incurs in order to do the following: prepare and
negotiate this Agreement and the documents relating to this Agreement; obtain
legal advice in connection with this Agreement or Borrower; enforce, or seek to
enforce, any of its rights; prosecute actions against, or defend actions by,
Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce GBC's security interest in, the Collateral; and otherwise
represent GBC in any litigation relating to Borrower. If either GBC or Borrower
files any lawsuit against the other predicated on a breach of this Agreement,
the prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All attorneys' fees and costs to which GBC may
be entitled pursuant to this Paragraph shall immediately become part of
Borrower's Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
9.12. BENEFIT OF AGREEMENT. The provisions of this Agreement shall
be binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and GBC; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of GBC, and any prohibited assignment shall be
void. No consent by GBC to any assignment shall release Borrower from its
liability for the Obligations.
9.13. JOINT AND SEVERAL LIABILITY. If Borrower consists of more than
one Person, their liability shall be joint and several, and the compromise of
any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
9.14. LIMITATION OF ACTIONS. Any claim or cause of action by
Borrower against GBC, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by GBC, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after* the act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service of a
summons and complaint on an officer of GBC, or on any other person authorized to
accept service on behalf of GBC, within thirty (30) days thereafter. Borrower
agrees that such one-year period is a reasonable and sufficient time for
Borrower to investigate and act upon any such claim or cause of action. The
one-year period provided herein shall not be waived, tolled, or extended except
by the written consent of GBC in its sole discretion. This provision shall
survive any termination of this Loan Agreement or any other present or future
agreement.
21
<PAGE> 22
* BORROWER LEARNS OF, OR IN THE EXERCISE OF REASONABLE DILIGENCE SHOULD
HAVE LEARNED OF,
9.15. PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only
used in this Agreement for convenience. Borrower and GBC acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including," whenever used in this Agreement, shall mean "including (but not
limited to)." This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against GBC or Borrower under any rule of
construction or otherwise.
9.16. GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all
acts and transactions hereunder and all rights and obligations of GBC and
Borrower shall be governed by the laws of the State of California. As a material
part of the consideration to GBC to enter into this Agreement, Borrower (i)
agrees that all actions and proceedings relating directly or indirectly to this
Agreement shall, at GBC's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii). consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.17. MUTUAL WAIVER OF JURY TRIAL. BORROWER AND GBC EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GBC AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF GBC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GBC OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
22
<PAGE> 23
BORROWER:
FACTORY AUTOMATION & COMPUTER
TECHNOLOGIES, INC.
BY /s/ Joseph T. Trino
---------------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Mark R. Simcoe
---------------------------------------
SECRETARY OR ASST. SECRETARY
GBC:
GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT
COMMERCIAL CORPORATION
BY /s/ Richard Suhl
---------------------------------------
TITLE President
-------------------------------------
23
<PAGE> 1
EXHIBIT 10.9
Greyrock
Business
Credit
A NationsBank Company
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: SYNQUEST, INC.
ADDRESS: 3500 PARKWAY LANE, SUITE 555
NORCROSS, GEORGIA 30092
DATE: JUNE 30, 1997
This Schedule is an integral part of the Loan and Security Agreement
between Greyrock Business Credit, a Division of NationsCredit Commercial
Corporation ("GBC") and the borrower named above ("Borrower") dated July 10,
1996, and amends and restates in its entirety the Schedule to Loan and Security
Agreement dated July 10, 1996.
================================================================================
1. CREDIT LIMIT An amount not to exceed the lesser of: (i) $7,500,000
(Section 1.1): at any one time outstanding; or (ii) 80% of the
amount of Borrower's Eligible Receivables (as defined
in Section 8 above) and the Eligible Receivables of
Bender Consulting, Inc. ("BCI"). For purposes of this
Agreement, the following provisions shall apply so
long as Loans are being made hereunder with respect
to any Receivables of BCI:
(1) all representations and warranties of BCI made in
the Security Agreement dated June 16, 1997 (the
"Security Agreement"), between BCI and GBC, relating
to any Receivable of BCI with respect to which any
Loan is requested by Borrower, including the
representations set forth in Section 2.12 of the
Security Agreement, shall be true and correct on the
date any such Loan is made; and
(2) Borrower shall, or shall cause BCI to, provide
GBC with the daily reporting of transactions and
daily schedules and assignments of BCI's Receivables
and schedules of collections, as called for by
Section 4.3 hereof with respect to Borrower's
Receivables, and Borrower shall deliver, or cause BCI
to deliver, all proceeds of BCI's Receivables to GBC,
within one business day after receipt, as called for
by Sections 4.4 and 5.4 hereof with respect to
Borrower's Receivables.
As used in this Schedule, the terms "Receivables" and
"Eligible Receivables" (as defined in Section 8)
shall be deemed to include
<PAGE> 2
a reference to BCI in each place in such definitions
in which a reference to Borrower is made.
================================================================================
2. INTEREST The interest rate in effect throughout each calendar
month during the term of this Agreement shall be the
Interest Rate highest "LIBOR Rate" in effect during such month,
(Section 1.2): plus a 5.125% per annum, provided that the interest
rate in effect in each month shall not be less than
9% per annum, and provided that the interest charged
for each month shall be a minimum of $5,000,
regardless of the amount of the Obligations
outstanding. Interest shall be calculated on the
basis of a 360-day year for the actual number of days
elapsed. "LIBOR Rate" has the meaning set forth in
Section 8 above.
================================================================================
3. FEES (Section 1.3/Section 6.2):
Renewal Fee: $25,000, payable concurrently herewith.
Termination Fee: $2,500 per month for each month (or portion
thereof) from the effective date of termination
to the Maturity Date.
NSF Check Charge: $15.00 per item.
Wire Transfer: $15.00 per transfer.
================================================================================
4. MATURITY DATE
(Section 6.1): July 31, 1998 subject to automatic renewal as
provided in Section 6.1 above, and early termination
as provided in Section 6.2 above.
================================================================================
5. REPORTING Borrower shall provide GBC with the following:
(Section 5.2):
1. Annual financial statements, as soon as
available, and in any event within 90 days
following the end of Borrower's fiscal year,
certified by Ernst & Young or other
independent certified public accountants
acceptable to GBC.
2. Quarterly unaudited financial statements, as
soon as available, and in any event within
30 days after the end of each fiscal quarter
of Borrower.
3. Monthly unaudited financial statements as
soon as available and, in any event, no
later than 30 days after the end of each
month.
<PAGE> 3
4. Monthly Receivable agings, aged by invoice
date, within 10 days after the end of each
month.
5. Monthly accounts payable agings, aged by
invoice date, and outstanding or held check
registers within 10 days after the end of
each month.
6. Upon request of GBC, such financial
statements as are prepared in the ordinary
course for BCI, as soon as available.
The foregoing reports described in items 4 and 5
above shall include BCI so long as Loans are being
made hereunder with respect to any Receivables of
BCI.
<PAGE> 4
ANNEX
TO
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
JUNE 30, 1997
Prior Names of Borrower
(Section 3.2): None
Prior Trade Names of Borrower
(Section 3.2): None
Existing Trade Names of Borrower:
(Section 3.2): Fact, Inc.
SynQuest, Inc.
Other Locations and Addresses:
Borrower: Borrower Subsidiaries:
3500 Parkway Lane Bender Consulting, Inc., a company
Suite 555 of SynQuest
Norcross, GA 30092 1755 Jefferson Davis Highway
Suite 904
Arlington, VA 22202
855 Rte 146 SynQuest, B. V.
Suite 150 Stephensonweg 11
Clifton Park, NY 17402 4207 HA
Gorinchem
The Netherlands
1301 West 22(nd) Street SynQuest, S.A. (Log'In S.A.)
Suite 301 Les Lanthanides E2
Oakbrook, IL 60523 4, Square du Chene-Germain
33510 Cesson-Sevigne, France
1010 Plymouth Road SynQuest, Ltd.
York, PA 17402 Knyvett House
The Causeway
Staines,
Middlesex TW18 3BA
United Kingdom
Material Adverse Litigation: None
<PAGE> 5
Greyrock Business Credit Schedule to Loan and Security Agreement
- -------------------------------------------------------------------------------
===============================================================================
6. BORROWER INFORMATION:
PRIOR NAMES OF
BORROWER
(Section 3.2): See Annex hereto
PRIOR TRADE
NAMES OF BORROWER
(Section 3.2): See Annex hereto
EXISTING TRADE
NAMES OF BORROWER
(Section 3.2): See Annex hereto
OTHER LOCATIONS AND
ADDRESSES (Section 3.3): See Annex hereto
MATERIAL ADVERSE
LITIGATION (Section 3.10): See Annex hereto
===============================================================================
7. COPYRIGHT REGISTRATION COVENANT
(Section 5.8): Borrower agrees promptly, and in any event
not later than July 31, 1997, to have any of
its currently unregistered material
copyrights registered and filed with the
Copyright Office in Washington, D.C. and to
promptly provide GBC with evidence of such
registration and filing. Borrower will, on
an ongoing basis, promptly register and file
any unregistered copyrights with the
Copyright Office.
===============================================================================
Borrower: GBC:
SYNQUEST, INC. GREYROCK BUSINESS CREDIT,
a Division of NationsCredit Commercial
Corporation
By: /s/ Joseph T. Trino By: /s/ Lisa Nagano
---------------------------- -----------------------
President or Vice President Title: Vice President
-------------------
By: /s/ Mark R. Simcoe
----------------------------
Secretary or Asst. Secretary
<PAGE> 1
EXHIBIT 10.10
================================================================================
GREYROCK
BUSINESS
CREDIT
A NATIONSBANK COMPANY
SECOND AMENDMENT TO LOAN DOCUMENTS
BORROWER: SYNQUEST, INC.
ADDRESS: 3500 PARKWAY LANE, SUITE 555
NORCROSS, GA 30092
DATE: SEPTEMBER 24, 1997
THIS SECOND AMENDMENT TO LOAN DOCUMENTS (this "Amendment") is entered
into between GREYROCK BUSINESS CREDIT, a Division of NationsCredit Commercial
Corporation ("GBC"), whose address is 10880 Wilshire Boulevard, Suite 950, Los
Angeles, California 90024, and the Borrower named above ("Borrower").
GBC and Borrower agree to amend and supplement the Loan and Security
Agreement between them, dated July 10, 1996, as amended (the "Loan Agreement"),
as follows. (This Amendment, the Loan Agreement, and all other written documents
and agreements between GBC and Borrower, are referred to herein collectively as
the "Loan Documents." Capitalized terms used but not defined in this Amendment
shall have the meanings set forth in the Loan Agreement.)
1. Amendment of Credit Limit. Section 1 of the Schedule to the Loan
Agreement is amended in its entirety to read as follows:
1. CREDIT LIMIT An amount not to exceed the lesser of (1) and (2) below:
(Section 1.1)
(1) $15,000,000 at any one time outstanding; and
(2) an amount equal to the sum of the following (without
duplication);
(i) an amount equal to 80% of Borrower's
Eligible Receivables (as defined in Section
8 above) and the Eligible Receivables of
Bender Consulting, Inc. ("BCI"); plus
(ii) the Overadvance Commitment (as defined
below); plus
<PAGE> 2
(iii) the amount from time to time outstanding
under the Term Loan described below.
As used herein, the "Overadvance Commitment" means an amount
of up to $2,500,000 at any one time outstanding; provided that
the Overadvance Commitment shall reduce to $0 and be available
hereunder for a period of five consecutive days during the
fifteen day period following the end of each fiscal quarter of
Borrower, and no Loans may be made or outstanding pursuant to
the Overadvance Commitment during such clean-up period.
Subject to the other provisions of the Loan and Security Agreement
(including, without limitation, the foregoing Credit Limit), the Borrower may
request a term loan (the "Term Loan") in the principal amount of $5,000,000 to
be funded on the date the conditions precedent set forth below are satisfied.
The Term Loan shall be evidenced by a promissory note in substantially the form
of Exhibit A hereto.
For purposes of this Agreement, the following provisions shall apply so
long as Loans are being made hereunder with respect to any Receivables of BCI:
(1) all representations and warranties of BCI made in the Security
Agreement dated June 16, 1997 (the "Security Agreement"), between BCI and GBC,
relating to any Receivable of BCI with respect to which any Loan is requested by
Borrower, including the representations set forth in Section 2.12 of the
Security Agreement, shall be true and correct on the date any such Loan is made;
and
(2) Borrower shall, or shall cause BCI to, provide GBC with the daily
reporting of transactions and daily schedules and assignments of BCI's
Receivables and schedules of collections, as called for by Section 4.3 hereof
with respect to Borrower's Receivables, and Borrower shall deliver, or cause BCI
to deliver, all proceeds of BCI's Receivables to GBC, within one business day
after receipt, as called for by Sections 4.4 and 5.4 hereof with respect to
Borrower's Receivables.
As used in this Schedule, the terms "Receivables" and "Eligible
Receivables" (as defined in Section 8) shall be deemed to include a reference to
BCI in each place in such definitions in which a reference to Borrower is made.
(3) Conditions Precedent. The effectiveness of this Amendment shall be
subject to the conditions precedent that GBC shall have received (i) Consent to
Amendment, in form and substance satisfactory to GBC, executed by Bender
Consulting, Inc., a corporation organized under the laws of the State of
Georgia, as Guarantor, evidencing such Guarantor's consent hereto, (ii)
Borrower's Resolutions authorizing this Amendment, and (iii) an amendment fee in
the amount of $75,000, which shall be payable on the execution hereof by
Borrower.
(4) Representations True. To induce GBC to enter into this Amendment,
Borrower hereby confirms and restates, as of the date hereof, the
representations and warranties made by it in Section 3 of the Loan Agreement.
For the purposes of this Section 4 each reference in Section 3 of the Loan
Agreement to "this Agreement," and the words "hereof," "herein," "hereunder," or
-2-
<PAGE> 3
GREYROCK BUSINESS CREDIT AMENDMENT TO LOAN DOCUMENTS
================================================================================
words of like import in such Section, shall mean and be a reference to the Loan
Agreement as amended by this Amendment.
(5) General Provisions. GBC's execution and delivery of, or acceptance
of, this Amendment and any other documents and instruments in connection
herewith shall not be deemed to create a course of dealing or otherwise create
any express or implied duty by it to provide any other or further amendments,
consents or waivers in the future. This Amendment, the Loan Agreement, and the
other Loan Documents set forth in full all of the representations and agreements
of the parties with respect to the subject matter hereof and supercede all prior
discussions, representations, agreements and understandings between the parties
with respect to the subject hereof. Except as herein expressly amended and
supplemented, all of the terms and provisions of the Loan Agreement and the
other Loan Documents shall continue in full force and effect and the same are
hereby ratified and confirmed. This Amendment forms part of the Loan Agreement
and the terms of the Loan Agreement are incorporated herein by reference.
BORROWER: GBC:
SYNQUEST, INC. GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT
COMMERCIAL CORPORATION
BY: BY: /s/ Lisa Nagano
--------------------------------- --------------------------------
PRESIDENT OR VICE PRESIDENT TITLE: Vice President
-----------------------------
BY: /s/ Mark Simcoe
---------------------------------
SECRETARY OR ASS'T SECRETARY
-3-
<PAGE> 1
EXHIBIT 10.11
EXTENSION AGREEMENT
BORROWER: SYNQUEST, INC.
ADDRESS: 3500 PARKWAY LANE, SUITE 555
NORCROSS, GEORGIA 30092
DATE: MAY 20, 1998
THIS EXTENSION AGREEMENT (this "Agreement") is entered into
between GREYROCK BUSINESS CREDIT, a Division of NationsCredit Commercial
Corporation ("GBC"), whose address is 10880 Wilshire Boulevard, Suite 950, Los
Angeles, California 90024, and the Borrower named above ("Borrower").
GBC and Borrower agree to amend and supplement the Loan and
Security Agreement between them, dated July 10, 1996, as amended (as amended,
the "Loan Agreement"), as follows. (This Agreement, the Loan Agreement, any
prior written amendments to the Loan Agreement signed by GBC and Borrower, and
all other written documents and agreements between GBC and Borrower, are
referred to herein collectively as the "Loan Documents." Capitalized terms used
but not defined in this Agreement shall have the meanings set forth in the Loan
Agreement.)
1. Extension. The date "July 31, 1998" in Section 4 of the
Schedule to Loan Agreement is hereby deleted and replaced with the date "July
31, 1999".
2. Credit Limit Increase and Overadvance Subline Increase.
Section 1 of the Schedule to Loan and Security Agreement is amended in its
entirety to read as follows:
1. CREDIT LIMIT An amount not to exceed the lesser of: (i)
(Section 1.1): $25,000,000 at any one time outstanding; or (ii) an
amount equal to the sum of the following: (A) 80% of
the amount of Borrower's Eligible Receivables (as
defined in Section 8 above) and the Eligible
Receivables of Bender Consulting, Inc. ("BCI"), plus
(B) until October 31, 1998, the Overadvance
Commitment (as defined below), plus (C) the amount
from time to time outstanding under the Term Loan in
the original principal amount of $5,000,000 made by
GBC to Borrower.
For purposes of this Agreement, the following
provisions shall apply so long as Loans are being
made hereunder with respect to any Receivables of
BCI:
<PAGE> 2
(1) all representations and warranties of BCI made in
the Security Agreement dated June 16, 1997 (the
"Security Agreement"), between BCI and GBC, relating
to any Receivable of BCI with respect to which any
Loan is requested by Borrower, including the
representations set forth in Section 2.12 of the
Security Agreement, shall be true and correct on the
date any such Loan is made; and
(2) Borrower shall, or shall cause BCI to, provide
GBC with the daily reporting of transactions and
daily schedules and assignments of BCI's Receivables
and schedules of collections, as called for by
Section 4.3 hereof with respect to Borrower's
Receivables, and Borrower shall deliver, or cause BCI
to deliver, all proceeds of BCI's Receivables to GBC,
within one business day after receipt, as called for
by Sections 4.4 and 5.4 hereof with respect to
Borrower's Receivables.
As used in this Schedule, the terms "Receivables" and
"Eligible Receivables" (as defined in Section 8)
shall be deemed to include a reference to BCI in each
place in such definitions in which a reference to
Borrower is made.
As used herein, the "Overadvance Commitment" means an
amount of up to $15,000,000 at any one time. All
Loans made under the Overadvance Commitment shall be
due and payable at the close of business on October
31, 1998.
3. Fee. In consideration of GBC entering into this Agreement,
Borrower shall concurrently pay GBC a fee in the amount of $100,000, which shall
be non-refundable and in addition to all interest and other fees payable to GBC
under the Loan Documents. GBC is authorized to charge said fee to Borrower's
loan account.
4. Representations True. To induce GBC to enter into this
Agreement, Borrower hereby confirms and restates, as of the date hereof, the
representations and warranties made by it in Section 3 of the Loan Agreement.
For the purposes of this Section 4 each reference in Section 3 of the Loan
Agreement to "this Agreement," and the words "hereof," "herein," "hereunder," or
words of like import in such Section, shall mean and be a reference to the Loan
Agreement as amended by this Agreement.
5. General Provisions. GBC's execution and delivery of, or
acceptance of, this Agreement and any other documents and instruments in
connection herewith shall not be deemed to create a course of dealing or
otherwise create any express or implied duty by it to provide any other or
further amendments, consents or waivers in the future. This Agreement, the Loan
Agreement, and the other Loan Documents set forth in full all of the
representations and agreements of the parties with respect to the subject matter
hereof and supersede all prior
-2-
<PAGE> 3
discussions, representations, agreements and understandings between the parties
with respect to the subject hereof. Except as herein expressly amended and
supplemented, all of the terms and provisions of the Loan Agreement and the
other Loan Documents shall continue in full force and effect and the same are
hereby ratified and confirmed. This Agreement forms part of the Loan Agreement
and the terms of the Loan Agreement are incorporated herein by reference.
BORROWER: GBC:
SYNQUEST, INC. GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT
COMMERCIAL CORPORATION
By: /s/ John Bartels By: Lisa Nagano
-------------------------------- --------------------------------
President or Vice President Title: Senior Vice President
-----------------------------
By: /s/ Mark R. Simcoe
--------------------------------
Secretary or Ass't Secretary
CONSENT AND AGREEMENT OF GUARANTOR
The undersigned, in its capacity as guarantor, acknowledges
that its consent to the foregoing Extension Agreement is not required, but the
undersigned nevertheless does hereby consent to the foregoing Extension
Agreement and to the documents and agreements referred to therein and to all
future modifications and amendments thereto (subject to the terms of the
Continuing Guaranty executed by the undersigned in GBC's favor and dated June
16, 1997 (the "Continuing Guaranty"), as such Continuing Guaranty may be amended
from time to time), and any termination thereof, and to any and all other
present and future documents and agreements by or between Borrower and GBC.
Nothing herein shall in any way limit any of the terms or provisions of the
Continuing Guaranty of the undersigned or that certain Security Agreement
executed by the undersigned in GBC's favor and dated June 16, 1997, or any other
Loan Document executed by the undersigned (as the same may be amended from time
to time), all of which are hereby ratified and affirmed in all respects.
GUARANTOR:
BENDER CONSULTING, INC.
By: /s/ Joseph Trino
--------------------------------
President or Vice President
By: /s/ Mark R. Simcoe
--------------------------------
Secretary of Ass't Secretary
-3-
<PAGE> 1
EXHIBIT 10.12
AMENDMENT AGREEMENT
BORROWER: SYNQUEST, INC.
ADDRESS: 3500 PARKWAY LANE, SUITE 555
NORCROSS, GEORGIA 30092
DATE: JANUARY 13, 1999
THIS AMENDMENT AGREEMENT (this "Agreement") is entered into
between GREYROCK CAPITAL, a Division of NationsCredit Commercial Corporation
("GC") (formerly known as Greyrock Business Credit), whose address is 10880
Wilshire Boulevard, Suite 950, Los Angeles, California 90024, and the Borrower
named above ("Borrower").
GC and Borrower agree to amend and supplement the Loan and
Security Agreement between them, dated July 10, 1996, as amended (as amended,
the "Loan Agreement"), as follows. (This Agreement, the Loan Agreement, any
prior written amendments to the Loan Agreement signed by GC and Borrower, and
all other written documents and agreements between GC and Borrower, are referred
to herein collectively as the "Loan Documents." Capitalized terms used but not
defined in this Agreement shall have the meanings set forth in the Loan
Agreement.)
1. Extension. The date "July 31, 1999" in Section 4 of the
Schedule to Loan Agreement is hereby deleted and replaced with the date
"December 31, 1999"; provided, however, that if the Borrower (i) does not
successfully close a private placement of its debt and/or equity securities (the
"Private Placement Closing") by April 30, 1999, and (ii) reduce the Loans made
under the Overadvance Commitment to $10,000,000 or less by that date, the
Maturity Date for purposes of the Schedule shall be "July 31, 1999" effective as
of April 30, 1999.
2. Credit Limit Increase. Section 1 of the Schedule to Loan
and Security Agreement is amended in its entirety to read as follows:
1. CREDIT LIMIT An amount not to exceed the lesser of: (i) the
Aggregate Commitment (as defined below) then in
(Section 1.1): effect at any one time outstanding; or (ii) an amount
equal to the sum of the following: (A) 80% of the
amount of Borrower's Eligible Receivables (as defined
in Section 8 above) plus (B) the Overadvance
Commitment (as defined below) then in effect, plus
(C) the amount from time to time outstanding
under the Term Loan in the original principal amount
of $5,000,000 made by GC to Borrower.
<PAGE> 2
As used herein, the following terms shall have the
following definitions: "Aggregate Commitment" means
(i) until the Private Placement Closing, an amount of
up to $31,000,000 at any one time, and (ii) on and
after the Private Placement Closing, an amount of up
to $25,000,000 at any one time; provided, however,
that `if the Private Placement Closing does not occur
by April 30, 1999, the Aggregate Commitment for
purposes of the Schedule shall be $25,000,000
effective as of April 30, 1999.
"Overadvance Commitment" means (i) until the Private
Placement Closing, an amount of up to $20,000,000 at
any one time, and (ii) on and after the Private
Placement Closing, an amount of up to $10,000,000 at
any one time; provided, however, that if the Private
Placement Closing does not occur by April 30, 1999,
the Overadvance Commitment for purposes of the
Schedule shall be $15,000,000 effective as of April
30, 1999.
If on the date of any Private Placement Closing the
amount of Loans made under the Overadvance Commitment
("Overadvance Loans") shall exceed $10,000,000, the
Borrower shall repay the Overadvance Loans in the
amount necessary to reduce the Overadvance Loans to
$10,000,000 or less. All Overadvance Loans shall be
due and payable at the close of business on December
31, 1999.
3. Conditions Precedent. The effectiveness of this Agreement
shall be subject to the conditions precedent that GC shall have received (i) a
certificate of the Secretary or other appropriate officer of the Borrower
certifying (A) the resolutions and other actions taken or adopted by the
Borrower, authorizing the execution, delivery and performance of this Agreement
and (b) the incumbency, authority and signatures of each officer of the Borrower
authorized to execute and deliver the Agreement and act with respect thereto,
and (ii) such other documents, duly executed by Borrower, as GC may deem
reasonably necessary to consummate this Agreement or as shall then be required
pursuant to the Loan Agreement.
4. Representations True. To induce GC to enter into this
Agreement, Borrower hereby confirms and restates, as of the date hereof, the
representations and warranties made by it in Section 3 of the Loan Agreement.
For the purposes of this Section 4 each reference in Section 3 of the Loan
Agreement to "this Agreement," and the words "hereof," "herein," "hereunder," or
words of like import in such Section, shall mean and be a reference to the Loan
Agreement as amended by this Agreement.
5. General Provisions. GC's execution and delivery of, or
acceptance of, this Agreement and any other documents and instruments in
connection herewith shall not be
-2-
<PAGE> 3
deemed to create a course of dealing or otherwise create any express or implied
duty by it to provide any other or further amendments, consents or waivers in
the future. This Agreement, the Loan Agreement, and the other Loan Documents set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except as herein expressly amended and supplemented, all
of the terms and provisions of the Loan Agreement and the other Loan Documents
shall continue in full force and effect and the same are hereby ratified and
confirmed. This Agreement forms part of the Loan Agreement and the terms of the
Loan Agreement are incorporated herein by reference.
BORROWER: GBC:
SYNQUEST, INC. GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT
COMMERCIAL CORPORATION
By: /s/ John Bartels By: /s/ Lisa Nagano
----------------------------- -----------------------------
President or Vice President Title: Senior Vice President
--------------------------
By: /s/ Mark Simcoe
-----------------------------
Secretary or Ass't Secretary
-3-
<PAGE> 1
EXHIBIT 10.13
GREYROCK
CAPITAL
A Bank OF AMERICA COMPANY
AMENDMENT AGREEMENT
BORROWER: SYNQUEST, INC.
ADDRESS: 3500 PARKWAY LANE, SUITE 555
NORCROSS, GEORGIA 30092
DATE: DECEMBER 14, 1999
THIS AMENDMENT AGREEMENT (this "Agreement") is entered into
between GREYROCK CAPITAL, a Division of Banc of America Commercial Finance
Corporation ("GC") (formerly known as NationsCredit Commercial Corporation),
whose address is 10880 Wilshire Boulevard, Suite 1850, Los Angeles, California
90024, and the Borrower named above ("Borrower").
GC and Borrower agree to amend and supplement the Loan and
Security Agreement between them, dated July 10, 1996, as amended (as amended,
the "Loan Agreement"), as follows. (This Agreement, the Loan Agreement, any
prior written amendments to the Loan Agreement signed by GC and Borrower, and
all other written documents and agreements between GC and Borrower, are referred
to herein collectively as the "Loan Documents." Capitalized terms used but not
defined in this Agreement shall have the meanings set forth in the Loan
Agreement.)
1. Amendments. (a) Section 1 of the Schedule is amended by
replacing "December 31, 1999" with "February 29, 2000" as the date for repayment
of all outstanding Overadvance Loans. (b) The date "December 31, 1999" in
Section 4 of the Schedule to Loan Agreement is hereby deleted and replaced with
the date "February 29, 2000" (c) In Section 6.1 of the Loan Agreement, "thirty"
is substituted for "sixty."
2. Representations True. To induce GC to enter into this
Agreement, Borrower hereby confirms and restates, as of the date hereof, the
representations and warranties made by it in Section 3 of the Loan Agreement.
For the purposes of this Section 2 each reference in Section 3 of the Loan
Agreement to "this Agreement," and the words "hereof, .... herein," "hereunder,"
or words of like import in such Section, shall mean and be a reference to the
Loan Agreement as amended by this Agreement.
3. General Provisions. GC's execution and delivery of, or
acceptance of, this Agreement and any other documents and instruments in
connection herewith shall not be deemed to create a course of dealing or
otherwise create any express or implied duty by it to provide any other or
further amendments, consents or waivers in the future. This Agreement, the Loan
Agreement, and the
<PAGE> 2
other Loan Documents set forth in full all of the representations and agreements
of the parties with respect to the subject matter hereof and supersede all prior
discussions, representations, agreements and understandings between the parties
with respect to the subject hereof. Except as herein expressly amended and
supplemented, all of the terms and provisions of the Loan Agreement and the
other Loan Documents shall continue in full force and effect and the same are
hereby ratified and confirmed. This Agreement forms pan of the Loan Agreement
and the terms of the Loan Agreement are incorporated herein by reference.
Borrower: GC:
SYNQUEST, INC. GREYROCK CAPITAL,
A DIVISION OF BANC OF AMERICA COMMERCIAL
FINANCE CORPORATION
By: /s/ John Bartels
- -------------------------
Title: Executive Vice President, By: /s/ Lisa Nagano
Finance and Administration -------------------------
Title: Senior Vice President
<PAGE> 1
EXHIBIT 10.14
GREYROCK
CAPITAL
AMENDMENT AGREEMENT
BORROWER: SYNQUEST, INC.
3500 PARKWAY LANE, SUITE 555
NORCROSS, GEORGIA 30092
DATE: MARCH 15, 2000
THIS AMENDMENT AGREEMENT (this "Agreement") is entered into
between GREYROCK CAPITAL, a Division of Bane of America Commercial Finance
Corporation ("GC") (formerly known as NationsCredit Commercial Corporation),
whose address is 10880 Wilshire Boulevard, Suite 1850, Los Angeles, California
90024, and the Borrower named above ("Borrower").
GC and Borrower agree to amend and supplement the Loan and
Security Agreement between them, dated July 10, 1996, as amended (as amended,
the "Loan Agreement"), as follows. (This Agreement, the Loan Agreement, any
prior written amendments to the Loan Agreement signed by GC and Borrower, and
all other written documents and agreements between GC and Borrower, are referred
to herein collectively as the "Loan Documents." Capitalized terms used but not
deemed in this Agreement shall have the meanings set forth in the Loan
Agreement.)
1. Amendments. For purposes of Section 6 of the Loan and
Security Agreement and Section 4 of the Schedule to Loan Agreement, the parties
agree that March 31, 2000 shall be the Maturity Date without any need for notice
of termination or other action by the parties in order for termination to take
place on such Maturity Date, and that the automatic renewal provisions of
Section 6.1 shah be suspended with respect to the upcoming Maturity Date to
occur on March 31, 2000.
2. General Provisions. This Agreement, the Loan Agreement, and
the other Loan Documents set forth in full all of the representations and
agreements of the parties with respect to the subject matter hereof and
supersede all prior discussions, representations, agreements and understandings
between the parties with respect to the subject hereof. Except as herein
expressly amended and supplemented, all of the terms and provisions of the Loan
<PAGE> 2
Agreement and the other Loan Documents shall continue in full force and effect
and the same are hereby ratified and confirmed.
Borrower: GC:
SYNQUEST, INC. GREYROCK CAPITAL,
A DIVISION OF BANC OF AMERICA
COMMERCIAL FINANCE CORPORATION
By: /s/ John Bartels By: /s/ Lisa Nagano
------------------------ ------------------------
Title: Executive Vice President Title: Senior Vice President
Finance and Administration
<PAGE> 1
EXHIBIT 10.15
AMENDMENT AGREEMENT
BORROWER: SYNQUEST, INC.
ADDRESS: 3500 PARKWAY LANE, SUITE 555
NORCROSS, GEORGIA 30092
DATE: MARCH 29, 2000
THIS AMENDMENT AGREEMENT (this "Agreement") is entered into between
GREYROCK CAPITAL, a Division of Banc of America Commercial Finance Corporation
("GC") (formerly known as Nations Credit Commercial Corporation), whose address
is 10880 Wilshire Boulevard, Suite 1850, Los Angeles, California 90024, and the
Borrower named above ("Borrower").
GC and Borrower agree to amend and supplement the Loan and Security
Agreement between them, dated July 10, 1996, as amended (as amended, the "Loan
Agreement"), as follows. (This Agreement, the Loan Agreement, any prior written
amendments to the Loan Agreement signed by GC and Borrower, and all other
written documents and agreements between GC and Borrower, and all other written
documents and agreements between GC and the Borrower, are referred to herein
collectively as the "Loan Documents." Capitalized terms used but not defined in
this Agreement shall have the meanings set forth in the Loan Agreement.
1. Amendments. (a) Section 1 of the Schedule (captioned "Credit
Limit") is amended as follows:
(i) The definition of "Aggregate Commitment" is amended and
restated in its entirety to read: "Aggregate Commitment" means an amount of up
to $20,000,000 at any one time."
(ii) The definition of "Overadvance Commitment" is amended and
restated in its entirety to read: Overadvance Commitment" means an amount of up
to $5,000, 000 at any one time."
(b) Section 4 of the Schedule (captioned "Maturity Date") is
amended by replacing the date "March 31, 2000" with the date "December 31,
2000".
2. Representations True. To induce GC to enter into this
Agreement, Borrower hereby confirms and restates, as of the date hereof, the
representations and warranties made by it in Section 3 of the Loan Agreement.
For the purposes of this Section 2 each reference in Section 3 of the Loan
Agreement to "this Agreement," and the works "hereof," "herein," "hereunder," or
words of like import in such Section, shall mean and be a reference to the Loan
Agreement as amended by this Agreement.
<PAGE> 2
3. General Provisions. GC's execution and delivery of, or
acceptance of, this Agreement and any other documents and instructions in
connection herewith shall not be deemed to create a course of dealing or
otherwise create any express or implied duty by it to provide any other or
further amendments, consents or waivers in the future. This Agreement, the Loan
Agreement, and the other Loan Documents set forth in full all of the
representations and agreements of the parties with respect to the subject matter
hereof and supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof. Except as
herein expressly amended and supplemented, all of the terms and provisions of
the Loan Agreement and other Loan Documents shall continue in full force and
effect and the same hereby ratified and confirmed. This Agreement forms part of
the Loan Agreement and the terms of the Loan Agreement are incorporated herein
by reference.
Borrower: GC:
SYNQUEST, INC. GREYROCK CAPITAL,
A DIVISION OF BANC OF AMERICA COMMERCIAL
FINANCE CORPORATION
BY: /s/ John Bartels BY: /s/ Lisa Nagano
------------------------------ ------------------------------------
TITLE: EXECUTIVE VICE-PRESIDENT TITLE: LISA NAGANO
FINANCE AND ADMINISTRATION SR. VICE PRESIDENT
<PAGE> 1
EXHIBIT 10.16
-------------
LEASE AGREEMENT
BETWEEN
ACQUIPORT PEACHTREE RIDGE, INC.,
a Delaware corporation
(Landlord)
AND
SYNQUEST, INC.,
a Georgia corporation
(Tenant)
3500 Parkway Lane
Suite 555,
Norcross, Georgia
(Premises)
-------------
<PAGE> 2
TABLE OF CONTENTS - LEASE AGREEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Basic Lease Information 1
2. Premises and Term 1
3. Base Rent and Additional Rent 2
4. Use 2
5. Service and Utilities 3
6. Tenant Repairs 3
7. Alterations 3
8. Rules and Regulations 4
9. Inspection and Right of Entry 4
10. Surrender of Premises 4
11. Assignment and Subletting 4
12. Insurance 5
13. Fire and Casualty Damage 6
14. Waiver of Claims, Landlord's Liability and Indemnification 6
15. Condemnation 7
16. Holding Over 7
17. Quiet Enjoyment 7
18. Events of Default 7
19. Remedies 8
20. Bankruptcy 9
21. Intentionally Omitted 9
22. Subordination; Estoppel Certificates 10
23. Mechanics Liens; Other Taxes 10
24. Intentionally Omitted 10
25. Certain Rights Reserved to Landlord 10
26. Notices 11
27. Hazardous Substances 12
28. Brokerage 12
29. Miscellaneous 12
30. Additional Provisions 14
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
Exhibit "A" Land
Exhibit "B" Premises
Exhibit "C" Work Letter
Exhibit "D" Rules and Regulations
Exhibit "E" Expansion Space
Exhibit "F" Building Floor Load
Exhibit "G" Payment of Operating Expenses
</TABLE>
<PAGE> 3
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease"), made and entered into by and
between ACQUIPORT PEACHTREE RIDGE, INC., a Delaware corporation (hereinafter
referred to as "Landlord"), and SYNQUEST, INC., a Georgia corporation
(hereinafter referred to as "Tenant").
W I T N E S S E T H :
1. BASIC LEASE INFORMATION. Each use of the terms capitalized and
defined in this Paragraph 1 shall be deemed to refer to, and shall have the
respective meanings set forth in, this Paragraph 1.
(a) Building. The seven (7) story concrete and pre-cast
office building located on the Land and being more commonly known as "3500
Parkway Lane, Norcross, Georgia 30092."
(b) Land. Those certain parcels of land more particularly
described on Exhibit "A" attached hereto and by this reference made a part
hereof.
(c) Project. The Land and all improvements thereon,
including, without limitation, the Building and all Common Areas.
(d) Premises. That portion of the fifth floor of the
Building, presently known as Suite Number 555 thereof, substantially as shown on
Floor Plan(s) attached hereto as Exhibit "B" and by this reference made a part
hereof.
(e) Common Areas. Those certain areas and facilities of
the Building and the Project which are from time to time provided by Landlord,
for the use of tenants of the Project and their employees, clients, customers,
licensees and invitees or for use by the public, which facilities and
improvements shall, at a minimum, include all corridors, elevator foyers,
bathrooms, electrical and telephone rooms, mechanical rooms, and janitorial
areas, and any and all grounds, parks, landscaped areas, outside sitting areas,
sidewalks, walkways, pedestrian ways, loading docks, and which may in Landlord's
discretion, include generally all other improvements located on the Land and
designed for use in common by tenants, their employees, clients, customers,
licensees and invitees.
(f) Tenant's Permitted Uses. Executive and administrative
offices reasonable and customary for a first-class office building, but
specifically excluding medical and dental offices, governmental offices, travel
agency and airline ticket sales.
(g) Commencement Date. January 1, 2000.
(h) Lease Expiration Date. The last day of the calendar
month in which the day immediately preceding the sixth (6th) annual anniversary
of the Commencement Date occurs.
(i) Term. Approximately six (6) years, beginning on the
Commencement Date and ending at 11:59 p.m. on the Lease Expiration Date, unless
this Lease is sooner terminated as provided herein.
(j) Net Rentable Area of the Premises. Landlord and
Tenant have agreed that the Net Rentable Area of the Premises is 18,452 square
feet. Neither Landlord nor Tenant shall have the right to remeasure the Net
Rentable Area of the Premises during the Term of this Lease.
(k) Net Rentable Area of the Building. Landlord and
Tenant have agreed that the Net Rentable Area of the Building is 160,099 square
feet. Neither Landlord nor Tenant shall have the right to change the agreed Net
Rentable Area of the Building during the Term of this Lease.
(l) Intentionally Omitted.
(m) Rent. The Base Rent, the Additional Rent [as defined
in Paragraph 3(a)] and all other sums due from Tenant to Landlord hereunder.
(n) Base Rent. The Base Rent for the Premises shall be as
follows:
<TABLE>
<CAPTION>
Per Square Foot Annual
Lease Year Net Rentable Area Total Monthly
- ---------- ----------------- ------ -------
<S> <C> <C> <C>
First (1st) $ 19.00 $ 350,588.00 $ 29,215.67
Second (2nd) $ 19.76 $ 364,611.52 $ 30,384.29
Third (3rd) $ 20.55 $ 379,188.60 $ 31,599.05
Fourth (4th) $ 21.37 $ 394,319.24 $ 32,859.94
Fifth (5th) $ 22.23 $ 410,187.96 $ 34,182.33
Sixth (6th) $ 23.12 $ 426,610.24 $ 35,550.85
</TABLE>
The term "Lease Year" shall be each twelve (12) month period beginning on the
Commencement Date; provided, however, if the Commencement Date is not the first
day of the month, the first Lease Year shall commence on the Commencement Date
and end on the last day of the twelfth (12th) month thereafter and the second
and each succeeding Lease Year shall commence on the first day of the next
calendar month.
2. PREMISES AND TERM.
(a) In consideration of the obligation of Tenant to pay
Rent as herein provided, and in consideration of the other terms, provisions and
covenants hereof, Landlord hereby demises and leases the Premises to Tenant, and
Tenant hereby leases the Premises from Landlord for the Term. During the Term,
Tenant shall have the right to use the Common Areas in common with others and in
accordance with the Rules and Regulations. Landlord and Tenant agree that the
number of square feet of Net Rentable Area of the Premises stated in Paragraph 1
above shall be used in the computation of Base Rent, Additional Rent, and all
other charges due hereunder, but Landlord and Tenant agree to enter into an
amendment to this Lease modifying the number of square feet of Net Rentable Area
of the Premises, the amount of the installments of Base Rent and other
provisions as appropriate, if Landlord or Tenant determines, after construction
of the Premises, that the number of square feet of Net Rentable Area contained
in the Premises is different than the number of square feet of Net Rentable Area
stated above. The Net Rentable Area of the Premises includes the area within the
space occupied by Tenant, together with a percentage of the area of all public
and common use areas within the Building.
(b) Tenant acknowledges that it currently is in
possession of approximately 11, 745 square feet of Net Rentable Area (the
"Existing Premises") within the Premises pursuant to a Temporary Holdover
Agreement between Landlord and Tenant (the "Temporary Holdover Agreement") and
that it has inspected and accepts the Existing Premises, the Building and the
Project, in their present condition, as suitable for the purpose for which the
Premises are currently leased, except for "Latent Defects"
<PAGE> 4
(as hereinafter defined) and "Punch List" (as hereinafter defined) items. Tenant
further acknowledges that no representations as to the repair of the Premises,
nor promises to alter, remodel or improve the Premises have been made by
Landlord, unless such are expressly set forth in this Lease. As provided in
Paragraph 2(c) below, Landlord is to construct "Leasehold Improvements" (as
hereinafter defined) to the Existing Premises and to the "Expansion Phase\" (as
hereinafter defined), after the Commencement Date. Upon "Substantial Completion"
(as defined in the Work Letter attached hereto as Exhibit "C") of the Leasehold
Improvements, Landlord's and Tenant's representatives shall do a walk-through
inspection of the Premises and create a list (the "Punch List") of defective,
nonconforming, damaged and otherwise non-acceptable portions of the Leasehold
Improvements. Tenant, by taking possession of the Premises or any portion
thereof after the Substantial Completion of the Leasehold Improvements,
acknowledges that it has inspected the Premises, and subject to those matters
set forth below in this Paragraph, thereby accepts the Premises and any such
improvements in their condition and for the use intended by Tenant, except for
Latent Defects and Punch List items. The taking of possession by Tenant or
acceptance of any portion of the Premises by Tenant after the Substantial
Completion of the Leasehold Improvements shall not be deemed as a waiver of: (i)
any Latent Defect in the Building or Premises; (ii) any Punch List item that
Landlord is to provide or perform; or (iii) any above-ceiling or other defect as
of the date of Substantial Completion of the Leasehold Improvements, not readily
visible during a walk-through inspection of the Premises, all of which items
described in (i) through (iii) Landlord shall be obligated to immediately repair
to the extent the condition requiring repair shall not be caused by Tenant. Any
such obligation of Landlord to make such repairs shall be made at Landlord's
expense. A "Latent Defect" is a defect in the condition of the Premises caused
by Landlord's, or Landlord's agents', failure to construct the Leasehold
Improvements in a good and workmanlike manner and in substantial accordance with
the Working Drawings and Specifications (as hereinafter defined), which defect
would not ordinarily be observed during a careful walk-through inspection by a
reasonable tenant. If Tenant notifies Landlord of a Latent Defect within twelve
(12) months after the Commencement Date, then Landlord, at its expense, will
repair such Latent Defect as soon as practicable. Except as set forth in this
Paragraph 2(d), Landlord shall have no liability or obligation to Tenant for
Latent Defects.
(c) This Lease pertains to Premises in which building
interior finish is to be constructed by Landlord in accordance with the Work
Letter attached hereto as Exhibit "C" ( the "Leasehold Improvements"). Tenant is
presently in occupancy of the Existing Premises under the Temporary Holdover
Agreement. Tenant acknowledges and agrees that the Leasehold Improvements will
be constructed in the Premises after the Commencement Date, and while Tenant is
in occupancy of the Existing Premises. Tenant agrees to cooperate with Landlord
to allow such construction to proceed in an orderly and expeditious manner. No
Base Rent shall be due and payable for the Expansion Phase (consisting of 6,707
square feet of Net Rentable Area in the aggregate, and located as shown on
Exhibit "B") until such time as the Leasehold Improvements reach Substantial
Completion. If Landlord is delayed in reaching Substantial Completion as a
result of "Tenant Delay" (as defined in Exhibit "C"), the date of Substantial
Completion, and the payment of Base Rent for the Expansion Phase, shall be
accelerated as provided in Exhibit "C"; and if Landlord cannot achieve
Substantial Completion as a result of Tenant Delay, Landlord may at its election
complete so much of the work to done by Landlord as may be practical under the
circumstances and by written notice to Tenant, establish the date for
commencement of payment of Base Rent on the Expansion Phase as the date of such
partial completion, subject to any applicable accelerations due to delays
resulting from Tenant Delay. Tenant shall begin paying Base Rent on the rest of
the Premises (excluding the Expansion Phase) on the Commencement Date
notwithstanding the fact that the Leasehold Improvements for such portion of the
Premises have not been started or completed as of such date. Tenant acknowledges
that no representations as to the repair of the Premises have been made by
Landlord, unless such are expressly set forth in this Lease. After the
completion of the Leasehold Improvements, including all Punch List items, Tenant
shall, upon demand, execute and deliver to Landlord a letter of acceptance of
delivery of the Premises which shall also set forth the Commencement Date and
the date payment of Rent on the Expansion Phase commences, shall confirm the
number of square feet Net Rentable Area of the Premises and shall contain such
other information as Landlord may reasonably request. In the event of any
dispute as to Substantial Completion of work performed or required to be
performed by Landlord, the certificate of Landlord's architect or general
contractor shall be conclusive.
(d) Landlord covenants and warrants that the Leasehold
Improvements shall be free from defects in workmanship and materials and
Landlord shall, at its own cost and expense, remedy any defect in the original
work, materials and equipment of Landlord herein provided, including without
limitation, plumbing, electrical, mechanical, air conditioning and ventilating
work, provided Tenant gives Landlord written notice thereof no later than twelve
(12) months after the date of Substantial Completion of the Leasehold
Improvements. In addition to (and not in lieu of) Landlord's obligations under
the Lease with respect to repairs, Landlord hereby agrees to use all reasonable
efforts to enforce the warranty of Landlord's contractor that the Leasehold
Improvements will be free from defects in workmanship and materials for a period
of one (1) year from the date of Substantial Completion. Alternatively, Landlord
hereby assigns to Tenant (and agrees to cooperate fully with Tenant in the
enforcement thereof) all of Landlord's rights pursuant to such warranty.
Landlord shall cooperate fully with Tenant to cause such defective workmanship
or material to be promptly corrected, repaired or replaced by Landlord's
contractor, without cost or expense to Tenant. Such correction, repair or
replacement shall be performed in such a manner so as to minimize interference
with Tenant's operations in or about the Premises.
3. BASE RENT AND ADDITIONAL RENT, Tenant shall pay to Landlord,
without notice, demand, offset or deduction, except as hereinafter expressly
provided, in lawful money of the United States of America, at Landlord's Address
for Payments as set forth in Paragraph 26 hereof, or at such other place as
Landlord shall designate in writing from time to time: (i) the Base Rent, in
equal monthly installments in advance on the first day of each calendar month
during the Term; (ii) the Additional Rent ("Additional Rent") consisting of all
other sums of money due and payable by Tenant hereunder, at the respective times
required hereunder. Except as provided above, payment of the Rent shall begin on
the Commencement Date; provided, however, that if either the Commencement Date
or the Lease Expiration Date falls on a date other than the first day of a
calendar month, the Rent due for such fractional month shall be prorated on a
per diem basis between Landlord and Tenant so as to charge Tenant only for the
portion of such fractional month falling within the Term.
4. USE.
(a) The Premises shall be used only for executive and
administrative offices, limited to the uses specifically set forth in the Basic
Lease Information and for no other purposes whatsoever. Landlord does, however,
represent that any certificate of occupancy issued with respect to the Premises
shall allow use for executive and administrative offices. Tenant shall at its
own cost and expense obtain any and all licenses and permits necessary for any
such use. Tenant shall comply with all governmental laws, ordinances and
regulations applicable to its use of the Premises, and shall promptly comply
with all governmental orders and directives for the correction, prevention and
abatement of nuisances by Tenant in or upon, or connected with, the Premises,
all at Tenant's sole expense. Tenant shall not permit any objectionable or
unpleasant odors, smoke, dust, gas, noise or vibrations to emanate from the
Premises, nor take any other action which would constitute a nuisance or would
disturb or endanger any other tenants of the Building or unreasonably interfere
with their use of their respective premises. Without Landlord's prior written
consent, Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive or highly flammable. Tenant will not
use the Premises for any purpose or in any manner (including without limitation
any method of storage) which would render the insurance thereon void or the
insurance risk more hazardous or cause the Insurance Commissioner or other
insurance authority to disallow any sprinkler credits. If any increase in the
fire and extended coverage insurance premiums paid by Landlord or other tenants
for the Building is caused by Tenant's use and occupancy of the Premises, or if
Tenant vacates the Premises and causes an increase in such premiums, then Tenant
shall pay the amount of such increase to Landlord as Additional Rent.
(b) Tenant agrees that the floor load resulting from
Tenant's furniture, inventory and equipment pertaining to Tenant's use of the
Premises shall not exceed allowable design floor loading for the Building as set
forth on Exhibit "F", which is attached hereto and by this reference made a part
hereof. Tenant shall distribute floor loading in accordance with design loads
for the
2
<PAGE> 5
Building. Tenant shall hold harmless Landlord from any loss, liability and
expenses, both real and alleged, arising out of or caused by Tenant's failure to
comply with this Paragraph.
5. SERVICES AND UTILITIES.
(a) Landlord shall maintain the Common Areas, including
lobbies, stairs, elevators, corridors and rest rooms, the windows in the
Building, the mechanical, plumbing and electrical equipment serving the
Building, and the structure itself, in good order and condition, except for
damage occasioned by the act of Tenant, its agents, servants, employees or
invitees, which damage shall be repaired by Landlord at Tenant's expense. In
addition, Landlord, at its own cost and expense, shall, during the Term of the
Lease: (i) subject to the limitation set forth in Paragraph 2(b) hereof, remedy
any Latent Defects in construction work; (ii) keep in good order and repair
during the Term of the Lease (and any extensions and renewals thereof) all
exterior portions of the Premises including, but without limitation, the roof,
walls, gutters, downspouts, interior roof drains or conductors, etc.; and (iii)
make any and all repairs to all concealed plumbing within the Premises
(including, without limitation, septic tanks, if any, and the sprinkler system),
as well as sewer, gas, electric and other utility lines up to but not within the
Premises unless such repairs are required by the negligent acts of Tenant, its
employees, agents or invitees. If Landlord fails to proceed promptly, taking in
to consideration the nature of such defect, to remedy any such defect to
Tenant's satisfaction after receipt of such notice from Tenant, the Tenant,
after not less than seven (7) days additional notice to Landlord (except that no
notice shall be required under emergency conditions or where Tenant's operations
shall be materially adversely affected) may, but shall not be obligated to,
remedy such defects. All sums expended by Tenant to cure such defects shall be
paid by the Landlord to Tenant upon demand with interest at the rate of eight
percent (8%) per annum from the date Tenant makes such payment(s). Without
limiting the generality of the foregoing covenants on the part of the Landlord
to remedy defects and without releasing the Landlord therefrom, any and all
guarantees and warranties given to the Landlord by a manufacturer, contractor or
subcontractor for any and all supplies, material, equipment (including
replacement equipment) or labor, whether related to the particular items
hereinbefore specified or not, shall inure to the benefit of the Tenant.
(b) Provided there does not exist any uncured Event of
Default hereunder, and subject to the provisions contained elsewhere herein and
in the Rules and Regulations, Landlord agrees to furnish to the Premises during
ordinary business hours of generally recognized "Business Days" (as hereinafter
defined), to be determined by Landlord (but exclusive in any event of Sundays
and legal holidays), heat and air conditioning required for the comfortable use
and occupancy of the Premises from 8:00 a.m. to 6:00 p.m. on weekdays and from
8:00 a.m. to 1:00 p.m. on Saturdays; janitorial services during the times and in
the manner that such services are customarily furnished in comparable office
buildings in the immediate market area, and elevator service. Landlord shall be
under no obligation to provide additional or after-hours heating or air
conditioning, but if Landlord elects to provide such services at Tenant's
request, Tenant shall pay to Landlord a charge for such services as set forth
below in Paragraph 38. Tenant agrees to keep and cause to be kept closed all
window coverings, if any, when necessary because of the sun's position, and
Tenant also agrees at all times to cooperate fully with Landlord and to abide by
all the regulations and requirements which Landlord may prescribe for the proper
functioning and protection of said heating, ventilating, and air conditioning
system and to comply with all laws, ordinances and regulations respecting the
conservation of energy. Whenever heat-generating machines, beyond those
customarily used for office purposes, excess lighting or equipment are used in
the Premises which materially affect the temperature otherwise maintained by the
air conditioning system, Landlord shall notify Tenant thereof and within thirty
(30) days after such notice, Tenant shall elect to: (i) discontinue use of such
equipment, machine or lighting; (ii) pay to Landlord as Additional Rent an
agreed upon fee per hour during the periods that Tenant uses such equipment,
machine or lighting; or (iii) cause Landlord to install supplementary air
conditioning units and metering devices for such units in the Premises; and the
cost thereof, including the cost of electricity and/or water therefor, shall be
paid by Tenant to Landlord within ten (10) days after written demand by
Landlord. Landlord agrees to furnish to the Premises electricity for general
office purposes, meeting the requirements set forth in the Work Letter, and
water for lavatory and drinking purposes, subject to the provisions of
subparagraph 5(c) below. Except as provided in Paragraph 39 below, Landlord
shall in no event be liable for any interruption or failure of utility services
to the Premises or for any result thereof.
(c) If Tenant shall require water or electric current or
any other resource materially in excess of that usually furnished or supplied
for use of the Premises as general office space (it being understood that such
an excess may result from the number of fixtures, apparatus and devices in use,
the nature of such fixtures, apparatus and devices, the hours of use, or any
combination of such factors), Landlord shall notify Tenant thereof and, within
thirty (30) days after receipt of such notice, Tenant shall elect to: (i)
discontinue use of such equipment, machine or lighting; (ii) pay to Landlord as
Additional Rent an agreed upon fee per hour during the periods that Tenant uses
such equipment, machine or lighting; or (iii) cause Landlord to install a
special meter in the Premises so as to measure the amount of water, electric
current or other resource consumed solely for any such other use. The cost of
any such meters and installation, maintenance and repair thereof shall be paid
for by Tenant, and Tenant agrees to pay Landlord promptly upon demand by
Landlord for all such water, electric current or other resource consumed, as
shown by said meters, at the rates charged to Landlord by the local public
utility furnishing the same. Landlord shall not be in default hereunder or be
liable for any damages directly or indirectly resulting from, nor shall the
rental herein reserved be abated by reason of: (i) the installation, use or
interruption of use of any equipment in connection with the furnishing of any of
the foregoing utilities and services; (ii) failure to furnish or delay in
furnishing any such utilities or services when such failure or delay is caused
by Acts of God or the elements, labor disturbances of any character, any other
accidents or other conditions beyond the reasonable control of Landlord; or
(iii) the limitation, curtailment, rationing or restriction on use of water or
electricity, gas or any other form of energy or any other service or utility
whatsoever serving the Premises or the Building. Furthermore, Landlord shall be
entitled to cooperate voluntarily in a reasonable manner with the efforts of
national, state or local governmental agencies or utilities suppliers in
reducing consumption of energy, water or any other resources.
(d) Any sums payable under this Paragraph 5 shall be
considered Additional Rent and may be added to any installment of Rent
thereafter becoming due and shall accrue late charges as Rent as set forth in
subparagraph 19(g) of this Lease, and Landlord shall have the same remedies for
a default in payment of such sums as for a default in the payment of Rent.
(e) Tenant shall not provide any janitorial services
without Landlord's prior written consent and then only subject to supervision of
Landlord and by a janitorial contractor or employees at all times satisfactory
to Landlord. Any such services provided by Tenant shall be at Tenant's sole
risk, cost and responsibility.
6. TENANT REPAIRS. Tenant shall, at all times during the Term, at
Tenant's sole cost and expense, keep the Premises and every part thereof in good
order, condition and repair, excepting ordinary wear and tear, damage thereto by
fire, earthquake, Act of God, the elements, or the negligence or intentional
misconduct of Landlord or its agents, servants, employees or invitees (other
than the Tenant). Tenant shall, on or before the Lease Expiration Date or any
sooner date of termination of this Lease, unless Landlord demands otherwise as
in Paragraph 7 hereof provided, surrender to Landlord the Premises and all
repairs, changes, alterations, additions and improvements thereto in the same
condition as when received, or when first installed, ordinary wear and tear,
damage by fire, earthquake, Act of God or the elements excepted. It is hereby
understood and agreed that, except as expressly set forth herein, Landlord has
no obligation to alter, remodel, improve, repair, decorate, or paint the
Premises or any part thereof. However, if Tenant fails to make required repairs
to the Premises promptly, Landlord, at Landlord's election, after not less than
then ten (10) days prior written notice to Tenant, shall have the right to make
such repairs, and Tenant shall pay Landlord on demand Landlord's actual costs of
such repair, plus a fee equal to fifteen percent (15%) of such actual costs to
cover Landlord's overhead in making such repairs.
7. ALTERATIONS. Tenant shall not make any alterations, additions
or improvements to the Premises (including but not limited to roof, floor and
wall penetrations) without the prior written consent of Landlord. In the event
Landlord consents to the making of any such alterations, additions or
improvements by Tenant, the same shall be made by Tenant, at Tenant's sole cost
and expense, in accordance with all applicable laws, ordinances and regulations,
and all requirements of Landlord's and Tenant's insurance policies and only in
accordance with plans and specifications approved by Landlord; and any
contractor or person selected by Tenant to make the
3
<PAGE> 6
same and all subcontractors must first be approved in writing by Landlord. If
Landlord and Tenant so agree, the alterations, additions or improvements may be
made by Landlord for Tenant's account and, in such event, Tenant shall fully
reimburse Landlord for the entire cost thereof, including a fee of fifteen
percent (15%) of such cost to cover Landlord's overhead, within twenty (20) days
after written notification of Tenant by Landlord providing Tenant with an
invoice or other request (or statement). Promptly after completion of any
alterations, additions, or improvements to the Premises made by Tenant, Tenant
shall supply Landlord with a set of scaled and dimensioned, reproducible mylars
of "as-built" plans for such alterations, additions or improvements, certified
by Tenant's architect or space planner. Tenant may, without the consent of
Landlord, but at its own cost and expense and in a good and workmanlike manner
erect such shelves, bins, machinery and trade fixtures as it may deem advisable,
without altering the basic character of the Building or improvements and without
overloading or damaging the Building or improvements, and in each case complying
with all applicable governmental laws, ordinances, regulations and other
requirements. All alterations, additions, improvements and partitions erected by
Tenant shall be and remain the property of Tenant during the Term and Tenant
shall, unless Landlord otherwise elects as herein provided, remove all
alterations, additions, improvements and partitions erected by Tenant and
restore the Premises to their condition, as existed after completion of the
Leasehold Improvements, normal wear and tear, casualty and condemnation
excepted, on or before the Lease Expiration Date or any sooner date of
termination of this Lease; provided, however, that if Landlord so elects prior
to termination or expiration of this Lease, such alterations, additions,
improvements and partitions shall become the property of Landlord as of the
Lease Expiration Date or any sooner date of termination of this Lease and shall
be delivered up to the Landlord with the Premises. All shelves, bins, machinery
and trade fixtures installed by Tenant may be removed by Tenant prior to the
termination of this Lease if Tenant so elects, and shall be removed on or before
the Lease Expiration Date or any sooner date of termination of this Lease if
required by Landlord; upon any such removal Tenant shall restore the Premises to
their original condition. All such removals and restoration shall be
accomplished in a good and workmanlike manner so as not to damage the primary
structure or structural qualities of the Building and improvements situated in
the Premises. Tenant shall not be required to remove any of the Leasehold
Improvements constructed pursuant to the Work Letter attached hereto as Exhibit
"C." In addition, Tenant shall not be required to remove any subsequent
alteration or improvement made by Tenant, provided Tenant obtains Landlord's
written consent to surrender such alteration or improvement with the Premises,
at the time Landlord consents to the making of such alteration or improvement.
8. RULES AND REGULATIONS. Tenant shall faithfully observe and
comply with the Rules and Regulations attached to this Lease as Exhibit "D" and
by this reference made a part hereof and all reasonable modifications thereof
and additions thereto from time to time put into effect by Landlord. For
purposes of the Rules and Regulations set forth in Exhibit "D" of the Lease,
Landlord hereby: (i) represents that such Rules and Regulations, with such minor
modifications as may have been negotiated between Landlord and such other
tenants, constitute the building rules and regulations for all of the tenants of
the Building; (ii) agrees that the Rules and Regulations will be enforced in a
non-discriminatory manner, and (iii) agrees that Landlord will use its
reasonable good faith efforts to effect compliance therewith. In the event of
any conflict with the terms of the Lease, the terms and conditions of the Lease
shall prevail over the Rules and Regulations. Notwithstanding anything to the
contrary contained in the Lease, the Rules and Regulations will not be modified
or amended so as to effect a material expansion of Tenant's obligations under
the Lease. Landlord shall not be responsible for the non-performance by any
other tenant or occupant of the Building of any of said Rules and Regulations.
9. INSPECTION AND RIGHT OF ENTRY. Landlord reserves and shall at
all times have the right to enter the Premises to inspect the same, to supply
janitorial service and any other service to be provided by Landlord to Tenant
hereunder, to show said Premises to prospective purchasers, mortgagees or
tenants, to post and maintain all notices, including notices of
non-responsibility, and to alter, improve, or repair the Premises in accordance
with the terms of this Lease, without abatement of Rent, and may for that
purpose erect, use and maintain scaffolding, pipes, conduits, and other
necessary structures in and through the Premises where reasonably required by
the character of the work to be performed, provided that entrance to the
Premises shall not be blocked thereby, and further provided that the business of
Tenant shall not be interfered with unreasonably. Tenant hereby waives any claim
for damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises. For each of
the aforesaid purposes, Landlord shall at all times have and retain a key with
which to unlock all of the doors in, upon and about the Premises, excluding
Tenant's vaults and safes, or special security areas (designated in writing in
advance and made known to Landlord), and Landlord shall have the right to use
any and all means which Landlord may deem necessary or proper to open said doors
in an emergency, in order to obtain entry to any portion of the Premises, and
any entry to the Premises, or portions thereof obtained by Landlord by any of
said means, or otherwise, shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into the Premises, or an eviction,
actual or constructive, of Tenant from the Premises or any portions thereof.
Landlord shall also have the right at any time, without the same constituting an
actual or constructive eviction and without incurring any liability to Tenant
therefor, to change the arrangement and/or location of entrances or passageways,
doors and doorways and corridors, elevators, stairs, toilets or other public
parts of the Building and to change the name, number or designation by which the
Building is commonly known.
10. SURRENDER OF PREMISES. Tenant shall give written notice to
Landlord at least thirty (30) days prior to vacating the Premises and shall
arrange to meet with Landlord for a joint inspection of the Premises prior to
vacating.
11. ASSIGNMENT AND SUBLETTING.
(a) Except as otherwise expressly provided in Paragraphs
40 and 41, neither Tenant nor its legal representatives or successors in
interest shall, by operation of law or otherwise, assign or otherwise transfer
this Lease or any part hereof, or the interest of Tenant under this Lease, and
the Premises or any part thereof shall never be sublet, occupied or used for any
purpose by anyone other than Tenant, without Tenant's obtaining in each instance
the prior written consent of Landlord in the manner hereinafter provided. Tenant
shall not modify, extend, or amend a sublease previously consented to by
Landlord without obtaining Landlord's prior written consent thereto. Tenant
shall not mortgage, pledge or otherwise encumber its interest under this Lease
without the prior written consent of Landlord, which consent may be withheld for
any reason or no reason, in the sole and absolute discretion of Landlord. All
renewal or extension rights, expansion rights, termination rights, exclusive
rights, opportunity rights and other such rights and options contained in this
Lease shall be personal to the original Tenant executing this Lease and shall
terminate upon any assignment or sublease affecting all or any portion of the
Premises.
(b) An assignment of this Lease shall be deemed to have
occurred: (i) if in a single transaction or in a series of transactions more
than a fifty percent (50%) interest in Tenant, any guarantor of this Lease, or
any subtenant (whether stock, partnership interest, interest in a limited
liability company or otherwise) is transferred, diluted, reduced, or otherwise
affected with the result that the present holder or owners of Tenant, such
guarantor, or such subtenant have less than a fifty percent (50%) interest in
Tenant, such guarantor or such subtenant or (ii) if Tenant's obligations under
this Lease are taken over or assumed in consideration of Tenant leasing space in
another office building. The transfer of the outstanding capital stock of any
corporate Tenant, guarantor or subtenant through the "over-the-counter" market
or any recognized national securities exchange [other than by persons owning
five percent (5%) or more of the voting stock of such corporation] shall not be
included in the calculation of such fifty percent (50%) interest in (i) above.
(c) If Tenant should desire to assign this Lease or
sublet the Premises (or any part thereof) and, there does not then exist any
uncured Event of Default, Tenant shall give Landlord written notice no later
than twenty-five (25) days in advance of the proposed effective date of any
proposed assignment or sublease, specifying (i) the name and business of the
proposed assignee or sublessee, (ii) the amount and location of the space within
the Premises proposed to be so subleased, (iii) the proposed effective date and
duration of the assignment or subletting, (iv) the proposed rent or
consideration to be paid to Tenant by such assignee or sublessee, (v) the
proposed use of the proposed assignee or sublessee, and (vi) a true and correct
copy of the proposed instrument of assignment or proposed sublease. In the event
that Landlord agrees to consent to any assignment or sublease, such consent
shall be evidenced by the
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execution of Landlord's standard form of consent to assignment or consent to
sublease by Tenant, the assignee or sublessee and Landlord. Landlord shall not
execute such consent until it has received a true and correct copy of the
fully-executed instrument of assignment or sublease and an original consent
executed by Tenant and the assignee or sublessee. Tenant shall promptly supply
Landlord with financial statements and such other information as Landlord may
request to evaluate the proposed assignment or sublease. Landlord shall have a
period of twenty-five (25) days following receipt of such notice and other
information requested by Landlord within which to notify Tenant in writing that
Landlord elects: (A) to terminate this Lease as to the space so affected as of
the proposed effective date set forth in Tenant's notice, in which event Tenant
shall be relieved of all further obligations hereunder as to such space, except
for provisions of this Lease which expressly survive the termination hereof; or
(B) to permit Tenant to assign or sublet such space; provided, however, that, if
the rent rate agreed upon between Tenant and its proposed subtenant is greater
than the rent rate that Tenant must pay Landlord hereunder for that portion of
the Premises, or if any consideration shall be promised to or received by Tenant
in connection with such proposed assignment or sublease (in addition to rent),
then all of such excess rent and other consideration shall be considered
Additional Rent owed by Tenant to Landlord (less brokerage commissions,
attorneys' fees and other disbursements reasonably incurred by Tenant for such
assignment and subletting if acceptable evidence of such disbursements is
delivered to Landlord), and shall be paid by Tenant to Landlord, in the case of
excess rent, in the same manner that Tenant pays Base Rent and, in the case of
any other consideration, within ten (10) business days after receipt thereof by
Tenant; or (C) to refuse to consent to Tenant's assignment or subleasing of such
space and to continue this Lease in full force and effect as to the entire
Premises. If Landlord should fail to notify Tenant in writing of such election
within the aforesaid twenty-five (25) day period, Landlord shall be deemed to
have elected option (C) above. If Landlord elects to terminate this Lease as to
the affected space as permitted in clause (A) above, Tenant may, by written
notice to Landlord given within ten (10) days after receipt of notice from
Landlord of Landlord's election to exercise such right, withdraw its request to
sublease such space and thereby nullify Landlord's exercise of its option to
terminate the Lease as to such space. If Landlord elects to terminate this Lease
as to the affected space pursuant to Landlord's option set forth in clause (A)
above, then this Lease shall terminate as to the affected space on the date set
forth in Landlord's notice to Tenant, which date shall be no less than thirty
(30) days and no more than ninety (90) days after the date of such notice. If
the affected space does not constitute the entire Premises and Landlord
exercises its option to terminate this Lease with respect to the affected space,
as to that portion of the Premises which is not part of the affected space, this
Lease shall remain in full force and effect except that Tenant's Base Rent and
Additional Rent shall be calculated on the basis of the Net Rentable Area of the
Premises remaining after the exclusion of the affected space. Landlord shall
bear its own costs, if any, of physically severing the affected space from the
balance of the Premises. Whether or not Landlord grants its consent, Tenant
shall reimburse Landlord, within thirty (30) days after written request
therefor, for all reasonable legal, architectural and engineering fees and any
other reasonable costs incurred by Landlord in connection with any request by
Tenant for approval of an assignment or subletting and such payment shall not be
deducted from the Additional Rent owed to Landlord pursuant to subsection (B)
above. Tenant shall deliver to Landlord copies of all documents executed in
connection with any permitted assignment or subletting, which documents shall be
in form and substance reasonably satisfactory to Landlord and which shall
require any assignee to assume performance of all terms of this Lease on
Tenant's part to be performed. No acceptance by Landlord of any Rent or any
other sum of money from any assignee, sublessee or other category of transferee
shall be deemed to constitute Landlord's consent to any assignment, sublease, or
transfer.
(d) Any attempted assignment or sublease by Tenant in
violation of the terms and provisions of this Paragraph 11 shall be void and
such act shall constitute a material breach of this Lease. In no event shall any
assignment, subletting or transfer, whether or not with Landlord's consent,
relieve Tenant of its primary liability under this Lease for the entire Term,
and Tenant shall in no way be released from the full and complete performance of
all the terms hereof. If Landlord takes possession of the Premises before the
expiration of the Term of this Lease, Landlord shall have the right, at its
option, to terminate all subleases, or to take over any sublease of the Premises
or any portion thereof and such subtenant shall attorn to Landlord, as its
landlord, under all the terms and obligations of such sublease occurring from
and after such date, but excluding previous acts, omissions, negligence or
defaults of Tenant and any repair or obligation in excess of available net
insurance proceeds or condemnation award.
(e) Landlord shall have the right to sell, transfer,
assign, pledge, and convey all or any part of the Building and any and all of
Landlord's rights under this Lease. In the event Landlord assigns or otherwise
conveys its rights under this Lease, Landlord shall be entirely freed and
released from any obligations accruing thereafter under the Lease, and Tenant
agrees to look solely to Landlord's successor in interest for performance of
such obligations.
12. INSURANCE.
(a) Throughout the Term of this Lease, Landlord shall
maintain Special Form Insurance on the Building and the Premises, such
policy(ies) to cover Landlord's interest in the Building and Premises for not
less than the full replacement cost thereof. Such insurance shall be maintained
at the expense of Landlord (as a part of Operating Expenses), and payments for
losses thereunder shall be made solely to Landlord or the holder or holders of
any mortgage or deed to secure debt encumbering the Land, Building or Project
(collectively, "Mortgagees"; each, a "Mortgagee") as their respective interests
shall appear.
(b) Tenant shall maintain, at its expense, in an amount
equal to the full replacement cost thereof, Special Form Insurance on all of its
personal property, including furniture, equipment, fittings, installations,
supplies, phone systems, computer systems and removable trade fixtures, located
in the Premises. Such policy shall include Business Interruption/Additional
Expense coverage on a loss sustained basis.
(c) Tenant shall also maintain Worker's Compensation and
Employer's Liability Insurance in form and amount as required by law.
(d) Tenant and Landlord shall, each at its own expense,
maintain a policy or policies of Commercial General Liability Insurance (written
on an occurrence basis) with respect to the respective activities of each on the
Land and in the Building with the premiums thereon fully paid on or before the
date due, issued by and binding upon an insurance company authorized to conduct
such business in the State of Georgia. Such Commercial General Liability
Insurance to be maintained by Tenant and Landlord under this Paragraph shall
afford minimum protection of not less than $2,000,000.00 combined single limit
coverage of bodily injury, property damage, or combination thereof; and such
Commercial General Liability Insurance to be maintained by Tenant shall name
Landlord, its managing agent, and any other party reasonably required by
Landlord, as additional insureds. Such insurance coverage maintained by Tenant
shall also include, without limitation, personal injury and contractual
liability coverage for the performance by Tenant of the indemnity agreements set
forth in this Lease. Landlord shall not be required to maintain insurance
against thefts within the Premises, the Building, or on the Land.
(e) Tenant shall also maintain and provide such other
form or forms of insurance, changes in amounts of coverage, or endorsements as
Landlord, or any Mortgagee of Landlord, may reasonably require from time to
time.
(f) All Commercial General Liability Insurance and
Special Form Insurance maintained by Tenant shall be written as primary policies
and shall not call for contribution from any other insurance available to
Landlord.
(g) Tenant shall, prior to the Commencement Date, provide
Landlord with current Certificates of Insurance, and receipts for payment of
premiums therefor, evidencing Tenant's compliance with the terms and
requirements of this Paragraph 12. All policies required to be maintained by
Tenant under this Paragraph 12 shall contain a provision whereby the insurer is
not allowed to cancel, fail to renew or change materially the coverage, without
first giving thirty (30) days' prior written notice to Landlord. Tenant shall
also obtain the agreement of Tenant's insurers to notify Landlord that a policy
is due to expire at least thirty (30) days prior to such
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expiration. Not less than fifteen (15) days prior to the expiration date of any
such policies, certificates of the renewals thereof (bearing notations
evidencing the payment of renewal premiums) shall be delivered to Landlord.
(h) All insurance policies carried with respect to this
Paragraph 12 shall be issued by insurance companies licensed to do business in
the State of Georgia with a general policyholder's rating of at least A and a
financial rating of at least VIII in the most current Best's Insurance Reports.
(i) All insurance policies required to be carried by
Tenant with respect to this Paragraph 12 shall be procured and maintained in
full force and effect by Tenant at its sole cost and expense and continue in
full force and effect during the Term of the Lease, any renewals or extensions
thereof, any holdover period under the Lease, any tenancy by whatsoever name
called and any period of occupancy by Tenant of the Premises prior to the
Commencement Date of the Lease or subsequent to the expiration or earlier
termination of the Lease.
(j) Anything in this Lease to the contrary
notwithstanding (including, without limitation, Paragraph 14 hereof), Landlord
and Tenant each hereby waive any and all rights of recovery, claim, action, or
cause of action, against the other, its agents, officers, or employees, for any
loss or damage that may occur to the Premises or a part thereof, or any
improvements thereto, or any personal property of such party therein, by reason
of fire, the elements, or any other cause(s), regardless of cause or origin,
including negligence of the other party hereto, its agents, officers or
employees, where such loss or damage would either be covered by insurance
required to be maintained under this Paragraph 12 (whether or not such insurance
is in effect) or to the extent such loss or damage is actually covered by any
other insurance carried by each of them. All insurance policies carried with
respect to this Paragraph 12, if permitted under applicable law, shall contain a
provision whereby the insurer waives, prior to loss, all rights of subrogation
against Landlord and Tenant. Landlord and Tenant acknowledge that the waivers
and releases set forth in this subparagraph are intended to result in any loss
or damage which is covered by insurance being borne by the insurance carrier of
Landlord or Tenant, as the case may be, or by the party having the insurable
interest if such loss is not covered by insurance and this Lease requires such
party to maintain insurance to cover such loss. Landlord and Tenant agree that
such waivers and releases were freely bargained for and willingly and
voluntarily agreed to by Landlord and Tenant and do not constitute a violation
of public policy.
13. FIRE AND CASUALTY DAMAGE.
(a) If the Building should be totally destroyed by fire,
tornado or other casualty or if it should be damaged, to the extent that, in
Landlord's reasonable judgment repair would not be economically feasible, or
that rebuilding or repairs cannot, in Landlord's estimation, be completed within
two hundred (200) days after the date of such damage; or if the insurance
proceeds remaining after any required payments to Mortgagees are insufficient to
repair such damage or destruction, then either Tenant or Landlord shall have the
right, at its option, to terminate this Lease by giving the other party written
notice of such termination within forty-five (45) days after the date of notice
from Landlord to Tenant as to such determination, and the Rent shall be
apportioned and paid to the date on which possession is relinquished or the date
of such damage, whichever last occurs, and Tenant shall immediately vacate the
Premises according to such notice of termination. Landlord shall notify Tenant
of its determination as to the length of time necessary to repair the Building,
the economic feasibility of restoration and the availability of insurance
proceeds within forty-five (45) days after such casualty.
(b) If the Building should be damaged by any peril
covered by the insurance to be provided by Landlord under Paragraph 12(a) above,
but only to such extent that rebuilding or repairs are, in Landlord's
estimation, economically feasible and can be completed within two hundred (200)
days after the date of such damage and the proceeds of such insurance, after
deducting any required payments to Mortgagees, are sufficient for such
rebuilding or repairs, this Lease shall not terminate, and Landlord shall at its
sole cost and expense thereupon proceed with reasonable diligence to rebuild and
repair the Building to substantially the condition in which it existed prior to
such damage, except that: (i) Landlord shall not be required to rebuild, repair
or replace any part of the partitions, fixtures, additions and other
improvements which may have been placed in, on or about the Premises by Tenant;
and (ii) Landlord may elect not to rebuild if such damage occurs during the last
year of the Term, exclusive of any option to extend the Term which is
unexercised at the time of such damage. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which the Premises are untenantable shall be reduced to such extent as
may be fair and reasonable under all of the circumstances. In the event that
Landlord should fail to complete such repairs and rebuilding within two hundred
(200) days after the date of such damage, Tenant may, at its option, terminate
this Lease by delivering written notice of termination to Landlord within thirty
(30) days after the expiration of such two hundred (200) day period. If Tenant
fails to terminate this Lease within such thirty (30)-day period, Tenant shall
be deemed to have waived its rights to terminate by reason of the failure of
Landlord to complete such repairs and rebuilding within two hundred (200) days
after the date of such damage. If Tenant elects not to terminate this Lease and
Landlord fails to complete such repairs and rebuilding to such a condition that
Tenant is no longer entitled to any abatement of Rent hereunder within two
hundred sixty (260) days after the date of the casualty (the "Outside Completion
Date"), then, for each day after the Outside Completion Date that such repairs
and rebuilding remain unfinished, Tenant shall be entitled to twice the Rent
abatement that it would have been entitled to prior to such Outside Completion
Date. In other words, if the entire Premises are untenantable on the day after
the Outside Completion Date to such a degree that Tenant is entitled to an
abatement of all Rent due under this Lease, then commencing on such first day
after the Outside Completion Date, Tenant shall be entitled to two (2) days of
Rent abatement for each day until such repairs and rebuilding have been
completed. The Outside Completion Date shall be extended on a day for day basis
for each day of Force Majeure and Tenant Delay (as hereinafter defined). If the
Premises should be substantially destroyed by fire, tornado or other casualty at
any time during the last twelve (12) months of the Term of the Lease (exclusive
of any option to extend the Term which is unexercised at the time of such
damage), then Tenant may terminate this Lease by written notice given to
Landlord within forty-five (45) days after the date of such destruction, and
Rent and other charges under this Lease will be apportioned as of the date of
destruction and Tenant will be discharged from responsibility to repair the
damage, but all proceeds of insurance covering the loss shall in that
circumstance belong to Landlord free of any claim thereto by Tenant. As used in
this Paragraph, the term "Tenant Delay" refers to each day that: (i)
construction is delayed because of changes by Tenant in the working drawings and
specifications; (ii) construction is delayed because of requirements by Tenant
for materials, finishes or installations which are not Building Standard and are
not set forth in the working drawings and specifications, as approved by
Landlord; or (iii) construction is delayed because of the failure to perform of
a party employed by Tenant.
(c) Notwithstanding anything herein to the contrary, in
the event any Mortgagee requires that the insurance proceeds be applied to the
indebtedness due such Mortgagee, then Landlord shall have the right to terminate
this Lease by delivering written notice of termination to Tenant within fifteen
(15) days after such requirement is made by any such Mortgagee, whereupon all
rights and obligations hereunder shall cease and terminate. In no event shall
Landlord be required under this Lease to incur any expenses in excess of
available insurance proceeds other than the deductible amounts for such
insurance for the purpose of repairing or restoring the Building or the Premises
after a fire or other casualty.
14. WAIVER OF CLAIMS; LANDLORD'S LIABILITY AND INDEMNIFICATION.
(a) Tenant waives and releases all claims against
Landlord, its agents, employees, representatives and contractors for damage to
any property or injury to, or death of, any person in, upon, or about the
Premises arising at any time and from any cause other than by reason of the sole
negligence or willful misconduct of Landlord, its agents, employees,
representatives, or contractors.
(b) Without limiting the generality of Paragraph 14(a),
Tenant agrees that Landlord, its agents, employees, representatives and
contractors will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons,
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property, or Tenant's business occasioned by theft, act of God, public enemy,
injunction, riot, strike, insurrection, war, vermin, court order, requisition,
order of governmental body or authority, electricity, computer or electronic
equipment or systems malfunction, fire, explosion, falling objects, steam,
water, rain or snow, leak or flow of water (including water from the elevator
system), rain or snow from the Premises or into the Premises or from the roof,
street, subsurface or from any other place or by dampness or from the breakage,
leakage, obstruction, or other defects of the pipes, sprinklers, wires,
appliances, plumbing, air conditioning, or lighting fixtures of the Building, or
from construction, repair, alteration of the Premises or from any acts or
omissions of any other tenant, occupant, or visitor of the Premises, or from any
other cause whatsoever, except if such loss, injury, death, or damage to
persons, property, or Tenant's business is occasioned by the sole negligence or
willful misconduct of the Landlord, its agents, employees, representatives or
contractors.
(c) Except as otherwise provided in Paragraph 12(j)
above, Tenant shall indemnify Landlord, its agents, employees, representatives
and contractors and shall hold Landlord, its agents, employees, representatives
and contractors harmless from any damage to any property or injury to, or death
of, any person arising from: (i) the use of the Premises by Tenant or any person
claiming under Tenant; (ii) any activity, work, or thing done by Tenant on or
about the Premises; (iii) any acts, omissions or negligence of Tenant, or any
person claiming under Tenant, or the employees, agents, contractors, invitees,
or visitors of Tenant; (iv) any breach, violation, or nonperformance by Tenant,
or any person claiming under Tenant, or the employees, agents, contractors,
invitees, or visitors of Tenant, of any term, covenant, or provision of this
Lease or any law ordinance, or governmental requirement of any kind; (v) (except
for loss of use of all or any portion of the Premises or Tenant's property
located within the Premises that is proximately caused by or results proximately
from the sole negligence of the Landlord its agents, employees, representatives,
or contractors), any injury or damage to the person, property, or business of
Tenant, its employees, agents, contractors, invitees, visitors, or any other
person entering upon the Premises under the invitation of Tenant. The foregoing
indemnity obligations of Tenant shall include attorneys' fees, investigation
costs, and all other reasonable costs and expenses incurred by Landlord from the
first notice that any claim or demand has been made or may be made. The
provisions of this Paragraph 14 shall survive for a period of one (1) year
following the expiration or termination of this Lease with respect to any
damage, injury, or death occurring before such expiration or termination.
15. CONDEMNATION.
(a) If the whole or any substantial part of the Premises
should be taken for any public or quasi-public use under governmental law,
ordinance or regulation, or by right of eminent domain, or by private purchase
in lieu thereof, and the taking would prevent or materially interfere with the
use of the Premises, for the purpose for which they are being used, this Lease
shall terminate and the Rent shall be apportioned and paid to the date on which
the physical taking of the Premises shall occur.
(b) If part of the Premises shall be taken for any public
or quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this Lease
is not terminated as provided in subparagraph 15(a) above, this Lease shall not
terminate but the Rent payable hereunder during the unexpired portion of this
Lease shall be reduced to such extent as may be fair and reasonable under all of
the circumstances.
(c) All compensation awarded for any taking (or the
proceeds of private sale in lieu thereof) of the Premises, the Building, the
Project or other improvements, or any part thereof, shall be the property of
Landlord and Tenant hereby assigns its interest in any such award to Landlord;
provided, however Landlord shall have no interest in any award made to Tenant
for loss of business or for the taking of Tenant's fixtures.
(d) In no event shall Landlord be required under this
Lease to incur any expenses in excess of available proceeds from any taking
contemplated hereby for the purposes of restoring the Building or the Premises
after any such taking.
16. HOLDING OVER. Tenant will, at the termination of this Lease by
lapse of time or otherwise, yield up immediate possession to Landlord with all
repairs and maintenance required herein to be performed by Tenant completed.
Should Tenant continue to hold the Premises after the expiration or earlier
termination of this Lease, or after reentry by Landlord without terminating this
Lease, such holding over, unless otherwise agreed to by Landlord in writing,
shall constitute and be construed as a tenancy at sufferance and not a tenancy
at will. Tenant shall have no right to notice under Official Code of Georgia
Annotated ss.44-7-7 of the termination of its tenancy. Tenant shall pay monthly
installments of Rent equal to one hundred fifty percent (150%) of the monthly
portion of Rent in effect as of the date of expiration or earlier termination,
and subject to all of the other terms, charges and expenses set forth herein
except any right to renew this Lease or to expand the Premises or any right to
additional services. Tenant shall also be liable to Landlord for all damage
which Landlord suffers because of any holding over by Tenant. No holding over by
Tenant, whether with or without consent of Landlord, shall operate to extend the
Term except as otherwise expressly provided in a written agreement executed by
both Landlord and Tenant. The provisions of this Paragraph 16 shall survive the
expiration or earlier termination of this Lease.
17. QUIET ENJOYMENT. Landlord represents and warrants that it has
full right and authority to enter into this Lease and that Tenant, upon paying
the Rent herein set forth and performing its other covenants and agreements
herein set forth, shall peaceably and quietly have, hold and enjoy the Premises
for the Term without hindrance or molestation from Landlord, subject to the
terms and provisions of this Lease.
18. EVENTS OF DEFAULT. The following events shall be deemed to be
"Events of Default" by Tenant under this Lease:
(a) Tenant shall fail to pay any installment of the Rent
herein reserved when due, or any other payment or reimbursement to Landlord
required herein when due, and such failure shall continue for a period of five
(5) days from the date such payment was due if such failure is a failure to pay
a regularly scheduled installment of monthly Base Rent or five (5) days after
written notice if such failure is a failure to pay any other sum.
(b) Tenant or any guarantor of Tenant's obligations
hereunder shall not pay its debts as they become due or shall admit in writing
its inability to pay its debts or shall make a general assignment for the
benefit of creditors; or Tenant or any such guarantor shall commence any case,
proceeding or other action seeking to have an order for relief entered on its
behalf as a debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution, or
composition of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all, or any
substantial part of, its property; or Tenant or any such guarantor shall take
any action to authorize any of the actions set forth above in this Paragraph.
(c) Any case, proceeding or other action against Tenant
or any guarantor of Tenant's obligations hereunder shall be commenced seeking to
have an order for relief entered against it as debtor or to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its property and such case or
action is not dismissed within one hundred twenty (120) days after it is
commenced.
(d) A receiver or trustee shall be appointed for all or
substantially all of the assets of the Tenant.
(e) Intentionally Omitted.
(f) Tenant shall fail to discharge any lien placed upon
the Premises in violation of Paragraph 23 hereof within sixty (60) days after
any such lien or encumbrance is filed against the Premises.
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(g) Intentionally Omitted.
(h) Tenant shall fail to comply with any term, provision
or covenant of this Lease (other than the foregoing in this Paragraph 18), and
shall not cure such failure within thirty (30) days after written notice thereof
to Tenant; provided, however that if such failure is of a nature that it cannot
reasonably be cured within such thirty(30) day period, and if Tenant commences
to cure such failure within twenty (20) days after notice thereof from Landlord
and thereafter diligently prosecutes the cure thereof, such thirty (30) day
period shall be extended to one hundred twenty (120) days.
19. REMEDIES.
(a) Upon the occurrence of any one or more of the
aforesaid Events of Default, or upon the occurrence of any other default or
defaults by Tenant under this Lease, Landlord may, at Landlord's option, without
any demand or notice whatsoever (except as expressly required in this Paragraph
19):
(i) Terminate this Lease, and Tenant shall
remain liable for all Rent and all other obligations under this Lease
arising up to the date of such termination; or
(ii) Terminate this Lease, and Tenant shall
remain liable for all damages Landlord may incur by reason of Tenant's
default, including, without limitation, a sum which, at the date of
such termination, represents the then value of the excess, if any, of
(1) the total Rent, and all other obligations which would have been
payable hereunder by Tenant for the period commencing with the day
following the date of such termination and ending with the expiration
date of the Term, over (2) the aggregate reasonable rental value of the
Premises for the same period, plus (3) the costs of recovering the
Premises and all other expenses incurred by Landlord due to Tenant's
default, including, without limitation, reasonable attorney's fees,
plus (4) the unpaid Rent earned as of the date of termination plus
interest at the "Interest Rate" (as hereinafter defined), plus other
sums of money and damages owing on the date of termination by Tenant to
Landlord under this Lease or in connection with the Premises, all of
which excess sum shall be deemed immediately due and payable; or
(iii) Landlord may at its option, declare the
difference, if any, between (A) the entire amount of Base Rent and
Additional Rent which would become due and payable during the remainder
of the Term, discounted to present value using a discount rate equal to
the "Prime Rate" (as hereinafter defined) in effect as of the date of
such declaration, and (B) the fair rental value of the Premises during
the remainder of the Term (taking into account, among other factors,
the anticipated duration of the period the Premises will be unoccupied
prior to reletting and the anticipated cost of reletting the Premises),
also discounted to present value using a discount rate equal to the
Prime Rate in effect as of the date of such declaration together with
all Base Rent, Additional Rent and other sums theretofore to be due and
payable; it being understood and agreed that such payment shall be and
constitute Landlord's liquidated damages, Landlord and Tenant
acknowledging and agreeing that it is difficult or impossible to
determine the actual damages Landlord would suffer from Tenant's breach
hereof and that the agreed upon liquidated damages are not punitive or
penalties and are just, fair and reasonable, all in accordance with
Official Code of Georgia Annotated ss. 13-6-7. If Landlord exercises
the election set out in this subparagraph, Landlord hereby waives any
right to assert that Landlord's actual damages are greater than the
amount calculated hereunder. "Prime Rate" means the Prime Rate
published in the Wall Street Journal from time to time (adjusted daily)
as being the base rate on corporate loans at large U.S. money center
commercial banks. If the Wall Street Journal ceases to publish such a
Prime Rate, the Prime Rate shall be the per annum interest rate which
is publicly announced (whether or not actually charged in each
instance) from time to time (adjusted daily) by Wachovia Bank of
Georgia, N.A., Atlanta, Georgia as its "prime rate" or similar
corporate borrowing reference rate; or
(iv) Without terminating this Lease, Landlord may
in its own name but as agent for Tenant enter into and upon and take
possession of the Premises or any part thereof, and, at Landlord's
option, remove persons and property therefrom and such property, if
any, may be removed and stored in a warehouse or elsewhere at the cost
of, and for the account of Tenant, and Landlord may rent the Premises
or any portion thereof as the agent of Tenant, with or without
advertisement, and by private negotiations and for any term upon such
reasonable terms and conditions as Landlord may deem necessary or
desirable in order to relet the Premises. Upon each such reletting, all
rentals received by Landlord from such reletting shall be applied:
first, to the payment of any indebtedness (other than any Rent due
hereunder) from Tenant to Landlord; second, to the payment of any
reasonable costs and expenses of such reletting, including, without
limitation, brokerage fees and attorney's fees and costs of alterations
and repairs; third, to the payment of Rent and other charges then due
and unpaid hereunder; and the residue, if any, shall be held by
Landlord to the extent of and for application in payment of future
Rent, if any becomes owing, as the same may become due and payable
hereunder. In reletting the Premises as aforesaid, Landlord may grant
reasonable rent concessions and Tenant shall not be credited therefor.
If such rentals received from such reletting shall at any time or from
time to time be less than sufficient to pay to Landlord the entire sums
then due from Tenant hereunder, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall, at Landlord's option, be calculated
and paid monthly. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate
this Lease for any such previous Event of Default provided same has not
been cured; or
(v) Without terminating this Lease, Landlord may
enter into and upon the Premises, maintain the Premises and repair or
replace any damage thereto or do anything for which Tenant is
responsible hereunder. Tenant shall reimburse Landlord within ten (10)
days after demand for any expenses which Landlord incurs in thus
effecting Tenant's compliance under this Lease, and Landlord shall not
be liable to Tenant for any damages with respect thereto; or
(vi) Intentionally Omitted; or
(vii) Allow the Premises to remain unoccupied, and
Tenant shall remain liable for the Rent and all other obligations
accruing over the balance of the Term; or
(viii) Terminate the Tenant's right to possession
of the Premises, without terminating the Lease, and Tenant shall remain
liable for the Rent and all other obligations accruing over the balance
of the Term; or
(ix) Terminate the Lease and Tenant's right to
possession of the Premises, and Tenant shall remain liable for the Rent
and all other obligations accruing over the balance of the Term; or
(x) Enforce the performance of Tenant's
obligations hereunder by injunction or other equitable relief, which
remedy may be exercised upon any actual or threatened Event of Default
by Tenant, without regard to whether Landlord may have an adequate
remedy at law; or
(xi) Intentionally Omitted; and
(xii) Pursue any combination of the foregoing
remedies permitted by law and such other remedies as are available at
law or equity.
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(b) Whenever Landlord terminates this Lease, it shall do
so by giving Tenant written notice of termination, in which event this Lease
shall expire and terminate on the date specified in such notice with the same
force and effect as though the date specified were the date herein originally
fixed as the Lease Expiration Date, and all rights of Tenant under this Lease
and in and to the Premises shall expire and terminate and Tenant shall surrender
the Premises to Landlord on the date specified in such notice, and if Tenant
fails to so surrender, Landlord shall have the right to enter upon and take
possession of the Premises and to expel or remove Tenant and its effects.
(c) Whenever Landlord terminates Tenant's right to
possession of the Premises without terminating this Lease, it shall do so by
giving Tenant written notice of termination of its right of possession, in which
event Tenant shall surrender the Premises to Landlord on the date specified in
such notice; and if Tenant fails to so surrender, Landlord shall have the right
to enter upon and take possession of the Premises and to expel or remove Tenant
and its effects.
(d) If this Lease shall terminate as a result of or while
there exists an uncured Event of Default hereunder, any funds of Tenant held by
Landlord may be applied by Landlord to unpaid Rent and any damages payable by
Tenant as a result of such termination or default, in Landlord's sole
discretion.
(e) Landlord shall in no way be responsible or liable to
Tenant for any failure to rent the Premises or any part thereof, or for any
failure to collect any rent due upon such reletting.
(f) If any statute or rule of law shall limit any of
Landlord's remedies as hereinabove set forth, Landlord shall nonetheless be
entitled to any and all other remedies hereinabove set forth.
(g) All installments of Rent, and all other amounts of
money payable by Tenant to Landlord under this Lease, if not received by
Landlord within five (5) days of the date due, shall be subject to a late fee of
$500.00, which late fee represents an agreed upon charge for the administrative
expense suffered by Landlord as a result of such late payment and not payment
for the use of money or a penalty; and (b) the amount past due (excluding late
fees), shall bear simple interest from the date due until paid at twelve percent
(12%) per annum (the "Interest Rate"); and Tenant agrees to pay said late fee
and interest immediately and without demand. However, if at the time such
interest is sought to be imposed, the Interest Rate exceeds the maximum rate
permitted under federal law or under the laws of the State of Georgia, the
Interest Rate shall be the maximum rate of interest then permitted by applicable
law. Should Tenant make a partial payment of past due amounts, the amount of
such partial payment shall be applied first to late fees, second to accrued but
unpaid interest at the Interest Rate, and third to past due amounts in the order
of their due dates. The provision for such late charge shall be in addition to
all of Landlord's other rights and remedies hereunder or at law and shall not be
construed as liquidated damages or as limiting Landlord's remedies in any
manner.
(h) In the event Tenant's check, given to Landlord in
payment, is returned by the bank for non-payment, Tenant agrees to pay a service
charge not to exceed $20.00 or five percent (5%) of the face amount of the
check, whichever is greater.
(i) If Landlord shall fail to keep or perform any of its
obligations under this Lease with respect to the making of any payments to
Tenant (including, without limitation, the payment of any allowances or tenant
inducements) or the performance of any other Lease obligation, upon the
continuance of such failure on Landlord's part for thirty (30) days after
receipt by Landlord of written notice from Tenant specifying the failure
[provided, however, that if such failure is of a nature that it cannot
reasonably be cured within such thirty (30) day period and if Landlord commences
to cure such failure within thirty (30) days after notice thereof from Tenant
and thereafter diligently prosecutes the cure thereof, such thirty (30) day
period shall be extended one hundred twenty (120) days], and without waiving or
releasing Landlord from any obligation, then Tenant may (but shall not be
obligated to do so) make such payment or perform such obligation. All sums so
paid by Tenant and all necessary and incidental costs and expenses, including
reasonable attorneys' fees, incurred by Tenant in making such payments or
performing such obligations, together with interest thereon at the Interest Rate
from the date of payment, the date payment was due or the date a cost was
incurred, as applicable, shall be paid by Landlord to Tenant within thirty (30)
days after demand, and if not so paid by Landlord, Tenant shall have the right
to offset the cost of such cure and any payment due Tenant from Landlord which
Landlord has failed to pay within any applicable cure period against any Rent or
any other amount payable under this Lease. Notwithstanding the foregoing, Tenant
shall have no right to cure any default by Landlord unless and until Tenant has
given not less than thirty (30) days prior written notice of such default to the
holder of any mortgage, deed to secure debt or deed of trust on the Premises of
which Tenant has received notice from Landlord and such holder fails to cure or
cause Landlord to cure said default. All rights and remedies of Tenant created
or otherwise existing at law or in equity are cumulative and the exercise of one
or more rights or remedies shall not be taken to exclude or waive the right to
exercise any other rights or remedies.
(j) The foregoing provisions of this Paragraph 19 shall
survive the expiration or earlier termination of this Lease and shall apply to
any renewal or extension of this Lease.
20. BANKRUPTCY.
(a) Notwithstanding anything in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated as Rent, shall constitute Rent for
the purposes of the Bankruptcy Code. 11 U.S.C. ss.502(b)(7).
(b) This is a contract under which applicable law excuses
Landlord from accepting performance from (or rendering performance to) any
person or entity other than Tenant within the meaning of the Bankruptcy Code. 11
U.S.C. ss.365(c), 365(e)(2).
(c) If this Lease is assigned to any person or entity
pursuant to the provisions of the Bankruptcy Code, any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or
the estate of Tenant within the meaning of the Bankruptcy Code. Any and all
monies or other considerations constituting Landlord's property under the
preceding sentence not paid or delivered to Landlord shall be held in trust for
the benefit of Landlord and be promptly paid or delivered to Landlord.
(d) Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code, shall be deemed, without
further act or deed, to have assumed all of the obligations arising under this
Lease on and after the date of such assignment. Any such assignee shall upon
demand execute and deliver to Landlord an instrument confirming such assumption.
21. INTENTIONALLY OMITTED.
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22. SUBORDINATION; ESTOPPEL CERTIFICATES.
(a) Tenant accepts this Lease subject and subordinate to
the lien or security title of any recorded mortgage, deed to secure debt or
ground lease hereafter created upon the Premises, and to all existing recorded
restrictions, covenants, easements and agreements with respect to the Project,
or any part thereof, and all amendments, modifications and restatements thereof,
and all replacements and substitutions therefor. The subordination created
hereby is intended to be self-operative and no further instrument shall be
required to effect such subordination of this Lease. Nevertheless, Tenant agrees
to execute such documents as Landlord may request to evidence and memorialize
such subordination. If Tenant fails to execute any such requested documentation
within ten (10) days after Landlord's request therefor, Landlord is hereby
irrevocably vested with full power and authority to subordinate Tenant's
interest under this Lease in Tenant's name and on Tenant's behalf to the lien or
security title of any mortgage, deed to secure debt or ground lease hereafter
placed on the Premises, and to any future instrument amending, modifying,
restating, replacing or substituting for any such existing recorded
restrictions, covenants, easements and agreements. Tenant hereby irrevocably
appoints Landlord as Tenant's agent and attorney-in-fact for the purpose of
executing, acknowledging and delivering any such instruments and certificates.
Such power of attorney is coupled with an interest and shall be irrevocable. If
the interest of Landlord under this Lease shall be transferred by reason of
exercise of a power of sale, foreclosure or other proceeding for enforcement of
any mortgage or deed to secure debt on the Premises, Tenant shall be bound to
the transferee (sometimes hereinafter referred to as the "Purchaser"), at the
option of the Purchaser, under the terms, covenants and conditions of this Lease
for the balance of the Term remaining, and any extensions or renewals, with the
same force and effect as if the Purchaser were Landlord hereunder, and, if
requested by the Purchaser, Tenant agrees to be bound and obligated hereunder to
the Purchaser (including the mortgagee or grantee under any such mortgage or
deed to secure debt), as its landlord.
(b) Landlord represents and warrants to Tenant that
neither the Premises, the Building, nor the Land, is presently encumbered by any
mortgage, deed to secure debt, trust deed or subject to any ground lease
(collectively, a "Security Instrument"). Landlord agrees that upon request of
Tenant, it will request from the holders of any future mortgages or other
security instruments encumbering the Building or any interest of Landlord
therein, a subordination, non-disturbance and attornment agreement ("SNDA") in
favor of Tenant, on such holder's standard form of SNDA. However, Landlord shall
not be obligated to expend any money to obtain such SNDA, and the inability or
failure of Landlord to obtain such SNDA shall not constitute a default by
Landlord hereunder, entitle Tenant to cancel or otherwise terminate this Lease,
or affect the automatic subordination of this Lease, to all such future Security
Instruments.
(c) Tenant shall, from time to time, within twenty (20)
days after request from Landlord, or from any mortgagee of Landlord, execute,
acknowledge and deliver in recordable form a certificate certifying, to the
extent true, that this Lease is in full force and effect and unmodified (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications); that the Term has commenced and the
full amount of the Rent then accruing hereunder; the dates to which Rent has
been paid; that, subject to Paragraph 2(b) above, Tenant has accepted possession
of the Premises and that any improvements required by the terms of this Lease to
be made by Landlord have been completed to the satisfaction of Tenant; the
amount, if any, that Tenant has paid to Landlord as a Security Deposit; that no
Rent under this Lease has been paid more than thirty (30) days in advance of its
due date; that the address for notices to be sent to Tenant is as set forth in
this Lease (or has been changed by notice duly given and is as set forth in the
certificate); that Tenant, to Tenant's knowledge, as of the date of such
certificate, has no charge, lien, or claim of offset under this Lease or
otherwise against Rent or other charges due hereunder; that, to the knowledge of
Tenant, Landlord is not then in default under this Lease; and such other matters
as may be reasonably requested by Landlord or any mortgagee or lessor of
Landlord. Any such certificate may be relied upon by Landlord or any mortgagee
or lessor of Landlord, any beneficiary, purchaser or prospective purchaser of
the Building or any interest therein, or by anyone to whom Landlord may provide
said certificate.
23. MECHANICS LIENS; OTHER TAXES.
(a) Tenant shall have no authority, express or implied to
create or place any lien or encumbrance of any kind or nature whatsoever upon,
or in any manner to bind the interests of Landlord in the Premises or to charge
the Rent payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs, and each such claim shall affect and each such lien
shall attach to, if at all, only the leasehold interest granted to Tenant by
this instrument. Tenant covenants and agrees that it will pay or cause to be
paid all sums legally due and payable by it on account of any labor performed or
materials furnished in connection with any work performed on the Premises on
which any lien is or can be validly and legally asserted against its leasehold
interest in the Premises or the improvements thereon and that it will save and
hold Landlord harmless from any and all loss, cost or expense based on or
arising out of asserted claims or liens against the leasehold estate or against
the right, title and interest of the Landlord in the Premises or under the terms
of this Lease. Tenant agrees to give Landlord immediate written notice if any
lien or encumbrance is placed on the Premises. In the event that Tenant shall
not, within sixty (60) days following the imposition of any such lien, cause the
same to be released of record by payment or posting of a proper bond, Landlord
shall have, in addition to all other remedies provided herein and by law, the
right, but not the obligation, upon not less than ten (10) days prior written
notice to Tenant, to cause the same to be released by such means as it shall
deem proper, including payment of the claim giving rise to such lien. All such
sums paid by Landlord and all expenses incurred by it in connection therewith
shall be considered Additional Rent and shall be payable to Landlord by Tenant
within ten (10) days after demand and with interest at the Interest Rate.
(b) Tenant shall be liable for all taxes levied or
assessed against personal property, furniture or fixtures placed by Tenant in
the Premises. If any such taxes for which Tenant is liable are levied or
assessed against Landlord or Landlord's property and if Landlord elects to pay
the same or if the assessed value of Landlord's property is increased by
inclusion of personal property, furniture or fixtures placed by Tenant in the
Premises, and Landlord elects to pay the taxes based on such increase, Tenant
shall pay to Landlord within ten (10) days after demand and delivery to Tenant
of reasonable supporting documentation showing Tenant's portion thereof, that
part of such taxes.
24. INTENTIONALLY OMITTED.
25. CERTAIN RIGHTS RESERVED TO LANDLORD. Landlord reserves and may
exercise the following rights without affecting Tenant's obligations hereunder:
(a) to change the name, street address, or suite numbers
of the Building;
(b) to install or maintain a sign or signs on the
exterior walls of the Building;
(c) to designate all sources furnishing sign painting and
lettering, ice, drinking water, towels, coffee cart service and toilet supplies,
lamps and bulbs used on the Premises;
(d) to retain at all times pass keys to the Premises;
(e) to close the Building after regular working hours and
on legal holidays subject, however to Tenant's right to admittance, under such
reasonable regulations as Landlord may prescribe from time to time, which may
include by way of example but not of limitation, that persons entering or
leaving the Building identify themselves to a watchman by registration or
otherwise and that said persons establish their right to enter or leave the
Building; and
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(f) to take any and all measures, including inspections,
repairs, alterations, decorations, additions and improvements to the Premises or
the Building, and identifications and admittance procedures for access to the
Building as may be necessary or desirable for the safety, protection,
preservation or security of the Premises or the Building or the Landlord's
interests or as may be necessary or desirable in the operation of the Building,
provided such measures shall not materially interfere with Tenant's use or
enjoyment of the Premises or the Common Areas.
The Landlord may enter upon the Premises and may exercise any or all of
the foregoing rights hereby reserved without the same being construed as an
unlawful entry into the Premises and without being deemed guilty of an eviction,
actual or constructive, or without being deemed guilty of trespass or
disturbance of the Tenant's use or possession and without abatement of Rent or
affecting any of Tenant's obligations hereunder.
26. NOTICES. Each provision of this instrument or of any
applicable governmental laws, ordinances, regulations and other requirements
with reference to the sending, mailing or delivery of any notice or the making
of any payment by Landlord to Tenant or with reference to the sending, mailing
or delivery of any notice or the making of any payment by Tenant to Landlord
shall be deemed to be complied with when and if the following steps are taken:
(a) All Rent and other payments required to be made by
Tenant to Landlord hereunder shall be payable to Landlord at the address
hereinbelow set forth or at such other address as the Landlord may specify from
time to time by written notice delivered in accordance herewith. Tenant's
obligations to pay Rent and any other amounts to Landlord under the terms of
this Lease shall not be deemed satisfied until such Rent and other amounts have
been actually received by Landlord. Landlord's obligation to pay any amounts to
Tenant under the terms of this Lease shall not be deemed satisfied until such
amounts have been actually received by Tenant.
(b) All payments required to be made by either party
hereunder shall be payable to the other party at the addresses hereinbelow set
forth, or at such other addresses within the continental United States as Tenant
or Landlord may specify from time to time by written notice delivered in
accordance herewith.
(c) Except for legal process, which shall be served as by
law provided, any notice or communication required or permitted hereunder shall
be in writing and shall be sent either by: (i) personal delivery service with
charges therefor billed to shipper; (ii) nationally recognized overnight
delivery service (such as Federal Express, United Parcel Service, Airborne,
etc.) with charges therefor billed to shipper; or (iii) United States Mail,
postage prepaid, registered or certified mail, return receipt requested. All
such notices and communications shall be addressed to Landlord or Tenant, as the
case may be, at the addresses set forth below, or at such other addresses as
Landlord or Tenant may have designated by notice to the other given as provided
above. Any notice or communication sent as above provided shall be deemed given
or delivered: (A) upon receipt, if personally delivered (provided delivery is
confirmed by the courier delivery service, if sent by such means); (B) on the
date of delivery by any nationally recognized overnight delivery service; or (C)
if sent by United States Mail, on the date appearing on the return receipt
therefor, or if there is no date on such return receipt, the receipt date shall
be presumed to be the postmark date appearing on such return receipt. Notice
shall be considered given and received on the latest original delivery or
attempted delivery date to all persons and addresses to which notice is to be
given, as indicated on the return receipt(s) of the United States Mail or
delivery receipts of the personal delivery service or nationally recognized
overnight delivery service. Any notice or communication which cannot be
delivered because of failure to provide notice of a change of address as herein
provided or for which delivery is refused shall be deemed to have been given and
received on the date of attempted delivery. Any notice or communication required
or permitted hereunder shall be addressed as follows:
Landlord: Landlord's Address for Payments:
Acquiport Peachtree Ridge, Inc.
c/o Brannen/Goddard Company
3390 Peachtree Road, N.E.
Suite 1200
Atlanta, Georgia 30326-1108
Attention: Property Management
Landlord's Address for Notices:
Acquiport Peachtree Ridge, Inc.
c/o J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Attention: Mr. Joel Moody
With a copy to:
Brannen/Goddard Company
3390 Peachtree Road, N.E.
Suite 1200
Atlanta, Georgia 30326-1108
Attention: Property Management
With a copy to:
Scoggins & Goodman, P.C.
2800 Marquis One Tower
245 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303-1227
Attention: Randall B. Scoggins, Esq.
Tenant: SynQuest, Inc.
3500 Parkway Lane
Suite 555
Norcross, GA 30092
Attention: Mr. John Bartels
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, GA 30303-1763
Attention: Thomas K. Dotzenrod, Esq.
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If and when included within the term "Tenant," as used in this instrument, there
are more than one person, firm or corporation, all shall jointly arrange among
themselves for their joint execution of a notice specifying some individual at
some specific address within the continental United States for the receipt of
notices and payments to Tenant. All parties included within the term "Tenant"
shall be bound by notices given in accordance with the provisions of this
paragraph to the same effect as if each had received such notice.
27. HAZARDOUS SUBSTANCES.
(a) Tenant covenants that, without first obtaining
Landlord's written consent, neither Tenant nor any of its agents, employees,
contractors or invitees shall cause or permit any Hazardous Materials (as
hereinafter defined) to be stored, handled, treated, released or brought upon or
disposed of on the Premises, the Building or the Project, except for Hazardous
Materials customarily used in general business offices in first-class office
buildings, and then only in accordance with any and all applicable laws,
ordinances, rules, regulations and requirements respecting the storage,
handling, treatment, release, disposal, presence or use of such Hazardous
Materials. Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all claims, judgments, damages, penalties, fines, costs
(including without limitation, consultants' fees, experts' fees, attorneys' fees
and court costs), liabilities or losses resulting from the storage, handling,
treatment, release, disposal, or use of Hazardous Materials in, on or about the
Premises, the Building or the Project by Tenant, its agents, employees,
contractors or invitees from and after the date of this Lease. Tenant agrees to
take such steps as are necessary to remediate any Hazardous Materials for which
the Tenant is liable under the terms of this Paragraph 27(a) in the manner
required by law.
(b) Definition of Hazardous Materials. As used herein,
the term "Hazardous Materials" means asbestos, polychlorinated biphenyls, oil,
gasoline or other petroleum based liquids, any and all materials or substances
deemed hazardous or toxic or regulated by applicable laws, including, but not
limited to, substances defined as hazardous under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601 et seq., the Resource Conservation and Response Act, as amended, 42
U.S.C. ss.6901 et seq. (or any state counterpart to the foregoing statutes) or
determined to present the unreasonable risk of injury to health or the
environment under the Toxic Substances Control Act, as amended, 15 U.S.C.
ss.2601 et seq.
(c) Landlord hereby agrees that it shall not cause any
Hazardous Materials to be released, generated, placed, held, located, stored,
used or disposed of, in the Land, the Building or the Premises or any part
thereof, in a manner or quantity prohibited by federal or State of Georgia laws
or regulations at the time such materials are placed in the Land, the Building
or in the Premises. Landlord shall indemnify, defend and hold Tenant harmless
from and against any and all claims, judgments, damages, penalties, fines, costs
(including without limitation, consultants' fees, experts' fees, attorneys' fees
and court costs), liabilities or losses resulting from the storage, handling,
treatment, release, disposal, presence or use of Hazardous Materials in, on or
about the Premises or the Building or the Land in violation of such federal or
State of Georgia laws or regulations by Landlord, its agents, employees,
contractors or invitees. Landlord agrees to take such steps as are necessary to
remediate any Hazardous Materials governed by the terms of this Paragraph 27(c)
in the manner required by law.
(d) The provisions of this Paragraph 27 shall survive the
expiration or earlier termination of this Lease.
28. BROKERAGE.
(a) Tenant represents and warrants to Landlord that it
has not entered into any agreement with, or otherwise had any dealings with, any
broker or agent other than The Wesley Company and The Fulton Group, Inc.
(collectively, "Tenant's Agents") in connection with the negotiation,
procurement or execution of this Lease which could form the basis of any claim
by any such broker or agent for a brokerage fee or commission, finder's fee, or
any other compensation of any kind or nature in connection herewith, and Tenant
shall, and hereby agrees to, indemnify, defend and hold Landlord harmless from
all costs (including, but not limited to, court costs, investigation costs, and
attorneys' fees), expenses, or liability for commissions or other compensation
claimed by any broker or agent with respect to this Lease which arise out of any
agreement or dealings, or alleged agreement or dealings, between Tenant and any
such agent or broker other than Tenant's Agents.
(b) Landlord represents and warrants to Tenant that it
has not entered into any agreement with, or otherwise had any dealings with, any
broker or agent other than Brannen/Goddard Company ("Landlord's Agent") in
connection with the negotiation, procurement or execution of this Lease which
could form the basis of any claim by any such broker or agent for a brokerage
fee or commission, finder's fee, or any other compensation of any kind or nature
in connection herewith, and Landlord shall, and hereby agrees to, indemnify,
defend and hold Tenant harmless from all costs (including, but not limited to,
court costs, investigation costs, and attorneys' fees), expenses, or liability
for commissions or other compensation claimed by any broker or agent with
respect to this Lease which arise out of any agreement or dealings, or alleged
agreement or dealings, between Landlord and any such agent or broker other than
Landlord's Agent.
(c) Landlord shall pay a commission to Landlord's Agent
pursuant to a separate agreement between Landlord and Landlord's Agent. Landlord
shall pay a commission to Tenant's Agent pursuant to a separate agreement
between Landlord and Tenant's Agent. The fact that Landlord is paying a
commission to Tenant's Agent does not constitute Tenant's Agent as the agent of
Landlord or as a dual agent for Landlord and Tenant. Tenant's Agent has acted
solely as Tenant's agent in connection with this transaction.
(d) The provisions of this Paragraph 28 shall survive the
expiration or earlier termination of this Lease.
29. MISCELLANEOUS.
(a) Words of any gender used in this Lease shall be held
and construed to include any other gender, and words in the singular number
shall be held to include the plural, unless the context otherwise requires.
(b) The terms, provisions, covenants and conditions
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon the parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
Landlord shall have the right to assign any of its rights and obligations under
this Lease to any mortgagee or to any purchaser of the Building. Each party
agrees to furnish to the other, promptly upon demand, a corporate resolution,
proof of due authorization by partners, or other appropriate documentation
evidencing the due authorization of such party to enter into this Lease.
(c) The captions inserted in this Lease are for
convenience only and in no way define, limit or otherwise describe the scope or
intent of this Lease, or any provision hereof, or in any way affect the
interpretation of this Lease.
(d) This Lease may not be altered, changed or amended
except by an instrument in writing signed by both parties hereto.
(e) All obligations of either party hereunder not fully
performed as of the expiration or earlier termination of the Term shall survive
the expiration or earlier termination of the Term, including without limitation
all payment obligations with respect to Rent and all obligations concerning the
condition of the Premises.
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(f) If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the Term,
then and in that event it is the intention of the parties hereto that the
remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added as a
part of this Lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and
that is legal, valid and enforceable.
(g) All references in this Lease to "the date hereof" or
similar references shall be deemed to refer to the last date, in point of time,
on which all parties hereto have executed this Lease.
(h) Time is of the essence of this Lease and all of its
provisions.
(i) No animals (except service animals) shall be brought
into or kept in or about the Building.
(j) Tenant agrees to comply with subdivision regulations,
protective covenants, or other restrictions of record that are applicable to the
Building or Project and with respect to which Landlord has given Tenant written
copies prior to the execution of this Lease.
(k) Intentionally Omitted.
(l) This Lease shall create the relationship of Landlord
and Tenant between the parties hereto; no estate shall pass out of Landlord.
Tenant has only a usufruct, not subject to levy and sale, and not assignable by
Tenant except by Landlord's consent as specifically provided in Paragraph 11 of
this Lease.
(m) Notwithstanding anything contained elsewhere in this
Lease, Tenant shall have no claim, and hereby waives the right to any claim,
against Landlord for money damages by reason of any refusal, withholding or
delaying by Landlord of any consent, approval or statement of satisfaction
required of Landlord by this Lease or applicable law. In such event, Tenant's
only remedy for any refusal, withholding or delay which is determined to be
unreasonable or in contravention of this Lease or applicable law shall be an
action for specific performance or an injunction to enforce any such
requirement.
(n) Anything contained in this Lease to the contrary
notwithstanding, Tenant shall look solely to the estate and property of Landlord
in the Project, and to all insurance, condemnation, sale and other proceeds
derived from the Project, for the collection of any judgment or other judicial
process requiring the payment of money by Landlord for any default or breach by
Landlord under this Lease, subject, however, to the prior rights of any
mortgagee, the holder of any deed to secure debt or lessor of the Project. No
other assets of Landlord or any partners, shareholders, or other principals of
Landlord shall be subject to levy, execution or other judicial process for the
satisfaction of Tenant's claim.
(o) This Lease and the Exhibits and Riders attached
hereto set forth the entire agreement between the parties and cancel all prior
negotiations, arrangements, brochures, agreements, and understandings, if any,
between Landlord and Tenant regarding the subject matter of this Lease. Neither
this Lease, nor any memorandum hereof, shall be recorded by Tenant without
Landlord's prior written consent to such recording.
(p) This Lease shall be governed by and construed under
the internal laws of the State of Georgia, without regard to the conflicts of
laws rules of such state. Any action brought to enforce or interpret this Lease
shall be brought in the court of appropriate jurisdiction in Gwinnett County,
Georgia. Should any provision of this Lease require judicial interpretation,
Landlord and Tenant hereby agree and stipulate that the court interpreting or
considering same shall not apply the presumption that the terms hereof shall be
more strictly construed against a party by reason of any rule or conclusion that
a document should be construed more strictly against the party who itself or
through its agent prepared the same, it being agreed that all parties hereto
have participated in the preparation of this Lease and that each party had full
opportunity to consult legal counsel of its choice before the execution of this
Lease.
(q) No Event of Default or provision of this Lease shall
be deemed to have been waived by Landlord unless such waiver is in writing and
signed by Landlord. Landlord's acceptance of Rent following an Event of Default
hereunder, or acceptance of less than the full amount due (even if Tenant writes
the words "accord and satisfaction" or words of similar import on its check)
shall not be construed as a waiver of such Event of Default, nor excuse any
delay or partial payment upon subsequent occasions. No custom or practice which
may develop between the parties in connection with the terms of this Lease shall
be construed to waive or lessen Landlord's right to insist upon strict
performance of the terms of this Lease, without a written notice thereof to
Tenant.
(r) In any action or proceeding brought by Landlord
against Tenant under this Lease for the collection of any Rent or other
indebtedness under this Lease, Landlord shall be entitled to recover from Tenant
its reasonable attorneys' fees and court costs in such action or proceeding. In
any other action or proceeding between Landlord and Tenant, the prevailing party
shall be entitled to recover all of its costs and expenses in connection
therewith, including, but not limited to, reasonable attorneys' fees actually
incurred. Notwithstanding anything contained herein to the contrary, if under
any circumstances Landlord or Tenant is required hereunder to pay any or all of
the other's attorneys' fees and expenses (or "reasonable attorneys' fees", or
"attorneys' fees incurred", or other similar obligations), the paying party
shall be responsible only for actual legal fees and out of pocket expenses
incurred at normal hourly rates for the work done. The paying party shall not be
liable under any circumstances for any additional attorneys' fees or expenses
under O.C.G.A. 13-1-11 or otherwise, and, to the extent Landlord and Tenant may
be permitted to charge or receive additional attorneys' fees or expenses under
O.C.G.A. 13-1-11, each of them hereby waives such right.
(s) Except as otherwise provided herein, Landlord shall
not be liable to Tenant for failure to give possession of any portion of the
Premises to Tenant if Landlord is delayed in commencing construction on such
portion of the Premises by reason of the unlawful holding over or retention of
possession of any previous tenant, tenants or occupants of such portion of the
Premises, nor shall such failure impair the validity of this Lease. However,
Landlord does agree to use reasonable diligence to obtain possession of each
portion of the Premises in a timely manner so that construction within such
portion of the Premises shall not be delayed.
(t) Intentionally Omitted.
(u) Whenever a period of time is herein prescribed for
action to be taken by Landlord, Landlord shall not be liable or responsible for,
and there shall be excluded from the computation for any such period of time,
any delays due to force majeure, which term shall include strikes, riots, acts
of God, war, or governmental laws, regulations and restrictions, or any other
cause of any kind whatsoever which is beyond the reasonable control of Landlord,
other than lack of funds by Landlord.
(v) Neither Landlord nor Landlord's agents or brokers
have made any representations or promises with respect to the Premises, the
Building, the Land, or any other portions of the Project except as herein
expressly set forth and all reliance with respect to any representations or
promises is based solely on those contained herein. No rights, easements, or
licenses are acquired by Tenant under this Lease by implication or otherwise
except as, and unless, expressly set forth in this Lease.
(w) The submission of this Lease to Tenant shall not be
construed as an offer and Tenant shall not have any rights with respect thereto
unless Landlord executes a copy of this Lease and delivers the same to Tenant.
When this Lease has been executed by Tenant and delivered to Landlord, this
Lease shall constitute an offer to Landlord to lease the Premises on the terms
and conditions herein described.
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(x) Any elimination or shutting off of light, air, or
view by any structure which may be erected on lands adjacent to the Building
shall in no way affect this Lease and Landlord shall have no liability to Tenant
with respect thereto.
30. ADDITIONAL PROVISIONS. See Additional Provisions Paragraphs 31
through 41 attached hereto and made a part hereof as if fully incorporated
herein and when in conflict with the body of this Lease, said Additional
Provisions shall prevail.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed in their names on their behalf and their seals affixed hereto by duly
authorized officials, the day and year respectively set forth below.
EXECUTED BY LANDLORD, this 12 day of January, 2000.
Witness ACQUIPORT PEACHTREE RIDGE, INC.,
a Delaware corporation
/s/ Marie Signoril By: /s/ Akram Busaidy
- ----------------------- ------------------------------------
Name: Akram Busaidy
-------------------------------
Title: Vice President
------------------------------
EXECUTED BY TENANT, this 10 day of January, 2000.
Witness
SYNQUEST, INC.,
a Georgia corporation
/s/ Mark Simcoe By: /s/ John Bartels
- ----------------------- ------------------------------------
Name: John Bartels
-------------------------------
Title: Executive VP Fin. & Adm.
------------------------------
(CORPORATE SEAL)
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ADDITIONAL PROVISIONS
ATTACHED TO AND INCORPORATED IN LEASE AGREEMENT BETWEEN ACQUIPORT PEACHTREE
RIDGE, INC., A DELAWARE CORPORATION ("LANDLORD") AND SYNQUEST, INC., A GEORGIA
CORPORATION ("TENANT").
31. IMPROVEMENT ALLOWANCE. Landlord shall provide Tenant an
"Improvement Allowance" (as defined in the Work Letter) of up to $15.25 per
square foot of Net Rentable Area in the original Premises ($281,393.00 total),
to be computed, expended and applied in accordance with the Work Letter attached
hereto as Exhibit "C." Any portion of the Improvement Allowance remaining
undisbursed as of December 31, 2001 shall belong to Landlord.
32. AMORTIZED EXCESS CONSTRUCTION COSTS.
(a) Landlord shall construct the Leasehold Improvements
(as defined in the Work Letter) and pay the cost thereof up to the amount of the
Improvement Allowance. In the event that the costs of the Leasehold Improvements
exceed the Improvement Allowance, then the entire amount of such excess
(hereinafter referred to as the "Excess") shall be Tenant's sole liability and
responsibility. Within five (5) Business Days after the approval of the bid for
Leasehold Improvements, as set forth in the Work Letter, Tenant shall notify
Landlord in writing as to whether or not Tenant elects to have Landlord pay up
to an additional $3.00 per square foot of Net Rentable Area of the Premises
($55,356.00 total) of the Excess (the "Potentially Amortized Costs"). If Tenant
elects to have Landlord amortize the Potentially Amortized Costs as set forth in
this Paragraph 32, the Potentially Amortized Costs shall be deducted from the
amounts payable by Tenant under Section 2.03 of the Work Letter and shall be
repaid by Tenant as set forth below in this Paragraph 32. If Tenant elects not
to have the Potentially Amortized Costs amortized as set forth in this Paragraph
32, or fails to provide notice of its election within such five (5) Business Day
period, Tenant shall be deemed to have waived its right to have such Potentially
Amortized Costs amortized as set forth in this Paragraph 32. In such event, the
amount of the Potentially Amortized Costs shall not be deducted from the amounts
payable by Tenant under Section 2.03 of the Work Letter.
(b) If Tenant elects to have the Potentially Amortized
Costs amortized by Landlord, the Potentially Amortized Costs shall be amortized
over the initial Term of the Lease, as follows:
The outstanding balance of the Potentially Amortized Costs shall bear
interest at the rate of eleven percent (11%) simple interest per annum
from the date of Substantial Completion until such sum is paid in full,
and a sum equal to the amount of principal and interest necessary to
fully amortize the Potentially Amortized Costs over the Term of the
Lease in equal monthly installments shall be added to Tenant's
liability for the payment of rent due under the Lease (hereinafter
referred to as "Additional Monthly Payments"), and the Additional
Monthly Payments shall constitute Additional Rent due under the Lease.
After completion of the Leasehold Improvements, Landlord shall
calculate the amount of the Potentially Amortized Costs and the amount
of Tenant's Additional Monthly Payments and shall provide Tenant
written notice of the results of such calculations. Tenant agrees, if
requested by Landlord, to execute an amendment to the Lease setting
forth the amount of the Additional Monthly Payments. Failure to pay the
Additional Monthly Payments when due shall constitute an Event of
Default under the Lease.
33. RIGHT OF FIRST REFUSAL. Tenant shall have the continuing right
of first refusal ("First Refusal Right") to lease the space contiguous to the
Premises consisting of 5,693 square feet of Net Rentable Area, as shown on
Exhibit "E" attached hereto and by this reference made a part hereof (the
"Expansion Space").
(a) Tenant shall not be entitled to exercise a First
Refusal Right if, at the time of the exercise of the First Refusal Right, there
exists an uncured Event of Default by Tenant under this Lease.
(b) (i) If Landlord has a "bona fide" prospect (the
"Prospect") for all or part of the Expansion Space, Landlord shall
deliver written notice to Tenant (the "First Refusal Notice") of the
availability of such portion of the Expansion Space along with a copy
of the terms and conditions under which such Prospect proposes to lease
the Expansion Space and a statement from the Landlord that the terms
upon which the Prospect proposes to lease the Expansion Space are
materially acceptable to the Landlord. Landlord agrees to endeavor to
provide Tenant with notice of the initial proposal given to a Prospect.
The First Refusal Notice shall specify the approximate location and Net
Rentable Area of the portion of the Expansion Space which will be
offered to the Prospect. Such portion of the Expansion Space is
hereinafter referred to as the "Offered Space."
(ii) Tenant shall have five (5) Business Days
from its receipt of the First Refusal Notice to notify Landlord in
writing that Tenant desires to lease the Offered Space. If Tenant does
so exercise its First Refusal Right by notifying Landlord within such
five (5) Business Day period, the Offered Space shall be added to the
Premises in accordance with the provisions of this Paragraph 33. If
Tenant does not exercise such First Refusal Right or fails to notify
Landlord within such five (5) Business Day period of its election,
Landlord shall thereafter have the right to lease that portion of the
Expansion Space to any prospective tenant on any terms and conditions
[but subject to the requirements of Paragraph 34(i)(i) below], in
Landlord's sole discretion, for a period of three (3) months after the
expiration of such five (5) Business Day period. If Landlord does not
lease such portion of the Expansion Space within such three (3) month
period, such portion of the Expansion Space shall again be subject to
the terms and conditions of this First Refusal Right. Landlord may give
Tenant a First Refusal Notice with respect to a portion of the
Expansion Space as many times as Landlord chooses to do so.
(c) The "Offered Space Commencement Date" for space for
which Tenant has exercised a First Refusal Right shall be the later of: (i) the
date of Substantial Completion of the improvements to be made to the Offered
Space by Landlord; or (ii) the date for commencement set forth in the First
Refusal Notice.
(d) If Tenant exercises any First Refusal Right at a time
when the Offered Space Commencement Date will occur on or before the end of the
third (3rd) Lease Year, the Term, Base Rent and other economic terms of the
Lease for the Offered Space (except for the Improvement Allowance) shall be the
same as the Term, Base Rent (as such rate may be adjusted from time to time) and
economic terms in effect from time to time under the Lease.
(e) If Tenant exercises any First Refusal Right at a time
when the Offered Space Commencement Date will occur after the end of the third
(3rd) Lease Year, the Base Rent and other economic terms of the Lease for the
Offered Space (except for the Improvement Allowance) shall be the Base Rent (as
such rate may be adjusted from time to time), and economic terms in effect from
time to time under the Lease. The Term for such Offered Space will end on the
date determined under Paragraph 35 below.
(f) Whenever Tenant exercises its First Refusal Right,
Landlord shall provide Tenant a pro rata improvement allowance for the Offered
Space in an amount equal to $15.25 per square foot of Net Rentable Area in the
Offered Space multiplied by a fraction, the numerator of which is the number of
months remaining in the original six (6) year Term and the denominator of which
is seventy-two (72), to be computed, applied and expended in accordance with an
Offered Space Work Letter in substantially the form of the Work Letter attached
to this Lease as Exhibit "C." All other terms and conditions for the lease of
such Offered Space shall be those terms and conditions then in effect under the
Lease at the Offered Space Commencement Date.
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(g) After the Offered Space Commencement Date, such
Offered Space shall be added to and form a part of the Premises with the same
force and effect as if originally demised under this Lease, and the term
"Premises," as used in this Lease, shall include such Offered Space.
(h) If the Offered Space does not contain the entire
Expansion Space, Tenant's First Refusal Right under this Paragraph 33 shall
continue with respect to the remaining portion of the Expansion Space.
(i) Upon exercise of the First Refusal Right by Tenant,
and the determination of the Base Rent with respect thereto, Landlord and
Tenant, upon demand of either of them, shall enter into an amendment to the
Lease adding such Offered Space to the Premises, setting forth such Base Rent,
after the addition of such Offered Space to the Premises, and extending the Term
of this Lease as to the original Premises, if applicable; provided that failure
to enter into any such agreement shall not affect the terms of this Paragraph
33. If Tenant properly exercises a First Refusal Right but thereafter, for any
reason (except for delays caused by Landlord), does not enter into such
amendment to the Lease within thirty (30) days after its submission to Tenant by
Landlord, Landlord shall have the option, by written notice to Tenant, to elect
to cancel Tenant's exercise of its First Refusal Right, and, if Landlord so
elects, Landlord will be free to rent such Offered Space to any other
prospective tenant and the First Refusal Right granted to Tenant under this
Paragraph 33 shall immediately expire and be of no further force or effect and
Tenant shall have no further rights, and Landlord shall have no further
obligations, under this Paragraph 33.
(j) Except as set forth in this Paragraph 33, the leasing
of any Offered Space under this First Refusal Right shall be upon the same
terms, covenants, agreements, provisions and conditions of the Lease as are in
effect with respect to the original Premises, as defined in the Lease.
(k) Any termination, cancellation or surrender of the
Lease shall terminate any rights of Tenant pursuant to this Paragraph 33. This
First Refusal Right is provided to Tenant for the exclusive benefit of Tenant
and shall terminate upon the sublease of more than 25%, in the aggregate, of the
Net Rentable Area of the Premises or upon the assignment of the Lease. Tenant's
rights under this Paragraph 33 shall expire at the end of the fifth (5th) Lease
Year.
(l) Time shall be of the essence with respect to the
exercise by Tenant of its First Refusal Right under this Paragraph 33.
34. OPTION TO EXPAND. Tenant shall have the option (the "Expansion
Option"), but not the obligation, to lease all or, subject to the requirements
set forth below, one-half (1/2) of the Net Rentable Area of the Expansion Space
(reduced by any portion of the Expansion Space leased by Tenant pursuant to its
First Refusal Right) upon and subject to the following terms and conditions:
(a) If, at the time of exercise of such Expansion Option,
a portion of the Expansion Space which Tenant desires to lease is leased to one
or more other tenants (collectively, the "Adjacent Tenant"), Tenant shall be
entitled to exercise such Expansion Option only if Landlord successfully
negotiates and executes a satisfactory relocation agreement with the Adjacent
Tenant to relocate such Adjacent Tenant to another suite in the Building which
is substantially similar in size to the portion of the Expansion Space occupied
by the Adjacent Tenant. If Landlord is not able to negotiate and execute a
satisfactory relocation agreement with the Adjacent Tenant, then Tenant shall
not be entitled to exercise the Expansion Option unless, at that time, Landlord
has the right to terminate its lease with the Adjacent Tenant as described in
Paragraph 34(i) below. In addition, if at the time of exercise of such Expansion
Option any portion of the Expansion Space is leased to an Adjacent Tenant,
Tenant shall not be entitled to exercise the Expansion Option in a manner which
will require Landlord to relocate such Adjacent Tenant or to terminate its lease
with such Adjacent Tenant unless Tenant exercises such Expansion Option as to
all of the Expansion Space.
(b) Tenant shall not be entitled to exercise the
Expansion Option if, at the time of exercise of such Expansion Option, there
exists an uncured Event of Default by Tenant under this Lease.
(c) Tenant may exercise the Expansion Option by giving
written notice of its election to exercise the Expansion Option to Landlord at
any time before the expiration of the Expansion Option; provided that Tenant
must exercise the Expansion Option so that the "Expansion Space Commencement
Date" (as hereinafter defined) for the Expansion Space will occur on or before
the end of the fifth (5th) Lease Year. Tenant shall give written notice to
Landlord of its exercise of the Expansion Option at least nine (9) months prior
to the expected Expansion Space Commencement Date (to give Landlord time to
attempt to relocate the Adjacent Tenant, if any, or to exercise its right to
terminate the lease of the Adjacent Tenant, if any). Tenant shall have no right
to exercise the Expansion Option at a time which will result in the Expansion
Space Commencement Date occurring after the end of the fifth (5th) Lease Year.
If Tenant exercises the Expansion Option at least nine (9) months prior to the
end of the fifth (5th) Lease Year, this requirement will be deemed to have been
met. This Expansion Option shall expire and be of no further force and effect at
the end of the fifth (5th) Lease Year.
(d) The Term of this Lease with respect to the Expansion
Space shall commence on the Expansion Space Commencement Date and shall end on
the date determined under Paragraph 35 below. The Expansion Space Commencement
Date shall be the date of Substantial Completion of the Leasehold Improvements
to be constructed in the Expansion Space pursuant to Paragraph 34(h) below, but
not later than the first (1st) day of the sixth (6th) Lease Year.
(e) After the Expansion Space Commencement Date, the
Expansion Space shall be added to and form a part of the Premises with the same
force and effect as if originally demised under this Lease, and the term
"Premises," as used in this Lease, shall include the Expansion Space.
(f) Base Rent payable by Tenant for the Expansion Space
during the remainder of the Term [including any "Expansion Extension Term" (as
hereinafter defined)], but excluding any Extended Term under the Extension
Option provided in Paragraph 36] shall be the product of: (i) the per square
foot annual Base Rent payable by Tenant for the Premises under the Lease, as
such rate may be adjusted from time to time, multiplied by (ii) the Net Rentable
Area of the Expansion Space. The Base Rent payable by Tenant for the Expansion
Space for the Extended Term, if any, shall be determined in the same manner as
the Base Rent for the original Premises shall be determined.
(g) Landlord shall provide Tenant an improvement
allowance for the Expansion Space of up to $15.25 per square foot of Net
Rentable Area of the Expansion Space multiplied by a fraction, the numerator of
which is the number of months remaining in the Term as to the Expansion Space
and the denominator of which is seventy-two (72), to be computed, expended and
applied in accordance with an Expansion Space Work Letter in substantially the
form of the Work Letter attached to this Lease as Exhibit "C."
(h) If at the time of exercise of such Expansion Option,
the Expansion Space is leased to the Adjacent Tenant and Landlord successfully
negotiates and executes a satisfactory relocation agreement in accordance with
Paragraph 34(a) above, Tenant shall, subject to the limitations set forth
herein, reimburse Landlord for any and all costs incurred by Landlord associated
with the relocation of the Adjacent Tenant, including, but not limited to, the
expenses of preparing the new premises (the "Relocated Premises") to which the
Adjacent Tenant will be relocated with improvements and finishes substantially
similar to those utilized by the Adjacent Tenant in the Expansion Space, the
cost of moving the Adjacent Tenant, its property and equipment to the Relocated
Premises, the cost of business stationery and business cards for the Adjacent
Tenant and its employees with the new address, and all other costs actually
incurred by Landlord in connection with the relocation of the Adjacent Tenant.
Notwithstanding the foregoing, Tenant shall not be
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required to reimburse Landlord for any relocation fees or inducements which
Landlord may pay to the Adjacent Tenant which are not related to actual
out-of-pocket costs incurred by the Adjacent Tenant in relocating. In addition,
Tenant shall be required to reimburse Landlord for relocation costs only if the
Adjacent Tenant is relocated within the Building. In no event shall Tenant be
required to pay that portion of the expenses of preparing the Relocated Premises
which is attributable to any increase in the size of the Relocated Premises in
excess of the premises from which such Adjacent Tenant is being relocated. If
the relocation agreement between Landlord and the Adjacent Tenant provides for a
term which extends beyond the end of the term for the Adjacent Tenant's lease of
the Expansion Space, Tenant shall reimburse Landlord for only a pro rata portion
of the cost of the improvements to be made by Landlord in the Relocated
Premises. Tenant's portion of such improvement costs shall be equal to the total
of such improvement costs multiplied by a fraction, the numerator of which is
the number of months remaining in the term of the Adjacent Tenant's lease for
the Expansion Space, and the denominator of which is the total number of months
which will remain in such Adjacent Tenant's lease (including the extension) for
the Relocated Premises. Even if the relocation agreement between Landlord and
the Adjacent Tenant provides for an extended term, Tenant shall reimburse
Landlord for the entire cost of moving the Adjacent Tenant, its property and
equipment to the Relocated Premises, the cost of business stationery and
business cards for the Adjacent Tenant and its employees, and any other costs
actually paid by Landlord in connection with the relocation of the Adjacent
Tenant (other than improvement costs which shall be prorated, as set forth
above).
(i) (i) If Landlord leases the Expansion Space to
the Adjacent Tenant, Landlord shall include in the Adjacent Tenant's
lease a provision giving Landlord the option to terminate the Adjacent
Tenant's lease after a minimum term of two (2) years. Such termination
provision may require that Landlord give the Adjacent Tenant a minimum
of six (6) months prior written notice of its intention to terminate
the Adjacent Tenant's lease (the "Termination Notice"). Landlord also
agrees that in any lease to the Adjacent Tenant, Landlord shall not
provide an improvement allowance in excess of $15.25 per square foot of
Net Rentable Area.
(ii) If at the time Tenant exercises its
Expansion Option, the Expansion Space is leased to the Adjacent Tenant,
and Landlord is unable to successfully negotiate and execute a
satisfactory relocation agreement in accordance with Paragraph 34(a)
above, Landlord shall exercise its option to terminate the Adjacent
Tenant's lease by giving the required Termination Notice to the
Adjacent Tenant. Upon giving the Termination Notice to the Adjacent
Tenant, Landlord shall compute the "Termination Reimbursement" (as
hereinafter defined) and provide an invoice therefor to Tenant. Sums
due under such invoice shall constitute Additional Rent due under the
Lease. Should Landlord fail to provide such invoice, such failure shall
not relieve Tenant of the obligation to pay the Termination
Reimbursement. Tenant shall pay such invoice within thirty (30) days
after receipt thereof, and Tenant's failure to pay such invoice within
such thirty (30) day period shall constitute an Event of Default under
the Lease.
(iii) If Landlord gives the Termination Notice to
the Adjacent Tenant, Tenant shall reimburse Landlord for the following
costs associated with the termination of the Adjacent Tenant's lease
(the "Termination Reimbursement"). The Termination Reimbursement shall
be an amount equal to the unamortized amounts (calculated as set forth
below) (the "Unamortized Up-Front Costs") remaining unpaid as of the
date of termination of the Adjacent Tenant's lease of all sums paid by
Landlord under the Adjacent Tenant's lease for a tenant improvement
allowance, and leasing commissions to Landlord's Agent and Tenant's
Agent (all such sums are collectively referred to as the "Up-Front
Costs").
(iv) The Unamortized Up-Front Costs shall be
calculated by amortizing such Up-Front Costs together with interest
thereon at eleven percent (11%) per annum. The Unamortized Up-Front
Costs shall be the amount remaining outstanding on the date of
termination of the Adjacent Tenant's lease, if the total Up-Front Costs
were amortized, together, with interest thereon at the rate set forth
above, in equal monthly installments of principal and interest over the
Term of the Adjacent Tenant's lease. The date of termination of the
Adjacent Tenant's lease for the purpose of calculating the unamortized
Up-front Costs, shall be the date upon which the Adjacent Tenant is
obligated to vacate the Expansion Space.
(v) Landlord shall be under no obligation to
give the Termination Notice until such time as it is able to do so in
accordance with the terms of the Adjacent Tenant's lease. If, as a
result, of the terms of the Adjacent Tenant's lease, Landlord is unable
to terminate the Adjacent Tenant's lease on or before a date which will
allow the Commencement Date for the Expansion Space under this Lease to
occur on or before the end of the fifth (5th) Lease Year, Landlord
shall have no obligation to give the Termination Notice and Tenant
shall have no further rights under this Expansion Option.
(j) Upon exercise of Tenant's Expansion Option, and the
determination of the Base Rent with respect thereto, Landlord and Tenant, upon
demand of either of them, shall enter into an amendment to the Lease adding such
Expansion Space to the Premises, setting forth such Base Rent, after the
addition of such Expansion Space to the Premises; provided that failure to enter
into any such agreement shall not affect Tenant's obligation to pay Base Rent
for such Expansion Space. If Tenant properly exercises Tenant's Expansion
Option, but thereafter, for any reason (except for delays caused by Landlord),
does not enter into an amendment to the Lease adding such Expansion Space to the
Premises within thirty (30) days after its submission to Tenant by Landlord,
Landlord shall have the option, by written notice to Tenant, to elect to cancel
Tenant's exercise of its Expansion Option, and, if Landlord so elects, Landlord
will be free to leave the Adjacent Tenant, if any, in the Expansion Space or to
rent such Expansion Space to any other prospective tenant and the Expansion
Option granted to Tenant under this Paragraph 34 shall immediately expire and be
of no further force or effect and Tenant shall have no further rights, and
Landlord shall have no further obligations, under this Paragraph 34.
(k) Except as set forth in this Paragraph 34, the leasing
of the Expansion Space for the remainder of the Term shall be upon all the same
terms, covenants, agreements, provisions and conditions of the Lease as are in
effect as of the date immediately prior to the Expansion Space Commencement
Date.
(l) If Tenant does not exercise its Expansion Option in
accordance with this Paragraph 34, Landlord shall have the right to lease all or
any part of the Expansion Space (alone or in conjunction with any other space)
to any other prospective tenant or tenants for any length of term and such space
shall no longer be subject to the provisions of this Paragraph 34.
(m) Any termination, cancellation or surrender of the
Lease shall terminate any rights of Tenant under the Expansion Option granted in
this Paragraph 34. This Expansion Option is provided to Tenant for the exclusive
benefit of Tenant and shall terminate upon the sublease of more than twenty five
percent (25%), in the aggregate, of the Net Rentable Area of the Premises or
upon the assignment of the Lease.
(n) Tenant acknowledges that Landlord's ability to
relocate the Adjacent Tenant will depend upon the availability of suitable
premises elsewhere in the Building. If such suitable premises are not available,
Landlord shall be under no obligation to relocate the Adjacent Tenant, and
Tenant shall have no right to exercise its Expansion Option, unless Landlord is
able to terminate the lease of the Adjacent Tenant under Paragraph 34(i) above.
(o) Time shall be of the essence with respect to the
exercise by Tenant of its rights under the Expansion Option granted in this
Paragraph 34.
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<PAGE> 20
35. EXPANSION EXTENSION TERM.
(a) If Tenant exercises its First Refusal Right at a time
when the Offered Space Commencement Date will occur on or before the end of the
third (3rd) Lease Year, the Term for the Lease of the Offered Space will be
coterminous with the original Term of the Lease.
(b) If Tenant exercises its Expansion Option at a time
when the Expansion Space Commencement Date will occur on or before the end of
the third (3rd) Lease Year, the Term for the Lease of the Expansion Space will
be coterminous with the original Term of the Lease.
(c) Landlord and Tenant have agreed that any leasing by
Tenant of any portion of the Expansion Space, whether by exercise of a First
Refusal Right or an Expansion Option, shall be for a minimum term of three (3)
years. Since Tenant is allowed to exercise the Expansion Option and the First
Refusal Right at any time when the Expansion Space Commencement Date, or the
Offered Space Commencement Date, as the case may be, will occur on or before the
end of the fifth (5th) Lease Year, the term of the Lease of such portion of the
Expansion Space could extend for up to two (2) years beyond the original Lease
Expiration Date set forth in Paragraph 1(h) of this Lease. In such event, the
parties have agreed that the Term of the Lease with respect to the original
Premises will be extended to be coterminous with the Term for the Expansion
Space, as set forth in this Paragraph 35.
(d) If Tenant exercises any First Refusal Right or the
Expansion Option and, as a result the Term of the Lease is extended as set forth
in this Paragraph 35, the period of time between the original Lease Expiration
Date specified in Paragraph 1(h) of the Lease and the end of the Term, as so
extended, is hereinafter referred to as the "Expansion Extension Term."
(e) If Tenant has exercised a First Refusal Right for
less than all of the Expansion Space, which exercise has resulted in the
extension of the Lease for the Expansion Extension Term, and thereafter again
exercises a First Refusal Right or the Expansion Option, the Expansion Extension
Term shall be extended to provide a term of three (3) years from the Offered
Space Commencement Date for the last portion of the Expansion Space leased by
Tenant under the First Refusal Right, but not beyond the date which is two (2)
years after the original Lease Expiration Date, as specified in Paragraph 1(h)
of this Lease. In such event, the Term for the original Premises and all
previous Offered Space leased by Tenant shall also be extended through the end
of the Expansion Extension Term, as so extended.
(f) If Tenant exercises any First Refusal Right or the
Expansion Option and the term for such Expansion Space will not be coterminous
with the Term for the original Premises under this Lease, the Term of this Lease
with respect to the original Premises shall be automatically extended so that
the expiration of the Term of this Lease for the original Premises shall also
include the Expansion Extension Term. If an exercise by Tenant of a First
Refusal Right results in an extension of the Term of the Lease for the Expansion
Extension Term, Landlord shall have no obligation by reason of such extension of
the Term of the Lease as to the original Premises for the Expansion Extension
Term to furnish any improvement or refurbishment allowance with respect to the
original Premises. The Base Rent payable under this Lease for the entire
Premises leased under this Lease (including the original Premises and any
portion of the Expansion Space leased by Tenant under the First Refusal Right or
Expansion Option) during the Expansion Extension Term shall be as follows:
<TABLE>
<CAPTION>
Annual Base Rent
Per Square Foot of
Lease Year Net Rentable Area
---------- ------------------
<S> <C>
Seventh (7th) $24.04
Eighth (8th) $25.00
</TABLE>
(g) (i) If the Lease is extended for the Expansion
Extension Term, beginning January 1, 2006, and continuing on the first day of
each month thereafter during the Expansion Extension Term, Tenant shall also pay
to Landlord, as Additional Rent, at the same time as the monthly installment of
Base Rent is paid, an amount equal to one-twelfth (1/12th) of Landlord's
estimate (as determined by Landlord in its sole discretion) of "Tenant's Share"
(as hereinafter defined) of any projected increase in "Taxes" (as hereinafter
defined) for the particular calendar year in excess of the "Tax Base" (as
hereinafter defined) (the "Estimated Tax Escalation Increase"). The Tax Base
shall be the actual Taxes experienced during calendar year 2005. If the Building
is not fully occupied during any calendar year, Landlord shall adjust those
Taxes which are affected by Building occupancy for such calendar year, or
portion thereof, as the case may be, to reflect an occupancy of not less than
ninety-five percent (95%) of the total Net Rentable Area of the Building. In
computing the Estimated Tax Escalation Increase for any particular calendar
year, Landlord shall take into account any prior increases in Tenant's Share of
Taxes. If during any calendar year the Estimated Tax Escalation Increase is less
than the Estimated Tax Escalation Increase for the previous year, such
Additional Rent payments attributable to the Estimated Tax Escalation Increase
to be paid by Tenant for the new calendar year shall be decreased accordingly;
provided, however, in no event will the Rent paid by Tenant hereunder ever be
less than the Base Rent. If, for any reason, Landlord has not provided Tenant
with the Estimated Tax Escalation Increase on or before the first day of any
year during the Expansion Extension Term after January 1, 2006, then, (x) until
the first day of the calendar month following the month in which Tenant is given
the Estimated Tax Escalation Increase, Tenant shall continue to pay to Landlord
on the first day of each calendar month the sum, if any, payable by Tenant under
this Paragraph for the month of December of the preceding year, and (y) on the
first day of the month following Tenant's receipt of Landlord's determination of
the Estimated Tax Escalation Increase, Tenant shall pay to Landlord an amount
equal to one-twelfth (1/12) of the Estimated Tax Escalation Increase as shown on
the estimate provided by Landlord, plus an amount equal to the remainder
obtained by subtracting the amount theretofore paid by Tenant pursuant to
subparagraph (x) from that amount obtained by multiplying the number of months
(exclusive of the month then at hand) occurring since the first day of such year
by Tenant's then-correct monthly share of the Estimated Tax Escalation Increase.
If such calculation proves that Tenant has overpaid, Landlord shall apply such
overpayment as a credit against Tenant's future payment obligations for
Additional Rent until such credit is depleted. The foregoing notwithstanding,
Landlord shall have the right from time to time during any year to notify Tenant
in writing of any change in Landlord's estimate of the Estimated Tax Escalation
Increase, in which event Tenant's payment of the Estimated Tax Escalation
Increase, as previously estimated, shall be adjusted to reflect the amount shown
in such notice and shall be effective and due from Tenant on the first day of
the month following Landlord's giving of such notice.
(ii) The term "Taxes" shall mean all taxes and
assessments and governmental charges whether federal, state, county or
municipal, and whether they be by taxing or management districts or authorities
presently taxing or by others, subsequently created or otherwise, and any other
taxes and assessments attributable to the Building and the Project (or their
operation), excluding, however, federal and state taxes on income (collectively,
"Taxes"); if the present method of taxation changes so that in lieu of the whole
or any part of any Taxes levied on the Project or Building, there is levied on
Landlord a capital tax directly on the rents received therefrom or a franchise
tax, assessment, or charge based, in whole or in part, upon such rents for the
Building, then all such taxes, assessments or charges, or the part thereof so
based, shall be deemed to be included within the term "Taxes" for the purposes
hereof.
(iii) Within nine (9) months after January 1,
2006, and each subsequent year during the Expansion Extension Term, or as soon
thereafter as is practicable, Landlord shall furnish Tenant with a statement of
the actual Taxes for the preceding year and the resulting, actual amount of
Tenant's Share of any increase in Taxes in excess of the Tax Base. Thereafter,
Landlord shall be entitled, if circumstances warrant, to issue one or more
revised, corrected or supplemental statements at any time and from time to time
following the issuance of the initial statement. Within ten (10) days after
Landlord's delivery of such statement,
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<PAGE> 21
Tenant shall make a lump sum payment to Landlord in the amount, if any, by which
Tenant's Share of the increase in the Taxes for the preceding calendar year in
excess of the Tax Base, as shown on such Landlord's statement, exceeds the
aggregate of the monthly installments of Tenant's payments of the Estimated Tax
Escalation Increase paid during such preceding year. If Tenant's share of the
actual increase in Taxes, as shown on such Landlord's statement, is less than
the aggregate of the monthly installments of the Estimated Tax Escalation
Increase actually paid by Tenant during such preceding year, then Landlord shall
apply such amount to the next accruing installments of Additional Rent due from
Tenant, until fully credited to Tenant.
(iv) As used in this Paragraph 35 (g), "Tenant's
Share" shall equal a fraction, the numerator of which is the Net Rentable Area
of the Premises and the denominator of which is the Net Rentable Area of the
Building, subject to future adjustments in the case of any expansion of the
Premises.
36. OPTION TO EXTEND. Tenant shall have the option to extend the
Term of this Lease (the "Extension Option") with respect to the Premises for the
"Extended Term" (as hereinafter defined) upon and subject to the following terms
and conditions:
(a) Tenant shall not be entitled to exercise the
Extension Option if, at the time of the exercise of such Extension Option, there
exists an uncured Event of Default by Tenant under this Lease.
(b) Tenant has the option to extend the Term of this
Lease for one (1) extended term of five (5) years (the "Extended Term") by
giving written notice of its election to extend to Landlord no earlier than
fifteen (15) months and no later than twelve (12) months prior to the expiration
of the Term. The Extended Term shall commence immediately upon the expiration of
the Term (as the same may have been extended for the Expansion Extension Term,
if applicable). If Tenant does not give notice of its election to exercise the
Extension Option in a timely manner, the Tenant's rights with respect to the
Extended Term shall expire and Tenant shall be conclusively deemed to have
waived its right to any Extended Term.
(c) (i) Base Rent for the Premises for the Extended
Term shall be an amount equal to the "Fair Market Value Base Rent" ( as
hereinafter defined) for the Premises for the Extended Term. Tenant acknowledges
that the method of escalating Base Rent and the lack of a requirement that
Tenant pay its share of increases in "Operating Expenses" (as defined in Exhibit
"G," attached hereto and by this reference made a part hereof) and "Taxes" (as
defined in Exhibit "G") for the original Term of the Lease (as the same may be
extended for the Expansion Extension Term) is a special concession to Tenant. If
Tenant exercises its Extension Option, Landlord may require other methods of
payment of Base Rent, escalation of Base Rent, payment of Operating Expenses and
Taxes and other economic terms, and the Landlord shall not be obligated to
continue the methods applicable for the original Term. If Tenant exercises its
Extension Option, Landlord shall notify Tenant of "Landlord's Determination" (as
hereinafter defined) as to whether or not Landlord is willing to continue to
escalate Rent in the same manner as set forth in this Lease for the original
Term (i.e. by escalating gross rent by a fixed percentage each year and not
utilizing a pass through of increases in Operating Expenses and Taxes or an
expense stop). In the alternative, Landlord may elect to escalate Base Rent for
the Extended Term on a fixed percentage or other basis and to require Tenant to
pay its pro rata share of increases in Operating Expenses over a base year. If
Landlord elects to require Tenant to pay its pro rata share of increases in
Operating Expenses during the Extended Term, the provisions of Exhibit "G"
attached hereto shall govern the calculation and payment of Tenant's pro rata
share of increases in Operating Expenses.
(ii) Within thirty (30) days after Landlord's
receipt of written notice of Tenant's election to exercise its Extension Option,
Landlord shall give Tenant a written notice setting forth Landlord's
determination, in its reasonable discretion, of the Fair Market Value Base Rent
of the Premises for the Extended Term and the method Landlord has chosen under
Paragraph 36(c)(i) above for calculating and escalating Rent ("Landlord's
Determination").
(iii) If Tenant rejects Landlord's Determination,
Landlord and Tenant shall negotiate in good faith in an attempt to reach
agreement as to the Fair Market Value Base Rent. The escalation method chosen by
Landlord under Paragraph 36(c)(i) above shall be binding on Tenant and Landlord
shall not be required to negotiate that determination. If Landlord and Tenant
are not able to agree as to the Fair Market Value Base Rent within sixty (60)
days after Landlord's notice to Tenant of Landlord's Determination (the
"Negotiation Period"), Fair Market Value Base Rent for the Extended Term shall
be determined by arbitration as set forth in Paragraph 36 (j) below.
Notwithstanding anything to the contrary, in the event the determination of Fair
Market Value Base Rent is submitted to arbitration, Landlord and Tenant shall be
bound by such determination, and Tenant shall not be entitled to revoke its
exercise of the Extension Option after submission of such determination to
arbitration.
(d) For the purposes of this Paragraph 36, the phrase
"Fair Market Value Base Rent" shall mean: the fair market rental which a tenant
would pay upon leasing space similar to the space in question in the Building,
or if no comparable space is available in the Building, in buildings of
comparable quality within a ten (10) mile radius of the Building ("Comparable
Buildings"), taking into consideration that Tenant is exercising a right to
extend the Term, and all other relevant factors, including, without limitation:
(i) the aggregate number of square feet of Net Rentable Area then leased by
Tenant in the Building; (ii) the length of the lease in question; (iii) the
market improvement allowances (which shall be paid by Landlord to Tenant); (iv)
any increases or decreases in Base Rent over the Extended Term that are then
being included in comparable leases, including adjustments made annually, or on
some other periodic basis, or based on changes in consumer price, cost of
living, or similar indexes or periodic market adjustments; (v) any tenant
concessions then being included (or not included) in comparable leases; (vi) the
location and quality of the Project; (vii) the credit standing of Tenant; (viii)
the method of payment of taxes and operating expenses by the tenant under
comparable leases; (ix) changes in measurement standards for the office space in
question; and (x) differences in building rules and regulations between the
building and such Comparable Buildings.
(e) Landlord shall have no obligation to make any
improvements, decorations or alterations to the Premises, other than Landlord's
existing obligations under the Lease and to provide Tenant with the market
allowance included in the Fair Market Value Base Rent determination, and Tenant
shall accept the Premises in their then current "as-is" condition as of the
commencement of the Extended Term.
(f) If Landlord so elects, as set forth in Paragraph
36(c)(i) above, the Fair Market Value Base Rent shall reflect the net or base
rent, and assume payment, in addition to payments of such Fair Market Value Base
Rent, of Tenant's share of any increase in Operating Expenses and Taxes over a
base year, and all other Additional Rent described in the Lease with respect to
the full Premises. Conversely, if Landlord so elects, Fair Market Value Base
Rent shall be determined as a gross rent without the payment of expense pass
throughs.
(g) Upon the determination of the Fair Market Value Base
Rent for the Extended Term, Landlord and Tenant, upon the demand of either of
them, shall enter into a supplementary agreement or amendment to the Lease to
set forth such Fair Market Value Base Rent, the Extended Term and the Lease
Expiration Date for such Extended Term, provided that failure to enter into any
such agreement shall not affect Tenant's obligation to pay Fair Market Value
Base Rent or, if applicable, Tenant's share of increases in Operating Expenses
for the Extended Term as determined pursuant to this Paragraph.
(h) Except as set forth in this Paragraph 36, the leasing
of the Premises for the Extended Term shall be upon the same terms, covenants,
agreements, provisions and conditions of the Lease as are in effect as of the
date immediately prior to the commencement of such Extended Term. Tenant shall
have no option to renew or extend this Lease beyond the expiration of the
Extended Term.
19
<PAGE> 22
(i) Any termination, cancellation or surrender of this
Lease shall terminate the Extension Option with respect to the portion of the
Premises for which this Lease is terminated, canceled or surrendered. The
Extension Option provided to Tenant herein is for the exclusive benefit of
Tenant and shall terminate upon the sublease of more than 25%, in the aggregate,
of the Net Rentable Area of the Premises or upon the assignment of the Lease.
(j) If Landlord and Tenant are unable to reach agreement
on the Fair Market Value Base Rent within the Negotiation Period, then Fair
Market Value Base Rent shall be determined in accordance with the procedures set
forth in this Paragraph 36(j) [the determination of Fair Market Value Base Rent
by any arbitrator shall be based on the factors set forth in this Paragraph
36(j)]:
(i) Within thirty (30) days after the end of the
Negotiation Period, Landlord and Tenant shall each deliver to the other a
written appointment of an arbitrator and an estimate of Fair Market Value Base
Rent submitted by such arbitrator. If either party fails to so deliver its
appointment and estimate within such time period, time being of the essence with
respect thereto, such party shall be deemed to have irrevocably waived its right
to deliver such estimate and the arbitrator appointed by the other party,
without holding a hearing, shall accept the estimate of the submitting party as
the Fair Market Value Base Rent.
(ii) Each arbitrator so appointed shall be a
disinterested party, engaged in appraising commercial office space in the
Peachtree Corners area of Gwinnett County, Georgia (the "Submarket"), either as
a M.A.I. appraiser, or a licensed commercial real estate broker, who shall be
currently active and engaged in rendering appraisals or leasing commercial
office space in the Submarket, and shall have been continuously so engaged for
at least ten (10) years prior to his or her selection.
(iii) Within five (5) days after such estimates
have been exchanged, the two arbitrators shall meet and attempt to reach
agreement as to Fair Market Value Base Rent.
(iv) If the arbitrators are unable to reach
agreement within such five (5) day period, but the higher of the two estimates
does not exceed one hundred five percent (105%) of the lower estimate, the
mathematical average of the estimates submitted by the two arbitrators shall be
the Fair Market Value Base Rent as determined by the arbitration. In all other
cases, the two arbitrators shall, within ten (10) days after the aforementioned
five (5) day period, select a third arbitrator to resolve which one of the two
estimates of Fair Market Value Base Rent shall be used. The third arbitrator
must also have the qualifications set forth above. If the two arbitrators are
unable to agree upon the selection of the third arbitrator, then, within a
further period of fifteen (15) days after the aforementioned ten (10) day
period, each arbitrator shall submit to the Presiding Judge of the Superior
Court of Gwinnett County, Georgia, the names of two (2) persons such arbitrator
would accept as the third arbitrator and the Presiding Judge of the Superior
Court of Gwinnett County, Georgia shall appoint such third arbitrator from among
the list of the four (4) submitted candidates.
(v) Within ten (10) days after the selection of
the third arbitrator, such third arbitrator shall select from the two (2) Fair
Market Value Base Rent estimates of the initial arbitrators the one which he or
she considers most correct, and the Fair Market Value Base Rent so selected
shall be the award of the arbitrators. In no event shall the third arbitrator be
entitled to render a decision that the Fair Market Value Base Rent is an amount
other than one of the amounts specified by the two initial arbitrators as the
Fair Market Value Base Rent.
(vi) The arbitration decision, determined as
provided in this Paragraph 36(j), shall be conclusive and binding on the
parties, shall constitute an "award" by the arbitrators within the meaning of
applicable law and judgment may be entered thereon in any court of competent
jurisdiction.
(vii) This provision shall constitute a written
agreement by Landlord and Tenant to submit any dispute regarding the
determination of Fair Market Value Base Rent to arbitration.
(viii) If any arbitrator appointed hereunder shall
be unwilling or unable, for any reason, to serve, or continue to serve, a
replacement arbitrator shall be appointed in the same manner as the original
arbitrator.
(ix) Each party shall pay the fees and expenses
of the original arbitrator appointed by such party and the fees and expenses of
the third arbitrator, if any, shall be borne equally by the parties.
(x) The arbitration shall be conducted, to the
extent consistent with this Paragraph 36, in accordance with the then prevailing
rules of the American Arbitration Association (or any successor organization)
and in accordance with applicable Georgia law.
(xi) The arbitrators shall render their decision
and award in writing within the time periods set forth herein, and counterpart
copies thereof shall be delivered to each of the parties. In rendering such
decision and award, the arbitrators shall not add to, subtract from, or
otherwise modify the provisions of the Lease. The arbitrators will base this
determination of Fair Market Value Base Rent on the escalation method specified
by Landlord in Landlord's Determination. Judgment may be had on the decision and
award of the arbitrators so rendered in any court of competent jurisdiction.
(k) Time shall be of the essence with respect to the
exercise by Tenant of its rights under the Extension Option granted in this
Paragraph 36.
37. BUSINESS DAYS. The term "Business Day" means Mondays through
Fridays, exclusive of any holidays observed by the Building.
38. AFTER HOURS HVAC. If Tenant requires air-conditioning or
heating for hours or days in addition to the hours and days specified in
Paragraph 5 of this Lease, Landlord shall make reasonable efforts to provide
such additional service after reasonable, prior written request therefor from
Tenant, and Tenant shall reimburse Landlord for the cost of such additional
service, at the hourly rates established from time to time by Landlord for such
services. Such hourly rates shall be based upon Landlord's cost of providing
such services, and shall include a component for Landlord's overhead,
depreciation, maintenance and labor costs in providing such services. Such
hourly rates shall not increase by more than three percent (3%) per annum over
the hourly rate for the preceding calendar year. If any of Landlord's other
tenants served by the equipment providing such additional service to the
Premises request that Landlord simultaneously provide such service to such other
tenants, the cost of Landlord providing such additional and concurrent service
shall be prorated among all of Landlord's tenants requesting such service, on a
reasonable basis, as determined by Landlord. As of the date of this Lease,
Landlord's hourly charge for providing after-hours heating or air-conditioning
service is $40.00 per hour (or part thereof), but such rate is subject to change
from time to time based upon Landlord's actual costs (which may include the
components set forth above) in providing such after-hours service.
39. INTERRUPTION OF SERVICES. In the event of any failure to
furnish, or any stoppage of, the following specified services for a period in
excess of five (5) consecutive Business Days, and if: (a) such interruption is
restricted to the Building and is not a neighborhood blackout; (b) such failure
to furnish or stoppage is caused by the negligence or willful misconduct of
Landlord or by the failure of Landlord to commence and diligently pursue repairs
for which Landlord is responsible under this Lease; (c) results in the Premises
becoming untenantable; and (d) Tenant actually ceases to occupy the Premises as
a result thereof, Tenant shall be entitled to an abatement of Rent which shall
commence on the sixth (6th) Business Day (and shall not be retroactive) and
shall continue the remainder
20
<PAGE> 23
of the period of such failure to furnish or stoppage of such specified services.
As used in this Paragraph 39, the specified services are: electricity, heating,
ventilating and air conditioning, water and elevator service.
40. CONSENT TO ASSIGNMENT OR SUBLEASING. Notwithstanding the
provisions of Paragraph 11 of the Lease, Landlord shall not unreasonably
withhold its consent to an assignment of this Lease in its entirety or to any
subletting of the Premises, provided that:
(a) No Event of Default shall have occurred and be
continuing;
(b) The proposed subtenant or assignee shall have a
financial standing, be of a character, be engaged in a business, and propose to
use the Premises in a manner in keeping with Landlord's then-current standards
in such respects of tenancies in the Building;
(c) The character of the business to be conducted or the
proposed use of the Premises by the proposed subtenant or assignee shall not:
(i) be likely to increase Landlord's operating expenses beyond those which would
be incurred for use by Tenant or for use in accordance with the standards of use
of other tenancies in the Building; (ii) increase the burden on existing
cleaning services or elevators over the burden prior to such proposed subletting
or assignment; or (iii) violate any provision or restrictions herein or in any
other leases in the Project relating to the use or occupancy of the Premises;
(d) The subletting shall be expressly subject to all of
the terms, covenants, conditions and obligations on Tenant's part to be observed
and performed under this Lease and the further condition and restriction that
the sublease or this Lease shall not be assigned, encumbered or otherwise
transferred or the subleased premises further sublet by the subtenant in whole
or in part, or any part thereof suffered or permitted by the subtenant to be
used or occupied by others, without the prior written consent of Landlord in
each instance, which consent may be granted or denied by Landlord in its sole
discretion;
(e) Intentionally Omitted;
(f) Intentionally Omitted;
(g) Any assignee shall agree to assume all of the
obligations of Tenant under this Lease;
(h) The proposed subtenant or assignee shall not be a
federal, state or local government, or an agency or instrumentality thereof, nor
shall it be entitled, directly or indirectly, to diplomatic or sovereign
immunity; and
(i) The proposed subtenant or assignee shall be subject
to service of process in, and the jurisdiction of the courts of, the State of
Georgia.
The foregoing shall in no way limit Landlord's ability: (A) to withhold or delay
its consent for any other reason which is reasonable under the circumstances; or
(B) to terminate this Lease as to the portion of the Premises affected by such
proposed sublease or assignment, as permitted by Paragraph 11(c) of this Lease.
41. ASSIGNMENT OR SUBLEASE TO AFFILIATES. Notwithstanding the
provisions of Paragraph 11, Tenant shall have the right, upon ten (10) days'
prior written notice to Landlord, but without Landlord's consent, to: (a) sublet
all or part of the Premises to any related corporation or entity which controls
Tenant, is controlled by Tenant, or is under common control with Tenant; or (b)
to assign this Lease to a successor corporation into which or with which Tenant
is merged or consolidated or which acquired substantially all of Tenant's assets
and property; provided that: (x) any such assignee or sublessee must be of a
character and reputation, be engaged in a business, and propose to use the
Premises in a manner in keeping with Landlord's then-current standards in such
respect for tenancies in the Building; and (y) with respect to an assignment
under Subparagraph (b), such successor corporation shall assume all of the
obligations and liabilities of Tenant and shall have assets, capitalization and
net worth at least equal to the assets, capitalization and net worth of Tenant
as of the date of this Lease, as determined by generally accepted accounting
principles. Tenant shall provide in its notice to Landlord the information
reasonably required by Landlord to assess compliance with these terms. For the
purpose hereof, "control" shall mean ownership of not less than fifty percent
(50%) of all of the voting stock or legal and equitable interest in such
corporation or entity.
21
<PAGE> 1
EXHIBIT 21.1
List of Subsidiaries
- --------------------
1) name: SynQuest, B.V.
jurisdiction: Netherlands
2) name: SynQuest, S.A.
jurisdiction: France
3) name: SynQuest, Ltd.
jurisdiction: United Kingdom
4) name: SynQuest, GMBH
jurisdiction: Germany
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 23, 1999 (except Note 14, as to which the date
is May 17, 2000) in the Registration Statement on Form S-1 and the related
Prospectus of SynQuest, Inc. filed on or about May 19, 2000.
/s/ Ernst & Young LLP
Atlanta, Georgia
May 17, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SYNQUEST, INC FOR THE TWELVE MONTH PERIOD ENDED JUNE 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 638,213
<SECURITIES> 0
<RECEIVABLES> 9,408,490
<ALLOWANCES> 1,238,000
<INVENTORY> 0
<CURRENT-ASSETS> 9,233,715
<PP&E> 4,445,746
<DEPRECIATION> 2,316,293
<TOTAL-ASSETS> 11,655,755
<CURRENT-LIABILITIES> 31,656,467
<BONDS> 0
0
57,256,365
<COMMON> 14,925
<OTHER-SE> (77,537,803)
<TOTAL-LIABILITY-AND-EQUITY> 11,655,755
<SALES> 0
<TOTAL-REVENUES> 23,281,420
<CGS> 0
<TOTAL-COSTS> 9,884,485
<OTHER-EXPENSES> 29,513,331
<LOSS-PROVISION> 753,000
<INTEREST-EXPENSE> 3,526,242
<INCOME-PRETAX> (19,560,110)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,560,110)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,560,110)
<EPS-BASIC> (15.21)
<EPS-DILUTED> (15.21)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SYNQUEST, INC. FOR THE NINE MONTHS ENDED MARCH 31, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 192,988
<SECURITIES> 0
<RECEIVABLES> 5,418,440
<ALLOWANCES> 1,477,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,458,101
<PP&E> 5,335,111
<DEPRECIATION> 3,132,862
<TOTAL-ASSETS> 6,898,026
<CURRENT-LIABILITIES> 40,112,873
<BONDS> 0
0
60,022,218
<COMMON> 16,275
<OTHER-SE> 93,382,480
<TOTAL-LIABILITY-AND-EQUITY> 6,898,026
<SALES> 0
<TOTAL-REVENUES> 17,150,436
<CGS> 0
<TOTAL-COSTS> 6,284,299
<OTHER-EXPENSES> 22,154,641
<LOSS-PROVISION> 596,000
<INTEREST-EXPENSE> 1,969,944
<INCOME-PRETAX> (13,202,503)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,202,503)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,202,503)
<EPS-BASIC> (10.52)
<EPS-DILUTED> (10.52)
</TABLE>
