<PAGE>
As filed with the Securities and Exchange Commission on September 30, 1999
Registration No. 333-86445
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
RAINMAKER SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
--------------
<TABLE>
<S> <C> <C>
California 5961 33-0442860
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Number) Identification No.)
</TABLE>
--------------
1800 Green Hills Road
Scotts Valley, California 95066
(831) 430-3800
(Address, Including Zip Code and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
--------------
Michael Silton
Chief Executive Officer
RAINMAKER SYSTEMS, INC.
1800 Green Hills Road
Scotts Valley, California 95066
(831) 430-3800
(Name, Address, Including Zip Code and Telephone Number,
Including Area Code, of Agent for Service)
--------------
Copies to:
<TABLE>
<S> <C>
Bruce R. Hallett, Esq. Richard D. Harroch, Esq.
Scott R. Santagata, Esq. Peter Lillevand, Esq.
Ryan S. Hong, Esq. Brett E. Cooper, Esq.
Joo Ryung Kang, Esq. Thomas R. Brida, Esq.
Brobeck, Phleger & Harrison LLP Orrick, Herrington & Sutcliffe LLP
38 Technology Drive Old Federal Reserve Bank Building
Irvine, California 92618 400 Sansome Street
(949) 790-6300 San Francisco, California 94111
(415) 392-1122
</TABLE>
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
--------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, 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. [_]
--------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Company shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting fees, payable in connection with the sale and distribution of the
securities being registered. All amounts are estimated except the Securities
and Exchange Commission and NASD registration fees. All of the expenses below
will be paid by Rainmaker.
<TABLE>
<CAPTION>
Item
----
<S> <C>
Registration fee.................................................... $13,900
NASD filing fee..................................................... 5,500
Nasdaq National Market listing fee.................................. *
Blue sky fees and expenses.......................................... *
Printing and engraving expenses..................................... *
Legal fees and expenses............................................. *
Accounting fees and expenses........................................ *
Transfer Agent and Registrar fees................................... *
Miscellaneous....................................................... *
-------
Total............................................................. $
=======
</TABLE>
- --------
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers.
Under Section 145 of the Delaware General Corporation Law, we can indemnify
our directors and officers against liabilities they may incur in such
capacities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). Our certificate of incorporation will further provide
that we are authorized to indemnify our directors and officers to the fullest
extent permitted by law through the bylaws, agreement, vote of stockholders or
disinterested directors, or otherwise. Our bylaws will provide that we will
indemnify our directors and officers to the fullest extent permitted by law and
require us to advance litigation expenses upon our receipt of an undertaking by
the director or officer to repay such advances if it is ultimately determined
that the director or officer is not entitled to indemnification. Our bylaws
will further provide that rights conferred under such bylaws do not exclude any
other right such persons may have or acquire under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise.
We also have directors' and officers' liability insurance. In addition,
concurrently with this offering, we will enter into agreements to indemnify our
directors and certain of our officers in addition to the indemnification
provided for in the certificate of incorporation and bylaws. These agreements
will, among other things, indemnify our directors and certain of our officers
for certain expenses (including attorneys fees), judgments, fines and
settlement amounts incurred by such person in any action or proceeding,
including any action by or in our right, on account of services by that person
as a director or officer of Rainmaker or as a director or officer of any
subsidiary of Rainmaker, or as a director or officer of any other company or
enterprise that the person provides services to at the request of Rainmaker.
Our certificate of incorporation will provide that, pursuant to Delaware
Law, our directors shall not be liable for monetary damages for breach of the
directors' fiduciary duty of care to Rainmaker and our stockholders. This
provision in the certificate of incorporation does not eliminate the duty of
care, and in appropriate circumstances equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware Law. In
addition, each director will continue to
II-1
<PAGE>
be subject to liability for breach of the director's duty of loyalty to
Rainmaker or our stockholders, for acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law, for actions
leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware Law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
The Underwriting Agreement provides for indemnification by the underwriters
of Rainmaker and its officers and directors, and by Rainmaker of the
underwriters, for certain liabilities arising under the Securities Act or
otherwise.
Item 15. Recent Sales of Unregistered Securities
The following is a summary of transactions by Rainmaker during the past
three years involving sales of our securities that were not registered under
the Securities Act of 1933, as amended:
In March 1994, we issued a warrant to Silicon Valley Bank to purchase 22,750
shares of Series B preferred stock at an exercise price of $1.03 per share in
consideration of a line of credit to borrow funds with an expiration date of
March 1999. We extended the expiration date of this warrant to March 8, 2000 in
consideration of an amendment to the credit facility dated as of April 15,
1998.
On February 12, 1999, we issued 8,536,585 shares of Series C preferred stock
at $1.64 per share for an aggregate price of approximately $14 million to
certain accredited investors.
On February 12, 1999, we issued 5,717,470 shares of Series D preferred stock
to The Santa Cruz Operation, Inc. ("SCO") in exchange for all of the securities
previously held by SCO, including a convertible debenture in the principal
amount of $995,529, warrants to purchase 2,844,370 shares of common stock and
Series A preferred stock convertible into 2,873,100 shares of common stock.
From January 1, 1996 to June 30, 1999, we have granted options to purchase
an aggregate of 4,087,002 shares of common stock to our directors, executive
officers, employees and consultants at exercise prices of $0.06 to $2.50 per
share. As of June 30, 1999, options to purchase 993,134 shares at an weighted
exercise price of $0.02 per share had been exercised.
In April and May 1999, we granted put rights to six existing stockholders to
sell back to us up to 1,164,537 shares of common stock at $1.64 per share. One
stockholder, SCO, subsequently exercised its put right, and we purchased from
SCO 540,642 shares in June 1999 and 540,642 shares in August 1999, at a price
of $1.64 per share.
The sale and issuance of securities in the above transactions were deemed to
be exempt from registration under the Securities Act by virtue of Section 4(2)
or Rule 701 thereof, or Regulation D, as transactions by an issuer not
involving a public offering. Appropriate legends are affixed to the stock
certificates issued in such transactions. Similar legends were imposed in
connection with any subsequent sales of any such securities. All recipients
either received adequate information about Rainmaker or had access, through
employment or other relationships, to such information.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
The following Exhibits are attached hereto and incorporated herein by
reference.
<TABLE>
<C> <S>
1.1 **Form of Underwriting Agreement.
3.1 **Certificate of Incorporation of Rainmaker Systems, Inc. to be filed
with the Delaware Secretary of State in October 1999.
3.2 **Bylaws of Rainmaker Systems, Inc. to be adopted in October 1999.
4.1 **Specimen certificate representing shares of common stock of
Rainmaker Systems, Inc.
4.2 Registration Rights Agreement dated March 8, 1994 between UniDirect
Corporation and Silicon Valley Bank.
4.3 Registration Rights Agreement dated February 12, 1999 among
Rainmaker Systems, Inc., ABS Capital Partners III, L.P., H & Q
Rainmaker Investors, L.P., Hambrecht & Quist California, Hambrecht
& Quist Employee Venture Fund, L.P. II and The Santa Cruz
Operation, Inc.
5.1 **Opinion of Brobeck, Phleger & Harrison LLP.
10.1 **Form of Indemnification Agreement.
10.2 **1999 Stock Incentive Plan.
10.3 **1999 Stock Purchase Plan.
10.4 Amended and Restated Loan and Security Agreement dated May 9, 1997
between UniDirect Corporation and Silicon Valley Bank, as amended
on September 22, 1997, April 15, 1998 and September 14, 1998.
10.5 *1995 Stock Option/Stock Issuance Plan, together with form of Notice
of Grant of Stock Option, Stock Option Agreement, Stock Purchase
Agreement and Stock Issuance Agreement.
10.6 *1998 Stock Option/Stock Issuance Plan, together with form of Notice
of Grant of Stock Option, Stock Option Agreement, Stock Purchase
Agreement and Stock Issuance Agreement.
10.7 Net Lease Agreement dated July 29, 1996 between UniDirect
Corporation and Borland International, Inc., together with
amendments dated February 27, 1997, April 14, 1998 and November 15,
1998.
10.8 Net Lease Agreement dated November 5, 1998 between UniDirect
Corporation and Inprise Corporation.
10.9 Warrant to Purchase Stock dated March 8, 1994 issued to Silicon
Valley Bank, as amended by letter agreement dated April 15, 1998.
10.10 Stock Purchase Agreement dated January 29, 1999 among Rainmaker
Systems, Inc., ABS Capital Partners III, L.P., H & Q Rainmaker
Investors, L.P., Hambrecht & Quist California and Hambrecht & Quist
Employee Venture Fund, L.P. II.
10.11 Exchange Agreement dated January 29, 1999 between Rainmaker Systems,
Inc. and The Santa Cruz Operation, Inc.
10.12 Asset Purchase Agreement dated May 18, 1998 between UniDirect
Corporation and Savoir Technology Group, Inc.
10.13 Master Lease Agreement dated May 5, 1999 between Rainmaker Systems,
Inc. and Celtic Leasing Corp.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.14 Loan and Security Agreement dated October 28, 1997 between UniDirect
Corporation and MetLife Capital Corporation, together with related
agreements dated May 5, 1999.
10.15 Compensation Agreement dated January 1, 1995 between UniDirect
Corporation and Richard Marotta, together with Notice of Grant of
Stock Option and Stock Option Agreement.
10.16 Compensation Agreement dated November 1, 1995 between UniDirect
Corporation and Richard Marotta, together with Notice of Grant of
Stock Option and Stock Option Agreement.
10.17 Separation Agreement and Release dated September 30, 1997 between
UniDirect Corporation and Bernard Jubb, together with Amendment No.
1 dated January 27, 1997 and the Promissory Note and Security
Agreement dated February 5, 1999.
10.18 Separation Agreement and Release dated April 8, 1999 between
Rainmaker Systems, Inc. and Chris Sterbenc.
10.19 +Distributor Agreement dated January 24, 1995 between UniDirect
Corporation and The Santa Cruz Operation, Inc., together with
amendments dated April 8, 1996, November 5, 1997, March 16, 1999
and May 17, 1999.
10.20 +Sun Software Subscription Services Outsourcing and Distribution
Agreement dated March 18, 1997 between UniDirect Corporation and
SunSoft, Inc., together with amendments dated May 20, 1997, June
16, 1997, April 30, 1999, May 19, 1999 and Assignment dated August
25, 1998.
10.21 +Outsourcing Services Agreement dated July 21, 1997 between UniDirect
Corporation and FTP Software, Inc., together with amendments dated
September 12, 1997, October 1, 1997, November 11, 1997, January 21,
1998, January 28, 1998, May 26, 1998 and August 1998.
10.22 +Outsource Services Agreement dated March 26, 1999 between Rainmaker
Systems, Inc. and Novell, Inc.
23.1 *Consent of Ernst & Young LLP.
23.2 **Consent of Brobeck, Phleger & Harrison LLP (contained in Exhibit
5.1).
24.1 Power of Attorney (contained on the signature page hereof).
27.1 *Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment is being sought with respect to certain portions of
this agreement. Such portions have been omitted from this filing and have
been filed separately with the Securities and Exchange Commission.
(b) Financial Statement Schedules
The following financial statement schedule for the three years in the period
ended December 31, 1998 and for the six months ended June 30, 1999 should be
read in conjunction with the financial statements of Rainmaker Systems, Inc.
filed as part of this Registration Statement.
. Schedule II--Valuation and qualifying accounts
Schedules other than that listed above have been omitted because the
information required to be set forth therein is not applicable or is shown in
the financial statements or notes thereto.
II-4
<PAGE>
Item 17. Undertakings
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-5
<PAGE>
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 Palo Alto, State of
California, on the 30 day of September, 1999.
RAINMAKER SYSTEMS, INC.
By: /s/ Michael Silton
_________________________________
Michael Silton,
Chairman of the Board, President
and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, the undersigned hereby constitute and
appoint Michael Silton his true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, or any related
registration statement filed pursuant to Rule 462(b) under the Securities Act
of 1933, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite or necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael Silton
____________________________________ Chairman of the Board, September 30, 1999
Michael Silton President and Chief
Executive Officer
(principal executive
officer)
* Secretary and Vice September 30, 1999
____________________________________ President, Finance
Frank Orasin (principal financial and
accounting officer)
/s/ Robert Leff Director September 30, 1999
____________________________________
Robert Leff
Director
____________________________________
Alok Mohan
* Director September 30, 1999
____________________________________
Peter Silton
* Director September 30, 1999
____________________________________
Andrew Sheehan
*By: /s/ Michael Silton
___________________________
Michael Silton,
attorney-in-fact
</TABLE>
II-6
<PAGE>
Schedule II-Valuation and Qualifying Accounts
A schedule of the allowance for sales returns and doubtful accounts is
presented below (in thousands):
<TABLE>
<CAPTION>
Balance Additions
at Charged Write-offs Balance at
Beginning to Costs and End
Description of Period and Expenses Recoveries of Period
----------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Allowance for sales returns and
doubtful accounts:
Six months ended June 30, 1999... $314 $ 80 $ 28 $366
Year ended December 31, 1998..... $298 $286 $270 $314
Year ended December 31, 1997..... $156 $338 $196 $298
Year ended December 31, 1996..... $145 $278 $267 $156
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 **Form of Underwriting Agreement.
3.1 **Certificate of Incorporation of Rainmaker Systems, Inc. to be filed
with the Delaware Secretary of State in October 1999.
3.2 **Bylaws of Rainmaker Systems, Inc. to be adopted in October 1999.
4.1 **Specimen certificate representing shares of common stock of
Rainmaker Systems, Inc.
4.2 Registration Rights Agreement dated March 8, 1994 between UniDirect
Corporation and Silicon Valley Bank.
4.3 Registration Rights Agreement dated February 12, 1999 among Rainmaker
Systems, Inc., ABS Capital Partners III, L.P., H & Q Rainmaker
Investors, L.P., Hambrecht & Quist California, Hambrecht & Quist
Employee Venture Fund, L.P. II and The Santa Cruz Operation, Inc.
5.1 **Opinion of Brobeck, Phleger & Harrison LLP.
10.1 **Form of Indemnification Agreement.
10.2 **1999 Stock Incentive Plan.
10.3 **1999 Stock Purchase Plan.
10.4 *Amended and Restated Loan and Security Agreement dated May 9, 1997
between UniDirect Corporation and Silicon Valley Bank, as amended by
letter agreement dated April 15, 1998.
10.5 *1995 Stock Option/Stock Issuance Plan, together with form of Notice
of Grant of Stock Option, Stock Option Agreement, Stock Purchase
Agreement and Stock Issuance Agreement.
10.6 *1998 Stock Option/Stock Issuance Plan, together with form of Notice
of Grant of Stock Option, Stock Option Agreement, Stock Purchase
Agreement and Stock Issuance Agreement.
10.7 Net Lease Agreement dated July 29, 1996 between UniDirect Corporation
and Borland International, Inc., together with amendments dated
February 27, 1997, April 14, 1998 and November 15, 1998.
10.8 Net Lease Agreement dated November 5, 1998 between UniDirect
Corporation and Inprise Corporation.
10.9 Warrant to Purchase Stock dated March 8, 1994 issued to Silicon Valley
Bank, as amended by letter agreement dated April 15, 1998.
10.10 Stock Purchase Agreement dated January 29, 1999 among Rainmaker
Systems, Inc., ABS Capital Partners III, L.P., H & Q Rainmaker
Investors, L.P., Hambrecht & Quist California and Hambrecht & Quist
Employee Venture Fund, L.P. II.
10.11 Exchange Agreement dated January 29, 1999 between Rainmaker Systems,
Inc. and The Santa Cruz Operation, Inc.
10.12 Asset Purchase Agreement dated May 18, 1998 between UniDirect
Corporation and Savoir Technology Group, Inc.
10.13 Master Lease Agreement dated May 5, 1999 between Rainmaker Systems,
Inc. and Celtic Leasing Corp.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.14 Loan and Security Agreement dated October 28, 1997 between UniDirect
Corporation and MetLife Capital Corporation.
10.15 Compensation Agreement dated January 1, 1995 between UniDirect
Corporation and Richard Marotta, together with Notice of Grant of
Stock Option and Stock Option Agreement.
10.16 Compensation Agreement dated November 1, 1995 between UniDirect
Corporation and Richard Marotta, together with Notice of Grant of
Stock Option and Stock Option Agreement.
10.17 Separation Agreement and Release dated September 30, 1997 between
UniDirect Corporation and Bernard Jubb, together with Amendment No. 1
to Separation Agreement and Release dated January 27, 1997 and the
Promissory Note and Security Agreement dated February 5, 1999.
10.18 Separation Agreement and Release dated April 8, 1999 between
Rainmaker Systems, Inc. and Chris Sterbenc.
10.19 +Distributor Agreement dated January 24, 1995 between UniDirect
Corporation and The Santa Cruz Operation, Inc., together with
amendments dated April 8, 1996, November 5, 1997, March 16, 1999
and May 17, 1999.
10.20 +Sun Software Subscription Services Outsourcing and Distribution
Agreement dated March 18, 1997 between UniDirect Corporation and
SunSoft, Inc., together with amendments dated May 20, 1997, June
16, 1997, April 30, 1999, May 19, 1999 and Assignment dated August
25, 1998.
10.21 +Outsourcing Services Agreement dated July 21, 1997 between UniDirect
Corporation and FTP Software, Inc., together with amendments dated
September 12, 1997, October 1, 1997, November 11, 1997, January 21,
1998, January 28, 1998, May 26, 1998 and August 1998.
10.22 +Outsource Services Agreement dated March 26, 1999 between Rainmaker
Systems, Inc. and Novell, Inc.
23.1 *Consent of Ernst & Young LLP.
23.2 **Consent of Brobeck, Phleger & Harrison LLP (contained in Exhibit
5.1).
24.1 Power of Attorney (contained on the signature page hereof).
27.1 *Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment is being sought with respect to certain portions of
this agreement. Such portions have been omitted from this filing and have
been filed separately with the Securities and Exchange Commission.
(b) Financial Statement Schedules
The following financial statement schedule for the three years in the period
ended December 31, 1998 and for the six months ended June 30, 1999 should be
read in conjunction with the financial statements of Rainmaker Systems, Inc.
filed as part of this Registration Statement.
. Schedule II--Valuation and qualifying accounts
Schedules other than that listed above have been omitted because the
information required to be set forth therein is not applicable or is shown in
the financial statements or notes thereto.
<PAGE>
EXHIBIT 4.2
________________________________________________________
Silicon Valley Bank
Registration Rights Agreement
Issuer: UniDirect Corporation
Address: One Venture, Suite 150
Irvine, California 92718
Date: March 8, 1994
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of the above date by and
between SILICON VALLEY BANK ("Purchaser"), whose address is 3000 Lakeside Drive,
Santa Clara, California 95054-2895, and the above Company, whose address is set
forth above.
RECITALS
A. Concurrently with the execution of this Agreement, the Purchaser is
purchasing from the Company a Warrant to Purchase Stock (the "Warrant") pursuant
to which Purchaser has the right to acquire from the Company the Shares (as
defined in the Warrant).
B. By this Agreement, the Purchaser and the Company desire to set forth the
registration rights of the Shares all as provided herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of effectiveness of such
registration statement or document.
(b) The term "Registrable Securities" means (i) the Shares (if Common Stock)
or all shares of Common Stock of the Company issuable or issued upon conversion
of the Shares and (ii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as (a dividend or other distribution with respect to, or in exchange for
or in replacement of, any stock referred to in (i).
(c) The terms "Holder" or "Holders" means the Purchaser or qualifying
transferees under subsection 1.8 hereof who hold Registrable Securities.
(d) The term "SEC" means the Securities and Exchange Commission.
1.2 Company Registration.
(a) Registration. If at any time or from time to time, the company shall
determine to register any of its securities, for its own account or the account
of any of its shareholders, other than a registration on Form S-1 or S-8
relating solely to employee stock option or purchase plans, or a registration on
Form S-4 relating solely to an SEC Rule 145 transaction, or a registration on
any other form (other than Form S-1, S-2, S-3 or S-18, or their successor forms)
or any successor to such forms, which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
(i) promptly give to each Holder written notice thereof (which shall include a
list of the jurisdictions in which the Company intends to attempt to qualify
such securities under the applicable blue sky or other state securities laws);
and
(ii) include in such registration (and compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 30 days after receipt of such written notice from the
Company, by any Holder or Holders, except as set forth in subsection 1.2(b)
below.
(b) Underwriting. If the registration of which the Company gives notice is for
a registered public offering involving an underwriting, the Company shall so
advise
-1-
<PAGE>
Silicon Valley Bank Registration Rights Agreement
__________________________________________________________________
the Holders as a part of the written notice given pursuant to subsection
1.2(a)(i). In such event the right of any Holder to registration pursuant to
this subsection 1.2 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
company and the other shareholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
1.3 Expenses of Registration. All expenses incurred in connection with any
registration, qualification or compliance pursuant to this Section 1 including
without limitation, all registration, filing and qualification fees, printing
expenses, fees and disbursements of counsel for the Company and expenses of any
special audits incidental to or required by such registration, shall be borne by
the Company except the Company shall not be required to pay underwriters' fees,
discounts or commissions relating to Registrable Securities. All expenses of any
registered offering not otherwise borne by the Company shall be borne pro rata
among the Holders participating in the offering and the Company.
1.4 Registration Procedures. In the case of each registration, qualification
or compliance effected by the Company pursuant to this Registration Rights
Agreement, the Company will keep each Holder participating therein advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. Except as otherwise provided in subsection
1.3, at its expense the Company will:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to 120 days.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
with the managing underwriting of such offering. Each Holder participating in
such underwriting shall also enter into and perform its obligations under such
an agreement.
(f) Notify each Holder of Registrable Securities covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act or the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
1.5 Indemnification
(a) The Company will indemnify each Holder of Registrable Securities and each
of its officers, directors and partners, and each person controlling such
Holder, with respect to which such registration, qualification or compliance has
been effected pursuant to this Rights Agreement and each underwriter, if any,
and each person who controls any underwriter of the Registrable Securities held
by or issuable to such Holder, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of material fact contained in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, or any violation or
alleged violation by the Company of the Securities Act, the Securities Exchange
Act of 1934, as amended ("Exchange Act") or any state securities law applicable
to the Company or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any such state law and relating to action or inaction
required of the Company in connection with any such registration, qualification
of compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, within a
reasonable amount of time after incurred for any reasonable legal and any other
expenses incurred in connection with investigating, defending or setting any
such claim, loss, damage, liability or action; provided, however that the
indemnity agreement contained in this subsection 1.5(a) shall not apply to
amounts paid in settlement of any such claim, loss, damage, liability or
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<PAGE>
Silicon Valley Bank Registration Rights Agreement
__________________________________________________________________
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld); and provided further, that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
instrument duly executed by such Holder or underwriter specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by or issuable to such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company within the meaning of the Securities Act, and each other such
Holder, each of its officers, directors and partners and each person
controlling such Holder, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Holders, such directors,
officers, partners, persons or underwriters for any reasonable legal or any
other expenses incurred in connection with investigating, defending or settling
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder specifically for use therein; provided, however,
that the indemnity agreement contained in this subsection 1.5(b) shall not apply
to amounts paid in settlement of any such claim, loss, damage, liability or
action if such settlement is effected without the consent of the Holder (which
consent shall not be unreasonably withheld); and provided further, that the
total amount for which any Holder shall be liable under this subsection 1.5(b)
shall not in any event exceed the aggregate proceeds received by such Holder
from the sale of Registrable Securities held by such Holder in such
registration.
(c) Each party entitled to indemnification under this subsection 1.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense; and provided further, that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless such failure resulted in prejudice to the
Indemnifying Party; and provided further, that an Indemnified Party (together
with all other Indemnified Parties which may be represented without conflict by
one counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
1.6 Information by Holder. Any Holder or Holders of Registrable Securities
included in any registration shall promptly furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to herein.
1.7 Rule 144 Reporting. With a view to making available to Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees at all times to:
(a) make and keep public information available, as those terms are understood
and defined in SEC Rule 144, after 90 days after the effective date of the first
registration filed by the Company for an offering of its securities to the
general public;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements); and
(c) so long as a Holder owns any Registrable Securities, to furnish to such
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by the
Company as the Holder may reasonably request in complying with any rule or
regulation of the SEC allowing the Holder to sell any such securities without
registration.
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Silicon Valley Bank Registration Rights Agreement
__________________________________________________________________
1.8 Transfer of Registration Rights. Holders' rights to cause the Company to
register their securities and keep information available, granted to them by the
Company under subsections 1.2 and 1.7 may be assigned to a transferee or
assignee of a Holder's Registrable Securities not sold to the public, provided,
that the Company is given written notice by such Holder at the time of or within
a reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned. The Company may prohibit the transfer of
any Holders' rights under this subsection 1.8 to any proposed transferee or
assignee who the Company reasonably believes is a competitor of the Company.
2. General
2.1 Waivers and Amendments. With the written consent of the record or
beneficial holders of at least a majority of the Registrable Securities, the
obligations of the Company and the rights of the Holders of the Registrable
Securities under this agreement may be waived (either generally or in a
particular instance, either retroactively to prospectively, and either for a
specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
provided, however, that no such modification, amendment or waiver shall reduce
the aforesaid percentage of Registrable Securities. Upon the effectuation of
each such waiver, consent, agreement of amendment or modification, the Company
shall promptly give written notice thereof to the record holders of the
Registrable Securities who have not previously consented thereto in writing.
This Agreement or any provision hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought, except to
the extent provided in this subsection 2.1.
2.2 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within
California.
2.3 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
2.4 Entire Agreement. Except as set forth below, this Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof.
2.5 Notices. Etc. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first class mail, postage
prepaid, certified or registered mail, return receipt requested, addressed (a)
if to Holder, at such Holder's address as set forth in the heading to this
Agreement, or at such other address as Holder shall have furnished to the
Company in writing, or (b) if to the Company, at the Company's address set forth
in the heading to this Agreement, or at such other address as the Company shall
have furnished to the Holder in writing.
2.6 Severability. In case any provision of this Agreement shall be invalid,
illegal, or unenforceable, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
2.7 Titles and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
2.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Company
UNIDIRECT CORPORATION
/s/ illegible
By____________________________
President or Vice President
/s/ illegible
By_____________________________
Secretary or Ass't Secretary
Purchaser:
SILICON VALLEY BANK
/s/ illegible
By____________________________
VP
Title_________________________
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<PAGE>
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
BETWEEN
RAINMAKER SYSTEMS, INC.
ABS CAPITAL PARTNERS III, L.P.
H&Q RAINMAKER INVESTORS, L.P.
HAMBRECHT & QUIST CALIFORNIA
HAMBRECHT & QUIST EMPLOYEE VENTURE FUND, L.P. II
AND
THE SANTA CRUZ OPERATION, INC.
FEBRUARY 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. REGISTRATION RIGHTS.............................................. 2
1.1. Demand Registration Rights of Initiating Holders.......... 2
1.1.1. Request........................................... 2
1.1.2. Demand Procedures................................. 2
1.1.3. Delay by Company.................................. 3
1.1.4. Reduction......................................... 3
1.1.5. Withdrawal........................................ 3
1.2. Piggyback Registration Rights............................. 4
1.2.1. Request........................................... 4
1.2.2. Reduction......................................... 4
1.3. Registration on Form S-3.................................. 5
1.4. Registration Procedures................................... 5
1.5. Holdback Agreement........................................ 7
1.6. Registration Expenses..................................... 8
1.6.1. Holder Expenses................................... 8
1.6.2. Company Expenses.................................. 8
1.6.3. Indemnity and Contribution........................ 8
1.7. Grant and Transfer of Registration Rights................. 10
1.8. Information from Holder................................... 11
2. DEFINITIONS...................................................... 11
3. MISCELLANEOUS.................................................... 12
3.1. Entire Agreement; Amendment............................... 12
3.2. Waiver.................................................... 12
3.3. No Third Party Beneficiaries.............................. 13
3.4. Binding Effect............................................ 13
3.5. Governing Law............................................. 13
3.6. Notices................................................... 13
3.7. Execution in Counterparts................................. 15
</TABLE>
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of February __, 1999 by and between Rainmaker Systems, Inc., a California
corporation (the "Company"), ABS Capital Partners II, L.P., a Delaware limited
partnership ("ABS"), H&Q Rainmaker Investors, L.P., Hambrecht & Quist California
and Hambrecht & Quist Employee Venture Fund, L.P. II ("H&Q Entities") and The
Santa Cruz Operation, Inc. a California corporation ("SCO," and together with
ABS and the H&Q Entities, the initial "Holders").
WHEREAS, on the date hereof, ABS and the H&Q Entities have acquired an
aggregate of 8,536,585 shares of Series C Convertible Participating Preferred
Stock, $0.001 par value (the "Series C Preferred") from the Company pursuant to
a Stock Purchase Agreement among the Company, ABS and the H&Q Entities (the
"Purchase Agreement");
WHEREAS, the Company and SCO had previously entered into a
Registration Rights Agreement dated January 24, 1995 (the "1995 Registration
Rights Agreement"), which agreement provided SCO with certain registration
rights in respect of shares issuable upon conversion of Series A Preferred
Stock, par value $0.001 per share and Subordinated Convertible Debentures;
WHEREAS, on the date hereof, SCO has exchanged all of its shares of
Series A Preferred, Subordinated Convertible Debentures and related Warrants for
an aggregate of 5,717,470 shares of the Company's Series D Convertible
Participating Preferred Stock, par value $0.001 per share (the "Series D
Preferred") pursuant to an Exchange Agreement dated the date hereof;
WHEREAS, it is a condition to the obligations of ABS and the H&Q
Entities under the Purchase Agreement that, in connection with the Exchange
Agreement, SCO and the Company terminate the 1995 Registration Rights
Agreement and enter into this Agreement; and
WHEREAS, the Company, ABS, the H&Q Entities and SCO desire to enter
into this Agreement in order to provide ABS, the H&Q Entities and SCO with
certain rights with respect to the registration of the Common Stock of the
Company issuable upon conversion of the Series C Preferred and the Series D
Preferred; and
WHEREAS capitalized terms used in this Agreement shall have the
meanings ascribed to them in Article 2 hereof.
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto agree
as follows:
<PAGE>
1. REGISTRATION RIGHTS
1.1. Demand Registration Rights of Initiating Holders
1.1.1. Request
At any time after the earlier of (i) February __, 2001 or (ii) six
months following the closing of the Company's IPO, the Initiating Holders may
request registration for sale under the Act of all or part of the Registrable
Securities then held by them, provided that such requested registration relates
to a number of shares of Registrable Securities which represents at least 25% of
the total number of shares of Registrable Securities (or a lesser percentage if
the anticipated aggregate offering price would exceed $10 million), and upon
such request the Company will promptly take the actions specified in Section
1.1.2.
1.1.2. Demand Procedures
Within 10 Business Days after receipt by the Company of a registration
request under Section 1.1.1 (which request shall specify the number of shares
proposed to be registered and sold and the manner in which such sale is proposed
to be effected), the Company shall promptly give written notice to all other
Holders of the proposed demand registration, and such other Holders shall have
the right to join in the proposed registration and sale, upon written request to
the Company (which request shall specify the number of shares proposed to be
registered and sold) within five Business Days after receipt of such notice from
the Company. The Company shall thereafter, as expeditiously as practicable (i)
file with the SEC under the Act a registration statement on the appropriate form
concerning all Registrable Securities specified in the demand request and all
Registrable Securities with respect to which the Company has received the
written request from the other Holders and (ii) use its reasonable best efforts
to cause the registration statement to be declared effective. At the request of
the Initiating Holders requesting registration, the Company shall cause each
offering pursuant to Section 1.1.1 to be managed, on a firm commitment basis, by
a recognized regional or national underwriter selected by the Initiating Holders
and approved by the Company, such approval not to be unreasonably withheld. All
holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form. The Company shall not be
obligated to effect more than three registrations requested by Initiating
Holders under Section 1.1.1, provided, however, that each such request shall be
deemed satisfied only when a registration statement covering all Registrable
Securities specified in notices received as aforesaid, for sale in accordance
with the method of disposition specified by the Initiating Holders, has become
effective.
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<PAGE>
1.1.3. Delay by Company
The Company shall not be required to effect a demand registration
under the Act pursuant to Section 1.1.1 above if (i) the Company receives a
request for registration under Section 1.1.1 less than 90 days preceding the
anticipated effective date of a proposed underwritten public offering of
securities of the Company approved by the Company's Board of Directors prior to
the Company's receipt of the request; (ii) within 120 days prior to any such
request for registration, a registration of securities of the Company has been
effected in which the Initiating Holders had the right to participate pursuant
to this Section 1.1 or Section 1.3 hereof, or (iii) the Board of Directors of
the Company reasonably determines in good faith that effecting such a demand
registration at such time would have a material adverse effect upon a proposed
sale of all (or substantially all) of the assets of the Company, or a merger,
reorganization, recapitalization, or similar transaction materially affecting
the capital structure or equity ownership of the Company, or would otherwise be
seriously detrimental to the Company because the Company was then in the process
of raising capital in the public or private markets; provided, however, that the
Company may only delay a demand registration pursuant to this Section 1.1.3 for
a period not exceeding 120 days (or until such earlier time as such transaction
is consummated or no longer proposed) and may only defer any such filing
pursuant to this Section 1.1.3 once per calendar year. The Company shall
promptly notify in writing the Holders requesting registration of any decision
not to effect any such request for registration pursuant to this Section 1.1.3,
which notice shall set forth in reasonable detail the reason for such decision
and shall include an undertaking by the Company promptly to notify such Holders
as soon as a demand registration may be effected.
1.1.4. Reduction
If a demand registration is an underwritten registration and the
managing underwriters advise the Company and the Holders participating in the
demand registration in writing that in their opinion the number of shares of
Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, then the amount of such shares that may be
included in such registration shall first be allocated pro rata among all of the
Holders joining in the registration under Section 1.1 in proportion to the
number of shares of Registrable Securities owned by them and then to the Company
or any other party seeking to participate in the offering.
1.1.5. Withdrawal
Holders participating in any demand registration pursuant to this
Section 1.1 may withdraw at any time before a registration statement is declared
effective, and the Company may withdraw such registration statement if no
Registrable Securities are then proposed to be included (and if withdrawn by the
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<PAGE>
Company the Holders shall not be deemed to have requested a demand registration
for purposes of Section 1.1.1 hereof). If the Company withdraws a registration
statement under this Section 1.1.5 in respect of a registration for which the
Company would otherwise be required to pay expenses under Section 1.6.2 hereof,
the Holders that shall have withdrawn shall reimburse the Company for all
expenses of such registration in proportion to the number of shares each such
withdrawing Holder shall have requested to be registered.
1.2. Piggyback Registration Rights
1.2.1. Request
If at any time or times after the date of this Agreement the Company
proposes to make a registered public offering of any of its securities under the
Act (whether to be sold by it or by one or more selling stockholders), other
than an offering pursuant to a demand registration under Section 1.1.1 or
Section 1.3 hereof or an offering registered on Form S-8 or Form S-4, or
successor forms relating to employee stock plans and business combinations, the
Company shall, not less than 20 days prior to the proposed filing date of the
registration form, give written notice of the proposed registration to all
Holders specifying in reasonable detail the proposed transaction to be covered
by the registration statement, and at the written request of any Holder
delivered to the Company within 20 days after giving such notice, shall include
in such registration and offering, and in any underwriting of such offering, all
Registrable Securities as may have been designated in the Holder's request. The
Company shall have no obligation to include shares of Common Stock owned by any
Holder in a registration statement pursuant to this Section 1.2, unless and
until such Holder (a) in connection with any underwritten offering, agrees to
enter into an underwriting agreement, a custody agreement and power of attorney
and any other customary documents required in an underwritten offering all in
customary form and containing customary provisions (but not requiring any Holder
to provide indemnification or contribution more extensive than is set forth in
Section 1.6.3 hereof) and (b) shall have furnished the Company with all
information and statements about or pertaining to such Holder in such reasonable
detail and on such timely basis as is reasonably deemed by the Company to be
legally required with respect to the preparation of the registration statement.
1.2.2. Reduction
If a registration in which any Holder has the right to participate
pursuant to this Section 1.2 is an underwritten registration, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, the Company shall include in such
registration (i) first, the securities of the Company proposed to be sold by the
Company, (ii) second, the
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<PAGE>
shares proposed to be sold by Holders exercising rights under Section 1.2.1,
allocated pro rata among such Holders in proportion to the number of Registrable
Securities owned by them and (iii) third, by any other stockholders proposing to
sell shares of Common Stock pursuant to such registration.
1.3. Registration on Form S-3
Subject to the limitations set forth in Section 1.1.3, if at any time
the Company is eligible to use Form S-3 (or any successor form) for secondary
sales any Holder may request (by written notice to the Company stating the
number of Registrable Securities proposed to be sold and the intended method of
disposition) that the Company file a registration statement on Form S-3 (or any
successor form) for a public sale of all or any portion of the Registrable
Securities beneficially owned by it (which may include a "shelf" registration
under Rule 415 under the Act, or any successor rule), provided that the
reasonably anticipated aggregate price to the public of such Registrable
Securities shall be at least $5 million. Upon receiving such request, the
Company shall use its reasonable best efforts to promptly file a registration
statement on Form S-3 (or any successor form) to register under the Act for
public sale in accordance with the method of disposition specified in such
request, the number of shares of Registrable Securities specified in such
request and shall otherwise carry out the actions specified in Section 1.1.2 and
1.4. Except for the minimum proposed offering size of $5 million and the
limitations set forth in Section 1.1.3, there shall be no limitation on the
number of registrations that can be requested by Holders under this Section 1.3.
1.4. Registration Procedures
Whenever any Holder has requested that any shares of Common Stock be
registered pursuant to Sections 1.1, 1.2 or 1.3 hereof, the Company shall, as
expeditiously as reasonably possible:
(1) prepare and file with the SEC a registration statement with
respect to such shares and use its reasonable best efforts to cause such
registration statement to become effective as soon as reasonably practicable
thereafter (provided that before filing a registration statement or prospectus
or any amendments or supplements thereto, the Company shall furnish counsel for
such Holder with copies of all such documents proposed to be filed);
(2) prepare and file with the SEC such amendments and supplements to
such registration statement and prospectus used in connection therewith as may
be necessary to keep such registration statement effective for a period of not
less than 90 days (2 years in the case of a registration pursuant to Section 1.3
hereof) or until such Holder has completed the distribution described in such
registration statement, whichever occurs first;
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<PAGE>
(3) furnish to such Holder such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus), and such
other documents as such Holder may reasonably request;
(4) use its reasonable best efforts to register or qualify such
shares under such other securities or blue sky laws of such jurisdictions as
such Holder requests (and to maintain such registrations and qualifications
effective for a period of 90 days (2 years in the case of a registration
pursuant to Section 1.3 hereof) or until such Holder has completed the
distribution of such shares, whichever occurs first), and to do any and all
other acts and things which may be necessary or advisable to enable such Holder
to consummate the disposition in such jurisdictions of such shares (provided
that the Company will not be required to (i) qualify generally to do business in
any jurisdiction where it would not be required but for this subsection (4),
(ii) subject itself to taxation in any such jurisdiction, or (iii) file any
general consent to service of process in any such jurisdiction); provided that,
notwithstanding anything to the contrary in this Agreement with respect to the
bearing of expenses, if any such jurisdiction shall require that expenses
incurred in connection with the qualification of such shares in that
jurisdiction be borne in part or full by such Holder, then such Holder shall pay
such expenses to the extent required by such jurisdiction;
(5) notify such Holder, at any time when a prospectus relating
thereto is required to be delivered under the Act within the period that the
Company is required to keep the registration statement effective, of the
happening of any event as a result of which the prospectus included in any such
registration statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading, and promptly
prepare, file and furnish to the Holder a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such shares,
such prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or, in light of the
circumstances then existing, necessary to make the statements therein not
misleading;
(6) cause all such shares to be listed on securities exchanges, if
any, on which similar securities issued by the Company are then listed (or if
not then listed, on such exchanges as are requested by a majority of the
participating Holders);
(7) provide a transfer agent and registrar for all such shares not
later than the effective date of such registration statement;
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<PAGE>
(8) enter into such customary agreements and take all such other
actions as such Holder reasonably requests (and subject to its reasonable
approval) in order to expedite or facilitate the disposition of such shares;
(9) make available for inspection by such Holder, by any underwriter
participating in any distribution pursuant to such registration statement, and
by any attorney, accountant or other agent retained by such Holder or by any
such underwriter, all financial and other records, pertinent corporate
documents, and properties (other than confidential intellectual property) of the
Company; and
(10) in connection with an underwritten offering pursuant to a
registration statement filed pursuant to Section 1.1 hereof, enter into an
underwriting agreement in customary form and containing customary provisions,
including provisions for indemnification of underwriters and contribution, if so
requested by any underwriter.
1.5. Holdback Agreement
(a) Notwithstanding anything in this Agreement to the contrary, if
after any registration statement to which the rights hereunder apply becomes
effective (and prior to completion of any sales thereunder), the Board of
Directors determines in good faith that the failure of the Company to (i)
suspend sales of stock under the registration statement or (ii) amend or
supplement the registration statement, would have a material adverse effect on
the Company, the Company shall so notify each Holder participating in such
registration and each Holder shall suspend any further sales under such
registration statement until the Company advises the Holder that the
registration statement has been amended or that conditions no longer exist which
would require such suspension, provided that the Company may impose any such
suspension for no more than 30 days and no more than 2 times during any twelve
month period.
(b) In the event that the Company effects a registration of any
securities under the Act in an underwritten public offering, each Holder agrees
not to effect any sale, transfer, disposition or distribution, including any
sale pursuant to Rule 144 under the Act, of any Equity Securities (except as
part of such offering) during the 180-day period commencing with the effective
date of the registration statement for the IPO and the 90-day period commencing
with the effective date of the registration statement for any subsequent public
offering, provided that all officers, directors and holders of 5% or more of the
Company's outstanding voting securities enter into agreements providing for
similar restrictions on sales.
-7-
<PAGE>
1.6. Registration Expenses
1.6.1. Holder Expenses
If, pursuant to Sections 1.1, 1.2 or 1.3 hereof, Registrable
Securities are included in a registration statement, then the Holder thereof
shall pay all transfer taxes, if any, relating to the sale of its shares, and
any underwriting discounts or commissions or the equivalent thereof applicable
to the sale of its shares.
1.6.2. Company Expenses
Except for the fees and expenses specified in Section 1.6.1 hereof and
except as provided below in this Section 1.6.2, the Company shall pay all
expenses incident to the registration of shares by the Company and any Holders
pursuant to Sections 1.1, 1.2 or 1.3 hereof, and to the Company's performance of
or compliance with this Agreement, including, without limitation, all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, underwriting discounts, fees and expenses (other than any
Holder's portion of any underwriting discounts or commissions or the equivalent
thereof), printing expenses, messenger and delivery expenses, and fees and
expenses of counsel for the Company and a single counsel for all Holders selling
shares (the fees of such counsel not to exceed $20,000) and all independent
certified public accountants and other persons retained by the Company.
1.6.3. Indenmity and Contribution
(a) In the event that any shares owned by a Holder are proposed to be
offered by means of a registration statement pursuant to Section 1.1, 1.2 or 1.3
hereof, to the extent permitted by law, the Company agrees to indemnify and hold
harmless such Holder, any underwriter participating in such offering, each
officer, partner, manager and director of such person, each person, if any, who
controls or may control such Holder or underwriter within the meaning of the Act
and each representative of any Holder serving on the Board of Directors of the
Company (such Holder or underwriter, its officers, partners, managers directors
and representatives, and any such other persons being hereinafter referred to
individually as an "Investor Indemnified Person" and collectively as "Investor
Indemnified Persons") from and against all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs, and expenses,
including, without limitation, interest, penalties, and attorneys' fees and
disbursements, asserted against, resulting to, imposed upon or incurred by such
Investor Indemnified Person, directly or indirectly (hereinafter referred to in
this Section 1.6.3 in the singular as a "claim" and in the plural as "claims"),
based upon, arising out of or resulting from any breach of representation or
warranty made by the Company in any underwriting agreement or any untrue
statement of a material
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<PAGE>
fact contained in the registration statement or any omission to state therein a
material fact necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
claim is based upon, arises out of or results from information furnished to the
Company in writing by such Investor Indemnified Person for use in connection
with the registration statement.
(b) In the event that any shares owned by a Holder are proposed to be
offered by means of a registration statement pursuant to Sections 1.1, 1.2 or
1.3 hereof, to the extent permitted by law, each such Holder agrees to indemnify
and hold harmless the Company any underwriter participating in such offering,
and each person, if any, who controls or may control the Company or such
underwriter within the meaning of the Act (the Company, such underwriter, and
any such other persons also being hereinafter referred to individually as a
"Company Indemnified Person" and collectively as "Company Indemnified Persons")
from and against all claims based upon, arising out of or resulting from any
untrue statement of a material fact contained in the registration statement or
any omission to state therein a material fact necessary in order to make the
statement made therein, in the light of the circumstances under which they were
made, not misleading, but only to the extent that such claim is based upon,
arises out of or results from information furnished to the Company in writing by
such Holder for use in connection with the registration statement; provided,
however, that a Holder shall be under no obligation to indemnify or hold
harmless any Company Indemnified Persons with respect to any amount in excess of
the net cash proceeds paid to such Holder in connection with any sales of
securities effected under such registration statement.
(c) The indemnification provisions set forth herein shall be in
addition to any liability the Company or any Holder may otherwise have to the
Investor Indemnified Persons or Company Indemnified Persons. The Company
Indemnified Persons and the Investor Indemnified Persons are hereinafter
referred to as Indemnified Persons. Promptly after receiving notice of any claim
in respect of which an Indemnified Person may seek indemnification under this
Section 1.6.3, such Indemnified Person shall submit written notice thereof to
either the Company or the Holders, as the case may be (sometimes being
hereinafter referred to as an "Indemnifying Person"). The omission of the
Indemnified Person so to notify the Indemnifying Person of any such claim shall
not relieve the Indemnifying Person from any liability it may have hereunder
except to the extent that (a) such liability was caused or increased by such
omission, or (b) the ability of the Indemnifying Person to reduce such liability
was materially adversely affected by such omission. In addition, the omission of
the Indemnified Person so to notify the Indemnifying Person of any such claim
shall not relieve the Indemnifying Person from any liability it may have
otherwise than hereunder. The Indemnifying Person shall have the right to
undertake, by counsel or representatives of its own choosing, the defense,
compromise or settlement (without admitting liability of the Indemnified
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<PAGE>
Person) of any such claim asserted, such defense, compromise or settlement to be
undertaken at the expense and risk of the Indemnifying Person, and the
Indemnified Person shall have the right to engage separate counsel, at its own
expense, whom counsel for the Indemnifying Person shall keep informed and
consult with in a reasonable manner. In the event the Indemnifying Person shall
elect not to undertake such defense by its own representatives, the Indemnifying
Person shall give prompt written notice of such election to the Indemnified
Person, and the Indemnified Person shall undertake the defense, compromise or
settlement (without admitting liability of the Indemnified Person) thereof on
behalf of and for the account and risk of the Indemnifying Person by counsel or
other representatives designated by the Indemnified Person. Notwithstanding the
foregoing, no Indemnifying Person shall be obligated hereunder with respect to
amounts paid in settlement of any claim if such settlement is effected without
the consent of such Indemnifying Person (such consent not to be unreasonably
withheld).
(d) If the indemnification provided for in this Section 1.6 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Person,
then the Indemnifying Person, in lieu of indemnifying such Indemnified Person
hereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of any losses or claims in such proportion as is appropriate
to reflect the relative fault of the Indemnified Person on the one hand and the
Indemnifying Person on the other in connection with the statements or omissions
that resulted in such losses or claims as well as any other relevant equitable
considerations. The relative fault of the Indemnified Person and the
Indemnifying Person shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Person or by the Indemnified Person and the parties' relative
intent, knowledge and access to information and opportunity to correct or
prevent such statement or omission. In no event will the liability of any Holder
for contribution exceed the net proceeds received by such Holder in any sale of
securities to which such liability relates.
1.7. Grant and Transfer of Registration Rights
Except for registration rights which have been granted by the Company
as of the date hereof and registration rights granted by the Company after the
date hereof (a) in connection with business acquisitions and which relate solely
to registrations on Form S-3 or (b) which are subordinate to the rights of the
Holders hereunder, the Company shall not grant any registration rights to any
other person or entity without the prior written consent of the Initiating
Holders, which consent shall not be unreasonably withheld or delayed. Holders
shall have the right to transfer or assign the rights contained in this
Agreement (i) to any limited partner or affiliate of a Holder in connection with
the transfer of any Registrable Securities or (ii) to any third party transferee
acquiring at least 20% of
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<PAGE>
the Registrable Securities issued to the Holder as of the date hereof or the
shares of Common Stock issued upon conversion of such Registrable Securities;
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement; and (c) such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act.
1.8. Information from Holder
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the Company
such information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of such Holder's Registrable Securities.
2. DEFINITIONS
The capitalized terms contained in this Agreement shall have the
following meanings unless otherwise specifically defined:
"Act" shall mean the Securities Act of 1933, as amended.
"Agreement" shall mean this Registration Rights Agreement.
"Business Day" shall mean Monday through Friday and shall exclude any
federal or bank holidays observed in New York City.
"Company" shall mean Rainmaker Systems, Inc., a California
corporation, or any successor thereto.
"Common Stock" shall mean the common stock of the Company, $0.001 par
value per share.
"Equity Securities" shall mean the Common Stock, the Series B
Preferred Stock, the Series C Preferred, the Series D Preferred and any warrants
or other rights to subscribe for or to purchase, or any options for the purchase
of, Common Stock, any stock or security convertible into or exchangeable for
Common Stock or any other stock, security or interest in the Company whether or
not convertible into or exchangeable for Common Stock.
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<PAGE>
"Holders" shall mean ABS, H&Q Entities and SCO and any other person or
entity that is a valid transferee of the rights granted hereunder pursuant to
Section 1.7 hereof.
"Indemnified Person" shall have the meaning ascribed to that term in
Section 1.6.3.
"Indemnifying Person" shall have the meaning ascribed to that term in
Section 1.6.3.
"Initiating Holders" shall mean Holders who in the aggregate
beneficially own not less than 50% of the Registrable Securities.
"IPO" shall mean the initial public offering of the Company's Equity
Securities registered under the Act.
"Registrable Securities" shall mean (i) shares of Common Stock issued
or issuable upon conversion of the Series C Preferred or Series D Preferred and
(ii) any equity securities issued as a distribution with respect to or in
exchange for or in replacement for any of the shares referred to in clause (i);
provided, however, that Registrable Securities shall not include any securities
that have been previously sold pursuant to a registration statement filed under
the Act or under Rule 144 promulgated under the Act, or which have otherwise
been transferred in a transaction in which the transferor's rights under this
Agreement are not assigned.
3. MISCELLANEOUS
3.1. Entire Agreement; Amendment
This Agreement constitutes the entire agreement among the parties
hereto with respect to the matters provided for herein, and it supersedes all
prior oral or written agreements, commitments or understandings with respect to
the matters provided for herein. SCO and the Company specifically agree that
this Agreement supersedes entirely the 1995 Registration Rights Agreement, and
the Company has no further obligations of any kind thereunder. This Agreement
may not be amended without the written consent of the Company and the Initiating
Holders.
3.2. Waiver
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Agreement or under any other instruments
-12-
<PAGE>
given in connection with or pursuant to this Agreement shall impair any such
right, power or privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of any such right, power or
privilege shall preclude the further exercise of such right, power or privilege,
or the exercise of any other right, power or privilege. No waiver shall be valid
against any party hereto unless made in writing and signed by the party against
whom enforcement of such waiver is sought and then only to the extent expressly
specified therein.
3.3. No Third Party Beneficiaries
Except to the extent that the rights hereunder are assigned in
accordance with Section 1.7, it is the explicit intention of the parties hereto
that no person or entity other than the parties hereto is or shall be entitled
to bring any action to enforce any provision of this Agreement against any of
the parties hereto, and the covenants, undertakings and agreements set forth in
this Agreement shall be solely for the benefit of, and shall be enforceable only
by, the parties hereto or their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
3.4. Binding Effect
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
3.5. Governing Law
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed in
accordance with the laws of California (excluding the choice of law rules
thereof).
3.6. Notices
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand-delivered, sent
by overnight courier service or mailed by first-class, registered or certified
mail, return receipt requested, postage prepaid, or transmitted by telegram,
telecopy, facsimile transmission or telex, addressed as follows:
(i) If to the Company:
Rainmaker Systems, Inc.
1800 Green Hills Road, 2nd Floor
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<PAGE>
Scotts Valley, California 95066
Attention: Michael Silton
in each case with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
Attention: Bruce Hallett
(ii) If to ABS:
ABS Capital Partners III, L.P.
101 California Street
San Francisco, California 94111
Attention: Andrew T. Sheehan
in each case with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
111 South Calvert Street, Suite 1600
Baltimore, Maryland 21202
Attention: Michael J. Silver
(iii) If to H&Q Rainmaker Investors, L.P.:
H&Q Rainmaker Investors, L.P.
One Bush Street
San Francisco, California 94104
Attention: Christopher McKay
If to Hambrecht & Quist California:
One Bush Street
San Francisco, California 94104
Attention: Steven N. Machtinger
If to Hambrecht & Quist Employee Venture Fund, L.P. II:
One Bush Street
San Francisco, California 94104
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<PAGE>
Attention:
(iv) If to SCO:
The Santa Cruz Operation, Inc.
425 Encinal Avenue
Santa Cruz, California 95061
Attention: Legal Department
(v) If to any other Holder, such Holder's address as appearing on the
records of the Company.
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand-delivered,
mailed, transmitted, telecopied or telexed in the manner described above, shall
be deemed sufficiently given, served, sent, received or delivered for all
purposes at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, or the answerback being deemed conclusive, but
not exclusive, evidence of such delivery) or at such time as delivery is refused
by the addressee upon presentation.
3.7. Execution in Counterparts
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf as of the day
and year first hereinabove set forth.
RAINMAKER SYSTEMS, INC.
By: /s/ MICHAEL SILTON
---------------------------------
Name: Michael Silton
Title: CEO
ABS CAPITAL PARTNERS III, L.P.
By: ABS Partners III, LLC
Its General Partner
By: /s/
---------------------------------
Managing Member
<PAGE>
H&Q RAINMAKER INVESTORS, L.P.
By: /s/ Christopher McKay
-----------------------------
Name: Christopher McKay
HAMBRECHT & QUIST
CALIFORNIA
By: /s/ Steven N. Machtinger
----------------------------
Name: Steven Machtinger
General Counsel, Secretary
HAMBRECHT & QUIST EMPLOYEE
VENTURE FUND, L.P. II
By: H&Q Venture Management, L.L.C.
Its General Partner
By: /s/
-----------------------------
Name:
<PAGE>
EXHIBIT 10.4
================================================================================
UNIDIRECT CORPORATION
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. DEFINITIONS AND CONSTRUCTION......................................................... 1
1.1 Definitions................................................................... 1
1.2 Accounting Terms.............................................................. 7
2. LOAN AND TERMS OF PAYMENT............................................................ 8
2.1 Advances...................................................................... 8
2.2 Overadvances.................................................................. 9
2.3 Interest Rates, Payments, and Calculations.................................... 9
2.4 Crediting Payments............................................................ 9
2.5 Fees.......................................................................... 10
2.6 Additional Costs.............................................................. 10
3. CONDITIONS OF LOANS.................................................................. 11
3.1 Conditions Precedent to Initial Advance....................................... 11
3.2 Conditions Precedent to all Advances.......................................... 11
4. CREATION OF SECURITY INTEREST........................................................ 11
4.1 Grant of Security Interest.................................................... 11
4.2 Delivery of Additional Documentation Required................................. 12
4.3 Right to Inspect.............................................................. 12
5. REPRESENTATIONS AND WARRANTIES....................................................... 12
5.1 Due Organization and Qualification............................................ 12
5.2 Due Authorization; No Conflict................................................ 12
5.3 No Prior Encumbrances......................................................... 12
5.4 Bona Fide Eligible Accounts................................................... 12
5.5 Merchantable Inventory........................................................ 12
5.6 Intellectual Property......................................................... 12
5.7 Name; Location of Chief Executive Office...................................... 12
5.8 Litigation.................................................................... 13
5.9 No Material Adverse Change in Financial Statements............................ 13
5.10 Solvency...................................................................... 13
5.11 Regulatory Compliance......................................................... 13
5.12 Environmental Condition....................................................... 13
5.13 Taxes......................................................................... 13
5.14 Subsidiaries.................................................................. 13
5.15 Government Consents........................................................... 13
5.16 Full Disclosure............................................................... 14
6. AFFIRMATIVE COVENANTS................................................................ 14
6.1 Good Standing................................................................. 14
6.2 Government Compliance......................................................... 14
6.3 Financial Statements, Reports, Certificates................................... 14
6.4 Inventory; Returns............................................................ 15
6.5 Taxes......................................................................... 15
6.6 Insurance..................................................................... 15
6.7 Principal Depository.......................................................... 15
6.8 Quick Ratio................................................................... 15
6.9 Debt-Tangible Net Worth Ratio................................................. 16
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
6.10 Tangible Net Worth............................................................ 16
6.11 Profitability................................................................. 16
6.12 Further Assurances............................................................ 16
7. NEGATIVE COVENANTS................................................................... 16
7.1 Dispositions.................................................................. 16
7.2 Change in Business............................................................ 16
7.3 Mergers or Acquisitions....................................................... 16
7.4 Indebtedness.................................................................. 16
7.5 Encumbrances.................................................................. 16
7.6 Distributions................................................................. 16
7.7 Investments................................................................... 17
7.8 Transactions with Affiliates.................................................. 17
7.9 Subordinated Debt............................................................. 17
7.10 Inventory..................................................................... 17
7.11 Compliance.................................................................... 17
8. EVENTS OF DEFAULT.................................................................... 17
8.1 Payment Default............................................................... 17
8.2 Covenant Default.............................................................. 17
8.3 Material Adverse Change....................................................... 18
8.4 Attachment.................................................................... 18
8.5 Insolvency.................................................................... 18
8.6 Other Agreements.............................................................. 18
8.7 Subordinated Debt............................................................. 18
8.8 Judgments..................................................................... 18
8.9 Misrepresentations............................................................ 18
9. BANK'S RIGHTS AND REMEDIES........................................................... 18
9.1 Rights and Remedies........................................................... 18
9.2 Power of Attorney............................................................. 19
9.3 Accounts Collection........................................................... 20
9.4 Bank Expenses................................................................. 20
9.5 Bank's Liability for Collateral............................................... 20
9.6 Remedies Cumulative........................................................... 20
9.7 Demand; Protest............................................................... 20
10. NOTICES.............................................................................. 21
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER........................................... 21
12. GENERAL PROVISIONS................................................................... 21
12.1 Successors and Assigns........................................................ 21
12.2 Indemnification............................................................... 21
12.3 Time of Essence............................................................... 22
12.4 Severability of Provisions.................................................... 22
12.5 Amendments in Writing, Integration............................................ 22
12.6 Counterparts.................................................................. 22
12.7 Survival...................................................................... 22
12.8 Effect of Amendment and Restatement........................................... 22
</TABLE>
ii
<PAGE>
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into as of
May 9, 1997, by and between SILICON VALLEY BANK ("Bank") and UNIDIRECT
CORPORATION ("Borrower").
RECITALS
--------
A. Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of March 8, 1994, as amended from time to time (the "Original
Loan Documents").
B. Borrower and Bank wish to amend and restate the terms of the Original
Loan Documents as stated herein. This Agreement sets forth the terms on which
Bank will loan money to Borrower and Borrower will repay the amounts owing to
Bank.
AGREEMENT
---------
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions. As used in this Agreement, the following terms shall
-----------
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a cash advance under the Revolving
Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners, except ESS
Technology, Inc., TelCom Semiconductor, Inc. and Adaptive Solutions, Inc.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and expenses
of appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1
hereof.
"Borrowing Base Option A" means an option selected by Borrower
under which the Borrowing Base is equal to Fifty Percent (50%) of Eligible
Accounts.
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"Borrowing Base Option B" means an option selected by Borrower
under which the Borrowing Base is equal to Sixty Percent (60%) of Eligible
Accounts.
"Borrowing Base Option C" means an option selected by Borrower
under which the Borrowing Base is equal to Seventy Percent (70%) of Eligible
Accounts.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
---------
hereto.
"Committed Line" means One Million Five Hundred Thousand Dollars
($1,500,000)
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed at the
end of a given day.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set
2
<PAGE>
forth in Section 5.4; provided, that standards of eligibility may be fixed and
--------
revised from time to time by Bank in Bank's reasonable judgment and upon
notification thereof to Borrower in accordance with the provisions hereof.
Unless otherwise agreed to by Bank, Eligible Accounts shall not include the
following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts;
(g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed twenty-
five percent (25%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(k) Accounts the collection of which Bank reasonably determines
to be doubtful.
. "Eligible Foreign Accounts" means Accounts with respect to which
the account debtor does not have its principal place of business in the United
States and that are: (1) covered by credit insurance in form and amount, and by
an insurer satisfactory to Bank less the amount of any deductible(s) which may
be or become owing thereon; or (2) supported by one or more letters of credit in
favor of Bank as beneficiary, in an amount and of a tenor, and issued by a
financial institution, acceptable to Bank; or (3) that Bank approves on a case-
by-case basis.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
3
<PAGE>
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
4
<PAGE>
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means the date immediately preceding the first
anniversary of the Closing Date.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Original Loan Documents" has the meaning set forth in the
recital paragraph above.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Capital leases or indebtedness incurred solely to purchase
equipment which is secured in accordance with clause (c) of "Permitted Liens"
below and is not in excess of the
5
<PAGE>
lesser of the purchase price of such equipment or the fair market value of such
equipment on the date of acquisition;
(d) Subordinated Debt; and
(e) Indebtedness to trade creditors incurred in the ordinary
course of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., and (iii) certificates
of deposit maturing no more than one (1) year from the date of investment
therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
--------
security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
--------
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens on Equipment leased by Borrower or any Subsidiary
pursuant to an operating or capital lease in the ordinary course of business
(including proceeds thereof and accessions thereto) incurred solely for the
purpose of financing the lease of such Equipment (including Liens pursuant to
leases permitted pursuant to Section 7.1 and Liens arising from UCC financing
statements regarding leases permitted by this Agreement);
(e) Leases or subleases and licenses or sublicenses granted to
others in the ordinary course of Borrower's business not interfering in any
material respect with the business of Borrower and its Subsidiaries taken as a
whole, and any interest or title of a lessor, licensor or under any lease or
license provided that such leases, subleases, licenses and sublicenses do not
prohibit the grant of the security interest granted hereunder; and
(f) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
--------
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
6
<PAGE>
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof
shall be determined, the unrestricted cash and cash-equivalents; net, billed,
accounts receivable; and investments, with maturities not to exceed one year, of
Borrower determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer,
the Chief Financial Officer and the Controller of Borrower.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue cash advances, as specified in Section 2.1 hereof.
"Schedule" means the schedule of exceptions attached hereto, if
any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which by
the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
-----
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
---
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Assignor connected
with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
7
<PAGE>
2. LOANS AND TERMS OF PAYMENT
2.1 Advances.
--------
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not
to exceed (i) the lesser of the Committed Line or the Borrowing Base (ii) minus
-----
the face amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit). For purposes of this Agreement, "Borrowing
Base" shall mean an amount specified in Borrowing Base Option A, Borrowing Base
Option B, or Borrowing Base Option C. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section 2.1 may be repaid and
reborrowed at any time prior to the Maturity Date.
(b) Whenever Borrower desires an Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00 p.m. California
time, on the Business Day that the Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form in substantially the form
of Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
---------
based upon instructions received from a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer, and Borrower shall indemnify and hold Bank harmless
for any damages or loss suffered by Bank as a result of such reliance. Bank will
credit the amount of Advances made under this Section 2.1 to Borrower's deposit
account.
(c) The Revolving Facility shall terminate on the Maturity
Date, at which time all Advances under this Section 2.1 and other amounts due
under this Agreement shall be immediately due and payable.
2.1.1 Selection of Borrowing Base Option. Borrower shall have a
----------------------------------
right to select a Borrowing Base Option in a written notice in a form acceptable
to Bank delivered not less than fourteen (14) days before the first day of each
fiscal quarter. Such Borrowing Base Option shall govern the Borrowing Base, the
interest rates, and the covenants for the fiscal quarter following such notice.
If Borrower does not elect a Borrowing Base Option, then the Borrowing Base
Option in effect for the current fiscal quarter shall continue in effect for the
subsequent fiscal quarter.
2.1.2 Letters of Credit.
-----------------
(a) Subject to the terms and conditions of this Agreement,
Bank agrees to issue or cause to be issued letters of Credit (each a "Letter of
Credit") for the account of Borrower in an aggregate face amount not to exceed
(i) the lesser of the Committed Line or the Borrowing Base minus (ii) the then
-----
outstanding principal balance of the Advances; provided that the face amount of
--------
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) shall not in any case exceed Five Hundred Thousand Dollars ($500,000).
Each such Letter of Credit shall have an expiry date no later than the Maturity
Date, provided that Borrower's Letter of Credit reimbursement obligation may
--------
extend up to ninety (90) days after the Maturity Date provided such obligation
shall be secured by cash on terms acceptable to Bank. All such Letters of Credit
shall be, in form and substance, acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank's form of application and
Letter of Credit agreement. All amounts actually paid by Bank in respect of a
Letter of Credit shall, when paid, constitute an Advance under this Agreement.
(b) The obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend and hold Bank harmless from any
8
<PAGE>
loss, cost, expense or liability, including, without limitation, reasonable
attorneys' fees, arising out of or in connection with any Letters of Credit.
2.1.3 Letter of Credit Reimbursement; Reserve.
---------------------------------------
(a) Borrower may request that Bank issue a Letter of Credit
payable in a currency other than United States Dollars. If a demand for payment
is made under any such Letter of Credit, Bank shall treat such demand as an
Advance to Borrower of the equivalent of the amount thereof (plus cable charges)
in United States currency at the then prevailing rate of exchange in San
Francisco, California, for sales of that other currency for cable transfer to
the country of which it is the currency.
(b) Upon the issuance of any Letter of Credit payable in a
currency other than United States Dollars, Bank shall create a reserve under the
Committed Line for Letters of Credit against fluctuations in currency exchange
rates, in an amount equal to ten percent (10%) of the face amount of such Letter
of Credit. The amount of such reserve may be amended by Bank from time to time
to account for fluctuations in the exchange rate. The availability of funds
under the Committed Line shall be reduced by the amount of such reserve for so
long as such Letter of Credit remains outstanding.
2.2 Overadvances. If, at any time or for any reason, the amount of
------------
Obligations owed by Borrower to Bank pursuant to Section 2.1 of this Agreement
is greater than the lesser of (i) the Committed Line or (ii) the Borrowing Base,
Borrower shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
------------------------------------------
(a) Interest Rate. Except as set forth in Section 2.3(b), any
-------------
Advances shall bear interest, on the average Daily Balance, at a rate equal to
Two and One Quarter Percent (2.25%) a above the Prime Rate while Borrowing Base
Option A is in effect, Two Percent (2%) above the Prime Rate while Borrowing
Base Option B is in effect, and One and Three Quarters Percent (1.75%) above the
Prime Rate while Borrowing Base Option C is in effect.
(b) Default Rate. All Obligations shall bear interest, from and
------------
after the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on
--------
the eighth calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Committed Line, in
which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from
-----------
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
------------------
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire
9
<PAGE>
transfer of funds, check, or other item of payment shall be immediately applied
to conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
----
(a) Facility Fee. A Facility Fee equal to Fifteen Thousand
------------
Dollars ($15,000), which fee shall be due on the Closing Date and shall be,
together with other fees paid, fully earned and nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's customary
----------------------------------------
fees and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and
for each appraisal of Collateral and financial analysis and examination of
Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon the date hereof, all Bank Expenses
-------------
incurred through the Closing Date, including reasonable attorneys' fees and
expenses, and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law, regulation,
----------------
treaty or official directive or the interpretation or application thereof by any
court or any governmental authority charged with the administration thereof or
the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. This Agreement shall become effective on the Closing Date,
----
and subject to Section 12.7, shall continue in full force and effect for a term
ending on the Maturity Date.
10
<PAGE>
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Advances under this Agreement immediately and without notice
upon the occurrence of and during the continuance of an Event of Default.
Notwithstanding termination, Bank's Lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding. The foregoing
notwithstanding, Borrower shall have the right to pay all outstanding
Obligations at any time prior to the Maturity Date. If such amounts are so paid,
this Agreement, including, but not limited to the requirements of Section 2.1.1,
shall be immediately terminated upon Borrower's request.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. The obligation of Bank
---------------------------------------
to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) subordination agreements by certain Persons;
(d) financing statement (Form UCC-1);
(e) insurance certificate;
(f) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
(g) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to
------------------------------------
make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Advance. The making of each Advance shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
--------------------------
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
11
<PAGE>
4.2 Delivery of Additional Documentation Required. Borrower shall
---------------------------------------------
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees,
-----------------
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
----------------------------------
is a corporation duly existing and in good standing under the laws of its state
of incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the Borrower's or other party's consent and
the Loan Documents constitute an assignment. Borrower is not in default under
any agreement to which it is a party or by which it is bound, which default
could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title
---------------------
to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
---------------------------
existing obligations. The property giving rise to such Eligible Accounts has
been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.
5.5 Merchantable Inventory. All Inventory (except work in progress)
----------------------
is in all material respects of good and marketable quality, free from all
material defects.
5.6 Intellectual Property. Borrower is the sole owner of the
---------------------
Intellectual Property Collateral, except for non-exclusive licenses granted by
Borrower to its customers in the ordinary course of business. Each of the
Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Intellectual Property Collateral
violates the rights of any third party.
5.7 Name; Location of Chief Executive Office. Except as disclosed in
----------------------------------------
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
12
<PAGE>
5.8 Litigation. Except as set forth in the Schedule, there are no
----------
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral. Borrower does not have knowledge of
any such pending or threatened actions or proceedings.
5.9 No Material Adverse Change in Financial Statements. All
--------------------------------------------------
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.10 Solvency. The fair saleable value of Borrower's assets
--------
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is able to pay its
debts (including trade debts) as they mature.
5.11 Regulatory Compliance. Borrower and each Subsidiary has met the
---------------------
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 Environmental Condition. None of Borrower's or any Subsidiary's
-----------------------
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the releasing, or otherwise
disposing of hazardous waste or hazardous substances into the environment.
5.13 Taxes. Borrower and each Subsidiary has filed or caused to be
-----
filed all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.
5.14 Subsidiaries. Borrower does not own any stock, partnership
------------
interest or other equity securities of any Person, except for Permitted
Investments.
5.15 Government Consents. Borrower and each Subsidiary has obtained
-------------------
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices
13
<PAGE>
to, all governmental authorities that are necessary for the continued operation
of Borrower's business as currently conducted.
5.16 Full Disclosure. No representation, warranty or other statement
---------------
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
-------------
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
-------------------------------------------
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations during such
period, certified by a Responsible Officer; (b) as soon as available, but in any
event within one hundred twenty (120) days after the end of Borrower's fiscal
year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (c) within five (5) days upon becoming available,
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated Debt and
all reports on Form 10-K and 10-Q filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand
Dollars ($100,000) or more; (e) prompt notice of any material change in the
composition of the Intellectual Property Collateral, including, but not limited
to, any subsequent ownership right of the Borrower in or to any Copyright,
Patent or Trademark not specified in any intellectual property security
agreement between Borrower and Bank or knowledge of an event that materially
adversely effects the value of the Intellectual Property Collateral; and (f)
such budgets, sales projections, operating plans or other financial information
as Bank may reasonably request from time to time.
Within twenty (20) days after the last day of each month (and, at any time
when the Obligations exceed One Million Dollars ($1,000,000), on the first day
and the fifteenth day of each month), Borrower shall deliver to Bank a Borrowing
Base Certificate signed by a Responsible Officer in substantially the form of
Exhibit C hereto, together with aged listings of accounts receivable and
- ---------
accounts payable.
14
<PAGE>
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
---------
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) months unless an Event of Default has occurred and
is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory (except
------------------
work in progress) in good and marketable condition, free from all material
defects. Returns and allowances, if any, as between Borrower and its account
debtors shall be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist at the time of the execution and delivery
of this Agreement. Borrower shall promptly notify Bank of all returns and
recoveries and of all disputes and claims, where the return, recovery, dispute
or claim involves more than Two Hundred Thousand Dollars ($200,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
-----
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
--------------------
depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
-----------
calendar month, a ratio of Quick Assets to Current Liabilities, less deferred
revenue, of at least 0.75 to 1.00 while Borrowing Base Option A is in effect, at
least 0.85 to 1.00 while Borrowing Base Option B is in effect, and at least 0.95
while Borrowing Base Option C is in effect.
15
<PAGE>
6.9 Debt-Tangible Net Worth Ratio. Borrower shall maintain, as of
-----------------------------
the last day of each calendar month, a ratio of Total Liabilities, less deferred
revenue, plus Subordinated Debt to Tangible Net Worth plus Subordinated
Debt of not more than 2.50 to 1.00 while Borrowing Base Option A is in effect,
not more than 2.25 to 1.00 while Borrowing Base Option B is in effect, and not
more than 1.75 to 1.00 while Borrowing Base Option C is in effect.
6.10 Tangible Net Worth. Borrower shall maintain, as of the last day
------------------
of each calendar month, a Tangible Net Worth, less capitalized catalog expenses,
plus Subordinated Debt of not less than Two Million Five Hundred Thousand
Dollars ($2,500,000).
6.11 Profitability. Borrower shall have a profit (less capitalized
-------------
catalog costs) of not less than One Dollar ($1.00) for each fiscal quarter and
each fiscal year, except Borrower may suffer a loss not to exceed Two Hundred
Fifty Thousand Dollars ($250,000) for the second quarter of Borrower's 1997
fiscal year.
6.12 Further Assurances. At any time and from time to time Borrower
------------------
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Advances, Borrower will
not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
------------
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of its
------------------
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership.
Borrower will not, without thirty (30) days prior written notification to Bank,
relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
-----------------------
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
------------
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution
-------------
or payment on account of or in redemption, retirement or purchase of any capital
stock, except in connection with termination of employment or consultancy.
16
<PAGE>
7.7 Investments. Directly or indirectly acquire or own, or make any
-----------
investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into
----------------------------
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
-----------------
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
---------
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by an
----------
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of, or
---------------
any interest on, any Advances when due and payable; or fails to pay any portion
of any other Obligations not constituting such principal or interest, including
without limitation Bank Expenses, within thirty (30) days of receipt by Borrower
of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
----------------
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after Borrower receives notice thereof or
any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default (provided that no Advances will be required to be made during such
cure period);
17
<PAGE>
8.3 Material Adverse Change. If there occurs a material adverse
-----------------------
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
----------
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within ten (10) days (provided
that no Advances will be made prior to the dismissal of such Insolvency
Proceeding);
8.6 Other Agreements. if there is a default in any agreement to which
----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in
---------
an amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days (provided that no Advances will be made
prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
------------------
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. Upon the occurrence and during the
--------------------
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
18
<PAGE>
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank in an amount
equal to the amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in
advance all Letters of Credit fees scheduled to be paid or payable over the
remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(e) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank
a license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(f) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(h) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(i) Bank may credit bid and purchase at any public sale; and
(j) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during
-----------------
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and
19
<PAGE>
notices to account debtors; (d) make, settle, and adjust all claims under and
decisions with respect to Borrower's policies of insurance; (e) settle and
adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; (f)
to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without the
signature of Borrower where permitted by law; and (g) to transfer the Collateral
into the name of Bank or a third party to the extent permitted under the
California Uniform Commercial Code provided Bank may exercise such power of
attorney to sign the name of Borrower on any of the documents described in
Section 4.2 regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time from the date of this Agreement,
-------------------
Bank may notify any Person owing funds to Borrower of Bank's security interest
in such funds and verify the amount of such Account. Borrower shall collect all
amounts owing to Borrower for Bank, receive in trust all payments as Bank's
trustee, and immediately deliver such payments to Bank in their original form as
received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If.Borrower fails to pay any amounts or furnish
-------------
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves under
the Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement. Bank shall have a
non-exclusive, royalty-free license to use the Intellectual Property Collateral
to the extent reasonably necessary to permit Bank to exercise its rights and
remedies upon the occurrence of an Event of Default.
9.5 Bank's Liability for Collateral. So long as Bank complies with
-------------------------------
reasonable banking practices, Bank shall not in arty way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
20
<PAGE>
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: UniDirect Corporation
1800 Green Hills Road, Suite 201
Scotts Valley, CA 95066
Attn: Bob Mason
FAX: (408) 461-5055
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn: Ron Kundich
FAX: (408) 748-9478
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
------------------------------------------
The Loan Documents shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAiVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
--------- -------
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a
21
<PAGE>
result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of
---------------
all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
----------------------------------
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents except that any financing statements or other
agreements or instruments filed by Bank with respect to the Borrower shall
remain in full force and effect.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
--------
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Effect of Amendment and Restatement. This Agreement is intended
-----------------------------------
to and does completely amend and restate, without novation, the Original Loan
Documents. All security interests granted under the Original Loan Documents are
hereby confirmed and ratified and shall continue to secure all Obligations under
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
UNIDIRECT CORPORATION
By: /s/ ROBERT MASON
-----------------------------
Title: CFO
--------------------------
SILICON VALLEY BANK
By:_____________________________
Title:__________________________
22
<PAGE>
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
23
<PAGE>
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ______________
FAX#: (408) 496-2426 TIME: ______________
- ----------------------------------------------------------------------------
FROM: ____________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY: _______________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:________________________________________________
PHONE NUMBER: _______________________________________________________
FROM ACCOUNT # __________________ TO ACCOUNT # ________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- -------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $_____________________________
PRINCIPAL PAYMENT (ONLY) $_____________________________
INTEREST PAYMENT (ONLY) $_____________________________
PRINCIPAL AND INTEREST (PAYMENT) $_____________________________
OTHER INSTRUCTIONS: _________________________________________________
_____________________________________________________________________
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as
of the date of the telephone request for and Advance confirmed by
this Borrowing Certificate; provided, however, that those
representations and warranties expressly referring to another date
shall be true, correct and complete in all material respects as of
such date.
- ----------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment
transfer/loan advance on the advance designated account and is known to me.
_______________________________ ____________________
Authorized Requester Phone #
_______________________________ ____________________
Received By (Bank) Phone #
__________________________________________
Authorized Signature (Bank)
- ----------------------------------------------------------------------------
24
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
- --------------------------------------------------------------------------------
Borrower: UniDirect Corporation Lender: Silicon Valley Bank
Commitment Amount: $1,500,000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of _____ $_______________
2. Additions (please explain on reverse) $_______________
3. TOTAL ACCOUNTS RECEIVABLE $_______________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $_______________
5. Balance of 50% over 90 day accounts $_______________
6. Concentration Limits* $_______________
7. Foreign Accounts $_______________
8. Governmental Accounts $_______________
9. Contra Accounts $_______________
10. Promotion or Demo Accounts $_______________
11. Intercompany/Employee Accounts $_______________
12. Other (please explain on reverse) $_______________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_______________
14. Eligible Accounts (#3 minus #13) $_______________
15. LOAN VALUE OF ACCOUNTS (__% of #14)* $_______________
BALANCES
16. Maximum Loan Amount $_______________
17. Total Funds Available [Lesser of #18 or #15] $_______________
18. Present balance owing on Line of Credit $_______________
19. Outstanding under Sublimits ( ) $_______________
20. RESERVE POSITION (#17 minus #18 and #19) $_______________
</TABLE>
The undersigned represents and warrants that foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
* Advance Rate depends on selection of Borrowing Base Option A, B or C under the
Agreement.
COMMENTS:
--------------------------
BANK USE ONLY
---- --- ----
___________________________________
Rec'd By: _____________
Auth. Signer
By: _______________________________
Authorized Signer Date: _________________
Verified:______________
Auth. Signer
Date: _________________
_______________________
--------------------------
25
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: UNIDIRECT CORPORATION
The undersigned authorized officer of UniDirect Corporation hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending ________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies"
column.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Reporting Covenant Required Complies
- ------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
A/R & A/P Agings, BBC Monthly within 20 days/1/ Yes No
A/R Audit Semi-Annual No Yes
Financial Covenant Required Actual Complies
- ------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio /2/ _____:1.0 Yes No
Minimum TNW + Sub Debt/3/ $2,500,000 $_________ Yes No
Maximum Debt/Tangible Net Worth /4/ ______:1.0 Yes No
Profitability: Quarterly, Annual $1.00/5/ $_________ Yes No
</TABLE>
/1/ Twice monthly, on 1st and 15th, when Obligations *$1,000,000
/2/ Option A *0.75:1.00; Option B *0.85:1.00; Option C *0.95:1.00
/3/ Less Capitalized Catalog Expenses
/4/ Option A **2.5:1.00; Option B **2.25:1.00; Option C 1.75:1.00
/5/ Loss **$250,00 permitted for 1997 Q2
* Greater than
** Less than
--------------------------------
Comments Regarding Exceptions: See Attached. BANK USE ONLY
Sincerely, Received by:__________________
AUTHORIZED SIGNER
_______________________________
Signature Date: ________________________
_______________________________
Title Verified:_____________________
AUTHORIZED SIGNER
_______________________________
Date Date:_________________________
Compliance Status: Yes No
--------------------------------
26
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of September 22, 1997,
by and between Unidirect Corporation ("Borrower") whose address is 1800 Green
Hills Road, Suite 201, Scotts Valley, CA 95066, and Silicon Valley Bank
("Bank") whose address is 3003 Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
------------------------------------
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, an Amended and Restated Loan and Security Agreement, dated May
9, 1997, as may be amended from time to time, (the "Loan Agreemen"). The Loan
Agreement provided for, among other things, a Committed Line in the original
principal amount of One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00) (the "Revolving Facility"). Defined terms used but not otherwise
defined herein shall have the same meanings as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by the Collateral as described in the Loan Agreement and a Collateral
Assignment, Patent Mortgage and Security Agreement dated March 8, 1994.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security. Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification(s) to Loan Agreement.
---------------------------------
l. Section 1.1 entitled "Definitions" is hereby amended in part to
read as follows:
"Committed Line" means Two Million Five Hundred Thousand and
00/100 Dollars ($2,500,000.00).
2. The second paragraph of Section 6.3 entitled "Financial
Statements, Reports, Certificates" is hereby amended in part to
read as follows:
Within twenty (20) days after the last day of each month (and, at
any time when the Obligations exceed Two Million and 00/100
Dollars ($2,000,000.00), on the first day and the fifteenth day
of each month), Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer, together with aged
listings of accounts receivable and accounts payable.
3. Section 6.9 entitled "Debt-Tangible Net Worth Ratio" is hereby
amended in part to restate the definition of the covenant as
follows:
Borrower shall maintain, as of the last day of each calendar
month, a ratio of Total Libilities less deferred maintenance
revenue and Subordinated Debt divided by Tangible Net Worth plus
Subordinated Debt.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
1
<PAGE>
5. PAYMENT OF LOAN FEE. Borrower shall pay to Bank a fee in the amount of Seven
-------------------
Thousand Five Hundred and 00/100 Dollars ($7,500.00) (the "Loan Fee") plus all
out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
-------------------
understands and agrees that in modifying the existing Indebtedness, Bank is
relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to modifications
to the existing Indebtedness pursuant to this Loan Modification Agreement in no
way shall obligate Bank to make any future modifications to the Indebtedness.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Indebtedness. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. No maker, endorser, or guarantor will be
released by virtue of this Loan Modification Agreement. The terms of this
paragraph apply not only to this Loan Modification Agreement, but also to all
subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
----------
conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
UNIDIRECT CORPORATION SILICON VALLEY BANK
By: /s/ Robert Mason By: ________________________
--------------------------------
Name: Robert Mason Name: ______________________
------------------------------
Title: V.P. Operations, CFO Title: _____________________
-----------------------------
2
<PAGE>
[LOGO OF SILICON VALLEY BANK]
April 15, 1998
Mr. Rob Mason
Chief Financial Officer
UniDirect Corporation
1800 Green Hills Rd., Suite 201
Scotts Valley, CA 95066
Dear Rob:
Thank you very much for taking the time to meet with Kathryn Lungaro and me over
the past few weeks to discuss UniDirect's future and new direction. We are very
excited about your prospects and about working with you to meet your goals.
In response to our conversations over the past few weeks, Silicon Valley Bank
has approved the following changes to your credit facility, which are
highlighted in bold and underlined.
Borrower: UniDirect Corporation (the "Company" or "Borrower")
Facility: $2,500,000 Revolving Line of Credit with a $500,000 sublimit for
Commercial or Standby Letters of Credit.
Purpose: To support working capital needs.
Maturity: August 8, 1998
Repayment: Monthly interest payments. Principal due at maturity.
Pricing:
Rate: No change
Fee: $2,000 Variance and Documentation Fee
Warrants: Extend the expiration on the current warrant agreement one year,
to March 8, 2000.
Collateral: Perfected first security interest on all corporate assets. SVB
to release inventory from collateral if direct marketing
business is sold.
<PAGE>
Mr. Bob Mason
UniDirect Corporation
Page 2
Advance
Rate: No change
Subordination: No change
Covenants and
Reporting:
Information Reporting:
. No change, except SVB to allow 1997 audits to be delivered within 160 days
from fiscal year end.
Financial Covenants:
. No change, except one quarterly loss not to exceed $550,000 will be allowed in
the First Quarter of fiscal 1998.
Other:
. SVB to allow for divestiture of direct marketing operations.
We hope you agree that the above terms and conditions address the various issues
you have been discussing with Silicon Valley Bank. If you find these terms and
conditions acceptable, please indicate so by signing in the space indicated
below and return to me via fax at (408) 748-9478. Upon recept, we will prepare
a Loan Modification Agreement to evidence the changes illustrated above.
Thanks again for your business, and we look forward to our continued
relationship with UniDirect.
Yours truly, Accepted:
/s/ D. EDWARD WOHLIEB /s/ ROBERT MASON
- ---------------------- -----------------
D. Edward Wohlieb Bob Mason
Chief Financial Officer
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of September 14, 1998,
by and between Rainmaker Systems, Inc. (formerly known as UniDirect Corporation)
("Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
------------------------------------
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, an Amended and Restated Loan and Security Agreement, dated May 9,
1997, as may be amended from time to time, (the "Loan Agreement"). The Loan
Agreement provided for, among other things, a Committed Line in the original
principal amount of One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00). The Loan Agreement has been modified pursuant to, among other
documents, a Loan Modification Agreement dated September 22, 1997, pursuant to
which, among other things, the Committed Line was increased to Two Million Five
Hundred Thousand and 00/100 Dollars ($2,500,000.00). Defined terms used but not
otherwise defined herein shall have the same meanings as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by the Collateral as described in the Loan Agreement and a Collateral
Assignment, Patent Mortgage and Security Agreement dated March 8, 1994.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification(s) to Loan Agreement
---------------------------------
1. The following defined terms are hereby amended and/or deleted
from Section 1.1 entitled "Definitions" to read as follows:
"Borrowing Base" means an amount equal to seventy percent (70%)
of Eligible Accounts.
"Borrowing Base Option A" and all references thereto are hereby
deleted in their entirety
"Borrowing Base Option B" and all references thereto are hereby
deleted in their entirety.
"Borrowing Base Option C" and all references thereto are hereby
deleted in their entirety.
"Maturity Date" means September 14, 1999.
2. Sub-section (a) of Section 2.1 entitled "Advances" is hereby
amended to read as follows:
Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make Advances to Borrower in an aggregate amount
not to exceed (i) the lesser of
<PAGE>
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to modifications
to the existing Indebtedness pursuant to this Loan Modification Agreement in no
way shall obligate Bank to make any future modifications to the Indebtedness.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Indebtedness. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. No maker, endorser, or guarantor will be
released by virtue of this Loan Modification Agreement. The terms of this
paragraph apply not only to this Loan Modification Agreement, but also to all
subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
----------
conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
RAINMAKER SYSTEMS, INC. SILICON VALLEY BANK
(formerly known as UniDirect Corporation)
By: /s/ Robert Mason By: ________________________
--------------------------------
Name: Robert Mason Name: ______________________
------------------------------
Title: CFO, Secretary Title: _____________________
-----------------------------
3
<PAGE>
Exhibit 10.7
NET LEASE AGREEMENT
by and between
BORLAND INTERNATIONAL, INC.,
a Delaware corporation,
as Landlord
and
UNIDIRECT CORPORATION
a California corporation
as Tenant
<PAGE>
NET LEASE AGREEMENT
(MULTI-TENANT)
For and in consideration of the rentals, covenants, and conditions
hereinafter set forth, Landlord hereby leases to Tenant, and Tenant hereby rents
from Landlord, the following described Premises for the term, at the rental and
subject to and upon all of the terms, covenants and agreements set forth in this
Net Lease Agreement ("Lease"):
1. Summary of Lease Provisions.
---------------------------
1.1 Tenant: UniDirect Corporation, a California corporation
("Tenant").
1.2 Landlord: Borland International, Inc., a Delaware corporation
("Landlord").
1.3 Date of Lease, for reference purposes only: July 29, 1996.
1.4 Premises: That certain space hereinafter more particularly
described, consisting of approximately sixteen thousand three hundred sixty-
three (16,363), plus or minus rentable square feet, situated in the second floor
of that certain building shown cross-hatched on the site plan attached hereto as
Exhibit A and located at 1800 Green Hills Road in the City of Scotts Valley,
- ---------
County of Santa Cruz, State of California. (Paragraph 2.1)
1.5 Term: Five (5) years, subject to three (3) consecutive one year
options to extend (Paragraph 3 and Paragraph 44)
1.6 Commencement Date: The earlier of (i) the date Tenant opens for
business in the Premises, or (ii) September 15, 1996 (Paragraph 3)
1.7 Ending Date: The date five (5) years following the Commencement
Date, unless sooner terminated or extended pursuant to the terms of this Lease.
(Paragraph 3)
1.8 Rent: Rent shall be payable by Tenant during the initial Lease
Term in accordance with the schedule below:
Months NNN Rent/PSF/Month
------ ------------------
01 - 03 $0.00 per rentable square foot per month
04 - 12 $1.02 per rentable square foot per month
13 - 24 $1.02 per rentable square foot per month
25 - 36 $1.06 per rentable square foot per month
37 - 48 $1.08 per rentable square foot per month
49 - 60 $1.12 per rentable square foot per month
-1-
<PAGE>
1.9 Use of Premises: Telephone sales and marketing, storage and
distribution, office and other legally related uses: (Paragraph 6)
1.10 Tenant's percentage share of Common Area Charges: twenty-three
and sixty-nine one hundredths percent (23.69%). (Paragraph 12)
1.11 Security Deposit: Fifteen Thousand Dollars ($15,000) (Paragraph
5)
1.12 Addresses for Notices:
To Landlord: Borland International, Inc.
100 Borland Way
Scotts Valley, CA 95066
Attn: Robert Kohn, Esq.
To Tenant: To the Premises, except that prior to the
Commencement Date notices shall be addressed to
Tenant at:
UniDirect, Inc.
One Venture
Irvine, CA 92718
Attn: Robert Mason, CFO
1.13 Nonexclusive Right to Use No More Than: sixty-six (66) parking
spaces within the Common Area. (Paragraph 11.2)
1.14 Summary Provisions in General. Parenthetical references in this
-----------------------------
Paragraph 1 to other paragraphs in this Lease are for convenience of reference,
and designate some of the other Lease paragraphs where applicable provisions are
set forth. All of the terms and conditions of each such referenced paragraph
shall be construed to be incorporated within and made a part of each of the
above referring Summary of Lease Provisions. In the event of any conflict
between any Summary of Lease Provision as set forth above and the balance of the
Lease, the latter shall control.
2. Property Leased.
---------------
2.1 Premises. Landlord hereby leases to Tenant and Tenant hereby
--------
leases from Landlord upon the terms and conditions herein set forth, those
certain premises ("Premises") referred to in Paragraph 1.4 above and shown
cross-hatched on the floor plan attached hereto as Exhibit B. In addition,
---------
Tenant shall have such rights in and to the Common Area (defined in Paragraph
11.1 below) as are more fully described in Paragraph 11.1 below.
-2-
<PAGE>
The building in which the Premises are located is referred to herein as the
"Building." The "Land" shall mean and refer to all of the real property outlined
in red on Exhibit A, and shall not be limited to the parcel of real property on
---------
which the Building is located (if the same is a separate legal parcel). Any
reference in this Lease to the "Parcel" shall be deemed a reference to the Land.
The Land, Building and any other building(s) or improvement(s) now or hereafter
located on the Land are referred to herein collectively as the "Project."
Landlord reserves the right to grant to tenants of the Project, and to the
agents, employees, servants, invitees, contractors, guests, customers and
representatives of such tenants or to any other user authorized by Landlord, the
nonexclusive right to use the Land for pedestrian and vehicular ingress and
egress and vehicular parking.
2.2 Improvements. Tenant shall have the right to construct certain
------------
leasehold improvements in the Premises pursuant to the provisions of Exhibit C
---------
attached hereto and made a part hereof. Following execution of this Lease,
Tenant shall have the right to access the Premises for the purpose of
constructing or installing Tenant's leasehold improvements in the Premises
pursuant to the terms of Exhibit C.
---------
2.3 Acceptance of Premises. By taking possession of the Premises,
----------------------
subject to the representations and warranties set forth in this Section 2.3
below, Tenant shall be deemed to have accepted the Premises as being in good and
sanitary order, condition and repair and to have accepted the Premises in their
condition existing as of the date Tenant takes possession of the Premises,
subject to all applicable laws, covenants, conditions, restrictions, easements
and other matters of public record and the reasonable rules and regulations from
time to time promulgated by Landlord (and non-discriminatorily applied)
governing the use of any portion of the Project (and further subject to Tenant's
reservation of claims of latent defects and/or code compliance violations, if
any, existing as of the Commencement Date). Tenant acknowledges that, except as
otherwise expressly provided in this Paragraph 2.3 below, neither Landlord nor
Landlord's agents have made any representation or warranty as to the suitability
of the Premises for the conduct of Tenant's business, the condition of the
Building or Premises, or the use or occupancy which may be made thereof and
Tenant has independently investigated and is satisfied that the Premises are
suitable for Tenant's intended use and that the Building and Premises meet all
governmental requirements for such intended use. Landlord hereby represents and
warrants that, to the best knowledge of Bruce Frager, Corporate Services Manager
of Landlord, without inquiry or investigation, as of the date of execution of
this Lease by Landlord, the interior and exterior of the Premises do not violate
any ordinance, rule, code or regulation of any governmental agency and Landlord
has not received any written notice of such a violation. If the Premises do not
comply with the representation and warranty set forth in the immediately
preceding sentence, Landlord shall, promptly after receipt of written notice
from Tenant given within six months following the date of execution of this
Lease and setting forth with specificity the nature and extent of such non-
compliance, take such action, at Landlord's expense, as may be reasonably
necessary to rectify the non-compliance. Tenant shall have no responsibility to
cure or remedy any latent defects or code compliance violations with respect to
the Premises existing as of the Commencement Date. Landlord further represents
and warrants to Tenant that as of the date of
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execution of this Lease, the Premises, the universal backup power supply, the
backup generator, the roof of the building in which the Premises are situated
and the HVAC, electrical, plumbing and lighting systems within the Premises are
in good working condition. In the event of any breach of the representation or
warranty of Landlord set forth in the immediately preceding sentence, Landlord
shall, promptly following receipt of written notice from Buyer setting forth
with specificity the nature and extent of such breach, cure the same at
Landlord's expense. If Tenant does not give Landlord written notice of such
breach of such representation or warranty as to the Premises, the universal
backup power supply, the backup generator, the roof of the building in which the
Premises are situated, and/or the HYAC, electrical, plumbing and lighting
systems within the Premises, as the case may be, within sixty (60) days
following the execution of this Lease, then the cure or correction of such
breach shall be the obligation of Tenant.
3. Term.
----
3.1 Commencement Date. The term of this Lease ("Lease Term") shall be
-----------------
for the period specified in Paragraph 1.5 above, commencing on the Commencement
Date set forth in Paragraph 1.6 ("Commencement Date")
When the Commencement Date, Ending Date, and such other dates become
ascertainable, Landlord and Tenant shall specify the same in writing, in the
form of the attached Exhibit D, which writing shall be deemed incorporated
---------
herein. Tenant's failure to execute and deliver the letter attached hereto as
Exhibit D within ten (10) days after Tenant receives written request from
- ---------
Landlord to do so (subject to any legitimate disagreement by Tenant with the
terms thereof, which both parties shall use reasonable efforts to resolve) shall
be a Default by Tenant hereunder. The expiration of the Lease Term (as the same
may be extended pursuant to the terms of Paragraph 3.5 below) or sooner
termination of this Lease is referred to herein as the "Lease Termination.
3.2 Delay of Commencement Date. Landlord shall not be liable for any
--------------------------
damage or loss incurred by Tenant for Landlord's failure for whatever cause to
deliver possession of the Premises by a particular date (including the
Commencement Date), nor shall this Lease be void or voidable on account of such
failure to deliver possession of the Premises; provided that if Landlord does
not deliver possession of the Premises to Tenant by the date five (5) days
following the date this Lease is executed, Tenant shall have the right to
terminate this Lease by written notice delivered to Landlord within five (5)
days thereafter, and Landlord and Tenant shall be relieved of their respective
obligations hereunder.
3.3 Early Occupancy. If Tenant takes possession of the Premises prior
---------------
to the Commencement Date, Tenant shall do so subject to all of the terms and
conditions hereof except that Tenant shall not be obligated to pay Rent or
Tenant's pro rata share of Common Area Charges prior to the Commencement Date.
3.4 Tenant to Physically Occupy Premises. Tenant shall, no later than
------------------------------------
thirty (30) days after the Commencement Date, exercise reasonable, good faith
efforts to go into actual physical occupancy of the Premises and open the
Premises for business in accordance with the
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uses specified in Paragraph 6 below; provided, however, the date of Tenant's
physical occupancy of the Premises shall in no event extend the Commencement
Date, the Lease Termination date or the date the payment of Rentals hereunder
commences. Time is of the essence.
3.5 Option to Extend Lease Term. Landlord hereby grants to Tenant
---------------------------
three (3) options to extend the Lease Term for consecutive periods of one (1)
year each (each such one year option period shall hereinafter be referred to as
an "Extended Term" and together shall hereinafter be referred to as the
"Extended Terms"), on the following terms and conditions:
3.5.1 Tenant shall give Landlord written notice of its
exercise of the applicable option to extend the Lease Term no earlier than nine
(9) months nor later than four (4) months before the date the Lease Term would
end but for said exercise. Time is of the essence. Tenant may not exercise its
second one year option to extend unless it has timely exercised its first one
year option to extend, and Tenant may not exercise its third one year option to
extend unless it has timely exercised its second one year option to extend.
3.5.2 Tenant may not extend the Lease Term pursuant to this
Paragraph 3.5 if Tenant is in default of any of its obligations under this Lease
as of the date of Tenant's notice of exercise of the applicable option, or if
Tenant shall have assigned or otherwise transferred its interest in this Lease
and/or the Premises, whether or not Landlord's consent to such assignment or
transfer has been given. If Tenant is in default beyond any applicable cure
period under this Lease on the date that the applicable Extended Term is to
commence, then Landlord may elect to terminate this Lease, notwithstanding any
notice given by Tenant of an exercise of its option to extend and such exercise
of Tenant's option to extend the Lease Term shall be void and of no force or
effect.
3.5.3 All terms and conditions of this Lease shall apply
during the applicable Extended Term, except that the Rent for the applicable
Extended Term shall be determined in accordance with Paragraph 4.4 below, Tenant
shall have no further options to extend the Lease Term beyond the third Extended
Term described above and Landlord shall have no obligation to contribute to the
cost of any leasehold or tenant improvements constructed by Tenant, if any,
during any Extended Term.
3.5.4 Once Tenant delivers notice of its exercise of the
option to extend the Lease Term, Tenant may not withdraw such exercise and,
subject to the provisions of this Paragraph 3.5, such notice shall operate to
extend the Lease Term. Upon the extension of the Lease Term pursuant to this
Paragraph 3.5, the term "Lease Term" as used in this Lease shall thereafter
include the applicable Extended Term and the Lease Termination date shall be the
expiration date of the applicable Extended Term unless sooner terminated
pursuant to the terms hereof
4. Rent.
----
4.1 Rent. Tenant shall pay to Landlord as rent for the Premises
----
("Rent"), in advance, on the first day of each calendar month, commencing on the
date specified in
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Paragraph 1.6 and continuing throughout the initial five year Lease Term the
Rent set forth in Paragraph 1.8 above.
Rent shall be prorated, based on thirty (30) days per month, for any
partial month during the Lease Term. Rent shall be payable without deduction,
offset, prior notice or demand in lawful money of the United States to Landlord
at the address herein specified for purposes of notice or to such other persons
or such other places as Landlord may designate in writing. Concurrently with the
execution of this Lease, Tenant shall deliver to Landlord the amount of Fifteen
Thousand Dollars ($15,000), representing approximately one months' Rent, to be
applied to the Rent due under the Lease for the fourth month following the
Commencement Date.
4.2 Late Charge. Tenant hereby acknowledges that late payment by
-----------
Tenant to Landlord of Rent will cause Landlord to incur costs not contemplated
by this Lease, the exact amount of which will be extremely difficult to
ascertain. Such costs include, but are not limited to, processing and accounting
charges, and late charges which may be imposed on Landlord by the terms of any
mortgage or deed of trust covering the Premises. Accordingly, Tenant shall pay
to Landlord, as Additional Rent (as defined in Paragraph 4.3 below), a late
charge equal to six percent (6%) of any installment of Rent which is not
received by Landlord within ten (10) days after written notice that such
installment is past due; provided, however, if Tenant is delinquent in the
payment of any installment of Rent more than two (2) times in any twelve (12)
month period, Landlord shall be excused from delivering written notice of such
delinquency as a condition to Tenant's obligation to pay the late charge
described above. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Landlord will incur by reason of late
payment by Tenant. In no event shall this provision for a late charge be deemed
to grant to Tenant a grace period or extension of time within which to pay any
installment of Rent or prevent Landlord from exercising any right or remedy
available to Landlord upon Tenant's failure to pay such installment of Rent when
due, including without limitation the right to terminate this Lease. In the
event any installment of Rent is not received by Landlord by the thirtieth
(30th) day after the due date for such installment, such installment shall bear
interest at the annual rate set forth in Paragraph 34 below, commencing on the
thirty-first (31st) day after the due date for such installment and continuing
until such installment is paid in full.
4.3 Additional Rent. All taxes, charges, costs and expenses and other
---------------
sums which Tenant is required to pay hereunder (together with all interest and
charges that may accrue thereon in the event of Tenant's failure to pay the
same), and all damages, costs and reasonable expenses which Landlord may incur
by reason of any Default by Tenant shall be deemed to be additional rent
hereunder ("Additional Rent"). Additional Rent shall accrue commencing on the
Commencement Date. In the event of nonpayment by Tenant of any Additional Rent,
Landlord shall have all the rights and remedies with respect thereto as Landlord
has for the nonpayment of Rent. The term "Rentals" as used in this Lease shall
mean Rent and Additional Rent.
4.4 Rent During Extended Term. If Tenant elects to extend the Lease
-------------------------
Term pursuant to Paragraph 3.5 above, the annual Rent for each Extended Term
shall be in an amount equal to ninety-five percent (95%) of the fair market
rental value of the Premises in relation to market conditions at the time of the
commencement of the applicable Extended Term (including,
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but not limited to, rental rates for comparable space with comparable tenant
improvements and taking into consideration any adjustments to rent based upon
direct costs (operating expenses) and taxes, load factors, financing charges,
and/or cost of living or other rental adjustments; the relative strength of the
tenants; the size of the space; and any other factors which affect market rental
values at the time of the commencement of the applicable Extended Term); and
provided further, that the monthly Rent for the applicable Extended Term shall
in no event be lower than the monthly Rent payable immediately prior to the
applicable Extended Term.
4.4.1 Mutual Agreement. After timely receipt by Landlord of
----------------
Tenant's notice of exercise of the option to extend the Lease Term, Landlord and
Tenant shall have a period of fifteen (15) days in which to agree on the Rent
for the applicable Extended Term. If Landlord and Tenant agree on said Rent
during that period, they shall immediately execute an amendment to this Lease
stating the Rent for the applicable Extended Term. If Landlord and Tenant are
unable to agree on the Rent for the applicable Extended Term as aforesaid, the
provisions of Paragraph 4.4.2 below shall apply.
4.4.2 Appraisal. Within five (5) days after the expiration of
---------
the fifteen (15) day period described in Paragraph 4.4.1 above, each party at
its cost and by giving notice to the other party, shall appoint an M.A.I. real
estate appraiser, with at least (5) years full-time commercial appraisal
experience in Santa Clara County or Santa Cruz County, to appraise and set the
fair market rental value of the Premises. If a party does not appoint an
appraiser within five (5) days after the other party has given notice of the
name of its appraiser, the single appraiser appointed shall be the sole
appraiser and shall set the fair market rental value. The cost of such sole
appraiser shall be borne equally by the parties. If two (2) appraisers are
appointed by the parties as provided in this Paragraph 4.4.2, the two appraisers
shall meet promptly in an attempt to set the fair market rental value. If they
are unable to agree within twenty (20) days after the last appraiser has been
appointed, then the two (2) appraisers shall attempt to select a third (3rd)
appraiser meeting the qualifications stated in this Paragraph 4.4.2 within ten
(10) days after the last day the two (2) appraisers are given to set the fair
market rental value. If they are unable to agree on the third (3rd) appraiser,
either of the parties to this Lease, by giving ten (10) days notice to the other
party, may apply to the presiding judge of the Superior Court of Santa Cruz
County for the selection of a third (3rd) appraiser who meets the qualifications
stated above. Each of the parties shall bear one-half (2) of the cost of
appointing the third (3rd) appraiser and of paying the third (3rd) appraiser's
fee. The third appraiser, however selected, shall be a person who has not
previously acted in any capacity for either party. Within twenty (20) days after
the selection of the third appraiser, the majority of the appraisers shall set
the fair market rental value. If the majority of the appraisers are unable to
set the fair market rental value within said twenty (20) day period, the three
(3) appraisals shall be added together and the total divided by three (3); the
resulting quotient shall be the fair market rental value and shall be deemed
incorporated herein; provided, however, that if any appraisal differs from the
median appraisal by an amount equal to more than ten percent (10%) of such
median appraisal, that appraisal shall be disregarded, and the average of the
remaining appraisals (or the remaining appraisal) shall be the fair market
rental value. In establishing the fair market rental value, the appraiser or
appraisers shall consider the reasonable market rental value for the highest and
best use for the Premises (including, but not limited to, rental rates for
comparable space with comparable tenant improvements and any
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adjustments to rent based upon direct costs (operating expenses) and taxes, load
factors, financing charges, and/or cost of living or other rental adjustments;
the relative strength of the Tenant; and the size of the space); without regard
to the existence of this Lease but taking into consideration the triple net
nature of this Lease. The appraiser shall have the right to include adjustments
to the Rent during the Extended Term as part of the fair market rental value of
the Premises.
5. Security Deposit. Concurrently with Tenant's execution of this Lease,
----------------
Tenant shall deposit with Landlord a security deposit ("Security Deposit") in
the amount set forth in Paragraph 1.11 above. The Security Deposit shall be held
by Landlord as security for the faithful performance by Tenant of each and every
term, covenant and condition of this Lease applicable to Tenant, and not as
prepayment of Rent. If Tenant shall at any time fail to keep or perform any
term, covenant or condition of this Lease applicable to Tenant, including
without limitation, the payment of Rentals or those provisions requiring Tenant
to repair damage to the Premises caused by Tenant or to surrender the Premises
in the condition required pursuant to Paragraph 35 below, Landlord may, but
shall not be obligated to, and without waiving or releasing Tenant from any
obligation under this Lease, use, apply or retain the whole or any part of the
Security Deposit reasonably necessary for the payment of any amount which
Landlord may spend by reason of Tenant's default or as necessary to compensate
Landlord for any loss or damage which Landlord may suffer by reason of Tenant's
default. In the event Landlord uses or applies any portion of the Security
Deposit, Tenant shall, within five (5) business days after written demand by
Landlord, remit to Landlord sufficient funds to restore the Security Deposit to
its original sum. Failure by Tenant to so remit funds shall be a Default by
Tenant. Should Tenant comply with all of the terms, covenants and conditions of
this Lease applicable to Tenant, the balance of the Security Deposit shall be
returned to Tenant within fourteen (14) days after Lease Termination and
surrender of the Premises by Tenant; provided, however, if any portion of the
Security Deposit is to be applied to repair damages to the Premises caused by
Tenant or Tenant's agents, to clean the Premises, or to remove alterations and
restore the Premises pursuant to Paragraph 13.2 below, then the balance of the
Security Deposit shall be returned to Tenant no later than thirty (30) days
after the date Landlord receives possession of the Premises.
6. Use of Premises.
---------------
6.1 Permitted Uses. Tenant shall use the Premises and the Common Area
--------------
only in conformance with applicable governmental or quasi-governmental laws,
statutes, orders, regulations, rules, ordinances and other requirements now or
hereafter in effect (collectively, "Laws") and shall use the Premises solely for
the purposes set forth in Paragraph 1.9 above, and for no other purpose without
the prior written consent of Landlord, which consent may be given or withheld by
Landlord in its sole discretion. Tenant acknowledges and agrees that Landlord
has selected or will be selecting tenants for the Building in order to produce a
mix of tenant uses compatible and consistent with the design integrity of the
Building and with other business uses of the Building; provided, however, the
selection of Building tenants shall be in Landlord's reasonable discretion and
Landlord in making such selection shall not be deemed to be warranting that any
use of the Building made by any such tenant is compatible or consistent with the
design integrity of the Building or other uses of the Building. Any change in
use of the Premises or the Common Area without the prior written consent of
Landlord shall be a Default by Tenant.
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6.2 Tenant to Comply with Legal Requirements. Tenant shall, at its
----------------------------------------
sole cost, promptly comply with all Laws relating to or affecting Tenant's
particular use or occupancy of the Premises or use of the Common Area, now in
force, or which may hereafter be in force, including without limitation those
relating to utility usage and load or number of permissible occupants or users
of the Premises, whether or not the same are now contemplated by the parties;
and with the requirements of any board of fire underwriters (or similar body now
or hereafter constituted) relating to or affecting Tenant's particular or
occupancy of the Premises or use of the Common Area. Tenant's obligations
pursuant to this Paragraph 6.2 shall include, without limitation, maintaining or
restoring the Premises and making structural and non-structural alterations and
additions in compliance and conformity with all Laws and recorded documents
(including, without limitation, alterations or additions to the Premises,
Building or Common Area that are required pursuant to the requirements of Title
III of the Americans with Disabilities Act of 1990, 42 U.S.C. section 12101 et.
seq., and the regulations promulgated thereunder), each relating to Tenant's
particular use or occupancy of the Premises during the Lease Term or alterations
made to the Premises by Tenant. Any alterations or additions undertaken by
Tenant pursuant to this Paragraph 6.2 shall be subject to the requirements of
Paragraph 13.1 below. At Landlord's option, Landlord may make the required
alteration, addition or change, and Tenant shall pay the cost thereof as
Additional Rent. The foregoing notwithstanding, Landlord shall make any
alteration or addition required by the applicable governmental agency or
agencies having jurisdiction over the same to bring the Premises, the Building
or the Common Area into compliance with legal requirements in effect at the time
the Premises, any improvements installed in the Premises as of the date of this
Lease by Landlord, the Building or the Common Area, respectively, were
originally constructed.
Tenant shall obtain prior to taking possession of the Premises any permits,
licenses or other authorizations required for the lawful operation of its
business at the Premises. The judgment of any court of competent jurisdiction or
the admission of Tenant in any action or proceeding against Tenant, regardless
of whether Landlord is a party thereto or not, that Tenant has violated such Law
or recorded document relating to Tenant's particular use or occupancy of the
Premises or use of the Common Area shall be conclusive of the fact of such
violation by Tenant.
6.3 Prohibited Uses. Tenant and Tenant's agents shall not do or
---------------
permit anything to be done in or about the Premises or Common Area which will in
any way obstruct or interfere with the rights of any other tenants of the
Building, other authorized users of the Common Area, or occupants of neighboring
property, or injure or annoy them. Tenant shall not conduct or permit any
auction or sale open to the public to be held or conducted on or about the
Premises or Common Area. Tenant and Tenant's agents shall not use or allow the
Premises to be used for any unlawful, immoral or hazardous purpose or any
purpose not permitted by this Lease, nor shall Tenant or Tenant's agents cause,
maintain, or authorize any nuisance in, on or about the Premises. Tenant and
Tenant's agents shall not do or authorize anything to be done in or about the
Premises nor bring or keep anything in the Premises which will in any way
increase the rate of any insurance upon any portion of the Project or any of its
contents, or cause a cancellation of any insurance policy covering any portion
of the Project or any of its contents, nor shall Tenant or
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Tenant's agents keep, use or sell or permit to be kept, used or sold in or about
the Premises any articles which may be prohibited by a standard form policy of
fire insurance. In the event the rate of any insurance upon any portion of the
Project or any of its contents is increased because of Tenant's particular use
of the Premises or that of Tenant's agents, Tenant shall pay, as Additional
Rent, the full cost of such increase; provided, however this provision shall in
no event be deemed to constitute a waiver of Landlord's right to declare a
default hereunder by reason of the act or conduct of Tenant or Tenant's agents
causing such increase or of any other rights or remedies of Landlord in
connection therewith. Tenant and Tenant's agents shall not place any loads upon
the floor, walls or ceiling of the Premises which would endanger the Building or
the structural elements thereof or of the Premises, nor place any harmful
liquids in the drainage system of the Building or Common Area. No waste
materials or refuse shall be dumped.upon or authorized to remain upon any part
of the Project except in enclosed trash containers designated for that purpose
by Landlord. No materials, supplies, equipment, finished products (or semi-
finished products), raw materials, or other articles of any nature shall be
stored upon, or be authorized to remain on, any portion of the Project outside
the Premises.
6.4 Hazardous Materials. Neither Tenant nor Tenant's agents shall
-------------------
authorize or cause the introduction, placement, use, storage, manufacture,
transportation, release or disposition (collectively "Release") of any Hazardous
Material(s) (defined below) on or about any portion of the Project without the
prior written consent of Landlord, which consent may be withheld in the sole and
absolute discretion of Landlord without any requirement of reasonableness in the
exercise of that discretion. Notwithstanding the immediately preceding sentence
to the contrary, Tenant may use customary quantities of the types of materials
which are technically classified as Hazardous Materials but commonly used in
domestic or office use to the extent not in an amount, which, either
individually or cumulatively, would be a "reportable quantity" under any
applicable Law. Tenant covenants that, at its sole cost and expense, Tenant will
comply with all applicable Laws with respect to the Release by Tenant, its
agents, employees, contractors or invitees of such permitted Hazardous
Materials. Any Release beyond the scope allowed in this paragraph shall be
subject to Landlord's prior consent, which may be withheld in Landlord's sole
and absolute discretion, and shall require an amendment to the Lease in the
event Landlord does consent which shall set forth the materials, scope of use,
indemnification and any other matter required by Landlord in Landlord's sole and
absolute discretion. Tenant covenants and agrees to promptly notify Landlord in
writing of any Hazardous Materials that Tenant or its agents, employees or
contractors discover or are notified of located or existing on, in or under the
Premises, the Land, the Building, the Common Areas or the Project, or any
portion thereof Tenant shall indemnify, defend and hold Landlord and Landlord's
agents harmless from and against any and all claims, losses, damages,
liabilities, or expenses arising in connection with the Release of Hazardous
Materials in violation of Hazardous Materials Laws by Tenant, Tenant's agents or
any other person using the Premises with Tenant's knowledge and consent or
authorization. Tenant's obligation to defend, hold harmless and indemnity
pursuant to this Paragraph 6.4 shall survive Lease Termination. The foregoing
indemnity shall not apply to, and Tenant shall not be responsible for, the
presence of Hazardous Materials on, under, or about the Premises, Building or
Common Area to the extent caused by any third parties or by Landlord or
Landlord's employees, agents, contractors or invitees.
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Landlord shall indemnify, defend and hold Tenant and Tenant's agents
harmless from and against any and all claims, losses, damages, liabilities, or
expenses arising in connection with the Release of Hazardous Materials in
violation of Hazardous Materials Laws by Landlord or Landlord's agents,
employees or other authorized representatives. Landlord's obligation to defend,
hold harmless and indemnify pursuant to this Paragraph 6.4 shall survive Lease
Termination. The foregoing indemnity shall not apply to, and Landlord shall not
be responsible for, the presence of Hazardous Materials on, under, or about the
Premises, Building or Common Area to the extent caused by any third parties or
by Tenant or Tenant's employees, agents, contractors or invitees.
As used in this Lease, the term "Hazardous Materials" means any chemical,
substance, waste or material which has been or is hereafter determined by any
federal, state or local governmental authority to be capable of posing risk of
injury to health or safety, including without limitation, those substances
included within the definitions of "hazardous substances," "hazardous
materials," "toxic substances," or "solid waste" under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Hazardous Materials
Transportation Act, as amended, and in the regulations promulgated pursuant to
said laws; those substances defined as "hazardous wastes" in section 25 117 of
the California Health & Safety Code, or as "hazardous substances" in section 253
16 of the California Health & Safety Code, as amended, and in the regulations
promulgated pursuant to said laws; those substances listed in the United States
Department of Transportation Table (49 CFR 172.101 and amendments thereto) or
designated by the Environmental Protection Agency (or any successor agency) as
hazardous substances (see, e.g., 40 CFR Part 302 and amendments thereto); such
--- ---
other substances, materials and wastes which are or become regulated or become
classified as hazardous or toxic under any Laws, including without limitation
the California Health & Safety Code, Division 20, and Title 26 of the California
Code of Regulations; and any material, waste or substance which is (i)
petroleum, (ii) asbestos, (iii) polychlorinated biphenyls, (iv) designated as a
"hazardous substance" pursuant to section 3 11 of the Clean Water Act of 1977,
33 U.S.C. sections 1251 et seq (33 U.S.C. ' 1321) or listed pursuant to
-- ---
section 307 of the Clean Water Act of 1977 (33 U.S.C. ' 1317), as amended; (v)
flammable explosives; (vi) radioactive materials; or (vii) radon gas.
Landlord shall have the right, upon reasonable advance notice to Tenant, to
inspect, investigate, sample and/or monitor the Premises, the Building and
Common Area, including any soil, water, groundwater, or other sampling, to the
extent reasonably necessary to determine whether Tenant is complying with the
terms of this Lease with respect to Hazardous Materials. Unless a previous
inspection has disclosed a violation by Tenant of the covenants contained in
this Paragraph 6.4, such inspections, investigations, sampling and/or monitoring
shall be performed not more often than semi-annually. In connection therewith,
Tenant shall provide Landlord with reasonable access to all portions of the
Premises; provided, however, that Landlord shall avoid any unreasonable
interference with the operation of Tenant's business on the Premises. If an
inspection by Landlord discloses a violation by Tenant of the covenants
contained in this Paragraph 6.4, then all costs reasonably incurred by Landlord
in performing such inspection, as well as future inspections, investigation,
sampling and/or monitoring to determine the extent or remediation of such
Hazardous Materials generated by Tenant or any of its agents, employees,
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contractors or authorized representatives shall be reimbursed by Tenant to
Landlord as Additional Rent within ten (10) days after Landlord's demand for
payment.
Landlord shall be responsible, if required by the applicable governmental
agency or agencies having jurisdiction over the clean up or remediation of
Hazardous Materials on the Project, or any portion thereof, for the clean up or
remediation, at no cost to Tenant, of any Hazardous Materials that exist on the
Project, or any portion thereof, as of the date of execution of this Lease.
Landlord hereby indemnifies and holds Tenant harmless from and against all clean
up and remediation costs and expenses related to any and all Hazardous Materials
that exist in , on or under the Project, or any portion thereof, as to the date
of execution of this Lease. The foregoing indemnity and hold harmless obligation
of Landlord shall not extend to or cover any damages or losses suffered or
incurred by Tenant to the extent Tenant takes any action that exacerbates any
Hazardous Materials condition existing as of the execution of this Lease.
7. Taxes.
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7.1 Personal Property Taxes. Tenant shall cause Tenant's trade
-----------------------
fixtures, equipment, furnishings, furniture, merchandise, inventory, machinery,
appliances and other personal property installed or located on the Premises
(collectively the "personal property") to be assessed and billed separately from
the Land and the Building. Tenant shall pay before delinquency any and all
taxes, assessments and public charges levied, assessed or imposed upon or
against Tenant's personal property. If any of Tenant's personal property shall
be assessed with the Land or the Building, Tenant shall pay to Landlord, as
Additional Rent, the amounts attributable to Tenant's personal property within
thirty (30) days after receipt of a written statement from Landlord setting
forth the amount of such taxes, assessments and public charges attributable to
Tenant's personal property. Tenant shall comply with the provisions of any Law
which requires Tenant to file a report of Tenant's personal property located on
the Premises.
7.2 Other Taxes Payable Separately by Tenant. Tenant shall pay (or
----------------------------------------
reimburse Landlord, as Additional Rent, if Landlord is assessed), prior to
delinquency or within thirty (30) days after receipt of Landlord's statement
thereof, any and all taxes, levies, assessments or surcharges payable by
Landlord or Tenant and relating to this Lease or the Premises (other than
Landlord's net income, succession, transfer, gift, franchise, estate or
inheritance taxes, and Taxes, as that term is defined in Paragraph 7.3.1 below,
payable as a Common Area Charge), whether or not now customary or within the
contemplation of the parties hereto, whether or not now in force or which may
hereafter become effective, including but not limited to taxes:
7.2.1 Upon, allocable to, or measured by the area of the
Premises or the Rentals payable hereunder, including without limitation any
gross rental receipts, excise, or other tax levied by the state, any political
subdivision thereof, city or federal government with respect to the receipt of
such Rentals;
7.2.2 Upon or with respect to the use, possession occupancy,
leasing, operation and management of the Premises or any portion thereof
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7.2.3 Upon this transaction or any document to which Tenant is a
party creating or transferring an interest or an estate in the Premises; or
7.2.4 Imposed as a means of controlling or the use of energy or
any natural resource (including without limitation gas, electricity or water),
including, without limitation, any parking taxes, levies or charges or vehicular
regulations imposed by any governmental agency. Tenant shall also pay, prior to
delinquency, all privilege, sales, excise, use, business, occupation, or other
taxes, assessments, license fees, or charges levied, assessed or imposed upon
Tenant's business operations conducted at the Premises.
In the event any such taxes are payable by Landlord and it shall not be
lawful for Tenant to reimburse Landlord for such taxes, then the Rentals payable
hereunder shall be increased to net Landlord the same net Rental after
imposition of any such tax upon Landlord as would have been payable to Landlord
prior to the imposition of any such tax.
7.3 Common Taxes.
------------
7.3.1 Definition of Taxes. The term "Taxes" as collectively mean
-------------------
(to the extent any of the following are not paid used in this Lease shall by
Tenant pursuant to Paragraphs 7.1 and 7.2 above) all real estate taxes and
general and special assessments (including, but not limited to, assessments for
public improvements or benefit); personal property taxes; taxes based on
vehicles utilizing parking areas on the Land; taxes computed or based on rental
income or on the square footage of the Premises or the Building (including
without limitation any municipal business tax but excluding federal, state and
municipal net income taxes); environmental surcharges; excise taxes; gross
rental receipts taxes; sales and/or use taxes; employee taxes; water and sewer
taxes, levies, assessments and other charges in the nature of taxes or
assessments (including, but not limited to, assessments for public improvements
or benefit); and all 'other governmental, quasi-governmental or special district
impositions of any kind and nature whatsoever; regardless of whether any of the
foregoing are now customary or within the contemplation of the parties hereto
and regardless of whether resulting from increased rate and/or valuation, or
whether extraordinary or ordinary, general or special, unforeseen or foreseen,
or similar or dissimilar to any of the foregoing and which during the Lease Term
are laid, levied, assessed or imposed upon Landlord and/or become a lien upon or
chargeable against any portion of the Project under or by virtue of any present
or future laws, statutes, ordinances, regulations, or other requirements of any
governmental, quasi-governmental or special district authority whatsoever. The
term "environmental surcharges" shall include any and all expenses, taxes,
charges or penalties imposed by the Federal Department of Energy, Federal
Environmental Protection Agency, the Federal Clean Air Act, or any regulations.
promulgated thereunder, or imposed by any other local, state or federal
governmental agency or entity now or hereafter vested with the power to impose
taxes, assessments or other types of surcharges as a means of controlling
environmental pollution or the use of energy or any natural resource in regard
to the use, operation or occupancy of the Project. The term "Taxes" shall
include (to the extent the same are not paid by Tenant pursuant to Paragraphs
7.1 and 7.2 above), without limitation, all taxes, assessments, levies, fees,
impositions or charges levied, imposed, assessed, measured, or based in any
manner whatsoever upon or with respect to the use, change in ownership,
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possession, occupancy, leasing, operation or management of the Project or in
lieu of or equivalent to any Taxes set forth in this Paragraph 7.3.1. In the
event any such Taxes are payable by Landlord and it shall not be lawful for
Tenant to reimburse Landlord for such Taxes, then the Rentals payable hereunder
shall be increased to net Landlord the same net Rental after imposition of any
such Tax upon Landlord as would have been payable to Landlord prior to the
imposition of any such Tax.
Notwithstanding anything to the contrary contained in this Lease, Tenant
shall not be required to pay any portion of any tax or assessment (i) in excess
of the amount which would be payable if the tax or assessment were paid in
installments over the longest possible term; or (ii) imposed on land and
improvements other than the Project.
7.3.2 Common Area Charge. All Taxes which are levied or assessed
------------------
or which become a lien upon any portion of the Project or which become due or
accrue during the Lease Term shall be a Common Area Charge, and Tenant shall pay
as Additional Rent each month during the Lease Term 1/12th of its annual share
of such Taxes, based on Landlord's estimate thereof, pursuant to Paragraph 12
below. Tenant's share of Taxes during any partial tax fiscal year(s) within the
Lease Term shall be prorated according to the ratio which the number of days
during the Lease Term or of actual occupancy of the Premises by Tenant,
whichever is greater, during such year bears to 365.
8. Insurance, Indemnity, Waiver.
----------------------------
8.1 Insurance by Landlord. Landlord may, during the Lease Term,
---------------------
procure and keep in force the following insurance, the cost of which if paid or
incurred by Landlord, shall be a Common Area Charge, payable by Tenant pursuant
to Paragraph 12 below:
8.1.1 Property Insurance. "All risk" property insurance,
------------------
including, without limitation, boiler and machinery (if applicable); sprinkler
damage; vandalism; malicious mischief, full coverage plate glass insurance; and
demolition, increased cost of construction and contingent liability from change
in building laws on the Building and the Land, including any improvements or
fixtures constructed or installed in the Building and on the Land by Landlord.
Such insurance may also include flood and earthquake coverage, however, Tenant
shall only be obligated to pay, as a Common Area Charge, its percentage share of
the premium associated with such flood and/or earthquake insurance coverage if
such insurance premium was available at a reasonable rate.. Such insurance shall
be in the full amount of the replacement cost of the foregoing, with reasonable
deductible amounts, which deductible amounts shall be a Common Area Charge,
payable by Tenant pursuant to Paragraph 12. Such insurance may also include
rental income insurance, insuring that one hundred percent (100%) of the Rentals
(as the same may be adjusted hereunder) will be paid to Landlord for a period of
up to twelve (12) months if the Premises are destroyed or damaged, or such
longer period as may be required by any beneficiary of a deed of trust or any
mortgagee of any mortgage affecting the Premises. Such insurance shall not cover
any leasehold improvements installed in the Premises by Tenant at its expense,
or Tenant's equipment, trade fixtures, inventory, fixtures or personal property
located on or in the Premises;
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8.1.2 Liability Insurance. Comprehensive general liability
-------------------
(lessor's risk) insurance against any and all claims for personal injury, death
or property damage occurring in or about the Building or the Land. Such
insurance shall have a combined single limit of not less than Two Million
Dollars ($2,000,000) per occurrence and Three Million Dollars ($3,000,000)
aggregate; and
8.1.3 Other. Such other insurance as Landlord reasonably deems
-----
necessary and prudent.
8.2 Insurance by Tenant. Tenant shall, during the Lease Term, at
-------------------
Tenant's sole cost and expense, procure and keep in force the following
insurance:
8.2.1 Personal Property Insurance. "All risk" property insurance,
---------------------------
including, without limitation, coverage for boiler and machinery (if
applicable); sprinkler damage; vandalism; malicious mischief, and demolition,
increased cost of construction and contingent liability from changes in building
laws on all leasehold improvements installed in the Premises by Tenant at its
expense (if any), and on all equipment, trade fixtures, inventory, fixtures and
personal property located on or in the Premises, including improvements or
fixtures hereinafter constructed or installed on the Premises. Such insurance
shall be in an amount equal to the full replacement cost of the aggregate of the
foregoing and shall provide coverage comparable to the coverage in the standard
ISO all risk form, when such form is supplemented with the coverages required
above.
8.2.2 Liability Insurance. Comprehensive general liability
-------------------
insurance for the mutual benefit of Landlord and Tenant, against any and all
claims for personal injury, death or property damage occurring in or about the
Premises and Common Area or arising out of Tenant's or Tenant's agents' use of
the Common Area, use or occupancy of the Premises or Tenant's operations on the
Premises. Such insurance shall have a combined single limit of not less than Two
Million Dollars ($2,000,000) per occurrence and Three Million Dollars
($3,000,000) aggregate. Such insurance shall contain a cross-liability
(severability of interests) clause and an extended ("broad form") liability
endorsement, including blanket contractual coverage. The minimum limits
specified above are the minimum amounts required by Landlord, and may be revised
by Landlord from time to time to meet changed circumstances, including without
limitation to reflect (i) changes in the purchasing power of the dollar, (ii)
changes indicated by the amount of plaintiffs' verdicts in personal injury
actions in the State of California, or (iii) changes consistent with the
standards required by other landlords in the county in which the Premises are
located. Such liability insurance shall be primary and not contributing to any
insurance available to Landlord, and Landlord's insurance (if any) shall be in
excess thereto. Such insurance shall specifically insure Tenant's performance of
the indemnity, defense and hold harmless agreements contained in Paragraph 8.4,
although Tenant's obligations pursuant to Paragraph 8.4 shall not be limited to
the amount of any insurance required of or carried by Tenant under this
Paragraph 8.2.2. Tenant shall be responsible for insuring that the amount of
insurance maintained by Tenant is sufficient for Tenant's purposes.
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<PAGE>
8.2.3 Other. Such other insurance as required by law, including,
-----
without limitation, workers' compensation insurance.
8.2.4 Form of the Policies. The policies required to be
--------------------
maintained by Tenant pursuant to Paragraphs 8.2.1, 8.2.2 and 8.2.3 above shall
be with companies, on forms, with deductible amounts (if any), and loss payable
clauses reasonably satisfactory to Landlord, shall include Landlord and the
beneficiary or mortgagee of any deed of trust or mortgage encumbering the
Premises and/or the Land as additional insureds, and shall provide that such
parties may, although additional insureds, recover for any loss suffered by
Tenant's negligence. Certified copies of policies or certificates of insurance
shall be delivered to Landlord prior to the Commencement Date; a new policy or
certificate shall be delivered to Landlord at least ten (10) business days prior
to the expiration date of the old policy. Tenant shall have the right to provide
insurance coverage which it is obligated to carry pursuant to the terms hereof
in a blanket policy, provided such blanket policy expressly affords coverage to
the Premises and Common Area and to Tenant as required by this Lease. Tenant
shall obtain a written obligation on the part of Tenant's insurer(s) to notify
Landlord and any beneficiary or mortgagee of a deed of trust or mortgage
encumbering the Premises and/or the Land in writing of any delinquency in
premium payments and at least thirty (30) days prior to any cancellation or
modification of any policy. Tenant's policies shall provide coverage on an
occurrence basis and not on a claims made basis. In no event shall the limits of
any policies maintained by Tenant be considered as limiting the liability of
Tenant under this Lease.
8.3 Failure by Tenant to Obtain Insurance. If Tenant does not take
-------------------------------------
out the insurance required pursuant to Paragraph 8.2 or keep the same in full
force and effect, Landlord may, but shall not be obligated to, take out the
necessary insurance and pay the premium therefor, and Tenant shall repay to
Landlord, as Additional Rent, the amount so paid promptly upon demand. In
addition, Landlord may recover from Tenant and Tenant agrees to pay, as
Additional Rent, any and all reasonable expenses (including reasonable
attorneys' fees) and damages which Landlord may sustain by reason of the failure
of Tenant to obtain and maintain such insurance, it being expressly declared
that the expenses and damages of Landlord shall not be limited to the amount of
the premiums thereon.
8.4 Indemnification. Tenant shall indemnify, hold harmless, and
---------------
defend Landlord with competent counsel reasonably satisfactory to Landlord
(except for Landlord's negligence or willful misconduct, or that of its agents,
employees, contractors or invitees) against all claims, losses, damages,
expenses or liabilities for injury or death to any person or for damage to or
loss of use of any property arising out of any occurrence in, on or about the
Building, Common Area or Land, if caused or contributed to by Tenant or Tenant's
agents, or arising out of any occurrence in, upon or at the Premises or on
account of the use, condition (but only to the extent Tenant is responsible for
the same elsewhere under the terms of this Lease), occupational safety (but only
to the extent Tenant is responsible for the same elsewhere under the terms of
this Lease), or occupancy of the Premises. Tenant's indemnification, defense and
hold harmless obligations under this Lease shall include and apply to reasonable
attorneys' fees, investigation costs, and other costs actually incurred by
Landlord. Tenant shall further indemnify, defend and hold harmless Landlord from
and against any and all claims, losses, damages, liabilities or
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expenses arising from any breach or default in the performance of any obligation
on Tenant's part to be performed under the terms of this Lease. The provisions
of this Paragraph 8.4 shall survive Lease Termination with respect to any
damage, injury, death, breach or default occurring prior to such termination.
Except as set forth in this Paragraph 8.4, this Lease is made on the express
condition that Landlord shall not be liable for, or suffer loss by reason of,
injury to person or property, from whatever cause, in any way connected with the
condition, use, occupational safety or occupancy of the Premises specifically
including, without limitation, any liability for injury to the person or
property of Tenant or Tenant's agents. The provisions of this Paragraph 8.4
shall not apply to the extent of any claims, losses, damages, expenses or
liabilities caused by Landlord's negligence or willful misconduct, or that of
its agents, employees, contractors or invitees.
8.5 Claims by Tenant. Except for Landlord's negligence or willful
----------------
misconduct, or that of its agents, employees, contractors or invitees, Landlord
shall not be liable to Tenant, and Tenant waives all claims against Landlord,
for injury or death to any person, damage to any property, or loss of use of any
property in any portion of the Project by and from all causes, including without
limitation, any defect in any portion of the Project and/or any damage or injury
resulting from fire, steam, electricity, gas, water or rain, which may leak or
flow from or into any part of the Premises, or from breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, whether the damage or injury results from
conditions arising upon the Premises or upon other portions of the Project or
from other sources. Neither Landlord nor Tenant shall be liable for any damages
arising from any act or negligence of any other tenant or user of the Project.
Tenant or Tenant's agents shall immediately notify Landlord in writing of any
known defect in the Project. The provisions of this Paragraph 8.5 shall not
apply to any damage or injury caused by Landlord's willful misconduct or
negligence, or that of its agents, employees, contractors or invitees. Anything
in this Lease to the contrary notwithstanding, under no circumstances shall
Landlord be liable to Tenant for lost profits or loss of business or income.
8.6 Mutual Waiver of Subrogation. Landlord hereby releases Tenant,
----------------------------
and Tenant hereby releases Landlord, and their respective officers, agents,
employees and servants, from any and all claims or demands of damages, loss,
expense or injury to the Project, or to the furnishings, fixtures, equipment,
inventory or other property of either Landlord or Tenant in, about or upon the
Project, which is caused by or results from perils, events or happenings which
are the subject of insurance carried by the respective parties pursuant to this
Paragraph 8 and in force at the time of any such loss, whether due to the
negligence of the other party or its agents and regardless of cause or origin;
provided, however, that such waiver shall be effective only to the extent
permitted by the insurance covering such loss, to the extent such insurance is
not prejudiced thereby, and to the extent insured against.
9. Utilities. Tenant shall pay during the Lease Term and prior to
---------
delinquency all charges for water, gas, light, heat, power, electricity,
telephone or other communication service, janitorial service, trash pick-up,
sewer and all other services supplied to Tenant or consumed by Tenant on the
Premises (collectively the "Services") and all taxes, levies, fees or surcharges
therefor. Tenant shall arrange for Services to be supplied to the Premises and
shall contract for all of the Services in Tenant's name prior to the
Commencement Date. The Commencement Date
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<PAGE>
shall not be delayed by reason of any failure by Tenant to so contract for
Services. Tenant shall be responsible for providing janitorial service to the
Premises. In the event that any of the Services are not separately billed or
metered to the Premises, or if any of the Services are not separately metered as
of the Commencement Date, the cost of such Services shall be a Common Area
Charge and Tenant shall pay, as Additional Rent, Tenant's proportionate share of
such cost to Landlord as provided in Paragraph 12 below, except that if any
meter services less than the entire Building, Tenant's proportionate share of
the costs measured by such meter shall be based upon the square footage of the
gross leasable area in the Premises as a percentage of the total square footage
of the gross leasable area of the portion of the Building serviced by such
meter. If Landlord determines that Tenant is using a disproportionate amount of
any commonly metered Services or an amount in excess of the customary amount of
any Services ordinarily furnished for use of the Premises in accordance with the
uses set forth in Paragraph 6 above, then Landlord may elect to periodically
charge Tenant, as Additional Rent, a sum equal to Landlord's estimate of the
cost of Tenant's excess use of any or all such Services. The lack or shortage of
any Services due to any cause whatsoever (except for a lack or shortage
proximately caused by the negligent acts or willful misconduct Landlord or that
of its agents, employees, contractors or invitees) shall not affect any
obligation of Tenant hereunder, and Tenant shall faithfully keep and observe all
the terms, conditions and covenants of this Lease and pay all Rentals due
hereunder, all without diminution, credit or deduction.
Tenant shall be responsible for the installation (using only a licensed
contractor or contractors) and maintenance of its own telecommunications, data,
telephone and phone system lines and wiring in accordance with the terms of this
Lease. Landlord represents and warrants to Tenant that fiber optic lines and T-1
lines are available to the Building and that Tenant shall have the non-exclusive
right, at its sole cost, to use or hook into such lines. Landlord further
represents and warrants that an uninterruptable power supply unit and emergency
backup generator are available to the Building. Tenant shall have the non-
exclusive right, at its sole cost, to hook or plug into such uninterrruptable
power supply unit. Landlord agrees to procure and maintain a maintenance service
contract (covering periodic inspection and servicing) on such uninterruptable
power supply unit and emergency backup generator. Tenant agrees to pay its
equitable share of the costs of periodic inspection and regular servicing of the
uninterruptable power supply unit (as reasonably determined by Landlord) within
thirty (30) days following receipt of a written statement or invoice evidencing
such costs and an explanation of the manner in which Tenant's share of such
costs was determined. Tenant further agrees that the costs of periodic
inspection and servicing of the emergency backup generator shall be a Common
Area Charge and Tenant shall pay, as Additional Rent, Tenant's proportionate
share of such costs to Landlord as provided in Paragraph 12 below. If the
uninterruptable power supply unit or emergency backup generator fails or Tenant
experiences problems with the same, then Tenant agrees to contact the
maintenance service contractor hired by Landlord to inspect and service such
equipment and notify such contractor of the problems experienced by Tenant.
Promptly following the date Landlord hires such maintenance service contractor,
Landlord shall furnish Tenant with the name, address and telephone number of
such contractor. Tenant agrees that, so long as Landlord has obtained a
maintenance service contract covering the uninterruptable power supply unit and
emergency backup generator, Landlord shall not be liable for any damages or
losses suffered or incurred by Tenant as a result of, arising from or related
to, the uninterruptable
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<PAGE>
power supply unit or emergency backup generator failing or malfunctioning;
provided, however, Landlord shall be liable for such damages or losses suffered
or incurred by Tenant as a result of the uninterruptable power supply unit or
emergency backup generator failing or malfunctioning if such failure or
malfunctioning occurred due to the negligence or willful misconduct of Landlord
or its agents, employee or contractors. The preceding sentence to the contrary
notwithstanding, in no event shall Landlord be liable to Tenant for loss
profits, loss of income or loss of business.
10. Repairs and Maintenance.
-----------------------
10.1 Landlord's Responsibilities. Subject to the provisions of
---------------------------
Paragraph 15 below, Landlord shall maintain in reasonably good order and repair
the structural roof, structural and exterior walls (including painting thereof)
and foundations of the Building. In addition, Landlord shall maintain the
heating and air conditioning systems of the Premises or obtain and maintain the
service contract (covering periodic inspection and servicing) for the heating
and air conditioning systems of the Premises. Tenant shall give prompt written
notice to Landlord of any known maintenance work required to be made by Landlord
pursuant to this Paragraph 10.1. The costs of (i) periodic inspection and
regular servicing of the heating and air conditioning systems of the Premises,
and (ii) painting the exterior of the Premises which are the obligation of
Landlord hereunder shall be a Common Area Charge and Tenant shall pay, as
Additional Rent, Tenant's share of such costs to Landlord as provided in
Paragraph 12 below. The costs of maintenance, repair, and replacement of the
structural parts of the Premises and the Building (including foundations, floor
slab, load bearing waIls and roof structure) which are the obligation of
Landlord hereunder shall be at the cost and expense of Landlord and shall not be
a Common Area Charge, except for any repairs required because of the wrongful
act of Tenant or Tenant's agents, which repairs shall be made at the expense of
Tenant and as Additional Rent.
10.2 Tenant's Responsibilities. Except as expressly provided in
-------------------------
Paragraph 10.1 above, and subject to the provisions of Paragraph 2.3 above,
Tenant shall, at its sole cost, maintain the entire Premises and every part
thereof, including without limitation, windows, skylights, window frames, plate
glass, freight docks, doors and related hardware, interior walls and partitions,
and the electrical, plumbing and lighting, systems in good order, condition and
repair. If Tenant fails to make repairs or perform maintenance work required of
Tenant hereunder within fourteen (14) days after written notice from Landlord
specifying the need for such repairs or maintenance work, Landlord or Landlord's
agents may, in addition to all other rights and remedies available hereunder or
by law and without waiving any alternative remedies, enter into the Premises and
make such repairs and/or perform such maintenance work. If Landlord makes such
repairs and/or performs such maintenance work, Tenant shall reimburse Landlord
upon demand and as Additional Rent, for the cost of such repairs and/or
maintenance work. Landlord shall use reasonable efforts to avoid causing any
inconvenience to Tenant or interference with the use of the Premises by Tenant
or Tenant's agents during the performance of any such repairs or maintenance.
Landlord shall have no liability to Tenant for any damage, inconvenience or
interference with the use of the Premises by Tenant or Tenant's agents as a
result of Landlord performing any such repairs or maintenance (except for the
negligent acts or willful misconduct Landlord or that of its agents, employees,
contractors or invitees). Except to the extent covered by insurance required to
be maintained (or actually maintained) by Landlord under Article 8 of
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<PAGE>
this Lease, Tenant shall reimburse Landlord, on demand and as Additional Rent,
for the cost of damage to the Project caused by Tenant or Tenant's agents.
Tenant expressly waives the benefits of any statute now or hereafter in effect
(including without limitation the provisions of subsection 1 of Section 1932,
Section 1941 and Section 1942 of the California Civil Code and any similar law,
statute or ordinance now or hereafter in effect) which would otherwise afford
Tenant the right to make repairs at Landlord's expense (or to deduct the cost of
such repairs from Rentals due hereunder) or to terminate this Lease because of
Landlord's failure to keep the Premises in good and sanitary order.
11. Common Area.
-----------
11.1 In General. Subject to the terms and conditions of this Lease and
----------
such rules and regulations as Landlord may from time to time prescribe, Tenant
and Tenant's agents shall have, in common with other tenants of the Building and
other permitted users, the nonexclusive right to use during the Lease Term the
access roads, parking areas, sidewalks, landscaped areas and other facilities on
the Land or in the Building designated by Landlord for the general use and
convenience of the occupants of the Building and other authorized users, which
areas and facilities are referred to herein as the "Common Area." This right to
use the Common Area shall terminate upon Lease Termination. Tenant acknowledges
that a portion of the first floor of the Building consists of a lobby area which
shall be part of the Common Area and that second floor tenants of the Building
and their agents, employees, guests and invitees shall have the right to use
such lobby area to gain access to the second floor of the Building. Tenant shall
also have access to the Premises through the back door and stairway of the
Building which shall be accessible through a security key card system. Landlord
shall furnish to Tenant and its employees key cards to permit access to the
Premises from the back door of the Building. Tenant and Tenant's agents and
employees shall observe the rules and regulations attached hereto as Exhibit
-------
"F". Landlord reserves the right to amend such rules and regulations from time
- ---
to time with or without advance notice, as Landlord may deem appropriate for the
best interests of the occupants of the Building and other authorized users. Any
amendments to the rules and regulations shall be effective as to Tenant, and
binding on Tenant, upon delivery of a copy of such rules and regulations to
Tenant. Any failure by Tenant or Tenant's agents or employees to observe and
comply with the rules and regulations shall be a Default by Tenant. Landlord
shall not be responsible for the nonperformance of the rules and regulations by
any tenants or occupants of the Building or other authorized users, nor shall
Landlord be liable to Tenant by reason of the noncompliance with or violation of
the rules and regulations by any other tenant or user.
The parties hereto acknowledge that the phone room located on the second
floor of the Building comprises part of the interior Common Areas of the
Building. In the event Landlord leases any portion of the second floor of the
Building to a third party tenant, Landlord agrees that, to the extent Tenant's
phone and telecommunications equipment (including, without limitation, wires and
switch) located in the phone room is segregated and separate and apart from the
phone and telecommunications equipment of such third party tenant to be located
in the phone room, Landlord shall, at Tenant's sole cost, construct or install,
to the extent feasible, a wire cage or barrier around Tenant's phone and
telecommunications equipment located in the phone room. Tenant hereby waives and
releases Landlord from any and all claims for any damages, losses,
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liabilities, actions or expenses suffered or incurred by Tenant arising from, or
related to, any other tenant of the second floor of the Building, or its agents,
employees or contractors, entering or using the phone room or installing or
maintaining any equipment therein.
11.2 Parking Areas. Tenant is allocated and Tenant and Tenant's
-------------
employees and invitees shall have the nonexclusive right to use not more than
the number of parking spaces set forth in Paragraph 1.13, the location of which
may be designated from time to time by Landlord. Neither Tenant nor Tenant's
agents shall at any time use more parking spaces than the number so allocated to
Tenant or park or permit the parking of their vehicles in any portion of the
Land not designated by Landlord as a nonexclusive parking area. Tenant and
Tenant's agents shall not have the exclusive right to use any specific parking
space. Notwithstanding the number of parking spaces designated for Tenant's
nonexclusive use, in the event by reason of any Law relating to or affecting
parking on the Land, or any other cause beyond Landlord's reasonable control,
Landlord is required to reduce the number of parking spaces on the Land,
Landlord shall have the right to proportionately reduce the number of Tenant's
parking spaces and the nonexclusive parking spaces of other tenants in the
Building. Landlord reserves the right to promulgate such reasonable rules and
regulations relating to the use of such parking areas on the Land as Landlord
may deem appropriate. Landlord furthermore reserves the right, after having
given Tenant reasonable notice, to have any vehicles owned by Tenant or Tenant's
agents which are parked in violation of the provisions of this Paragraph 11.2 or
in violation of Landlord's rules and regulations relating to parking, to be
towed away at Tenant's cost. In the event Landlord elects or is required by any
law to limit or control parking on the Land, by validation of parking tickets or
any other method, Tenant agrees to participate in such validation or other
program under such reasonable rules and regulations as are from time to time
established by Landlord. Provided that Tenant's use, occupancy and enjoyment of
the Premises or access to the Premises is not unreasonably interfered with,
Landlord shall have the right to close, at reasonable times, all or any portion
of the parking areas for any reasonable purpose, including without limitation,
the prevention of a dedication thereof, or the accrual of rights of any person
or public therein. Tenant and Tenant's agents shall not at any time park or
permit the parking of (i) trucks or other vehicles (whether owned by Tenant or
other persons) adjacent to any loading areas so as to interfere in any manner
with the use of such areas, (ii) Tenant's or Tenant's agents' vehicles or
trucks, or the vehicles or trucks of Tenant's suppliers or others, in any
portion of the Common Area not designated by Landlord for such use by Tenant, or
(iii) any inoperative vehicles or equipment on any portion of the Common Area.
11.3 Maintenance by Landlord. Landlord shall maintain the Common Area
-----------------------
in good repair and condition and shall manage the Common Area to reasonable and
customary standards. The expenditures for such maintenance shall be at the
reasonable discretion of Landlord. The cost of such maintenance, operation and
management shall be a "Common Area Charge," and Tenant shall pay to Landlord, as
Additional Rent, Tenant's share of such costs as provided in Paragraph 12 below.
12. Common Area Charges.
-------------------
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12.1 Definition. "Common Area Charge" or "Common Area Charges" as used
----------
in this Lease shall mean and include all items identified in other paragraphs of
this Lease as a Common Area Charge and the total cost paid or incurred by
Landlord for the operation, maintenance, repair, and management of the Project
which costs shall include, without limitation: the cost of Services and
utilities supplied to the Project (to the extent the same are not separately
charged or metered to tenants of the Building); water; sewage; trash removal;
fuel; electricity; heat; lighting systems; fire protection systems; storm
drainage and sanitary sewer systems; periodic inspection and regular servicing
of the heating and air conditioning systems of the Premises; property and
liability insurance covering the Building and the Land and any other insurance
carried by Landlord pursuant to Paragraph 8 above; window cleaning; cleaning,
sweeping, striping, resurfacing of parking and driveway areas; cleaning the
Common Area following storms or other severe weather; cleaning and repairing of
sidewalks, curbs, stairways; costs related to irrigation systems and Project
signs; fees for licenses and permits required for the operation of the Project;
the cost of complying with Laws, including, without limitation, maintenance and
repairs required in connection therewith (subject to the provisions of Paragraph
12.3 hereof); costs related to landscape maintenance; and the cost of contesting
the validity or applicability of any governmental enactments which may affect
Common Area Charges. If the Project contains more than one (1) building at any
time during the Lease Term, then the term "Common Area Charges" shall mean and
include all of the Common Area Charges allocable to the Building and a
proportionate share (based on the square footage of gross leasable area in the
Building as a percentage of the total of square footage of gross leasable area
of the buildings in the Project at the time in question) of all Common Area
Charges which are related to the Project in general and are not allocated to any
one building in the Project. Common Area Charges shall also include a management
fee to Landlord in an amount equal to ten percent (10%) of the total Common Area
Charges.
The specific examples of Common Area Charges stated in this Paragraph 12.1
are in no way intended to and shall not limit the costs comprising Common Area
Charges, nor shall such examples be deemed to obligate Landlord to incur such
costs or to provide such services or to take such actions except as Landlord may
be expressly required in other portions of this Lease, or except as Landlord, in
its reasonable discretion, may elect. All reasonable costs incurred by Landlord
in good faith for the operation, maintenance, repair and management of the
Project shall be deemed conclusively binding on Tenant.
Notwithstanding anything to the contrary contained in this Lease, within
thirty (30) days after receipt by Tenant of Landlord's statement of Common Area
Charges prepared pursuant to Paragraph 12.2 hereof for any prior annual period
during the Lease Term, Tenant or its authorized representative shall have the
right to inspect the books of Landlord during the business hours of Landlord at
Landlord's office or, at Landlord's option, such other location as Landlord
reasonably may specify, for the purpose of verifying the information contained
in the statement. Unless Tenant asserts specific errors within thirty (30) days
after receipt of the statement, the statement shall be deemed correct as between
Landlord and Tenant, except as to individual components subsequently determined
to be in error by future audit.
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12.2 Payment of Common Area Charges by Tenant. Prior to the
----------------------------------------
Commencement Date, and annually thereafter, Landlord shall deliver to Tenant an
estimate of Common Area Charges for the succeeding year. Tenant's payment of
Common Area Charges shall be based upon Landlord's estimate of Common Area
Charges and shall be payable in equal monthly installments in advance on the
first day of each calendar month commencing on the date specified in Paragraph
1.6 and continuing throughout the Lease Term. Tenant shall pay to Landlord, as
Additional Rent and without deduction or offset, an amount equal to Tenant's
percentage share (stated in Paragraph 1.10 above) of the Common Area Charges.
Landlord shall revise its estimate of Common Area Charges on an annual
basis, and Landlord may adjust the amount of Tenant's monthly installment in the
event of a material change in Common Area Charges during any year. Landlord
shall furnish Tenant an annual statement (and a statement within one hundred
eighty (180) days after Lease Termination) showing the actual Common Area
Charges for the period to which Landlord's estimate pertains and shall
concurrently either bill Tenant for the balance due (payable upon demand by
Landlord) or credit Tenant's account for the excess previously paid.
Alternatively, Common Area Charges actually incurred or paid by Landlord
but not theretofore billed to Tenant, as invoiced by Landlord shall be payable
by Tenant within ten (10) days after receipt of Landlord's invoice, but not more
often than once each calendar month.
Notwithstanding the foregoing provisions of this Paragraph 12, Landlord and
Tenant agree that if Landlord incurs any costs for insurance, Services, repairs
or maintenance exclusively for or to the Premises or for less than all the
tenants of the Building and such costs are Common Area Charges, or if any
improvements installed in the Premises by Tenant or Landlord are valued by the
assessor disproportionately higher than those of any other tenants in the
Building, then Tenant's share of such Common Area Charges shall be equitably
increased by Landlord to reflect the portion of any such costs or taxes incurred
by Landlord in regard to the Premises, and Tenant shall pay the same to Landlord
as Additional Rent.
12.3 Exclusions From Common Area Charges. Notwithstanding anything to
-----------------------------------
the contrary contained in this Lease, in no event shall Tenant have any
obligation to perform, to pay directly, or to reimburse Landlord for, all or any
portion of the following repairs, maintenance, improvements, replacements,
premiums, claims, losses, fees, commissions, charges, disbursements, attorneys'
fees, experts' fees, costs and expenses (collectively, "Costs"):
12.3.1 Losses Caused by Others and Construction Defects. Costs
------------------------------------------------
occasioned by the act, omission or violation of Law by Landlord; any other
occupant of the Project, or their respective agents, employees or contractors,
or costs arising out of the failure to construct the Building, Premises, or
Common Areas in accordance with Laws and private restrictions applicable at the
time of construction thereof
12.3.2 Condemnation and Insurance Costs. Costs occasioned by the
--------------------------------
exercise of the power of eminent domain, or increases in insurance Costs caused
by the activities of other occupant(s) of the Project.
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12.3.3 Reimbursable Expenses. Costs for which Landlord has a
---------------------
right of reimbursement from others, or Costs which Tenant pays directly to a
third person.
12.3.4 Utilities or Service. Costs (i) arising from the
--------------------
disproportionate use of any utility or service supplied by Landlord to any other
occupant of the Project; or (ii) associated with utilities and services of a
type not provided to Tenant.
12.3.5 Leasing Expenses. Costs incurred in connection with
----------------
negotiations or disputes with other occupant(s) of the Project, and Costs
arising from the violation by Landlord or any occupant of the Project (other
than Tenant) of the terms and conditions of any lease or other agreement.
12.3.6 Reserves. Depreciation, amortization or other expense
--------
reserves.
12.3.7 Mortgages. Interest, charges and fees incurred on debt,
---------
payments or mortgages and rent under ground leases.
12.3.8 Hazardous Materials. Costs incurred to investigate the
-------------------
presence of any Hazardous Material, Costs to respond to any claim of Hazardous
Material contamination or damage, Costs to remove any Hazardous Material from
the Premises, Building or Project or to remediate any Hazardous Material
contamination, and any judgments or other Costs incurred in connection with any
Hazardous Material exposure or release, except to the extent such Costs are
incurred by Landlord in accordance with Paragraph 6.4 or incurred by Landlord or
caused by reason of the storage, use or disposal of the Hazardous Material in
question by Tenant, its agents, employees, contractors or invitees.
12.3.9 Management. Any fee, profit or compensation retained by
----------
Landlord or its affiliates for management and administration of the Project in
excess of the management fee and accounting fee specified in Paragraph 12.1.
12.3.10 Capital Improvements. The cost of any capital
--------------------
improvements to the Building, Premises or Common Areas unless the same are paid
or incurred by Landlord and have the effect of reducing Common Area Charges or
avoiding increases in Common Area Charges (in which event the cost of such
capital improvement shall be amortized at ten percent (10%) per annum over the
useful life of the capital improvement, and be paid monthly by Tenant from the
date of installation or repair through Lease Termination). The preceding to the
contrary notwithstanding, in no event shall the amortized cost of any capital
improvement to be borne by Tenant pursuant to the terms of this Paragraph
12.3.10 exceed the amount of cost savings or reduction of Common Area Charges
resulting from the installation or construction of such capital improvement.
13. Alterations and Improvements.
----------------------------
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13.1 In General. Tenant shall not make, or permit to be made, any
----------
alterations, removals, changes, enlargements, improvements or additions
(collectively "Alterations") in, on, about or to the Premises, or any part
thereof, including Alterations required pursuant to Paragraph 6.2, without the
prior written consent of Landlord (which consent shall not be unreasonably
withheld) and without acquiring and complying with the conditions of all permits
required for such Alterations by any governmental authority having jurisdiction
thereof. The preceding sentence to the contrary notwithstanding, Tenant may make
non-structural Alterations in or to the Premises without first obtaining
Landlord's prior consent provided the cost of such non-structural Alterations
are in an aggregate amount not greater than Ten Thousand Dollars ($10,000)
during the term of the Lease, such non-structural Alterations do not impair the
structural integrity of the Building or Premises or adversely affect the
exterior appearance of the Building or Premises and Tenant gives Landlord prior
written notice of its intent to construct or install such non-structural
Alterations. The term "Alterations" as used in this Paragraph 13 shall also
include all heating, lighting, electrical (including all wiring, cabling,
conduit outlets, drops, buss ducts, main and subpanels), air conditioning and
partitioning in the Premises made by Tenant regardless of how affixed to the
Premises. As a condition to the giving of its consent, Landlord may impose such
reasonable requirements as Landlord reasonably may deem necessary, including
without limitation, the manner in which the work is done; a right of approval of
the contractor by whom the work is to be performed; the times during which the
work is to be accomplished; the requirement that Tenant post a completion bond
in an amount and form reasonably satisfactory to Landlord; and the requirement
that Tenant reimburse Landlord, as Additional Rent, for Landlord's actual costs
for outside consultants incurred in reviewing any proposed Alteration, whether
or not Landlord's consent is granted. In the event Landlord consents to the
making of any Alterations by Tenant, the same shall be made by Tenant at
Tenant's sole cost and expense, in accordance with the plans and specifications
approved by Landlord and in a manner causing Landlord and Landlord's agents and
other tenants of the Building the least interference and inconvenience
practicable under the circumstances. Tenant shall give written notice to
Landlord five (5) business days prior to employing any laborer or contractor to
perform services related to, or receiving materials for use upon the Premises,
and prior to the commencement of any work of improvement on the Premises. Any
Alterations to the Premises made by Tenant shall be made in accordance with
applicable Laws and in a first-class workmanlike manner. In making any such
Alterations, Tenant shall, at Tenant's sole cost and expense, file for and
secure and comply with any and all permits or approvals required by any
governmental departments or authorities having jurisdiction thereof and any
utility company having an interest therein. In no event shall Tenant make any
structural changes to the Premises or make any changes to the Premises which
would weaken or impair the structural integrity of the Building or adversely
affect or alter the building systems within the Building.
13.2 Removal Upon Lease Termination. At the time Tenant request
------------------------------
Landlord's consent, Tenant shall request a decision from Landlord in writing as
to whether Landlord will require Tenant, at Tenant's expense, to remove any such
Alterations and restore the Premises to their prior condition at Lease
Termination. Landlord shall, within five (5) business days following receipt of
Tenant's request for a decision as to whether Tenant will be required to remove
any Alterations at Lease Termination, respond in writing to Tenant with
Landlord's decision. In the event Tenant fails to earlier obtain Landlord's
written decision as to whether Tenant will be
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required to remove any Alteration, then no less than ninety (90) nor more than
one hundred twenty (120) days prior to the expiration of the Lease Term, Tenant
by written notice to Landlord shall request Landlord to inform Tenant whether or
not Landlord desires to have any of such Alterations removed at Lease
Termination. Following receipt of such notice, Landlord may elect to have all or
a portion of such Alterations removed from the Premises at Lease Termination,
and Tenant shall, at its sole cost and expense, remove at Lease Termination such
Alterations designated by Landlord for removal and repair all damage to the
Project arising from such removal. In the event Tenant fails to so request
Landlord's decision or fails to remove any such Alterations designated by
Landlord for removal, Landlord may remove any Alterations made to the Premises
by Tenant, restore the Premises to their prior condition and repair all damage
to the Premises and Common Area arising from such removal, and may recover from
Tenant all reasonable costs and expenses incurred thereby, together with an
amount equal to the fair rental value of the Premises for the period of time
required for Landlord to accomplish such removal and restoration. Tenant's
obligation to pay such costs and expenses to Landlord shall survive Lease
Termination. Unless Landlord elects to have Tenant remove (or, upon Tenant's
failure to obtain Landlord's decision, Landlord removes) any such Alterations,
all such Alterations, except for moveable furniture, personal property and
equipment, and trade fixtures of Tenant not affixed to the Premises, shall
become the property of Landlord upon Lease Termination (without any payment
therefor) and remain upon and be surrendered with the Premises at Lease
Termination.
13.3 Landlord's Improvements. All fixtures, improvements or equipment
-----------------------
which are installed, constructed on or attached to the Premises, Building or
Common Area by Landlord shall be a part of the realty and belong to Landlord.
14. Default and Remedies.
--------------------
14.1 Events of Default. The term "Default by Tenant" as used in this
-----------------
Lease shall mean the occurrence of any of the following events:
14.1.1 Tenant's failure to pay any Rentals within five (5)
business days following the date such payment is due;
14.1.2 Commencement and continuation for at least sixty (60)
days of any case, action or proceeding by, against or concerning Tenant under
any federal or state bankruptcy, insolvency or other debtor's relief law,
including without limitation, (i) a case under Title 11 of the United States
Code concerning Tenant, whether under Chapter 7, 11, or 13 of such Title or
under any other Chapter, or (ii) a case, action or proceeding seeking Tenant's
financial reorganization or an arrangement with any of Tenant's creditors;
14.1.3 Voluntary or involuntary appointment of a receiver,
trustee, keeper or other person who takes possession for more than sixty (60)
days of substantially all of Tenant's assets or of any asset used in Tenant's
business on the Premises, regardless of whether such appointment is as a result
of insolvency or any other cause;
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<PAGE>
14.1.4 Execution of an assignment for the benefit of creditors
of substantially all assets of Tenant available by law for the satisfaction
of judgement creditors;
14.1.5 Commencement of proceedings for winding up or dissolving
(whether voluntary or involuntary) the entity of Tenant, if Tenant is a
corporation or a partnership;
14.1.6 Levy of a writ of attachment or execution on Tenant's
interest under this Lease, if such writ continues for a period of thirty (30)
days;
14.1.7 Transfer or attempted Transfer of this Lease or the
Premises by Tenant contrary to the provisions of Paragraph 24 below; or
14.1.8 Breach by Tenant of any term, covenant, condition,
warranty, or other provision contained in this Lease or of any other obligation
owing or due to Landlord where such breach is not cured within thirty (30) days
after written notice by Landlord to Tenant (or if such breach cannot be
reasonably cured within thirty (30) days, if Tenant does not commence to cure
the default within the thirty (30) day period or does diligently and in good
faith prosecute the cure to completion).
14.2 Remedies. Upon any Default by Tenant, Landlord shall have the
--------
following remedies, in addition to all other rights and remedies provided by
law, to which Landlord may resort cumulatively, or in the alternative:
14.2.1 Termination. Landlord shall have the right (but not the
-----------
obligation) to give written notice to Tenant of such default and terminate this
Lease and Tenant's right to possession of the Premises. The parties agree that
any notice given by Landlord to Tenant pursuant to Paragraph 14.1.8 shall be
sufficient notice for purposes of California Code of Civil Procedure Section
1161 and Landlord shall not be required to give any additional notice in order
to be entitled to commence an unlawful detainer proceeding. Upon termination of
this Lease and Tenant's right to possession of the Premises, Landlord shall have
the right to recover from Tenant:
(a) The worth at the time of award of the unpaid Rentals
which had been earned at the time of termination;
(b) The worth at the time of award of the amount by which
the Rentals which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided;
(c) The worth at the time of award (computed by
discounting at the discount rate of the Federal Reserve Bank of San Francisco at
the time of award plus one percent) of the amount by which the Rentals for the
balance of the Lease Term after the time of award exceed the amount of such
rental loss that Tenant proves could be reasonably avoided;
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(d) Any other amounts necessary to compensate Landlord
for all detriment proximately caused by the Default by Tenant or which in the
ordinary course of events would likely result, including without limitation the
following:
(i) Expenses in retaking possession of the
Premises;
(ii) Expenses for cleaning, repairing or restoring
the Premises;
(iii) Any unamortized real estate brokerage
commission paid in connection with this Lease;
(iv) Expenses for removing, transporting, and
storing any of Tenant's property left at the Premises (although Landlord shall
have no obligation to remove, transport, or store any such property);
(v) Expenses of reletting the Premises, including
without limitation, brokerage commissions and reasonable attorneys' fees;
(vi) Reasonable attorneys' fees and court costs;
and
(vii) Costs of carrying the Premises such as
repairs, maintenance, taxes and insurance premiums, utilities and security
precautions (if any).
(e) The "worth at the time of award" of the amounts
referred to in subparagraphs (a) and (b) of this Paragraph 14.2.1 is computed by
allowing interest at an annual rate equal to the greater of: ten percent (10%);
or five percent (5%) plus the rate established by the Federal Reserve Bank of
San Francisco, as of the twenty-fifth (25th) day of the month immediately
preceding the Default by Tenant, on advances to member banks under Sections 13
and 13(a) of the Federal Reserve Act, as now in effect or hereafter from time to
time amended, not to exceed the maximum rate allowable by law.
14.2.2 Continuance of Lease. Upon any Default by Tenant and
--------------------
unless and until Landlord elects to terminate this Lease pursuant to Paragraph
14.2.1 above, this Lease shall continue in effect after the Default by Tenant
and Landlord may enforce all its rights and remedies under this Lease, including
without limitation, the right to recover payment of Rentals as they become due.
Neither efforts by Landlord to mitigate damages caused by a Default by Tenant
nor the acceptance of any Rentals shall constitute a waiver by Landlord of any
of Landlord's rights or remedies, including the rights and remedies specified in
Paragraph 14.2.1 above.
15. Damage or Destruction.
---------------------
15.1 Definition of Terms. For the purposes of this Lease, the term:
-------------------
(a) "Insured Casualty" means damage to or destruction of the Premises from a
cause actually insured against, or required by this Lease to be insured against,
for which the insurance proceeds paid or made
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<PAGE>
available to Landlord are sufficient to rebuild or restore the Premises under
then existing building codes to the condition existing immediately prior to the
damage or destruction; and (b) "Uninsured Casualty" means damage to or
destruction of the Premises from a cause not actually insured against, or not
required to be insured against, or from a cause actually insured against but for
which the insurance proceeds paid or made available to Landlord are for any
reason insufficient to rebuild or restore the Premises under then existing
building codes to the condition existing immediately prior to the damage or
destruction, or from a cause actually insured against but for which the
insurance proceeds are not paid or made available to Landlord within ninety (90)
days of the event of damage or destruction.
15.2 Insured Casualty.
----------------
15.2.1 Rebuilding Required. In the event of an Insured Casualty
-------------------
where the extent of damage or destruction is less than twenty percent (20%) of
the then full replacement cost of the Premises, Landlord shall rebuild or
restore the Premises to the condition existing immediately prior to the damage
or destruction, provided the damage or destruction was not a result of a
negligent or willful act of Tenant, and that there exist no governmental codes
or regulations that would interfere with Landlord's ability to so rebuild or
restore.
15.2.2 Landlord's Election. In the event of an Insured Casualty
-------------------
where the extent of damage or destruction is equal to or greater than twenty
percent (20%) of the then full replacement cost of the Premises, Landlord may,
at its option and at its sole discretion, rebuild or restore the Premises to the
condition existing immediately prior to the damage or destruction, or terminate
this Lease. Landlord shall notify Tenant in writing within sixty (60) days after
the event of damage or destruction of Landlord's election to either rebuild or
restore the Premises or terminate this Lease.
15.2.3 Continuance of Lease. If Landlord is required to rebuild
--------------------
or restore the Premises pursuant to Paragraph 15.2.1 or if Landlord elects to
rebuild or restore the Premises pursuant to Paragraph 15.2.2, this Lease shall
remain in effect and Tenant shall have no claim against Landlord for
compensation for inconvenience or loss of business during any period of repair
or restoration.
15.3 Uninsured Casualty.
------------------
15.3.1 Landlord's Election. In the event of an Uninsured
-------------------
Casualty, Landlord may, at its option and at its sole discretion (i) rebuild or
restore the Premises as soon as reasonably possible at Landlord's expense
(unless the damage or destruction was caused by a negligent or willful act of
Tenant, in which event Tenant shall pay all costs of rebuilding or restoring to
the extent not covered by insurance proceeds), in which event this Lease shall
continue in full force and effect or (ii) terminate this Lease, in which event
Landlord shall give written notice to Tenant within sixty (60) days after the
event of damage or destruction of Landlord's election to terminate this Lease as
of the date of the event of damage or destruction, and if the damage or
destruction was caused by a negligent or willful act of Tenant, Tenant shall be
liable therefor to Landlord.
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15.3.2 Tenant's Ability to Continue Lease. If Landlord elects to
----------------------------------
terminate this Lease and the extent of damage or destruction is less than twenty
percent (20%) of the then full replacement cost of the Premises or the proceeds
paid or made available to Landlord are for any reason insufficient to rebuild or
restore the Premises under then existing building codes to the condition
existing immediately prior to the damage or destruction, and if there exist no
governmental codes or regulations that would interfere with Landlord's ability
to so repair or restore, then Tenant may nevertheless cause the Lease to
continue in effect by (i) notifying Landlord in writing within ten (10) days
after Landlord's notice of termination of Tenant's agreement to pay all costs of
rebuilding or restoring not covered by insurance, and (ii) providing Landlord
with reasonable security (acceptable to Landlord in its sole discretion) for or
assurance of such payment. Tenant shall pay to Landlord in cash no later than
thirty (30) days prior to the date of commencement of construction the
reasonable estimated cost of rebuilding or restoring. In the event Tenant fails
to pay such cost to Landlord by the date specified, Landlord may immediately
terminate the Lease and recover from Tenant all reasonable costs incurred by
Landlord in preparation for construction. If the actual cost of rebuilding or
restoring exceeds the estimated cost of such work, Tenant shall pay the
difference to Landlord in cash upon notification by Landlord of the final cost.
If the cost of rebuilding or restoring is less than the estimated cost of such
work, Tenant shall be entitled to a refund of the difference upon completion of
the rebuilding or restoring and determination of final cost.
15.4 Tenant's Election. Notwithstanding anything to the contrary
-----------------
contained in this Paragraph 15, Tenant may elect to terminate this Lease in the
event the Premises are damaged or destroyed (through no fault of Tenant) and the
restoration of the Premises cannot be substantially completed within ninety (90)
days after the event of damage or destruction. Tenant's election shall be made
by written notice to Landlord within ten (10) days after Tenant receives from
Landlord the estimate of the time needed to complete repair or restoration of
the Premises. If Tenant does not deliver said notice within said ten (10) day
period, Tenant may not later terminate this Lease even if substantial completion
of the rebuilding or restoration occurs subsequent to said ninety (90) day
period, provided that Landlord is proceeding with diligence to rebuild or
restore the Premises. If Tenant delivers said notice within said ten (10) day
period, this Lease shall terminate as of the date of the event of damage or
destruction.
15.5 Damage or Destruction Near End of Lease Term. Notwithstanding
--------------------------------------------
anything to the contrary contained in this Paragraph 15, in the event the
Premises are materially damaged or destroyed in whole or in part from any cause
during the last twelve (12) months of the Lease Term, Landlord or Tenant may, at
its option, terminate this Lease as of the date of the event of damage or
destruction by giving written notice to the other of its election to do so
within thirty (30) days after the event of such damage or destruction. For
purposes of this Paragraph 15.5, if Tenant has been granted an option to extend
or renew the Lease Term pursuant to another provision of this Lease, then the
damage or destruction shall be deemed to have occurred during the last twelve
(12) months of the Lease Term if Tenant fails to exercise its option to extend
or renew within thirty (30) days after the event of damage or destruction.
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15.6 Termination of Lease. If the Lease is terminated pursuant to
--------------------
this Paragraph 15, the unused balance of the Security Deposit shall be refunded
to Tenant. The current Rent shall be proportionately reduced during the period
following the event of damage or destruction until the date on which Tenant
surrenders the Premises, based upon the extent to which the damage or
destruction interferes with Tenant's business conducted in the Premises, as
reasonably determined by Landlord and Tenant, to the extent such loss is covered
as an insured peril by the insurance carried by Landlord pursuant to Paragraph
8.1. All other Rentals due hereunder shall continue unaffected during such
period. The proceeds of insurance carried by Tenant pursuant to Paragraph 8.2
shall be paid to Landlord and Tenant, as their interests appear.
15.7 Abatement of Rentals. If the Premises are to be rebuilt or
--------------------
restored pursuant to this Paragraph 15, the then current Rentals shall be
proportionately reduced during the period of repair or restoration, based upon
the extent to which the making of repairs interferes with Tenant's business
conducted in the Premises, as reasonably determined by Landlord and Tenant, to
the extent such loss is covered as an insured peril by the insurance carried, or
required to be carried, by Landlord pursuant to Paragraph 8.1.
15.8 Liability for Personal Property. Except for the negligent acts
-------------------------------
or willful misconduct of Landlord or that of its agents, employees, contractors
or invitees, in no event shall Landlord have any liability for, nor shall it be
required to repair or restore, any injury or damage to any Alterations to the
Premises made by Tenant, trade fixtures, equipment, merchandise, furniture, or
any other property installed by Tenant or at the expense of Tenant. If Landlord
or Tenant do not elect to terminate this Lease pursuant to this Paragraph 15,
Tenant shall be obligated to promptly rebuild or restore the same to the
condition existing immediately prior to the damage or destruction in accordance
with the provisions of Paragraph 13.1.
15.9 Waiver of Civil Code Remedies. Landlord and Tenant acknowledge
-----------------------------
that the rights and obligations of the parties upon damage or destruction of the
Premises are as set forth herein; therefore Tenant hereby expressly waives any
rights to terminate this Lease upon damage or destruction of the Premises,
except as specifically provided by this Lease, including without limitation any
rights pursuant to the provisions of Subdivision 2 of Section 1932 and
Subdivision 4 of Section 1933 of the California Civil Code, as amended from time
to time, and the provisions of any similar law hereinafter enacted, which
provisions relate to the termination of the hiring of a thing upon its
substantial damage or destruction.
15.10 Damage or Destruction to the Building. The foregoing
-------------------------------------
notwithstanding, in the event the Building is damaged or destroyed to the extent
of more than forty percent (40%) of the then replacement cost thereof, Landlord
or Tenant may elect to terminate this Lease, whether or not the Premises are
damaged or injured.
16. Condemnation.
------------
16.1 Definition of Terms. For the purposes of this Lease, the term:
-------------------
(a) "Taking" means a taking of the Premises, Common Area or Building or damage
related to the exercise of the power of eminent domain and includes, without
limitation, a voluntary conveyance, in lieu of
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court proceedings, to any agency, authority, public utility, person or corporate
entity empowered to condemn property; (b) "Total Taking" means the Taking of the
entire Premises or so much of the Premises, Building or Common Area as to
prevent or substantially impair the use thereof by Tenant for the uses herein
specified; provided, however, that in no event shall the Taking of less than
twenty percent (20%) of the Premises or fifty percent (50%) of the Building and
Common Area be considered a Total Taking; (c) "Partial Taking" means the Taking
of only a portion of the Premises, Building or Common Area which does not
constitute a Total Taking; (d) "Date of Taking" means the date upon which the
title to the Premises, Building or Common Area or a portion thereof, passes to
and vests in the condemnor or the effective date of any order for possession if
issued prior to the date title vests in the condemnor; and (e) "Award" means the
amount of any award made, consideration paid, or damages ordered as a result of
a Taking.
16.2 Rights. The parties agree that in the event of a Taking all
------
rights between them or in and to an Award shall be as set forth herein.
16.3 Total Taking. In the event of a Total Taking during the Lease
------------
Term: (a) the rights of Tenant under this Lease and the leasehold estate of
Tenant in and to the Premises shall cease and terminate as of the Date of
Taking; (b) Landlord shall refund to Tenant any prepaid Rent and the unused
balance of the Security Deposit; (c) Tenant shall pay Landlord any Rentals due
Landlord under the Lease, prorated as of the Date of Taking; (d) to the extent
the Award is not payable to the beneficiary or mortgagee of a deed of trust or
mortgage affecting the Premises, Tenant shall receive from the Award those
portions of the Award attributable to trade fixtures of Tenant; and (e) the
remainder of the Award shall be paid to and be the property of Landlord. Nothing
contained in this Paragraph 16.3 shall be deemed to deny Tenant its right to
recover awards made by the condemning authority for moving costs, relocation
costs, and costs attributable to goodwill and leasehold improvements installed
and paid for by Tenant.
16.4 Partial Taking. In the event of a Partial Taking during the
--------------
Lease Term: (a) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the portion of the Premises taken shall cease and terminate as
of the Date of Taking; (b)from and after the Date of Taking the Rent shall be an
amount equal to the product obtained by multiplying the then current Rent by the
quotient obtained by dividing the fair market value of the Premises immediately
after the Taking by the fair market value of the Premises immediately prior to
the Taking; (c) to the extent the Award is not payable to the beneficiary or
mortgagee of a deed of trust or mortgage affecting the Premises, Tenant shall
receive from the Award the portions of the Award attributable to trade fixtures
of Tenant; and (d) the remainder of the Award shall be paid to and be the
property of Landlord. In the event of a Partial Taking, Landlord shall, to the
extent of severance damages received by Landlord, restore the portion of the
Premises not taken into a single efficient architectural unit promptly following
the date of the taking. Landlord's obligation to restore the Premises to an
architectural unit is understood to be limited to the extent of severance
damages received by Landlord. Each party waives the provisions of California
Code of Civil Procedure Section 1265.130 allowing either party to petition the
Superior Court to terminate this Lease in the event of a Partial Taking. Nothing
contained in this Paragraph 16.4 shall be deemed to deny Tenant its right to
recover awards made by the condemning authority for
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moving costs, relocation costs, and costs attributable to goodwill and leasehold
improvements installed and paid for by Tenant.
17. Liens.
-----
17.1 Premises to Be Free of Liens. Tenant shall pay for all labor and
----------------------------
services performed for, and all materials used by or furnished to Tenant,
Tenant's agents, or any contractor employed by Tenant with respect to the
Premises. Tenant shall indemnify, defend and hold Landlord harmless from and
keep the Project free from any liens, claims, demands, encumbrances, or
judgments, including all costs, liabilities and attorneys' fees with respect
thereto, created or suffered by reason of any labor or services performed for,
or materials used by or furnished to Tenant or Tenant's agents or any contractor
employed by Tenant with respect to the Premises. Landlord shall have the right,
at all times, to post and keep posted on the Premises any notices permitted or
required by law, or which Landlord shall deem proper for the protection of
Landlord and the Premises, Building, Common Area and Land, and any other party
having an interest therein, from mechanics' and materialmen's liens, including
without limitation a notice of nonresponsibility. In the event Tenant is
required to post an improvement bond with a public agency in connection with any
work performed by Tenant on or to the Premises, Tenant shall include Landlord as
an additional obligee.
17.2 Notice of Lien: Bond. Should any claims of lien be filed
--------------------
against, or any action be commenced affecting the Premises, Tenant's interest in
the Premises or any other portion of the Project, Tenant shall give Landlord
notice of such lien or action within five (5) business days after Tenant
receives notice of the filing of the lien or the commencement of the action. In
the event that Tenant shall not, within twenty (20) days following the
imposition of any such lien, cause such lien 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, to cause
the same to be released by such means as Landlord shall deem proper, including
payment of the claim giving rise to such lien or posting of a proper bond. All
such sums paid by Landlord and all expenses incurred by Landlord in connection
therewith, including attorneys' fees and costs, shall be payable to Landlord by
Tenant as Additional Rent on demand.
18. Landlord's Right of Access to Premises. Landlord reserves and shall
--------------------------------------
have the right and Tenant and Tenant's agents shall permit Landlord and
Landlord's agents to enter the Premises at any reasonable time upon reasonable
notice during normal business hours (except in the event of an emergency) and
subject to any security measures of Tenant that are applied to visitors to the
Premises on a non-discriminatory basis for the purpose of (i) inspecting the
Premises, (ii) performing Landlord's maintenance and repair responsibilities set
forth herein, (iii) posting notices of nonresponsibility, (iv) placing upon the
Premises at any time "For Sale" signs, (v) placing on the Premises ordinary "For
Lease" signs at any time within one hundred eighty (180) days prior to Lease
Termination, or at any time Tenant is in uncured default hereunder, or at such
other times as agreed to by Landlord and Tenant, (vi) protecting the Premises in
the event of an emergency and (vii) exhibiting the Premises to prospective
purchasers or lenders at any reasonable time or to prospective tenants within
one hundred eighty (180) days prior to Lease Termination. In the event of an
emergency, Landlord shall have the right to use any and all means which Landlord
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reasonably may deem proper to gain access to the Premises and, in the event
Landlord exercises such right and enters the Premises, Landlord shall take
reasonable steps practicable under the circumstances to secure the Premises and
shall repair, subject to the provisions of Paragraph 15 above, any damage caused
by Landlord's entry. Any entry to the Premises by Landlord or Landlord's agents
in accordance with this Paragraph 18 or any other provision of this Lease shall
not under any circumstances be construed or deemed to be a forcible or unlawful
entry into, or a detainer of the Premises, or an eviction of Tenant from the
Premises or any portion thereof nor give Tenant the right to abate the Rentals
payable under this Lease. Except to the extent caused by the negligence or
willful misconduct of Landlord, its agents, employees, contractors or invitees,
Tenant hereby waives any claims for damages for any injury or inconvenience to
or interference with Tenant's business, any loss of occupancy or quiet enjoyment
of the Premises, and any other loss occasioned by Landlord's or Landlord's
agents' entry into the Premises as permitted by this Paragraph 18 or any other
provision of this Lease. Notwithstanding anything to the contrary contained in
this Lease, Landlord and Landlord's agents, except in the case of emergency,
shall provide Tenant with twenty-four (24) hours' notice prior to entry of the
Premises. Any entry by Landlord and Landlord's agents shall not impair Tenant's
operations more than reasonably necessary, and Tenant shall have the right to
have an employee accompany Landlord at all times that Landlord is present on the
Premises.
19. Landlord's Right to Perform Tenant's Covenants. Except as otherwise
----------------------------------------------
expressly provided herein, if Tenant shall at any time fail to make any payment
or perform any other act required to be made or performed by Tenant under this
Lease, Landlord may upon ten (10) days written notice to Tenant, but shall not
be obligated to and without waiving or releasing Tenant from any obligation
under this Lease, make such payment or perform such other act to the extent that
Landlord may deem desirable, and in connection therewith, pay expenses and
employ counsel. All reasonable sums so paid by Landlord and all penalties,
interest and reasonable costs in connection therewith shall be due and payable
by Tenant as Additional Rent upon demand.
20. Lender Requirements.
-------------------
20.1 Subordination. This Lease, at Landlord's option, shall be
-------------
subject and subordinate to the lien of any mortgages or deeds of trust
(including all advances thereunder, renewals, replacements, modifications,
supplements, consolidations, and extensions thereof) in any amount(s) whatsoever
now or hereafter placed on or against or affecting the Premises, Building or
Land, or Landlord's interest or estate therein without the necessity of the
execution and delivery of any further instruments on the part of Tenant to
effectuate such subordination. Tenant's obligation to subordinate this Lease and
its rights hereunder shall be subject to the granting of non-disturbance rights
in favor of Tenant (to be incorporated in a Subordination, Non-disturbance and
Attornment Agreement in a form reasonably acceptable to Tenant and customarily
provided by Landlord's lender). If any mortgagee or beneficiary shall elect to
have this Lease prior to the lien of its mortgage or deed of trust, and shall
give written notice thereof to Tenant, this Lease shall be deemed prior to such
mortgage or deed of trust, whether this Lease is dated prior or subsequent to
the date of such mortgage or deed of trust or the date of the recording thereof.
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20.2 Subordination Agreements. Tenant shall execute and deliver,
------------------------
without charge therefor, such further instruments evidencing subordination of
this Lease to the lien of any mortgages or deeds of trust affecting the
Premises, Building or Land as may be required by Landlord within ten (10) days
following Landlord's request therefor; provided that such mortgagee or
beneficiary under such mortgage or deed of trust agrees in writing that this
Lease shall not be terminated or modified in any material way in the event of
any foreclosure if Tenant is not in default under this Lease. Failure of Tenant
to execute such instruments evidencing subordination of this Lease shall
constitute a Default by Tenant hereunder.
20.3 [Intentionally Omitted].
----------------------
20.4 Attornment. In the event of foreclosure or the exercise of the
----------
power of sale under any mortgage or deed of trust made by Landlord and covering
the Premises, Building or Land, Tenant shall attorn to the purchaser upon any
such foreclosure or sale and recognize such purchaser as the Landlord under this
Lease, provided such purchaser expressly agrees in writing to be bound by the
terms of the Lease, including, but not limited to, the quiet enjoyment
provisions of Paragraph 40.
20.5 Estoppel Certificates and Financial Statements.
----------------------------------------------
20.5.1 Delivery by Tenant. Tenant shall, within ten (10)
------------------
business days following request by Landlord therefor and without charge, execute
and deliver to Landlord any and all documents, estoppel certificates, and
current financial statements of Tenant reasonably requested by Landlord in
connection with the sale or financing of the Premises, Building or Land, or
requested by any lender making a loan affecting the Premises, Building or Land.
Landlord may require that Tenant in any estoppel certificate shall (i) certify
that this Lease is unmodified and in full force and effect (or, if modified,
state the nature of such modification and certify that this Lease, as so
modified, is in full force and effect) and has not been assigned, (ii) certify
the date to which Rentals are paid in advance, if any, (iii) acknowledge that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder, or specify such defaults if claimed, (iv) evidence the
status of this Lease as may be required either by a lender making a loan to
Landlord to be secured by a deed of trust or mortgage covering the Premises,
Building or Land or a purchaser of the Premises, Building or Land from Landlord,
(v) warrant that in the event any beneficiary of any security instrument
encumbering the Premises, Building or Land forecloses on the security instrument
or sells the Premises, Building or Land pursuant to any power of sale contained
in such security instrument, such beneficiary shall not be liable for the
Security Deposit, unless the Security Deposit actually has been received by the
beneficiary from Landlord, (vi) certify the date Tenant entered into occupancy
of the Premises and that Tenant is conducting business at the Premises, (vii)
certify that all improvements to be constructed on the Premises by Landlord have
been substantially completed except for punch list items which do not prevent
Tenant from using the Premises for its intended use, and (viii) certify such
other matters relating to the Lease and/or Premises as may be reasonably
requested by a lender making a loan to Landlord or a purchaser of the Premises,
Building or Land from Landlord. Any such estoppel certificate may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises, Building or Land. Any financial statements of Tenant shall include an
opinion of a
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certified public accountant (if available) and a balance sheet and profit and
loss statement for the most recent fiscal year, or a reasonable substitute for
the form of such financial information, all prepared in accordance with
generally accepted accounting principles consistently applied.
20.5.2 Nondelivery by Tenant. Tenant's failure to deliver an
---------------------
estoppel certificate as required pursuant to Paragraph 20.5.1 above shall be
conclusive upon Tenant that (i) this Lease is in full force and effect, without
modification except as may be represented by Landlord and has not been assigned,
(ii) there are now no uncured defaults in Landlord's performance, (iii) no
Rentals have been paid in advance except those that are set forth in this Lease,
(iv) no beneficiary of any security instrument encumbering the Premises,
Building or Land shall be liable for the Security Deposit in the event of a
foreclosure or sale under such security instrument, unless the Security Deposit
actually has been received by the beneficiary from Landlord, (v) the
improvements to be constructed on the Premises by Landlord have been
substantially completed except for punch list items which do not prevent Tenant
from using the Premises for its intended use, and (vi) Tenant has entered into
occupancy of the Premises on such date as may be represented by Landlord and is
open and conducting business at the Premises. Tenant's failure to deliver any
financial statements, estoppel certificates or other documents as required
pursuant to Paragraph 20.5.1 above shall be a Default by Tenant.
21. Holding Over. This Lease shall terminate without further notice at the
------------
expiration of the Lease Term. Any holding over by Tenant after Lease Termination
shall not constitute a renewal or extension of the Lease Term, nor give Tenant
any rights in or to the Premises except as expressly provided in this Lease. Any
holding over after Lease Termination with the consent of Landlord shall be
construed to be a tenancy from month to month, at one hundred twenty-five
percent (125%) of the monthly Rent for the month preceding Lease Termination in
addition to all Additional Rent payable hereunder, and shall otherwise be on the
terms and conditions herein specified insofar as applicable. If Tenant remains
in possession of the Premises after Lease Termination without Landlord's
consent, Tenant shall indemnify, defend and hold Landlord harmless from and
against any loss, damage, expense, claim or liability resulting from Tenant's
failure to surrender the Premises, including without limitation, any claims made
by any succeeding tenant based on delay in the availability of the Premises.
22. Notices. Any notice required or desired to be given under this Lease
-------
shall be in writing, and all notices shall be given by personal delivery or
mailing. All notices personally given on Tenant may be delivered to any person
apparently in charge at the Premises, on any corporate officer or agent of
Tenant if Tenant is a corporation, or on any one signatory party if more than
one party signs this Lease on behalf of Tenant; any notice so given shall be
binding upon all signatory parties as if served upon each such party personally.
Any notice given pursuant to this Paragraph 22 shall be deemed to have been
given when personally delivered, or if mailed, when three (3) business days have
elapsed from the time when such notice was deposited in the United States mail,
certified or registered mail and postage prepaid, addressed to the party at the
last address given for purposes of notice pursuant to the provisions of this
Paragraph 22. At the date of execution of this Lease, the addresses of Landlord
and Tenant are set forth in Paragraph 1.12 above.
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23. Attorneys' Fees. In the event either party hereto shall bring any
---------------
action or legal proceeding for damages for an alleged breach of any provision of
this Lease, to recover Rentals, to enforce an indemnity, defense or hold
harmless obligation, to terminate the tenancy of the Premises, or to enforce,
protect, interpret, or establish any term, condition, or covenant of this Lease
or right or remedy of either party, the prevailing party shall be entitled to
recover, as a part of such action or proceeding, reasonable attorneys' fees and
court costs, including reasonable attorneys' fees and costs for appeal, as may
be fixed by the court or jury. Notwithstanding anything to the contrary
contained in this Lease, "prevailing party" as used in this paragraph shall
include the party who dismisses an action for recovery hereunder in exchange for
sums allegedly due, performance of covenants allegedly breached or
considerations substantially equal to the relief sought in the action.
24. Assignment. Subletting and Hypothecation.
----------------------------------------
24.1 In General. Tenant shall not voluntarily sell, assign or
----------
transfer all or any part of Tenant's interest in this Lease or in the Premises
or any part thereof, sublease all or any part of the Premises, or permit all or
any part of the Premises to be used by any person or entity other than Tenant or
Tenant's employees, except as specifically provided in this Paragraph 24.
24.2 Voluntary Assignment and Subletting.
-----------------------------------
24.2.1 Notice to Landlord. Tenant shall, by written notice,
------------------
advise Landlord of Tenant's desire on a stated date (which date shall not be
less than fifteen (15) days nor more than ninety (90) days after the date of
Tenant's notice) to assign this Lease or to sublet all or any part of the
Premises for any part of the Lease Term. Tenant's notice shall state the name,
legal composition and address of the proposed assignee or subtenant, and Tenant
shall provide the following information to Landlord with said notice: a true and
complete copy of the proposed assignment agreement or sublease; a financial
statement of the proposed assignee or subtenant prepared in accordance with
generally accepted accounting principles within one year prior to the proposed
effective date of the assignment or sublease; the nature of the proposed
assignee's or subtenant's business to be carried on in the Premises; the
payments to be made or other consideration to be given on account of the
assignment or sublease; and such other pertinent information as may be
reasonably requested by Landlord, all in sufficient detail to enable Landlord to
evaluate the proposed assignment or sublease and the prospective assignee or
subtenant. Tenant's notice shall not be deemed to have been served or given
until such time as Tenant has provided Landlord with all information reasonably
requested by Landlord pursuant to this Paragraph 24.2. Tenant shall immediately
notify Landlord of any modification to the proposed terms of such assignment or
sublease. Tenant may withdraw its notice at any time prior to or after exercise
by Landlord of Landlord's right to terminate as described in Paragraph 24.2.2.
24.2.2 [Intentionally Omitted].
----------------------
24.2.3 Landlord's Consent. Landlord shall not unreasonably
------------------
withhold or delay its consent to the proposed assignment or subletting, on the
terms and conditions specified in said notice. Landlord's decision whether or
not to consent to the proposed assignment or
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subletting shall be made in writing within fifteen (15) days after Tenant has
delivered to Landlord its notice as described in Paragraph 24.2.1 above and all
information reasonably requested by Landlord pursuant to the terms of Paragraph
24.2 above. Landlord's failure to make a decision whether or not to consent to a
proposed assignment or subletting within the fifteen (15) day period prescribed
above, shall be deemed an election by Landlord to approve such assignment or
subletting. Without otherwise limiting the criteria upon which Landlord may
withhold its consent to any proposed assignment or sublease, if Landlord
withholds its consent where Tenant is in default at the time of the giving of
Tenant's notice or at any time thereafter, or where the net worth of the
proposed assignee (according to generally accepted accounting principles) is
less than the net worth of Tenant at the time this Lease is executed, such
withholding of consent shall be presumptively reasonable. Fifty percent (50%) of
any and all rent paid by an assignee or subtenant in excess of the Rentals to be
paid under this Lease (prorated in the event of a sublease of less than the
entire Premises), after Tenant's deduction therefrom of all reasonable costs to
effect the assignment or subletting, including without limitation, brokerage
commissions, attorneys' fees, and the cost of leasehold improvements or
alterations installed or redecorating performed by Tenant for the sublessee,
shall be paid directly to Landlord, as Additional Rent, at the time and place
specified in this Lease. For the purposes of this Paragraph 24, the term "rent"
shall include any consideration of any kind received, or to be received, by
Tenant from an assignee or subtenant, if such sums are related to Tenant's
interest in this Lease or in the Premises, including, but not limited to key
money, bonus money, and payments (in excess of the fair market value thereof)
for Tenant's assets, fixtures, trade fixtures, inventory, accounts, goodwill,
equipment, furniture, general intangibles, and any capital stock or other equity
ownership interest of Tenant. Any assignment or subletting without Landlord's
consent shall be voidable at Landlord's option, and shall constitute a Default
by Tenant. Landlord's consent to any one assignment or sublease shall not
constitute a waiver of the provisions of this Paragraph 24 as to any subsequent
assignment or sublease nor a consent to any subsequent assignment or sublease;
further, Landlord's consent to an assignment or sublease shall not release
Tenant from Tenant's obligations under this Lease, and Tenant shall remain
jointly and severally liable with the assignee or subtenant.
24.2.4 Assumption of Obligations. In the event Landlord
-------------------------
consents to any assignment, such consent shall be conditioned upon the assignee
expressly assuming and agreeing to be bound by each of Tenant's covenants,
agreements and obligations contained in this Lease, pursuant to a written
assignment and assumption agreement in a form reasonably approved by Landlord.
Landlord's consent to any assignment or sublease shall be evidenced by
Landlord's signature on said assignment and assumption agreement or on said
sublease or by a separate written consent. In the event Landlord consents to a
proposed assignment or sublease, such assignment or sublease shall be valid and
the assignee or subtenant shall have the right to take possession of the
Premises only if an executed original of the assignment or sublease is delivered
to Landlord, and such document contains the same terms and conditions as stated
in Tenant's notice to Landlord given pursuant to Paragraph 24.2.1 above, except
for any such modifications to which Landlord has consented in writing.
24.3 Collection of Rent. Tenant hereby irrevocably gives to and
------------------
confers upon Landlord, as security for Tenant's obligations under this Lease,
the right, power and authority to
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collect all rents from any assignee or subtenant of all or any part of the
Premises as permitted by this Paragraph 24, or otherwise, and Landlord, as
assignee of Tenant, or a receiver for Tenant appointed on Landlord's
application, may collect such rent and apply it toward Tenant's obligations
under this Lease; provided, however, that until the occurrence of any Default by
Tenant, subject to applicable cure periods, or except as provided by the
provisions of Paragraph 24.2.3 above, Tenant shall have the right to collect
such rent. Upon the occurrence of any Default by Tenant, Landlord may at any
time without notice in Landlord's own name sue for or otherwise collect such
rent, including rent past due and unpaid, and apply the same, less costs and
expenses of operation and collection, including reasonable attorneys' fees,
toward Tenant's obligations under this Lease. Landlord's collection of such
rents shall not constitute an acceptance by Landlord of attornment by such
subtenants. In the event of a Default by Tenant, Landlord shall have all rights
provided by this Lease and by law, and Landlord may, upon re-entry and taking
possession of the Premises, eject all parties in possession or eject some and
not others, or eject none, as Landlord shall determine in Landlord's sole
discretion.
24.4 Corporations and Partnerships. If Tenant is a partnership, any
-----------------------------
withdrawal or substitution (whether voluntary, involuntary, or by operation of
law and whether occurring at one time or over a period of time) of any
partner(s) owning fifty percent (50%) or more (cumulatively) of the partnership,
any assignment(s) of fifty percent (50%) or more (cumulatively) of any interest
in the capital or profits of the partnership, or the dissolution of the
partnership shall be deemed an assignment of this Lease requiring the prior
written consent of Landlord. If Tenant is a corporation, any dissolution,
merger, consolidation or other reorganization of Tenant, any sale or transfer
(or cumulative sales or transfers) of the capital stock of Tenant in excess of
fifty percent (50%), or any sale (or cumulative sales) of all of the assets of
Tenant shall be deemed an assignment of this Lease requiring the prior written
consent of Landlord. Any such withdrawal or substitution of partners or
assignment of any interest in or dissolution of a partnership tenant, and any
such sale of stock or assets of a corporate tenant without the prior written
consent of Landlord shall be a Default by Tenant hereunder. The foregoing
notwithstanding, the sale or transfer of any or all of the capital stock of a
corporation, the capital stock of which is now or hereafter becomes publicly
traded, shall not be deemed an assignment of this Lease.
Notwithstanding anything to the contrary contained in this Lease, Tenant,
without Landlord's prior written consent (but with notice to Landlord), may
sublet the Premises or assign this Lease to (i) a subsidiary, affiliate,
division or corporation controlled by or under common control with Tenant; (ii)
a successor corporation related to Tenant by merger, consolidation, non-
bankruptcy reorganization or government action; or (iii) a purchaser of
substantially all of Tenant's assets located at the Premises, provided that in
either of the latter two instances the successor or purchaser has a net worth
not less than the net worth of Tenant at the time that Tenant executes this
Lease (each, a "Permitted Assignee"). Notwithstanding that a Transfer is made to
a Permitted Assignee, Tenant shall not be released from any of its obligations
under this Lease and such Permitted Assignee shall be required to assume all of
Tenant's obligations hereunder as a condition to such transfer being permitted
without Landlord's prior written consent.
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24.5 Reasonable Provisions. Tenant expressly agrees that the
---------------------
provisions of this Paragraph 24 are not unreasonable standards or conditions for
purposes of Section 1951.4(b)(2) of the California Civil Code, as amended from
time to time, under bankruptcy laws, or for any other purpose.
24.6 Attorneys' Fees. Tenant shall pay, as Additional Rent,
---------------
Landlord's reasonable attorneys' fees for reviewing, investigating, processing
and/or documenting any requested assignment or sublease, whether or not
Landlord's consent is granted.
24.7 Involuntary Transfer. No interest of Tenant in this Lease shall
--------------------
be assignable involuntarily or by operation of law, including, without
limitation, the transfer of this Lease by testacy or intestacy. Each of the
following acts shall be considered an involuntary assignment:~
24.7.1 If Tenant is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors, or a proceeding under any bankruptcy
law is instituted in which Tenant is the bankrupt; or, if Tenant is a
partnership or consists of more than one person or entity, if any partner of the
partnership or other person or entity is or becomes bankrupt or insolvent, or
makes an assignment for the benefit of creditors;
24.7.2 Levy of a writ of attachment or execution on this Lease;
24.7.3 Appointment of a receiver with authority to take
possession of the Premises in any proceeding or action to which Tenant is a
party; or
24.7.4 Foreclosure of any lien affecting Tenant's interest in
the Premises, which lien was not consented to by Landlord pursuant to Paragraph
24.9.
An involuntary assignment shall constitute a Default by Tenant and Landlord
shall have the right to terminate this Lease, in which case this Lease shall not
be treated as an asset of Tenant. In the event the Lease is not terminated, the
provisions of Paragraph 24.2.3 regarding rents paid by an assignee or subtenant
shall apply. If a writ of attachment or execution is levied on this Lease, or if
any involuntary proceeding in bankruptcy is brought against Tenant or a receiver
is appointed, Tenant shall have sixty (60) days in which to cause the attachment
or execution to be removed, the involuntary proceeding dismissed, or the
receiver removed.
24.8 Hypothecation. Tenant shall not hypothecate, mortgage or
-------------
encumber Tenant's interest in this Lease or in the Premises or otherwise use
this Lease as a security device in any manner without the prior written consent
of Landlord, which consent shall not be unreasonably withheld. Consent by
Landlord to any such hypothecation or creation of a lien or mortgage shall not
constitute consent to an assignment or other transfer of this Lease following
foreclosure of any permitted lien or mortgage.
24.9 Binding on Successors. The provisions of this Paragraph 24
---------------------
expressly apply to all heirs, successors, sublessees, assignees and transferees
of Tenant.
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25. Successors. Subject to the provisions of Paragraph 24 above and
----------
Paragraph 30.2.1 below, the covenants, conditions, and agreements contained in
this Lease shall be binding on the parties hereto and on their respective heirs,
successors and assigns.
26. Landlord Default: Mortgage Protection. Landlord shall not be in
-------------------------------------
default under this Lease unless Tenant shall have given Landlord written notice
of the breach and, within thirty (30) days after notice, Landlord has not cured
the breach or, if the breach is such that it cannot reasonably be cured under
the circumstances within thirty (30) days, has not commenced diligently to
prosecute the cure to completion. Any money judgment obtained by Tenant based
upon Landlord's breach of this Lease shall be satisfied only out of the proceeds
of the sale or disposition of Landlord's interest in the Premises (whether by
Landlord or by execution of judgment). In the event of any default on the part
of Landlord under this Lease, Tenant shall give notice by registered or
certified mail to any beneficiary of a deed of trust or any mortgagee of a
mortgage affecting the Premises, Building or Land whose address shall have been
furnished to Tenant, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default, including time to obtain possession of the
Premises by power of sale or judicial foreclosure or through appointment of a
receiver, if such should prove necessary to effect a cure.
27. Exhibits. All exhibits attached to this Lease shall be deemed to be
--------
incorporated herein by the individual reference to each such exhibit, and all
such exhibits shall be deemed to be a part of this Lease as though set forth in
full in the body of the Lease.
28. Surrender of Lease Not Merger. The voluntary or other surrender of
-----------------------------
this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger
and shall, at the option of Landlord, terminate all or any existing subleases or
subtenants, or may, at the option of Landlord, operate as an assignment to
Landlord of any or all such subleases or subtenants.
29. Waiver. The waiver by either party of any breach of any term, covenant
------
or condition herein contained (or the acceptance by either party of any
performance by the other after the time the same shall become due) shall not be
deemed to be a waiver of such term, covenant or condition or any subsequent
breach thereof or of any other term, covenant or condition herein contained,
unless otherwise expressly agreed to by the party waiving such performance in
writing. The acceptance by Landlord of any sum less than that which is required
to be paid by Tenant shall be deemed to have been received only on account of
the obligation for which it is paid (or for which it is allocated by Landlord,
in Landlord's reasonable discretion, if Tenant does not designate the obligation
as to which the payment should be credited), and shall not be deemed an accord
and satisfaction notwithstanding any provisions to the contrary written on any
check or contained in any letter of transmittal. The acceptance by Landlord of
any sum tendered by a purported assignee or transferee of Tenant shall not be
deemed a consent by Landlord to any assignment or transfer of Tenant's interest
herein. No custom or practice which may arise between the parties hereto in the
administration of the terms of this Lease shall be construed as a waiver or
diminution of each party's right to demand performance by the other in strict
accordance with the terms of this Lease.
30. General.
-------
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30.1 Captions and headings. The captions and paragraph headings used
---------------------
in this Lease are for convenience of reference only. They shall not be construed
to limit or extend the meaning of any part of this Lease, and shall not be
deemed relevant in resolving any question of interpretation or construction of
any paragraph of this Lease.
30.2 Definitions.
-----------
30.2.1 Landlord. The term Landlord as used in this Lease, so
--------
far as the covenants or obligations on the part of Landlord are concerned, shall
be limited to mean and include only the owner at the time in question of the fee
title to the Premises. In the event of any transfer(s) of such interest, the
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall have no further liability under this Lease to Tenant
except as to matters of liability which have accrued and are unsatisfied as of
the date of such transfer, it being intended that the covenants and obligations
contained in this Lease on the part of Landlord shall be binding on Landlord and
its successors and assigns only during and in respect of their respective
periods of ownership of the fee; provided that any funds in the possession of
Landlord or the then grantor and as to which Tenant has an interest, less any
deductions permitted by law or this Lease, shall be turned over to the grantee.
The covenants and obligations contained in this Lease on the part of Landlord
shall, subject to the provisions of this Paragraph 30.2.1, be binding upon each
Landlord and such Landlord's heirs, personal representatives, successors and
assigns only during its respective period of ownership. Except as provided in
this Paragraph 30.2.1, this Lease shall not be affected by any transfer of
Landlord's interest in the Premises, and Tenant shall attorn to any transferee
of Landlord provided that all of Landlord's obligations hereunder are assumed in
writing by such transferee.
30.2.2 Agents. For purposes of this Lease and without otherwise
------
affecting the definition of the word "agent" or the meaning of an "agency," the
term "agents" shall be deemed to include the agents, employees, officers,
directors, servants, invitees, contractors, successors, representatives,
subcontractors, guests, customers, suppliers, partners, affiliated companies,
and any other person or entity related in any way to the respective party,
Tenant or Landlord.
30.2.3 Interpretation of Terms. The words "Landlord" and
-----------------------
"Tenant" as used herein shall include the plural as well as the singular. Words
in the neuter gender include the masculine and feminine and words in the
masculine or feminine gender include the neuter.
30.3 Copies. Any executed copy of this Lease shall be deemed an
------
original for all purposes.
30.4 Time of Essence. Time is of the essence as to each and every
------- -------
provision in this Lease requiring performance within a specified time.
30.5 Severability. In case any one or more of the provisions
------------
contained herein shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity,
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illegality or unenforceability shall not affect any other provision of this
Lease, but this Lease shall be construed as if such invalid, illegal or
unenforceable provision had not been contained herein. However, if Tenant's
obligation to pay the Rentals is determined to be invalid or unenforceable, this
Lease at the option of Landlord shall terminate.
30.6 Governing Law. This Lease shall be construed and enforced in
-------------
accordance with the laws of the State of California.
30.7 Joint and Several Liability. If Tenant is more than one person
---------------------------
or entity, each such person or entity shall be jointly and severally liable for
the obligations of Tenant hereunder. If Tenant is a husband and wife, the
obligations hereunder shall extend to their sole and separate property as well
as community property.
30.8 Construction of Lease Provisions. Although printed provisions of
--------------------------------
this Lease were prepared by Landlord, this Lease shall not be construed either
for or against Tenant or Landlord, but shall be construed in accordance with the
general tenor of the language to reach a fair and equitable result.
30.9 Tenant's Financial Statements. Tenant hereby warrants that all
-----------------------------
financial statements delivered by Tenant to Landlord are true, correct, and
complete, and prepared in accordance with generally accepted accounting
principles. Tenant acknowledges and agrees that Landlord is relying on such
financial statements in accepting this Lease, and that a breach of Tenant's
warranty as to such financial statements shall constitute a Default by Tenant.
Notwithstanding anything to the contrary contained in this Lease, Landlord shall
keep confidential all such financial information received from Tenant, except
that Landlord may provide such financial information to Landlord's lenders or
prospective lenders with respect to the Premises.
30.10 [Intentionally Omitted].
----------------------
31. Signs. Tenant shall not place or permit to be placed any sign or
-----
decoration on the Land or the exterior of the Building or that would be visible
from the exterior of the Building or Premises, without the prior written consent
of Landlord, which consent shall not be unreasonably withheld. Tenant may place
"for lease" signs in connection with efforts to assign or sublease the Premises,
subject to the prior written consent of Landlord, which consent shall not be
unreasonably withheld; provided that all such signs shall be removed not later
than the one hundred eightieth (180th) day prior to Lease Termination. In no
event shall any such sign revolve, rotate, move or create the illusion of
revolving, rotating or moving or be internally illuminated and there shall be no
exterior spotlighting or other illumination on any such sign. Tenant, upon
written notice by Landlord, shall immediately remove any of Tenant's signs or
decorations that are visible from the exterior of the Building or Premises or
that Tenant has placed or permitted to be placed on the Land or the exterior of
the Building without the prior written consent of Landlord, or which remain
beyond the one hundred eightieth (180th) day prior to Lease Termination. If
Tenant fails to so remove such sign or decoration within five (5) days after
Landlord's written notice, Landlord may enter the Premises and remove such sign
or decoration and Tenant shall pay Landlord, as Additional Rent upon demand, the
cost of such removal. All
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signs placed on the Premises, Building or Land by Tenant shall comply with all
recorded documents affecting the Premises, including but not limited to any
Declaration of Conditions, Covenants and Restrictions; and applicable statutes,
ordinances, rules and regulations of governmental agencies having jurisdiction
thereof. At Landlord's option, Tenant shall at Lease Termination remove any sign
which it has placed on the Premises, Land or the Building, and shall, at its
sole cost, repair any damage caused by the installation or removal of such sign.
32. Landlord as Party Defendant. If, by reason of any act or omission by
---------------------------
Tenant or Tenant's agents, employees or contractors, Landlord is made a party
defendant concerning this Lease, or any portion of the Project, Tenant shall
indemnify Landlord against all liability actually incurred (or threatened
against) Landlord as a party defendant, including all damages, costs and
reasonable attorneys' fees.
33. Landlord Not a Trustee. Landlord shall not be deemed to be a trustee
----------------------
of any funds paid to Landlord by Tenant (or held by Landlord for Tenant)
pursuant to this Lease, including without limitation the Security Deposit.
Landlord shall not be required to keep any such funds separate from Landlord's
general funds or segregated from any funds paid to Landlord by (or held by
Landlord for) other tenants of the Building. Any funds held by Landlord pursuant
to this Lease shall not bear interest.
34. Interest. Any payment due from Tenant to Landlord, except for Rent
--------
received by Landlord within thirty (30) days after the same is due, shall bear
interest from the date due until paid, at an annual rate equal to the greater
of: ten percent (10%); or five percent (5%) plus the rate established by the
Federal Reserve Bank of San Francisco, as of the twenty-fifth (25th) day of the
month immediately preceding the due date, on advances to member banks under
Sections 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter
from time to time amended. In addition, Tenant shall pay all costs and
reasonable attorneys' fees incurred by Landlord in the collection of such
amounts.
35. Surrender of Premises. On the last day of the Lease Term or upon the
---------------------
sooner termination of this Lease, Tenant shall, to the reasonable satisfaction
of Landlord, surrender the Premises to Landlord in the same condition as when
received (reasonable wear and tear, acts of God, casualty, condemnation,
Hazardous Materials other than those stored, used or disposed of by Tenant, its
agents, employees, contractors or invitees, and alterations concerning which
Landlord has not reserved the right to require removal excepted) with all
originally painted interior walls washed, or re-painted if marked or damaged,
and other interior walls cleaned and repaired or replaced, all carpets cleaned
and in good condition, the air conditioning, ventilating and heating equipment
inspected, serviced and repaired by a reputable and licensed service firm
(unless Landlord has elected to maintain heating and air conditioning systems
pursuant to Paragraph 10.1 above), and all floors cleaned and waxed. Tenant
shall remove all of Tenant's personal property and trade fixtures from the
Premises, and all property not so removed shall be deemed abandoned by Tenant.
Furthermore, Tenant shall immediately repair all damage to the Project caused by
any such removal. If the Premises are not so surrendered at Lease Termination,
Tenant shall indemnify, defend and hold Landlord harmless from and against any
loss, damage, expense, claim or liability resulting from delay by Tenant in so
surrendering the Premises
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including, without limitation, any claims made by any succeeding tenant or
losses to Landlord due to lost opportunities to lease to succeeding tenants.
36. Labor Disputes. In the event Tenant shall in any manner be involved in
--------------
or be the object of a labor dispute which subjects the Premises or any part of
the Project to any picketing, work stoppage or other concerted activity which in
the reasonable opinion of Landlord is detrimental to the operation of the
Project or its tenants, Landlord shall have the right to require Tenant, at
Tenant's own expense and within a reasonable period of time, to use Tenant's
best efforts to either resolve such labor dispute or terminate or control any
such picketing, work stoppage or other concerted activity to the extent
necessary to eliminate any interference with the operation of the Project. To
the extent such labor dispute interferes with the performance of Landlord's
duties hereunder, Landlord shall be excused from the performance of such duties.
Failure by Tenant to use its best efforts to so resolve such dispute or
terminate or control such picketing, work stoppage or other concerted activity
within a reasonable period of time shall constitute a Default by Tenant
hereunder. Nothing contained in this Paragraph 36 shall be construed as placing
Landlord in an employer/employee relationship with any of Tenant's employees or
with any other employees who may be involved in such labor dispute.
37. No Partnership or Joint Venture. Nothing in this Lease shall be
-------------------------------
construed as creating a partnership or joint venture between Landlord, Tenant,
or any other party, or cause Landlord to be responsible for the debts or
obligations of Tenant or any other party.
38. Entire Agreement. Any agreements, warranties, or representations not
----------------
expressly contained herein shall in no way bind either Landlord or Tenant, and
Landlord and Tenant expressly waive all claims for damages by reason of any
statement, representation, warranty, promise or agreement, if any, not contained
in this Lease. This Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, agreements and understandings, whether
written or oral, between Landlord and its agents and Tenant and its agents with
respect to the Project or this Lease. This Lease constitutes the entire
agreement between the parties hereto and no addition to, or modification of, any
term or provision of this Lease shall be effective until and unless set forth in
a written instrument signed by both Landlord and Tenant.
39. Submission of Lease. Submission of this instrument for Tenant's
-------------------
examination or execution does not constitute a reservation of space nor an
option to lease. This instrument shall not be effective until executed by both
Landlord and Tenant (and approved by Landlord's lender holding a security
interest in the Building if required). Execution of this Lease by Tenant shall
constitute an offer by Tenant to lease the Premises, which offer shall be deemed
accepted by Landlord when this Lease is executed by Landlord and delivered to
Tenant.
40. Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon
---------------
Tenant paying Rentals and performing its covenants and conditions under the
Lease, Tenant shall and may peaceably and quietly have, hold and enjoy the
Premises for the Lease Term, subject, however, to the terms of this Lease and of
any mortgages or deeds of trust affecting the Premises, and the rights reserved
by Landlord hereunder. Any purchaser upon any foreclosure or exercise of the
power of sale under any mortgage or deed of trust made by Landlord and covering
the
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Premises, Building or Land to whom Tenant attorns pursuant to Paragraph 20.4
above shall be bound by the terms of this Paragraph 40.
41. Authority. The undersigned parties hereby warrant that they have
---------
proper authority and are empowered to execute this Lease on behalf of the
Landlord and Tenant, respectively. If Tenant is a corporation (or partnership),
each individual executing this Lease on behalf of said corporation (or
partnership) represents and warrants that he is duly authorized to execute and
deliver this Lease on behalf of said corporation in accordance with a duly
adopted resolution of the Board of Directors of said corporation or in
accordance with the by-laws of said corporation (or on behalf of said
partnership in accordance with the partnership agreement of such partnership),
and that this Lease is binding upon said corporation (or partnership) in
accordance with its terms. If Tenant is a corporation, and this Lease is not
executed by two corporate officers, Tenant shall, upon execution of this Lease,
deliver to Landlord evidence of the authority of the individual executing this
Lease on behalf of Tenant to execute this Lease on behalf of Tenant. In the
event Tenant should fail to deliver such evidence to Landlord upon execution of
this Lease, Landlord shall not be deemed to have waived its right to require
delivery of such evidence, and at any time during the Lease Term Landlord may
request Tenant to deliver the same, and Tenant agrees it shall thereafter
promptly deliver such evidence to Landlord. If Tenant is a corporation, Tenant
warrants that:
41.1 Tenant is a valid and existing corporation;
41.2 Tenant is qualified to do business in California;
41.3 All fees and all franchise and corporate taxes are paid to date,
and will be paid when due;
41.4 All required forms and reports will be filed when due; and
41.5 The signers of this Lease are properly authorized to execute
this Lease.
42. Brokers. Landlord and Tenant each represent and warrant to the other
-------
that it has had no dealings with any person, firm, broker or finder other than
Jeffry S. Nochimson and Donald Reiman of Colliers Parrish International, Inc.
("Colliers Parrish") and Randolph F. Lamb and Kimberly A. Gates of Cornish &
Carey Commercial ("Cornish & Carey"), in connection with the negotiation of this
Lease and/or the consummation of the transaction contemplated hereby, and that
no broker or other person, firm or entity other than Colliers Parrish and
Cornish & Carey is entitled to a commission or finder's fee in connection with
said transaction. Landlord agrees to pay Colliers Parrish a brokerage commission
in connection with this Lease pursuant to the terms of a separate written
agreement between Landlord and Colliers Parrish. Any brokerage commission or
finder's fee payable to Cornish & Carey in connection with this Lease shall be
paid to Cornish & Carey by Colliers Parrish pursuant to a separate agreement
between them. Landlord and Tenant do each hereby agree to indemnify, defend and
hold the other harmless from and against liability for compensation or charges
which may be claimed by any unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying party, including any
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costs, expenses and/or attorneys' fees reasonably incurred with respect thereto.
The obligation to indemnify, defend and hold harmless as set forth in the
immediately preceding sentence shall survive the termination of this Lease.
43. Right of First Refusal. Provided that (i) Tenant is not in default
----------------------
(beyond any applicable cure period) under this Lease; (ii) this Lease is in full
force and effect; and (iii) Tenant has not assigned this Lease and is in
physical occupancy of at least 50% of the area of the Premises (excluding
transfers not requiring Landlord's consent hereunder); then, and only then,
Tenant shall have the right of first refusal to lease the First Refusal Space
(as defined below) pursuant to the terms and conditions set forth below. If,
subject to the terms of the immediately preceding sentence, at any time during
the initial five year Lease Term, Landlord reaches an agreement with a third
party who desires to lease any available space within the building located at
1800 Green Hills Road in Scotts Valley (the "First Refusal Space"), Landlord
shall give Tenant written notice of the terms and conditions on which such third
party is willing to lease the First Refusal Space ("Offer") and Tenant shall
have a right of first refusal to lease the First Refusal Space on the same terms
and conditions set forth in the Offer. Tenant may exercise its right of first
refusal hereunder by giving Landlord written notice of such exercise within
seven days after the date of Tenant's receipt of the Offer. To be valid,
Tenant's exercise of such right of first refusal must be unqualified and
unconditional, and once timely exercised, may not be rescinded by Tenant.
Tenant's failure to give written notice of its exercise of the right of first
refusal within said seven day period referred to above shall be deemed Tenant's
waiver of its right of first refusal to lease the First Refusal Space as
provided herein. If Tenant gives timely written notice of its exercise of the
right of first refusal, then Landlord shall prepare an amendment to this Lease
that incorporates the First Refusal Space into the Premises or a new lease
covering the First Refusal Space on the applicable terms and conditions set
forth in the third party Offer and otherwise on the terms and conditions set
forth in this Lease (except that Landlord shall not be obligated to furnish any
tenant improvement allowance with respect to the First Refusal Space unless set
forth in the third party Offer). Landlord and Tenant agree to execute an
amendment to this Lease that incorporates the First Refusal Space into the
Premises or a new lease covering the First Refusal Space as contemplated herein
within fifteen days after Landlord delivers the same to the Tenant; If Tenant
fails to timely exercise its right of first refusal in accordance with the terms
set forth above, then Tenant's right of first refusal with respect to the First
Refusal Space shall be deemed terminated and Landlord shall have the unfettered
right, notwithstanding the provisions of Paragraph 44 below, to lease the First
Refusal Space to any third party on terms and conditions not substantially more
favorable to the proposed tenant than those set forth in the third party Offer.
For purposes of this Paragraph 43, the term "substantially more favorable" shall
mean a rental rate of less than 95% of the rental rate offered to Tenant
pursuant to the third party Offer. If Landlord leases the First Refusal Space to
a third party in accordance with the terms set forth above, such third party
shall be deemed to lease such First Refusal Space free and clear of any rights
of Tenant to such First Refusal Space and also free and clear of any right
Tenant may have to expand into such First Refusal Space pursuant to the terms of
Paragraph 44 below. If, however, Landlord has not leased the First Refusal Space
to a third party as provided above within sixty (60) days following the date
Tenant waives its right of first refusal or the date such right of first refusal
lapses without Tenant having timely exercised such right, then Tenant's right of
first refusal shall revive automatically.
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44. Expansion Option. Provided that (i) Tenant is not in default (beyond
----------------
any applicable cure period) under this Lease; (ii) this Lease is in full force
and effect; and (iii) Tenant has not assigned this Lease and is in physical
occupancy of at least 50% of the area of the Premises (excluding transfers not
requiring Landlord's consent hereunder); then, and only then, Tenant shall have
an option, pursuant to the terms and conditions of this Paragraph 44, but
subject to Landlord's rights under Paragraph 43 above, to lease all or any
portion of the entire balance of the second floor, consisting of approximately
eleven thousand two hundred sixty-six useable square feet, as designated on the
plan attached hereto as Exhibit "E" (the "Expansion Area"). If Tenant exercises
----------
the option to expand as to less than the entire Expansion Area, then, (i) as to
the portion of the Expansion Area to which Tenant's notice of exercise is given,
such portion must be contiguous to the Premises then being leased by Tenant
hereunder (or contiguous to any Substituted Expansion Space then being leased by
Tenant hereunder (if applicable)), (ii) the portion of the Expansion Area which
Tenant elects not to expand into must be of a size and configuration which is
reasonably marketable, and Tenant may not lease any portions of the interior
Common Areas included within the Expansion Area, if any, such as bathrooms,
janitorial closets, elevators or phone rooms (unless Tenant leases the entire
Expansion Area). Tenant may exercise the option to expand described herein at
any time, or from time to time in stages, commencing with the twelfth month of
the initial five year Lease Term and terminating at the expiration of the
initial five year Lease Term by delivering to Landlord its irrevocable written
notice of such exercise. To be valid, Tenant's exercise of its option to expand
must be unqualified and unconditional, and once timely exercised, may not be
rescinded by Tenant. Time is of the essence with respect to the time period
during which Tenant must deliver to Landlord its written notice of exercise of
the expansion option. If Tenant fails to deliver written notice of its exercise
of the expansion option to Landlord during the expansion option exercise period
described above, then the expansion option shall expire and be of no further
force and effect and Landlord shall be free to lease the Expansion Area or
applicable portion thereof (and/or Substituted Expansion Space, if applicable)
to third parties.
If Tenant timely exercises the expansion option, and the Expansion Area
described above or applicable portion thereof (or such portion of the Expansion
Area and/or other comparable space Landlord is willing to lease located in the
first floor of the Building or the first and/or second floors of the building
located at 1700 Green Hills Road that is of a size comparable to the square
footage of the Expansion Space, which comparable space is hereinafter referred
to as the "Substituted Expansion Space") desired to be let by Tenant is
available for lease, then Landlord shall prepare, and Landlord and Tenant shall
execute, an amendment to this Lease that incorporates the Expansion Area or
applicable portion thereof (and/or Substituted Expansion Space, if applicable)
being let by Tenant into the Premises and subjects the Expansion Area or
applicable portion thereof (and/or Substituted Expansion Space) being let by
Tenant to all of the terms and conditions of this Lease, except (i) Tenant shall
not have any rights of early occupancy of the Expansion Area or applicable
portion thereof (and/or Substituted Expansion Space, if applicable) being let by
Tenant; (ii) the term of the Lease with respect to the Expansion Space or
applicable portion thereof (and/or the Substituted Expansion Space, if
applicable) being let by
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Tenant shall commence immediately following the exercise of such expansion
option and shall terminate concurrently with the Lease Term, (iii) Tenant's
proportionate share of Common Area Expenses and number of non-exclusive parking
spaces allocated to Tenant shall be adjusted based on the leasable square
footage included in the expansion space leased by Tenant, and (iv) Landlord
shall grant Tenant an allowance for the construction of tenant improvements in
the Expansion Area or applicable portion thereof (and/or Substituted Expansion
Space, if applicable) in an amount equal to the product obtained by multiplying
Four Dollars ($4.00) per square foot of the Expansion Space or applicable
portion thereof (and/or Substituted Expansion Space, if applicable) being let by
Tenant by a fraction, the numerator of which is the number of months remaining
in the initial five year Lease Term and the denominator of which is equal to
sixty months. The amendment shall attach an Improvement Agreement similar to the
attached hereto as Exhibit "C" for the construction of tenant improvements in
the Expansion Area or applicable portion thereof (and/or Substituted Expansion
Space, if applicable) being let by Tenant. Landlord and Tenant agree to execute
the amendment within fifteen days after the date Landlord delivers the same to
Tenant. In the event Tenant timely exercises the expansion option described
above in accordance with the terms set forth above and the Expansion Area
desired to be let by Tenant is not available for lease by Tenant at the time of
such exercise of the expansion option, then, provided Landlord does not have
alternative space available for lease on the first floor of the Building located
at 1800 Green Hills Road or on either the first or second floors of the building
located at 1700 Green Hills Road that is comparable to the Expansion Area space
desired to be let by Tenant to accommodate Tenant's expansion space requirement
(which requirement cumulatively or individually shall not exceed the square
footage of the Expansion Area), then Tenant shall have the right to terminate
this Lease on the following conditions:
(a) Tenant shall give Landlord at least four months advance written
notice of the date of termination of the Lease specifying the date of
termination of the Lease; provided, however, Tenant's right to
terminate the Lease for lack of available Expansion Area and/or
Substituted Expansion Space as provided above shall not be effective
prior to expiration of the thirty-sixth (36/th/) month of the Lease
Term.
(b) On the effective date of such termination of the Lease, Tenant
shall pay to Landlord, in addition to any Rentals or other sums owing
to Landlord, an amount equal to the sum of the unamortized leasing
commissions, tenant improvement allowances and other fees paid or
incurred by Landlord in connection with this Lease.
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IN WITNESS WHEREOF, the parties have executed this Lease effective as of
the date set forth below.
LANDLORD: TENANT:
BORLAND INTERNATIONAL, INC., a UNIDIRECT CORPORATION, a
Delaware corporation California corporation
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ [SIGNATURE ILLEGIBLE]
---------------------------- ------------------------------
Title: VP Fin. & CFO Title: PRESIDENT
------------------------- ---------------------------
Date: 8/6/96 Date: 7/30/96
-------------------------- ----------------------------
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EXHIBIT "C"
IMPROVEMENT AGREEMENT
---------------------
This Improvement Agreement is made part of that Lease dated July 29, 1996
(the "Lease") by and between BORLAND INTERNATIONAL, INC., a Delaware corporation
("Landlord") and UNIDIRECT CORPORATION, a corporation ("Tenant"). Landlord and
Tenant agree that the following terms are part of the Lease:
1. Purpose of Improvement Agreement. The purpose of the Improvement
--------------------------------
Agreement is to set forth the rights and obligations of Landlord and Tenant with
respect to the construction of the Tenant Improvements in the Premises.
2. Definitions. As used in this Improvement Agreement, the following
-----------
terms shall have the following meanings, and initially capitalized terms which
are not defined below, but which are defined in the Lease and which are used in
this Improvement Agreement, shall have the meanings ascribed to them in the
Lease:
(a) Final Tenant Improvement Plans. The term "Final Tenant
------------------------------
Improvement Plans" shall mean those plans and specifications for the Tenant
Improvements to be constructed by Tenant which are to be prepared by Tenant and
approved by Landlord pursuant to Paragraph 3 below.
(b) Tenant Improvements. The term "Tenant Improvements" shall mean
-------------------
the tenant improvements to be constructed by Tenant in accordance with the Final
Tenant Improvement Plans and which shall be consistent with building standard
improvements.
(c) TI Costs. The terms "TI Costs" shall mean and include all costs
--------
and expenses incurred by Tenant for any or all of the following: architectural
and engineering fees and costs, all building permits fees and taxes and other
governmental fees and taxes required for the construction and occupancy of the
Tenant Improvements all of Tenant's contractors' and subcontractors' prices and
fees for constructing the Tenant Improvements, including the cost of all
partitions, utility systems, fire sprinkler systems, heating, ventilating and
air conditioning systems and equipment, roof screens, electrical distribution
facilities, wiring, data, telephone and phone system installation, lighting,
ceilings, installations of fixtures and equipment, restrooms, carpeting, and all
other improvements and alterations required to prepare the Building for
occupancy by Tenant in accordance with the Final Tenant Improvement Plans. TI
Costs shall not include the cost of constructing or installing the demising wall
separating the Premises from the balance of the second floor space. The parties
hereto agree that Landlord shall be responsible for constructing or installing,
or causing to be constructed or installed, the demising wall referred to above
and that the cost of constructing such demising wall shall not be included in
the TI Costs.
-1-
<PAGE>
(d) Maximum TI Allowance. The term "Maximum TI Allowance" shall mean
--------------------
a an amount equal to the product obtained by multiplying the rentable square
footage of the Premises by Four Dollars ($4.00) per rentable square foot.
(e) Excess TI Costs. The term "Excess TI Costs" shall mean all TI
---------------
Costs in excess of the Maximum TI Allowance.
3. Design of Tenant Improvements.
-----------------------------
(a) Preliminary Tenant Improvement Plans. Tenant shall, on or before
------------------------------------
September 1, 1996, prepare and deliver to Landlord for its review and approval
preliminary plans for the Tenant Improvements, which preliminary plans shall
show Tenant's desired floor plan, layout, electrical requirements, HVAC
requirements and general requirements in sufficient detail in order to permit
Tenant's architect to prepare working drawings for the Tenant Improvements (the
"Preliminary Tenant Improvement Plans"). The Preliminary Tenant Improvement
Plans shall reflect building standard improvements. Within ten (10) business
days after receipt of the Preliminary Tenant Improvement Plans, Landlord shall
either approve such plans or notify Tenant in writing of any request for changes
to the Preliminary Tenant Improvement Plans. If Landlord submits any request for
changes, the parties shall meet and confer to develop Preliminary Tenant
Improvement Plans that are acceptable to both Landlord and Tenant within five
(5) business days after Landlord has notified Tenant of its request for changes.
(b) Development and Approval of Tenant Improvement Plans. Once the
----------------------------------------------------
Preliminary Tenant Improvement Plans have been approved by Landlord and Tenant,
Tenant shall cause Tenant's architect to complete and submit to Landlord for its
approval final working drawings for the Tenant Improvements that are consistent
with and are logical evolutions of the Preliminary Tenant Improvement Plans
approved by the parties. Landlord shall approve the final working drawings for
the Tenant Improvements or notify Tenant in writing of its specific request for
changes within ten (10) business days after receipt of the working drawings from
Tenant. If Landlord submits any request for changes, the parties shall confer
and reach agreement upon the final working drawings for the Tenant Improvements
within five (5) business days after Landlord has notified Tenant of its request
for changes. When Landlord and Tenant agree upon the final working drawings for
the Tenant Improvements, a representative of each shall sign the same. The final
working drawings so approved by Landlord and Tenant are referred to herein as
the "Final Improvement Plans".
4. Construction of Tenant Improvements. After the Final Improvement Plans
-----------------------------------
have been approved by the parties hereto, Tenant shall put such Plans out to
competitive bid and Tenant shall select the lowest qualified bidder acceptable
to Tenant to perform such Tenant Improvement work. Prior to the commencement of
the construction of the Tenant Improvements, Tenant shall submit to Landlord for
its approval (which shall not be unreasonably withheld), Tenant's construction
contract for the Tenant Improvements. Landlord also shall have the right but not
the obligation nor the duty, to reasonably disapprove any such contractor (or
subcontractors) who, in Landlord's good faith determination, is financially or
otherwise unqualified. The failure of Landlord to disapprove a contractor or
subcontractor shall not constitute a warranty that any contractor or
subcontractor not so disapproved is in fact qualified. Following Landlord's
approval of the Final Tenant Improvement Plans
-2-
<PAGE>
and Tenant's contractor and subcontractors, Tenant shall promptly commence
construction and installation of the Tenant Improvements and shall thereafter
pursue the same diligently to completion. Any damage to the Building caused by
Tenant or its contractors or subcontractors in connection with the construction
of the Tenant Improvements shall be repaired at Tenant's expense. Tenant shall
be responsible for obtaining all necessary permits and approvals required for
the construction and installation of the Tenant Improvements. All work done in
connection with the Tenant Improvements shall be performed in compliance with
all applicable laws, ordinances, rules, orders and regulations of all federal,
state, county and municipal governments or agencies now in force or that may be
enacted hereafter and with all directives rules and regulations of the fire
marshal, health officer, building inspector or other proper officers of any
governmental agency now having or hereafter acquiring jurisdiction. If the
construction of the Tenant Improvements triggers compliance with the Americans
With Disabilities Act, or the regulations promulgated thereunder ("ADA") in the
Common Areas, then Landlord, at its sole cost, shall be responsible for such ADA
compliance in the Common Areas. If construction of the Tenant Improvements
triggers compliance with ADA in the Premises, then Tenant, at its cost, shall be
responsible for such ADA compliance in the Premises.
5. Changes to Approved Plans. There shall be no changes to the approved
-------------------------
Final Tenant Improvement Plans without the prior written consent of Landlord.
All change orders requested by Tenant shall be made in writing. Any change not
approved or disapproved by Landlord within five (5) business days of Landlord's
receipt of detailed plans and specifications therefor shall be deemed
disapproved.
6. Purpose of Maximum TI Allowance. The Maximum TI Allowance shall be
-------------------------------
used by Tenant to construct general purpose interior leasehold improvements in
the Building. As used herein "general purpose interior leasehold improvements"
shall mean and refer to interior improvements which may be of permanent
improvement to the Building (e.g., permanent partitions; window, wall and floor
coverings; HVAC equipment and wiring; electrical distribution facilities and
wiring; lighting and utility fixtures); and shall not mean and include any
"special purpose improvements" needed by Tenant for the conduct of its business
or which might not be a permanent improvement to the Premises (e.g., demountable
partitions, special operating equipment, trade fixtures of Tenant, special
security requirements, and cabinet and fixture work). For purposes hereof,
general purpose improvements shall include the installation of Tenant's new
phone system in the Premises. In determining whether any interior improvement is
a "general purpose interior leasehold improvement" or a "special purpose
improvement", the parties shall take into account the kind, quality, and amount
of such improvements, their location in the Premises, and their relationship to
the other improvements.
7. Payment of TI Costs. The TI Costs for the Tenant Improvements shall be
-------------------
paid by Landlord and Tenant as follows:
(a) Maximum TI Allowance. Landlord shall contribute the Maximum TI
--------------------
Allowance toward the TI Costs, in the manner set forth below, but subject to the
satisfaction of the conditions set forth in Paragraphs 8 and 9 below.
(b) Excess TI Costs. Tenant shall pay the full amount of all Excess
---------------
TI Costs, in the manner set forth below.
-3-
<PAGE>
(c) Progress Payments During Construction. During the course of
-------------------------------------
construction of the Tenant Improvements, each progress payment due to Tenant's
contractor or to any subcontractor or material supplier shall be paid by
Landlord and Tenant as follows: (i) Landlord shall pay a fraction of each
progress or other payment, which fraction shall have as its numerator the
Maximum TI Allowance and shall have as its denominator Tenant's estimate of the
total TI Costs to complete construction of the Tenant Improvements, less a ten
percent (10%) retention; and (ii) Tenant shall pay the balance of each
progress or other payment. The ten percent (10%) retention shall be paid by
Landlord to Tenant thirty-five (35) days after the timely filing of a Notice of
Completion or, if no Notice of Completion is filed, then ninety-five (95) days
after substantial completion of the Tenant Improvements, in each case assuming
such period shall expire without the filing of any lien claims
8. Conditions Precedent. Landlord shall not be obligated to make any
--------------------
disbursements of the Maximum TI Allowance to or for the benefit of Tenant unless
at the time of each request for disbursement, all of the following conditions
are satisfied:
(a) Such request shall be made prior to the date which is one (1)
year following the Commencement Date; it being understood and agreed that any
portion of the Maximum TI Allowance which is not required to be disbursed to
Tenant pursuant to the terms hereof shall be retained by Landlord and shall not
---
be credited against Tenant's Rental obligations or paid to Tenant;
(b) There shall exist no condition, event or act which would
constitute an event of default hereunder or under the Lease;
(c) The Lease shall be in full force and effect;
(d) Tenant shall have furnished to Landlord receipted bills and
releases of lien rights (in statutory form) covering work done and/or materials
furnished in connection with the construction of the Tenant Improvements.
9. Disbursement Procedures. Tenant may request disbursements from the
-----------------------
Maximum TI Allowance not more frequently than once each month. No disbursements
shall be made until Landlord has approved the Final Tenant Improvement Plans.
Each request for disbursement shall be accompanied by (i) an itemized statement,
in form and content reasonably acceptable to Landlord; (ii) lien releases in
statutory form from all persons and entities providing work or materials covered
by such statement; and (iii) invoices, vouchers, statements, affidavits and/or
other documents in a form reasonably acceptable to Landlord which substantiate
and justify the disbursement requested. Landlord shall make disbursements of the
Maximum TI Allowance within thirty (30) days after Landlord's receipt of each
fully completed disbursement request directly to Tenant or, at Landlord's
option, directly to contractors, contractors, laborers or suppliers entitled
thereto; provided, however, Landlord reserves the right to subsequently
disapprove some or all of the matters disclosed by such disbursement request and
to withhold the amounts relating to the disapproved matters from the next
succeeding disbursement. Prior to or at the time of each disbursement hereunder
for construction costs, Tenant shall deliver to Landlord lien waivers in a form
reasonably satisfactory to Landlord from Tenant's prime contractor to whom funds
were disbursed under the previous disbursement.
-4-
<PAGE>
10. Inspections. In addition to Landlord's right under the Lease to enter
-----------
the Premises for the purpose of posting notices of nonresponsibility, Landlord,
its officers, agents or employees, shall have the right at all reasonable times
to enter upon the Premises and inspect the Tenant Improvements to determine that
the same are in conformity with the Final Tenant Improvement Plans and all
requirements hereof. Landlord, however, is under no obligation to supervise,
inspect or inform Tenant of the progress of construction and Tenant shall not
rely upon Landlord therefor.
11. Protection Against Lien Claims. In addition to the Lease, Tenant
------------------------------
agrees to fully pay and discharge all claims for labor done and materials and
services furnished in connection with the construction of the Tenant
Improvements, to diligently file or procure the filing of a valid Notice of
Completion upon completion of construction and within ten (10) days thereafter,
to diligently file or procure the filing of a Notice of Cessation upon a
cessation of labor on the Tenant Improvements for a continuous period of thirty
(30) days or more, and to take all other reasonable steps to forestall the
assertion of claims of lien against the Premises, the Parcel, or any part
thereof or right or interest appurtenant thereto. The provisions of Paragraph 7
notwithstanding, Tenant acknowledges that no portion of the Maximum TI Allowance
shall be disbursed to or for the benefit of Tenant until Landlord has received
satisfactory evidence of the release or removal (including removal by
appropriate surety bond) of all recorded mechanics' liens and bonded stop
notices, the payment or satisfaction of which was covered by any prior
disbursement of the Maximum TI Allowance.
12. Default. Each of the following events shall constitute an event of
-------
default hereunder:
(a) Substantial deviations in construction work from the Final Tenant
Improvement Plans, without the prior approval of Landlord or the appearance of
defective workmanship or materials when said deviations or defects are not
corrected within thirty (30) days after written notice thereof;
(b) Cessation of construction work prior to the completion of the
Tenant Improvements for a continuous period of thirty (30) days or more for
causes other than causes beyond the reasonable control of Tenant;
(c) The filing of any claim of lien against the Premises, the
Building, the Land, or any part thereof, in connection with the Tenant
Improvements, and the continued maintenance of said claim of lien for a period
of thirty (30) days after notice to Tenant thereof without discharge or
satisfaction thereof or provision therefor satisfactory to Landlord (at
Landlord's sole discretion); or
(d) The occurrence of a default by Tenant under the Lease.
13. Remedies. In the event of a default by Tenant hereunder, Landlord
--------
shall thereafter have no further obligation to disburse any portion of the
Maximum TI Allowance, unless and until such default is cured. In addition,
Landlord shall have the right (but not the obligation) to enter upon the
Premises and take over .and complete the construction of the Tenant
Improvements, to make disbursements from the Maximum TI Allowance, and to
discharge or replace the contractors or subcontractors performing such work. In
no event shall Landlord be required to expend its own funds
-5-
<PAGE>
to complete the Tenant Improvements if the Maximum TI Allowance is insufficient.
Where substantial deviations from the Final Tenant Improvement Plans have
occurred which have not been approved in accordance with Paragraph 5 above, or
defective or unworkmanlike labor or materials are being used in construction of
the Tenant Improvements, Landlord shall have the right to immediately order
stoppage of all construction and demand that such condition be corrected. After
issuance of such an order in writing, no further work shall be done on the
Tenant Improvements without the prior written consent of Landlord unless and
until said condition has been fully corrected, and upon correction, Landlord
shall promptly consent to the continuation of construction.
14. Evidence of Compliance with Government Regulations. Upon completion of
--------------------------------------------------
the Tenant Improvements, Tenant shall furnish to Landlord copies of such permits
of occupancy as may be required by any public authority having jurisdiction.
15. Indemnification. Tenant shall, at Tenant's expense, defend, indemnify,
---------------
save and hold Landlord harmless from any and all claims, demands, losses,
expenses, damages (general, punitive or otherwise) causes of action (whether
legal or equitable in nature) asserted by any person, firm, corporation,
governmental body or agency, or entity arising out of the construction of the
Tenant Improvements or caused by the use of the Maximum TI Allowance. Tenant
shall pay to Landlord upon demand all claims, judgments, damages, losses or
expenses (including attorneys' fees) incurred by Landlord as a result of any
legal action arising out of the construction of the Tenant Improvements or
caused by the use of the Maximum TI Allowance.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set
forth below.
LANDLORD: TENANT:
BORLAND INTERNATIONAL, INC. UNIDIRECT CORPORATION,
a Delaware corporation a California corporation
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ [SIGNATURE ILLEGIBLE]
--------------------------- ---------------------------
Title: VP Fin. & CFO Title: PRESIDENT
------------------------ ------------------------
Dated: 8/6/96 Dated: 7/30/96
------------------------ ------------------------
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<PAGE>
FIRST AMENDMENT TO NET LEASE AGREEMENT
--------------------------------------
This First Amendment to Net Lease Agreement ("Amendment") is dated as of
February 27, 1997, by and between Borland International, Inc., a Delaware
corporation ("Landlord") and UniDirect Corporation, a California corporation
("Tenant").
RECITALS
--------
A. Landlord and Tenant have entered into Net Lease Agreement dated as of
July 29, 1996 (the "Lease") covering that certain space, consisting of
approximately sixteen thousand three hundred sixty-five (16,365) rentable square
feet, situated in the second floor of that certain building located at 1800
Green Hills Road in the City of Scotts Valley, County of Santa Cruz, State of
California (the "Premises").
B. Pursuant to the terms of Paragraph 43 of the Lease, Landlord has
presented to Tenant the terms of a third party offer to lease the balance of
available space located on the second floor of the building referred to above.
Tenant has exercised its right of first refusal with respect to such space
covered by the third party offer. This Amendment sets forth the terms and
conditions upon which Landlord will lease to Tenant, and Tenant will lease from
Landlord, the balance of the second floor space described below. Upon leasing
the balance of the second floor space, Tenant will be leasing the entire second
floor of the above-described building, which entire second floor space shall
consist of thirty thousand five hundred seventy-six (30,576) rentable square
feet.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, the parties hereto agree as follows:
1. Additional Space.
----------------
(a) Demise of Additional Space. Pursuant to the terms of Paragraph 43
--------------------------
of the Lease, Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord that certain space, consisting of approximately fourteen thousand nine
hundred sixty-six (14,966) rentable square feet located adjacent to the Premises
and comprising the balance of the available space located on the second floor of
the building referred to above (the "Additional Space"). Said Additional Space,
together with the original Premises, is shown cross-hatched on Exhibit "A"
----------
attached hereto and made a part hereof. The Additional Space includes the break
area identified on Exhibit "A" attached hereto. Except to the extent that
----------
such meaning would be clearly inconsistent with the terms of this Amendment,
wherever the term "Premises" is used in the Lease, such terms shall include the
Additional Space.
(b) Term. The term of the Lease with respect to the Additional Space
----
shall commence on February 28, 1997 (the "Additional Space Commencement Date")
and shall expire (unless earlier terminated in accordance with the terms of the
Lease, as amended hereby) on February 27, 2002. In the event Tenant elects,
pursuant to Paragraph 3.5 of the Lease, to extend
-1-
<PAGE>
the term of the Lease, such election or elections shall also operate as to
extend the term of the Lease as to the Premises and the Additional Space at a
---
rental as described in Paragraph 4.4 of the Lease.
(c) Early Occupancy of Additional Space. Prior to the Additional
-----------------------------------
Space Commencement Date, Tenant shall have the right, subject to the terms of
this subparagraph 1(c), to enter the Premises solely for the purpose of
fixturizing the Additional Space and installing furniture, computers and
telephones in the Additional Space. Tenant's right of early occupancy with
respect to such Additional Space shall subject to all of the terms and
conditions of the Lease, as amended hereby, except that Tenant shall not be
obligated to pay Rent or Tenant's pro rata share of Common Area Charges (with
respect to the Additional Space only) prior to the Additional Space Commencement
Date. Tenant agrees that in exercising its right of early occupancy pursuant to
the terms described in this subparagraph 1(c), Tenant shall not interfere with
Landlord's work described in subparagraph 1(d) below. Tenant agrees to
coordinate its fixturizing of the Additional Space and installation of its
furniture, computers and telephones in the Additional Space so that the same
does not interfere with Landlord's work described in subparagraph 1(d) below.
(d) Tenant Improvements By Landlord in Additional Space. Prior to the
---------------------------------------------------
February 28, 1997, Landlord shall, at Landlord's sole cost, cure any deferred
maintenance items with respect to the Additional Space and place the roof,
heating ventilation and air conditioning system, electrical system, lighting,
plumbing system and toilet facilities in or with respect to the Additional Space
in good condition and repair. In the event of any breach of Landlord's
obligations described in the immediately preceding sentence, Tenant shall notify
Landlord in writing of such breach not later than thirty (30) days following the
Additional Space Commencement Date and such written notice shall state in detail
the nature of such breach. In the event of such breach, Landlord shall promptly
cure the same at Landlord's cost. In the event Tenant does not give Landlord
written notice of any breach of its obligations under the first sentence of this
subparagraph 1(d) within thirty (30) days following the Additional Space
Commencement Date, then Tenant shall be deemed to have accepted the Premises in
their as is condition as of the Additional Space Commencement Date and shall be
deemed to have waived any right to claim a breach by Landlord of any of its
obligations under the first sentence of this subparagraph 1(d). Except as
otherwise provided in this subparagraph 1(d), the parties hereto acknowledge and
agree that Landlord shall have no obligation to improve the Additional Space and
shall have no obligation to provide any allowance for the cost of construction
of any improvements with respect to the Additional Space.
(e) Rent. Tenant shall pay to Landlord as monthly rent for the
----
Additional Space ("Additional Space Rent"), in advance without offset, deduction
or demand, on the first day of each month, commencing on March ??, 1997 and
continuing throughout the term of the Lease (until adjusted pursuant to the
terms of subparagraph 1(f) below), the sum of Fourteen Thousand Nine Hundred
Sixty-six Dollars ($14,966) per month (NNN). Tenant shall have no obligation to
pay any Additional Space Rent for the period of February 28, 1997 through March
27, 1997. Additional Space Rent shall be prorated, based on a thirty (30) day
month, for any partial month during the term of the Lease following the
Additional Space Rent Commencement Date. The Additional Space Rent shall be
adjusted pursuant to the terms of subparagraph 1(f)
-2-
<PAGE>
below and also shall be adjusted pursuant to the terms of Paragraph 4.4 in the
event Tenant exercises its option(s) to extend the Lease Term as provided in
Paragraph 3.5 of the Lease.
(f) Cost of Living Adjustments. The Additional Space Rent payable
--------------------------
hereunder shall be adjusted pursuant to this subparagraph 1(f) every twelve
months during the initial term of the Lease with respect to the Additional
Space, with the first such adjustment on February 28, 1998, and the Additional
Space Rent as adjusted shall be payable monthly pursuant to the terms of
subparagraph 1(e) above until the next adjustment under this subparagraph 1(f).
As used herein, the term "Adjustment Date" shall mean the date of an Additional
Space Rent adjustment under this subparagraph 1(f). As of each Adjustment Date,
the Additional Space Rent shall be increased to a sum equal to the product
obtained by multiplying the then current Additional Space Rent by a fraction,
the numerator of which is the New Index as of the applicable Adjustment Date and
the denominator of which is the Initial Index. For the purposes of adjusting the
Additional Space Rent as provided in this subparagraph 1(f), the following
definitions shall apply:
(i) INDEX: The Consumer Price Index (all items) for all Urban
Consumers as published by the United States Department of Labor, Bureau of Labor
Statistics, for the San Francisco/Oakland/San Jose Metropolitan Area (1982-
84=100);
(ii) INITIAL INDEX: In regard to the first adjustment pursuant to this
subparagraph 1(f), the Index published for the month nearest but prior to the
Additional Space Commencement Date and in regard to all subsequent adjustments,
the Index published nearest but prior to the immediately preceding Adjustment
Date;
(c) NEW INDEX: The Index published nearest but prior to the
applicable Adjustment Date.
If, at any time when the Additional Space Rent is to be adjusted as provided
above, the Index is changed so that the base year differs from the base year
used for the Initial Index, the Index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau of
Labor Statistics. In the event the Index is otherwise changed or discontinued
during the term of this Lease with respect to the Additional Space, the most
nearly comparable official price index of the United States Government (as
determined in Landlord's reasonable discretion) shall be used for computing the
adjustments to the Additional Space Rent. Anything in this Lease to the contrary
notwithstanding, in no event shall the Additional Space Rent following any
adjustment pursuant to this subparagraph 1(f) be less than 103% nor greater than
106% of the Additional Space Rent immediately prior to the applicable Adjustment
Date.
2. Prepaid Rent. Concurrently with the execution of this Amendment,
------------
Tenant shall pay to Landlord the sum of Twenty-nine Thousand Nine Hundred
Thirty-two Dollars ($29,932), which is to be applied by Landlord to the first
and last month's rental due under this Amendment for Additional Space Rent.
-3-
<PAGE>
3. Additional Security Deposit. Concurrently with the execution of this
---------------------------
Amendment, Tenant shall pay to Landlord an additional Fourteen Thousand Nine
Hundred Sixty-six Dollars ($14,966), which is to be added to the Security
Deposit previously delivered to Landlord and applied in accordance with the
terms of Paragraph 5 of the original Lease.
4. Additional Parking Spaces. Effective as of the Additional Space
-------------------------
Commencement Date, Paragraph 1.1.3 of the Lease is hereby amended to provide
that Tenant shall be entitled to the non-exclusive right to use no more than
sixty-two (62) parking spaces within the Common Area.
5. Tenant's Percentage Share of Common Area Charges. Effective as of the
------------------------------------------------
Additional Space Commencement Date, Tenant's percentage share of Common Area
Charges as provided in Paragraph 1.10 of the Lease shall be increased to forty-
four and seventy-two one hundredths percent (44.72%). It is understood that the
44.72% share of Common Area Charges referred to above is exclusive of any
additional Common Area Charges to be paid by Tenant under its lease with
Landlord of certain premises located on the first floor of the building located
at 1800 Green Hills Road.
6. Landlord Consent to All Alterations in Additional Space. Anything in
-------------------------------------------------------
the Lease (including, without limitation, the provisions of Paragraph 13.1 of
the Lease) to the contrary notwithstanding, Tenant agrees that Tenant shall not
make, or permit to be made, any Alterations in, on, about or to the Additional
Space, or any part thereof (including, without limitation, non-structural
Alterations the cost of which do not exceed $10,000), without the prior written
consent of Landlord (which consent shall not be unreasonably withheld). In
making any such Alterations, Tenant shall, at its sole cost, obtain and comply
with any and all permits or approvals required by any governmental departments
or authorities having jurisdiction thereof and any utility company having an
interest therein. Anything in this Paragraph 6 or in Paragraph 13.1 to the
contrary notwithstanding, under no circumstances shall Tenant have the right to
alter or change the perimeter office layout of the Additional Space or remove
any perimeter office walls within the Additional Space.
7. [Intentionally Omitted}.
8. Modification of Initial Term of Lease With Respect to Original
--------------------------------------------------------------
Premises. The parties hereto agree that, the provisions of Paragraphs 1.5, 1.6,
and 1.7 of the Lease to the contrary notwithstanding, the initial term of the
Lease with respect to the original Premises shall expire, unless sooner
terminated or extended pursuant to the terms of the Lease, on February 27, 2002.
The initial term of the Lease with respect to the original Premises shall thus
be coterminus with the initial term of the Lease with respect to the Additional
Space. Solely with respect to the original Premises (not including the
Additional Space), the monthly Rent to be paid by Tenant to Landlord from the
sixty-first month of the initial Lease Term through February 27, 2002 shall be
equal to the product obtained by multiplying (i) the total rentable square
footage of the original Premises (not including the Additional Space), (ii) by
$1.12 per rentable square foot per month.
-4-
<PAGE>
9. Cross Default. The following provision is hereby added to Paragraph
-------------
14.1.9 to the Lease:
"14.1.9 Default by Tenant under any other lease executed by
Landlord, as lessor, and Tenant, as lessee, with respect to any space let
by Tenant in the Building or at 1700 Green Hills Road in Scotts Valley."
10. Notices. Paragraph 1.12 of the Lease is hereby amended, in part, to
-------
provide that notices to Landlord are to be sent to the attention of Paul W.
Emery II, CFO, and not to the attention of Robert Kohn, Esq.
11. Commissions. Landlord and Tenant each represent and warrant to the
-----------
other that it has no dealings with any person, firm, broker or finder other than
Jeffry S. Nochimson and Donald Reiman of Colliers Parrish International, Inc.
("Colliers Parrish") and Randolph F. Lamb and Kimberly A. Gates of Cornish &
Carey Commercial ("Cornish & Carey"), in connection with the negotiation of this
Amendment and/or the consummation of the transaction contemplated hereby, and
that no broker or other person, firm or entity other than Colliers Parrish and
Cornish & Carey is entitled to a commission or finder's fee in connection with
the lease of the Additional Space. Landlord agrees to pay Colliers Parrish a
brokerage commission in connection with this Amendment pursuant to the terms
of a separate written agreement between Landlord and Colliers Parrish. Any
brokerage commission or finder's fee payable to Cornish & Carey in connection
with this Amendment shall be paid by Colliers Parrish to Cornish & Carey
pursuant to a separate agreement between them. Landlord and Tenant do each
hereby agree to indemnify, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying party including any costs, expenses and/or attorneys fees
reasonably incurred with respect thereto. The obligation to indemnify, defend
and hold harmless as set forth in the immediately preceding sentence shall
survive the termination of the Lease.
12. Original Premises. The parties hereto agree that, from and after
-----------------
February 28, 1997, the rentable square footage of the original Premises
described in Recital A above shall be deemed equal to fifteen thousand six
hundred ten (15,610) rentable square feet (and not 16,365 rentable square feet
as stated in the original Lease).
13. Definitions. Except as otherwise provided herein, the capitalized
-----------
terms used herein shall have the definitions set forth in the Lease.
14. Lease Terms. Except as otherwise modified herein, the terms and
-----------
conditions of the Lease shall remain unmodified and in full force and effect. In
the event of any inconsistency or conflict between the terms of this Amendment
and the original Lease, the terms of this Amendment shall control.
-5-
<PAGE>
15. Counterparts. This Amendment may be executed in counterparts, each of
------------
which shall be deemed an original, and which together shall constitute one
instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
set forth above.
LANDLORD:
BORLAND INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Paul W. Emery II
---------------------------------------
Paul W. Emery II, Vice-President
and Chief Financial Officer
TENANT:
By: /s/ Robert Mason
---------------------------------------
Its: CFO
--------------------------------------
-6-
<PAGE>
EXHIBIT A
[PLAN APPEARS HERE]
<PAGE>
EXHIBIT B
SECOND AMENDMENT TO NET LEASE AGREEMENT
---------------------------------------
This Second Amendment to Net Lease Agreement ("Second Amendment") is
dated as of April 14, 1998, by and between Borland International, Inc., a
Delaware corporation ("Landlord") and UniDirect Corporation, a California
corporation ("Tenant").
RECITALS
--------
A. Landlord and Tenant have entered into Net Lease Agreement dated as of
July 29, 1996, as amended by that certain First Amendment to Net Lease Agreement
dated as of February 27, 1997 (collectively, the "Lease") covering that certain
space, consisting of approximately thirty thousand five hundred seventy-six
(30,576) rentable square feet, situated in the second floor of that certain
building located at 1800 Green Hills Road in the City of Scotts Valley, County
of Santa Cruz, State of California (the "Premises").
B. Landlord and Tenant also entered into Net Lease Agreement dated as of
January 5, 1997 (the "Warehouse Lease") covering that certain space, consisting
of approximately three thousand seven hundred forty-four(3,744) rentable square
feet, situated in the first floor of that certain building located at 1800 Green
Hills Road in the City Of Scotts Valley, County Of Santa Cruz, State of
California (the "Warehouse Premises"). The term of the Warehouse Lease expires
on May 20, 1998.
C. Pursuant to the terms of Paragraph 43 of the Lease, Landlord has
presented to Tenant the terms of a third party offer to lease certain space,
consisting of approximately eight thousand nine hundred eighty (8,980) rentable
square feet located on the first floor of the building referred to above. Tenant
has exercised its right of first refusal with respect to such space covered by
the third party offer. This Second Amendment sets forth the terms and conditions
upon which Landlord will lease to Tenant, and Tenant will lease from Landlord,
the first floor space described below. Upon leasing the first floor space,
Tenant will be leasing the entire second floor of the above-described building,
consisting of approximately thirty thousand five hundred seventy-six (30,576)
rentable square feet, and a portion of the first floor of the above-described
building, consisting of approximately eight thousand nine hundred eighty (8,980)
rentab1e square feet.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, the parties hereto agree as follows:
1. First Floor Additional Space.
----------------------------
(a) Demise of First Floor Additional Space. Pursuant to the terms of
--------------------------------------
Paragraph 43 of the Lease, Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord that certain space, consisting of approximately eight
thousand nine hundred eighty (8,980) rentable square feet located on the first
floor of the building referred to above (the "First Floor Additional Space").
Said First Floor Additional Space is shown cross-hatched on Exhibit "A" attached
----------
hereto and made a part hereof. Except to the extent that such meaning
-1-
<PAGE>
would be clearly inconsistent with the terms of this Second Amendment, wherever
the term "Premises" is used in the Lease, such terms shall include the First
Floor Additional Space.
(b) Term. The term of the Lease with respect to the First Floor
----
Additional Space ("First Floor Additional Space Lease Term") shall commence on
June 20, 1998 ("First Floor Additional Space Commencement Date") and shall
expire (unless earlier terminated in accordance with the terms of the Lease, as
amended) on June 19, 2003. Landlord hereby grants to Tenant two (2) options to
extend the First Floor Additional Space Lease Term for consecutive periods of
three (3) years each, upon the same terms and conditions as those pertaining to
the Extended Term (as defined in Paragraph 3.5 of the original Lease), such
terms and conditions being contained in subparagraphs 3.5.1 through and
including 3.5.4 of the original Lease. In the event Tenant e1ects, pursuant to
this Paragraph 1(b), to extend the First Floor Additional Space Lease Term, such
election or elections shall operate at a rental as described in Paragraph 4.4 of
the original Lease; it being understood and agreed that the monthly Rent payable
by Tenant with respect to the First Floor Additional Space during any extended
term referred to in this Paragraph 1(b) shall in no event be lower than the
monthly Rent payable immediately prior to the applicable extended term with
respect to such First Floor Additional Space. Such election or elections by
Tenant to extend the First Floor Additional Space Lease Term shall not operate
to extend the term of the original Lease, as amended by the First Amendment to
Net Lease Agreement dated as of February 27, 1997 (the "First Amendment"), as to
the second floor space leased by Tenant in the building located at 1800 Green
Hills Road, Scotts Valley.
(c) Early Occupancy of First Floor Additional Space. as of May 20,
-----------------------------------------------
1998 Tenant shall have the right, subject to the terms of this subparagraph
1(c), to enter the First Floor Additional Space sole1y for the purpose of
fixturizing the First Floor Additional Space and installing furniture, computers
and telephones in the First Floor Additional Space. Tenant's right of early
occupancy with respect to such First Floor Additional Space shall be subject to
all of the terms and conditions of the Lease, as amended, except that Tenant
shall not be obligated to pay Rent or Tenant's pro rata share of Common Area
Charges (with respect to the First Floor Additional Space only) prior to the
First Floor Additional Space Commencement Date. Tenant agree that in exercising
its right of early occupancy pursuant to the terms described in this
subparagraph 1(c), Tenant shall not interfere with landlord's work described in
subparagraph 1(d) below. Tenant agrees to coordinate its fixturizing of the
First Floor Additional Space and installation of its furniture, computers and
telephones in the First Floor Additional Space so that the same does not
interfere with Landlord's work described in subparagraph 1(d) below.
(d) Tenant Improvements By Landlord in First Floor Additional Space.
---------------------------------------------------------------
Prior to the First Floor Additional Space Commencement Date, Landlord shall, at
Landlord's sole cost, place the roof, heating ventilation and air conditioning
system, electrical system, lighting, plumbing system, fire protection system and
ceiling tiles in or with respect to the First Floor Additional Space in good
condition and repair. In the event of any breach of Landlord's obligations
described in the immediately preceding sentence, Tenant shall notify Landlord in
writing of such breach not later than thirty (30) days following the First Floor
Additional Space Commencement Date and such written notice shall state in detail
the nature of such breach. In the event of such breach, Landlord shall promptly
cure the same at Landlord's cost. In the event
-2-
<PAGE>
Tenant does not give Landlord written notice of any breach of its obligations
under the first sentence of this subparagraph 1(d) within thirty (30) days
fol1owing the First Floor Additional Space Commencement Date, then Tenant shall
be deemed to have accepted the First Floor Additional Space in its "as is"
condition as of the First Floor Additional Space Commencement Date and shall be
deemed to have waived any right to claim a breach by Landlord of any of its
obligations under the first sentence of this subparagraph 1(d). Except as
otherwise provided in this subparagraph 1(d), the parties hereto acknowledge and
agree that Tenant shall accept the First Floor Additiona1 Space in its "as is"
condition, "with all faults," and landlord shall have no obligation to improve
the First Floor Additional Space and shall have no obligation to provide any
allowance for the cost of construction of any improvements with respect to the
First Floor Additional Space.
(e) Rent. Tenant shall pay to Landlord as monthly rent for the First
----
Floor Additional Space ("First Floor Additional Space Rent"), in advance,
without offset, deduction or demand, on the first day of each month,
commencing on June 15, 1998 and continuing throughout the First Floor Additional
Space Lease Term (until adjusted pursuant to the terms of subparagraph 1(f)
below), the sum of Ten Thousand Seven Hundred Seventy-six Dollars ($10,776) per
month (NNN), Tenant shall have no obligation to pay any First Floor Additional
Space Rent for the period of May 20, 1998 through June 19, 1998. First Floor
Additional Space Rent shall be prorated, based on a thirty (30) day month, for
any partial month during the First Floor Additional Space Lease Term following
the First Floor Additional Space Commencement Date. The First Floor Additional
Space Rent shall be adjusted pursuant to the terms of subparagraph 1(f) below
and also shall be adjusted pursuant to the terms of paragraph 4.4 of the Lease,
as amended, in the event Tenant exercises its option(s) to extend the First
Floor Additional Space Lease Term as provided in subparagraph 1(b) above.
(f) Cost of Living Adjustments. The First Floor Additional Space Rent
--------------------------
payable hereunder shall be adjusted pursuant to this subparagraph 1(f) every
twelve months during the initial First Floor Additional Space Lease Term with
respect to the First Floor Additional Space, with the first such adjustment on
June 20, 1999, and the First Floor Additional Space Rent as adjusted shall be
payable monthly pursuant to the terms of subparagraph 1(e) above until the next
adjustment under this subparagraph 1(f). As used in this Second Amendment, the
term "Adjustment Date" shall mean, solely with respect to the First Floor
Additional Space, the date of a First Floor Additional Space Rent adjustment
under this subparagraph 1(f). As of each Adjustment Date, the First Floor
Additional Space Rent shall be increased to a sum equal to the product obtained
by multiplying the then current First Floor Additional Space Rent by a fraction,
the numerator of which is the New Index as of the applicable Adjustment Date and
the denominator of which is the Initial Index. For the purposes of adjusting the
First Floor Additional Space Rent as provided in this subparagraph 1(f), the
following definitions shall apply:
(i) INDEX: The Consumer Price Index (all items) for all Urban
Consumers as published by the United States Department of Labor, Bureau of Labor
Statistics, for the San Francisco/Oakland/San Jose Metropolitan Area
(l982-84=100);
-3-
<PAGE>
(ii) INITIAL INDEX: In regard to the first adjustment pursuant
to this subparagraph 1(f), the Index published for the month nearest but prior
to the First Floor Additional Space Commencement Date and in regard to all
subsequent adjustments, the Index published nearest but prior to the
immediately preceding Adjustment Date;
(c) NEW INDEX The Index published nearest but prior to the applicable
Adjustment Date.
If, at any time when the First Floor Additional Space Rent is to be adjusted as
provided above, the Index is changed so that the base year differs from the base
year used for the Initial Index, the index shall be converted in accordance with
the conversion factor published by the United States Department of Labor, Bureau
of Labor Statistics. In the event the Index is otherwise changed or discontinued
during the initial First Floor Additional Space Lease Term with respect to the
First Floor Additional Space, the most nearly comparable official price index of
the United States Government (as determined in Landlord's reasonable discretion)
shall be used for computing the adjustments to the First Floor Additional Space
Rent. Anything in the Lease, as amended, to the contrary notwithstanding, in no
event shall the First Floor Additional Space Rent following any adjustment
pursuant to this subparagraph 1(f) be greater than 104% of the First Floor
Additional Space Rent immediately prior to the applicable Adjustment Date.
2. Prepaid Rent. Concurrently with the execution of this Second Amendment,
-------------
Tenant shall pay to Landlord the sum of Ten Thousand Seven Hundred Seventy-six
dollars ($10,776), which is to be applied by Landlord to the first month's
rental due under this Second Amendment for the First Floor Additional Space
Rent.
3. Additional Security Deposit. Concurrently with the execution of this
---------------------------
Second Amendment, Tenant shall pay to Landlord an additional sum of Ten Thousand
Seven Hundred Seventy-six Dollars ($10,776), which is to be added to the
Security Deposit previously delivered to Landlord and applied in accordance with
the terms of Paragraph 5 of the Lease.
4. Additional Parking Spaces. Effective as of the First Floor Additional
-------------------------
Space Commencement Date, Paragraph 1.13 of the original Lease (as amended by
Paragraph 4 of the First Amendment) are hereby amended to provide that Tenant
shall be entitled to the non-exclusive right to use no more than one hundred
(100) parking spaces within the Common Area.
5. Tenants Percent Share of Common Area Charges. Effective as of the
--------------------------------------------
First Floor Additional Space Commencement Date, Tenant's percentage share of
Common Area Charges as provided in Paragraph 1.10 of the original Lease (as
amended by Paragraph 5 of the First Amendment) shall be increased to fifty-seven
and eight hundred twenty-four thousandths percent (57.824%).
6. Landlord Consent to all Alterations in First Floor Additional Space.
-------------------------------------------------------------------
Anything in the Lease, as amended, (including, without limitation, the
provisions of Paragraph 13.1 of the original Lease and Paragraph 6 of the First
Amendment) to the contrary notwithstanding, Tenant agrees that Tenant shall not
make, or permit to be made, any Alterations in, on, about or to the
-4-
<PAGE>
First Floor Additional Space, or any part thereof (inc1uding, without
limitation, non-structural Alterations the cost of which do not exceed $10,000),
without the prior written consent of Landlord (which consent shall not be
unreasonably withheld). In making any such Alterations, Tenant shall, at its
sole cost, obtain and comply with any and all permits or approvals required by
any governmental departments or authorities having jurisdiction thereof and any
utility company having an interest therein. Anything in this Paragraph 6, in
Paragraph 13.1 of the original Lease or in Paragraph 6 of the First Amendment to
the contrary notwithstanding, under no circumstances shall Tenant have the right
to alter or change the perimeter office layout of the First Floor Additional
Space or remove any perimeter office walls within the First Floor Additional
Space.
7. Restoration of Warehouse Premises. Tenant covenants and agrees that,
---------------------------------
upon the expiration or earlier termination of the Lease as to the First Floor
Additional Space, if Landlord requests the same, Tenant shall, at its sole cost,
replace the carpeting that was previously installed in the Warehouse Premises
with a grade of carpeting substantially the same as was removed by Tenant and in
a color selected by Landlord, and replace the double door that Tenant previously
removed from the Warehouse Premises. If such work described in the immediately
preceding sentence is requested to be performed by Landlord, then Tenant agrees
to retain, Devcon Construction Company, a general contractor, or other
contractor acceptable to Landlord in its sole discretion, to perform such work.
8. Notices. Paragraph 1.12 of the Lease and Paragraph 10 of the First
-------
Amendment are hereby amended, in part, to provide that notices to Landlord are
to be sent to the attention of James Schmidt, and not to the attention of Paul
W. Emery, II, or Robert Kohn, Esq.
9. Commissions. Landlord and Tenant each represent and warrant to the
-----------
other that it has no dealings with any person, firm, broker or finder other than
Colliers Parrish International, Inc. ("Colliers Parrish"), in connection with
the negotiation of this Second Amendment and/or the consummation of the
transaction contemplated hereby, and that no broker or other person, firm or
entity other than Colliers Parrish is entitled to a commission or finder's fee
in connection with the lease of the First Floor Additional Space. Landlord
agrees to pay Colliers Parrish a brokerage commission in connection with this
Second Amendment pursuant to the terms of a separate written agreement between
Landlord and Colliers Parrish. Landlord and Tenant do each hereby agree to
indemnify, defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any unnamed broker, finder or
other similar party by reason of any dealings or actions of the indemnifying
party including any cots, expenses and/or attorneys fees reasonably incurred
with respect thereto. The obligation to indemnify, defend and hold harmless as
set forth in the immediately preceding sentence shall survive the termination of
the Lease.
-5-
<PAGE>
11. Definitions. Except as otherwise provided herein, the capitalized
-----------
terms used herein shall have the definitions set forth in the Lease.
12. Lease Terms. Except as otherwise modified herein, the terms and
-----------
conditions of the Lease shall remain unmodified and in full force and effect.
In the event of any inconsistency or conflict between the terms of this Second
Amendment and the Lease, the terms of this Second Amendment shall control.
13. Counterparts. This Second Amendment may be executed in counterparts,
------------
each of which shall be deemed an original, and which together shall constitute
one instrument.
IN WITNESS WHEREOF, the parties have executed this Second Amendment as of
the date set forth above.
LANDLORD:
BORLAND INTERNATIONAL, INC.,
a Delaware corporation
By: _________________________
Its:_________________________
By: _________________________
Its:_________________________
TENANT:
UNIDIRECT CORPORATION,
a California corporation
By: /s/ Robert Mason
-------------------------
Its: CFO
------------------------
-6-
<PAGE>
EXHIBIT "A"
[MAP OF BUILDING SITE PLAN APPEARS HERE]
<PAGE>
EXHIBIT B
[MAP OF SECOND FLOOR PLAN OF BUILDING D APPEARS HERE]
<PAGE>
THIRD AMENDMENT TO NET LEASE AGREEMENT
--------------------------------------
This Third Amendment to Net Lease Agreement ("Third Amendment") is dated as
of November 15, 1998, by and between INPRISE Corporation, a Delaware corporation
(formerly known as Borland International, Inc.) ("Landlord") and Rainmaker
Systems, Inc., a California corporation (formerly known as UniDirect
Corporation) ("Tenant").
RECITALS
--------
A. Landlord and Tenant have entered into Net Lease Agreement dated as of
July 29, 1996, as amended by that certain First Amendment to Net Lease Agreement
dated as of February 27, 1997, as further amended by that certain Second
Amendment to Net Lease Agreement dated as of April 14, 1998 (collectively, the
"Lease") covering that certain space, consisting of approximately thirty-nine
thousand five hundred fifty-six (39,556) rentable square feet, in that certain
building located at 1800 Green Hills Road in the City of Scotts Valley, County
of Santa Cruz, State of California (the "Building"). Of the 39,556 rentable
square feet referred to above, approximately 30,576 rentable square feet is
situated in the second floor of the Building (the "Premises") and approximately
8,980 rentable square feet is situated on the first floor of the Building (the
"First Floor Additional Space"). The Building referred to above is located in
the area shown on the site plan attached hereto as Exhibit A.
---------
B. Landlord and Tenant also entered into Net Lease Agreement dated as of
November 5, 1998, covering that certain space, consisting of approximately
eleven thousand seven hundred eighteen (11,718) rentable square feet, situated
in the first floor of the Building (the "Initial First Floor Refusal Space").
C. Pursuant to the terms of Paragraph 43 of the Lease, Landlord has
presented to Tenant the terms of a third party offer to lease certain space,
consisting of approximately fourteen thousand eight hundred forty-eight (14,848)
rentable square foot located on the first floor of the Building referred to
above. Tenant has exercised its right of first refusal with respect to such
space covered by the third party offer plus an additional approximately three
thousand ten (3,010) rentable square feet (for a total of seventeen thousand
eight hundred fifty-eight (17,858) rentable square feet). This Third Amendment
sets forth the terms and conditions upon which Landlord will lease to Tenant,
and Tenant will lease from Landlord, the approximately 17,858 rentable square
feet on the first floor of the Building as described below. Upon leasing such
additional first floor space, Tenant will be leasing the entire Building from
Landlord.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, the parties hereto agree as follows:
1. Final First Floor Refusal Space.
-------------------------------
(a) Demise of Final First Floor Refusal Space. Pursuant to the terms
-----------------------------------------
of Paragraph 43 of the Lease, Landlord hereby leases to Tenant and Tenant hereby
leases from
-1-
<PAGE>
Landlord that certain space, consisting of approximately seventeen thousand
eight hundred fifty-eight (17,858) rentable square feet located on the first
floor of the building referred to above (the "Final First Floor Refusal Space").
Said Final First Floor Refusal Space is shown cross-hatched on Exhibit B
---------
attached hereto and made a part hereof. Except to the extent that such meaning
would be clearly inconsistent with the terms of this Second Amendment, wherever
the term "Premises" is used in the Lease, such terms shall include the Final
First Floor Refusal Space.
(b) Term. The term of the Lease with respect to the Final First Floor
----
Refusal Space ("Final First Floor Refusal Space Lease Term") shall commence on
January 1, 1999 ("Final First Floor Refusal Space Commencement Date") and shall
expire (unless earlier terminated in accordance with the terms of the Lease, as
amended) on December 31, 2004. Landlord hereby grants to Tenant one (1) option
to extend the Final First Floor Refusal Space Lease Term for a period of two (2)
years, upon the same terms and conditions as those pertaining to the Extended
Term (as defined in Paragraph 3.5 of the original Lease), such terms and
conditions being contained in subparagraphs 3.5.1 through and including 3.5.4 of
the original Lease. In the event Tenant elects, pursuant to this Paragraph 1(b),
to extend the Final First Floor Refusal Space Lease Term, such election or
elections shall operate at a rental as described in Paragraph 1(e), as adjusted
pursuant to Paragraph 1(f) below. Such election by Tenant to extend the Final
First Floor Refusal Space Lease Term shall not operate to extend the term of the
Lease as to the Premises or the First Floor Additional Space referred to above
or operate to extend the term of the lease covering the Initial First Floor
Refusal Space.
(c) Early Occupancy of Final First Floor Refusal Space. Subject to the
--------------------------------------------------
terms of this subparagraph 1(c), Tenant shall have the right, prior to the Final
First Floor Refusal Space Commencement Date, to enter the Final First Floor
Refusal Space solely for the purpose of fixturizing the Final First Floor
Refusal Space and installing furniture, computers and telephones in the Final
First Floor Refusal Space. Tenant's right of early occupancy with respect to
such Final First Floor Refusal shall be subject to all of the terms and
conditions of the Lease, as amended, except that Tenant shall not be obligated
to pay Rent or Tenant's pro rata share of Common Area Charges (with respect to
the Final First Floor Refusal Space only) prior to the Final First Floor Refusal
Space Commencement Date.
(d) "As Is" Condition of Final First Floor Refusal Space. Subject to
----------------------------------------------------
the terms of this subparagraph 1(d), Tenant agrees to accept possession of the
Final First Floor Refusal Space in its "as is," "where is" condition and with
all faults. The preceding to the contrary notwithstanding, Landlord represents
to Tenant that as of the Final First Floor Refusal Space Commencement Date, the
roof, heating ventilation and air conditioning system, electrical system,
lighting, plumbing system, fire protection system and ceiling tiles in or with
respect to the Final First Floor Refusal Space (and the parking lot and
landscape irrigation in the exterior Common Area around the Building) shall be
in good working order and repair. In the event of any breach of Landlord's
representations described in the immediately preceding sentence, Tenant shall
notify Landlord in writing of such breach not later than thirty (30) days
following the Final First Floor Refusal Space Commencement Date and such written
notice shall state in detail the nature of such breach. In the event of such
breach, Landlord shall promptly cure the same at Landlord's cost. In the event
Tenant does not give Landlord written notice of any breach of its
representations under
-2-
<PAGE>
the first sentence of this subparagraph 1(d) within thirty (30) days following
the Final First Floor Refusal Space Commencement Date, then Tenant shall be
deemed to have accepted the Final First Floor Refusal Space in its "as is,"
"where is," condition and with all faults (subject to the paragraph immediately
below) as of the Final First Floor Refusal Space Commencement Date and shall be
deemed to have waived any right to claim a breach by Landlord of its
representations under the first sentence of this subparagraph 1(d).
Landlord also represents and warrants that, to the best of its knowledge as
of October 26, 1998, the Final First Floor Refusal Space is in compliance with
the Title 24 of the California Code of Regulations. In the event of any breach
of Landlord's representation set forth in the immediately preceding sentence,
Tenant shall promptly notify Landlord in writing of such breach and Landlord
shall promptly cure the same at Landlord's cost.
Except as otherwise provided in this subparagraph 1(d), the parties hereto
acknowledge and agree that Tenant shall accept the Final First Floor Refusal
Space in its "as is," "where is" condition and with all faults, and Landlord
shall have no obligation to improve the Final First Floor Refusal Space.
(e) Rent. Tenant shall pay to Landlord as monthly rent for the Final
----
First Floor Refusal Space ("Final First Floor Refusal Space Rent"), in advance,
without offset, deduction or demand, on the first day of each month, commencing
on January 1, 1999 and continuing throughout the Final First Floor Refusal Space
Lease Term, including the two year extension term, if applicable (until adjusted
pursuant to the terms of subparagraph 1(f) below), the sum of Twenty-three
Thousand Two Hundred Fifteen and 40/100 Dollars ($23,215.40) per month (NNN).
Final First Floor Refusal Space Rent shall be prorated, based on a thirty (30)
day month, for any partial month during the Final First Floor Refusal Space
Lease Term following the Final First Floor Refusal Space Commencement Date. The
Final First Floor Refusal Space Rent shall be adjusted pursuant to the terms of
subparagraph 1(f) below on each anniversary of the Final First Floor Refusal
Space Commencement Date during the Final First Floor Refusal Space Lease Term,
as the same may be extended.
(f) Cost of Living Adjustments. The Final First Floor Refusal Space
--------------------------
Rent payable hereunder shall be adjusted pursuant to this subparagraph 1(f)
every twelve months during the Final First Floor Refusal Space Lease Term, as
the same may be extended, with respect to the Final First Floor Refusal Space,
with the first such adjustment on January 1, 2000, and the Final First Floor
Refusal Space Rent as adjusted shall be payable monthly pursuant to the terms of
subparagraph 1(e) above until the next adjustment under this subparagraph 1(f).
As used in this Third Amendment, the term "Adjustment Date" shall mean, solely
with respect to the Final First Floor Refusal Space, the date of a Final First
Floor Refusal Space Rent adjustment under this subparagraph 1(f). As of each
Adjustment Date, the Final First Floor Refusal Space Rent shall be increased to
a sum equal to the product obtained by multiplying the then current Final First
Floor Refusal Space Rent by a fraction, the numerator of which is the New Index
as of the applicable Adjustment Date and the denominator of which is the Initial
Index. For the purposes of adjusting the Final First Floor Refusal Space Rent as
provided in this subparagraph 1(f), the following definitions shall apply:
-3-
<PAGE>
(i) INDEX: The Consumer Price Index (all items) for all Urban
Consumers as published by the United States Department of Labor, Bureau of Labor
Statistics, for the San Francisco/Oakland/San Jose Metropolitan Area
(1982-84=100);
(ii) INITIAL INDEX: In regard to the first adjustment pursuant to this
subparagraph 1(f), the Index published for the month nearest but prior to the
Final First Floor Refusal Space Commencement Date And in regard to all
subsequent adjustments, the Index published nearest but prior to the immediately
preceding Adjustment Date;
(c) NEW INDEX: The Index published nearest but prior to the
applicable Adjustment Date.
If, at any time when the Final First Floor Additional Space Rent is to be
adjusted as provided above, the Index is changed so that the base year differs
from the base year used for the Initial Index, the Index shall be converted in
accordance with the conversion factor published by the United States Department
of Labor, Bureau of Labor Statistics. In the event the Index is otherwise
changed or discontinued during the Final First Floor Refusal Space Lease Term
with respect to the Final First Floor Refusal Space, the most nearly comparable
official price index of the United States Government (as determined in
Landlord's reasonable discretion) shall be used for computing the adjustments to
the Final First Floor Refusal Space Rent. Anything in the Lease, as amended, to
the contrary notwithstanding, in no event shall the Final First Floor Refusal
Space Rent following any adjustment pursuant to this subparagraph 1(f) be
greater than 104% of the Final First Floor Refusal Space Rent immediately prior
to the applicable Adjustment Date.
2. Prepaid Rent. Concurrently with the execution of this Third Amendment,
------------
Tenant shall pay to Landlord the sum of Twenty-three Thousand Two Hundred
Fifteen and 40/100 Dollars ($23,215.40), which is to be applied by Landlord to
the first month's Final First Floor Refusal Space Rent due under this Third
Amendment.
3. Additional Security Deposit. Concurrently with the execution of this
---------------------------
Third Amendment, Tenant shall pay to Landlord an additional sum of Twenty-three
Thousand Two Hundred Fifteen and 40/100 Dollars ($23,215.40), which is to be
added to the Security Deposit previously delivered to Landlord and applied in
accordance with the terms of Paragraph 5 of the Lease.
4. Additional Parking Spaces. During the Final First Floor Refusal Space
-------------------------
Lease TERM, AS THE same may be amended, Tenant shall be entitled to the non-
exclusive right to use an additional sixty-two (62) parking spaces within the
Common Area in connection with its lease of the Final First Floor Refusal Space
lease Term. Such non-exclusive parking rights shall be on the same terms and
conditions as set forth in subparagraph 11.2 of the original Lease.
5. Tenant's Percentage Share of Common Area Charges. Tenant's percentage
------------------------------------------------
share of Common Area Charges applicable to the Final First Floor Refusal Space
shall be equal to twenty-five and eight tenths percent (25.8%). Effective as of
the Final First Floor Refusal Space
-4-
<PAGE>
Commencement Date and for so king as Tenant leases the entire Building, Tenant's
percentage share of Common Area Charges under the Lease, as am ended by the
First, Second and this Third Amendment thereto, when added to the Tenant's
percentage share of Common Area Charges under the lease of the Initial First
Floor Refusal Space, shall be equal to one hundred percent (100%). Tenant shall
pay its percentage share of Common Area Charges as provided in the immediately
two preceding sentences, in accordance with the terms of Paragraph 12 of the
Lease.
6. Landlord Consent to All Alterations in First Floor Additional Space.
-------------------------------------------------------------------
Anything in the Lease, as amended, (including, without limitation, the
provisions of Paragraph 13.1 of the original Lease and Paragraph 6 of the First
Amendment) to the contrary notwithstanding, Tenant agrees that Tenant shall not
make, nor permit to be made, any Alterations in, on, about or to the Final First
Floor Refusal Space, or any part thereof (including, without limitation, non-
structural Alterations the cost of which do not exceed $10,000), without the
prior written consent of Landlord (which consent shall not be unreasonably
withheld). In making any such Alterations, Tenant shall, at its sole cost,
obtain and comply with any and all permits or approvals required by any
governmental departments or authorities having jurisdiction thereof and any
utility company having an interest therein. Anything in this Paragraph 6, in
Paragraph 13.1 of the original Lease or in Paragraph 6 of the First Amendment
thereto to the contrary notwithstanding, under no circumstances shall Tenant
have the right to alter or change the perimeter office layout of the Final First
Floor Refusal Space or remove any perimeter office walls within the Final First
Floor Refusal Space. Tenant shall be responsible and liable, at its sole cost,
for complying with all applicable laws, statutes, ordinances, rules and
regulations applicable or related to the construction or installation of any
Alterations or leasehold improvements in the Final First Floor Refusal Space.
7. Tenant Improvement Allowance. During the Final First Floor Refusal
----------------------------
Lease Term, Landlord agrees to contribute, as a tenant improvement allowance, up
to Thirty-six Thousand Three Hundred Sixty-five Dollars ($36,365) (the "Final
First Floor Allowance") toward the cost of constructing permanent partitions,
window, wall and floor coverings, HVAC equipment and wiring, electrical
distribution facilities and wiring, lighting and utility fixtures (collectively,
"real property interior improvements'). Any costs of real property interior
improvements in the Final First Floor Refusal Space in excess of the $36,365
referred to above (and any other costs of constructing or installing leasehold
improvements in the Final First Floor Refusal Space) shall be borne by Tenant.
Landlord shall not be obligated to make any disbursements of the Final First
Floor Allowance to or for the benefit of Tenant unless at the time of each
request for disbursement, all of the following conditions are satisfied:
(a) There shall exist no condition, event nor act which would
constitute an event of default hereunder or under the Lease (or under any lease
between Landlord and Tenant);
(b) The Lease shall be in full force and effect;
(c) Tenant shall have furnished to Landlord receipted bills and
releases of lien rights (in statutory form) covering work done and/or materials
furnished in connection with the construction of real property interior
improvements in the Final First Floor Refusal Space.
-5-
<PAGE>
Tenant may request disbursements from the Final First Floor Allowance not
more frequently than once each month. Each request for disbursement shall be
accompanied by (i) an itemized statement, in form and content reasonably
acceptable to Landlord, (ii) lien releases in statutory form from all persons
and entities providing work or materials covered by such statement, and (iii)
invoices, vouchers, statements, affidavits and/or other documents in a form
reasonably acceptable to Landlord which substantiate and justify the
disbursement requested. Landlord shall make disbursements of the Final First
Floor Allowance within thirty (30) days after Landlord's receipt of each fully
completed disbursement request directly to Tenant or, at Landlord's option,
directly to contractors, contractors, laborers or suppliers entitled thereto;
provided, however, Landlord reserves the right to subsequently disapprove some
or all of the matters disclosed by such disbursement request and to withhold the
amounts relating to the disapproved matters from the next succeeding
disbursement. Prior to or at the time of each disbursement hereunder for
construction costs, Tenant shall deliver to Landlord lien waivers in a form
reasonably satisfactory to Landlord from Tenant's prime contractor to whom funds
were disbursed under the previous disbursement.
In addition to the Lease, Tenant agrees to fully pay and discharge all
claims for labor done and materials and services furnished in connection with
the construction of leasehold improvements in the Final First Floor Refusal
Space, to diligently file or procure the filing of a valid Notice of Completion
upon completion of construction and within ten (10) days thereafter, to
diligently file or procure the filing of a Notice of Cessation upon a cessation
of labor on the leasehold improvements for a continuous period of thirty (30)
days or more, and to take all other reasonable steps to forestall the assertion
of claims of lien against the Final First Floor Refusal Space, or any part
thereof or right or interest appurtenant thereto. The provisions of Paragraph 7
above notwithstanding, Tenant acknowledges that no portion of the Final First
Floor Allowance shall be disbursed to or for the benefit of Tenant until
Landlord has received satisfactory evidence of the release or removal (including
removal by appropriate surety bond) of all recorded mechanics' liens and bonded
stop notices, the payment or satisfaction of which was covered by any prior
disbursement of the Final First Floor Allowance.
-6-
<PAGE>
8. Furniture Rental. Tenant shall also pay to Landlord on the first day
----------------
of each month during the initial five year Final First Floor Refusal Space Lease
Term (but not including any extension thereof), as Additional Rent, without
deduction, offset, prior notice or demand in lawful money of the United States,
an amount equal to One Thousand Three Hundred Fifty Dollars ($1,350) ("Monthly
Furniture Rental"). The Monthly Furniture Rental shall be paid by Tenant in
consideration of Tenant's right to use in the Final First Floor Refusal Space
the furniture and furnishings described in Exhibit C attached hereto. Tenant
---------
agrees to use such furniture and furnishings for the purposes for which they
were intended. Tenant acknowledges that Landlord makes no representations or
warranties, express or implied, concerning such furniture and furnishings and
Tenant accepts possession of the same as of the Final First Floor Refusal Space
Commencement Date in its "as-is" "where is" condition and with all faults. At
the expiration of the initial Final First Floor Refusal Space Lease Term,
provided Tenant is not in default with respect to any Monthly Furniture Rental
payments, Landlord shall convey and transfer title to the furniture and
furnishings described in Exhibit C to Tenant for no additional consideration,
---------
Tenant shall own such furniture and furnishings and Tenant shall accept the same
in its then "as-is," "where is" condition and with all faults. If this Lease
terminates prior to the expiration of the initial Final First Floor Refusal
Space Lease Term as a result of a default or breach by Tenant, then Tenant
agrees to surrender the furniture and furnishings described in Exhibit C to
---------
Landlord as of the date the Lease terminates in good condition and repair
(ordinary wear and tear excepted) or, alternatively, Tenant may purchase such
furniture and furnishings from Landlord by paying to Landlord, within five (5)
days following the date the Lease terminates due to Tenant's default, in a lump
sum all delinquent Monthly Furniture Rental payments, if any, plus all Monthly
Furniture Rental payments that would have been payable from the date the Lease
terminates through the expiration of the initial Final First Floor Refusal Space
Lease Term.
9. Notices. Paragraph 1.12 of the Lease, Paragraph 10 of the First
-------
Amendment and Paragraph 8 of the Second Amendment are hereby amended, in part,
to provide that notices to Landlord are to be sent to the attention of Director
of Facilities, and not to the attention of Paul W. Emery, II, Robert Kohn, Esq.
or James Schmidt.
10. Commissions. Landlord and Tenant each represent and warrant to the
-----------
other that it has no dealings with any person, firm, broker or finder other than
Colliers Parrish International, Inc. ("Colliers Parrish"), in connection with
the negotiation of this Third Amendment and/or the consummation of the
transaction contemplated hereby, and that no broker or other person, firm or
entity other than Colliers Parrish is entitled to a commission or finder's fee
in connection with the lease of the Final First Floor Refusal Space. Landlord
agrees to pay Colliers Parrish a brokerage commission in connection with this
Third Amendment pursuant to the terms of a separate written agreement between
Landlord and Colliers Parrish. Landlord and Tenant do each hereby agree to
indemnify, defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any unnamed broker, finder or
other similar party by reason of any dealings or actions of the indemnifying
party including any costs, expenses and/or attorneys fees reasonably incurred
with respect thereto. The obligation to indemnify, defend and hold harmless as
set forth in the immediately preceding sentence shall survive the termination of
the Lease, as amended hereby.
-7-
<PAGE>
11. No Further Expansion Rights. Tenant hereby acknowledges and agrees
---------------------------
that it is currently occupying all the Expansion Area (as defined in Paragraph
44 of the Lease) on the second floor of the Building and there is no further
right to expand under Paragraph 44 of the Lease. Tenant further acknowledges and
agrees that it has no further right to terminate the Lease pursuant to the terms
of Paragraph 44 of the Lease.
12. Definitions. Except as otherwise provided herein, the capitalized
-----------
terms used herein shall have the definitions set forth in the Lease.
13. Lease Terms. Except as otherwise modified herein, the terms and
-----------
conditions of the Lease shall remain unmodified and in full force and effect. In
the event of any inconsistency or conflict between the terms of this Third
Amendment and the Lease, the terms of this Third Amendment shall control.
14. Counterparts. This Third Amendment may be executed in counterparts,
------------
each of which shall be deemed an original, and which together shall constitute
one instrument.
IN WITNESS WHEREOF, the parties have executed this Third Amendment as of
the date set forth above.
LANDLORD:
INPRISE CORPORATION,
a Delaware corporation
By: /s/ James M. Schmidt
-----------------------------------
James M. Schmidt
Its: Vice President, Human Resources
-----------------------------------
By: ___________________________________
Its: ___________________________________
TENANT:
RAINMAKER SYSTEMS, INC.,
a California corporation
By: /s/ Robert Mason
-----------------------------------
Its: CFO
-----------------------------------
By: ___________________________________
Its: ___________________________________
-8-
<PAGE>
EXHIBIT A
[PLAN APPEARS HERE]
<PAGE>
EXHIBIT B
[PLAN APPEARS HERE]
<PAGE>
EXHIBIT C
---------
FURNITURE AND FURNISHINGS
-------------------------
1. Forty-two (42) existing cubicles with existing desks, storage cabinets
and two (2) chairs per cubicle.
2. Classroom with nine (9) tables and eighteen (18) chairs, the small
conference room with a table and six chairs, and the storage room with two (2)
tables.
Note-- Tenant acknowledges that the actual number of existing cubicles,
desks, cabinets, chairs and tables referred to above is an estimation made by
Landlord that the actual number of such items may vary. Tenant has conducted an
inventory of the personal property located in the Final First Floor Refusal
Space and accepts the same as of the Final First Floor Refusal Space
Commencement Date. There shall be no adjustment (upward or downward) in the
Monthly Furniture Rental payments to be paid by Tenant for such furniture and
furnishings set forth above in the event it is later determined that the actual
number of existing cubicles, desks, cabinets, chairs and tables in the Final
First Floor Refusal Space is different from that described in this Exhibit C.
-1-
<PAGE>
Exhibit 10.8
NET LEASE AGREEMENT
(Multi-Tenant)
by and between
UNIDIRECT CORPORATION,
a California corporation
D/B/A RAINMAKER SYSTEMS, INC.
("Tenant")
and
INPRISE CORPORATION,
a Delaware corporation
("Landlord")
<PAGE>
NET LEASE AGREEMENT
(Multi-Tenant)
For and in consideration of the rentals, covenants, and conditions
hereinafter set forth, Landlord hereby leases to Tenant, and Tenant hereby rents
from Landlord, the following described Premises for the term, at the rental and
subject to and upon all of the terms, covenants and agreements set forth in this
Net Lease Agreement ("Lease"):
1. Summary of Lease Provisions.
---------------------------
1.1. Tenant: UniDirect Corporation, a California corporation,
d/b/a Rainmaker Systems, Inc. ("Tenant").
1.2. Landlord: INPRISE Corporation, a Delaware corporation
("Landlord").
1.3. Date of Lease, for reference purposes only: November 5,
1998.
1.4. Premises: That certain space consisting of approximately
11,718 rentable square feet, hereinafter more particularly
described, situated in that certain building shown on the
site plan attached hereto as Exhibit A and commonly referred
---------
to as 1800 Greens Hills Road, Suite 101, and located in the
City of Scotts Valley, County of Santa Cruz, State of
California. (Paragraph 2.1)
1.5. Term: Five (5) years (Paragraph 3)
1.6. Commencement Date: November 15, 1998, subject to the
provisions of Paragraph 3 below. (Paragraph 3)
1.7. Ending Date: November 14, 2003, unless sooner terminated
pursuant to the terms of this Lease. (Paragraph 3)
1.8. Rent: $168,739.20 per annum (payable monthly in twelve equal
installments of $14,061.60) to be increased annually on each
anniversary of the Commencement Date in the same ratio as
the percentage increase in the Consumer Price Index - All
Items for the San Francisco - Oakland - San Jose Region
(1982-84 = 100) for the annual period immediately preceding
the rent adjustment, not to exceed four percent (4%) per
annum (Paragraph 4)
Receipt of the first month's Rent is hereby acknowledged by
Landlord.
1.9. Use of Premises: Office and related use. (Paragraph 6)
1.10. Tenant's percentage share of Common Area Charges: 17.0996%.
(Paragraph 12)
1.11. Security Deposit: None.
<PAGE>
1.12. Address for Notices:
To Landlord: INPRISE Corporation
100 Enterprise Way
Scotts Valley, CA 95066-3249
Attn: Director of Facilities
To Tenant: To the Premises
attention: Mr. Robert Mason
1.13. Nonexclusive Right to Use No More Than: forty-eight (48)
parking spaces within the Common Area. (Paragraph 10.2)
1.14. Summary Provisions in General. Parenthetical references in
this Paragraph 1 to other paragraphs in this Lease are for
convenience of reference, and designate some of the other
Lease paragraphs where applicable provisions are set forth.
All of the terms and conditions of each such referenced
paragraph shall be construed to be incorporated within and
made a part of each of the above referring Summary of Lease
Provisions. In the event of any conflict between any Summary
of Lease Provision as set forth above and the balance of the
Lease, the latter shall control.
2. Property Leased.
---------------
2.1. Premises. Landlord hereby leases to Tenant and Tenant hereby
--------
leases from Landlord upon the terms and conditions herein set forth, those
certain premises ("Premises") referred to in Paragraph 1.4 above and shown
cross-hatched on the floor plan attached hereto as Exhibit B. In addition,
---------
Tenant shall have such rights in and to the Common Area (defined in Paragraph
11.1 below) as are more fully described in Paragraph 11.1 below.
The building in which the Premises are located is referred to herein
as the "Building." The "Land" shall mean and refer to all of the real property
outlined in red on Exhibit A, and shall not be limited to the parcel of real
---------
property on which the Building is located (if the same is a separate legal
parcel). Any reference in this Lease to the "Parcel" shall be deemed a reference
to the Land. The Land, Building and any other building(s) or improvement(s) now
or hereafter located on the Land are referred to herein collectively as the
"Project."
Landlord reserves the right to grant to tenants of the Project, and to
the agents, employees, servants, invitees, contractors, guests, customers and
representatives of such tenants or to any other user authorized by Landlord, the
nonexclusive right to use the Land for pedestrian and vehicular ingress and
egress and vehicular parking (excluding only that portion of the Land designated
herein for Tenant's exclusive use for vehicular parking, if any).
2.2. Allowance for Construction of Improvements. Tenant shall receive from
------------------------------------------
Landlord an allowance (the "Allowance") of Twenty Thousand Six Hundred Ninety
and No/100 Dollars ($20,690.00) (i.e., $2.00 per square foot multiplied by
----
10,345 usable square feet within the
2
<PAGE>
Premises), which Allowance shall be used solely to contribute toward the payment
of the Tenant Improvements (as defined below) and all costs relating thereto
including without limitation, the costs of contractors, architects, or other
consultants in connection therewith. The Allowance shall not be used for the
payment of anything else including, without limitation, furniture or furniture
systems to be installed and used in the Premises by Tenant. The Tenant
Improvements shall be those improvements set forth and described in plans to be
prepared by Tenant and its architect, approved by Landlord as provided in the
Lease, and upon approval, attached hereto as Exhibit E (the "Plans"). Tenant
shall cause the Plans to be delivered to Landlord for its approval on or prior
to the date sixty (60) days after the Commencement Date. Tenant shall obtain all
permits necessary to construct the Tenant Improvements (the costs of which shall
be payable out of the Allowance). The Tenant Improvements shall be constructed
in compliance with all applicable Legal Requirements, including without
limitation, the Americans with Disabilities Act of 1990, as amended (the "ADA").
Tenant shall make the Tenant Improvements using a contractor of Tenant's choice
(the "Contractor") for the construction of the Tenant Improvements, subject to
Landlord's approval. Landlord's prior approval is hereby granted for Devcon
Construction. The Tenant Improvements must be completed by Tenant no later than
five (5) months following the Commencement Date and in no event shall the Tenant
Improvements delay the Commencement Date hereunder. Any costs for the Tenant
Improvements in excess of the Allowance are to be paid by Tenant. If the
Allowance exceeds the cost of the Tenant Improvements, Tenant shall not be
entitled to any payment, rent reduction or credit therefor. All items of the
Tenant Improvements, whether or not the cost thereof is covered by the
Allowance, shall immediately become the property of Landlord and shall remain on
the Premises at all times during the Term of this Lease. Tenant hereby assigns,
transfers and conveys all of its right, title and interest in and to any and all
warranties and guaranties applicable to the Tenant Improvements in any way,
whether by applicable law or contract.
2.3. Acceptance of Premises. By taking possession of the Premises, Tenant
----------------------
shall be deemed to have accepted the Premises as being in good and sanitary
order, condition and repair and to have accepted the Premises in their condition
existing as of the date Tenant takes possession of the Premises, subject to all
applicable laws, covenants, conditions, restrictions, easements and other
matters of public record and the reasonable rules and regulations from time to
time promulgated by Landlord (and non-discriminatorily applied) governing the
use of any portion of the Project. Tenant acknowledges that neither Landlord nor
Landlord's agents have made any representation or warranty as to the suitability
of the Premises for the conduct of Tenant's business, or the use or occupancy
which may be made thereof and Tenant has independently investigated and is
satisfied that the Premises are suitable for Tenant's intended use and that the
Building and Premises meet all governmental requirements for such intended use.
Landlord shall deliver the Premises with all Building systems and components in
good working order and repair, including, but not limited to HVAC, electrical,
lighting, plumbing, ceiling tiles, fire protection system, parking lot,
landscape irrigation, structural integrity, and roof (it being understood that
Landlord's current undertaking to construct decks on the roof of the Building
shall not be deemed a violation of the foregoing covenant on the part of
Landlord.) Landlord represents that to its knowledge the Premises are in
compliance with the requirements of Title III of the Americans with Disabilities
Act of 1990, 42 U.S.C. Section 12101 et. seq., and the
3
<PAGE>
regulations promulgated thereunder (the "ADA") as of the date hereof and
Landlord knows of no latent defects
3. Term.
----
3.1. Commencement Date. The term of this Lease ("Lease Term") shall be for
-----------------
the period specified in Paragraph 1.5 above, commencing on the date set forth in
Paragraph 1.6 ("Commencement Date"), subject to postponement only as expressly
set forth in Paragraph 3.3 below.
If the Commencement Date is a date other than the date set forth in
Paragraph 1.6 above, then the Ending Date set forth in Paragraph 1.7, and any
other certain dates specified herein shall be adjusted accordingly. When the
Commencement Date, Ending Date, and such other dates become ascertainable,
Landlord and Tenant shall specify the same in writing, in the form of the
attached Exhibit D, which writing shall be deemed incorporated herein. Tenant's
---------
failure to execute and deliver the letter attached hereto as Exhibit D within
---------
thirty (30) days after Tenant receives written request from Landlord to do so
(subject to any legitimate disagreement by Tenant with the terms thereof, which
both parties shall use reasonable efforts to resolve) shall be a deemed to be
accepted as of the dates set forth in the letter. The expiration of the Lease
Term or sooner termination of this Lease is referred to herein as the "Lease
Termination."
3.2. Delay of Commencement Date. Landlord shall not be liable for any
--------------------------
damage or loss incurred by Tenant for Landlord's failure for whatever cause to
deliver possession of the Premises by a particular date (including the
Commencement Date), nor shall this Lease be void or voidable on account of such
failure to deliver possession of the Premises, provided however, that if
Landlord does not deliver possession of the Premises to Tenant by December 1,
1998 (through no fault of Tenant), then Tenant shall have the right to terminate
this Lease, by written notice delivered to Landlord within five (5) days
thereafter, and, in the event of such termination, Landlord and Tenant shall be
relieved of their respective obligations hereunder.
3.3. Early Occupancy. If Tenant takes possession of the Premises prior to
---------------
the Commencement Date, Tenant shall do so subject to all of the terms and
conditions hereof and shall pay the Rentals provided for herein; provided,
however, Landlord hereby agrees that Landlord shall make the Premises available
to Tenant for a period equal to one (1) month immediately prior to the
Commencement Date, intended to be October 15, 1998, in order to permit Tenant to
construct the Tenant Improvements pursuant to the provisions of Paragraph 2.2
hereto and in the event Tenant enters the Premises prior to the Commencement
Date for such limited purposes, Tenant shall do so subject to all the terms and
conditions hereof except that Tenant shall not be obligated to pay Rents
provided for herein. In the event that Landlord does not make the Premises
available to Tenant for such limited purpose on the execution date, the
Commencement Date, and, correspondingly, the Ending Date, shall be postponed one
(1) day for each day beyond the execution date that Landlord fails to make the
Premises available to Tenant for construction of the Tenant Improvements.
Landlord agrees that during the Lease Term, Tenant shall be provided
access to the telecommunications room located near the lobby on the first floor
on the Building (as more
4
<PAGE>
particularly shown on Exhibit B attached hereto) for purposes of the
---------
installation and repair of Tenant's telephone and telecommunications lines.
Tenant acknowledges and agrees that any material installation, repair or removal
by Tenant of telecommunication lines or the making by Tenant of material
connections or disconnections of telecommunication lines in a common
telecommunications closet or room serving the Premises and other portions of the
Project shall require Landlord's prior written consent, which consent shall not
be unreasonably withheld. Landlord's prior written consent shall also be
required for any alteration, addition or improvement in the Premises that would
require a material increase or modification of the Project's telecommunications
system beyond the original design of the Project's telecommunication system.
Tenant agrees to remove its telecommunication lines and cabling upon the
expiration or earlier termination of this Lease. All material connection,
disconnection, removal, repair and installation of telecommunication lines and
cabling of Tenant shall be performed by a qualified contractor approved by
Landlord in advance (which approval shall not be unreasonably withheld). In no
event shall Landlord be liable for, and Tenant hereby releases Landlord from,
any and all claims for loss, damage, cost or expense incurred by Tenant as the
result of the interruption of any telecommunication services; provided, however,
the Landlord shall be liable for any interruption of telecommunication services
caused by Landlord's negligence or willful misconduct. The preceding to the
contrary notwithstanding, in no event shall Landlord be liable to Tenant for
claims of lost profits or loss of business or income.
3.4. Options to Extend Lease Term. Landlord hereby grants to Tenant one
----------------------------
(1) option to extend the Lease Term for a period of three (3) consecutive years
(such three (3) year term being referred to herein as an "Extended Term"), on
the following terms and conditions:
(a) Tenant shall give Landlord written notice of its exercise of the
applicable option to extend the Lease Term no earlier than nine (9) months nor
later than six (6) months before the date the Lease Term would end but for said
exercise. Time is of the essence.
(b) Tenant may not extend the Lease Term pursuant to this Paragraph
3.5 if Tenant is in default of any of its obligations under this Lease as of the
date of Tenant's notice of exercise of the applicable option (and any applicable
cure period has expired), or if Tenant shall have assigned or otherwise
transferred its interest in this Lease and/or the Premises, whether or not
Landlord's consent to such assignment or transfer has been given. If Tenant is
in default under this Lease on the date that the applicable Extended Term is to
commence (and any applicable cure period has expired), then Landlord may elect
to terminate this Lease, notwithstanding any notice given by Tenant of an
exercise of its option to extend and such exercise of Tenant's option to extend
the Lease Term shall be void and of no force or effect.
(c) All terms and conditions of this Lease shall apply during the
applicable Extended Term, except that the Rent for the Extended Term shall be
determined in accordance with Paragraph 4.4 below, Tenant shall have no further
options to extend the Lease Term beyond the Extended Terms described in this
Section 3.5 and Landlord shall have no obligation to construct or install any
tenant improvements.
(d) Once Tenant delivers notice of its exercise of the option to
extend the Lease Term, Tenant may not withdraw such exercise and, subject to the
provisions of this
5
<PAGE>
Paragraph 3.5, such notice shall operate to extend the Lease Term. Upon the
extension of the Lease Term pursuant to this Paragraph 3.5, the term "Lease
Term" as used in this Lease shall thereafter include the applicable Extended
Term and the Lease Termination date shall be the expiration date of the
applicable Extended Term unless sooner terminated pursuant to the terms hereof
4. Rent.
----
4.1. Rent. Tenant shall pay to Landlord as rent for the Premises ("Rent"),
----
in advance, on the first day of each calendar month, commencing on the date
specified in Paragraph 1.6 and continuing throughout the Lease Term the Rent set
forth in Paragraph 1.8 above, in twelve (12) monthly installments during the
applicable year, and the Rent as otherwise determined in Paragraph 4.4(a) during
the Extended Term. Rent shall be prorated, based on thirty (30) days per month,
for any partial month during the Lease Term. Rent shall be payable without
deduction, offset, prior notice or demand in lawful money of the United States
to Landlord at the address herein specified for purposes of notice or to such
other persons or such other places as Landlord may designate in writing.
4.2. Late Charge. Tenant hereby acknowledges that late payment by Tenant
-----------
to Landlord of Rent will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain. Such
costs include, but are not limited to, processing and accounting charges, and
late charges which may be imposed on Landlord by the terms of any mortgage or
deed of trust covering the Premises. Accordingly, Tenant shall pay to Landlord,
as Additional Rent (as defined in Paragraph 4.3 below), without the necessity of
prior notice or demand, a late charge equal to ten percent (10%) of any
installment of Rent which is not received by Landlord within ten (10) days after
the due date for such installment. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. In no event shall this provision for
a late charge be deemed to grant to Tenant a grace period or extension of time
within which to pay any installment of Rent or prevent Landlord from exercising
any right or remedy available to Landlord upon Tenant's failure to pay such
installment of Rent when due, including without limitation the right to
terminate this Lease. In the event any installment of Rent is not received by
Landlord by the thirtieth (30th) day after the due date for such installment,
such installment shall bear interest at the annual rate set forth in Paragraph
33 below, commencing on the thirty-first (31st) day after the due date for such
installment and continuing until such installment is paid in full.
4.3. Additional Rent. All taxes, charges, costs and expenses and other
---------------
sums which Tenant is required to pay hereunder (together with all interest and
charges that may accrue thereon in the event of Tenant's failure to pay the
same), and all damages, costs and reasonable expenses which Landlord may incur
by reason of any Default by Tenant shall be deemed to be additional rent
hereunder ("Additional Rent"). Additional Rent shall accrue commencing on the
Commencement Date. In the event of nonpayment by Tenant of any Additional Rent,
Landlord shall have all the rights and remedies with respect thereto as Landlord
has for the nonpayment of Rent. The term "Rentals" as used in this Lease shall
mean Rent and Additional Rent.
4.4. Rent During Extended Term.
-------------------------
6
<PAGE>
(a) During the Extended Term, the Rent shall be the Fair Market Rent
as of the last full month immediately preceding Landlord's receipt of the
extension notice pursuant to Section 3.5 (a) hereof (The "Rent Determination
Date.") As used in this Lease, Fair Market Rent shall be deemed to mean fair
market rental value of the Premises determined on a "triple net" basis, with the
tenant obligated to pay its pro rata share of Common Area Charges and Taxes, and
taking into consideration the uses permitted under this Lease, the quality,
size, design and location of the Premises, the age and condition of the
Building, the Tenant Improvements (and any other improvements paid for by
Landlord) and the rental payable for, and the tenant improvement allowances,
deferred or free rent, moving allowances, demolition allowances and any other
then-customary tenant inducements provided to tenants of, comparable premises
located in comparable buildings.
(b) If Landlord and Tenant cannot agree on the Fair Market Rent
within thirty (30) days after the Rent Determination Date, the Rent payable
during the Extended Term shall be conclusively determined as follows:
(i) Within ten (10) days after the expiration of the thirty
(30) day period, each party, at its cost and by giving written notice to the
other party, shall appoint a real estate appraiser with at least five (5) years'
full-time commercial appraisal experience to appraise and determine the then
Fair Market Rent as described in this Paragraph.
(ii) If one party does not appoint an appraiser within the time
period in Paragraph 4.4(b)(i) above, the appraiser appointed by the other party
shall be the sole appraiser and shall determine the Fair Market Rent.
(iii) If neither party appoints an appraiser within the time
period set forth in Paragraph 4.4(b)(i), the Rent during the Extended Term shall
be the Rent payable in the last full month immediately preceding the Ending
Date.
(iv) If the two (2) appraisers are so appointed by the parties,
they shall meet promptly and attempt to appraise and determine the Fair Market
Rent. If they are unable to agree within ten (10) days after the second
appraiser has been appointed, they shall attempt to select a third appraiser who
meets the qualifications stated in Paragraph 4.4(b)(i) within ten (10) days
after the last day the two appraisers are given to determine the Fair Market
Rent. If they are unable to agree on a third appraiser, either of the parties to
this Lease, by giving ten (10) days' notice to the other party, can apply to the
presiding judge of the Superior Court for the county in which the Premises are
located for the selection of a third appraiser who meets the qualifications
stated in Paragraph 4.4(b)(i). Each of the parties shall bear one-half (1/2) of
the cost of appointing the third appraiser and of the third appraiser's fees.
The third appraiser, however selected, shall be a person who has not previously
acted in any capacity for either party.
(v) Within ten (10) days after the selection of the third
appraiser, a majority of the appraisers shall appraise and determine the Fair
Market Rent. If a majority of the appraisers are unable to so set the Fair
Market Rent within the required period of time, the appraisals of the three
appraisers shall be added together and their total divided by three. The
resulting quotient shall be the Fair Market Rent.
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(vi) If, however, the low appraisal or the high appraisal are
more than ten percent (10%) lower or higher than the middle appraisal, the low
appraisal or the high appraisal shall be disregarded. If only one appraisal is
disregarded, the remaining two appraisals shall be added together and their
total divided by two. The resulting quotient shall be the Fair Market Rent. If
two appraisals are disregarded, the remaining appraisal shall be the Fair Market
Rent.
5. Use of Premises.
---------------
5.1. Permitted Uses. Tenant shall use the Premises and the Common Area only
--------------
in conformance with applicable governmental or quasi-governmental laws,
statutes, orders, regulations, rules, ordinances and other requirements now or
hereafter in effect (collectively, "Laws") and shall use the Premises solely for
the purposes set forth in Paragraph 1.9 above, and for no other purpose without
the prior written consent of Landlord, which consent may be given or withheld by
Landlord in its sole and absolute discretion. Tenant acknowledges and agrees
that Landlord has selected or will be selecting tenants for the Building in
order to produce a mix of tenant uses compatible and consistent with the design
integrity of the Building and with other uses of the Building; provided,
however, the selection of Building tenants shall be in Landlord's reasonable
discretion and Landlord in making such selection shall not be deemed to be
warranting that any use of the Building made by any such tenant is compatible or
consistent with the design integrity of the Building or other uses of the
Building. Any change in use of the Premises or the Common Area without the prior
written consent of Landlord shall be a Default by Tenant.
Landlord agrees that employees of Tenant who work at the Premises may
use the tennis courts and recreational facilities located in a separate building
behind the Premises, provided such employees sign a written waiver and release
of claims in a form prepared by Landlord and pay to Landlord a monthly fee
imposed by Landlord in its sole discretion. The monthly fee currently in effect
as of the date of this Lease for the use of the tennis courts and recreational
facilities is Twenty Five Dollars ($25.00) per month. Landlord reserves the
right to adjust this monthly fee at any time upon not less than thirty (30) days
prior notice. Landlord also reserves the right to close, remove, modify or alter
the tennis courts and/or recreational facilities or to change the equipment
located in such recreational facilities. Tenant hereby waives and releases
Landlord from all claims, damages, liabilities, injuries, actions, costs and
expenses (including, without limitation, attorney's fees and court costs)
arising from or related to Tenant or its employees use of the tennis courts and
recreational facilities.
5.2. Tenant to Comply with Legal Requirements. Tenant shall, at its sole
----------------------------------------
cost, promptly comply with all Laws relating to or affecting Tenant's particular
use or occupancy of the Premises or use of the Common Area, now in force, or
which may hereafter be in force, including without limitation those relating to
utility usage and load or number of permissible occupants or users of the
Premises, whether or not the same are now contemplated by the parties; with the
provisions of all recorded documents affecting the Premises or the Common Area
insofar as the same relate to or affect Tenant's particular use or occupancy of
the Premises or use of the Common Area; and with the requirements of any board
of fire underwriters (or similar body now or hereafter constituted) relating to
or affecting Tenant's particular or occupancy of the Premises or use of the
Common Area. Tenant shall, at its sole cost, maintain or restore the Premises as
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required by all applicable Laws and make structural and/or non-structural
alterations and additions in compliance and conformity with all applicable Laws
if such maintenance, restoration and/or alterations or additions is caused by
Tenant's particular use of the Premises during the Lease Term or caused by
alterations made to the Premises by Tenant. Any alterations or additions
undertaken by Tenant pursuant to this Paragraph 5.2 shall be subject to the
requirements of Paragraph 12.1 below. At Landlord's option, Landlord may make
the required alteration, addition or change, and Tenant shall pay the cost
thereof as Additional Rent. The foregoing notwithstanding, Landlord shall make
any alteration or addition required to bring the Premises, the Building or the
Common Area into compliance with legal requirements in effect at the time the
Premises, any improvements installed therein by Landlord, the Building or the
Common Area, respectively, were originally constructed. The cost of any
structural alterations or capital improvements as may be hereafter required due
to a change in laws and unrelated to Tenant's specific use of the Premises or
Tenant's alterations or improvements to the Premises shall be amortized over the
useful life of such alteration or improvement (with interest thereon at 10% per
annum or such higher rate of interest as may have been paid by Landlord on funds
borrowed for the purpose of constructing such structural or capital improvements
and shall be a Common Area Charge.
Tenant shall obtain prior to taking possession of the Premises any
permits, licenses or other authorizations required for the lawful operation of
its business at the Premises. The judgment of any court of competent
jurisdiction or the admission of Tenant in any action or proceeding against
Tenant, regardless of whether Landlord is a party thereto or not, that Tenant
has violated such Law or recorded document relating to Tenant's particular use
or occupancy of the Premises or use of the Common Area shall be conclusive of
the fact of such violation by Tenant.
5.3. Prohibited Uses. Tenant and Tenant's agents shall not commit nor
---------------
suffer to be committed any waste upon the Premises. Tenant and Tenant's agents
shall not do nor permit anything to be done in or about the Premises or Common
Area which will in any way obstruct or interfere with the rights of any other
tenants of the Building, other authorized users of the Common Area, or occupants
of neighboring property, or injure or annoy them. Tenant shall not conduct nor
permit any auction or sale open to the public to be held or conducted on or
about the Premises or Common Area. Tenant and Tenant's agents shall not use nor
allow the Premises to be used for any unlawful, immoral or hazardous purpose or
any purpose not permitted by this Lease, nor shall Tenant or Tenant's agents
cause, maintain, or permit any nuisance in, on or about the Premises. Tenant and
Tenant's agents shall not do nor permit anything to be done in or about the
Premises nor bring or keep anything in the Premises which will in any way
increase the rate of any insurance upon any portion of the Project or any of its
contents, or cause a cancellation of any insurance policy covering any portion
of the Project or any of its contents, nor shall Tenant or Tenant's agents keep,
use or sell or permit to be kept, used or sold in or about the Premises any
articles which may be prohibited by a standard form policy of fire insurance. In
the event the rate of any insurance upon any portion of the Project or any of
its contents is increased because of Tenant's particular use of the Premises or
that of Tenant's agents, Tenant shall pay, as Additional Rent, the full cost of
such increase; provided, however this provision shall in no event be deemed to
constitute a waiver of Landlord's right to declare a default hereunder by reason
of the act or conduct of Tenant or Tenant's agents causing such increase or of
any other rights or remedies of
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Landlord in connection therewith. Tenant and Tenant's agents shall not place any
loads upon the floor, walls or ceiling of the Premises which would endanger the
Building or the structural elements thereof or of the Premises, nor place any
harmful liquids in the drainage system of the Building or Common Area. No waste
materials or refuse shall be dumped upon or permitted to remain upon any part of
the Project except in enclosed trash containers designated for that purpose by
Landlord. No materials, supplies, equipment, finished products (or semi-finished
products), raw materials, or other articles of any nature shall be stored upon,
nor be permitted to remain on, any portion of the Project outside the Premises.
5.4. Hazardous Materials. Neither Tenant nor Tenant's agents shall permit
-------------------
the introduction, placement, use, storage, manufacture, transportation, release
or disposition (collectively "Release") of any Hazardous Material(s) (defined
below) on or about any portion of the Project without the prior written consent
of Landlord, which consent may be withheld in the sole and absolute discretion
of Landlord without any requirement of reasonableness in the exercise of that
discretion. Notwithstanding the immediately preceding sentence to the contrary,
Tenant may use de minimis quantities of the types of materials which are
technically classified as Hazardous Materials but commonly used in domestic or
office use to the extent not in an amount, which, either individually or
cumulatively, would be a "reportable quantity" under any applicable Law. Tenant
hereby represents, warrants and covenants to Landlord that Tenant will not use
Hazardous Materials in or on the Premises or on or about any portion of the
Project except those Hazardous Materials that are commonly used in domestic or
office use in compliance with applicable Laws. Tenant covenants that, at its
sole cost and expense, Tenant will comply with all applicable Laws with respect
to the Release by Tenant, its agents, employees, contractors or invitees of such
permitted Hazardous Materials. Any Release beyond the scope allowed in this
paragraph shall be subject to Landlord's prior consent, which may be withheld in
Landlord's sole and absolute discretion, and shall require an amendment to the
Lease in the event Landlord does consent which shall set forth the materials,
scope of use, indemnification and any other matter required by Landlord in
Landlord's sole and absolute discretion. Tenant shall indemnify, defend and hold
Landlord and Landlord's agents harmless from and against any and all claims,
losses, damages, liabilities, or expenses arising in connection with the Release
of Hazardous Materials in violation of Hazardous Materials Laws by Tenant,
Tenant's agents or any other person using the Premises with Tenant's knowledge
and consent or authorization. Tenant's obligation to defend, hold harmless and
indemnify pursuant to this Paragraph 5.4 shall survive Lease Termination for a
period of five (5) years and if Landlord has not given Tenant written notice
within such five (5) year period of Tenant's obligation to indemnify, defend or
hold harmless Landlord with respect to any particular Release of Hazardous
Materials by Tenant, then Tenant's obligation to indemnify, defend and hold
harmless pursuant to this Paragraph 5.4 shall expire.
The foregoing indemnity shall not apply to, and Tenant shall not be
responsible for, the presence of Hazardous Materials on, under, or about the
Premises, Building or Common Area to the extent caused by any third parties or
by Landlord or Landlord's employees, agents, contractors or invitees.
As used in this Lease, the term "Hazardous Materials" means any
chemical, substance, waste or material which has been or is hereafter determined
by any federal, state or local governmental authority to be capable of posing
risk of injury to health or safety, including
10
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without limitation, those substances included within the definitions of
"hazardous substances," "hazardous materials," "toxic substances," or "solid
waste" under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and
the Hazardous Materials Transportation Act, as amended, and in the regulations
promulgated pursuant to said laws; those substances defined as "hazardous
wastes" in section 25117 of the California Health & Safety Code, or as
"hazardous substances" in section 25316 of the California Health & Safety Code,
as amended, and in the regulations promulgated pursuant to said laws; those
substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or designated by the Environmental
Protection Agency (or any successor agency) as hazardous substances (see e.g.,
--- ----
40 CFR Part 302 and amendments thereto); such other substances,
materials and wastes which are or become regulated or become classified as
hazardous or toxic under any Laws, including without limitation the California
Health & Safety Code, Division 20, and Title 26 of the California Code of
Regulations; and any material, waste or substance which is (i) petroleum, (ii)
asbestos, (iii) polychlorinated biphenyls, (iv) designated as a "hazardous
substance" pursuant to section 311 of the Clean Water Act of 1977, 33 U.S.C.
sections 1251 et seq. (33 U.S.C. `1321) or listed pursuant to section 307 of the
-- ---
Clean Water Act of 1977 (33 U.S.C. `1317), as amended; (v) flammable
explosives; (vi) radioactive materials; or (vii) radon gas.
Landlord shall have the right, upon reasonable advance notice to
Tenant, to inspect, investigate, sample and/or monitor the Premises, the
Building and Common Area, including any soil, water, groundwater, or other
sampling, to the extent reasonably necessary to determine whether Tenant is
complying with the terms of this Lease with respect to Hazardous Materials.
Unless a previous inspection has disclosed a violation by Tenant of the
covenants contained in this Paragraph 5.4, such inspections, investigations,
sampling and/or monitoring shall be performed not more often than semi-annually.
In connection therewith, Tenant shall provide Landlord with reasonable access to
all portions of the Premises; provided, however, that Landlord shall avoid any
unreasonable interference with the operation of Tenant's business on the
Premises. All reasonable costs incurred by Landlord in performing such
inspections, investigation, sampling and/or monitoring where Landlord has a
reasonable suspicion of Hazardous Materials existing, migrating or being
released on, in, under or about the Premises shall be reimbursed by Tenant to
Landlord as Additional Rent within ten (10) days after Landlord's demand for
payment.
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6. Taxes.
-----
6.1. Personal Property Taxes. Tenant shall cause Tenant's trade fixtures,
-----------------------
equipment, furnishings, furniture, merchandise, inventory, machinery, appliances
and other personal property installed or located on the Premises (collectively
the "personal property") to be assessed and billed separately from the Land and
the Building. Tenant shall pay before delinquency any and all taxes, assessments
and public charges levied, assessed or imposed upon or against Tenant's personal
property. If any of Tenant's personal property shall be assessed with the Land
or the Building, Tenant shall pay to Landlord, as Additional Rent, the amounts
attributable to Tenant's personal property within thirty (30) days after receipt
of a written statement from Landlord setting forth the amount of such taxes,
assessments and public charges attributable to Tenant's personal property.
Tenant shall comply with the provisions of any Law which requires Tenant to file
a report of Tenant's personal property located on the Premises.
6.2. Other Taxes Payable Separately by Tenant. Tenant shall pay (or
----------------------------------------
reimburse Landlord, as Additional Rent, if Landlord is assessed), prior to
delinquency or within thirty (30) days after receipt of Landlord's statement
thereof, any and all taxes, levies, assessments or surcharges payable by
Landlord or Tenant and relating to this Lease or the Premises (other than
Landlord's net income, succession, transfer, gift, franchise, estate or
inheritance taxes, and Taxes, as that term is defined in Paragraph 6.3(a) below,
payable as a Common Area Charge), whether or not now customary or within the
contemplation of the parties hereto, whether or not now in force or which may
hereafter become effective, including but not limited to taxes:
(a) Upon, allocable to, or measured by the area of the Premises or
the Rentals payable hereunder, including without limitation any gross rental
receipts, excise, or other tax levied by the state, any political subdivision
thereof, city or federal government with respect to the receipt of such Rentals;
(b) Upon or with respect to the use, possession occupancy, leasing,
operation and management of the Premises or any portion thereof;
(c) Upon this transaction or any document to which Tenant is a party
creating or transferring an interest or an estate in the Premises; or
(d) Imposed as a means of controlling or abating environmental
pollution or the use of energy or any natural resource (including without
limitation gas, electricity or water), including, without limitation, any
parking taxes, levies or charges or vehicular regulations imposed by any
governmental agency. Tenant shall also pay, prior to delinquency, all privilege,
sales, excise, use, business, occupation, or other taxes, assessments, license
fees, or charges levied, assessed or imposed upon Tenant's business operations
conducted at the Premises.
In the event any such taxes are payable by Landlord and it shall not
be lawful for Tenant to reimburse Landlord for such taxes, then the Rentals
payable hereunder shall be increased to net Landlord the same net Rental after
imposition of any such tax upon Landlord as would have been payable to Landlord
prior to the imposition of any such tax.
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6.3. Common Taxes.
------------
(a) Definition of Taxes. The term "Taxes" as used in this Lease shall
-------------------
collectively mean (to the extent any of the following are not paid by Tenant
pursuant to Paragraphs 6.1 and 6.2 above) all real estate taxes and general and
special assessments (including, but not limited to, assessments for public
improvements or benefit); personal property taxes; taxes based on vehicles
utilizing parking areas on the Land; taxes computed or based on rental income or
on the square footage of the Premises or the Building (including without
limitation any municipal business tax but excluding federal, state and municipal
net income taxes); environmental surcharges; excise taxes; gross rental receipts
taxes; sales and/or use taxes; employee taxes; water and sewer taxes, levies,
assessments and other charges in the nature of taxes or assessments (including,
but not limited to, assessments for public improvements or benefit); and all
other governmental, quasi-governmental or special district impositions of any
kind and nature whatsoever; regardless of whether any of the foregoing are now
customary or within the contemplation of the parties hereto and regardless of
whether resulting from increased rate and/or valuation, or whether extraordinary
or ordinary, general or special, unforeseen or foreseen, or similar or
dissimilar to any of the foregoing and which during the Lease Term are laid,
levied, assessed or imposed upon Landlord and/or become a lien upon or
chargeable against any portion of the Project under or by virtue of any present
or future laws, statutes, ordinances, regulations, or other requirements of any
governmental, quasi-governmental or special district authority whatsoever. The
term "environmental surcharges" shall include any and all expenses, taxes,
charges or penalties imposed by the Federal Department of Energy, Federal
Environmental Protection Agency, the Federal Clean Air Act, or any regulations
promulgated thereunder, or imposed by any other local, state or federal
governmental agency or entity now or hereafter vested with the power to impose
taxes, assessments or other types of surcharges as a means of controlling or
abating environmental pollution or the use of energy or any natural resource in
regard to the use, operation or occupancy of the Project. The term "Taxes" shall
include (to the extent the same are not paid by Tenant pursuant to Paragraphs
6.1 and 6.2 above), without limitation, all taxes, assessments, levies, fees,
impositions or charges levied, imposed, assessed, measured, or based in any
manner whatsoever upon or with respect to the use, possession, occupancy,
leasing, operation or management of the Project or in lieu of or equivalent to
any Taxes set forth in this Paragraph 6.3(a). In the event any such Taxes are
payable by Landlord and it shall not be lawful for Tenant to reimburse Landlord
for such Taxes, then the Rentals payable hereunder shall be increased to net
Landlord the same net Rental after imposition of any such Tax upon Landlord as
would have been payable to Landlord prior to the imposition of any such Tax.
(b) Common Area Charge. All Taxes which are levied or assessed or
------------------
which become a lien upon any portion of the Project or which become due or
accrue during the Lease Term shall be a Common Area Charge, and Tenant shall pay
as Additional Rent each month during the Lease Term 1/12th of its annual share
of such Taxes, based on Landlord's estimate thereof, pursuant to Paragraph 11
below. Tenant's share of Taxes during any partial tax fiscal year(s) within the
Lease Term shall be prorated according to the ratio which the number of days
during the Lease Term or of actual occupancy of the Premises by Tenant,
whichever is greater, during such year bears to 365.
7. Insurance; Indemnity; Waiver.
----------------------------
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7.1. Insurance by Landlord. Landlord shall, during the Lease Term, procure
---------------------
and keep in force the following insurance, the cost of which, if incurred by
Landlord, shall be a Common Area Charge, payable by Tenant pursuant to Paragraph
11 below:
(a) Property Insurance. "All risk" property insurance, including,
------------------
without limitation, boiler and machinery (if applicable); sprinkler damage;
vandalism; malicious mischief, full coverage plate glass insurance; and
demolition, increased cost of construction and contingent liability from change
in building laws on the Building and the Land, including any improvements or
fixtures constructed or installed in the Building and on the Land by Landlord.
Such insurance may be in the full amount of the replacement cost of the
foregoing, with reasonable deductible amounts, which deductible amounts shall be
a Common Area Charge, payable pursuant to Paragraph 11 in the event of a
casualty. Such insurance may also include rental income insurance, insuring that
one hundred percent (100%) of the Rentals (as the same may be adjusted
hereunder) will be paid to Landlord for a period of up to twelve (12) months if
the Premises are destroyed or damaged, or such longer period as may be required
by any beneficiary of a deed of trust or any mortgagee of any mortgage affecting
the Premises. Such insurance shall not cover any leasehold improvements
installed in the Premises by Tenant at its expense, or Tenant's equipment, trade
fixtures, inventory, fixtures or personal property located on or in the
Premises;
(b) Liability Insurance. Comprehensive general liability (lessor's
-------------------
risk) insurance against any and all claims for personal injury, death or
property damage occurring in or about the Building or the Land. Such insurance
shall have a combined single limit of not less than One Million Dollars
($1,000,000) per occurrence and Two Million Dollars ($2,000,000) aggregate; and
(c) Other. Such other insurance (including, without limitation,
-----
worker's compensation insurance) as Landlord deems reasonably necessary and
prudent, and which is available at commercially reasonable rates.
7.2. Insurance by Tenant. Tenant shall, during the Lease Term, at Tenant's
-------------------
sole cost and expense, procure and keep in force the following insurance:
(a) Personal Property Insurance. "All risk" property insurance,
---------------------------
including, without limitation, coverage for boiler and machinery (if
applicable); sprinkler damage; vandalism; malicious mischief, and demolition,
increased cost of construction and contingent liability from changes in building
laws on all leasehold improvements installed in the Premises by Tenant at its
expense (if any), and on all equipment, trade fixtures, inventory, fixtures and
personal property located on or in the Premises, including improvements or
fixtures hereinafter constructed or installed on the Premises. Such insurance
shall be in an amount equal to the full replacement cost of the aggregate of the
foregoing and shall provide coverage comparable to the coverage in the standard
ISO all risk form,when such form is supplemented with the coverages required
above.
(b) Liability Insurance. Comprehensive general liability insurance
-------------------
for the mutual benefit of Landlord and Tenant, against any and all claims for
personal injury, death or property damage occurring in or about the Premises and
Common Area or arising out of Tenant's or Tenant's agents' use of the Common
Area, use or occupancy of the Premises or Tenant's
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operations on the Premises. Such insurance shall have a combined single limit of
not less than Two Million Dollars ($2,000,000) per occurrence and Three Million
Dollars ($3,000,000) aggregate. Such insurance shall contain a cross-liability
(severability of interests) clause and an extended ("broad form") liability
endorsement, including blanket contractual coverage. The minimum limits
specified above are the minimum amounts required by Landlord, and may be
reasonably revised by Landlord from time to time to meet changed circumstances,
including without limitation to reflect (i) changes in the purchasing power of
the dollar, (ii) changes indicated by the amount of plaintiffs' verdicts in
personal injury actions in the State of California, or (iii) changes consistent
with the standards required by other landlords in the county in which the
Premises are located. Such liability insurance shall be primary and not
contributing to any insurance available to Landlord, and Landlord's insurance
shall be in excess thereto. Such insurance shall specifically insure Tenant's
performance of the indemnity, defense and hold harmless agreements contained in
Paragraph 7.4, although Tenant's obligations pursuant to Paragraph 7.4 shall not
be limited to the amount of any insurance required of or carried by Tenant under
this Paragraph 7.2(b). Tenant shall be responsible for insuring that the amount
of insurance maintained by Tenant is sufficient for Tenant's purposes.
(c) Other. Such other insurance as required by law, including,
-----
without limitation, workers' compensation insurance.
(d) Form of the Policies. The policies required to be maintained by
--------------------
Tenant pursuant to Paragraphs 7.2(a), (b), and (c) above shall be with companies
rated A-VII or better in Best's Insurance Guide), and shall include Landlord and
the beneficiary or mortgagee of any deed of trust or mortgage encumbering the
Premises and/or the Land as additional insureds, and shall provide that such
parties may, although additional insureds, recover for any loss suffered by~
Tenant's negligence. In the event that the policies maintained by Tenant contain
deductibles amounts exceeding $50,000, Tenant shall self-insure for amounts
exceeding $50,000. Certificates of insurance shall be delivered to Landlord
prior to the Commencement Date; a new policy or certificate shall be delivered
to Landlord at least ten (10) business days prior to the expiration date of the
old policy. Tenant shall have the right to provide insurance coverage which it
is obligated to carry pursuant to the terms hereof in a blanket policy, provided
such blanket policy expressly affords coverage to the Premises and Common Area
and to Tenant as required by this Lease. Tenant shall obtain a written
obligation on the part of Tenant's insurer(s) to notify Landlord and any
beneficiary or mortgagee of a deed of trust or mortgage encumbering the Premises
and/or the Land in writing of any delinquency in premium payments and at least
thirty (30) days prior to any cancellation or modification of any policy.
Tenant's policies shall provide coverage on an occurrence basis and not on a
claims made basis. In no event shall the limits of any policies maintained by
Tenant be considered as limiting the liability of Tenant under this Lease.
7.3. Failure by Tenant to Obtain Insurance. If Tenant does not take out
-------------------------------------
the insurance required pursuant to Paragraph 7.2 or keep the same in full force
and effect, Landlord may, but shall not be obligated to, take out the necessary
insurance and pay the premium therefor, and Tenant shall repay to Landlord, as
Additional Rent, the amount so paid promptly upon demand. In addition, Landlord
may recover from Tenant and Tenant agrees to pay, as Additional Rent, any and
all reasonable expenses (including reasonable attorneys' fees) and damages which
Landlord may sustain by reason of the failure of Tenant to obtain and maintain
such insurance, it being
15
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expressly declared that the expenses and damages of Landlord shall not be
limited to the amount of the premiums thereon.
7.4. Indemnification. Subject to the terms of this Paragraph 7.4, Tenant
---------------
shall indemnify, hold harmless, and defend Landlord with competent counsel
reasonably satisfactory to Landlord against all claims, losses, damages,
expenses or liabilities for injury or death to any person or for damage to or
loss of use of any property arising out of any occurrence in, on or about the
Building, Common Area or Land, to the extent caused or contributed to by Tenant
or Tenant's agents, or arising out of any occurrence in, upon or at the Premises
or on account of the use, occupational safety or occupancy of the Premises.
Tenant's indemnification, defense and hold harmless obligations under this Lease
shall include and apply to reasonable attorneys' fees, investigation costs, and
other costs actually incurred by Landlord. Tenant shall further indemnify,
defend and hold harmless Landlord from and against any and all claims, losses,
damages, liabilities or expenses arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease. The provisions of this Paragraph 7.4 shall survive Lease
Termination with respect to any damage, injury, death, breach or default
occurring prior to such termination. Except for Landlord's liability arising
from the negligence or willful misconduct of Landlord or its agents, employees,
contractors or invitees, this Lease is made on the express condition that
Landlord shall not be liable for, or suffer loss by reason of, injury to person
or property, from whatever cause, in any way connected with the condition, use,
occupational safety or occupancy of the Premises specifically including, without
limitation, any liability for injury to the person or property of Tenant or
Tenant's agents. The provisions of this Paragraph 7.4 shall not apply to the
extent of any claims, losses, damages, expenses or liabilities caused by
Landlord's willful misconduct or negligence, or that or its agents, employees,
contractors or invitees.
7.5. Claims by Tenant. Except as expressly provided in Paragraph 7.4,
----------------
Landlord shall not be liable to Tenant, and Tenant waives all claims against
Landlord, for injury or death to any person, damage to any property, or loss of
use of any property in any portion of the Project by and from all causes,
including without limitation, any defect in any portion of the Project and/or
any damage or injury resulting from fire, steam, electricity, gas, water or
rain, which may leak or flow from or into any part of the Premises, or from
breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, whether the damage
or injury results from conditions arising upon the Premises or upon other
portions of the Project or from other sources. Neither Landlord nor Tenant shall
be liable for any damages arising from any act or negligence of any other tenant
or user of the Project. Tenant or Tenant's agents shall immediately notify
Landlord in writing of any known defect in the Project. The provisions of this
Paragraph 7.5 shall not apply to any damage or injury caused by Landlord's
willful misconduct or negligence, or that of its agents, employees, contractors
or invitees. Anything in this Lease to the contrary notwithstanding, under no
circumstances shall Landlord be liable to Tenant for lost profits or loss of
business or income.
7.6. Mutual Waiver of Subrogation. Landlord hereby releases Tenant, and
----------------------------
Tenant hereby releases Landlord, and their respective officers, agents,
employees and servants, from any and all claims or demands of damages, loss,
expense or injury to the Project, or to the furnishings, fixtures, equipment,
inventory or other property of either Landlord or Tenant in, about or upon
16
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the Project, which is caused by or results from perils, events or happenings
which are the subject of insurance carried by the respective parties pursuant to
this Paragraph 7 and in force at the time of any such loss, whether due to the
negligence of the other party or its agents and regardless of cause or origin;
provided, however, that such waiver shall be effective only to the extent
permitted by the insurance covering such loss, to the extent such insurance is
not prejudiced thereby, and to the extent insured against.
8. Utilities. Tenant shall pay during the Lease Term and prior to
---------
delinquency all charges for water, gas, light, heat, power, electricity,
telephone or other communication service, janitorial service, trash pick-up,
sewer and all other services supplied to Tenant or consumed by Tenant on the
Premises (collectively the "Services") and all taxes, levies, fees or surcharges
therefor. Tenant shall arrange for Services to be supplied to the Premises and
shall contract for all of the Services in Tenant's name prior to the
Commencement Date. The Commencement Date shall not be delayed by reason of any
failure by Tenant to so contract for Services. Tenant shall be responsible for
providing its own janitorial service to the Premises. In the event that any of
the Services are not separately billed or metered to the Premises, or if any of
the Services are not separately metered as of the Commencement Date, the cost of
such Services shall be a Common Area Charge and Tenant shall pay, as Additional
Rent, Tenant's proportionate share of such cost to Landlord as provided in
Paragraph 11 below, except that if any meter services less than the entire
Building, Tenant's proportionate share of the costs measured by such meter shall
be based upon the square footage of the gross leasable area in the Premises as a
percentage of the total square footage of the gross leasable area of the portion
of the Building serviced by such meter. If Landlord reasonably determines that
Tenant is using a disproportionate amount of any commonly metered Services or an
amount in excess of the customary amount of any Services ordinarily furnished
for use of the Premises in accordance with the uses set forth in Paragraph 5
above, then Landlord may elect to periodically charge Tenant, as Additional
Rent, a sum equal to Landlord's reasonable estimate of the cost of Tenant's
excess use of any or all such Services. The lack or shortage of any Services due
to any cause whatsoever (except for a lack or shortage proximately caused by the
negligent acts or willful misconduct Landlord or that of its agents, employees,
contractors or invitees) shall not affect any obligation of Tenant hereunder,
and Tenant shall faithfully keep and observe all the terms, conditions and
covenants of this Lease and pay all Rentals due hereunder, all without
diminution, credit or deduction.
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9. Repairs and Maintenance.
-----------------------
9.1. Landlord's Responsibilities. Subject to the provisions of Paragraph
---------------------------
14 below, Landlord shall maintain in reasonably good order and repair the
structural roof, roof membrane, structural and exterior walls (including
painting thereof) and foundations of the Building. In addition, Landlord shall
maintain the heating and air conditioning systems of the Premises or obtain and
maintain a service contract (covering periodic inspection and servicing) for the
heating and air conditioning systems of the Premises. Tenant shall give prompt
written notice to Landlord of any known maintenance work required to be made by
Landlord pursuant to this Paragraph 9.1. The costs of (i) repairs and
maintenance of the roof membrane, (ii) periodic inspection and regular servicing
of the heating and air conditioning systems of the Premises, and (iii) painting
the exterior of the Premises, and (iv) replacement of the structural parts of
the Premises and the Building (including load bearing walls and roof structure)
which are the obligation of Landlord hereunder shall be a Common Area Charge and
Tenant shall pay, as Additional Rent, Tenant's share of such costs to Landlord
as provided in Paragraph 11 below. Any repairs required because of the wrongful
act of Tenant or Tenant's agents, which repairs shall be made at the expense of
Tenant and as Additional Rent.
9.2. Tenant's Responsibilities. Except as expressly provided in Paragraph
-------------------------
9.1 above, and subject to the provisions of Paragraph 2.3 above, Tenant shall,
at its sole cost, maintain the entire Premises and every part thereof, including
without limitation, windows, skylights, window frames, plate glass, freight
docks, doors and related hardware, interior walls and partitions, and the
electrical, plumbing, lighting, in good order, condition and repair. If Tenant
fails to make repairs or perform maintenance work required of Tenant hereunder
within thirty (30) days after written notice from Landlord specifying the need
for such repairs or maintenance work, Landlord or Landlord's agents may, in
addition to all other rights and remedies available hereunder or by law and
without waiving any alternative remedies, enter into the Premises and make such
repairs and/or perform such maintenance work. If Landlord makes such repairs
and/or performs such maintenance work, Tenant shall reimburse Landlord upon
demand and as Additional Rent, for the cost of such repairs and/or maintenance
work. Landlord shall use reasonable efforts to avoid causing any inconvenience
to Tenant or interference with the use of the Premises by Tenant or Tenant's
agents during the performance of any such repairs or maintenance. Landlord shall
have no liability to Tenant for any damage, inconvenience or interference with
the use of the Premises by Tenant or Tenant's agents as a result of Landlord
performing any such repairs or maintenance (except for the negligent acts or
willful misconduct Landlord or that of its agents, employees, contractors or
invitees). Tenant shall reimburse Landlord, on demand and as Additional Rent,
for the cost of damage to the Project caused by Tenant or Tenant's agents.
Tenant expressly waives the benefits of and remedies described under the
provisions of subsection 1 of Section 1932, Section 1941 and Section 1942 of the
California Civil Code (which shall have no application hereunder) and Tenant
further waives all rights to make repairs at Landlord's expense or to repair and
deduct as provided in Section 1942 of the California Civil Code. Nothing stated
herein shall require the Landlord to wait thirty days before taking action to
protect the Building or correct a situation which poses a threat to life.
9.3.
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10. Common Area.
-----------
10.1. In General. Subject to the terms and conditions of this Lease and
----------
such reasonable rules and regulations as Landlord may from time to time
prescribe, Tenant and Tenant's agents shall have, in common with other tenants
of the Building and other permitted users, the nonexclusive right to use during
the Lease Term the access roads, parking areas, sidewalks, landscaped areas and
other facilities on the Land or in the Building designated by Landlord for the
general use and convenience of the occupants of the Building and other
authorized users, which areas and facilities are referred to herein as the
"Common Area." This right to use the Common Area shall terminate upon Lease
Termination. Tenant acknowledges that a portion of the first floor of the
Building consists of a lobby area which shall be part of the Common Area and
that any other tenant or tenants occupying space on the first floor of the
Building and second floor tenants of the Building and their respective agents,
employees, guests and invitees shall have the right to use such lobby area to
gain access to the portions of the Building leased by such other tenants.
Landlord reserves the right to promulgate such reasonable rules and regulations
relating to the use of all or any portion of the Common Area and to amend such
rules and regulations from time to time with or without advance notice, as
Landlord may deem appropriate for the best interests of the occupants of the
Building and other authorized users. Any amendments to the rules and regulations
shall be effective as to Tenant, and binding on Tenant, upon delivery of a copy
of such rules and regulations to Tenant. Tenant and Tenant's agents shall
observe such rules and regulations and any material failure by Tenant or
Tenant's agents to observe and comply with the rules and regulations shall be a
Default by Tenant. Landlord shall not be responsible for the nonperformance of
the rules and regulations by any tenants or occupants of the Building or other
authorized users, nor shall Landlord be liable to Tenant by reason of the
noncompliance with or violation of the rules and regulations by any other tenant
or user. In the event of a conflict between the rules and regulations and this
Lease, the terms of this Lease shall prevail.
10.2. Parking Areas. Tenant is allocated and Tenant and Tenant's employees
-------------
and invitees shall have the nonexclusive right to use not more than the number
of parking spaces set forth in Paragraph 1.13, the location of which may be
designated from time to time by Landlord. Neither Tenant nor Tenant's agents
shall at any time use more parking spaces than the number so allocated to Tenant
or park or permit the parking of their vehicles in any portion of the Land not
designated by Landlord as a nonexclusive parking area. Tenant and Tenant's
agents and employees shall not have the exclusive right to use any specific
parking space. Notwithstanding the number of parking spaces designated for
Tenant's non-exclusive use, in the event by reason of any Law relating to or
affecting parking on the Land, or any other cause beyond Landlord's reasonable
control, Landlord is required to reduce the number of parking spaces on the
Land, Landlord shall have the right to proportionately reduce the number of
Tenant's nonexclusive parking spaces and the nonexclusive parking spaces of
other tenants in the Building. Landlord reserves the right to promulgate such
reasonable rules and regulations relating to the use of such parking areas on
the Land as Landlord may deem appropriate. Landlord furthermore reserves the
right, after having given Tenant reasonable notice, to have any vehicles owned
by Tenant or Tenant's agents which are parked in violation of the provisions of
this Paragraph 10.2 or in violation of Landlord's rules and regulations relating
to parking, to be towed away at Tenant's cost. In the event Landlord elects or
is required by any law to limit or control parking on the Land, by validation of
parking tickets or any other method, Tenant agrees to participate in such
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validation or other program under such reasonable rules and regulations as are
from time to time established by Landlord. Provided that Tenant's use, occupancy
and enjoyment of the Premises or access to the Premises is not unreasonably
interfered with, Landlord shall have the right to close, at reasonable times,
all or any portion of the parking areas for any reasonable purpose, including
without limitation, the prevention of a dedication thereof, or the accrual of
rights of any person or public therein. Tenant and Tenant's agents shall not at
any time park or permit the parking of (i) trucks or other vehicles (whether
owned by Tenant or other persons) adjacent to any loading areas so as to
interfere in any manner with the use of such areas except for the purpose of
loading or unloading, (ii) Tenant's or Tenant's agents' vehicles or trucks, or
the vehicles or trucks of Tenant's suppliers or others, in any portion of the
Common Area not designated by Landlord for such use by Tenant, or (iii) any
inoperative vehicles or equipment on any portion of the Common Area.
10.3. Maintenance by Landlord. Landlord shall maintain the Common Area in
-----------------------
good repair and condition and shall manage the Common Area to reasonable and
customary standards for comparable facilities. The expenditures for such
maintenance shall be at the reasonable discretion of Landlord. The cost of such
maintenance, operation and management shall be a "Common Area Charge," and
Tenant shall pay to Landlord, as Additional Rent, Tenant's share of such costs
as provided in Paragraph 11 below.
11. Common Area Charges.
-------------------
11.1. Definition. "Common Area Charge" or "Common Area Charges" as used
----------
in this Lease shall mean and include all items identified in other paragraphs of
this Lease as a Common Area Charge and the total cost paid or incurred by
Landlord for the operation, maintenance, repair, and management of the Project
which costs shall include, without limitation: the cost of Services and
utilities supplied to the Project (to the extent the same are not separately
charged or metered to tenants of the Building); water; sewage; trash removal;
fuel; electricity; heat; lighting systems; fire protection systems; storm
drainage and sanitary sewer systems; periodic inspection and regular servicing
of the heating and air conditioning systems of the Premises; maintaining,
repairing and replacing the roof membrane; property, rental loss and liability
insurance covering the Building and the Land and any other insurance carried by
Landlord pursuant to Paragraph 7 above; window cleaning; cleaning, sweeping,
striping, resurfacing of parking and driveway areas; cleaning the Common Area
following storms or other severe weather; cleaning and repairing of sidewalks,
curbs, stairways; costs related to irrigation systems and Project signs; fees
for licenses and permits required for the operation of the Project; the cost of
complying with Laws, including, without limitation, maintenance, alterations and
repairs required in connection therewith, except as otherwise provided
hereunder); costs related to landscape maintenance; and the cost of contesting
the validity or applicability of any governmental enactments which may affect
Common Area Charges. Common Area Charges shall also include a management fee to
Landlord in an amount equal to four percent (4%) of the total Rent, and such
management fee shall be the sole cost or fee to be paid to Landlord by Tenant
for management of the Project. The cost of(i) capital repair items (i.e., items
which Landlord is required to capitalize and not expense in the current year for
federal income tax purposes), (ii) replacement of the roof membrane, (iii)
resurfacing the parking lot, and (iv) repainting the exterior of the Building,
shall be amortized at
20
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ten percent (10%) over its useful life, as reasonably determined by Landlord,
and be paid monthly by Tenant from the date of installation or repair through
Lease Termination.
The specific examples of Common Area Charges stated in this
Paragraph 11.1 are in no way intended to and shall not limit the costs
comprising Common Area Charges (unless herein specifically excluded), nor shall
such examples be deemed to obligate Landlord to incur such costs or to provide
such services or to take such actions except as Landlord may be expressly
required in other portions of this Lease, or except as Landlord, in its
reasonable discretion, may elect. All reasonable costs incurred by Landlord in
good faith for the operation, maintenance, repair and management of the Project
shall be deemed conclusively binding on Tenant.
Notwithstanding anything to the contrary contained in this Lease,
within thirty (30) days after receipt by Tenant of Landlord's statement of
Common Area Charges prepared pursuant to Paragraph 11.2 hereof for any prior
annual period during the Lease Term, Tenant or its authorized representative
shall have the right to inspect the books of Landlord during the business hours
of Landlord at Landlord's office or, at Landlord's option, such other location
as Landlord reasonably may specify, for the purpose of verifying the information
contained in the statement. Unless Tenant asserts specific errors within thirty
(30) days after receipt of the statement, the statement shall be deemed correct
as between Landlord and Tenant, except as to individual components subsequently
determined to be in error by future audit.
11.2. Payment of Common Area Charges by Tenant. Prior to the Commencement
----------------------------------------
Date, and annually thereafter, Landlord shall deliver to Tenant an estimate of
Common Area Charges for the succeeding year. Tenant's payment of Common Area.
Charges shall be based upon Landlord's estimate of Common Area Charges and shall
be payable in equal monthly installments in advance on the first day of each
calendar month commencing on the date specified in Paragraph 1.6 and continuing
throughout the Lease Term. Tenant shall pay to Landlord, as Additional Rent and
without deduction or offset, an amount equal to Tenant's percentage share
(stated in Paragraph 1.10 above) of the Common Area Charges.
Landlord shall revise its estimate of Common Area Charges on an
annual basis, and Landlord may adjust the amount of Tenant's monthly installment
in the event of a material change in Common Area Charges during any year.
Landlord shall furnish Tenant an annual statement (and a statement within ninety
(90) days after Lease Termination) showing the actual Common Area Charges for
the period to which Landlord's estimate pertains and shall concurrently either
bill Tenant for the balance due (payable within thirty (30) days) or credit
Tenant's account for the excess previously paid.
Alternatively, Common Area Charges actually incurred or paid by
Landlord but not theretofore billed to Tenant, as invoiced by Landlord shall be
payable by Tenant within ten (10) days after receipt of Landlord's invoice, but
not more often than once each calendar month.
Notwithstanding the foregoing provisions of this Paragraph 11,
Landlord and Tenant agree that if Landlord incurs any costs for insurance,
Services, repairs or maintenance exclusively for or to the Premises or for less
than all the tenants of the Building and such costs are
21
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Common Area Charges, or if any improvements installed in the Premises by Tenant
or Landlord are valued by the assessor disproportionately higher than those of
any other tenants in the Building, then Tenant's share of such Common Area
Charges shall be equitably increased by Landlord to reflect the portion of any
such costs or taxes incurred by Landlord in regard to the Premises, and Tenant
shall pay the same to Landlord as Additional Rent.
11.3. Exclusions From Common Area Charges. Notwithstanding anything to the
-----------------------------------
contrary contained in this Lease, in no event shall Tenant have any obligation
to perform, to pay directly, or to reimburse Landlord for, all or any portion of
the following repairs, maintenance, improvements, replacements, premiums,
claims, losses, fees, commissions, charges, disbursements, attorneys 'fees,
experts' fees, costs and expenses (collectively, "Costs"):
(a) Losses Caused by Others and Construction Defects. Costs
------------------------------------------------
occasioned by the act, omission or violation of Law by Landlord, any other
occupant of the Project (other than Tenant), or their respective agents,
employees or contractors, or costs arising out of the failure to construct the
Building, Premises, tenant improvements installed by Landlord, or Common Areas
in accordance with Laws and private restrictions applicable at the time of
construction thereof.
(b) Condemnation and Insurance Costs. Costs occasioned by the
--------------------------------
exercise of the power of eminent domain, or increases in insurance Costs caused
by the activities of other occupant(s) of the Project.
(c) Reimbursable Expenses. Costs for which Landlord has a right of
---------------------
reimbursement from others, or Costs which Tenant pays directly to a third
person.
(d) Utilities or Services. Costs (i) arising from the
---------------------
disproportionate use of any utility .or service supplied by Landlord to any
other occupant of the Project; or (ii) associated with utilities and services of
a type not provided to Tenant.
(e) Leasing Expenses. Costs incurred in connection with negotiations
----------------
or disputes with other occupant(s) of the Project, and Costs arising from the
violation by Landlord or any occupant of the Project (other than Tenant) of the
terms and conditions of any lease or other agreement.
(f) Reserves. Depreciation, amortization or other expense reserves.
--------
(g) Mortgages. Interest, charges and fees incurred on debt,
---------
payments or mortgages and rent under ground leases.
(h) Hazardous Materials. Costs incurred to investigate the
-------------------
presence of any Hazardous Material, Costs to respond to any claim of Hazardous
Material contamination or damage, Costs to remove any Hazardous Material from
the Premises, Building or Project or to remediate any Hazardous Material
contamination, and any judgments or other Costs incurred in connection with any
Hazardous Material exposure or release, except to the extent such Costs are
incurred by Landlord in accordance with Paragraph 5.4 or incurred by Landlord or
caused by reason of the storage, use or disposal of the Hazardous Material in
question by Tenant, its agents, employees, contractors or invitees.
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(i) Management. Any fee, profit or compensation retained by Landlord
----------
or its affiliates for management and administration of the Project in excess of
the management fee specified in Paragraph 11.1.
12. Alterations and Improvements.
----------------------------
12.1. In General. Tenant shall not make, nor permit to be made, any
----------
alterations, removals, changes, enlargements, improvements nor additions
(collectively "Alterations") in, on, about or to the Premises, or any part
thereof, including Alterations required pursuant to Paragraph 5.2, without the
prior written consent of Landlord (which consent shall not be unreasonably
withheld) and without acquiring and complying with the conditions of all permits
required for such Alterations by any governmental authority having jurisdiction
thereof. The term "Alterations" as used in this Paragraph 12 shall also include
all heating, lighting, electrical (including all wiring, conduit outlets, drops,
buss ducts, main and subpanels), air conditioning and partitioning in the
Premises made by Tenant regardless of how affixed to the Premises. As a
condition to the giving of its consent, Landlord may impose such reasonable
requirements as Landlord reasonably may deem necessary, including without
limitation, the manner in which the work is done; a right of approval of the
contractor by whom the work is to be performed (which approval shall not be
unreasonably withheld); the times during which the work is to be accomplished;
the requirement that Tenant post a completion bond in an amount and form
reasonably satisfactory to Landlord; and the requirement that Tenant reimburse
Landlord, as Additional Rent, for Landlord's reasonable and customary costs for
outside consultants incurred in reviewing any proposed Alteration, whether or
not Landlord's consent is granted. In the event Landlord consents to the making
of any 'Alterations by Tenant, the same shall be made by Tenant at Tenant's sole
cost and expense, in accordance with the plans and specifications approved by
Landlord and in a manner causing Landlord and Landlord's agents and other
tenants of the Building the least interference and inconvenience practicable
under the circumstances. Tenant shall give written notice to Landlord five (5)
business days prior to employing any laborer or contractor to perform services
related to, or receiving materials for use upon the Premises, and prior to the
commencement of any work of improvement on the Premises, except in the event of
an emergency. Any Alterations to the Premises made by Tenant shall be made in
accordance with applicable Laws and in a first-class workmanlike manner. In
making any such Alterations, Tenant shall, at Tenant's sole cost and expense,
file for and secure and comply with any and all permits or approvals required by
any governmental departments or authorities having jurisdiction thereof and any
utility company having an interest therein. In no event shall Tenant make any
structural changes to the Premises or make any changes to the Premises which
would weaken or impair the structural integrity of the Building or adversely
affect or alter the basic building systems within the Building or alter the
exterior appearance of the Building.
12.2. Removal Upon Lease Termination. At the time Tenant requests
------------------------------
Landlord's consent, Tenant shall request a decision from Landlord in writing as
to whether Landlord will require Tenant, at Tenant's expense, to remove any such
Alterations and restore the Premises to their prior condition at Lease
Termination. In the event Tenant fails to earlier obtain Landlord's written
decision as to whether Tenant will be required to remove any Alteration, then no
less than ninety (90) nor more than one hundred twenty (120) days prior to the
expiration of the Lease Term, Tenant by written notice to Landlord shall request
Landlord to inform Tenant whether or
23
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not Landlord desires to have any of such Alterations removed at Lease
Termination. Following receipt of such notice, Landlord may elect to have all or
a portion of such Alterations removed from the Premises at Lease Termination,
and Tenant shall, at its sole cost and expense, remove at Lease Termination such
Alterations designated by Landlord for removal and repair all damage to the
Project arising from such removal. In the event Tenant fails to so request
Landlord's decision or fails to remove any such Alterations designated by
Landlord for removal, Landlord may remove any Alterations made to the Premises
by Tenant, restore the Premises to their prior condition and repair all damage
to the Premises and Common Area arising from such removal, and may recover from
Tenant all reasonable costs and expenses incurred thereby, together with an
amount equal to the fair rental value of the Premises for the period of time
required for Landlord to accomplish such removal and restoration. Tenant's
obligation to pay such costs and expenses to Landlord shall survive Lease
Termination. Unless Landlord elects to have Tenant remove (or, upon Tenant's
failure to obtain Landlord's decision, Landlord removes) any such Alterations,
all such Alterations, except for moveable furniture, personal property and
equipment, and trade fixtures of Tenant not affixed to the Premises, shall
become the property of Landlord upon Lease Termination (without any payment
therefor) and remain upon and be surrendered with the Premises at Lease
Termination.
12.3. Landlord's Improvements. All fixtures, improvements or equipment
-----------------------
which are installed, constructed on or attached to the Premises, Building or
Common Area by Landlord shall be a part of the realty and belong to Landlord.
13. Default and Remedies.
--------------------
13.1. Events of Default. The term "Default by Tenant" as used in this
-----------------
Lease shall mean the occurrence of any of the following events:
(a) Tenant's failure to pay when due any Rentals;
(b) Commencement and continuation for at least sixty (60) days of
any case, action or proceeding by, against or concerning Tenant under any
federal or state bankruptcy, insolvency or other debtor's relief law, including
without limitation, (i) a case under Title 11 of the United States Code
concerning Tenant, whether under Chapter 7, 11, or 13 of such Title or under any
other Chapter, or (ii) a case, action or proceeding seeking Tenant's financial
reorganization or an arrangement with any of Tenant's creditors;
(c) Voluntary or involuntary appointment of a receiver, trustee,
keeper or other person who takes possession for more than sixty (60) days of
substantially all of Tenant's assets or of any asset used in Tenant's business
on the Premises, regardless of whether such appointment is as a result of
insolvency or any other cause;
(d) Execution of an assignment for the benefit of creditors of
substantially all assets of Tenant available by law for the satisfaction
of judgement creditors;
(e) Commencement of proceedings for winding up or dissolving
(whether voluntary or involuntary) the entity of Tenant, if Tenant is a
corporation or a partnership;
24
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(f) Levy of a writ of attachment or execution on Tenant's interest
under this Lease, if such writ continues for a period of thirty (30) days;
(g) Transfer or attempted Transfer of this Lease or the Premises by
Tenant contrary to the provisions of Paragraph 23 below; or
(h) Breach by Tenant of any term, covenant, condition, warranty, or
other provision contained in this Lease or of any other obligation owing or due
to Landlord.
13.2. Remedies. Upon any Default by Tenant, Landlord shall have the
--------
following remedies, in addition to all other rights and remedies provided by
law, to which Landlord may resort cumulatively, or in the alternative:
(a) Termination. Upon any material Default by Tenant, Landlord shall
-----------
have the right (but not the obligation) to give written notice to Tenant of such
default and terminate this Lease and Tenant's right to possession of the
Premises if(i) such default is in the payment of Rentals and is not cured within
five (5) days following the date such Rentals are due, or, (ii) with respect to
the defaults referred to in subparagraphs 13.1(d), (e), (g) and (h), such
default is not cured within thirty (30) days after any such notice (or if a
default under subparagraph 13.1(h) cannot be reasonably cured within thirty (30)
days, if Tenant does not commence to cure the default within the thirty (30) day
period or does not diligently and in good faith prosecute the cure to
completion), or, (iii) with respect to the defaults specified in subparagraphs
13.1(b), (c) and (f) such default is not cured within the respective time
periods specified in those subparagraphs. The parties agree that any notice
given by Landlord to Tenant pursuant to this Paragraph 13.2(a) shall be
sufficient notice for purposes of California Code of Civil Procedure Section
1161 and Landlord shall not be required to give any additional notice in order
to be entitled to commence an unlawful detainer proceeding. Upon termination of
this Lease and Tenant's right to possession of the Premises, Landlord shall have
the right to recover from Tenant:
(i) The worth at the time of award of the unpaid Rentals which
had been earned at the time of termination;
(ii) The worth at the time of award of the amount by which the
Rentals which would have been earned after termination until the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided;
(iii) The worth at the time of award (computed by discounting at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent) of the amount by which the Rentals for the balance of
the Lease Term after the time of award exceed the amount of such rental loss
that Tenant proves could be reasonably avoided;
(iv) Any other amounts necessary to compensate Landlord for all
detriment proximately caused by the Default by Tenant or which in the ordinary
course of events would likely result, including without limitation the
following:
(A) Expenses in retaking possession of the Premises;
25
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(B) Expenses for cleaning, repairing or restoring the
Premises;
(C) Any unamortized real estate brokerage commission paid
in connection with this Lease;
(D) Expenses for removing, transporting, and storing any of
Tenant's property left at the Premises (although Landlord shall have no
obligation to remove, transport, or store any such property);
(E) Expenses of reletting the Premises, including without
limitation, brokerage commissions and reasonable attorneys' fees;
(F) Reasonable attorneys' fees and court costs; and
(G) Costs of carrying the Premises such as repairs,
maintenance, taxes and insurance premiums, utilities and security precautions
(if any).
(v) The "worth at the time of award" of the amounts referred to
in subparagraphs (a) and (b) of this Paragraph 13.2(a) is computed by allowing
interest at an annual rate equal to the greater of: ten percent (10%); or five
percent (5%) plus the rate established by the Federal Reserve Bank of San
Francisco, as of the twenty-fifth (25th) day of the month immediately preceding
the Default by Tenant, on advances to member banks under Sections 13 and 13(a)
of the Federal Reserve Act, as now in effect or hereafter from time to time
amended, not to exceed the maximum rate allowable by law.
(b) Continuance of Lease. Upon any Default by Tenant and unless and
--------------------
until Landlord elects to terminate this Lease pursuant to Paragraph 13.2(a)
above, this Lease shall continue in effect after the Default by Tenant and
Landlord may enforce all its rights and remedies under this Lease, including
without limitation, the right to recover payment of Rentals as they become due.
Neither efforts by Landlord to mitigate damages caused by a Default by Tenant
nor the acceptance of any Rentals shall constitute a waiver by Landlord of any
of Landlord's rights or remedies, including the rights and remedies specified in
Paragraph 13.2(a) above.
14. Damage or Destruction.
---------------------
14.1. Definition of Terms. For the purposes of this Lease, the term: (a)
-------------------
"Insured Casualty" means damage to or destruction of the Premises from a cause
actually insured against, or required by this Lease to be insured against, for
which the insurance proceeds paid or made available to Landlord are sufficient
to rebuild or restore the Premises under then existing building codes to the
condition existing immediately prior to the damage or destruction; and (b)
"Uninsured Casualty" means damage to or destruction of the Premises from a cause
not actually insured against, or not required to be insured against, or from a
cause actually insured against but for which the insurance proceeds paid or made
available to Landlord are for any reason insufficient to rebuild or restore the
Premises under then existing building codes to the condition existing
immediately prior to the damage or destruction, or from a cause actually insured
against but for which the insurance proceeds are not paid or made available to
Landlord within ninety (90) days of the event of damage or destruction.
26
<PAGE>
14.2. Insured Casualty.
----------------
(a) Rebuilding Required. In the event of an Insured Casualty where
-------------------
the extent of damage or destruction is less than twenty percent (20%) of the
then full replacement cost of the Premises, Landlord shall rebuild or restore
the Premises to the condition existing immediately prior to the damage or
destruction, provided the damage or destruction was not a result of a negligent
or willful act of Tenant, and that there exist no governmental codes or
regulations that would interfere with Landlord's ability to so rebuild or
restore.
(b) Landlord's Election. In the event of an Insured Casualty where
-------------------
the extent of damage or destruction is equal to or greater than twenty percent
(20%) of the then full replacement cost of the Premises, Landlord may, at its
option and at its sole discretion, rebuild or restore the Premises to the
condition existing immediately prior to the damage or destruction, or terminate
this Lease. Landlord shall notify Tenant in writing within sixty (60) days after
Landlord receives notice of damage or destruction of the Premises of Landlord's
election to either rebuild or restore the Premises or terminate this Lease.
(c) Continuance of Lease. If Landlord is required to rebuild or
-------------- -----
restore the Premises pursuant to Paragraph 14.2(a) or if Landlord elects to
rebuild or restore the Premises pursuant to Paragraph 14.2(b), this Lease shall
remain in effect and Tenant shall have no claim against Landlord for
compensation for inconvenience or loss of business during any period of repair
or restoration.
14.3. Uninsured Casualty.
------------------
(a) Landlord's Election. In the event of an Uninsured Casualty,
-------------------
Landlord may, at its option and at its sole discretion (i) rebuild or restore
the Premises as soon as reasonably possible at Landlord's expense (unless the
damage or destruction was caused by a negligent or willful act of Tenant, in
which event Tenant shall pay all costs of rebuilding or restoring), in which
event this Lease shall continue in full force and effect or (ii) terminate this
Lease, in which latter event Landlord shall give written notice to Tenant within
sixty (60) days of the event of the damage or destruction of Landlord's
election to terminate this Lease as of the date of the damage and destruction,
and if the damage or destruction was caused by a negligent or willful act of
Tenant, or its agents, employees or contractors, Tenant shall be liable therefor
to Landlord. In the event of an Uninsured Casualty where the extent of damage or
destruction is less than $50,000.00, Landlord shall rebuild or restore the
Premises, and the cost of such rebuilding or restoration shall be a Common Area
Charge.
(b) Tenant's Ability to Continue Lease. If Landlord elects to
----------------------------------
terminate this Lease and the extent of damage or destruction is less than twenty
percent (20%) of the then full replacement cost of the Premises or the proceeds
paid or made available to Landlord are for any reason insufficient to rebuild or
restore the Premises under then existing building codes to the condition
existing immediately prior to the damage or destruction, and if there exist no
governmental codes or regulations that would interfere with Landlord's ability
to so repair or restore, then Tenant may nevertheless cause the Lease to
continue in effect by (i) notifying Landlord in writing within ten (10) days
after Landlord's notice of termination of Tenant's
27
<PAGE>
agreement to pay all costs of rebuilding or restoring not covered by insurance,
and (ii) providing Landlord with reasonable security (acceptable to Landlord in
its sole discretion) for or assurance of such payment. Tenant shall pay to
Landlord in cash no later than thirty (30) days prior to the date of
commencement of construction the reasonable estimated cost of rebuilding or
restoring. In the event Tenant fails to pay such cost to Landlord by the date
specified, Landlord may immediately terminate the Lease and recover from Tenant
all reasonable costs incurred by Landlord in preparation for construction. If
the actual cost of rebuilding or restoring exceeds the estimated cost of such
work, Tenant shall pay the difference to Landlord in cash upon notification by
Landlord of the final cost. If the cost of rebuilding or restoring is less than
the estimated cost of such work, Tenant shall be entitled to a refund of the
difference upon completion of the rebuilding or restoring and determination of
final cost.
14.4. Tenant's Election. Notwithstanding anything to the contrary contained
-----------------
in this Paragraph 14, Tenant may elect to terminate this Lease in the event the
Premises are damaged or destroyed through no fault of Tenant or its agents,
employees or contractors and, in the reasonable opinion of Landlord's architect
or construction consultants, the restoration of the Premises cannot be
substantially completed within one hundred eighty (180) days after the event of
damage or destruction. Tenant's election shall be made by written notice to
Landlord within twenty (20) days after Tenant receives from Landlord the
estimate of the time needed to complete repair or restoration of the Premises.
Time is of the essence. If Tenant does not deliver said notice within said
twenty (20) day period, Tenant may not later terminate this Lease even if
substantial completion of the rebuilding or restoration occurs subsequent to
said one hundred eighty day period, provided that Landlord is proceeding with
due diligence to rebuild or restore the Premises. If Tenant delivers said notice
within said twenty (20) day period, this Lease shall terminate as of the date of
the event of damage or destruction.
14.5. Damage or Destruction Near End of Lease Term. Notwithstanding
--------------------------------------------
anything to the contrary contained in this Paragraph 14, in the event the
Premises are materially damaged or destroyed in whole or in part from any cause
during the last twelve (12) months of the Lease Term, Landlord or Tenant may, at
its option, terminate this Lease as of the date of the event of damage or
destruction by giving written notice to the other of its election to do so
within thirty (30) days after the event of such damage or destruction. For
purposes of this Paragraph 14.5, if Tenant has been granted an option to extend
or renew the Lease Term pursuant to another provision of this Lease, then the
damage or destruction shall be deemed to have occurred during the last twelve
(12) months of the Lease Term if Tenant fails to exercise its option to extend
or renew within twenty (20) days after the event of damage or destruction.
14.6. Termination of Lease. If the Lease is terminated pursuant to this
--------------------
Paragraph 14, the unused balance of the Security Deposit shall be refunded to
Tenant. The current Rent shall be proportionately reduced during the period
following the event of damage or destruction until the date on which Tenant
surrenders the Premises, based upon the extent to which the damage or
destruction interferes with Tenant's business conducted in the Premises, as
reasonably determined by Landlord and Tenant, to the extent such loss is covered
as an insured peril by the insurance carried by Landlord pursuant to Paragraph
7.1. All other Rentals due hereunder shall continue unaffected during such
period. The proceeds of insurance carried by Tenant pursuant to Paragraph 7.2
shall be paid to Landlord and Tenant, as their interests appear.
28
<PAGE>
14.7. Abatement of Rentals. If the Premises are to be rebuilt or restored
--------------------
pursuant to this Paragraph 14, the then current Rentals shall be proportionately
reduced during the period of repair or restoration, based upon the extent to
which the making of repairs interferes with Tenant's business conducted in the
Premises, as reasonably determined by Landlord and Tenant, to the extent such
loss is covered as an insured peril by the insurance carried by Landlord
pursuant to Section 8.1.
14.8. Liability for Personal Property. Except for the negligent acts or
-------------------------------
willful misconduct Landlord or that of its agents, employees, contractors or
invitees, in no event shall Landlord have any liability for, nor shall it be
required to repair or restore, any injury or damage to any Alterations to the
Premises made by Tenant, trade fixtures, equipment, merchandise, furniture, or
any other property installed by Tenant or at the expense of Tenant. If Landlord
or Tenant do not elect to terminate this Lease pursuant to this Paragraph 14,
Tenant shall be obligated to promptly rebuild or restore the same to the
condition existing immediately prior to the damage or destruction in accordance
with the provisions of Paragraph 14.1.
14.9. Waiver of Civil Code Remedies. Landlord and Tenant acknowledge that
-----------------------------
the rights and obligations of the parties upon damage or destruction of the
Premises are as set forth herein; therefore Tenant hereby expressly waives any
rights to terminate this Lease upon damage or destruction of the Premises,
except as specifically provided by this Lease. Tenant hereby waives any rights
pursuant to the provisions of Subdivision 2 of Section 1932 and Subdivision 4 of
Section 1933 of the California Civil Code, as amended from time to time, and the
provisions of any similar law hereinafter enacted, which provisions relate to
the termination of the hiring of a thing upon its substantial damage or
destruction.
14.10. Damage or Destruction to the Building. The foregoing
-------------------------------------
notwithstanding, in the event the Building is damaged or destroyed to the extent
of more than twenty-five percent (25%) of the then replacement cost thereof,
Landlord may elect to terminate this Lease, whether or not the Premises are
injured.
15. Condemnation.
------------
15.1. Definition of Terms. For the purposes of this Lease, the term: (a)
-------------------
"Taking" means a taking of the Premises, Common Area or Building or damage
related to the exercise of the power of eminent domain and includes, without
limitation, a voluntary conveyance, in lieu of court proceedings, to any agency,
authority, public utility, person or corporate entity empowered to condemn
property; (b) "Total Taking" means the Taking of the entire Premises or so much
of the Premises, Building or Common Area as to prevent or substantially impair
the use thereof by Tenant for the uses herein specified; provided, however, that
in no event shall the Taking of less than twenty percent (20%) of the Premises
or fifty percent (50%) of the Building and Common Area be considered a Total
Taking; (c) "Partial Taking" means the Taking of only a portion of the Premises,
Building or Common Area which does not constitute a Total Taking; (d) "Date of
Taking" means the date upon which the title to the Premises, Building or Common
Area or a portion thereof, passes to and vests in the condemnor or the effective
date of any order for possession if issued prior to the date title vests in the
condemnor; and (e) "Award" means the amount of any award made, consideration
paid, or damages ordered as a result of a Taking.
29
<PAGE>
15.2. Rights. The parties agree that in the event of a Taking all rights
------
between them or in and to an Award shall be as set forth herein.
15.3. Total Taking. In the event of a Total Taking during the Lease Term:
------------
(a) the rights of Tenant under this Lease and the leasehold estate of Tenant in
and to the Premises shall cease and terminate as of the Date of Taking; (b)
Landlord shall refund to Tenant any prepaid Rent and the unused balance of the
Security Deposit; (c) Tenant shall pay Landlord any Rentals due Landlord under
the Lease, prorated as of the Date of Taking; (d) to the extent the Award is not
payable to the beneficiary or mortgagee of a deed of trust or mortgage affecting
the Premises, Tenant shall receive from the Award those portions of the Award
attributable to trade fixtures of Tenant; and (e) the remainder of the Award
shall be paid to and be the property of Landlord. Nothing contained in this
Paragraph 15.3 shall be deemed to deny Tenant its right to recover awards made
by the condemning authority for moving costs, relocation costs, and costs
attributable to goodwill and leasehold improvements installed by Tenant.
15.4. Partial Taking. In the event of a Partial Taking during the Lease
--------------
Term: (a) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the portion of the Premises taken shall cease and terminate as
of the Date of Taking; (b) from and after the Date of Taking the Rent shall be
an amount equal to the product obtained by multiplying the then current Rent by
the quotient obtained by dividing the fair market value of the Premises
immediately after the Taking by the fair market value of the Premises
immediately prior to the Taking; (c) to the extent the Award is not payable to
the beneficiary or mortgagee of a deed of trust or mortgage affecting the
Premises, Tenant shall receive from the Award the portions of the Award
attributable to trade fixtures of Tenant; and (d) the remainder of the Award
shall be paid to and be the property of Landlord. Nothing contained in this
Paragraph 15.4 shall be deemed to deny Tenant its right to recover awards made
by the condemning authority for moving costs, relocation costs, and costs
attributable to goodwill and leasehold improvements installed by Tenant.
16. Liens.
-----
16.1. Premises to Be Free of Liens. Tenant shall pay for all labor and
----------------------------
services performed for, and all materials used by or furnished to Tenant,
Tenant's agents, or any contractor employed by Tenant with respect to the
Premises. Tenant shall indemnify, defend and hold Landlord harmless from and
keep the Project free from any liens, claims, demands, encumbrances, or
judgments, including all costs, liabilities and attorneys' fees with respect
thereto, created or suffered by reason of any labor or services performed for,
or materials used by or furnished to Tenant or Tenant's agents or any contractor
employed by Tenant with respect to the Premises. Landlord shall have the right,
at all times, to post and keep posted on the Premises any notices permitted or
required by law, or which Landlord shall deem proper for the protection of
Landlord and the Premises, Building, Common Area and Land, and any other party
having an interest therein, from mechanics' and materialmen's liens, including
without limitation a notice of nonresponsibility. In the event Tenant is
required to post an improvement bond with a public agency in connection with any
work performed by Tenant on or to the Premises, Tenant shall include Landlord as
an additional obligee.
30
<PAGE>
16.2. Notice of Lien; Bond. Should any claims of lien be filed against, or
--------------------
any action be commenced affecting the Premises, Tenant's interest in the
Premises or any other portion of the Project, Tenant shall give Landlord notice
of such lien or action within five (5) business days after Tenant receives
notice of the filing of the lien or the commencement of the action. In the event
that Tenant shall not, within twenty (20) days following notice of the
imposition of any such lien, cause such lien 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, to cause
the same to be released by such means as Landlord shall deem proper, including
payment of the claim giving rise to such lien or posting of a proper bond. All
such sums paid by Landlord and all expenses incurred by Landlord in connection
therewith, including attorneys' fees and costs, shall be payable to Landlord by
Tenant as Additional Rent on demand.
17. Landlord's Right of Access to Premises. Landlord reserves and shall
--------------------------------------
have the right and Tenant and Tenant's agents shall permit Landlord and
Landlord's agents to enter the Premises at any reasonable time during normal
business hours (except in the event of an emergency) and subject to any security
measures of Tenant that are applied to visitors to the Premises on a non-
discriminatory basis for the purpose of (i) inspecting the Premises, (ii)
performing Landlord's maintenance and repair responsibilities set forth herein,
(iii) posting notices of nonresponsibility, (iv) placing upon the Premises at
any time "For Sale" signs, (v) placing on the Premises ordinary "For Lease"
signs at any time within one hundred eighty (180) days prior to Lease
Termination, or at such other times as agreed to by Landlord and Tenant, (vi)
protecting the Premises in the event of an emergency and (vii) exhibiting the
Premises to prospective purchasers or lenders at any reasonable time or to
prospective tenants within one hundred eighty (180) days prior to Lease
Termination. In the event of an emergency, Landlord shall have the right to use
any and all means which Landlord reasonably may deem proper to gain access to
the Premises. Any entry to the Premises by Landlord or Landlord's agents in
accordance with this Paragraph 17 or any other provision of this Lease shall not
under any circumstances be construed or deemed to be a forcible or unlawful
entry into, or a detainer of the Premises, or an eviction of Tenant from the
Premises or any portion thereof nor give Tenant the right to abate the Rentals
payable under this Lease. Except to the extent caused by the negligence or
willful misconduct of Landlord, its agents, employees, contractors or invitees,
Tenant hereby waives any claims for damages for any injury or inconvenience to
or interference with Tenant's business, any loss of occupancy or quiet enjoyment
of the Premises, and any other loss occasioned by Landlord's or Landlord's
agents' entry into the Premises as permitted by this Paragraph 17 or any other
provision of this Lease. Notwithstanding anything to the contrary contained in
this Lease, Landlord and Landlord's agents, except in the case of emergency,
shall provide Tenant with twenty-four (24) hours' notice prior to entry of the
Premises. Any entry by Landlord and Landlord's agents shall not impair Tenant's
operations more than reasonably necessary, and Tenant shall have the right to
have an employee accompany Landlord at all times that Landlord is present on the
Premises.
18. Landlord's Right to Perform Tenant's Covenants. Except as otherwise
----------------------------------------------
expressly provided herein, if Tenant shall at any time fail to make any payment
or perform any other act required to be made or performed by Tenant under this
Lease, Landlord may upon ten (10) days written notice to Tenant, but shall not
be obligated to and without waiving or releasing Tenant from any obligation
under this Lease, make such payment or perform such other act to the extent
31
<PAGE>
that Landlord may deem desirable, and in connection therewith, pay expenses and
employ counsel. All reasonable sums so paid by Landlord and all penalties,
interest and reasonable costs in connection therewith shall be due and payable
by Tenant as Additional Rent upon demand.
19. Lender Requirements.
-------------------
19.1. Subordination. This Lease, at Landlord's option, shall be subject
-------------
and subordinate to the lien of any mortgages or deeds of trust (including all
advances thereunder, renewals, replacements, modifications, supplements,
consolidations, and extensions thereof) in any amount(s) whatsoever now or
hereafter placed on or against or affecting the Premises, Building or Land, or
Landlord's interest or estate therein without the necessity of the execution and
delivery of any further instruments on the part of Tenant to effectuate such
subordination. If any mortgagee or beneficiary shall elect to have this Lease
prior to the lien of its mortgage or deed of trust, and shall give written
notice thereof to Tenant, this Lease shall be deemed prior to such mortgage or
deed of trust, whether this Lease is dated prior or subsequent to the date of
such mortgage or deed of trust or the date of the recording thereof.
19.2. Subordination Agreements. Tenant shall execute and deliver, without
------------------------
charge therefor, such further instruments evidencing subordination of this Lease
to the lien of any mortgages or deeds of trust affecting the Premises, Building
or Land as may be reasonably required by Landlord within fifteen (15) days
following Landlord's request therefor; provided that such mortgagee or
beneficiary under such mortgage or deed of trust agrees in writing that this
Lease shall not be terminated or modified in any material way in the event of
any foreclosure if. Tenant is not in default under this Lease. Failure of Tenant
to execute such instruments evidencing subordination of this Lease shall
constitute a Default by Tenant hereunder.
19.3. Approval by Lenders. Tenant recognizes that the provisions of this
-------------------
Lease may be subject to the approval of any financial institution that may make
a loan secured by a new or subsequent deed of trust or mortgage affecting the
Premises, Building or Land. If the financial institution should require, as a
condition to such financing, any modifications of this Lease in order to protect
its security interest in the Premises or a reasonable modification of the
provisions relating to damage to and/or condemnation of the Premises, Tenant
agrees to negotiate in good faith with Landlord and such financial institution
to agree on mutually acceptable modifications and execute the appropriate
amendments; provided, however, that no modification shall substantially change
the size, location or dimension of the Premises, or increase the Rentals payable
by Tenant hereunder, or any of Tenant's other obligations hereunder.
19.4. Attornment. In the event of foreclosure or the exercise of the power
----------
of sale under any mortgage or deed of trust made by Landlord and covering the
Premises, Building or Land, Tenant shall attorn to the purchaser upon any such
foreclosure or sale and recognize such purchaser as the Landlord under this
Lease, provided such purchaser expressly agrees in writing to be bound by the
terms of the Lease, including, but not limited to, the quiet enjoyment
provisions of Paragraph 39.
32
<PAGE>
19.5. Estoppel Certificates and Annual Reports.
----------------------------------------
(a) Delivery by Tenant. Tenant shall, within twenty (20) days
------------------
following request by Landlord therefor and without charge, execute and deliver
to Landlord any and all documents, estoppel certificates, and current annual
reports of Tenant reasonably requested by Landlord in connection with the sale
or financing of the Premises, Building or Land, or requested by any lender
making a loan affecting the Premises, Building or Land. Landlord may require
that Tenant in any estoppel certificate shall (i) certify that this Lease is
unmodified and in full force and effect (or, if modified, state the nature of
such modification and certify that this Lease, as so modified, is in full force
and effect) and has not been assigned, (ii) certify the date to which Rentals
are paid in advance, if any, (iii) acknowledge that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specify
such defaults if claimed, (iv) evidence the status of this Lease as may be
required either by a lender making a loan to Landlord to be secured by a deed of
trust or mortgage covering the Premises, Building or Land or a purchaser of the
Premises, Building or Land from Landlord, (v) certify the date Tenant entered
into occupancy of the Premises and that Tenant is conducting business at the
Premises, (vi) certify that all improvements to be constructed on the Premises
by Landlord have been substantially completed except for punch list items which
do not prevent Tenant from using the Premises for its intended use (or if
Landlord has not substantially completed all improvements to be constructed on
the Premises by Landlord, specify such improvements not so completed), and (vii)
certify such other matters relating to the Lease and/or Premises as may be
reasonably requested by a lender making a loan to Landlord or a purchaser of the
Premises, Building or Land from Landlord. Any such estoppel certificate may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises, Building or Land.
(b) Nondelivery by Tenant. Tenant's failure to deliver an estoppel
---------------------
certificate as required pursuant to Paragraph 19.5(a) above shall be conclusive
upon Tenant that (i) this Lease is in full force and effect, without
modification except as may be represented by Landlord and has not been assigned,
(ii) there are now no uncured defaults in Landlord's performance, (iii) no
Rentals have been paid in advance except those that are set forth in this Lease,
(iv) no beneficiary of any security instrument encumbering the Premises,
Building or Land shall be liable for the Security Deposit in the event of a
foreclosure or sale under such security instrument, unless the Security Deposit
actually has been received by the beneficiary from Landlord, (v) the
improvements to be constructed on the Premises by Landlord have been
substantially completed except for punch list items which do not prevent Tenant
from using the Premises for its intended use, and (vi) Tenant has entered into
occupancy of the Premises on such date as may be represented by Landlord and is
open and conducting business at the Premises. Tenant's failure to deliver any
annual reports, estoppel certificates or other documents as required pursuant to
Paragraph 19.5(a) above shall be a Default by Tenant.
33
<PAGE>
(c) Delivery by Landlord. Landlord shall, within twenty (20) days
--------------------
following request by Tenant therefor and without charge, execute and deliver to
Tenant an estoppel certificate reasonably requested by Tenant. Tenant may
require that Landlord in any estoppel certificate shall (i) certify that this
Lease is unmodified and in full force and effect (or, if modified, state the
nature of such modification and certify that this Lease, as so modified, is in
full force and effect) and has not been assigned, (ii) certify the date to which
Rentals are paid in advance, if any, (iii) acknowledge that there are not, to
Landlord's knowledge, any uncured defaults on the part of Tenant hereunder, or
specify such defaults if claimed, (iv) evidence the status of this Lease (v)
certify the date Tenant entered into occupancy of the Premises and that Tenant
is conducting business at the Premises, and (vi) certify that all improvements
to be constructed on the Premises by Landlord have been substantially completed
except for punch list items which do not prevent Tenant from using the Premises
for its intended use (or if Landlord has not substantially completed all
improvements to be constructed on the Premises by Landlord, specify such
improvements not so completed.
20. Holding Over. This Lease shall terminate without further notice at the
------------
expiration of the Lease Term. Any holding over by Tenant after Lease Termination
shall not constitute a renewal or extension of the Lease Term, nor give Tenant
any rights in or to the Premises except as expressly provided in this Lease. Any
holding over after Lease Termination with the consent of Landlord shall be
construed to be a tenancy from month to month, at one hundred fifty percent
(150%) of the monthly Rent for the month preceding Lease Termination in addition
to all Additional Rent payable hereunder, and shall otherwise be on the terms
and conditions herein specified insofar as applicable. If Tenant remains in
possession of the Premises after Lease Termination without Landlord's consent,
Tenant shall indemnify, defend and hold Landlord harmless from and against any
loss, damage, expense, claim or liability resulting from Tenant's failure to
surrender the Premises, including without limitation, any claims made by any
succeeding tenant based on delay in the availability of the Premises.
21. Notices. Any notice required or desired to be given under this Lease
-------
shall be in writing, and all notices shall be given by personal delivery or
mailing. Any notice given pursuant to this Paragraph 21 shall be deemed to have
been given when personally delivered, or if mailed, when five (5) business days
have elapsed from the time when such notice was deposited in the United States
mail, certified or registered mail and postage prepaid, addressed to the party
at the last address given for purposes of notice pursuant to the provisions of
this Paragraph 21. At the date of execution of this Lease, the addresses of
Landlord and Tenant are set forth in Paragraph 1.12 above.
22. Attorneys' Fees. In the event either party hereto shall bring any
---------------
action or legal proceeding for damages for an alleged breach of any provision of
this Lease, to recover Rentals, to enforce an indemnity, defense or hold
harmless obligation, to terminate the tenancy of the Premises, or to enforce,
protect, interpret, or establish any term, condition, or covenant of this Lease
or right or remedy of either party, the prevailing party shall be entitled to
recover, as apart of such action or proceeding, reasonable attorneys' fees and
court costs, including reasonable attorneys' fees and costs for appeal, as may
be fixed by the court or jury.
34
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23. Assignment, Subletting and Hypothecation.
----------------------------------------
23.1. In General. Tenant shall not voluntarily sell, assign or transfer all
----------
or any part of Tenant's interest in this Lease or in the Premises or any part
thereof, sublease all or any part of the Premises, or permit all or any part of
the Premises to be used by any person or entity other than Tenant or Tenant's
employees, except as specifically provided in this Paragraph 23.
23.2. Voluntary Assignment and Subletting.
-----------------------------------
(a) Notice to Landlord. Tenant shall, by written notice, advise
------------------
Landlord of Tenant's desire on a stated date (which date shall not be less than
fifteen (15) days nor more than ninety (90) days after the date of Tenant's
notice) to assign this Lease or to sublet all or any part of the Premises for
any part of the Lease Term. Said notice shall constitute an offer to terminate
the Lease pursuant to Paragraph 23.2(b) if the notice applies to a proposed
assignment of the Lease or Tenant's interest herein. Tenant's notice shall state
the name, legal composition and address of the proposed assignee or subtenant,
and Tenant shall provide the following information to Landlord with said notice:
a true and complete copy of the proposed assignment agreement or sublease; a
financial statement or annual report of the proposed assignee or subtenant
prepared in accordance with generally accepted accounting principles within one
year prior to the proposed effective date of the assignment or sublease; the
nature of the proposed assignee's or subtenant's business to be carried on in
the Premises; the payments to be made or other consideration to be given on
account of the assignment or sublease; a current financial statement of Tenant;
and such other pertinent information as may be requested by Landlord, all in
sufficient detail to enable Landlord to evaluate the proposed assignment or
sublease and the prospective assignee or subtenant. Tenant's notice shall not be
deemed to have been served or given until such time as Tenant has provided
Landlord with all information reasonably requested by Landlord pursuant to this
Paragraph 23.2. Tenant shall immediately notify Landlord of any modification to
the proposed terms of such assignment or sublease. Tenant may withdraw its
notice at any time prior to or after exercise by Landlord of Landlord's right to
terminate as described in Paragraph 23.2(b).
(b) Offer to Terminate. If Tenant notifies Landlord of its desire to
------------------
assign this Lease or Tenant's interest herein, Tenant's notice shall constitute
an offer to terminate this Lease and Landlord shall have the right, to be
exercised by giving written notice to Tenant within fifteen (15) days after
receipt of Tenant's notice, to terminate the Lease. If Landlord elects to
terminate, then within ten (10) days after receipt of Landlord's election,
Tenant shall have the right to rescind its request to assign, and this Lease
shall continue in full force and effect. If Tenant does not rescind its request,
this Lease shall terminate on the date stated in the notice given by Tenant
pursuant to Paragraph 23.2(a), subject to any obligations which have accrued and
are unfulfilled as of such date.
(c) Landlord's Consent. If Landlord does not exercise its right to
------------------
terminate pursuant to Paragraph 23.2(b) within fifteen (15) days after receipt
of Tenant's notice or if Tenant proposes a sublease, Landlord shall not
unreasonably withhold or delay its consent to the proposed assignment or
subletting, on the terms and conditions specified in said notice. Fifty percent
(50%) of any and all rent paid by an assignee or subtenant in excess of the
Rentals to be
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paid under this Lease (prorated in the event of a sublease of less than the
entire Premises), after Tenant's deduction therefrom of brokerage commissions
incurred by Tenant in connection with such assignment or subletting and the cost
of leasehold improvements or alterations constructed or installed by Tenant for
the sublessee, shall be paid directly to Landlord, as Additional Rent, at the
time and place specified in this Lease. For the purposes of this Paragraph 23,
the term "rent" shall include any consideration of any kind received, or to be
received, by Tenant from an assignee or subtenant, if such sums are related to
Tenant's interest in this Lease or in the Premises, including, but not limited
to key money, bonus money, and payments (in excess of the fair market value
thereof) for Tenant's assets, fixtures, trade fixtures, inventory, accounts,
goodwill, equipment, furniture, general intangibles, and any capital stock or
other equity ownership interest of Tenant. Any assignment or subletting without
Landlord's consent shall be voidable at Landlord's option, and shall constitute
a Default by Tenant. Landlord's consent to any one assignment or sublease shall
not constitute a waiver of the provisions of this Paragraph 23 as to any
subsequent assignment or sublease nor a consent to any subsequent assignment or
sublease; further, Landlord's consent to an assignment or sublease shall not
release Tenant from Tenant's obligations under this Lease, and Tenant shall
remain jointly and severally liable with the assignee or subtenant.
(d) Assumption of Obligations. In the event Landlord consents to any
-------------------------
assignment, such consent shall be conditioned upon the assignee expressly
assuming and agreeing to be bound by each of Tenant's covenants, agreements and
obligations contained in this Lease, pursuant to a written assignment and
assumption agreement in a form reasonably approved by Landlord. Landlord's
consent to any assignment or sublease shall be evidenced by Landlord's signature
on said assignment and assumption agreement or on said sublease or by a separate
written consent. In the event Landlord consents to a proposed assignment or
sublease, such assignment or sublease shall be valid and the assignee or
subtenant shall have the right to take possession of the Premises only if an
executed original of the assignment or sublease is delivered to Landlord, and
such document contains the same terms and conditions as stated in Tenant's
notice to Landlord given pursuant to Paragraph 23.2(a) above, except for any
such modifications to which Landlord has consented in writing.
23.3. Collection of Rent. Tenant hereby irrevocably gives to and confers
------------------
upon Landlord, as security for Tenant's obligations under this Lease, the right,
power and authority to collect all rents from any assignee or subtenant of all
or any part of the Premises as permitted by this Paragraph 23, or otherwise, and
Landlord, as assignee of Tenant, or a receiver for Tenant appointed on
Landlord's application, may collect such rent and apply it toward Tenant's
obligations under this Lease; provided, however, that until the occurrence of
any Default by Tenant, subject to applicable cure periods, or except as provided
by the provisions of Paragraph 23.2(c) above, Tenant shall have the right to
collect such rent. Upon the occurrence of any Default by Tenant, Landlord may at
any time without notice in Landlord's own name sue for or otherwise collect such
rent, including rent past due and unpaid, and apply the same, less costs and
expenses of operation and collection, including reasonable attorneys' fees,
toward Tenant's obligations under this Lease. Landlord's collection of such
rents shall not constitute an acceptance by Landlord of attornment by such
subtenants. In the event of a Default by Tenant, Landlord shall have all rights
provided by this Lease and by law, and Landlord may, upon re-entry
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and taking possession of the Premises, eject all parties in possession or eject
some and not others, or eject none, as Landlord shall determine in Landlord's
sole discretion.
23.4. Corporations and Partnerships. If Tenant is a partnership, any
-----------------------------
withdrawal or substitution (whether voluntary, involuntary, or by operation of
law and whether occurring at one time or over a period of time) of any
partner(s) owning fifty percent (50%) or more (cumulatively) of the partnership,
any assignment(s) of fifty percent (50%) or more (cumulatively) of any interest
in the capital or profits of the partnership, or the dissolution of the
partnership shall be deemed an assignment of this Lease requiring the prior
written consent of Landlord. If Tenant is a corporation, any dissolution, or
other reorganization of Tenant, any sale or transfer (or cumulative sales or
transfers) of the capital stock of Tenant in excess of fifty percent (50%), or
any sale (or cumulative sales) of all of the assets of Tenant shall be deemed an
assignment of this Lease requiring the prior written consent of Landlord;
provided however that Tenant may assign this Lease without first obtaining
Lessor's written consent, but with written notice thereof, to any corporation
resulting from the merger or consolidation with Tenant, provided that the
successor entity has a net worth equal to or greater than that of Tenant prior
to any reorganization. Any such withdrawal or substitution of partners or
assignment of any interest in or dissolution of a partnership tenant, and any
such sale of stock or assets of a corporate tenant without the prior written
consent of Landlord shall be a Default by Tenant hereunder. The foregoing
notwithstanding, the sale or transfer of any or all of the capital stock of a
corporation, the capital stock of which is now or hereafter becomes publicly
traded, shall not be deemed an assignment of this Lease.
Notwithstanding anything to the contrary contained in this Lease,
Tenant, without Landlord's prior written consent (but with notice to Landlord),
may sublet the Premises or assign this Lease to (i) a subsidiary, affiliate,
division or corporation controlled by or under common control with Tenant; (ii).
a successor corporation related to Tenant by merger, consolidation, non-
bankruptcy reorganization or government action; or (iii) a purchaser of
substantially all of Tenant's assets located at the Premises, provided that in
either of the latter two instances the successor or purchaser has a net worth
not less than the net worth of Tenant at the time that Tenant executes this
Lease (each, a "Permitted Assignee"). Notwithstanding that a Transfer is made to
a Permitted Assignee, Tenant shall not be released from any of its obligations
under this Lease and such Permitted Assignee shall be required to assume all of
Tenant's obligations hereunder as a condition to such transfer being permitted
without Landlord's prior written consent.
23.5. Reasonable Provisions. Tenant expressly agrees that the provisions of
---------------------
this Paragraph 23 are not unreasonable standards or conditions for purposes of
Section 1951.4(b)(2) of the California Civil Code, as amended from time to time,
under bankruptcy laws, or for any other purpose.
23.6. Attorneys' Fees. Tenant shall pay, as Additional Rent, not to exceed
---------------
$5,000, Landlord's reasonable attorneys' fees for reviewing, investigating,
processing and/or documenting any requested assignment or sublease, whether or
not Landlord's consent is granted.
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23.7. Involuntary Transfer. No interest of Tenant in this Lease shall be
--------------------
assignable involuntarily or by operation of law, including, without limitation,
the transfer of this Lease by testacy or intestacy. Each of the following acts
shall be considered an involuntary assignment:
(a) If Tenant is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors, or a proceeding under any bankruptcy
law is instituted in which Tenant is the bankrupt; or, if Tenant is a
partnership or consists of more than one person or entity, if any partner of the
partnership or other person or entity is or becomes bankrupt or insolvent, or
makes an assignment for the benefit of creditors;
(b) Levy of a writ of attachment or execution on this Lease;
(c) Appointment of a receiver with authority to take possession of
the Premises in any proceeding or action to which Tenant is a party; or
(d) Foreclosure of any lien affecting Tenant's interest in the
Premises, which lien was not consented to by Landlord pursuant to Paragraph 23.9
An involuntary assignment shall constitute a Default by Tenant and Landlord
shall have the right to terminate this Lease, in which case this Lease shall not
be treated as an asset of Tenant. In the event the Lease is not terminated, the
provisions of Paragraph 23.2(c) regarding rents paid by an assignee or subtenant
shall apply. If a writ of attachment or execution is levied on this Lease, or if
any involuntary proceeding in bankruptcy is brought against Tenant or a receiver
is appointed, Tenant shall have sixty (60) days in which to cause the attachment
or execution to be removed, the involuntary proceeding dismissed, or the
receiver removed.
23.8. Hypothecation. Tenant shall not hypothecate, mortgage or encumber
-------------
Tenant's interest in this Lease or in the Premises or otherwise use this Lease
as a security device in any manner without the consent of Landlord, which
consent Landlord may withhold in its sole and absolute discretion. Consent by
Landlord to any such hypothecation or creation of a lien or mortgage shall not
constitute consent to an assignment or other transfer of this Lease following
foreclosure of any permitted lien or mortgage.
23.9. Binding on Successors. The provisions of this Paragraph 23 expressly
---------------------
apply to all heirs, successors, sublessees, assignees and transferees of Tenant.
24. Successors. Subject to the provisions of Paragraph 23 above and
----------
Paragraph 29.2(a) below, the covenants, conditions, and agreements contained in
this Lease shall be binding on the parties hereto and on their respective heirs,
successors and assigns.
25. Landlord Default; Mortgagee Protection. Landlord shall not be in
--------------------------------------
default under this Lease unless Tenant shall have given Landlord written notice
of the breach and, within thirty (30) days after notice, Landlord has not cured
the breach or, if the breach is such that it cannot reasonably be cured under
the circumstances within thirty (30) days, has not commenced diligently to
prosecute the cure to completion. Any money judgment obtained by Tenant based
upon Landlord's breach of this Lease shall be satisfied only out of the proceeds
of the sale or disposition of Landlord's interest in the Project (whether by
Landlord or by execution of
38
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judgment). In the event of any default on the part of Landlord under this Lease,
Tenant shall give notice by registered or certified mail to any beneficiary of a
deed of trust or any mortgagee of a mortgage affecting the Premises, Building or
Land whose address shall have been furnished to Tenant, and shall offer such
beneficiary or mortgagee a reasonable opportunity to cure the default, including
time to obtain possession of the Premises by power of sale or judicial
foreclosure, if such should prove necessary to effect a cure.
26. Exhibits. All exhibits attached to this Lease shall be deemed to be
--------
incorporated herein by the individual reference to each such exhibit, and all
such exhibits shall be deemed to be a part of this Lease as though set forth in
full in the body of the Lease.
27. Surrender of Lease Not Merger. The voluntary or other surrender of
-----------------------------
this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger
and shall, at the option of Landlord, terminate all or any existing subleases or
subtenants, or may, at the option of Landlord, operate as an assignment to
Landlord of any or all such subleases or subtenants.
28. Waiver. The waiver by Landlord of any breach of any term, covenant or
------
condition. herein contained (or the acceptance by Landlord of any performance by
Tenant after the time the same shall become due) shall not be deemed to be a
waiver of such term, covenant or condition or any subsequent breach thereof or
of any other term, covenant or condition herein contained, unless otherwise
expressly agreed to by Landlord in writing. The acceptance by Landlord of any
sum less than that which is required to be paid by Tenant shall be deemed to
have been received only on account of the obligation for which it is paid (or
for which it is allocated by Landlord, in Landlord's reasonable discretion, if
Tenant does not designate the obligation as to which the payment should be
credited), and shall not be deemed an accord and satisfaction notwithstanding
any provisions to the contrary written on any check or contained in any letter
of transmittal. The acceptance by Landlord of any sum tendered by a purported
assignee or transferee of Tenant shall not be deemed a consent by Landlord to
any assignment or transfer of Tenant's interest herein. No custom or practice
which may arise between the parties hereto in the administration of the terms of
this Lease shall be construed as a waiver or diminution of Landlord's right to
demand performance by Tenant in strict accordance with the terms of this Lease.
29. General.
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29.1. Captions and Headings. The captions and paragraph headings used in
---------------------
this Lease are for convenience of reference only. They shall not be construed to
limit or extend the meaning of any part of this Lease, and shall not be deemed
relevant in resolving any question of interpretation or construction of any
paragraph of this Lease.
29.2. Definitions.
-----------
(a) Landlord. The term Landlord as used in this Lease, so far as the
--------
covenants or obligations on the part of Landlord are concerned, shall be limited
to mean and include only the owner at the time in question of the fee title to
the Premises. In the event of any transfer(s) of such interest, the Landlord
herein named (and in case of any subsequent transfers or conveyances, the then
grantor) shall have no further liability under this Lease to Tenant except as to
matters of
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liability which have accrued and are unsatisfied as of the date of such
transfer, it being intended that the covenants and obligations contained in this
Lease on the part of Landlord shall be binding on Landlord and its successors
and assigns only during and in respect of their respective periods of ownership
of the fee; provided that any funds in the possession of Landlord or the then
grantor and as to which Tenant has an interest, less any deductions permitted by
law or this Lease, shall be turned over to the grantee. The covenants and
obligations contained in this Lease on the part of Landlord shall, subject to
the provisions of this Paragraph 29.2(a), be binding upon each Landlord and such
Landlord's heirs, personal representatives, successors and assigns only during
its respective period of ownership. Except as provided in this Paragraph
29.2(a), this Lease shall not be affected by any transfer of Landlord's interest
in the Premises, and Tenant shall attorn to any transferee of Landlord provided
that all of Landlord's obligations hereunder are assumed in writing by such
transferee.
(b) Agents. For purposes of this Lease and without otherwise
------
affecting the definition of the word "agent" or the meaning of an "agency," the
term "agents" shall be deemed to include the agents, employees, officers,
directors, servants, invitees, contractors, successors, representatives,
subcontractors, guests, customers, suppliers, partners, affiliated companies,
and any other person or entity related in any way to the respective party,
Tenant or Landlord.
(c) Interpretation of Terms. The words "Landlord" and "Tenant" as
-----------------------
used herein shall include the plural as well as the singular. Words in the
neuter gender include the masculine and feminine and words in the masculine or
feminine gender include the neuter.
29.3. Copies. Any executed copy of this Lease shall be deemed an original
------
for all purposes. This Lease may be executed in counterparts, each of which
shall be deemed an original and which together shall constitute one instrument.
29.4. Time of Essence. Time is of the essence as to each and every
---------------
provision in this Lease requiring performance within a specified time.
29.5. Severability. In case any one or more of the provisions contained
------------
herein shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had not been contained herein.
However, if Tenant's obligation to pay the Rentals is determined to be invalid
or unenforceable, this Lease at the option of Landlord shall terminate.
29.6. Governing Law. This Lease shall be construed and enforced in
-------------
accordance with the laws of the State of California.
29.7. Joint and Several Liability. If Tenant is more than one person or
---------------------------
entity, each such person or entity shall be jointly and severally liable for the
obligations of Tenant hereunder. If Tenant is a husband and wife, the
obligations hereunder shall extend to their sole and separate property as well
as community property.
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29.8. Construction of Lease Provisions. Although printed provisions of
--------------------------------
this Lease were prepared by Landlord, this Lease shall not be construed either
for or against Tenant or Landlord, but shall be construed in accordance with the
general tenor of the language to reach a fair and equitable result.
29.9. Tenant's Annual Reports. Tenant hereby warrants that annual reports
-----------------------
delivered by Tenant to Landlord are true, correct, and complete, and prepared in
accordance with generally accepted accounting principles. Tenant acknowledges
and agrees that Landlord is relying on such annual reports in accepting this
Lease, and that a breach of Tenant's warranty as to such annual reports shall
constitute a Default by Tenant. Notwithstanding anything to the contrary
contained in this Lease, Landlord shall keep confidential all such financial
information received from Tenant, except that Landlord may provide such
financial information to Landlord's lenders or prospective lenders with respect
to the Premises.
29.10. Withholding of Landlord's Consent. Notwithstanding any other
---------------------------------
provision of this Lease where Tenant is required to obtain the consent (whether
written or oral) of Landlord to do any act, or to refrain from the performance
of any act, Tenant agrees that if Tenant is in default with respect to any term,
condition, covenant or provision of this Lease and all applicable cure periods
have passed, then Landlord shall be deemed to have acted reasonably in
withholding its consent if said consent is, in fact, withheld.
30. Signs. Tenant may install a sign at the entrance of the Premises, at
-----
Tenant's sole cost, subject to Landlord's prior approval of such sign and its
exact location. Landlord shall install Building standard signage identifying
Tenant's presence in the Building in the directory in the lobby of the Building.
Tenant shall not place or permit to be placed any sign or decoration on the Land
or the exterior of the Building or that would be visible from the exterior of
the Building, without the prior written consent of Landlord, which consent may
be withheld in Landlord's sole discretion. Tenant may place "for lease" signs in
connection with efforts to assign or sublease the Premises, subject to the prior
written consent of Landlord, which consent shall not be unreasonably withheld;
provided that all such signs shall be removed not later than the one hundred
eightieth (180th) day prior to Lease Termination. In no event shall any such
sign revolve, rotate, move or create the illusion of revolving, rotating or
moving or be internally illuminated and there shall be no exterior spotlighting
or other illumination on any such sign. Tenant, upon written notice by Landlord,
shall immediately remove any of Tenant's signs or decorations that are visible
from the exterior of the Building or Premises or that Tenant has placed or
permitted to be placed on the Land or the exterior of the Building without the
prior written consent of Landlord, or which remain beyond the one hundred
eightieth (180th) day prior to Lease Termination. If Tenant fails to so remove
such sign or decoration within five (5) days after Landlord's written notice,
Landlord may enter the Premises and remove such sign or decoration and Tenant
shall pay Landlord, as Additional Rent upon demand, the cost of such removal.
All signs placed on the Premises, Building or Land by Tenant shall comply with
all recorded documents affecting the Premises, including but not limited to any
Declaration of Conditions, Covenants and Restrictions; and applicable statutes,
ordinances, rules and regulations of governmental agencies having jurisdiction
thereof At Landlord's option, Tenant shall at Lease Termination remove any sign
which it has placed on the Premises, Land or the Building, and shall, at its
sole cost, repair any damage caused by the installation or removal of such sign.
41
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31. Landlord as Party Defendant. If, by reason of any act or omission by
---------------------------
Tenant or Tenant's agents, employees, or contractors, Landlord is made a party
defendant concerning this Lease, or any portion of the Project, Tenant shall
indemnify Landlord against all liability actually incurred (or threatened
against) Landlord as a party defendant, including all damages, costs and
reasonable attorneys' fees.
32. Landlord Not a Trustee. Landlord shall not be deemed to be a trustee
----------------------
of any funds paid to Landlord by Tenant (or held by Landlord for Tenant)
pursuant to this Lease, including without limitation the Security Deposit.
Landlord shall not be required to keep any such funds separate from Landlord's
general funds or segregated from any funds paid to Landlord by (or held by
Landlord for) other tenants of the Building. Any funds held by Landlord pursuant
to this Lease shall not bear interest.
33. Interest. Any payment due from Tenant to Landlord, except for Rent
--------
received by Landlord within thirty (30) days after the same is due, shall bear
interest from the date due until paid, at an annual rate equal to the greater
of: ten percent (10%); or five percent (5%) plus the rate established by the
Federal Reserve Bank of San Francisco, as of the twenty-fifth (25th) day of the
month immediately preceding the due date, on advances to member banks under
Sections 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter
from time to time amended. In addition, Tenant shall pay all costs and
reasonable attorneys' fees incurred by Landlord in the collection of such
amounts.
34. Surrender of Premises. On the last day of the Lease Term or upon the
---------------------
sooner termination of this Lease, Tenant shall, to the reasonable satisfaction
of Landlord, surrender the Premises to Landlord in good condition (reasonable
wear and tear, acts of God, casualty, condemnation, Hazardous Materials other
than those stored, used or disposed of by Tenant, its agents, employees,
contractors or invitees, and alterations concerning which Landlord has not
reserved the right to require removal excepted) with all originally painted
interior walls washed, or re-painted if marked or damaged, and other interior
walls cleaned and repaired or replaced, all carpets cleaned and in good
condition, the air conditioning, ventilating and heating equipment inspected,
serviced and repaired by a reputable and licensed service firm (unless Landlord
has elected to maintain heating and air conditioning systems pursuant to
Paragraph 9.1 above), and all floors cleaned and waxed. Tenant shall remove all
of Tenant's personal property and trade fixtures from the Premises, and all
property not so removed shall be deemed abandoned by Tenant. Furthermore, Tenant
shall immediately repair all damage to the Project caused by any such removal.
If the Premises are not so surrendered at Lease Termination, Tenant shall
indemnify, defend and hold Landlord harmless from and against any loss, damage,
expense, claim or liability resulting from delay by Tenant in so surrendering
the Premises including, without limitation, any claims made by any succeeding
tenant or losses to Landlord due to lost opportunities to lease to succeeding
tenants.
35. Labor Disputes. In the event Tenant shall in any manner be involved in
--------------
or be the object of a labor dispute which subjects the Premises or any part of
the Project to any picketing, work stoppage or other concerted activity which in
the reasonable opinion of Landlord is detrimental to the operation of the
Project or its tenants, Landlord shall have the right to require Tenant, at
Tenant's own expense and within a reasonable period of time, to use Tenant's
best
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efforts to either resolve such labor dispute or terminate or control any such
picketing, work stoppage or other concerted activity to the extent necessary to
eliminate any interference with the operation of the Project. To the extent such
labor dispute interferes with the performance of Landlord's duties hereunder,
Landlord shall be excused from the performance of such duties. Failure by Tenant
to use its best efforts to so resolve such dispute or terminate or control such
picketing, work stoppage or other concerted activity within a reasonable period
of time shall constitute a Default by Tenant hereunder. Nothing contained in
this Paragraph 35 shall be construed as placing Landlord in an employer/employee
relationship with any of Tenant's employees or with any other employees who may
be involved in such labor dispute.
36. No Partnership or Joint Venture. Nothing in this Lease shall be
-------------------------------
construed as creating a partnership or joint venture between Landlord, Tenant,
or any other party, or cause Landlord to be responsible for the debts or
obligations of Tenant or any other party.
37. Entire Agreement. Any agreements, warranties, or representations not
----------------
expressly contained herein shall in no way bind either Landlord or Tenant, and
Landlord and Tenant expressly waive all claims for damages by reason of any
statement, representation, warranty, promise or agreement, if any, not contained
in this Lease. This Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, agreements and understandings, whether
written or oral, between Landlord and its agents and Tenant and its agents with
respect to the Project or this Lease. This Lease constitutes the entire
agreement between the parties hereto and no addition to, or modification of, any
term or provision of this Lease shall be effective until and unless set forth in
a written instrument signed by both Landlord and Tenant.
38. Submission of Lease. Submission of this instrument for Tenant's
-------------------
examination or execution does not constitute a reservation of space nor an
option to lease. This instrument shall not be effective until executed by both
Landlord and Tenant (and approved by Landlord's lender holding a security
interest in the Building). Execution of this Lease by Tenant shall constitute an
offer by Tenant to lease the Premises, which offer shall be deemed accepted by
Landlord when this Lease is executed by Landlord and delivered to Tenant.
39. Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon
---------------
Tenant paying Rentals and performing its covenants and conditions under the
Lease, Tenant shall and may peaceably and quietly have, hold and enjoy the
Premises for the Lease Term, subject, however, to the terms of this Lease and of
any mortgages or deeds of trust affecting the Premises, and the rights reserved
by Landlord hereunder. Any purchaser upon any foreclosure or exercise of the
power of sale under any mortgage or deed of trust made by Landlord and covering
the Premises, Building or Land to whom Tenant attorns pursuant to Paragraph 19.4
above shall be bound by the terms of this Paragraph 39.
40. Authority. If Tenant is a corporation (or partnership), Landlord and
---------
Tenant each warrant that each individual executing this Lease on behalf of said
corporation (or partnership) represents and warrants that he is duly authorized
to execute and deliver this Lease on behalf of said corporation in accordance
with a duly adopted resolution of the Board of Directors of said corporation or
in accordance with the by-laws of said corporation (or on behalf of said
partnership in accordance with the partnership agreement of such partnership),
and that this Lease
43
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is binding upon said corporation (or partnership) in accordance with its terms.
If Tenant is a corporation, and this Lease is not executed by two corporate
officers, Tenant shall, upon execution of this Lease, deliver to Landlord
evidence of the authority of the individual executing this Lease on behalf of
Tenant to execute this Lease on behalf of Tenant. In the event Tenant should
fail to deliver such evidence to Landlord upon execution of this Lease, Landlord
shall not be deemed to have waived its right to require delivery of such
evidence, and at any time during the Lease Term Landlord may request Tenant to
deliver the same, and Tenant agrees it shall thereafter promptly deliver such
evidence to Landlord. If Tenant is a corporation, Tenant warrants that:
(a) Tenant is a valid and existing corporation;
(b) Tenant is qualified to do business in California;
(c) All fees and all franchise and corporate taxes are paid to date,
and will be paid when due;
(d) All required forms and reports will be filed when due; and
(e) The signers of this Lease are properly authorized to execute this
Lease.
41. Brokers. Landlord hereby represents and warrants to Tenant that it
-------
has retained no broker or finder other than Colliers Parrish International, Inc.
("Colliers") in connection with the negotiation of this Lease and/or the
consummation of the transaction contemplated hereby. Tenant hereby represents
and warrants to Landlord that it has worked with no broker or finder in
connection with the negotiation with this Lease and/or the consummation of the
transaction contemplated hereby. Landlord agrees to pay Colliers a brokerage
commission in connection with this Lease pursuant to a terms of a separate
written agreement between Landlord and Colliers. By virtue of this Lease alone,
neither Landlord nor Tenant have agreed to pay any brokerage commissions.
Landlord and Tenant do each hereby agree to indemnify, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any broker, finder or other similar party by reason of any dealings
or actions of the indemnifying party, including any costs, expenses and/or
attorneys' fees reasonably incurred with respect thereto. The obligation to
indemnify, defend and hold harmless as set forth in the immediately preceding
sentence shall survive the termination of this Lease.
IN WITNESS WHEREOF, the parties have executed this Lease effective as of
the date set forth below.
LANDLORD: TENANT:
INPRISE CORPORATION UNIDIRECT CORPORATION
44
<PAGE>
By /s/ Hobart Birmingham By /s/ Robert Mason
----------------------------------- -----------------------------
Hobart Birmingham
Title: Vice President and General Counsel Title V.P. Operations & CFO
--------------------------
Date November 5, 1998 Date 11-4-98
--------------------------------- ---------------------------
By /s/ James M. Schmidt By______________________________
-----------------------------------
James M. Schmidt
Title Vice President, Human Resources Title___________________________
--------------------------------
Date November 5, 1998 Date____________________________
---------------------------------
45
<PAGE>
EXHIBITS
--------
A Site Plan Paragraph 1.4 (Building shown cross-hatched, the
Land outlined in red pursuant to Paragraph 2.1
B Floor Plan Paragraph 2.1 (Premises shown cross-hatched)
C Work Letter Paragraph 2.2
D Commencement Paragraph 3.1
Date Letter
E Plans for Tenant Paragraph 2.2
Improvements
-1-
<PAGE>
EXHIBIT A
[PLAN APPEARS HERE]
<PAGE>
EXHIBIT B
[PLAN APPEARS HERE]
<PAGE>
EXHIBIT C
---------
WORK LETTER
The parties hereto acknowledge and agree that Landlord shall not be under
any obligation under the Lease or otherwise to construct or install any tenant
improvements in the Premises as a condition to the effectiveness of the Lease.
Tenant hereby agrees to accept the Premises described in the Lease in its
"as-is," "where-is" condition, except as otherwise provided in the Lease
LANDLORD: TENANT:
INPRISE CORPORATION UNIDIRECT CORPORATION
By /s/ Hobart Birmingham By /s/ Robert Mason
------------------------------- ---------------------------
Hobart Birmingham Robert Mason
Title Vice President and General Counsel Title: Vice President - Operations and
----------------------------
CFO
Date 11-5-98
---------------------------
Date November 5, 1998
-----------------------------
-1-
<PAGE>
EXHIBIT D
---------
COMMENCEMENT DATE LETTER
------------------------
Re: Lease dated November 5, 1998 between UniDirect Corporation, a California
corporation, as Tenant, and Inprise Corporation., a Delaware corporation,
as Landlord, concerning certain first floor Premises known as Suite 101,
consisting of approximately 11,718 rentable square feet, more or less,
located at 1800 Green Hills Road, Scotts Valley, California.
Ladies and Gentlemen:
In accordance with the subject Lease, we wish to advise and/or confirm as
follows:
1. That the Tenant has possession of the subject Premises and
acknowledges that under the provisions of the subject Lease, the term of said
Lease commenced as of November 15, 1998 (the "Commencement Date") for an initial
term of five (5) years (the "Lease Term") ending on November 14, 2003 (the
"Ending Date").
2. That in accordance with the subject Lease, Rent shall commence to
accrue on November 15, 1998, and Tenant's percentage share of Common Area
Charges and Common Area Taxes shall commence to accrue on November 15, 1998.
Please acknowledge acceptance of the foregoing by executing this letter
where indicated below.
LANDLORD:
INPRISE CORPORATION, a Delaware
corporation
By: /s/ James M. Schmidt
----------------------------------
James M. Schmidt
Its: Vice President, Human Resources
ACCEPTED AND AGREED:
TENANT:
UNIDIRECT CORPORATION,
a California corporation
By: /s/ Robert Mason
----------------------------------
Robert Mason
Its: Vice President - Operations and
CFO
-1-
<PAGE>
EXHIBIT 10.9
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
_____________________________________
WARRANT TO PURCHASE STOCK
Warrant to Purchase 65 Issue Date: March 8, 1994
Shares of the Class B Preferred Expiration Date: March 8, 1999
Stock of UniDirect Corporation Initial Exercise Price: $360 per share
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other
good and valuable consideration, SILICON VALLEY BANK ("Holder") is entitled to
purchase the number of fully paid and non-assessable shares of the class of
securities (the "Shares") of the corporation (the "Company") at the initial
exercise price per Share (the "Warrant Price") all as set forth above and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a duly
executed Notice of Exercise in substantially the form attached as Appendix 1 to
the principal office of the Company. Unless Holder is exercising the conversion
right set forth in Section 1.2, Holder shall also deliver to the Company a check
for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 Alternative Stock Appreciation Right. At Holder's option, the Company
shall pay Holder the fair market value of the Shares issuable upon conversion of
this Warrant pursuant to Section 1.2 in cash in lieu of such Shares.
1.4 Fair Market Value. If the Shares are traded in a public market, the fair
market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder exercises
or converts the Warrant, the Company shall deliver to Holder certificates for
the shares acquired and, if this Warrant has not been fully exercised or
converted and has not expired, a new Warrant representing the Shares not so
acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, or surrender and cancellation of the Warrant, the Company at
its expense shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.
1.7 Repurchase on Sale, Merger or Consolidation of the Company.
1.7.1 "Acquisition". For the purpose of this Warrant, "Acquisition" means any
sale, license, or other disposition of all or substantially all of the assets of
the Company, or any reorganization, consolidation, or merger of the Company
where the holders of the Company's securities before the transaction
beneficially own less then 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2 Assumption of Warrant. If upon the closing of any Acquisition the
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of the
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
<PAGE>
Warrant to Purchase Stock
__________________________________________________________________
1.7.3 Nonassumption. If upon the closing of Acquisition the successor entity
does not assume the obligations of the Warrant and Holder has not otherwise
exercised this Warrant in full, then the unexercised portion of this Warrant
shall be deemed to have been automatically converted pursuant to Section 1.2 and
thereafter Holder shall participate in acquisition on the same terms as other
holders of the same class of securities of the Company.
1.7.4 Purchase Right. Notwithstanding the foregoing, at the election of
Holder, the Company shall purchase the unexercised portion of the Warrant for
cash upon the closing of any Acquisition for an amount equal to (a) the fair
market value of any consideration that would have been received by Holder in
consideration of the Shares had Holder exercised the unexercised portion of this
Warrant immediately before the record date for determining the shareholders
entitled to participate in the proceeds of the Acquisition, less (b) the
aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend
on its common stock (or the Shares if the Shares are securities other than
common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as if the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common
stock pursuant to the terms of the Company's Articles of Incorporation upon the
closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number or securities or property issuable upon exercise
of the new Warrant. The provisions of the Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number of
Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment, from time to time in the manner set
forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company take any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall
be adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon exercise or
conversion of the Warrant and the number of Shares to be issued shall be rounded
down to the nearest whole Share. If a fractional share interest arises upon any
exercise or conversion of the Warrant, the Company shall eliminate such
fractional share interest by paying Holder amount computed by multiplying the
fractional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant Price,
the Company at its expense shall promptly compute such adjustment, and furnish
Holder with a certificate of its Chief Financial Officer setting forth such
adjustment and the facts upon which such adjustment is based. The Company shall,
upon written request, furnish Holder a certificate setting forth the Warrant
Price in effect upon the date thereof and the series of adjustments leading to
such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of the Warrant is
not greater than (i) the price per share at which the Shares were last issued in
an arms-
<PAGE>
Warrant to Purchase Stock
__________________________________________________________________
length transaction on which at least $250,000 if the Shares were sold and (ii)
the fair market value of the Shares as of the date of this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid non-assessable, and free of any liens and encumbrances except
for restrictions on transfer provided for herein or under applicable federal and
state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other
rights;(c) to effect any reclassification or recapitalization of common stock;
(d) to merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights ( and
specifying the date on which the holders of common stick will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information rights. Information Rights. So long as the Holder holds this
Warrant and/or any of the Shares, the Company shall deliver to the Holder (a)
promptly after mailing, copies of all notices or other written communications to
the shareholders of the Company, (b) within ninety (90) days after the end of
each fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company agrees
that the Shares of, if the Shares are convertible into common stock of the
Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
--------------
4.1 Term: Notice of Expiration. This Warrant is exercisable, in whole or in
part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares
issuable upon exercise this Warrant (and the securities issuable, directly or
indirectly, upon conversation of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws by the transferor and the transferee (including, without
limitation, the delivery of investments representation letters and legal
opinions reasonably satisfactory to the Company, if reasonably requested by the
Company). The Company shall not require Holder to provide an opinion of counsel
if the transfer is to an affiliate of Holder or if there is no material question
as to the availability of current information as referenced in Rule 144(c),
Holder represents that it has complied with Rule 144(d) and (e) in reasonable
detail, the selling broker represents that it has complied with Rule 144(f),
and the Company is provided with a copy of Holders notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Sections 4.2, Holder may
transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversation of the Shares, if any) by giving the Company notice of the portion
of the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of the Warrant to any person who directly competes with the
Company.
<PAGE>
Warrant to Purchase Stock
__________________________________________________________________
4.5 Notices. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all cost incurred
in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and constructed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
UNIDIRECT CORPORATION
By
_____________________________________
Chairman of the Board, President or
Vice President
By
_____________________________________
Secretary or Ass't Secretary
<PAGE>
Warrant to Purchase Stock
__________________________________________________________________
EXHIBIT A
ANTI-DILUTION PROVISIONS
In the event of the issuance (a "Diluting Issuance") by the Company, after the
Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, or if the Shares are common stock less than the then conversion
price of the Company's Series B Preferred Stock, then the number of shares of
common stock issuable upon conversion of the Shares, or if the shares are common
stock, the number of Shares issuable upon exercise of the Warrant, shall be
adjusted as a result of Diluting Issuances in accordance with the Holder's
standard from of Anti-Dilution Agreement in effect on the Issue Date.
Under no circumstances shall the aggregate Warrant Price payable by the Holder
upon exercise of the Warrant increase as a result of any adjustment arising from
a Diluting Issuance.
EXHIBIT B
REGISTRATION RIGHTS
The Shares (if common stock), or the common stock issuable upon conversion of
the Shares, shall be deemed "registrable securities" or otherwise entitled to
"piggy back" registration rights in accordance with the terms of the following
agreement ( the "Agreement") between the Company and its investor(s):
______________________________________________________________________________
___ [Identify Agreement by date, title and parties. If no Agreement exists,
indicate by "none".]
The Company agrees that no amendments will be made to the Agreement which
would have an adverse impact on Holder's registration rights thereunder without
the consent of Holder. By acceptance of the Warrant to which this Exhibit B is
attached, Holder shall be deemed to be a party to the Agreement.
If no Agreement exists, then the Company and the Holder shall enter into
Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
<PAGE>
Warrant to Purchase Stock
__________________________________________________________________
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase __________ shares of the
Common/Series______ Preferred [strike one] Stock of ________ pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name as is specified below:
______________________
(NAME)
______________________
______________________
(ADDRESS)
3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale of distribution thereof except in compliance with applicable securities
laws.
______________________
(Signature)
______________________
(Date)
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
--------------------------------------
______________________
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear_____________:
This is to advise you that the Warrant issued to you described below will
expire on ______________________ , 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any questions
you may have concerning exercise of the Warrant. This your only notice of
pending expiration.
(Name of Issuer)
By______________________
Its______________________
<PAGE>
_______________________________________________
Silicon Valley Bank
Antidilution Agreement
Issuer: UniDirect Corporation
Address: One Venture, Suite 150
Irvine, California 92718
Date: March 8, 1994
THIS AGREEMENT is entered into as of the above date by and between SILICON
VALLEY BANK ("Purchaser"), whose address is 3000 Lakeside Drive, Santa Clara,
California 95054-2895, and the above Company, whose address is set forth above.
RECITALS
A. Concurrently with the execution of this Antidilution Agreement, the
Purchaser is purchasing from the Company a Warrant to Purchase Stock (the
"Warrant") pursuant to which Purchaser has the right to acquire from the Company
the Shares (as defined in the Warrant).
B. By this Antidilution Agreement, the Purchaser and the Company desire to set
forth the adjustment in the number of Shares issuable upon exercise of the
Warrant as a result of a Diluting Issuance (as defined in Exhibit A to the
Warrant).
C. Capitalized terms used herein shall have the same meaning as set forth in
the Warrant.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. Definitions. As used in this Antidilution Agreement, the following terms
have the following respective meanings:
(a) "Option" means any right, option, or warrant to subscribe for, purchase,
or otherwise acquire common stock or convertible Securities.
(b) "Convertible Securities" means any evidence of indebtedness, shares of
stock, or other securities directly or indirectly convertible into or
exchangeable for common stock
(c) "Issue" means to grant, issue, sell, assume, or fix a record date for
determining persons entitled to receive, any security (including Options),
whichever of the foregoing is the first to occur.
(d) "Additional Common Shares" means all common stock (including reissued
shares) issued (or deemed to be issued pursuant to Section 2) after the date of
the Warrant,. Additional Common Shares does not include, however, any common
stock issued in a transaction described in Sections 2.1 and 2.2 of the Warrant;
any common stock Issued upon the conversion of preferred stock outstanding on
the date of the Warrant; the Shares; or common stock Issued as incentive or in a
nonfinancing transaction to employees, officers, directors, or consultants to
the Company.
(e) The shares of common stock ultimately Issuable upon exercise of an Option
(including the shares of common stock ultimately Issuable upon conversion of
exercise of a Convertible Security Issuable pursuant to an Option) are deemed to
be Issued when the Option is Issued. The shares of common stock ultimately
Issuable upon conversion or exercise of a Convertible Security (other than a
Convertible Security Issued pursuant to an Option) shall be deemed Issued upon
Issuance of the Convertible Security.
2. Deemed Issuance of Additional Common Shares. The shares of common stock
ultimately Issuable upon exercise of an Option (including the shares of common
stock ultimately Issuable upon conversion or exercise of a Convertible Security
Issuable pursuant to an Option) are deemed to be Issued when the Option is
Issued. The shares of common stock ultimately Issuable upon conversion or
exercise of a Convertible Security (other than a Convertible Security Issued
pursuant to an Option) shall be deemed Issued upon Issuance of the Convertible
Security. The maximum amount of common stock Issuable is determined without
regard to any future adjustments permitted under the instrument creating the
Options or Convertible Securities.
-1-
<PAGE>
Silicon Valley Bank Antidilution Agreement
_____________________________________________________________________
3. Adjustment of Warrant Price for Diluting Issuances.
3.1 Ratchet Adjustment. If the Company issues Additional Common Shares after
the date of the Warrant and the consideration per Additional Common Share
(determined pursuant to Section 9) is less than the Warrant Price in effect
immediately before such Issue, the Warrant Price shall be reduced to the lesser
of:
(a) the amount of such consideration per Additional Common Share; or
(b) if the Company's common stock is traded on a national securities exchange
or the National Association of Securities Dealers Automated Quotation System,
the last reported bid or sale price of the Company's common stock on the first
trading day following a public announcement of the Issuance.
3.2 Adjustment of Number of Shares. Upon each adjustment of the Warrant Price,
the number of Shares issuable upon exercise of the Warrant shall be increased to
equal the quotient obtained by dividing (a) the product resulting from
multiplying (I) the number of Shares issuable upon exercise of the Warrant and
(ii) the Warrant Price, in each case as in effect immediately before such
adjustment, by (b) the adjusted Warrant Price.
3.3 Securities Deemed Outstanding. For the purpose of this Section 3, all
securities issuable upon exercise of any outstanding Convertible Securities or
Options, warrants, or other rights to acquire securities of the Company shall be
deemed to be outstanding.
4. No Adjustment for Issuances Following Deemed Issuances. No adjustment to
the Warrant Price shall be made upon the exercise of Options or conversion of
Convertible Securities.
5. Adjustment Following Changes in Terms of Options or Convertible Securities.
If the consideration payable to, or the amount of common stock Issuable by, the
Company increases or decreases, respectively, pursuant to the terms of any
outstanding Options or Convertible Securities, the Warrant Price shall be
recomputed to reflect such increase or decrease. The recomputation shall be made
as of the time of the Issuance of the Options or Convertible Securities. Any
changes in the Warrant Price that occurred after such Issuance because other
Additional Common Shares were Issued or deemed Issued shall also be recomputed.
6. Recomputation Upon Expiration of Options or Convertible Securities. The
Warrant Price computed upon the original Issue of any Options or Convertible
Securities, and any subsequent adjustments based thereon, shall be recomputed
when any Options or rights of conversion under Convertible Securities expire
without having been exercised. In the case of Convertible Securities or Options
for common stock, the Warrant Price shall be recomputed as if the only
Additional Common Shares Issued were the shares of common stock actually Issued
upon the exercise of such securities, if any, and as if the only consideration
received therefor was the consideration actually received upon the Issue,
exercise or conversion of the Options or Convertible Securities. In the case of
Options for Convertible Securities, the Warrant Price shall be recomputed as if
the only Convertible Securities Issued were the Convertible Securities actually
Issued upon the exercise thereof, if any, and as if the only consideration
received therefor was the consideration actually received by the Company
(determined pursuant to Section 9), if any, upon the Issue of the Options for
the Convertible Securities.
7. Limit on Readjustments. No readjustment of the Warrant Price pursuant to
Sections 5 or 6 shall increase the Warrant Price more than the amount of any
decrease made in respect of the Issue of any Options or Convertible Securities.
8. 30 day Options. In the case of any Options that expire by their terms not
more than 30 days after the date of Issue thereof, no adjustment of the Warrant
Price shall be made until the expiration or exercise of all such Options.
9. Computation of Consideration. The consideration received by the Company for
the Issue of any Additional Common Shares shall be computed as follows:
(a) Cash shall be valued at the amount of cash received by the Corporation,
----
excluding amounts paid or payable for accrued interest or accrued dividends.
(b) Property. Property other than cash shall be computed at the fair market
--------
value thereof at the time of the Issue as determined in good faith by the Board
of Directors of the Company.
(c) Mixed Consideration. The consideration for Additional common Shares Issued
-------------------
together with other property of the Company for consideration that covers both
shall be determined in good faith by the Board of Directors.
(d) Options and Convertible Securities. The consideration per Additional
----------------------------------
Common Share for Options and Convertible Securities shall be determined by
dividing:
(i) the total amount, if any, received or receivable by the Company for Issue
of the Options or Convertible Securities, plus the minimum amount of additional
consideration (as set for in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon exercise of the Options or conversion
of the Convertible Securities, by
(ii) the maximum amount of common stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number) ultimately Issuable upon the exercise of
such Convertible Securities.
10. General
-2-
<PAGE>
Silicon Valley Bank Antidilution Agreement
_____________________________________________________________________
10.1 Governing Law. This Antidilution Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
10.2 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
10.3 Entire Agreement. Except as set forth below, this Antidilution Agreement
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
10.4 Notices. Etc. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first class mail, postage
prepaid, certified or registered mail, return receipt requested, addressed (a)
if to Purchaser at Purchaser's address as set forth in the heading to this
Agreement, or at such other address as Purchaser shall have furnished to the
Company in writing, or (b) if to the Company, at the Company's address set forth
in the heading to this Agreement, or at such other address as the Company shall
have furnished to the Purchaser in writing.
10.5 Severability. In case any provision if this Antidilution Agreement shall
be invalid, illegal, or unenforceable, the validity, legality and enforceability
of the remaining provisions of this Antidilution Agreement shall not in any way
be affected or impaired thereby.
10.6 Titles and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Antidilution Agreement.
10.7 Counterparts. This Antidilution Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Company
UNIDIRECT CORPORATION
/s/ illegible
By________________________________
President or Vice President
/s/ illegible
By________________________________
Secretary or Ass't Secretary
Purchaser:
SILICON VALLEY BANK
/s/ illegible
By________________________________
VP
Title_____________________________
-3-
<PAGE>
[LOGO OF SILICON VALLEY BANK]
April 15, 1998
Mr. Rob Mason
Chief Financial Officer
UniDirect Corporation
1800 Green Hills Rd., Suite 201
Scotts Valley, CA 95066
Dear Rob:
Thank you very much for taking the time to meet with Kathryn Lungaro and me over
the past few weeks to discuss UniDirect's future and new direction. We are very
excited about your prospects and about working with you to meet your goals.
In response to our conversations over the past few weeks, Silicon Valley Bank
has approved the following changes to your credit facility, which are
highlighted in bold and underlined.
Borrower: UniDirect Corporation (the "Company" or "Borrower")
Facility: $2,500,000 Revolving Line of Credit with a $500,000 sublimit for
Commercial or Standby Letters of Credit.
Purpose: To support working capital needs.
Maturity: August 8, 1998
Repayment: Monthly interest payments. Principal due at maturity.
Pricing:
Rate: No change
Fee: $2,000 Variance and Documentation Fee
Warrants: Extend the expiration on the current warrant agreement one year,
to March 8, 2000.
Collateral: Perfected first security interest on all corporate assets. SVB
to release inventory from collateral if direct marketing
business is sold.
<PAGE>
Mr. Bob Mason
UniDirect Corporation
Page 2
Advance
Rate: No change
Subordination: No change
Covenants and
Reporting:
Information Reporting:
. No change, except SVB to allow 1997 audits to be delivered within 160 days
from fiscal year end.
Financial Covenants:
. No change, except one quarterly loss not to exceed $550,000 will be allowed in
the First Quarter of fiscal 1998.
Other:
. SVB to allow for divestiture of direct marketing operations.
We hope you agree that the above terms and conditions address the various issues
you have been discussing with Silicon Valley Bank. If you find these terms and
conditions acceptable, please indicate so by signing in the space indicated
below and return to me via fax at (408) 748-9478. Upon recept, we will prepare
a Loan Modification Agreement to evidence the changes illustrated above.
Thanks again for your business, and we look forward to our continued
relationship with UniDirect.
Yours truly, Accepted:
/s/ D. EDWARD WOHLIEB /s/ ROBERT MASON
- ---------------------- -----------------
D. Edward Wohlieb Bob Mason
Chief Financial Officer
<PAGE>
EXHIBIT 10.10
STOCK PURCHASE AGREEMENT
AMONG
RAINMAKER SYSTEMS, INC.
ABS CAPITAL PARTNERS III, L.P.,
AND
H&Q RAINMAKER INVESTORS, L.P.
HAMBRECHT & QUIST CALIFORNIA
HAMBRECHT & QUIST EMPLOYEE VENTURE FUND, L.P. II
DATED JANUARY 29, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS ................................................................ 1
2. SALE AND PURCHASE OF SHARES ................................................ 1
2.1. Sale and Purchase of Shares .......................................... 1
2.2. Payment at Closing ................................................... 2
3. ADDITIONAL UNDERTAKINGS AND COVENANTS ...................................... 2
3.1. Consents and Approvals ............................................... 2
3.2. Access of the Investors to Information ............................... 2
3.3. Confidentiality ...................................................... 3
3.4. Operation of Business ................................................ 4
3.5. Compliance with Law .................................................. 5
3.6. Subsequent Events; Adverse Changes ................................... 5
3.7. Amendments to the Company's Articles of Incorporation; Authorize and
Effect Exchange and Redemption ..................................... 6
3.8. News Releases ........................................................ 6
3.9. No Inconsistent Negotiations ......................................... 6
3.10. Final 1998 Audit .................................................... 7
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .............................. 7
4.1. Organization and Standing ............................................ 7
4.2. Capital Structure of the Company ..................................... 7
4.3. Financial Statements ................................................. 8
4.4. No Liabilities ....................................................... 9
4.5. Taxes ................................................................ 9
4.6. Conduct of Business; Absence of Material Adverse Change .............. 10
4.7. Title to Property and Assets ......................................... 12
4.8. Insurance ............................................................ 12
4.9. Intellectual Property ................................................ 12
4.10. Debt Instruments .................................................... 13
4.11. Leases .............................................................. 13
4.12. Other Agreements .................................................... 14
4.13. Books and Records ................................................... 15
4.14. Litigation; Disputes ................................................ 15
4.15. Labor Relations ..................................................... 16
4.16. Pension and Benefit Plans ........................................... 16
4.17. Environmental ....................................................... 16
4.18. Transactions with Related Parties ................................... 17
4.19. Restrictions and Consents ........................................... 17
4.20. Authorization; No Conflict .......................................... 17
4.21. Absence of Violation ................................................ 17
4.22. Compliance with Law; Approvals ...................................... 18
4.23. Copies of Documents ................................................. 19
4.24. Binding Obligation .................................................. 19
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.25. Disclosure ...................................................... 19
4.26. Use of Proceeds ................................................. 19
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS ......................... 19
5.1. Organization and Standing ........................................ 20
5.2. Authorization .................................................... 20
5.3. Binding Obligation ............................................... 20
5.4. No Registration Under the Securities Act ......................... 20
5.5. Acquisition for Investment ....................................... 20
5.6. Evaluation of Merits and Risks of Investment ..................... 21
5.7. Additional Information ........................................... 21
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY ...................... 21
6.1. Representations and Warranties ................................... 21
6.2. Performance ...................................................... 21
6.3. Legal Proceedings ................................................ 22
6.4. Documents at Closing ............................................. 22
6.5. Consents ......................................................... 22
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INVESTORS .................... 22
7.1. Representations and Warranties ................................... 22
7.2. Performance ...................................................... 23
7.3. Absence of Material Adverse Changes .............................. 23
7.4. Legal Proceedings ................................................ 23
7.5. SCO Exchange ..................................................... 23
7.6. Certificates ..................................................... 23
7.7. Opinion of Counsel ............................................... 23
7.8. Shareholders' Agreement .......................................... 24
7.9. Registration Rights Agreement .................................... 24
7.10. Corporate Documents ............................................. 24
7.11. Documents at Closing ............................................ 24
7.12. Consents ........................................................ 24
7.13. Composition of the Board of Directors ........................... 25
7.14. ABS Letter ...................................................... 25
8. CLOSING ................................................................. 25
9. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION REMEDIES ................... 25
9.1. Survival of Representations ...................................... 25
9.2. Agreement of the Company to Indemnify ............................ 25
9.3. Conditions of Indemnification .................................... 26
9.4. Specific Performance ............................................. 27
9.5. Remedies Cumulative .............................................. 27
10. TERMINATION ............................................................ 27
10.1. Termination ..................................................... 27
10.2. Effect of Termination ........................................... 28
11. MISCELLANEOUS .......................................................... 28
11.1. Additional Actions and Documents ................................ 28
11.2. No Brokers ...................................................... 28
11.3. Expenses ........................................................ 28
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
11.4. Assignment ...................................................... 28
11.5. Entire Agreement; Amendment ..................................... 29
11.6. Waiver .......................................................... 29
11.7. Severability .................................................... 29
11.8. Governing Law ................................................... 29
11.9. Notices ......................................................... 30
11.10. Headings ....................................................... 31
11.11. Execution in Counterparts ...................................... 31
11.12. Limitation on Benefits ......................................... 31
11.13. Binding Effect ................................................. 32
</TABLE>
EXHIBIT A DEFINITIONS
EXHIBIT B AMENDED AND RESTATED ARTICLES OF INCORPORATION
EXHIBIT C [OMITTED]
EXHIBIT D REDEMPTION TERMS
EXHIBIT E FORM OF BROBECK, PHLEGER & HARRISON LEGAL OPINION
EXHIBIT F SHAREHOLDERS' AGREEMENT
EXHIBIT G REGISTRATION RIGHTS AGREEMENT
EXHIBIT H ABS LETTER
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Purchase Agreement") is entered
into as of January 29, 1999 by and among Rainmaker Systems, Inc., a California
corporation (the "Company"), ABS Capital Partners III, L.P., a Delaware limited
partnership ("ABS") and H&Q RAINMAKER INVESTORS, L.P., HAMBRECHT & QUIST
California and Hambrecht & Quist Employee Venture Fund, L.P. II ("H&Q" and,
together with ABS, the "Investors").
WHEREAS, the Company desires to issue and sell to the Investors, and
the Investors desire to subscribe for and acquire from the Company, a
substantial equity interest in the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. DEFINITIONS
For all purposes of this Purchase Agreement, certain capitalized terms
specified in Exhibit A shall have the meanings set forth in that Exhibit A,
--------- ---------
except as otherwise expressly provided.
2. SALE AND PURCHASE OF SHARES
2.1. Sale and Purchase of Shares
On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions hereof, the Company
agrees to issue and sell to the Investors, and the Investors, severally and not
jointly, agree to purchase from the Company, an aggregate of 8,536,585
shares of Series C Convertible Participating Preferred Stock, par value $0.001
per share ("Series C Stock"), having the rights, preferences and other terms set
forth on Exhibit B hereto, at a price per share of $1.64. The number of shares
---------
to be purchased by each Investor and the purchase price to be paid by each
Investor is as set forth below:
<TABLE>
<CAPTION>
Investor Number of Shares Purchase Price
-------- ---------------- --------------
<S> <C> <C>
H&Q Rainmaker Investors, 426,830 $ 700,001.20
L.P.
Hambrecht & Quist California 91,463 $ 149,999.32
Hambrecht & Quist Employee 91,463 $ 149,999.32
Venture Fund, L.P. II
ABS Capital Partners III, L.P. 7,926,829 $13,000,000.00
</TABLE>
<PAGE>
2.2 Payment at Closing
At the Closing, each Investor shall deliver to the Company by wire
transfer of immediately available funds the amount set forth opposite its name
above.
3. ADDITIONAL UNDERTAKINGS AND COVENANTS
The Company and the Investors hereby covenant and agree as follows:
3.1. Consents and Approvals
(a) The Company shall take all measures reasonably necessary or
advisable to secure such consents, authorizations and approvals of governmental
authorities and of private persons or entities with respect to the transactions
contemplated by this Purchase Agreement, and to perform all other obligations of
such parties hereunder, as may be required by any applicable statute or
regulation of the United States or any country, state or other jurisdiction or
by any Agreement of any kind whatsoever applicable to the Company.
(b) The Company shall (i) cooperate in the filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to applicable statutes, rules, regulations or orders of any
governmental authority in connection with the transactions contemplated by this
Purchase Agreement and (ii) use good faith efforts to cause any applicable
waiting periods thereunder to expire and any objections to the transactions
contemplated hereby to be withdrawn before Closing.
3.2. Access of the Investors to Information
(a) The Company shall provide the Investors and their representatives
prior to the Closing Date access during normal business hours to the offices,
books, agreements, records (including, without limitation, tax returns and
correspondence with accountants), officers, directors, employees, consultants
and contractors of the Company and will furnish to the Investors and their
representatives such financial and operating data and other information with
respect to the businesses and assets of the Company as the Investors may
reasonably request, including, without limitation, agreements with clients,
customers, vendors, lessors, licensors and suppliers of such businesses.
(b) The Investors' investigation of the financial and operating data,
Assets, Real Property and other information with respect to the Company shall in
no way affect the obligations of the Company with respect to the agreements,
representations, warranties, covenants and indemnification provisions set forth
in this Purchase Agreement.
-2-
<PAGE>
3.3 Confidentiality
(a) Each Investor hereby acknowledges that it has obtained and may
continue to obtain knowledge of and access to confidential and valuable business
information relating to the Company not generally known by or available to the
general public. Each Investor agrees at all times after the date hereof to use
reasonable efforts, consistent with those employed by it with respect to its own
confidential information, (i) to keep confidential all information that is
identified as being confidential, (ii) not to use any confidential information
on its own behalf, except in connection with the transactions contemplated
hereby, or on behalf of any other person, firm or entity, and (iii) not to
disclose confidential information to any third party (other than to its counsel,
accountants, financial advisors, partners, and other persons having a
confidential relationship with an Investor, in connection with the transactions
contemplated hereby) without the advance written authorization of the Company;
provided, however, that each Investor shall have no obligation of
- -------- -------
confidentiality with respect to confidential information that (A) was lawfully
obtained by it not subject to restrictions of confidentiality; (B) is a matter
of public knowledge; (C) has been or is hereafter publicly disclosed other than
by or through the Investor; or (D) is required to be disclosed by law or
judicial process. In the event this Purchase Agreement is terminated prior to
Closing, each Investor will return to the Company or destroy, at the Investor's
option, all documents, workpapers and other materials reflecting confidential
information or relating to the transactions contemplated hereunder, whether
obtained before or after the execution of this Purchase Agreement. In the event
of a breach or threatened breach by an Investor of the provisions of this
Section, the Company shall be entitled to an injunction restraining the Investor
from disclosing, in whole or in part, the information.
(b) The Company hereby acknowledges that it has obtained and may
continue to obtain knowledge of and access to confidential and valuable business
information relating to each Investor not generally known by or available to the
general public. The Company agrees at all times after the date hereof to use
reasonable efforts, consistent with those employed by it with respect to its
own confidential information, (i) to keep confidential all information that is
identified as being confidential, (ii) not to use any confidential information
on its own behalf, except in connection with the transactions contemplated
hereby, or on behalf of any other person, firm or entity, and (iii) not to
disclose confidential information to any third party (other than to the
Company's counsel, accountants, financial advisors and other persons having a
confidential relationship with the Company, in connection with the transactions
contemplated hereby) without the advance written authorization of the affected
Investor; provided, however, that the Company shall have no obligation of
--------- -------
confidentiality with respect to confidential information that (A) was lawfully
obtained by it not subject to restrictions of confidentiality; (B) is a matter
of public knowledge; (C) has been or is hereafter publicly disclosed; or (D) is
required to be disclosed by law or judicial process. At the request of any
Investor, the Company will return to the Investor or destroy, at the Company's
option, all documents, workpapers and other materials reflecting confidential
information or relating to each Investor and the transactions contemplated
hereunder, whether obtained before or after the execution of this Purchase
Agreement. In the event of a breach or threatened breach by the Company of the
provisions of this Section, each Investor shall be entitled to an injunction
restraining such Person from disclosing, in whole or in part, the information.
-3-
<PAGE>
3.4. Operation of Business
Except as contemplated by this Purchase Agreement or with the prior
consent of ABS, on its own behalf and as representative of all of the Investors
(the "Investor Representative"), the Company shall, until the Closing Date, (i)
preserve its business organization and its present relationships with customers,
suppliers, consultants, employees and any other persons having business
relationships with it, (ii) operate or manage its business only in the usual,
regular and ordinary manner consistent with prior practice and (iii) maintain
its books of account and records in the usual, regular and ordinary manner, in
accordance with generally accepted accounting principles applied on a basis
consistent with the basis used in keeping its books in prior years and shall not
do any of the following:
(a) issue any capital stock or any options, warrants or other rights
to subscribe for or purchase the same or any securities convertible into or
exchangeable for capital stock (except Common Stock issuable upon exercise of
options, warrants or other rights outstanding as of the date of this Purchase
Agreement);
(b) declare, set aside or pay any dividend or distribution with
respect to the Company's outstanding capital stock (except for any dividends
payable to holders of the Company's Series A Preferred Stock);
(c) directly or indirectly redeem, purchase or otherwise acquire any
of the Company's capital stock (except for the exchange contemplated by Section
3.7);
(d) effect a split, reclassification or other change in or of any of
the Company's capital stock (except as contemplated by Section 3.7);
(e) amend the Company's articles of incorporation or bylaws (except
for such changes or amendments to the articles of incorporation as may be
required by Section 3.7);
(f) grant any increase in the compensation payable or to become
payable to its officers or employees, or enter into any bonus, insurance,
pension or other benefit plan, payment or arrangement for or with any of its
officers or employees (except for compensation payable and rights granted, as
disclosed in the Disclosure Schedules, to Bernard Jubb in connection with his
resignation as a director);
(g) borrow or agree to borrow any funds, or directly or indirectly
guarantee or agree to guarantee the obligations of others;
(h) enter into any Agreement which may have a material effect on its
business and operations;
(i) place, or allow to be placed, an Encumbrance on any of its
Material Assets;
(j) cancel any indebtedness owing to it or any Claims which it may
possess, or waive any rights of substantial value;
-4-
<PAGE>
(k) sell, assign, license or transfer any Intellectual Property;
(l) sell or otherwise dispose of any interest in any Material Asset
(other than in the Ordinary Course of Business);
(m) commit any act or omit to do any act, or engage in any activity
or transaction or incur any obligation (by conduct or otherwise), which
(individually or in the aggregate) reasonably could be expected to have a
Material Adverse Effect; or
(n) make any loan or advance to, or enter into any other transaction
with, any shareholder, officer, director or Affiliate of the Company (except as
contemplated by Section 3.7).
3.5. Compliance with Law
Until Closing, the operations of the Company will be conducted in
material compliance with all Laws, including, without limitation, all laws,
regulations, orders and requirements promulgated by any governmental authority
relating to consumer protection, equal opportunity, environmental protection,
fire, zoning and building and occupational safety matters (including Workers
Compensation).
3.6. Subsequent Events; Adverse Changes
Until the Closing Date, the Company shall:
(a) inform and discuss with the Investors on a regular and ongoing
basis matters relating to the management of the business and Assets of the
Company, including, without limitation, any significant new Agreements or
transactions proposed to be entered into or management persons proposed to be
employed or terminated by the Company, and any other significant developments
relating to the business or Assets of the Company; provided, however, that, the
-------- -------
Investors, as Investors, shall have no express or implied power, authority or
responsibility with respect to the Company or its respective business, Assets or
Agreements;
(b) promptly notify the Investors of the occurrence of any event, or
the failure of any event to occur, that results in an omission from, or breach
of, any of the covenants, representations or warranties made by or on behalf of
the Company in this Purchase Agreement, the Disclosure Schedule or any other
Document Furnished in connection with or pursuant to this Purchase Agreement,
but notification shall not excuse breaches of representations, warranties,
covenants or agreements disclosed in the notification; and
(c) promptly notify the Investors of any adverse change in the
business, operations, financial condition, Assets or liabilities of the Company,
including, without limitation, information (including, without limitation,
copies of all Documents relating thereto) concerning all Claims instituted,
threatened or asserted against or affecting the Company before or by any court
or governmental authority.
-5-
<PAGE>
3.7. Amendments to the Company's Articles of Incorporation; Authorize and
Effect Exchange and Redemption
(a) The Company shall take all actions (corporate and otherwise)
necessary to duly authorize, adopt and file with the Secretary of State of the
State of California and otherwise make effective on the Closing Date the amended
and restated articles of incorporation in the form attached hereto as Exhibit B
---------
providing for the retirement of the Series A Preferred Stock of the Company and
setting forth the rights and preferences of the Company's capital stock,
including the Series C Stock and Series D Convertible Participating Preferred
Stock, par value $0.001 per share ("Series D Stock").
(b) The Company shall take all actions (corporate and otherwise)
necessary to authorize an exchange (the "SCO Exchange") of all securities of the
Company held by The Santa Cruz Organization, Inc. ("SCO"), consisting of a
Convertible Debenture having a principal amount of $995,529.50, a related
Warrant to purchase 2,844,370 shares of Common Stock and shares of Series A
Preferred Stock convertible into 2,873,100 shares of Common Stock (the "SCO
Investment"), for an aggregate of 5,717,470 shares of Series D Stock.
(c) The Company shall take all actions (corporate and otherwise)
necessary to authorize the Redemption on or prior to the Closing Date,
including, but not limited to, obtaining the consent of the holders of the
Series A Stock to the redemption of shares of Common Stock.
(d) Concurrently with the Closing, the Company shall consummate the
SCO Exchange and as soon as practicable thereafter, the Company shall consummate
the Redemption on the terms and conditions set forth on Exhibit D.
---------
3.8. News Releases
Neither the Company nor the Investors shall issue or approve any news
release or other public announcement concerning the transactions contemplated by
this Purchase Agreement without the prior approval of the Company and the
Investor Representative (which approval in each case shall not be unreasonably
withheld), except as required by law or contract.
3.9. No Inconsistent Negotiations
Until the Closing Date or earlier if this Agreement is terminated
pursuant to Section 10, the Company shall not, nor shall it permit or authorize
any director, officer, employee, or other agent of the Company or any of its
shareholders, directly or indirectly, to
(i) take any action to solicit, initiate or encourage the submission
of a Proposal, or
(ii) participate in any negotiations regarding, or furnish to any
other person, entity or group any non-public information with respect to, or
otherwise cooperate in any way
-6-
<PAGE>
with, or assist or participate in, facilitate, or encourage, any effort or
attempt by any other person, entity or group to take any action to solicit,
initiate or encourage the submission of a Proposal.
3.10. Final 1998 Audit
The Company shall cause Ernst & Young, its independent public
accountants, to complete an audit of the Company's financial statements at and
for the year ended December 31, 1998 (the "1998 Audit") as promptly as
practicable following the Closing (but in no event later than May 15, 1999), and
shall cooperate with such firm in all respects in the course of the audit.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the Disclosure Schedule (with a
disclosure with respect to a Section of this Agreement to include a specific
reference in the Disclosure Schedule to the Section of this Agreement to which
each such disclosure applies), the Company represents and warrants (which
representation and warranty shall be deemed to include the disclosure with
respect thereto so specified in the Disclosure Schedule) to the Investors as
follows:
4.1. Organization and Standing
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has all requisite
corporate power and corporate authority to own, operate and lease its Assets, to
carry on its business as currently conducted and to carry out the transactions
contemplated hereby. The Company has made available to the Investor
Representative complete and correct copies of the articles of incorporation and
by-laws of the Company, with all amendments thereto, as in effect on the date of
this Purchase Agreement. The Company is qualified to conduct business as a
foreign corporation in each jurisdiction in which the nature of the business
conducted by the Company makes such qualification necessary other than those in
which the failure to so qualify would not have a Material Adverse Effect.
4.2. Capital Structure of the Company
The Disclosure Schedule sets forth the authorized capital stock of
the Company. All shares of capital stock of the Company have been duly
authorized and validly issued and are outstanding, fully paid and nonassessable.
Except as set forth on the Disclosure Schedule, no shares of capital stock of
the Company have been reserved for any purpose. Except as set forth on the
Disclosure Schedule, there are no outstanding securities convertible into or
exchangeable for the capital stock of the Company, or warrants to purchase or to
subscribe for any shares of such stock or other securities of the Company. There
are no outstanding Agreements affecting or relating to the voting, issuance,
purchase, redemption, repurchase, transfer or registration for sale under the
Securities Act of any securities of the Company, except as contemplated
hereunder or described in the Disclosure Schedule. Except as set forth on the
Disclosure Schedule, the
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Company has no Subsidiaries and no equity investment or other interest in, nor
has the Company made any advances or loans to any corporation, limited liability
company, association, partnership, joint venture or other entity.
4.3. Financial Statements
(a) The Company has prepared and Furnished to the Investors the
audited consolidated balance sheets of the Company as of the end of the fiscal
years ending December 31, 1995, 1996 and 1997, and the audited consolidated
statements of income, stockholders' equity and changes in financial position for
such periods (the "Audited Financial Statements"). The Company has Furnished to
the Investor the unaudited balance sheets of the Company for the nine months
ended September 30, 1998, and the unaudited statements of income, stockholders'
equity and cash flow for such period. The Company has also prepared and
furnished to the Investors the unaudited projected balance sheet of the Company
as of December 31, 1998 and the unaudited projected consolidated statements of
income, stockholders' equity and changes in financial positions for the year
then ended (the "1998 Unaudited Projected Financial Statements"). (The September
30, 1998 unaudited financial statements, the 1998 Unaudited Projected Financial
Statements and the Audited Financial Statements are herein referred to
collectively as the "Financial Statements"). All of the Financial Statements,
including, without limitation, the notes thereto, referred to in this Section:
(i) are in accordance with the books and records of the Company, (ii) present
fairly in all material respects the financial position of the Company as of the
respective dates and the results of operations and changes in financial position
for the respective periods indicated (subject, in the case of unaudited
financial statements, to normal year-end adjustments), and (iii) have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with prior accounting periods, except as may be otherwise
indicated in such Financial Statements or the Notes thereto and except that
unaudited financial statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements set forth all
changes in accounting methods (for financial accounting purposes) at any time
made, agreed to, requested or required with respect to the Company. Except for
(i) possible adjustments or variances related to the Company's May 15, 1998 sale
of assets to Savoir Technology Group, Inc. and (ii) adjustments or variances
which do not individually exceed $250,000, there will be no material adjustments
required to the 1998 Unaudited Projected Financial Statements or material
variances therefrom resulting from the 1998 Audit in order for such financial
statements to be presented as final 1998 audited financial statements.
(b) The financial forecasts of the Company for the fiscal years
1998-2001 Furnished to the Investor were carefully prepared by the Company in
good faith on the basis of the assumptions stated therein, and the Company has
no reason to believe that the assumptions or the financial forecasts themselves
are not reasonable; provided, however, that the Company makes no representation
or warranty that the results projected in the financial forecasts will actually
be achieved.
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4.4 No Liabilities
Except as reflected in the Financial Statements as of December 31,
1998, there existed no liabilities (whether contingent or absolute, matured or
unmatured, known or unknown) of the Company other than (i) incurred in the
Ordinary Course of Business and in amounts that are not individually material to
the Company, and (ii) for taxes, assessments and other governmental charges, if
such taxes, assessments and other charges (x) are not yet due and payable, or
(y) are due and payable but can be paid hereafter without penalty or interest
and for which a proper accrual relating thereto is reflected in the Financial
Statements and which will be paid before penalty or interest begins to accrue
thereon. Except as described in the Disclosure Schedule, since December 31,
1998, the Company has not incurred any liabilities (whether contingent or
absolute, matured or unmatured, known or unknown) other than in the Ordinary
Course of Business and in amounts that are not material to the Company.
4.5. Taxes
(a) The Company has (or, in the case of returns becoming due after
the date hereof and on or before the Closing Date, will have prior to the
Closing Date) duly filed all Tax Returns required to be filed on or before the
Closing Date with respect to all applicable Taxes. No penalties or other charges
are or will become due with respect to any such Tax Returns as the result of the
late filing thereof. All of the Tax Returns are (or, in the case of returns
becoming due after the date hereof and on or before the Closing Date, will be)
true and complete in all respects. The Company: (i) has paid all Taxes due or
claimed to be due by any taxing authority in connection with any such Tax
Returns; or (ii) has established (or, in the case of amounts becoming due after
the date hereof, prior to the Closing Date will have paid or established) in the
Financial Statements provided to the Investor Representative adequate reserves
(in conformity with generally accepted accounting principles consistently
applied) for the payment of such Taxes. The amounts set up as reserves for Taxes
on the Financial Statements are sufficient for the payment of all unpaid Taxes
as of the dates thereof, whether or not such Taxes are disputed or are yet due
and payable, for or with respect to the period, and for which the Company may be
liable in its own right or as a transferee of the Assets of, or successor to,
any corporation, person, association, partnership, joint venture or other
entity.
(b) The Company, either individually or in its own right or as a
transferee, does not have and on the Closing Date will not have any liability
for Taxes payable for or with respect to any periods prior to and including the
Closing Date in excess of the amounts actually paid prior to the Closing Date or
reserved for in the Financial Statements (other than Taxes accruing after
December 31, 1998 in the Ordinary Course of Business which are not payable on or
prior to the Closing Date).
(c) Except as set forth in the Disclosure Schedule, there is no
action, suit, proceeding, audit, investigation or claim pending or, to the
Knowledge of the Company, threatened in respect of any Taxes for which the
Company is or may become liable, nor has any deficiency or claim for any such
Taxes been proposed, asserted or, to the Knowledge of the Company, threatened.
The Company has not consented to any waivers or extensions of any
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statute of limitations with respect to the collection or assessment of any Taxes
against the Company. There is no Agreement, waiver or consent providing for an
extension of time with respect to the assessment or collection of any Taxes
against the Company and no power of attorney granted by the Company with respect
to any tax matters is currently in force.
(d) The Company has Furnished or otherwise made available to the
Investor Representative true and complete copies of all Tax Returns and all
written communications relating to any such Tax Returns or to any deficiency or
claim proposed and/or asserted, irrespective of the outcome of such matter, but
only to the extent such items relate to tax years (i) which are subject to an
audit, investigation, examination or other proceeding, or (ii) with respect to
which the statute of limitations has not expired.
(e) The Disclosure Schedule sets forth (i) all material federal tax
elections that currently are in effect with respect to the Company, and (ii) all
material elections for purposes of foreign, state or local Taxes and all
material consents or Agreements for purposes of federal, foreign, state or local
Taxes in each case that reasonably could be expected to affect or be binding
upon the Company or its Assets or operations after Closing. The Disclosure
Schedule sets forth all material changes in accounting methods for Tax purposes
at any time made, agreed to, requested or required with respect to the Company.
(f) Except as set forth on the Disclosure Schedule, the Company has
not: (i) been a partner in a partnership or an owner of an interest in an entity
treated as a partnership for federal income tax purposes; (ii) executed or filed
with the Internal Revenue Service any consent to have the provisions of Section
341(f) of the Code apply to it; (iii) been subject to Section 999 of the Code;
(iv) been a passive foreign investment company as defined in Section 1296(a) of
the Code; or (v) been a party to any Agreement relating to the sharing,
allocation or payment of, or indemnity for, Taxes.
4.6. Conduct of Business; Absence of Material Adverse Change
Except as otherwise contemplated by the terms of this Purchase
Agreement or as set forth in the Disclosure Schedule, since December 31, 1998
there has been no material adverse change in the business, operations,
prospects, financial condition, Assets or liabilities of the Company. Except as
set forth in the Disclosure Schedule or as contemplated hereunder, since
December 31, 1998, the Company has conducted business substantially in the
manner heretofore conducted and only in the Ordinary Course of Business, and the
Company has not:
(a) incurred any loss materially and adversely affecting any of its
Assets as the result of any fire, explosion, flood, windstorm, earthquake, labor
trouble, riot, accident, act of God or public enemy or armed forces, or other
casualty;
(b) issued any capital stock (other than capital stock issued upon
exercise of outstanding options) or member interests, bonds or other corporate
securities or debt instruments, granted any options, warrants or other rights
calling for the issuance thereof, or borrowed any
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funds (other than borrowings in the Ordinary Course of Business in amounts,
individually or in the aggregate, that do not exceed $50,000);
(c) incurred, or become subject to, any material obligation or
liability (absolute or contingent, matured or unmatured, known or unknown),
except current liabilities incurred in the Ordinary Course of Business and liens
for current taxes, assessments or governmental charges or levies on property not
yet due and delinquent;
(d) discharged or satisfied any Encumbrance or paid any obligation or
liability (absolute or contingent, matured or unmatured, known or unknown) other
than current liabilities shown in the Financial Statements and current
liabilities incurred since December 31, 1998 in the Ordinary Course of Business;
(e) except for dividends payable to holders of the Company's Series A
Preferred Stock or the Redemption contemplated by Section 3.7 of this Agreement,
declared or made payment of, or set aside for payment, any dividends or
distributions of any Assets, or purchased, redeemed or otherwise acquired any of
its capital stock, any securities convertible into capital stock, or any other
securities;
(f) mortgaged, pledged or subjected to any Encumbrance any Material
Assets, except for (i) liens reflected in the Financial Statements of the
Company or on the Disclosure Schedule, (ii) liens consisting of zoning or
planning restrictions, easements, permits and other restrictions or limitations
on the use of real property or irregularities in title thereto which do not
materially detract from the value of, or impair the use of, such property by the
Company in the operation of their respective businesses, and (iii) liens for
current taxes, assessments or governmental charges or levies on property not yet
due and delinquent;
(g) sold, exchanged, transferred or otherwise disposed of any
Material Assets, or canceled any debts or claims, except in each case in the
Ordinary Course of Business;
(h) written down the value of any Material Assets or written off as
uncollectible any notes or accounts receivable, except write-downs and write-
offs in the Ordinary Course of Business or reflected in the Financial
Statements, none of which, individually or in the aggregate, are material;
(i) entered into any transactions other than in the Ordinary Course
of Business;
(j) increased the rate of compensation payable, or to become payable,
by the Company to any of its officers, employees, agents or independent
contractors over the rate being paid to them on December 31, 1998;
(k) made or permitted any amendment or termination of any material
Agreement to which it is a party;
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(l) through negotiation or otherwise made any commitment or incurred
any liability to any labor organization;
(m) made any accrual or arrangement for or payment of bonuses or
special compensation of any kind to any director, officer or employee;
(n) directly or indirectly paid any severance or termination pay to
any officer or employee in excess of three months' salary;
(o) made capital expenditures, or entered into commitments therefor,
aggregating more than $50,000;
(p) made any change in any method of accounting or accounting
practice;
(q) entered into any transaction of the type described in Section
4.18; or
(r) made an Agreement to do any of the foregoing.
4.7. Title to Property and Assets
The Company has good, valid and marketable title to all Material
Assets owned by it, free and clear of all Encumbrances other than those referred
to in the Financial Statements (or the notes thereto) and liens for taxes not
yet due and payable. The Company does not own any real estate, and the Company
is not a United States Real Property Holding Company as defined under Section
897 of the Code. All personal property material to the conduct of the Company's
business is in good operating condition and repair (ordinary wear and tear and
routinely scheduled maintenance excepted) and is suitable and adequate for the
uses for which it is intended or is being used.
4.8. Insurance
Other than as set forth in the Disclosure Schedule, the Company has
insurance coverage under policies that (a) are with insurance companies
reasonably believed by the Company to be financially sound and reputable; (b)
are in full force and effect; (c) to the Company's Knowledge, are sufficient for
compliance by the Company with all requirements of Law and of all Agreements to
which the Company is a party; (d) to the Company's Knowledge, are valid and
outstanding policies enforceable against the insurer; and (e) provide adequate
insurance coverage for the Assets and business of the Company.
4.9. Intellectual Property
(a) To the Company's Knowledge, the Company has sufficient title and
ownership of all patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights owned or licensed by or
registered in the name of the Company or used or to be used by the Company in
its business as presently conducted or
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<PAGE>
contemplated, and all other items of Intellectual Property that are material to
the business or operations of the Company. The Disclosure Schedule lists those
patents, patent applications, trademarks, trademark applications and
registrations and registered copyrights which have been duly registered in,
filed in or issued by the United States Patent and Trademark Office, the United
States Register of Copyrights, or the corresponding offices of other
jurisdictions as identified on the Disclosure Schedule, and have been properly
maintained and renewed in accordance with all applicable provisions of law and
administrative regulations in the United States and each such jurisdiction. All
trade secrets, know-how, technical process and procedures developed and
belonging to the Company which are material to the Company which have not been
patented or registered have been kept confidential.
(b) The Company is not making any unauthorized use of any
Intellectual Property, confidential information or trade secrets of any Person
and, to the Knowledge of the Company, no Person is making any unauthorized use
of any Intellectual Property of the Company. The Company has the right to use
all trade secrets, customer lists, processes, computer software, patents,
copyrights and trademarks as currently used in its business.
4.10. Debt Instruments
The Disclosure Schedule lists all mortgages, indentures, notes,
guarantees and other Agreements for or relating to borrowed money (including,
without limitation, conditional sales agreements and capital leases) involving
payments by the Company aggregating in excess of $ 100,000 per year to which
the Company is a party or which have been assumed by the Company or to which any
Material Assets are subject. The Company has performed all the material
obligations it is required to perform to date and is not in material default
under any of the foregoing, and, to the Knowledge of the Company, there has not
occurred any event which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a material
default.
4.11. Leases
The Disclosure Schedule lists all leases and other Agreements under
which the Company is a lessee or lessor of any Material Asset (including Real
Property), or holds, manages or operates any Material Asset owned by any third
party, or under which any Material Asset owned by the Company is held, operated
or managed by a third party. Except as described in the Disclosure Schedule, the
Company is the owner and holder of all the leasehold estates purported to be
granted by the leases or other Agreements listed in the Disclosure Schedule.
Each such lease and other Agreement is in full force and effect and constitutes
a legal, valid and binding obligation of, and is legally enforceable against,
the Company and, to the Company's Knowledge, the other parties thereto (except
as enforceability may be limited or affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws and
equitable principles now or hereafter in effect and affecting the rights and
remedies of creditors generally), and grants the leasehold estate it purports to
grant free and clear of all Encumbrances. All necessary governmental approvals
with respect thereto have been obtained and all necessary filings or
registrations therefor (the lack of which would materially and
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adversely affect the Company) have been made, in each case to the extent that
the Company is responsible therefor, and there are no outstanding disputes
thereunder and, to the Knowledge of the Company, there have been no threatened
cancellations thereof. The Company has in all respects performed all material
obligations thereunder it is required to perform to date. Neither the Company
nor, to the Knowledge of the Company, any other party is in material default in
any respect under any of the foregoing, and, to the Knowledge of the Company,
there has not occurred any event which (whether with or without notice, lapse of
time or the happening or occurrence of any other event) would constitute such a
material default.
4.12. Other Agreements
(a) The Disclosure Schedule lists all material Agreements to which
the Company is a party or by which the Company is bound at the date hereof. Each
such material Agreement is in full force and effect and constitutes a legal,
valid and binding obligation of, and is legally enforceable against the Company
and, to the Company's Knowledge, the other parties thereto (except as
enforceability may be limited or affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws and
equitable principles now or hereafter in effect and affecting the rights and
remedies of creditors generally). All necessary governmental approvals with
respect thereto have been obtained and all necessary filings or registrations
therefor (the lack of which would materially and adversely affect the Company)
have been made, in each case to the extent that the Company is responsible
therefor, and there are no outstanding disputes thereunder and, to the Knowledge
of the Company, there have been no threatened cancellations thereof. The Company
has performed all the material obligations thereunder required to be performed
to date. Neither the Company nor, to the Knowledge of the Company, any other
party is in material default in any respect under any of the Agreements listed
in the Disclosure Schedule, and, to the Knowledge of the Company, there has not
occurred any event which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a material
default.
(b) Except as listed in the Disclosure Schedule (and without
limiting the foregoing), the Company is not a party to any oral or written:
(i) Agreement for the employment of any officer, employee,
consultant or independent contractor which provides for annual compensation in
excess of $100,000;
(ii) license agreement or distributor, dealer, manufacturer's
representative, sales agency, advertising, property management or brokerage
agreement involving payments of more than $50,000;
(iii) Agreement with any labor organization or other collective
bargaining unit;
(iv) Agreement for the future purchase of materials, supplies,
services, merchandise or equipment involving payments of more than $50,000 over
its remaining term (including, without limitation, periods covered by any option
to renew by either party);
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<PAGE>
(v) Agreement for the purchase, sale or lease of any real
estate or other Assets involving payments of more than $50,000 over its
remaining term (including, without limitation, periods covered by any option to
renew by either party);
(vi) profit-sharing, bonus, incentive compensation, deferred
compensation, stock option, severance pay, stock purchase, employee benefit,
insurance, hospitalization, pension, retirement or other similar plan or
Agreement;
(vii) Agreement for the sale of any of its Material Assets or
the grant of any preferential rights to purchase any of its Material Assets or
rights, other than in the Ordinary Course of Business;
(viii) joint venture agreement or other Agreement involving the
sharing of profits;
(ix) outstanding loan of more than $50,000 to any person or
entity or receivable due from any shareholder of the Company or persons or
entities controlling, controlled by or under common control with the Company; or
(x) Agreements not to compete and exclusivity Agreements that
reasonably could be interpreted to impose any restriction on any business
operations of the Company.
4.13. Books and Records
The books of account, stock records, minute books and other records
of the Company are true and accurate and have been maintained in accordance with
good business practices.
4.14. Litigation; Disputes
(a) Except as described in the Disclosure Schedule, there are no
material actions, suits, claims, arbitrations, proceedings or known
investigations pending or, to the Knowledge of the Company, threatened or
reasonably anticipated against, affecting or involving the Company, or its
business or Assets, or the transactions contemplated by this Purchase Agreement
before or by any court, arbitrator or governmental authority, domestic or
foreign. The Company is not operating under, subject to or in default with
respect to any order, award, writ, injunction, decree or judgment of any court,
arbitrator or governmental authority. The Company has Furnished to the Investor
Representative copies of all pleadings filed with respect to any material
litigation in which the Company is engaged.
(b) Except as set forth on the Disclosure Schedule, the Company is
not currently involved in or, to the knowledge of the Company, reasonably
anticipates any material dispute with any of its current or former employees,
agents, brokers, distributors, vendors, customers, business consultants,
franchisees, franchisers, representatives or independent
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contractors (or any current or former employees of any of the foregoing persons
or entities) which may materially affect the business or Assets of the Company.
4.15. Labor Relations
There are no strikes, work stoppages, grievance proceedings, union
organization efforts or other controversies pending or, to the Knowledge of the
Company, threatened or reasonably anticipated between the Company and (a) any
current or former employees of the Company, or (b) any union or other collective
bargaining unit representing the employees. The Company is in compliance in all
material respects with all Laws relating to employment or the workplace,
including, without limitation, provisions relating to wages, hours, collective
bargaining, safety and health, work authorization, equal employment opportunity,
immigration, withholding, unemployment compensation, worker's compensation,
employee privacy and right to know. Except as set forth on the Disclosure
Schedule, there are no collective bargaining agreements, employment agreements
between the Company and any of its employees, or professional service agreements
not terminable at will relating to the businesses and Assets of the Company. The
consummation of the transactions contemplated hereby will not cause the Company
or the Investor to incur or suffer any liability relating to, or obligation to
pay, severance, termination or other payments to any person or entity.
4.16. Pension and Benefit Plans
The Company (a) does not maintain or never has maintained any Plan
or Other Arrangement, (b) is not or ever has been a party to any Plan or Other
Arrangement and (c) has no obligations under any Plan or Other Arrangement.
4.17. Environmental
(a) The Company has complied and is in compliance in all material
respects with, and the facilities occupied by the Company and all improvements
thereon are in compliance in all material respects with, all Environmental Laws
relating to or affecting the Company.
(b) The Company has no liability under any Environmental Law and it
is not responsible for any liability of any other person under any Environmental
Law. There are no pending or, to the Knowledge of the Company, threatened
actions, suits, orders, claims, legal proceedings or other proceedings based on,
nor has the Company or any officer or director, directly or indirectly received
any formal or informal notice of any complaint, order, directive, citation,
notice of responsibility, notice of potential responsibility, or information
request from any governmental authority or any other person or entity or knows
or suspects any fact(s) which might reasonably form the basis for any such
actions or notices arising out of or attributable to: (i) the current or past
presence, Release, or threatened Release of Hazardous Materials at or from any
part of the Real Property; (ii) the off-site disposal or treatment of Hazardous
Materials originating on or from the Real Property or the businesses or Assets
of the Company; or (iii) any
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violation of Environmental Laws at any part of the Real Property or arising from
the Company's activities (or the activities of such Person's predecessors in
title) involving Hazardous Materials.
4.18. Transactions with Related Parties
Except as set forth on the Disclosure Schedule, neither any present
or former officer, director or shareholder of the Company, nor any Affiliates of
the officers, directors or shareholders, are currently a party to any
transaction with the Company of more than $50,000, including, without
limitation, any Agreement providing for the employment of, furnishing of
services by, rental of Assets from or to, or otherwise requiring payments to,
any of the officers, directors, shareholders or Affiliates.
4.19. Restrictions and Consents
Except as set forth on the Disclosure Schedule, there are no
Agreements, Laws or other restrictions of any kind to which the Company is a
party or to which the Company's Assets are subject that would prevent or
restrict the execution, delivery or performance of this Purchase Agreement or
prohibit or limit the continued operation of the business of the Company after
the date hereof on substantially the same basis as heretofore operated, as a
result of the execution, delivery or performance of this Purchase Agreement. The
Disclosure Schedule lists all Agreements and Laws that require the consent or
acquiescence of any person or entity not party to this Purchase Agreement with
respect to any aspect of the execution, delivery or performance of this Purchase
Agreement by the Company.
4.20. Authorization; No Conflict
The execution, delivery and performance by the Company of this
Purchase Agreement and all other Documents contemplated hereby, the fulfillment
of and compliance with the respective terms and provisions hereof and thereof,
and the consummation by the Company of the transactions contemplated hereby and
thereby, do not and will not in any material respect: (a) conflict with, or
violate any provision of, any Law having applicability to the Company or any of
its Assets, or any provision of the articles of incorporation or bylaws of the
Company (b) conflict with, or result in any breach of, or constitute a default
under any Agreement to which the Company is a party or by which the Company or
any of its Assets may be bound; or (c) result in or require the creation or
imposition of or result in the acceleration of any indebtedness, or of any
Encumbrance of any nature upon, or with respect to any of the Material Assets of
the Company.
4.21. Absence of Violation
The Company is not in material violation of or material default
under, nor has the Company breached, any term or provision of its articles of
incorporation or bylaws or any material Agreement or restriction to which the
Company is a party or by which the Company is bound or any of its Assets are
bound or affected. Neither the Company, nor to the Company's Knowledge, any of
its officers, directors, employees or agents (or shareholders, distributors,
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representatives or other persons acting on the express, implied or apparent
authority of such entity) have paid, given or received or have offered or
promised to pay, give or receive, any bribe or other unlawful, questionable
payment of money or other thing of value, any extraordinary discount, or any
other unlawful or unusual inducement, to or from any person, business
association or governmental official or entity in the United States or elsewhere
in connection with or in furtherance of the business of the Company (including,
without limitation, any offer, payment or promise to pay money or other thing of
value (a) to any foreign official or political party (or official thereof) for
the purposes of influencing any act, decision or omission in order to assist the
Company in obtaining business for or with, or directing business to, any person,
or (b) to any person, while knowing that all or a portion of such money or other
thing of value will be offered, given or promised to any such official or party
for such purposes. The business of the Company is not in any manner dependent
upon the making or receipt of such payments, discounts or other inducements.
4.22. Compliance with Law; Approvals
Except as set forth in the Disclosure Schedule:
(a) The operations of the Company have been conducted, in all
material respects, in compliance with all Laws and regulations applicable to the
Company's business.
(b) The Company has not received notice of any violation (or of any
investigation, inspection, audit, or other proceeding by any governmental
authority involving allegations of any violation) of any Law, or is in material
default with respect to any Law, and to the Knowledge of the Company, no
investigation, inspection, audit, or other proceeding by any governmental
authority involving allegations of violation of any Law is threatened or
contemplated;
(c) The Company has all licenses, franchises, permits,
authorizations or approvals from all governmental authorities ("Approvals")
required for the conduct of the business of the Company and the occupancy and
operation, for its present uses, of the real and personal property which the
Company owns or leases, except where the failure to have such Approvals would
not, individually or in the aggregate, have a Material Adverse Effect, and the
Company is not in violation of any such Approval or any terms or conditions
thereof.
(d) All such Approvals are in full force and effect, have been
issued to and fully paid for by the holder thereof and, to the Knowledge of the
Company, no suspension or cancellation there of has been threatened; and
(e) No such Approvals will in any way be affected by, or terminate
or lapse by reason of, the transactions contemplated by this Purchase Agreement
or any of the other agreements contemplated hereunder or executed herewith.
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4.23. Copies of Documents
True and complete copies of all Documents listed in the Disclosure
Schedule have been Furnished to the Investor Representative.
4.24. Binding Obligation
This Purchase Agreement constitutes a valid and binding obligation
of the Company, enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting creditors' rights generally, (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or
other equitable remedies, and (iii) to the extent indemnification provisions may
be limited by applicable federal or state securities laws; and each Document to
be executed by the Company pursuant hereto, when executed and delivered in
accordance with the provisions thereof, shall be a valid and binding obligation
of the Company, enforceable in accordance with their terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies, and (iii) to the extent indemnification
provisions may be limited by applicable federal or state securities laws.
4.25. Disclosure
To the Company's Knowledge, no representation or warranty by the
Company in this Purchase Agreement, and no Document Furnished to the Investor
pursuant to this Purchase Agreement, contains or will contain any untrue or
misleading statement or omits or will omit any fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which made, not misleading. The Company has provided all information that the
Investor Representative has requested in connection with the Investors' purchase
of the Series C Stock.
4.26. Use of Proceeds
No more than $10 million of the total investment being made by the
Investors shall be used for the Redemption, and any proceeds not used for the
Redemption, net of issuance costs, shall be used for the Company's working
capital.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby represents and warrants, severally and not
jointly, to the Company as follows:
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5.1. Organization and Standing
The Investor is a limited partnership, duly organized, validly
existing and in good standing under the laws of the State of Delaware or
California and each has the full and unrestricted power and authority to enter
into this Purchase Agreement and to carry out the transactions contemplated
hereby.
5.2. Authorization
The execution, delivery and performance by that Investor of this
Purchase Agreement and all other Documents contemplated hereby, the fulfillment
of and the compliance with the respective terms and provisions hereof and
thereof, and the consummation by the Investor of the transactions contemplated
hereby and thereby have been duly authorized, and will not: (a) conflict with,
or violate any term or provision of the Investor's certificate or agreement of
limited partnership or (b) conflict with, or result in any breach of, or
constitute a default under, any Agreement to which the Investor is a party or by
which such Investor is bound. No other action is necessary for the Investor to
enter into this Purchase Agreement and all other Documents contemplated hereby
and to consummate the transactions contemplated hereby and thereby.
5.3. Binding Obligation
This Purchase Agreement constitutes a valid and binding obligation
of the Investor, enforceable in accordance with its terms. Each Document to be
executed by the Investor pursuant hereto, when executed and delivered in
accordance with the provisions hereof, shall be a valid and binding obligation
of the Investor, enforceable in accordance with its terms.
5.4. No Registration Under the Securities Act
The Investor understands that the Series C Stock to be purchased by
it at Closing pursuant to the terms of this Purchase Agreement, and the Common
Stock of the Company into which the Series C Stock is convertible, will not be
registered under the Securities Act and will be issued in reliance upon
exemptions contained in the Securities Act or interpretations thereof, and
cannot be offered for sale, sold or otherwise transferred unless the Series C
Stock being acquired hereunder or the Common Stock of the Company into which the
Series C Stock is convertible subsequently is so registered or qualifies for
exemption from registration under the Securities Act.
5.5. Acquisition for Investment
The Series C Stock, and the Common Stock issuable upon conversion
thereof, is being acquired under this Purchase Agreement by the Investor in good
faith solely for its own account, for investment and not with a view toward
distribution within the meaning of the
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Securities Act. The Series C Stock will not be offered for sale, sold or
otherwise transferred by the Investor without either registration or exemption
from registration under the Securities Act.
5.6. Evaluation of Merits and Risks of Investment
The Investor has knowledge and experience in financial and business
matters such that it is capable of evaluating the merits and risks of its
investment in the Series C Stock being acquired hereunder. The Investor is an
"accredited investor" within the meaning of Rule 501(a) under the Securities
Act. The Investor understands and is able to bear any economic risks associated
with such investment (including, without limitation, the necessity of holding
the Series C Stock for an indefinite period of time, inasmuch as the Series C
Stock has not been registered under the Securities Act).
5.7. Additional Information
The Investor acknowledges that it has been afforded the opportunity
to ask questions and receive answers concerning the Company and to obtain
additional information that it has requested to verify the accuracy of the
information contained herein. Notwithstanding the foregoing, nothing contained
herein shall operate to modify or limit in any respect the representations and
warranties of the Company or to relieve it from any obligations to the Investors
for breach thereof or the making of misleading statements or the omission of
material facts in connection with the transactions contemplated herein.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Purchase Agreement to
issue and sell the Series C Stock on the Closing Date are subject to the
fulfillment, at or prior to Closing, of the following conditions, and failure to
satisfy any such condition shall excuse and discharge all obligations of the
Company to issue and sell the Series C Stock at Closing, unless the failure is
agreed to in writing by the Company:
6.1. Representations and Warranties
The representations and warranties made by each Investor in this
Purchase Agreement or in any Document Furnished by the Investor pursuant to this
Purchase Agreement shall be true and complete in all material respects when made
and on and as of the Closing Date as though the representations and warranties
were made on and as of that date, except for any changes expressly permitted by
this Purchase Agreement.
6.2. Performance
Each Investor shall have performed and complied with all Agreements
and covenants required by this Purchase Agreement to be performed or complied
with by the Investor prior to the Closing Date.
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6.3. Legal Proceedings
No action or proceeding by or before any governmental authority
shall have been instituted or threatened (and not subsequently dismissed,
settled or otherwise terminated) which is reasonably expected to restrain,
prohibit or invalidate the transactions contemplated by this Purchase Agreement,
other than an action or proceeding instituted or threatened by the Company.
6.4. Documents at Closing
All other documents required hereunder to be furnished by each
Investor to the Company prior to or at Closing shall have been so furnished.
6.5. Consents
(a) The Investors shall have received all consents, authorizations
and approvals of governmental and private parties which are required to be
obtained in order to consummate the transactions contemplated hereby, and such
consents, authorizations and approvals shall be in full force and effect on the
Closing Date.
(b) The Company shall have received all consents, authorizations and
approvals of governmental and private parties which are required to be obtained
in order to consummate the transactions contemplated hereby, and such consents,
authorizations and approvals be in full force and effect on the Closing Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INVESTORS
The obligations of the Investors under this Purchase Agreement to
purchase the Series C Stock at Closing are subject to the fulfillment, at or
prior to Closing, of each of the following conditions, and failure to satisfy
any such condition shall excuse and discharge all obligations of the Investors
to purchase the Series C Stock at Closing, unless the failure is agreed to in
writing by the Investor Representative.
7.1. Representations and Warranties
The representations and warranties made by the Company in this
Purchase Agreement and the statements contained in the Disclosure Schedule and
Exhibits attached hereto or in any Document Furnished by the Company pursuant to
this Purchase Agreement shall be true and complete in all material respects
when made and on and as of the Closing Date as though the representations and
warranties were made on and as of that date, except for any changes disclosed to
and approved by the Investor and as otherwise expressly permitted by this
Purchase Agreement.
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7.2. Performance
The Company shall have performed and complied with all Agreements
and covenants required by this Purchase Agreement to be performed or complied
with prior to Closing.
7.3. Absence of Material Adverse Changes
There shall have been no changes that have had or are reasonably
likely to have a Material Adverse Effect since the date of this Purchase
Agreement in the business, operations, prospects, financial condition, Assets or
liabilities of the Company (regardless of whether or not such events or changes
are inconsistent with the representations and warranties given herein by the
Company), except changes contemplated by this Purchase Agreement.
7.4. Legal Proceedings
No action or proceeding by or before any governmental authority
shall have been instituted or threatened (and not subsequently settled,
dismissed or otherwise terminated) which could reasonably be expected to have a
Material Adverse Effect or to restrain, prohibit or invalidate the transactions
contemplated by this Purchase Agreement other than an action or proceeding
instituted or threatened by the Investors.
7.5. SCO Exchange
Prior to or concurrently with Closing, the Company and SCO shall
have completed the SCO Exchange on terms heretofore approved by the Investor
Representative, and SCO shall have waived any preemptive rights, co-sale rights
or rights of first refusal in connection with the transactions contemplated
herein.
7.6. Certificates
The Company shall have delivered to the Investor Representative a
certificate, dated as of the Closing Date and executed by the President of the
Company certifying to the fulfillment of the conditions specified in Sections
7.1 through 7.5.
7.7. Opinion of Counsel
The Investor Representative shall have received an opinion of
Brobeck, Phleger & Harrison LLP, counsel to the Company, dated as of the Closing
Date, to the effect and in the form attached hereto as Exhibit E.
---------
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7.8. Shareholders' Agreement
Prior to or concurrently with Closing, the Company, certain
stockholders of the Company and the Investors shall execute and deliver a
Shareholders' Agreement in the form attached hereto as Exhibit F.
---------
7.9. Registration Rights Agreement
Prior to or concurrently with Closing, the Company, SCO and the
Investors shall execute and deliver a Registration Rights Agreement in the form
attached hereto as Exhibit G.
---------
7.10. Corporate Documents
Concurrently with Closing, the Company shall have provided to the
Investor Representative an incumbency certificate for the officers of the
Company executing this Agreement and any other Documents pursuant hereto and a
copy of each of the following: (a) the articles of incorporation of the Company
as amended and restated pursuant to Section 3.7 and any other filings required
to authorize the issuance of, and designate the terms of, the Series C Stock and
Series D Stock, as certified by the California Secretary of State and by the
secretary of the Company as being true and complete as of the Closing Date; (b)
certificates certifying that the Company is in good standing (or its equivalent)
in its state of incorporation and in any jurisdiction where it is qualified to
do business and in which the Company maintains an office, in each case dated not
more than ten days prior to the Closing Date; (c) the Company's By-laws
certified by the secretary of the Company as being true and complete as of the
Closing Date; and (d) a copy of the resolutions of the Company's Board of
Directors and Shareholders certified by the secretary of the Company as of the
Closing Date authorizing the execution, delivery and performance of this
Purchase Agreement, the issuance of the Shares to the Investors pursuant hereto,
the Redemption and the SCO Exchange.
7.11. Documents at Closing
All documents required to be Furnished by the Company to the
Investors prior to or at Closing shall have been so Furnished.
7.12. Consents
(a) The Investors shall have received all consents, authorizations
and approvals of governmental and private parties which are required to be
obtained in order to consummate the transactions contemplated hereby, and such
consents, authorizations and approvals shall be in full force and effect on the
Closing Date.
(b) The Company shall have received all consents, authorizations and
approvals of governmental and private parties which are required to be obtained
in order to consummate the transactions contemplated hereby, and such consents,
authorizations and approvals be in full force and effect on the Closing Date.
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7.13 Composition of the Board of Directors
The following individuals shall constitute the entire Board of
Directors of the Company (effective as of the Closing): Andrew T. Sheehan,
Robert Leff, Alok Mohan, Michael Silton and Peter Silton.
7.14. ABS Letter
Prior to or concurrently with Closing, the Company shall have
delivered to ABS a certificate substantially in the form of Exhibit H.
---------
8. CLOSING
Subject to the terms and conditions of this Purchase Agreement,
Closing shall take place at 11:00 a.m., Eastern Time no later than the date that
is one business day following the date on which the conditions set forth in
Sections 6 and 7 of this Agreement have been fulfilled at the offices of Hogan &
Hartson L.L.P., Suite 1600, 111 South Calvert Street, Baltimore, Maryland 21202
or at such other time, date or place mutually agreeable to the Company and the
Investor Representative.
9. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION REMEDIES
9.1. Survival of Representations
All representations, warranties, covenants, and other Agreements
made by any party to this Purchase Agreement herein or pursuant hereto shall
also be deemed made on and as of the Closing Date as though such
representations, warranties, covenants, indemnities and other Agreements were
made on and as of such date, and all the representations, warranties, covenants,
indemnities and other Agreements shall survive the Closing Date.
9.2. Agreement of the Company to Indemnify
Subject to the conditions and provisions of this Section 9, the
Company hereby agrees to indemnify, defend and hold harmless the Investor
Indemnified Persons from and against and in any respect of all Claims asserted
against, resulting to, imposed upon or incurred by the Investor Indemnified
Persons (whether such Claims are by, against or relate to the Company or any
other party, including a governmental entity), directly or indirectly, by reason
of or resulting from any misrepresentation or breach of any representation or
warranty, or noncompliance with any covenants, given or made by the Company in
this Purchase Agreement or in the Disclosure Schedule or actions asserted or
claims made by SCO relating to, arising from or connected with, the SCO Exchange
or the transactions contemplated hereby, or by any shareholder of the Company
relating to, arising from or connected with, the Redemption, regardless of
whether the shareholder asserting the action or bringing the Claim participated
or
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declined to participate in the Redemption, specifically including, but not
limited to, Claims based on alleged misstatements or omissions from the offering
memorandum provided to shareholders in connection with the Redemption, except to
the extent the claimed misstatement or omission relates to information provided
by any Investor specifically for inclusion in the offering memorandum.
(b) Except with respect to Claims based upon fraud or intentional
wrongdoing by the Company in connection with the representations, warranties or
covenants of the Company contained in this Agreement or any of the transactions
contemplated by this Agreement, or as otherwise provided in this Agreement, the
Company shall not be required to provide any indemnification under the
provisions of this Section 9 unless and until the aggregate losses of the
Investor Indemnified Persons exceed $100,000, and then only to the extent that
such losses exceed that amount.
9.3. Conditions of Indemnification
The obligations and liabilities of the Company hereunder with respect
to its indemnities pursuant to this Section 9, resulting from any Claim shall be
subject to the following additional terms and conditions:
(a) The indemnified party shall give prompt written notice to the
indemnifying party of any Claim which is asserted against, resulting to, imposed
upon or incurred by such indemnified party and which may give rise to liability
of the indemnifying party pursuant to this Section 9, stating (to the extent
known or reasonably anticipated) the nature and basis of such Claim and the
amount thereof. The omission of the indemnified party so to notify the
indemnifying party of any Claim shall not relieve the indemnifying party from
any liability it may have hereunder except to the extent that (i) the liability
was caused or increased by such omission, or (ii) the ability of the
indemnifying party to reduce the liability was materially adversely affected by
the omission. In addition, the omission of the indemnified party so to notify
the indemnifying party of any such claim shall not relieve the indemnifying
party from any liability it may have otherwise than hereunder. The indemnified
party shall not settle or compromise any claim of a third party for which it is
entitled to indemnification hereunder, without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld).
(b) The indemnifying party may engage counsel with respect to any
such Claim, the representation (including the compromise or settlement of any
Claim) to be undertaken on behalf of the indemnified party, and the indemnified
party shall have right to approve counsel (which approval shall not be
unreasonably withheld). The indemnified party shall have the prior right to
approve any compromise or settlement of any Claim by counsel engaged by the
indemnifying party (which approval shall not be unreasonably withheld). In the
event the indemnifying party elects not to undertake the defense of the Claim by
its own counsel, or in the event that the indemnified party believes that
representation by counsel designated by the indemnifying party would be
inappropriate due to actual or potential conflicts of interest, the
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indemnified party (together with other indemnified parties) will undertake the
defense thereof by a single counsel designated by it, at the reasonable cost and
expense of the indemnifying party.
9.4. Specific Performance
In addition to any other remedies which the Investors may have at law
or in equity, the Company hereby acknowledges that the Series C Stock and the
Company are unique, and that the harm to the Investors resulting from breaches
by the Company of its obligations cannot be adequately compensated by damages.
Accordingly, the Company agrees that the Investors shall have the right to have
all obligations, undertakings, Agreements, covenants and other provisions of
this Purchase Agreement specifically performed by the Company and that the
Investors shall have the right to obtain an order or decree of such specific
performance in any of the courts of the United States of America or of any state
or other political subdivision thereof.
9.5. Remedies Cumulative
The remedies provided herein shall be cumulative and shall not
preclude the assertion by the Company or the Investors of any other rights or
the seeking of any other remedies against the other, or their respective
successors or assigns.
10. TERMINATION
10.1. Termination
This Purchase Agreement may be terminated at any time before the
Closing Date under any one or more of the following circumstances:
(a) by the mutual consent of the Company and the Investor
Representative;
(b) by the Investor Representative, by written notice of termination
delivered to the Company, if any of the conditions set forth in Section 7 have
not been fulfilled by March 31, 1999, provided, that (i) no Investor contributed
to the Company's failure to fulfill the conditions set forth in Section 7 and
(ii) the failure to fulfill the conditions is not the result solely of the
necessity of obtaining government approvals or satisfying governmental
requirements;
(c) by the Company by written notice of termination delivered to the
Investor Representative, if any of the conditions set forth in Section 6 have
not been fulfilled by March 31, 1999, provided that (i) the Company did not
contribute to any Investor's failure to fulfill the conditions set forth in
Section 6 and (ii) the failure to fulfill the conditions is not the result
solely of the necessity of obtaining government approvals or satisfying
governmental requirements; or
(d) by either the Company or the Investor Representative, by written
notice of termination to the other parties hereto, if Closing has not occurred
by March 31, 1999, provided that the failure to close is not the result of a
breach of this Agreement by the terminating party.
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10.2. Effect of Termination
Except as provided below, in the event this Purchase Agreement is
terminated as provided in Section 10.1, this Purchase Agreement shall forthwith
become wholly void and of no effect, and the parties shall be released from all
future obligations hereunder; provided, however, that the obligations of the
--------- -------
Company and the Investors as to confidentiality provided in Section 3.3, the
obligations of the Company under Section 9 and the provisions of Section 11.3
relating to the payment of expenses, shall not be extinguished but shall survive
such termination. The parties hereto shall have any and all remedies to enforce
such obligations provided at law or in equity (including, without limitation,
specific performance).
11. MISCELLANEOUS
11.1. Additional Actions and Documents
After Closing, each of the parties hereto hereby agrees to take or
cause to be taken such further actions, to execute, deliver and file or cause to
be executed, delivered and filed such further Documents, and will obtain such
consents, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of this Purchase Agreement.
11.2. No Brokers
Each of the parties hereto represents and warrants to the other
parties (and to each of them) that such party has not engaged any broker, finder
or agent in connection with the transactions contemplated by this Purchase
Agreement and has not incurred (and will not incur) any unpaid liability to any
broker, finder or agent for any brokerage fees, finders' fees or commissions,
with respect to the transactions contemplated by this Purchase Agreement. Each
party agrees to indemnify, defend and hold harmless each of the other parties
from and against any and all claims asserted against such parties for any such
fees or commissions by any persons purporting to act or to have acted for or on
behalf of the indemnifying party.
11.3. Expenses
The Company also agrees to pay all reasonable out-of-pocket expenses
of the Investors incurred in connection with the transactions contemplated
hereby, including the reasonable legal fees and expenses of Hogan & Hartson
L.L.P., up to an aggregate of $100,000.
11.4. Assignment
Each Investor shall have the right to assign its rights and
obligations under this Purchase Agreement, in whole or in part, to any Affiliate
of an Investor or to designate any of its Affiliates (to the extent permitted by
Law) to receive directly the Series C Stock to be purchased hereunder or to
exercise any of the rights of such Investor, or to perform its obligations. The
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Company shall not assign its rights and obligations under this Purchase
Agreement, in whole or in part, whether by operation of law or otherwise,
without the prior written consent of the Investor Representative, and any such
assignment contrary to the terms hereof shall be null and void and of no force
and effect. In no event shall the assignment by the Company or any Investor of
its rights or obligations under this Purchase Agreement, whether before or after
the Closing, release the Company or the Investor from their respective
liabilities and obligations hereunder.
11.5. Entire Agreement; Amendment
This Purchase Agreement, including the Disclosure Schedule, the
Exhibits and other Documents referred to herein or Furnished pursuant hereto,
constitutes the entire Agreement among the parties hereto with respect to the
transactions contemplated herein, and it supersedes all prior oral or written
Agreements, commitments or understandings with respect to the matters provided
for herein. No amendment or modification of this Purchase Agreement shall be
valid or binding unless set forth in writing and duly executed and delivered by
the Company and the Investor Representative.
11.6. Waiver
No delay or failure on the part of any party hereto in exercising
any right, power or privilege under this Purchase Agreement or under any other
Documents Furnished in connection with or pursuant to this Purchase Agreement
shall impair any such right, power or privilege or be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein, provided that
the signature of the Investor Representative shall be sufficient to effect a
waiver on behalf of all Investors.
11.7. Severability
If any part of any provision of this Purchase Agreement or any other
Agreement or document given pursuant to or in connection with this Purchase
Agreement shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Purchase Agreement.
11.8. Governing Law
This Purchase Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of the State of California (excluding the
choice of law rules thereof).
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11.9. Notices
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by any party to any other party
pursuant to this Purchase Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
telegram, telecopy or telex, addressed as follows:
(i) If to ABS:
ABS Capital Partners III, L.P.
101 California Street
San Francisco, California 94111
Attention: Andrew T. Sheehan
If to H&Q Rainmaker Investors, L.P.:
H&Q Rainmaker Investors, L.P.
One Bush Street
San Francisco, California 94104
Attention: Christopher McKay
If to Hambrecht & Quist California:
H&Q Rainmaker Investors, L.P.
One Bush Street
San Francisco, California 94104
Attention: Lisa Lewis
----------
If to Hambrecht & Quist Employee Venture Fund, L.P. II:
H&Q Rainmaker Investors, L.P.
One Bush Street
San Francisco, California 94104
Attention: Charles Walker
--------------
in each case with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
111 South Calvert Street, Suite 1600
Baltimore, Maryland 21202
Attention: Michael J. Silver
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(ii) If to the Company
Rainmaker Systems, Inc.
1800 Green Hills Road, 2nd Floor
Scotts Valley, California 95066
Attention: Michael Silton
with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
Attention: Bruce Hallett
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, telecopied or telexed in the manner described above, shall be
deemed sufficiently given, served, sent, received or delivered for all purposes
at such time as it is delivered to the addressee (with the return receipt, the
delivery receipt, or (with respect to a telecopy or telex) the answerback or
confirmation being deemed conclusive, but not exclusive, evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
11.10. Headings
Section headings contained in this Purchase Agreement are inserted
for convenience of reference only, shall not be deemed to be a part of this
Purchase Agreement for any purpose, and shall not in any way define or affect
the meaning, construction or scope of any of the provisions hereof.
11.11. Execution in Counterparts
To facilitate execution, this Purchase Agreement may be executed in
as many counterparts as may be required. It shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
Agreement. It shall not be necessary in making proof of this Purchase Agreement
to produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
11.12. Limitation on Benefits
The covenants, undertakings and agreements set forth in this
Purchase Agreement shall be solely for the benefit of, and shall be enforceable
only by, the parties hereto and their
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respective successors, heirs, executors, administrators, legal representatives
and permitted assigns (including specifically, without limitation, any third
party transferees acquiring Series C Stock purchased by the Investors pursuant
hereto).
11.13. Binding Effect
Subject to any provisions hereof restricting assignment, this
Purchase Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
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IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement, or have caused this Agreement to be duly executed on their
behalf, as of the day and year first hereinabove set forth.
RAINMAKER SYSTEMS, INC.
By: /s/ Michael Silton
----------------------------------
Name Michael Silton
Title: President and Chief Executive
Officer
ABS CAPITAL PARTNERS III, L.P.
By: ABS Partners III, LLC
Its General Partner
By:__________________________________
Name: Andrew T. Sheehan
Title: Managing Member
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement, or have caused this Agreement to be duly executed on their
behalf, as of the day and year first hereinabove set forth.
RAINMAKER SYSTEMS, INC.
By:_____________________________________
Name Michael Silton
Title: President and Chief Executive
Officer
ABS CAPITAL PARTNERS III, L.P.
By: ABS Partners III, LLC
its General Partner
By: /s/ Andrew T. Sheehan
------------------------------------
Name: Andrew T. Sheehan
Title: Managing Member
<PAGE>
H&Q RAINMAKER INVESTORS, L.P.
By: /s/ Christopher McKay
--------------------------------
Name: Christopher McKay
HAMBRECHT & QUIST CALIFORNIA
By: /s/ Steven N. Machtinger
-------------------------------
Steven N. Machtinger
General Counsel, Secretary
HAMBRECHT & QUIST EMPLOYEE
VENTURE FUND, L.P. II
By: H&Q Venture Management, L.L.C.
Its General Partner
By: /s/ [SIGNATURE ILLEGIBLE]^^
-------------------------------
Name:
<PAGE>
EXHIBIT A
TO STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 29, 1999
----------------------------
DEFINITIONS
"1998 Audit" has the meaning set forth in Section 3.10.
"ABS" means ABS Capital Partners III, L.P., a Delaware limited
partnership.
"Affiliate" means: (a) with respect to a person, any member of such
person's family; (b) with respect to an entity, any officer, director,
shareholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a person or entity, any person or entity
which directly or indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with such person or entity.
"Agreement" means any concurrence of understanding and intention
between two or more persons (or entities) with respect to their relative rights
and/or obligations or with respect to a thing done or to be done (whether or not
conditional, executory, express, implied, in writing or meeting the requirements
of contract), including, without limitation, contracts, leases, promissory
notes, covenants, easements, rights of way, covenants, commitments, arrangements
and understandings.
"Assets" means assets of every kind and everything that is or may be
available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
"Claims" means all demands, claims, actions or causes of action,
assessments, losses, damages (including, without limitation, diminution in value
and excluding any amounts received under any insurance policy which provides
coverage for the liability to which such damage relates), liabilities, costs and
expenses, including, without limitation, interest, penalties and attorneys' fees
and disbursements and settlements or compromises made by an indemnified party
with the written consent of the indemnifying party.
"Closing" means the Closing of the sale of Series C Stock to the
Investors under this Purchase Agreement.
"Closing Date" is defined in Section 8 of the Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
"Common Stock" means the Company's Common Stock, par value $0.001 per
share.
<PAGE>
"Company" means Rainmaker Systems, Inc., a California corporation.
"Control" means possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
voting securities, by Agreement or otherwise).
"Disclosure Schedule" means the disclosure schedule identified as the
Disclosure Schedule to the Purchase Agreement.
"Documents" means any paper or other material (including, without
limitation, computer storage media) on which is recorded (by letters, numbers or
other marks) information that may be evidentially used, including, without
limitation, legal opinions, mortgages, indentures, notes, instruments, leases,
Agreements, insurance policies, reports, studies, Financial Statements
(including, without limitation, the notes thereto), other written financial
information, schedules, certificates, charts, maps, plans, photographs, letters,
memoranda and all similar materials.
"DOL" means the Department of Labor or its successors.
"Encumbrance" means, with respect to any Asset, any mortgage, lien,
pledge, encumbrance, security interest, deed of trust, option, encroachment,
reservation, order, decree, judgment, condition, restriction, charge, Agreement,
claim or equity of any kind.
"Environmental Laws" means any Laws (including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act),
including any plans, other criteria, or guidelines promulgated pursuant to such
Laws, now or hereafter in effect relating to the generation, production,
installation, use, storage, treatment, transportation, release, threatened
release, or disposal of Hazardous Materials, noise control, or the protection of
human health, safety, natural resources, animal health or welfare, or the
environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"Exhibit" means an exhibit attached to this Agreement.
"Financial Statements" has the meaning set forth in Section 4.3.
"Furnished" means supplied, delivered or provided in any way.
"H&Q Entities" means H&Q Rainmaker Investors, L.P., Hambrecht &
Quist California and Hambrecht & Quist Employee Venture Fund, L.P., II.
"Hazardous Materials" means any wastes, substances, radiation, or
materials (whether solids, liquids or gases) (i) which are hazardous, toxic,
infectious, explosive, radioactive, carcinogenic, or mutagenic; (ii) which are
or become defined as a "pollutants" "contaminants", "hazardous materials,"
"hazardous wastes," "hazardous substances," "toxic
-2-
<PAGE>
substances," "radioactive materials," "solid wastes," or other similar
designations in, or otherwise subject to regulation under, any Environmental
Laws; (iii) without limitation, which contain polychlorinated biphenyls (PCBs),
asbestos, lead-based paints, urea-formaldehyde foam insulation, and petroleum or
petroleum products (including, without limitation, crude oil or any fraction
thereof) or (iv) which pose a hazard to human health, safety, natural resources,
industrial hygiene, or the environment, or an impediment to working conditions.
"Intellectual Property" means all franchises, patents, patent
qualifications, trademarks, service marks, trade names, trade styles, brands,
private labels, copyrights, know-how, computer software, industrial designs and
drawings and general intangibles of a like nature, trade secrets, licenses, and
rights and filings with respect to the foregoing, and all reissues, extensions
and renewals thereof.
"Investor Indemnified Persons" means each Investor and its Affiliates,
employees, representatives, agents, officers, partners, members and directors,
and each other person who "controls" an Investor within the meaning of the
Securities Act.
"Investor Representative" means ABS.
"Knowledge" means to the actual knowledge of the party making the
representation.
"Laws" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, determinations, writs,
injunctions, awards (including, without limitation, awards of any arbitrator),
judgments and decrees applicable to the specified persons or entities and to the
businesses and Assets thereof (including, without limitation, Laws relating to
securities registration and regulation; the sale, leasing, ownership or
management of real property; employment practices, terms and conditions, and
wages and hours; safety, health and fire prevention; and environmental
protection, including Environmental Laws).
"Material Adverse Effect" means any material adverse effect on the
assets, properties, business, operations, prospects, financial condition or
liabilities of the Company.
"Material Asset" means an Asset having a value equal to or in excess
of $50,000, or Assets having an aggregate value in excess of $75,000.
"Ordinary Course of Business" means ordinary course of the Company's
business consistent with past practices and business operations.
"Other Arrangement" means a benefit program or practice providing for
bonuses, incentive compensation, vacation pay, severance pay, insurance,
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, officers or
independent contractors that is not a Plan.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, government or department or
agency of a government.
-3-
<PAGE>
"Plan" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by the Company
(or any predecessor entity); (b) to which the Company (or any predecessor
entity) contributed or was obligated to contribute or to fund or provide
benefits; or (c) which provides or promises benefits to any person who performs
or who has performed services for the Company and because of those services is
or has been (i) a participant therein or (ii) entitled to benefits thereunder.
"Proposal" means any proposal, offer or indication of interest from
any Person, entity or group relating to any acquisition or purchase of all or
any portion of the capital stock or (other than in the Ordinary Course of
Business) assets of the Company except as specifically permitted by this
Purchase Agreement.
"Redemption" means the Company's redemption and repurchase of up to
6,097,561 shares of its outstanding Common Stock at an aggregate price not to
- ---------
exceed $10 million, on the terms and conditions set forth on Exhibit D.
---------
"Release" means any emission, spill, seepage, leak, escape, leaching,
discharge, injection, pumping, pouring, emptying, dumping, disposal, or release
of Hazardous Materials from any source (including without limitation the Real
Property) into or upon the environment, including the air, soil, improvements,
surface water, groundwater, the sewer, septic system, or waste treatment,
storage, or disposal systems at, on, above, or under the Real Property.
"SCO', means The Santa Cruz Operation, Inc., a California corporation
"SCO Exchange" has the meaning set forth in Section 3.7.
"SCO Investment" has the meaning set forth in Section 3.7.
"Section" means a Section (or a subsection) of this Purchase
Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and all
laws promulgated pursuant thereto or in connection therewith.
"Series A Stock" means the Company's Series A Preferred Stock, par
value $0.001 per share.
"Series C Stock" means the Company's Series C Convertible
Participating Preferred Stock, par value $0.001 per share.
"Series D Stock" means the Company's Series D Convertible
Participating Preferred Stock, par value $0.00l per share.
"Shares" means the Series C Stock being purchased by the Investors
pursuant to the terms of this Purchase Agreement.
-4-
<PAGE>
"Taxes" means all federal, state, local and foreign taxes (including,
without limitation, income, profit, franchise, sales, use, real property,
personal property, ad valorem, excise, employment, social security and wage
withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings, or other similar charges of every kind, character or description
imposed by any governmental or quasi-governmental authorities, and any interest,
penalties or additions to tax imposed thereon or in connection therewith.
"Tax Returns" means all federal, state, local, foreign and other
applicable tax returns, declarations of estimated tax reports required to be
filed by the Company (without regard to extensions of time permitted by law or
otherwise).
-5-
<PAGE>
EXHIBIT B
TO STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 29, 1999
-----------------------------
AMENDED AND RESTATED ARTICLES OF INCORPORATION***
<PAGE>
EXHIBIT C
TO STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 29, 1999
----------------------------
[OMITTED]
<PAGE>
EXHIBIT D
TO STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 29, 1999
-----------------------------
REDEMPTION TERMS
As soon as practicable after the Closing, the Company shall prepare
an offering memorandum or other similar document notifying all of the Company's
shareholders of (i) the completion of the Series C Preferred and Series D
Preferred sales and (ii) the repurchase of outstanding shares of the Company on
the following terms:
1. The Company will offer to repurchase up to $10 million aggregate
amount of shares of the Company's Common Stock from the Company's
shareholders (except the Investors).
2. The repurchase price will be $1.64 per share.
3. Shareholders will be offered the right to participate in the
repurchase on a pro rata basis. The maximum aggregate proceeds that
any shareholder may receive in the repurchase will be equal to the
product of (i) $l0 million multiplied by (ii) a fraction in which
the numerator is the number of shares held by a shareholder and the
denominator is the total number of shares held by all shareholders
participating in the repurchase.
4. Shareholders will be offered an election to participate on a pro
rata basis in the following form: (i) cash for all shares to be
repurchased at an initial closing for the repurchase; (ii) a right
to put Common Stock to the Company at $1.64 per share at any time
within [six (6)] months from the date of the initial closing for the
repurchase; or (iii) a combination of (i) and (ii).
5. Holders of Series B Preferred Stock or Series D Preferred Stock will
convert any shares that are to be repurchased to Common Stock.
6. Shareholders who elect to sell shares to the Company in the
repurchase will make standard representations and warranties
regarding ownership of their shares and will also agree to a 180-day
"market stand-off" with respect to shares retained by such
shareholders.
7. The repurchase offer will be made in accordance with applicable
federal and state laws, including any notice requirements under such
laws.
<PAGE>
8. The terms of the repurchase may be revised in order to comply with
certain accounting and tax requirement.
<PAGE>
EXHIBIT E
TO STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 29, 1999
----------------------------
FORM OF BROBECK, PHLEGER & HARRISON LEGAL OPINION***
<PAGE>
EXHIBIT F
TO STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 29, 1999
-----------------------------
SHAREHOLDERS' AGREEMENT***
<PAGE>
EXHIBIT G
TO STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 29, 1999
------------------------------
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT H
TO STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 29, 1999
------------------------------
ABS LETTER ***
<PAGE>
*** Rainmaker Systems, Inc. agrees to furnish supplementally a copy of any of
the foregoing exhibits to the SEC upon request.
<PAGE>
DISCLOSURE SCHEDULE
-------------------
This Disclosure Schedule is delivered pursuant to Section 4 of that
certain Stock Purchase Agreement (the "Agreement") entered into as of
January 29, 1999 by and among Rainmaker Systems, Inc. a California
corporation (the "Company"), ABS Capital Partners III, L.P., a Delaware
limited partnership ("ABS") and H&Q Rainmaker Investors, L.P., Hambrecht &
Quist California and Hambrecht & Quist Employee Venture Fund, L.P. II ("H&Q"
and together with ABS, the "Investors").
Numbered sections of this Disclosure Schedule correspond to the
numbered sections of the Agreement; however, the information contained in
this Disclosure Schedule should be read in its entirety and all disclosures
should be read together and be deemed disclosures for the purposes of all
sections of the Agreement. The titles used in this Disclosure Schedule are
for convenience only and are not to be read as part of the Agreement.
Capitalized terms used in this Disclosure Schedule not otherwise defined
herein shall have the meaning set forth in the Agreement of which this
Disclosure Schedule is a part. Certain agreements and matters are listed in
this Disclosure Schedule for informational purposes only, notwithstanding
the fact that, because they do not rise above applicable materiality
thresholds or otherwise, they are not required to be listed in this
Disclosure Schedule by the terms of the Agreement.
Section 4.2. Capital Structure of the Company
----------------------------------------------
1. Prior to the filing of the Certificate of Designations, the Company is
authorized to issue 47,000,000 shares, of which 45,000,000 shares are
designated Common Stock, par value $0.001, and 2,000,000 shares are
designated Preferred Stock. Of the Preferred Stock, the Company is
authorized to issue 1,143,494 shares of Series A Preferred Stock and
402,710 shares of Series B Preferred Stock. As of the date of the
Agreement, the Company had issued and outstanding 21,460,894 shares of
Common Stock, 574,620 shares of Series A Preferred Stock and 349,160
shares of Series B Preferred Stock. Each share of Series A Preferred
Stock and Series B Preferred Stock is convertible into five shares of
the Company's Common Stock as of the date of the Agreement.
2. The Amended and Restated Articles of Incorporation will authorize the
Company to issue 65,000,000 shares, of which 50,000,000 shares are
designated Common Stock and 15,000,000 are designated Preferred
Stock. The Amended and Restated Articles of Incorporation will further
authorize the issuance of no shares of Series A Preferred Stock,
402,710 shares of Series B Preferred Stock (all of which will be
issued and outstanding or reserved for issuance upon exercise of
certain outstanding warrants), 8,536,585 shares of Series C
Convertible Participating Preferred Stock and 5,717,470 shares of
Series D Convertible Participating Preferred Stock. The Preferred
Stock will be convertible into shares of Common Stock in accordance
with the Amended and Restated Articles of Incorporation.
3. The Company has reserved 2,418,538 shares of Common Stock for
issuance pursuant to exercise of outstanding options granted under the
1995 Stock Option/Stock Issuance Plan; 674,683 shares of Common Stock
for issuance pursuant exercise of outstanding
<PAGE>
EXHIBIT 10.11
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Agreement") is made and entered into as of
January 29, 1999, between RAINMAKER SYSTEMS, INC., a California corporation,
(the "Company"), and THE SANTA CRUZ OPERATION, INC., a California corporation
("SCO").
ARTICLE I
EXCHANGE OF SECURITIES IN RECAPITALIZATION; CONSENT TO FILING OF
RESTATED CERTIFICATE OF INCORPORATION
Section 1.1 Exchange. Subject to the terms and conditions hereof, on the
--------
Closing Date (as defined below) SCO agrees to deliver that number of securities
of the Company currently held by SCO consisting of the Convertible Debenture in
the principal amount of ($995,529.50) and related warrants convertible into
2,844,370 shares of Common Stock of the Company and Series A Convertible
Preferred Stock convertible into 2,873,100 shares of Common Stock (collectively,
the "Old Securities"). On the Closing Date (as defined below) Company agrees to
issue to SCO, in exchange for the Old Securities, 5,717,470 shares of Series D
Convertible Participating Preferred Stock (the "New Securities") of the Company
(the "Exchange").
ARTICLE II
CLOSING DATE; DELIVERY
Section 2.1 Closing Date and Location. The consummation of the Exchange as
-------------------------
described above (the "Closing") shall occur on the same date as the closing of
the Investment (as defined in Section 5.1 hereof). The Closing shall be held
at the offices of Brobeck, Phleger & Harrison LLP, 38 Technology Drive, Irvine,
California 92618, or at such other place as the Company, SCO and ABS Capital
Partners III, L.P. ("ABS") may mutually agree in writing.
Section 2.2 Delivery. At the Closing, the Company shall deliver to SCO
--------
certificates representing the New Securities, registered in the name of SCO,
against delivery by SCO of the Old Securities to the Company.
Section 2.3 Consummation of Closing. All acts, deliveries and
-----------------------
confirmations comprising the Closing regardless of chronological sequence shall
be deemed to occur contemporaneously and simultaneously upon the occurrence of
the last act, delivery or confirmation of the Closing and none of such acts,
deliveries or confirmations shall be effective unless and until the last of same
shall have occurred.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization. The Company is a corporation duly organized,
------------
existing and in good standing under the laws of the state of California. The
Company has the corporate power to
<PAGE>
own, lease and operate its property and to carry on its business as now being
conducted.
Section 3.2 Valid Securities. The New Securities have been duly
----------------
authorized. The New Securities, when issued and exchanged for in accordance with
the terms hereof, will be fully paid, validly issued and nonassessable. All
shares of Common Stock issuable upon conversion of the New Securities have been
duly authorized, validly reserved for issuance and upon conversion of the New
Securities in accordance with the terms thereof, will be fully paid, validly
issued and nonassessable.
Section 3.3 Approval. The execution, delivery and performance of this
--------
Agreement by the Company will have been duly approved by the Board of Directors
of the Company and all other actions required to authorize and effect the
Exchange will have been duly taken and approved.
Section 3.4 Authorization. The Company has obtained, or is in the process
-------------
of obtaining, all licenses, permits and other governmental authorizations
necessary to the conduct of the business of the Company; such licenses, permits
and other governmental authorizations obtained are in full force and effect; and
the Company is in all material respects complying therewith.
Section 3.5 Authority: No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) The Company has all requisite power, right and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement have been
duly and validly approved by all necessary action on the part of the Company and
no other proceedings on the part of the Company are necessary to approve this
Agreement or to consummate the transactions contemplated hereby.
(b) The execution and delivery by the Company of this Agreement
does not, and consummation of the transactions contemplated by this Agreement
will not, (i) conflict with, or result in any violation or breach of any
provision of, the governing documents of the Company, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which the
Company is a party or by which any of its properties or assets may be bound, or
(iii) conflict with or violate any permit, concession, franchise,
license,judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company, or any of its properties or assets, except in the
case of (ii) and (iii) for any such violations, defaults, breaches,
terminations, cancellations, accelerations, losses or conflicts which would not
materially burden or delay the consummation of the transactions contemplated
hereby.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to the Company in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for such consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not materially
burden or delay the consummation of the
2
<PAGE>
transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SCO
SCO hereby represents and warrants to the Company as follows:
Section 4.1 Title. SCO owns the Old Securities free and clear of all liens,
-----
encumbrances, charges, security interests, claims and assessments, and the Old
Securities are subject to no restrictions with respect to transferability except
in compliance with applicable securities laws as set forth in the legend
thereon. The Old Securities represent all of SCO's right, title and interest in
and to equity securities of the Company immediately prior to the Closing.
Section 4.2 Authority. This Agreement has been duly executed and delivered
---------
by SCO and constitutes a valid and legally binding obligation of SCO,
enforceable against SCO in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
Section 4.3 Investment Representation. The New Securities will be acquired
-------------------------
solely for investment purposes, for SCO's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof.
SCO has no present intention or any agreement to sell, grant any participation
in or otherwise distribute the New Securities.
Section 4.4 Investment Experience. SCO believes it has acquired sufficient
---------------------
information about the Company to reach an informed decision to exchange the Old
Securities for the New Securities. SCO has a preexisting personal or business
relationship with the Company and its officers, directors and controlling
persons, and has such business and financial experience and knowledge of the
Company as is required to give it the capacity to protect its own interests in
connection with the exchange of the Old Securities for the New Securities.
Section 4.5 Restricted Securities. SCO understands that the New Securities
---------------------
are being offered in a transaction not involving any public offering in the
United States within the meaning of the Securities Act of 1933, as amended (the
"Securities Act'), that such New Securities have not been registered under the
Securities Act or state securities laws and that it may not resell, pledge or
otherwise transfer any such New Securities in the absence of registration or the
availability of an exemption from registration under the Securities Act and
regulations promulgated thereunder and applicable state securities laws.
Section 4.6 Legends. SCO understands that the New Securities and any
-------
securities issued in respect thereof or in exchange therefor, may bear the
following legend (or a substantially similar legend) until such time, if any, as
the New Securities or such securities may be resold pursuant to Rule 144(k)
under the Securities Act (or a comparable successor provision):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("THE ACT")
3
<PAGE>
OR STATE SECURITIES LAWS AND CANNOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION OR
THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER
THE ACT AND REGULATIONS PROMULGATED THEREUNDER AND
APPLICABLE STATE SECURITIES LAWS."
Section 4.7 Finder's Fees. SCO has not retained any finder or broker in
-------------
connection with the transactions contemplated by this Agreement and hereby
agrees to indemnify and to hold the Company harmless for and from any liability
for any commission or compensation in the nature of a finder's fee to any broker
or other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which SCO, or any person or entity acting
on behalf of SCO, is or may be responsible as a result of the transactions
contemplated hereby.
Section 4.8 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) SCO has all requisite power, right and authority to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement have been duly and validly
approved by all necessary action on the part of SCO, and no other proceedings on
the part of SCO are necessary to approve this Agreement or to consummate the
transactions contemplated hereby.
(b) The execution and delivery by SCO of this Agreement does not,
and consummation of the transactions contemplated by this Agreement will not,
(i) conflict with, or result in any violation or breach of any provision of, the
governing documents of SCO, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which SCO is a party or by which any of
its properties or assets may be bound, or (iii) conflict with or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to SCO, or any of its properties or
assets, except in the case of (ii) and (iii) for any such violations, defaults,
breaches, terminations, cancellations, accelerations, losses or conflicts which
would not materially burden or delay the consummation of the transactions
contemplated hereby.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to SCO in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for such consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not materially burden or delay the consummation
of the transactions contemplated hereby.
4
<PAGE>
ARTICLE V
TERMINATION OF EXISTING RIGHTS; CONSENT TO THE ABS INVESTMENT;
AUTHORIZE AND EFFECT REDEMPTION
Section 5.1 ABS Investment. SCO hereby consents to the investment in
--------------
the Company (the "Investment") pursuant to the Stock Purchase Agreement by and
among the Company and the Series C Preferred Stock Investors named therein,
dated even date herewith (the "Series C Stock Purchase Agreement"). As such, SCO
waives any and all rights that may have been triggered by the Investment
including, but not limited to, any right of first refusal or co-sale right, and
the Company and SCO hereby agree to terminate all previously existing agreements
and rights as follows:
(a) That certain Series A Preferred Stock and Subordinated
Convertible Debenture Agreement by and among the Company and SCO dated January
24, 1995 (the "SCO Purchase Agreement"), as amended, is hereby terminated;
(b) That certain Registration Rights Agreement by and among the
Company and SCO dated January 24, 1995 (the "SCO Registration Rights Agreement")
is hereby terminated;
(c) That certain Right of First Offer and Co-Sale Agreement by
and among the Company and SCO dated January 24, 1995 (the "SCO Right of First
Offer and Co-Sale Agreement") is hereby terminated; and
(d) That certain Subordination Agreement, as amended, by and
among the Company and SCO dated January 24, 1995 (the "SCO Subordination
Agreement") is hereby terminated.
Section 5.2 Redemption. As soon as practicable after the Closing, the
----------
Company shall consummate the Redemption (as defined in the Series C Stock
Purchase Agreement) on the terms and conditions set forth on Exhibit D to the
Series C Stock Purchase Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Obligations of the Company. The Company's
----------------------------------------
obligation to issue the New Securities to SCO at the Closing is subject to the
fulfillment on or prior to the Closing Date of each of the following conditions:
(a) Representations and Warranties Correct; Performance of
------------------------------------------------------
Obligations. The representations and warranties of SCO in Article IV hereof
- -----------
shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and as
of such date; and SCO shall have performed all obligations and conditions herein
required to be performed by it on or prior to the Closing Date.
(b) No Injunction, Order, Etc. There shall be no injunction,
-------------------------
order or decree of any nature of any court or government authority of competent
jurisdiction that is in effect that restrains or prohibits the consummation of
the transactions contemplated hereby.
5
<PAGE>
(c) Closing of the Investment. The Investment shall have closed.
-------------------------
(d) Registration Rights Agreement. The Company, ABS and SCO each
-----------------------------
shall have executed the Registration Rights Agreement by and among the Company,
SCO and the other Investors named therein (the "Registration Rights Agreement").
(e) Shareholders' Agreement. The Company, the Investors named in
-----------------------
the Series C Stock Purchase Agreement and certain of the Company's shareholders
agreeable to ABS each shall have executed the Shareholders' Agreement by and
among the Company and the shareholders named therein (the "Shareholders'
Agreement").
Section 6.2 Conditions to Obligations of SCO: SCO's obligation to deliver
--------------------------------
the Old Securities and exchange them for the New Securities of the Company at
the Closing is subject to fulfillment on or prior to the Closing Date of each of
the following conditions
(a) Representations and Warranties Correct; Performance of
------------------------------------------------------
Obligations. The representations and warranties of the Company in Article III
- -----------
hereof shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and as
of such date; and the Company shall have performed all obligations and
conditions herein required to be performed by it on or prior to the Closing
Date.
(b) No Injunction, Order, Etc. There shall be no injunction, order
-------------------------
or decree of any nature of any court or government authority of competent
jurisdiction that is in effect that restrains or prohibits the consummation of
the transactions contemplated hereby.
(c) Filing of the Restated Articles of Incorporation. The Company
------------------------------------------------
has filed the Amended and Restated Articles of Incorporation authorizing the
issuance of the Series C Convertible Preferred Stock and the New Securities and
designating the rights, preferences, privileges and restrictions granted to or
imposed upon the respective series of shares or the holders thereof pursuant to
the Series C Stock Purchase Agreement, the Shareholders' Agreement, and the
Registration Rights Agreement.
(d) Closing of the Investment. The Investment shall have closed.
-------------------------
(e) Registration Rights Agreement. The Registration Rights
-----------------------------
Agreement shall have been executed.
(f) Shareholders' Agreement. The Shareholders' Agreement shall have
-----------------------
been executed.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of California.
6
<PAGE>
Section 7.2 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive the closing of the transactions
contemplated hereby.
Section 7.3 Successors and Assigns. Except as expressly provided herein,
----------------------
the rights and obligations hereunder may not be assigned or delegated by SCO or
the Company without the prior written consent of the other. The provisions
hereof shall inure to the benefit of, and be binding upon, the successors and
permitted assigns of the parties hereto.
Section 7.4 Amendment. Any term of this Agreement may be amended and the
---------
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and SCO.
Section 7.5 Integration. This Agreement and any exhibits hereto, as well as
-----------
agreements or other documents specifically referred to in this Agreement
constitute the entire agreement between the parties with regard to the subject
matter hereof. This Agreement supersedes all previous agreements between parties
including, but not limited to, that certain SCO Purchase Agreement, the SCO
Registration Rights Agreement, the SCO Right of First Offer and Co-Sale
Agreement and the SCO Subordination Agreement.
Section 7.6 Notices and Other Communications. Every notice or other
--------------------------------
communication required or contemplated by this Agreement by either party shall
be deemed sufficient upon delivery when delivered either by (i) personal
delivery, (ii) postage prepaid return receipt requested by registered or
certified mail, (iii) overnight courier, such as Federal Express or UPS, or (iv)
facsimile in each case addressed to the Company or SCO as the case may be at the
address set forth on the signature page hereto or at such other address as the
intended recipient previously shall have designated by written notice.
Section 7.7 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to any person or entity hereunder, upon any
breach or default under this Agreement, shall impair any such right, power or
remedy nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
person or entity hereunder of any breach or default under this Agreement, or any
waiver on the part of any such person or entity of any provisions or conditions
of this Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies either under this
Agreement, or by law or otherwise shall be cumulative and not alternative.
Section 7.8 Severability. In case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 7.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. Execution and delivery of this Agreement by
exchange of facsimile copies bearing the
7
<PAGE>
facsimile signature of a party hereto shall constitute a valid and binding
execution and delivery of this Agreement by such party.
Section 7.10 Attorneys' Fees. If any action or proceeding shall be
---------------
commenced to enforce this Agreement or any right arising in connection with this
Agreement, the prevailing party in such action or proceeding shall be entitled
to recover from the other party the reasonable attorneys' fees, costs and
expenses incurred by such prevailing party in connection with such action or
proceeding.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
RAINMAKER SYSTEMS, INC.
By: /s/ Michael Silton
----------------------------------------
. Name: Michael Silton
Title: Chief Executive Officer
Address: 1800 Green Hills Road
Scotts Valley, California 95066
THE SANTA CRUZ OPERATION, INC.
By: ________________________________________
Name:
Title:
Address: 400 Encinal Street
Santa Cruz, California 95061
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
RAINMAKER SYSTEMS, INC.
By:
________________________________________
Name: Michael Silton
Title: Chief Executive Officer
Address: 1800 Green Hills Road
Scotts Valley, California 95066
SANTA CRUZ OPERATION, INC.
By: /s/ Job W Luhtala
----------------------------------------
Name: Job W Luhtala
Title: CFO
Address: 400 Encinal Street
Santa Cruz, California 95061
10
<PAGE>
EXHIBIT 10.12
Execution Copy
ASSET PURCHASE AGREEMENT
By and Between
SAVOIR TECHNOLOGY GROUP, INC.
AND
UNIDIRECT CORPORATION
May 15, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS................................................. 1
ARTICLE 2 PURCHASE AND SALE; CLOSING.................................. 1
2.1 Purchase and Sale of Assets................................. 1
2.2 Assumption of Liabilities................................... 2
2.3 Excluded Assets............................................. 2
2.4 Purchase Price.............................................. 3
2.5 Closing Date................................................ 3
2.6 Escrow of Funds............................................. 3
2.7 Tax Treatment............................................... 3
2.8 Accounting Treatment........................................ 3
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF UDC....................... 3
3.1 Organization................................................ 4
3.2 Authority................................................... 4
3.3 Purchased Assets/Assumed Liabilities Statements............. 4
3.4 Business Changes............................................ 4
3.5 Taxes....................................................... 5
3.6 Compliance with Law......................................... 6
3.7 Litigation.................................................. 6
3.8 Contracts................................................... 6
3.9 No Default.................................................. 7
3.10 Business and Customers...................................... 7
3.11 Inventories................................................. 7
3.12 Proprietary Rights.......................................... 8
3.13 Insurance................................................... 9
3.14 Brokers or Finders.......................................... 9
3.15 ERISA....................................................... 9
3.16 Underlying Documents........................................ 9
3.17 Full Disclosure............................................. 10
3.18 Accounts Payable............................................ 10
3.19 Liabilities................................................. 10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SVTG...................... 10
4.1 Organization................................................ 10
4.2 Authority................................................... 10
4.3 No Conflict................................................. 11
4.4 Brokers or Finders.......................................... 11
4.5 Business Changes............................................ 11
4.6 Full Disclosure............................................. 12
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS................... 12
5.1 Conduct of Business in Normal Course........................ 12
5.2 Preservation of Business and Relationships.................. 12
5.3 Maintenance of Insurance.................................... 12
5.4 Employees and Compensation.................................. 12
5.5 No Other Bids............................................... 13
ARTICLE 6 ADDITIONAL AGREEMENTS....................................... 13
6.1 Access to Information....................................... 13
6.2 Legal Conditions............................................ 13
6.3 Good Faith.................................................. 14
6.4 Employee Retention and Motivation Program................... 14
6.5 Employee Benefits........................................... 14
6.6 Best Efforts................................................ 14
6.7 Payment of Assumed Liabilities.............................. 14
6.8 Cooperative Marketing Programs.............................. 14
ARTICLE 7 CONDITIONS PRECEDENT........................................ 15
7.1 Conditions to Obligations of SVTG and UDC................... 15
7.2 Conditions to Obligations of SVTG........................... 15
7.3 Conditions to Obligations of UDC............................ 16
ARTICLE 8 INDEMNIFICATION AND ESCROW.................................. 17
8.1 Indemnification by UDC...................................... 17
8.2 Escrow Fund................................................. 18
8.3 Escrow Period............................................... 18
8.4 Protection of Escrow Fund................................... 18
8.5 Claims Upon Escrow Fund..................................... 18
8.6 Objections to Claims........................................ 19
8.7 Resolution of Conflicts; Arbitration........................ 19
8.8 Distribution upon Termination of Escrow Period.............. 20
8.9 Escrow Agent's Duties....................................... 20
8.10 Indemnification by SVTG..................................... 20
8.11 Indemnification Procedure................................... 21
ARTICLE 9 PAYMENT OF EXPENSES......................................... 22
ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER........................... 22
10.1 Termination................................................. 22
10.2 Effect of Termination....................................... 22
10.3 Amendment................................................... 23
10.4 Extension; Waiver........................................... 23
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 11 GENERAL..................................................... 23
11.1 Notices..................................................... 23
11.2 Headings.................................................... 24
11.3 Entire Understanding........................................ 24
11.4 Counterparts................................................ 24
11.5 Binding Nature.............................................. 24
11.6 Applicable Law.............................................. 24
11.7 Attorneys' Fees............................................. 24
</TABLE>
-iii-
<PAGE>
EXHIBITS
--------
Exhibit A Escrow Agreement
Exhibit B Disclosure Schedule
Exhibit C Promissory Note
Exhibit 7.2(d) Opinion of UDC's Counsel
Exhibit 7.2(g) Form of Employment Agreement
Exhibit 7.2(i) Covenant Not to Compete
Exhibit 7.3(c) Opinion of SVTG's Counsel
SCHEDULES
---------
Schedule 2.1(a) Inventories
Schedule 2.1(b) Intangibles
Schedule 2.1(c) Books and Records
Schedule 2.1(d) Permits
Schedule 2.1(e) Programs
Schedule 2.2(a) Accounts Payable
Schedule 2.2(b) Contractual Liabilities
Schedule 2.7 Tax Treatment
Schedule 3.2 Authority
Schedule 3.4 Business Changes
Schedule 3.8 Contracts
Schedule 3.10 Customers
Schedule 3.11(a) Inventory on Hand (Less than 90 days)
Schedule 3.11(b) Inventory on Hand (Greater than 90 days)
Schedule 3.12 Proprietary Rights
Schedule 3.13 Insurance
Schedule 3.15 Benefit Plans
Schedule 3.19 Liabilities
Schedule 5.1 Conduct of Business
Schedule 5.4 Compensation
Schedule 6.8 Cooperative Marketing Programs
Schedule 7.1(d) Third-Party Approvals
Schedule 7.2(f) Material Adverse Change
Schedule 7.2(h) UDC's Designated Employees
-iv-
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made and entered into as
of the 15th of May, 1998 by and between SAVOIR TECHNOLOGY GROUP, INC., a
-----------------------------
Delaware corporation ("SVTG"), and UNIDIRECT CORPORATION, a California
---------------------
corporation ("UDC"),
WITNESSETH:
WHEREAS, SVTG desires to purchase from UDC, and UDC desires to sell to
SVTG substantially all of UDC's UniDirect catalog and VarCity distribution
business and related electronic software distribution software programs
(collectively, the "Software Distribution Assets") and disclosed liabilities for
cash and other considerations on the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements and covenants herein contained, SVTG and UDC agree as
follows:
ARTICLE 1
DEFINITIONS
-----------
The terms defined in this Agreement shall have their respective defined
meanings whenever such terms are used in this Agreement, unless the context
expressly or by necessary implication otherwise requires.
ARTICLE 2
PURCHASE AND SALE; CLOSING
--------------------------
2.1 Purchase and Sale of Assets. Subject to the terms and conditions set
---------------------------
forth in this Agreement, UDC agrees to sell, convey, transfer, assign, and
deliver to SVTG, and SVTG agrees to purchase from UDC on the Closing Date (as
defined herein), all of the following Software Distribution Assets of UDC:
(a) Inventories. UDC inventories relating to the Software
-----------
Distribution Assets which are on hand as of the date of the Closing (as defined
herein) listed in Schedule 2.1(a) (the "Inventories");
(b) Intangibles. UDC rights in, to or under any trademarks,
-----------
copyrights, licenses, URL's and other intangibles relating to the Software
Distribution Assets listed in Schedule 2.1(b);
-1-
<PAGE>
(c) Books and Records. All papers and records in UDC's care, custody,
-----------------
or control solely relating to the Software Distribution Assets and the
operation thereof, including, without limitation, all purchasing and sales
records, customer and vendor lists and all accounting and financial records
(collectively, the "Books and Records") listed in Schedule 2.1(c), excluding any
minute books, the seal and stock records of UDC;
(d) Permits. UDC rights in, to or under any governmental licenses,
-------
environmental and other permits, approvals and authorizations relating to the
Software Distribution Assets listed in Schedule 2.1(d); and
(e) Programs. All software distribution programs set forth in
--------
Schedule 2.1(e).
2.2 Assumption of Liabilities. The Software Distribution Assets shall
-------------------------
be conveyed on the Closing Date to SVTG by UDC free and clear of all
liabilities, obligations, liens and encumbrances, except as follows:
(a) SVTG will assume all accounts payable disclosed in Schedule
2.2(a). Accounts payable shall not exceed acquired inventories by more than Two
Hundred Thousand Dollars ($200,000);
(b) SVTG will assume those contractual obligations relating to
certain vendor relationships disclosed in Schedule 2.2(b); and
(c) Except as set forth in this Section 2.2 and except for any
continuing obligations under the accounts payable which SVTG is assuming and
agrees to pay in the normal course of business and in any event not later than
the twentieth (20th) day after coming due, SVTG is not assuming any debt,
liability or obligation of UDC, whether known or unknown, fixed or contingent,
including, without limitation, any liabilities or obligations arising out of or
connected in any way with any retirement, medical, life, disability or other
employee benefit plan of UDC, including liabilities under ERISA (as defined in
Section 3.15 below) section 601 et seq. and section 4980B(f) of the Internal
Revenue Code of 1986, as amended, that may arise in connection with this
Agreement. All liabilities arising from or related to UDC's operations or UDC's
ownership of the Software Distribution Assets through the Closing Date shall
remain the responsibility of UDC. SVTG agrees that it will not sell goods on
credit to customers whose account with UDC is more than twenty (20) days
overdue, provided that UDC gives SVTG timely written notice of the overdue
account.
2.3 Excluded Assets. Notwithstanding anything herein to the contrary,
---------------
the Software Distribution Assets purchased by SVTG shall not include UDC's
accounts receivable. "Accounts Receivable" shall mean any right of UDC to
payment for products or services prior to the Closing Date and any other cash
accounts receivable arising from the operation of UDC prior to the Closing Date.
However, SVTG agrees to use its best efforts in assisting UDC in collecting
accounts receivable relating to the Software Distribution Assets after the
Closing Date. Such best efforts shall include, but shall not be limited to,
SVTG's refusal to sell goods on credit to customers whose account with UDC is
more than twenty
-2-
<PAGE>
(20) days overdue, provided that UDC gives SVTG timely written notice of the
overdue account.
2.4 Purchase Price. As consideration for the purchase of the Software
--------------
Distribution Assets, SVTG shall pay the following amounts (collectively, the
"Purchase Price"):
(a) To UDC, Two Million Nine Hundred Thousand Dollars ($2,900,000),
less Three Hundred Thousand Dollars ($300,000) to be held by the escrow agent
pursuant to the terms of Article 8 hereof, at Closing by wire transfer to a bank
or banks designated by UDC;
(b) To U.S. Bank Trust, N.A., as escrow agent, Three Hundred Thousand
Dollars ($300,000) which shall be deposited by SVTG with the escrow agent on the
Closing Date in accordance with the terms of Article 8 hereof; and
(c) To UDC, One Million Seven Hundred Thousand Dollars ($1,700,000)
pursuant to a promissory note substantially in the form attached hereto as
Exhibit C.
2.5 Closing Date. The Closing under this Agreement (the "Closing") shall
------------
be held on May 15, 1998 at the offices of Pillsbury Madison & Sutro LLP, 2550
Hanover Street, Palo Alto, California, at 10:00 a.m. on such date, or at such
other time and place as SVTG and UDC may agree upon in writing. Such date on
which the Closing is to be held is herein referred to as the "Closing Date."
2.6 Escrow of Funds. UDC agrees that Three Hundred Thousand Dollars
---------------
($300,000) paid to UDC under Section 2.4(a) of this Agreement (the "Funds") will
be placed in escrow, as described in Article 8 hereof, as security for
indemnification as provided in Article 8 until one hundred twenty (120) days
following the Closing Date. On such date, SVTG shall instruct the escrow agent
to promptly deliver the remaining Funds to UDC.
2.7 Tax Treatment. The parties intend that the purchase and sale of the
-------------
Software Distribution Assets will be as described in Schedule 2.7.
2.8 Accounting Treatment. The parties intend that the purchase and sale of
--------------------
the Software Distribution Assets will be accounted for using purchase
accounting.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF UDC
-------------------------------------
Except as otherwise set forth in the disclosure schedule attached hereto as
Exhibit B (the "Disclosure Schedule"), UDC represents and warrants to SVTG as of
the date hereof as follows:
-3-
<PAGE>
3.1 Organization. UDC is a corporation duly organized, validly existing
------------
and in good standing under the laws of the State of California, and is not
required to be qualified in any other jurisdiction except where the failure to
be so qualified will not have a material adverse effect on UDC and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
3.2 Authority. UDC has all requisite corporate power and authority to
---------
enter into this Agreement, the Escrow Agreement and the Covenant Not to Compete
(collectively referred to herein as the "Collateral Agreements") and, subject to
satisfaction of the conditions set forth herein, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Collateral Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of UDC. This Agreement and the Collateral
Agreements have been duly executed and delivered by UDC, and constitutes the
valid and binding obligation of UDC, enforceable in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency, reorganization or
other similar laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies. Except as set forth in Schedule 3.2 and provided
the conditions set forth in Article 7 are satisfied, the execution and delivery
of this Agreement and the Collateral Agreements do not or will not, and the
consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation under (a) any provision of the
Articles of Incorporation or the Bylaws of UDC or (b) any material agreement or
instrument, permit, franchise, license, judgment or order, applicable to UDC or
its properties or assets.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority (a "Governmental Entity"), is required by or with
respect to UDC in connection with the execution and delivery of this Agreement
or the Collateral Agreements by UDC or the consummation by UDC of the
transactions contemplated hereby or thereby, except for such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and the laws
of any foreign country.
3.3 Purchased Assets/Assumed Liabilities Statements. UDC has furnished
-----------------------------------------------
SVTG with financial statements setting forth (i) all assets sold to SVTG and
(ii) all liabilities assumed by SVTG pursuant to Section 2.2(a) hereof
(collectively, the "Purchased Assets/Assumed Liabilities Statements").
3.4 Business Changes. Except as set forth in Schedule 3.4, since December
----------------
31, 1997, except as otherwise contemplated by this Agreement or as disclosed in
writing to SVTG, UDC has conducted its business relating to the Software
Distribution assets only in the ordinary and usual course and, without limiting
the generality of the foregoing, with
-4-
<PAGE>
respect to the Software Distribution Assets but not with respect to any other
business or asset of UDC:
(a) There have been no changes in the condition (financial or
otherwise), business, net worth, assets, properties, employees, operations,
obligations or liabilities of UDC which, in the aggregate, have had or may be
reasonably expected to have a materially adverse effect on the condition,
business, net worth, assets, prospects, properties or operations of UDC, other
than those changes or proposed changes set forth in Schedule 3.4.
(b) UDC has not paid any obligation or liability, or discharged,
settled or satisfied any claim, lien or encumbrance in excess of Twenty-Five
Thousand Dollars ($25,000), except for current liabilities in the ordinary and
usual course of business.
(c) UDC has not mortgaged, pledged, or otherwise encumbered (including
any purchase money encumbrances) any of the Software Distribution Assets.
(d) UDC has not disposed of, or agreed to dispose of, by sale, lease,
license or otherwise, any of the Software Distribution Assets other than
inventory sold or returned in the normal course of business.
(e) UDC has not entered into any transaction or contract, or made any
commitment to do the same, except in the ordinary and usual course of business.
(f) UDC has not sold, assigned, transferred or conveyed, or committed
itself to sell, assign, transfer or convey, any Proprietary Rights (as defined
in Section 3.12 hereof).
3.5 Taxes. To the best of its knowledge, UDC has accurately and
-----
completely filed with the appropriate United States, state, local and foreign
governmental agencies all tax returns and reports required to be filed (subject
to permitted extensions applicable to such filings), and has paid or accrued in
full all taxes shown as owing on such tax returns, duties, charges, withholding
obligations and other governmental liabilities as well as any interest,
penalties, assessments or deficiencies, if any, due to, or claimed to be due by
(and not contested in good faith), any governmental authority (including taxes
on properties, income, franchises, licenses, sales and payrolls). (All such
items are collectively referred to herein as "Taxes"). The UDC Purchase
Assets/Assumed Liabilities Statements fully accrue or reserve or will fully
accrue or reserve all current and deferred Taxes. UDC is not a party to any
pending action or proceeding, nor to UDC's knowledge is any such action or
proceeding threatened by any governmental authority for the assessment or
collection of Taxes. No liability for Taxes has been incurred other than in the
ordinary course of business. There are no liens for Taxes except for liens for
property taxes not yet delinquent. UDC is not a party to any Tax sharing, Tax
allocation, Tax indemnity or statute of limitations extension or waiver
agreement, and in the past five (5) years has not been included on any
consolidated combined or unitary return with any other entity.
-5-
<PAGE>
3.6 Compliance with Law. All material licenses, franchises, permits,
-------------------
clearances, consents, certificates and other evidences of authority of UDC which
are necessary to the conduct of UDC's business as it relates to the Software
Distribution Assets ("Permits") are in full force and effect and UDC is not in
violation of any Permit in any material respect. Except for possible exceptions,
the curing or non-curing of which would not have a material adverse effect on
the condition (financial or otherwise), business, net worth, assets, prospects,
properties or operations of UDC with respect to the Software Distribution
Assets, the business of UDC with respect to the Software Distribution Assets has
been conducted in accordance with all applicable laws, regulations, orders and
other requirements of governmental authorities.
3.7 Litigation. There is no claim, dispute, action, proceeding, notice,
----------
order, suit, appeal or investigation, at law or in equity, pending against UDC
with respect to the Software Distribution Assets, or involving any of its assets
or properties relating to the Software Distribution Assets, before any court,
agency, authority, arbitration panel or other tribunal (other than those, if
any, with respect to which service of process or similar notice has not yet been
made on UDC), and none have been threatened. UDC and its officers are aware of
no facts which, if known to the stockholders, directors, officers, customers,
governmental authorities or other persons, would result in any such claim,
dispute, action, proceeding, suit or appeal or investigation which would have a
material adverse effect on the condition (financial or otherwise), business, net
worth, assets, prospects, properties or operations of UDC with respect to the
Software Distribution Assets. With respect to the Software Distribution Assets,
UDC is not subject to any order, writ, injunction or decree of any court,
agency, authority, arbitration panel or other tribunal, nor is it in default
with respect to any notice, order, writ, injunction or decree.
3.8 Contracts. UDC has provided SVTG with a complete list in Schedule 3.8
---------
of each executory contract and agreement the subject of which is the Software
Distribution Assets in the following categories to which UDC is a party, or by
which it is bound in any respect, (a) agreements for the purchase, sale, lease
or other disposition of equipment, goods, materials, research and development,
supplies, studies or capital assets, or for the performance of services, in any
case involving more than Two Thousand Five Hundred Dollars ($2,500); (b)
contracts or agreements for the joint performance of work or services, and all
other joint venture agreements; (c) management or employment contracts,
consulting contracts, collective bargaining contracts, termination and severance
agreements; (d) notes, mortgages, deeds of trust, loan agreements, security
guarantees, debentures, indentures, credit agreements and other evidences of
indebtedness; (e) pension, retirement, profit-sharing, deferred compensation,
bonus, incentive, life insurance, hospitalization or other employee benefit
plans or arrangements (including, without limitation, any contracts or
agreements with trustees, insurance companies or others relating to any such
employee benefit plan or arrangement); (f) stock option, stock purchase,
warrant, repurchase or other contracts or agreements relating to any share of
capital stock of UDC; (g) contracts or agreements with agents, brokers,
consignees, sales representatives or distributors; (h) contracts or agreements
with any director, officer, employee, consultant or stockholder; (i) powers of
attorney or similar authorizations granted by UDC to third parties; (j)
licenses, sublicenses, royalty agreements and other contracts or agreements to
which UDC is a party,
-6-
<PAGE>
or otherwise subject, relating to technical assistance or to Proprietary Rights
in the Software Distribution Assets as defined below; and (k) other material
contracts.
UDC has not entered into any contract or agreement containing covenants
limiting the right of UDC to compete in any business or with any person. As used
in this Agreement, the terms "contract" and "agreement" include every contract,
agreement, commitment, understanding and promise, whether written, oral or
otherwise.
3.9 No Default.
----------
(a) Each of the contracts, agreements or other instruments referred to
in Section 3.8 of this Agreement and each of the standard customer agreements or
contracts of UDC relating to the Software Distribution Assets, to the best of
its knowledge, is a legal, binding and enforceable obligation by or against UDC,
subject to the effect of applicable bankruptcy, insolvency, reorganization,
moratorium or other similar federal or state laws affecting the rights of
creditors and the effect or availability of rules of law governing specific
performance, injunctive relief or other equitable remedies (regardless of
whether any such remedy is considered in a proceeding at law or in equity). To
UDC's knowledge, no party with whom UDC has an agreement or contract with
respect to the Software Distribution Assets is in default thereunder or has
breached any term or provision thereof which is material to the conduct of UDC's
business.
(b) UDC has performed, or is now performing, the obligations of, and
UDC is not in material default (or would by the lapse of time and/or the giving
of notice be in material default) in respect of, any contract, agreement or
commitment binding upon it or its assets or properties and material to the
conduct of its business with respect to the Software Distribution Assets. No
third party has raised any claim, dispute or controversy with respect to any of
the executory contracts of UDC, nor has UDC received written notice or warning
of alleged nonperformance, delay in delivery or other noncompliance by UDC with
respect to its obligations under any of those contracts, nor are there any facts
which exist indicating that any of those contracts may be totally or partially
terminated or suspended by the other parties thereto.
3.10 Business and Customers. Schedule 3.10 is a list of all of UDC's
----------------------
customers relating to the Software Distribution Assets from whom more than Two
Thousand Five Hundred Dollars ($2,500) in revenues was received by UDC during
the twelve (12) month period preceding the Closing Date.
3.11 Inventories. The inventories of the Software Distribution Assets of
-----------
UDC consist of items of a quality and quantity usable and salable (within less
than six (6) months from the date of Closing) in the normal course of the
business, subject to balance sheet reserves. All inventory on hand at Closing
will be set forth on the Purchased Assets/ Assumed Liabilities Statements. A
summary of inventory on hand, and the values of such inventory items, as of
Closing is set forth in Schedule 3.11(a). All items included in such inventories
are owned by UDC and have not been held by UDC for more than ninety (90) days.
Schedule 3.11(b) is a complete list of all inventory items, and the values of
such
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<PAGE>
inventory items, received by SVTG, which have been held by UDC for more than
ninety (90) days as of May 8, 1998. Subject to the provisions of Section 6.6
hereof, any Schedule 3.11(b) inventory items still held by SVTG one hundred
twenty (120) days following the Closing Date (the "Returned Inventory"), shall
be promptly returned to UDC and SVTG shall be entitled to receive from the
Escrow Fund (as defined in Section 8.2 below) an amount equal to the amount at
which UDC valued such Returned Inventory in Schedule 3.11(b). No items included
in the Inventories have been pledged as collateral or are held by UDC on
consignment from others. All the Inventories reflected in the Purchased
Assets/Assumed Liabilities Statements and on the books of UDC are based on
quantities determined from month-end physical count, and are valued in the
Purchased Assets/Assumed Liabilities Statements at the lower of cost (first-in,
first-out) or market and on a basis consistent with that of prior periods.
3.12 Proprietary Rights.
------------------
(a) Schedule 3.12(a) is a complete and accurate list of all computer
software, software programs, patents and applications for patents, trademarks,
trade names, service marks, and copyrights, and applications therefor, owned or
used by UDC with respect to the Software Distribution Assets or in which it has
any rights or licenses, except for software used by UDC and generally available
on the commercial market.
(b) Schedule 3.12(b) is a complete and accurate description of all
agreements of UDC relating to the Software Distribution Assets with each
officer, employee or consultant of UDC providing UDC with title and ownership to
patents, patent applications, trade secrets and inventions developed or used by
UDC in its Software Distribution Assets business. All of such agreements so
described are valid, enforceable and legally binding, subject to the effect of
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the rights of creditors or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity).
(c) UDC owns or possesses licenses or other rights to use all computer
software, software programs, patents, patent applications, trademarks, trademark
applications, trade secrets, service marks, trade names, copyrights, inventions,
drawings, designs, customer lists, proprietary know-how or information, or other
rights with respect thereto used in the business of UDC relating to the Software
Distribution Assets (collectively referred to as "Proprietary Rights"), and the
same are sufficient to conduct UDC's business with respect to the Software
Distribution Assets as it has been and is now being conducted.
(d) The operations of UDC with respect to the Software Distribution
Assets do not conflict with or infringe, and no one has asserted to UDC that
such operations conflict with or infringe, on any Proprietary Rights, owned,
possessed or used by any third party. There are no claims, disputes, actions,
proceedings, suits or appeals pending against UDC with respect to any
Proprietary Rights in the Software Distribution Assets (other than those, if
any, with respect to which service of process or similar notice may not yet have
been made on UDC), and, none has been threatened against UDC. To the knowledge
of
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<PAGE>
UDC and the officers of UDC, there are no facts or alleged facts which would
reasonably serve as a basis for any claim that UDC does not have the right to
use, free of any rights or claims of others, all Proprietary Rights in the
Software Distribution Assets in the development, manufacture, use, sale or other
disposition of any or all products or services presently being used, furnished
or sold in the conduct of the business of UDC as it has been and is now being
conducted with respect to the Software Distribution Assets.
(e) To UDC's knowledge, no employee of UDC is in violation of any term
of any employment contract, proprietary information and inventions agreement,
non-competition agreement, or any other contract or agreement relating to the
relationship of any such employee with UDC or any previous employer.
3.13 Insurance. UDC has provided SVTG with a complete list in Schedule
---------
3.13 of all policies of insurance relating to the Software Distribution Assets
to which UDC is a party or is a beneficiary or named insured. UDC has in full
force and effect, with all premiums due thereon paid, the policies of insurance
set forth therein. All such insurable properties are insured in amounts and
coverage and against risks and losses which are adequate and usually insured
against by persons holding or operating similar properties in similar
businesses. There were no claims in excess of Five Thousand Dollars ($5,000)
asserted under any of the insurance policies of UDC relating to the Software
Distribution Assets in respect of all motor vehicle, general liability,
professional liability, errors and omissions, and worker's compensation claims,
nor medical claims in excess of Ten Thousand Dollars ($10,000) for the period
from February 28, 1998 to the date of this Agreement that are not covered by
insurance.
3.14 Brokers or Finders. UDC has not dealt with any broker or finder in
------------------
connection with the transactions contemplated by this Agreement. UDC has not
incurred, and shall not incur, directly or indirectly, any liability for any
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.15 ERISA. Schedule 3.15 hereto lists all employee pension benefit plans,
-----
multi-employer plans and employee welfare benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) covering active, former or retired employees of UDC. UDC has
furnished to SVTG copies or descriptions of each employment, severance or other
similar contract, arrangement or policy and each plan, agreement, policy or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), vacation benefits, severance benefits, disability
benefits, early retirement benefits, death benefits, hospitalization benefits,
retirement benefits, deferred compensation, profit-sharing, bonuses, options,
purchase or other forms of compensation or post-retirement benefits.
3.16 Underlying Documents. Copies of any underlying documents listed or
--------------------
described as having been disclosed to SVTG pursuant to this Agreement have been
furnished to SVTG. All such documents furnished to SVTG are true and correct
copies, and there are no amendments or modifications thereto that have not been
disclosed to SVTG.
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<PAGE>
3.17 Full Disclosure. Any information furnished by UDC to SVTG in
---------------
writing pursuant to this Agreement (including the Exhibits and Schedules
hereto), at any time prior to the Closing Date, does not and will not contain
any untrue statement of a material fact and does not and will not omit to state
any material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading; provided, however, that UDC
shall not be held responsible for the accuracy or inaccuracy of customer sales
tax identification numbers provided to SVTG.
3.18 Accounts Payable. Schedule 2.2(a) contains a summary of the accounts
----------------
payable of UDC relating to the Software Distribution Assets as of May 15, 1998
together with an accurate aging of such accounts payable. Such accounts payable
arose in the normal and ordinary course of the business of UDC. Except as set
forth in Schedule 2.2(a), such accounts payable are not past due and there are
no collection actions currently pending with respect to such accounts payable.
3.19 Liabilities. Except as disclosed relating to the Software
-----------
Distribution Assets in Schedule 3.19, there are no liabilities or obligations of
any nature to which UDC relating to the Software Distribution Assets is subject,
whether absolute, accrued, contingent or otherwise, and whether due or to become
due. Furthermore, UDC knows of no basis for any assertion against UDC of any
such liability or obligation not fully disclosed in Schedule 3.19.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SVTG
--------------------------------------
Except as contemplated by this Agreement, SVTG represents and warrants to
UDC as of the date hereof as follows:
4.1 Organization. SVTG is a corporation duly incorporated, validly
------------
existing and in good standing under the laws of Delaware. SVTG is duly qualified
to do business and is in good standing in its state of incorporation and in each
other jurisdiction in which it owns or leases property or conducts business,
except where the failure to be so qualified would not have a material adverse
effect on the business of SVTG. SVTG has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted, and possesses all licenses, franchises, rights and privileges
material to the conduct of its business.
4.2 Authority. SVTG has all requisite corporate power and authority to
---------
enter into this Agreement and the Collateral Agreements contemplated herein,
and, subject to satisfaction of the conditions set forth herein, to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Collateral Agreements contemplated herein, and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of SVTG. This Agreement
and the Collateral Agreements contemplated herein, have been duly
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<PAGE>
executed and delivered by SVTG and constitute the valid and binding obligations
of SVTG enforceable in accordance with their terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization or other similar federal or
state laws affecting the rights of creditors and the effect or availability of
rules of law governing specific performance, injunctive relief or other
equitable remedies. Provided the conditions set forth in Article 7 are
satisfied, the execution and delivery of this Agreement and the Collateral
Agreements contemplated herein, do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation under (a) any provision of SVTG's Certificate of Incorporation or
Bylaws, or (b) any material agreement or instrument, permit, license, judgment,
order, statute, law, ordinance, rule or regulation applicable to SVTG or its
properties or assets, other than any such conflicts, violations, defaults,
terminations, cancelations or accelerations which individually or in the
aggregate would not have a material adverse effect on SVTG.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority is required by or with
respect to SVTG in connection with the execution and delivery of this Agreement
and the Collateral Agreements contemplated herein by SVTG or the consummation by
SVTG of the transactions contemplated hereby or thereby, except for such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state commercial laws.
4.3 No Conflict. The execution and delivery of this Agreement by SVTG
-----------
and the performance of SVTG's obligations hereunder, (a) are not in violation or
breach of, and will not conflict with or constitute a default under, any of the
terms of the Certificate of Incorporation or Bylaws of SVTG or any of its
Subsidiaries (as defined below), or any material contract, agreement or
commitment binding upon SVTG or any of its assets or properties; (b) will not
result in the creation or imposition of any lien, encumbrance, equity or
restriction in favor of any third party upon any of the assets or properties of
SVTG; and (c) will not conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over SVTG or any of its assets or
properties. The consent of SVTG's lenders is required to consummate the
transactions contemplated herein pursuant to the terms of its existing credit
agreement. The term "Subsidiary" means a corporation whose voting securities are
owned directly or indirectly by the "parent" corporation in such amounts as are
sufficient to elect at least a majority of the Board of Directors.
4.4 Brokers or Finders. Except for its arrangement with Alliant
------------------
Partners, SVTG has not dealt with any broker or finder in connection with the
transactions contemplated by this Agreement. Except for its arrangement with
Alliant Partners, SVTG has not incurred, and shall not incur, directly or
indirectly, any liability for any brokerage or finders' fees or agents
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
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<PAGE>
4.5 Business Changes. Since December 31, 1997, there have been no
----------------
changes in the condition (financial or otherwise), business, net worth, assets,
properties, employees, operations, obligations or liabilities of SVTG which, in
the aggregate, have had or may be reasonably expected to have a materially
adverse effect on the condition, business, net worth, assets, prospects,
properties or operations of SVTG.
4.6 Full Disclosure. Any information furnished by SVTG to UDC in
---------------
writing pursuant to this Agreement (including the Exhibits and Schedules
hereto), at any time prior to the Closing Date, does not and will not contain
any untrue statement of a material fact and does not and will not omit to state
any material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading.
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
During the period from the date hereof, and continuing until the
Closing Date, unless earlier terminated in accordance with Section 10.1, UDC
covenants and agrees with SVTG that:
5.1 Conduct of Business in Normal Course. Except as disclosed in
------------------------------------
Schedule 5.1, UDC (relating to the Software Distribution Assets) shall carry on
the business and its activities diligently and in the ordinary course and shall
not make or institute any unusual or novel methods of purchase, sale, lease,
management, accounting or operation that will vary materially from the methods
used by UDC as of February 28, 1998. UDC relating to the Software Distribution
Assets shall maintain the nature and quantities of inventories for the business
in a normal and customary manner consistent with prior practice.
5.2 Preservation of Business and Relationships. UDC shall use its
------------------------------------------
best efforts to preserve its business organization relating to the Software
Distribution Assets intact, to keep available its present employees listed in
Schedule 6.4, and to preserve its present relationships with suppliers,
customers and others having business relationships with it.
5.3 Maintenance of Insurance. Prior to the Closing, UDC shall
------------------------
maintain in effect all insurance covering the Software Distribution Assets
business. If the Closing shall occur after a renewal date for any such
insurance, UDC shall renew the insurance on the same or substantially similar
terms, limits of liability and other conditions. SVTG shall reimburse UDC for
the pro rata share of any assumed insurance covering the Software Distribution
Assets business from the Closing Date.
5.4 Employees and Compensation. UDC shall not do, or agree to do, any
--------------------------
of the following acts with respect to those employees listed in Schedule 6.4:
(a) grant any increase in salaries, except for any normal and customary salary
increases to sales representatives pursuant to quarterly reviews conducted in
April 1998 in the ordinary course of business, payable or to become payable to
any employee, sales agent or representative; or
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<PAGE>
(b) except as set forth in Schedule 5.4, grant benefits to any employee, sales
agent or representative listed in Schedule 6.4 under any executive compensation,
bonus, pension, profit-sharing, retirement, deferred compensation, severance,
employee stock option or stock purchase, group life, health and other employee
benefit plans, arrangements, practices or commitments other than in the ordinary
course of business. UDC shall provide SVTG with reasonable access to its
employees listed in Schedule 6.4 during normal business hours.
5.5 No Other Bids. Neither UDC nor any of its directors, officers or
-------------
agents, will, directly or indirectly, solicit or initiate or encourage any
discussions or negotiations with, or participate in any negotiations with or
provide any information to or otherwise cooperate in any other way with any
corporation, partnership, person or other entity or group (other than SVTG)
concerning the sale of the Software Distribution Assets. SVTG shall be promptly
notified in writing by UDC of any of the events referred to in this Section 5.5
including a summary of the material terms of any other bid.
ARTICLE 6
ADDITIONAL AGREEMENTS
---------------------
6.1 Access to Information. UDC shall afford to SVTG and shall cause
---------------------
its independent accountants to afford to SVTG, and its accountants, counsel and
other representatives, reasonable access during normal business hours to UDC's
properties, books, contracts, commitments and records and to the independent
accountants, reasonable access to the audit work papers and other records of
UDC's accountants in each case as the same may relate to the Software
Distribution Assets; provided, that such access does not materially impair the
ability of UDC to conduct its business in the ordinary course. During such
period, UDC shall use reasonable efforts to furnish promptly to SVTG (a) a copy
of each report, schedule and other document filed or received by UDC pursuant to
the requirements of federal and state securities laws and (b) all other
information concerning the business, properties and personnel of UDC with
respect to the Software Distribution Assets as SVTG may reasonably request.
Pending the Closing (and if this Agreement is terminated, at all times after the
date hereof), SVTG shall treat as confidential and will not use, submit or
disclose to, or make available for inspection by any other person, or allow any
other person to use or disclose, any information, materials, documents,
financial statements or other data relating to UDC, its business or its owners.
If this Agreement is terminated, SVTG shall promptly return to UDC any and all
copies of such material, including copies prepared by SVTG.
6.2 Legal Conditions. Each party will take all reasonable actions
----------------
necessary to comply promptly with all legal requirements which may be imposed on
such party with respect to this Agreement and will promptly cooperate with and
furnish information to the other party in connection with any such requirements
imposed upon such other party or any Subsidiary of such other party in
connection with this Agreement. Each party will take, and will cause its
Subsidiaries to take, all reasonable actions to obtain (and to cooperate with
the other party and its Subsidiaries in obtaining) any consent, authorization,
order or approval of, or any exemption by, any governmental authority, or other
third party, required to be
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<PAGE>
obtained or made by such party or its Subsidiaries (or by the other party or its
Subsidiaries) in connection with this Agreement or the taking of any action
contemplated hereby or thereby.
6.3 Good Faith. Each party shall act in good faith in an attempt to
----------
cause to be satisfied all the conditions precedent to its obligations and those
of the other parties to this Agreement over which it has control or influence.
Each party will act in good faith and take all reasonable action within its
capability necessary to render accurate as of the Closing Date its
representations and warranties contained in this Agreement, but in no event
shall any party hereto be required to spend any amounts in connection with such
actions to the extent that the party reasonably determines that such amounts or
expenses are unreasonable.
6.4 Employee Retention and Motivation Program. At or shortly after
-----------------------------------------
the Closing Date, SVTG will establish a program to grant stock options to
purchase shares of SVTG Common Stock to those employees listed on Schedule
7.2(i) who have more than one year of service with UDC.
6.5 Employee Benefits. At or shortly after the Closing Date, the UDC
-----------------
employees listed in Schedule 7.2(i) shall receive the standard SVTG package of
employee benefits. Each UDC employee shall be credited time of service with UDC
for purposes of the SVTG employee benefit programs.
6.6 Best Efforts. SVTG shall use its best efforts to sell and shall
------------
properly rotate all inventory received by SVTG from UDC pursuant to this
Agreement.
6.7 Payment of Assumed Liabilities. SVTG shall promptly pay when due
------------------------------
all liabilities assumed pursuant to Section 2.2 hereof.
6.8 Cooperative Marketing Programs. The parties agree that from and
------------------------------
after the Closing Date:
(a) All funds payable or credits against future purchases
granted from vendors to UDC under any vendor approved marketing program for
marketing campaigns commenced or completed by UDC prior to the Closing Date as
set forth in Schedule 6.8 shall remain the property of UDC and shall not be
transferred to SVTG hereunder.
(b) All funds payable or credits against future purchases
granted from vendors to UDC under any vendor approved marketing program for
marketing campaigns not commenced by UDC prior to the Closing Date shall be
payable or credited to SVTG.
(c) In the event any funds or credits against purchases owing
to UDC under paragraph (a) of this Section 6.8 are paid or credited to SVTG by
any vendor, SVTG shall promptly reimburse UDC for the amount of such payments or
credits.
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<PAGE>
ARTICLE 7
CONDITIONS PRECEDENT
--------------------
7.1 Conditions to Obligations of SVTG and UDC. The obligations of
-----------------------------------------
SVTG and UDC to consummate this Agreement shall be subject to the satisfaction
on or prior to the Closing Date of the following conditions unless waived by
both SVTG and UDC:
(a) Government Approvals. All authorizations, consents, orders
--------------------
or approvals of, or declarations or filings with, or expiration of waiting
periods imposed by, any governmental authority necessary for the consummation of
the transactions contemplated by this Agreement and the Collateral Agreements
contemplated herein shall have been obtained.
(b) Approval of Shareholders. All necessary consents of the
------------------------
UDC shareholders to the consummation of the transactions contemplated by this
Agreement shall have been obtained.
(c) Approval of Board of Directors. The Board of Directors
------------------------------
approval of both SVTG and UDC to the consummation of the transactions
contemplated by this Agreement shall have been obtained.
(d) Third-Party Approvals. Except as set forth in Schedule
---------------------
7.1(d), any and all consents or approvals required from third parties relating
to contracts, agreements, licenses, leases and other instruments, material to
the respective businesses of SVTG and UDC shall have been obtained.
(e) Legal Action. No temporary restraining order, preliminary
------------
injunction or permanent injunction or other order preventing the consummation of
this Agreement shall have been issued by any federal or state court and remain
in effect, and no litigation seeking the issuance of such an order or
injunction, shall be pending which, in the good faith judgment of UDC or SVTG
has a reasonable probability of resulting in such order, injunction or damages.
(f) Waiver. A consummation of the Closing shall constitute a
------
waiver of these conditions to Closing.
7.2 Conditions to Obligations of SVTG. The obligations of SVTG to
---------------------------------
consummate this Agreement are subject to the satisfaction on or prior to the
Closing Date of the following conditions, unless waived by SVTG:
(a) Representations and Warranties. The representations and
------------------------------
warranties of UDC set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as if made at and as of
the Closing Date, except as otherwise contemplated by this Agreement, and SVTG
shall have received a certificate or certificates signed by the chief executive
officer and chief financial officer of UDC to such effect.
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(b) Due Diligence. SVTG shall have completed its due diligence
-------------
investigation of UDC to its good faith satisfaction.
(c) Performance of Obligations. UDC shall have performed all
--------------------------
covenants, agreements, obligations required to be performed under this Agreement
prior to the Closing Date, and SVTG shall have received a certificate signed by
the chief executive officer and chief financial officer of UDC to such effect.
(d) Opinion of UDC's Counsel. SVTG shall have received an opinion
------------------------
dated as of the Closing Date of Brobeck, Phleger & Harrison LLP, outside counsel
to UDC, in substantially the form attached hereto as Exhibit 7.2(d).
(e) Purchased Assets/Assumed Liabilities Statements. UDC's
-----------------------------------------------
Purchased Assets/Assumed Liabilities Statements for each month after December
31, 1997, shall be delivered to SVTG.
(f) No Material Adverse Change. Except as set forth in Schedule
--------------------------
7.2(f), there shall have been no changes in the condition (financial or
otherwise), business, prospects, employees, operations, obligations or
liabilities of UDC which, in the aggregate, have had or may be reasonably
expected to have a materially adverse effect on the Software Distribution Assets
or the ability of UDC to consummate the transactions contemplated hereby.
(g) Employment Agreements. Each of Cruz Fermin, Blaine Welker and
---------------------
Karen Stevens shall have entered into an employment agreement with SVTG, a form
of which is attached hereto as Exhibit 7.2(g).
(h) Employment Arrangements. Not less than fifteen (15) of the
-----------------------
remaining twenty (20) UDC employees designated in Schedule 7.2(h) hereto shall
have signed an offer letter from SVTG, a form of which is attached hereto as
Exhibit 7.2(g).
(i) Non-Compete Arrangements. UDC and Michael Silton shall have
------------------------
entered into a covenant not to compete, a form of which is attached hereto as
Exhibit 7.2(i).
(j) Escrow Agreement. SVTG, UDC and U.S. Bank Trust, N.A. shall
----------------
have entered into the Escrow Agreement, a form of which is attached hereto as
Exhibit A.
(k) Waiver. A consummation of the Closing shall constitute a waiver
------
of these conditions to Closing.
7.3 Conditions to Obligations of UDC. The obligations of UDC to consummate
--------------------------------
the transactions contemplated hereby are subject to the satisfaction on or prior
to the Closing Date of the following additional conditions unless waived by UDC:
(a) Representations and Warranties. The representations and
------------------------------
warranties of SVTG set forth in this Agreement shall be true and correct in all
material respects as of the
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<PAGE>
date of this Agreement and as if made at and as of the Closing Date, except as
otherwise contemplated by this Agreement, and UDC shall have received a
certificate signed by the chief executive officer and the chief financial
officer of SVTG to such effect.
(b) Performance of Obligations of SVTG. SVTG shall have performed
----------------------------------
in all material respects all obligations required to be performed by it under
this Agreement prior to the Closing Date, and UDC shall have received a
certificate signed by the chief financial officer of SVTG to such effect.
(c) Opinion of SVTG's Counsel. UDC shall have received an opinion
-------------------------
dated the Closing Date of Pillsbury Madison & Sutro LLP, outside counsel to
SVTG, in substantially the form attached hereto as Exhibit 7.3(c).
(d) No Material Adverse Change. Since December 31, 1997, there
--------------------------
shall have been no changes in the condition (financial or otherwise), business,
prospects, employees, operations, obligations or liabilities of SVTG which, in
the aggregate, have had or may be reasonably expected to have a materially
adverse effect on the financial condition, business or operations of SVTG.
ARTICLE 8
INDEMNIFICATION AND ESCROW
--------------------------
8.1 Indemnification by UDC.
----------------------
(a) UDC, after the Closing and until the period ending one (1)
year from the Closing Date, agrees to defend and indemnify SVTG and its
affiliates, directors, officers and shareholders, and their respective
successors and assigns (collectively, the "SVTG Indemnitees"), against and hold
each of them harmless from any and all losses, liabilities, taxes, claims,
suits, proceedings, demands, judgments, damages, expenses and costs, including,
without limitation, reasonable counsel fees, costs and expenses incurred in the
investigation, defense or settlement of any claims covered by this indemnity (in
this Section 8.1 collectively, the "Indemnifiable Damages") which any such
indemnified person may suffer or incur by reason of (i) the inaccuracy or breach
of any of the representations, warranties and covenants of UDC contained in this
Agreement or any documents, certificate or agreement delivered pursuant hereto;
(ii) any claim by any person under any provision of any federal or state
securities law relating to any transaction, event, act or omission of or by UDC
occurring before or after the Closing Date; or (iii) liabilities of UDC or the
Software Distribution Assets arising before or after the Closing not expressly
assumed by SVTG in Section 2.3 hereof. Nothing herein shall limit in any way
SVTG's remedies in the event of breach by UDC of any of its covenants or
agreements hereunder which are not also a representation or warranty or for
willful fraud or intentionally deceptive material misrepresentation or omission
by UDC in connection herewith or with the transactions contemplated hereby.
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(b) Without limiting the generality of the foregoing but
considering the limitation on indemnification provided for in Section 8.1(a),
with respect to the measurement of Indemnifiable Damages, SVTG and, after the
Closing Date, SVTG and its affiliates, shall have the right to be put in the
same financial position as they would have been in had each of the
representations, warranties and covenants of UDC been true and accurate or the
same said parties had not breached any such covenants or had any of the events,
claims or liabilities referred to (a) of this Section 8.1 not occurred or been
made or incurred.
(c) Any indemnitee under this Agreement may not seek recovery
under the indemnities set forth herein unless and until the Indemnifiable
Damages of such party are greater than Fifteen Thousand Dollars ($15,000), at
which point such indemnity shall apply to all Indemnifiable Damages.
8.2 Escrow Fund. As security for the indemnity provided for in Section 8.1
-----------
a total of Three Hundred Thousand Dollars ($300,000), shall be registered in the
name of U.S. Bank Trust National Association (or other institution selected by
SVTG with the reasonable consent of UDC) as escrow agent (the "Escrow Agent"),
such deposit to constitute an escrow fund (the "Escrow Fund") to be governed by
the terms set forth herein and in the Escrow Agreement to be signed by all
parties thereto, the form of which is attached hereto as Exhibit A. In the event
of any conflict between the terms of this Agreement and the Escrow Agreement,
the terms of the Escrow Agreement shall govern. SVTG shall pay all costs and
fees of the Escrow Agent for establishing and administering the Escrow Fund.
Upon compliance with the terms hereof, SVTG shall be entitled to obtain
indemnity from the Escrow Fund for all Indemnifiable Damages covered by the
indemnity provided for in Section 8.1 hereof.
8.3 Escrow Period. The Escrow Fund shall remain in existence until one
-------------
hundred twenty (120) days after the Closing Date.
8.4 Protection of Escrow Fund. The Escrow Agent shall hold and safeguard
-------------------------
the Escrow Fund during the Escrow Period, shall treat such fund as a trust fund
in accordance with the terms of this Agreement and not as the property of SVTG,
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
8.5 Claims Upon Escrow Fund. Upon receipt by the Escrow Agent on or before
-----------------------
the last day of the Escrow Period of a certificate signed by any officer of SVTG
(an "Officer's Certificate") stating that SVTG has paid or properly accrued
Indemnifiable Damages in an aggregate stated amount to which such party is
entitled to indemnity pursuant to this Agreement, and specifying in reasonable
detail the individual items of Indemnifiable Damages included in the amount so
stated, the date each such item was paid or properly accrued, and the nature of
the misrepresentation, breach of warranty or claim to which such item is
related, the Escrow Agent shall, subject to the provisions of Section 8.6
hereof, deliver to SVTG out of the Escrow Fund, as promptly as practicable, the
Funds held in the Escrow Fund to indemnify SVTG against such Indemnifiable
Damages.
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<PAGE>
8.6 Objections to Claims. Upon the time of delivery of an Officer's
--------------------
Certificate to the Escrow Agent, the Escrow Agent shall deliver a duplicate copy
of such certificate to UDC and for a period of thirty (30) days after such
delivery to UDC, the Escrow Agent shall make no delivery of Funds pursuant to
Section 8.5 hereof unless the Escrow Agent shall have received written
authorization from the Spokesperson for UDC ("Spokesperson"), initially Michael
Silton and any successor as chosen by UDC, to make such delivery. After the
expiration of such thirty (30) day period, the Escrow Agent shall make delivery
of the Funds in the Escrow Fund in accordance with Section 8.5 hereof, provided
that no such payment or delivery may be made if the Spokesperson shall object in
a written statement to the claim made in the Officer's Certificate, and such
statement shall have been delivered to the Escrow Agent prior to the expiration
of such thirty (30) day period.
8.7 Resolution of Conflicts; Arbitration.
------------------------------------
(a) If the Spokesperson shall object in writing to the indemnity
of the SVTG Indemnitees in respect of any claim or claims made in any Officer's
Certificate, the Spokesperson and SVTG shall attempt in good faith to agree upon
the rights of the respective parties with respect to each of such claims. If the
Spokesperson and SVTG should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and distribute the Funds from the Escrow Fund in accordance with the terms
thereof.
(b) If no such agreement can be reached after good faith
negotiation within sixty (60) days after objection by either the Spokesperson or
SVTG, either SVTG or the Spokesperson may demand arbitration of the matter and
the matter shall be settled by arbitration conducted by three arbitrators. SVTG
and the Spokesperson shall each select one arbitrator, and the two arbitrators
so selected shall select a third arbitrator. The decision of the arbitrators so
selected as to the validity and amount of any claim in such Officer's
Certificate or by UDC shall be final and binding and conclusive upon the parties
to this Agreement, and, notwithstanding anything in Section 8.6 hereof, the
Escrow Agent shall be entitled to act in accordance with such decision and make
or withhold payments out of the Escrow Fund in accordance therewith, if
applicable.
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
the City of San Jose, California under the rules then in effect of the American
Arbitration Association. A claimant shall be deemed to be the non-prevailing
party in the event that the arbitrators award such claimant less than one-half
(1/2) of the amount claimed by it; otherwise, the other party shall be deemed to
be the non-prevailing party. The non-prevailing party to an arbitration shall
pay its own expenses, the fees of each arbitrator, the administrative fee of the
American Arbitration Association, and the reasonable attorneys' fees and costs
incurred by the other party to the arbitration as well as the amount of any
Indemnifiable Damages awarded and in addition interest thereon from the date of
actual loss or expenditure until the date paid at ten percent (10%) per annum,
or at the maximum rate permitted by applicable law if less than ten percent
(10%) per annum.
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<PAGE>
8.8 Distribution upon Termination of Escrow Period. Immediately
----------------------------------------------
following termination of the Escrow Period, the Escrow Agent shall deliver to
UDC the Funds in the Escrow Fund in excess of any amount of such Funds
sufficient, in the reasonable judgment of SVTG, to satisfy any agreed upon
claims specified in any Officer's Certificate theretofore properly delivered to
the Escrow Agent in good faith. Any such Funds or refunds will be properly
delivered to the party entitled to such receipt upon completion of the
resolution process contemplated by this Article 8.
8.9 Escrow Agent's Duties.
---------------------
(a) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein or in the Escrow
Agreement and may rely and shall be protected in relying or refraining from
acting on any instrument reasonably believed to be genuine and to have been
signed or presented by the proper party or parties. The Escrow Agent shall not
be liable for any act done or omitted hereunder as Escrow Agent while acting in
good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith.
(b) The Escrow Agent is hereby expressly authorized to
disregard any and all orders by any party who is not authorized to give orders
under the Escrow Agreement, excepting only orders or process of courts of law,
and is hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case the Escrow Agent obeys or complies with any such
order, judgment or decree of any court, the Escrow Agent shall not be liable to
any of the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(c) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(d) The Escrow Agent shall not be liable for the outlawing of
any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
8.10 Indemnification by SVTG.
-----------------------
(a) After the Closing Date, SVTG shall, as to those
representations, warranties, covenants and agreements which are herein made or
agreed to by SVTG, indemnify and hold harmless UDC and its respective officers
and directors (prior to the Closing) and their heirs and assigns against and in
respect of (i) any damage, deficiency, losses or costs incurred by UDC resulting
from any material misrepresentation or breach of warranty or any nonfulfillment
of any covenant or agreement on the part of SVTG under this Agreement; (ii) any
claim by any person under any provision of any federal or state securities law
relating to any transaction, event, act or omission of or by SVTG occurring
before or after
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<PAGE>
the Closing Date; and (iii) any claim, action, suit, proceeding, demand,
judgment, assessment, cost and expense, including reasonable counsel fees,
incident to any of the foregoing; provided that the total indemnity shall not
exceed the purchase price as provided in Section 2.4 hereof; except that, such
limitation shall not extend to any claim by any person under any provision of
any federal or state securities law relating to any transaction, event, act or
omission of or by SVTG occurring before or after the Closing Date unless such
claim relates to this Agreement.
(b) SVTG shall reimburse UDC for any liabilities, damages,
deficiencies, claims, actions, suits, proceedings, demands, judgments,
assessments, costs and expenses to which this Section 8.10 relates only if a
claim for indemnification is made by UDC within the period ending one (1) year
after the Closing Date. Without limiting the generality of the foregoing, with
respect to the measure of Indemnifiable Damages, UDC shall have the right to be
put in the same financial position as it would have been in had each of the
representations, warranties and covenants of SVTG been true and accurate or the
same said parties had not breached any such covenants.
(c) Any indemnitee under this Agreement may not seek recovery
under the indemnities set forth herein unless and until the Indemnifiable
Damages of such party are greater than Fifteen Thousand Dollars ($15,000), at
which point such indemnity shall apply to all Indemnifiable Damages.
8.11 Indemnification Procedure. A party seeking indemnification (the
-------------------------
"Indemnitee") shall use its best efforts to minimize any liabilities, damages,
deficiencies, claims, judgments, assessments, costs and expenses in respect of
which indemnity may be sought under this Agreement. The Indemnitee shall give
prompt written notice to the party from whom indemnification is sought (the
"Indemnitor") of the assertion of a claim for indemnification, but in no event
longer than (a) thirty (30) days after service of process in the event
litigation is commenced against the Indemnitee by a third party, or (b) sixty
(60) days after the assertion of such claim in writing to an officer of UDC. No
such notice of assertion of a claim shall satisfy the requirements of this
Section 8.11 unless it describes in reasonable detail and in good faith the
facts and circumstances upon which the asserted claim for indemnification is
based. If any action or proceeding shall be brought in connection with any
liability or claim to be indemnified hereunder, the Indemnitee shall provide the
Indemnitor twenty (20) calendar days to decide whether to defend such liability
or claim. During such period, the Indemnitee shall take all necessary steps to
protect the interests of itself and the Indemnitor, including the filing of any
necessary responsive pleadings, the seeking of emergency relief or other action
necessary to maintain the status quo, subject to reimbursement from the
Indemnitor of its expenses in doing so. The Indemnitor shall (with, if
necessary, reservation of rights) defend such action or proceeding at its
expense, using counsel selected by the insurance company insuring against any
such claim and undertaking to defend such claim, or by other counsel selected by
it and approved by the Indemnitee, which approval shall not be unreasonably
withheld or delayed. The Indemnitor shall keep the Indemnitee fully apprised at
all times of the status of the defense and shall consult with the Indemnitee
prior to the settlement of any indemnified matter and shall not settle or
compromise any claim without the prior written consent of Indemnitee whose
consent shall
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<PAGE>
not be unreasonably withheld. Indemnitee agrees to use reasonable efforts to
cooperate with Indemnitor in connection with its defense of indemnifiable
claims. In the event the Indemnitee has a claim or claims against any third
party growing out of or connected with the indemnified matter, then upon receipt
of indemnification, the Indemnitee shall fully assign to the Indemnitor the
entire claim or claims to the extent of the indemnification actually paid by the
Indemnitor and the Indemnitor shall thereupon be subrogated with respect to such
claim or claims of the Indemnitee.
ARTICLE 9
PAYMENT OF EXPENSES
-------------------
SVTG and UDC shall each pay their own fees and expenses incurred
incident to the preparation and carrying out of the transactions herein
contemplated (including legal, accounting and travel).
ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
10.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Closing Date:
(a) by mutual written consent of UDC and SVTG;
(b) by either SVTG or UDC if there has been a material breach
of any representation, warranty, covenant or agreement contained in this
Agreement on the part of any party set forth in this Agreement and, if such
breach is curable, such breach has not been promptly cured after written notice
of such breach;
(c) by either SVTG or UDC if there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of this Agreement;
(d) by SVTG if any condition to SVTG's obligation to
consummate this Agreement has not been satisfied or waived by SVTG; and
(e) by UDC if any condition to UDC's obligation to consummate
this Agreement has not been satisfied or waived by UDC.
10.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either UDC or SVTG as provided in Section 10.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of the parties hereto or their respective officers or directors except as
set forth in Article 9 and the confidentiality provision of this Agreement and
except to the extent that such termination results from the
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<PAGE>
(a) willful breach by a party hereto of any of its representations or
warranties, or (b) a breach by a party hereto of its covenants or agreements set
forth in this Agreement.
10.3 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of each of the parties hereto.
10.4 Extension; Waiver. At any time prior to the Closing, SVTG or UDC
-----------------
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions for the benefit thereof contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE 11
GENERAL
-------
11.1 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party to the other shall be in writing and delivered
personally or sent by certified mail, postage prepaid, by telecopy, or by
courier service, as follows:
If to SVTG: Savoir Technology Group, Inc.
254 East Hacienda Avenue
Campbell, CA 95008
Attention: Mr. James W. Dorst
Chief Financial Officer
Fax: (408) 341-4762
with a copy to: Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304-1115
Attention: Katharine A. Martin
Fax: (650) 233-4545
If to UDC: UniDirect Corporation
1800 Green Hills Road, Suite 201
Scotts Valley, CA 95066
Attention: Michael Silton
Fax: (408) 430-9640
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<PAGE>
with a copy to: Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, CA 92618
Attention: Bruce R. Hallett
Fax: (949) 790-6301
or to such other persons as may be designated in writing by the parties, by a
notice given as aforesaid.
11.2 Headings. The headings of the several sections of this Agreement
--------
are inserted for convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
11.3 Entire Understanding. The terms set forth in this Agreement
--------------------
including its Schedules and Exhibits are intended by the parties as a final,
complete and exclusive expression of the terms of their agreement and may not be
contradicted, explained or supplemented by evidence of any prior agreement, any
contemporaneous oral agreement or any consistent additional terms. The Schedules
and Exhibits attached to this Agreement are made a part of this Agreement.
11.4 Counterparts. This Agreement may be executed in counterparts, and
------------
when so executed each counterpart shall be deemed to be an original, and said
counterparts together shall constitute one and the same instrument.
11.5 Binding Nature. This Agreement shall be binding upon and inure to
--------------
the benefit of the parties hereto. No party may assign or transfer any rights
under this Agreement.
11.6 Applicable Law. This Agreement shall be governed by and construed
--------------
under the laws of the State of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California.
11.7 Attorneys' Fees. If any action at law or in equity is necessary
---------------
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable
-24-
<PAGE>
attorneys' fees, costs and disbursements in addition to any other relief to
which such party may be entitled.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed,
all as of the date first above written
SAVOIR TECHNOLOGY GROUP, INC.,
a Delaware corporation
By /s/ [ILLEGIBLE]^^
-----------------------------------------------
Its CEO
----------------------------------------------
UNIDIRECT CORPORATION, a California
corporation
By /s/ [ILLEGIBLE]^^
-----------------------------------------------
Its CEO
----------------------------------------------
-25-
<PAGE>
ASSET PURCHASE AGREEMENT
By and Between
SAVOIR TECHNOLOGY GROUP, INC.
and
UNIDIRECT CORPORATION
May 15, 1998
Exhibit A - Escrow Agreement
Exhibit B - Disclosure Schedule
Exhibit C - Promissory Note
Exhibit 7.2(d) - Opinion of Brobeck Phleger & Harrison LLP
Exhibit 7.2(g) - Form of Employment Agreement (Offer Letter)
Exhibit 7.2(i) - Covenant Not To Compete
Exhibit 7.3(c) - Opinion of Pillsbury Madison & Sutro LLP
Schedule 2.1(a) Inventories
Schedule 2.1(b) Intangibles
Schedule 2.1(c) Books and Records
Schedule 2.1(d) Permits
Schedule 2.1(e) Programs
Schedule 2.2(a) Accounts Payable
Schedule 2.2(b) Contractual Liabilities
Schedule 2.7 Tax Treatment
Schedule 3.2 Authority
Schedule 3.4 Business Changes
Schedule 3.8 Contracts
Schedule 3.10 Customers
Schedule 3.11 Inventory on Hand
Schedule 3.12 Proprietary Rights
Schedule 3.13 Insurance
Schedule 3.15 Benefit Plans
Schedule 3.19 Liabilities
Schedule 5.1 Conduct of Business
Schedule 5.4 Compensation
Schedule 6.4 Employee Retention and Motivation Participants
Schedule 6.8 Cooperative Marketing Programs
Schedule 7.1(d) Third Party Approvals
Schedule 7.2(f) Material Adverse Change
Schedule 7.2(h) Designated Employees
Rainmaker Systems, Inc. agrees to furnish Suppementally a copy of any of the
foregoing exhibits to the SEC upon request.
<PAGE>
EXHIBIT 10.13
[LETTERHEAD OF CELTIC LEASING CORP. APPEARS HERE]
Lessee: Rainmaker Systems, Inc.
----------------------------------------------------------------------
Corporate
Address: 1800 Green Hills Road, Scotts Valley, CA 95066
----------------------------------------------------------------------
This is a MASTER LEASE AGREEMENT (herein called "Lease").
Lessor hereby agrees to lease to Lessee, and Lessee hereby
agrees to lease from Lessor, the items of personal property
(collectively called "Equipment" and individually called an
"Item") described on any Lease Schedule(s) ("Schedule") now
or in the future annexed hereto and made a part hereof,
subject to the terms and conditions set forth herein.
1. QUIET ENJOYMENT: So long as Lessee is not in default hereunder, Lessor
shall not disturb Lessee's quiet enjoyment of the Equipment subject to the terms
and conditions of this Lease.
2. NO WARRANTIES BY LESSOR: Lessee acknowledges that Lessor is not the
manufacturer, developer, distributor, publisher or licensor (for purposes of
this Lease, all of which are called "Manufacturer", both collectively and
individually) of any of the Equipment. Lessee further acknowledges and agrees
that LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE
MERCHANTABILITY, FITNESS FOR ANY PURPOSE, CONDITION, DESIGN, CAPACITY
SUITABILITY OR PERFORMANCE OF ANY OF THE EQUIPMENT, OR ANY OTHER REPRESENTATION
OR WARRANTY WITH RESPECT THERETO, IT BEING AGREED THAT THE EQUIPMENT IS LEASED
"AS IS". LESSEE FURTHER REPRESENTS THAT ALL ITEMS OF EQUIPMENT ARE OF A SIZE,
DESIGN AND CAPACITY SELECTED BY IT, AND THAT IT IS SATISFIED THE SAME IS
SUITABLE FOR LESSEE'S PURPOSES.
3. ASSIGNMENT OF WARRANTIES: Lessor assigns to Lessee any and all
Manufacturer/vendor warranties, to the extent assignable, for the term of the
Lease with respect to any and all Items of Equipment. Lessor shall have no
liability to Lessee or anyone claiming through Lessee for the breach of any such
warranty or for any claim, loss, damage or expenses of any kind or nature
resulting, directly or indirectly, from the delivery, installation, use,
operation, performance, or lack or inadequacy thereof, of any Items of
Equipment. Lessee acknowledges that Lessor has hereby notified Lessee that
Lessee may have rights and warranties under any applicable Equipment supply
contracts and that Lessee may contact the vendor for a description of those
rights and warranties, if any. Lessor, at its sole option, may choose the vendor
for any Items of Equipment provided Lessor so notifies Lessee of the vendor's
name and address and provided the Item(s), whether new or used, meet the exact
specifications delineated on the Schedule. For vendors not chosen by Lessor,
Lessee acknowledges it has their names and addresses.
4. TERM: The lease term for each Item of Equipment shall commence on the day
the Manufacturer or vendor certifies that the Item has been delivered to and is
usable by Lessee ("Commencement Date"). The "Base Term" as indicated on any
Schedule shall mean the period beginning on the first day of the calendar
quarter (January 1, April 1, July 1, or October 1) following the final
Commencement Date ("Final Commencement Date") of the respective Schedule, or, if
the Final Commencement Date falls on the last day of a calendar quarter, then
that day, and continuing for the number of months specified therein. This Lease
with respect to any Schedule may be terminated as of the last day of the Base
Term by either party giving the other party at least six months but not more
than twelve months prior written notice of such termination. Otherwise, the term
with respect to any Schedule shall automatically be extended in successive one
year intervals ("Extension Term(s)") at the rental amount in effect as of the
last billing cycle of the Base Term. During any such extension period, the
applicable Schedule may be terminated as of the last day of any one year
Extension Term by either party giving the other party at least six months but
not more than twelve months prior written notice of such termination. Each
Schedule now or in the future annexed hereto shall be deemed to incorporate
therein these specific terms and conditions and shall have an independent Base
Term and Extension Term(s).
5. RENT: The monthly rent as shown on each Schedule shall be due and payable
by Lessee in the amount of the monthly rent multiplied by the number of months
in the billing cycle indicated on the respective Schedule (one month in a
monthly billing cycle, three in a quarterly cycle, six in a biannual cycle,
etc.) on the first day of the Base Term and on the first day of each billing
cycle (if the billing cycle is monthly, then, the first day of each month; if
quarterly, then the first day of every third month; etc.) thereafter for the
remainder of the Base Term and any Extension Term(s). For Items of Equipment
having a Commencement Date prior to the first day of the Base Term, rent shall
be due on a pro rata basis only in the amount of one-thirtieth of the Item's
proportional monthly rent for each day from the Item's Commencement Date until,
but not including, the first day of the Base Term and shall be payable by Lessee
five days after receipt of invoice from Lessor. If any rental or other amounts
payable hereunder are not paid within five days of their due date then Lessee
shall pay to Lessor upon demand the "Delinquency Charges" which shall equal
interest compounded monthly at the rate of eighteen percent per annum on the
delinquent balance from the date due until the date paid, plus a monthly
administrative fee of five percent of the cumulative delinquent balance to
offset Lessor's collection and accounting costs. Unless otherwise delineated on
the respective Schedule, any deposit paid by Lessee to Lessor shall be
refundable if the Schedule is not accepted by Lessor, less, at Lessor's sole
discretion, a credit processing fee not to exceed one percent of the anticipated
cost of the proposed Equipment. This is a net lease and Lessee's obligation to
pay all rental charges and other amounts due hereunder shall be absolute and
unconditional under all circumstances and shall not be subject to any abatement,
defense, counterclaim, setoff, recoupment or reduction for any reason whatsoever
except as otherwise provided herein, it being the express intention of Lessor
and Lessee that all rental and other amounts payable by Lessee hereunder shall
be and continue to be payable in all events. Lessee hereby waives any and all
rights it may have to reject or cancel this Lease, to revoke acceptance of any
of the Equipment, and/or to grant a security interest in any of the Equipment
for any reason except as required herein.
6. USE, MAINTENANCE AND LOCATION: Lessee, at its own cost and expense, shall
at all times properly use the Equipment, shall keep all Equipment in good
working order, repair and condition, shall not alter the Equipment without
Lessor's prior written consent, and shall use the Equipment for business
purposes only. Lessee shall comply with any and all Manufacturers'/vendors'
instructions (including, in the event any of the Equipment is software, any
software license terms, conditions and restrictions) relating to the Equipment,
and with any and all applicable laws, rules, regulations or orders of any
governmental agency with respect to the Equipment or the use, maintenance or
storage thereof. Without limiting the foregoing, Lessee, without expense to
Lessor, shall enter into and keep in force during the entire lease term a
standard maintenance agreement with the Manufacturer of the Equipment, or such
other party as is reasonably acceptable to Lessor, that will cause the
Manufacturer, or such other acceptable party, to make all necessary repairs,
adjustments and replacements, and will entitle Lessee to obtain enhancements,
updates and changes in accordance with and available under the maintenance
agreement. Lessee shall comply with all its obligations under such maintenance
agreement and shall take all actions necessary to ensure that the Equipment will
be eligible for a standard full service
<PAGE>
maintenance contract with the Manufacturer, or such other acceptable party, if
such is customarily available, at the termination or expiration of the lease
term. Any fees or charges at the termination or expiration of the lease term for
maintenance certification or recertification by the Manufacturer, or such other
acceptable party, shall be paid by Lessee. Throughout the lease term, Lessee
shall keep the Equipment at the location set forth on the Schedule and shall
retain uninterrupted possession, control and use of the Equipment. Lessee shall
not relocate any of the Equipment without Lessor's prior written consent. Lessee
shall pay all costs and expenses associated with the delivery, installation,
use, relocation, deinstallation, and return of the Equipment. If Lessor supplies
Lessee with labels or tags stating that the Equipment is owned by Lessor, Lessee
shall affix such labels or tags to and keep them in a prominent place on the
Equipment. Subject to Lessee's reasonable security requirements, Lessee shall
permit Lessor to enter the premises where any of the Equipment is located in
order to inspect such Equipment.
7. TITLE; PERSONAL PROPERTY: Except as otherwise provided in this Lease or any
Schedule hereto, title to the Equipment shall at all times remain in Lessor. In
the event any of the Equipment is software governed by a software license,
Lessee shall keep said license current for the entire lease term and, to the
extent the license allows title to the software to pass to licensee, such title
shall vest and remain in Lessor. To the extent that such vesting requires a
written conveyance from Lessee, Lessee hereby conveys to Lessor any title it has
or may hereafter acquire in the software and forgoes any future claim to the
software including any right to purchase and/or use the software beyond the
lease term except as otherwise provided in this Lease or the related Schedule.
If the software license restricts any provision of this Lease without the
licensor's consent, then Lessee shall assist Lessor, if so requested, in
obtaining such consent. Lessee shall at all times keep the Equipment free and
clear of all liens, claims, levies, and legal processes, except those inherent
to this Lease, and shall at its expense protect and defend Lessor's title and/or
license rights in the Equipment against all persons claiming against or through
Lessee. Lessee hereby authorizes Lessor to cause this Lease or other instruments
necessary, in Lessor's determination, to be filed or recorded at Lessee's
expense in order to protect Lessor's interest in the Equipment, and grants
Lessor the right to execute and deliver such instruments for and on behalf of
Lessee. If requested by Lessor, then Lessee agrees to execute and deliver any
such instruments and agrees to pay or reimburse Lessor for any searches,
filings, recordings, or stamp fees or taxes incurred as necessary to protect
Lessor's interest in the Equipment. Lessee also authorizes Lessor to insert on
any Schedule and on related supplemental lease documentation information
commonly determined after execution by Lessee such as: serial numbers and other
Equipment identification data, Equipment locations, and Commencement Dates.
Lessee shall take all steps necessary to ensure that the Equipment is and
remains personal property. Unless otherwise provided in writing, immediately
upon the termination or expiration of the term of this Lease with respect to any
Schedule, Lessee shall: discontinue its use of the Equipment including any Items
constituting software; return the Equipment, including any Items constituting
tangible software, to Lessor at such place as Lessor shall designate within the
continental United States; destroy any Items constituting intangible software or
records thereof; not retain any Items constituting software in any form; and
grant Lessor the right (which shall survive termination), at Lessor's request
and subject to Lessee's reasonable security requirements, to inspect all of
Lessee's locations to insure compliance with the provisions of this sentence. In
the event Lessee fails to comply with any of the foregoing upon the termination
or expiration of the lease term with respect to any Schedule, then rent for said
Schedule shall continue to be due and payable in full by Lessee for each month
until Lessee has complied with all of the foregoing.
8. ALTERATIONS: Lessee shall make no alterations, modifications, attachments,
improvements, enhancements, revisions or additions to any of the Equipment
(collectively called "Alterations"), without Lessor's prior written consent. All
Alterations that are made shall become part of the Equipment and shall be the
property of Lessor. Lessor may, at its sole option and subject to the then
prevailing interest rates and the Lessee's credit standing, lease to Lessee any
Alterations desired by Lessee during the lease term. If requested in writing by
Lessor, Alterations not leased hereunder shall be removed and the Equipment
shall be restored to its original condition, normal wear and tear excepted, at
Lessee's sole expense, prior to the return of the Equipment.
9. TAXES: Lessee shall pay all taxes (except those based solely on Lessor's
net income), fees and assessments accrued or imposed on the purchase, ownership,
possession or use of the Equipment during the lease term, or imposed on Lessor
or Lessee with respect to the rental payments hereunder, including but not
limited to sales, use, personal property, excise, stamp and documentary taxes,
license and registration fees, and any other similar charges, together with any
penalties, interest or fines relating thereto. LESSEE SHALL FILE ALL REQUIRED
PERSONAL PROPERTY TAX RETURNS RELATING TO THE EQUIPMENT.
10. LOSS OR DAMAGE: Lessee shall bear the entire risk of loss, damage, theft,
destruction, confiscation, requisition, inoperability, erasure, or incapacity,
for or from any cause whatsoever (except Lessor's gross negligence), of any or
all Items of Equipment during the period the Equipment is in transit to or from,
or in the possession of, Lessee ("Event of Loss") and shall hold Lessor harm
less against same. Immediately upon its discovery, Lessee shall fully inform
Lessor of an Event of Loss. Except as herein provided, no Event of Loss shall
relieve Lessee of any obligation hereunder, and all Schedules shall remain in
full force and effect without any abatement or interruption of rent. In an Event
of Loss, Lessee, at its option provided no event of default has occurred
hereunder otherwise at Lessor's option, shall, within a commercially expedient
time frame: (a) place the Equipment in good working order, repair and condition;
and/or (b) replace the effected Equipment with identical equipment or, upon
consent of Lessor, with similar equipment of equal or greater value and utility,
in good working order, repair and condition, and with documentation creating
clear title thereto in Lessor; or (c) terminate the term of the Lease with
respect to the affected Schedule by paying to Lessor within sixty days the
"Casualty Value" which is defined as the sum of: (i) the present value of the
unpaid balance of the aggregate rent reserved under the related Schedule
calculated using a discount rate of six percent per annum, plus (ii) all accrued
but unpaid taxes, Delinquency Charges, penalties, interest and all or any other
sums then due and owing under the related Schedule, plus (iii) the amount of any
applicable end of term purchase option or other end of term payment or, in the
absence thereof, the fair market value of the Equipment as reasonably determined
by Lessor, and plus (iv) an amount reasonably determined by Lessor to make
Lessor whole on an after tax basis for any loss, recapture, or unavailability of
any tax credit and/or deduction. Upon Lessor's receipt of the Casualty Value
payment, Lessee shall be entitled to any and all of Lessor's right, title and
interest in the related Equipment for salvage purposes, in its then condition
and location, as is, without any warranties, express or implied.
11. INSURANCE: Lessee, at its expense shall provide and maintain in full force
and effect at all times that this Lease is in force and effect such casualty,
property damage, comprehensive public liability and other insurance in such form
and amounts as is customarily secured by prudent entities engaged in a business
similar to Lessee's, or using equipment of a character similar to the Equipment
leased hereunder, and as is reasonably acceptable to Lessor. All such insurance
shall provide that it may not be canceled or materially altered without at least
thirty days prior written notice to Lessor, shall name Lessor as additional
insured and loss payee, and shall not be rescinded, or invalidated by any act or
neglect of Lessee.
12. INDEMNITY: Lessee shall indemnify, defend, protect, save and hold harmless
Lessor, its employees, officers, directors, agents assigns and successors from
and against any and all claims, action, costs, expenses (including reasonable
attorneys' fees), damages including any interruption of service, loss of
business or other consequential damages), liabilities, penalties, losses,
obligations, injuries, demands and liens (including any of the foregoing arising
or imposed under the doctrines of "strict liability" or "product liability") of
any kind or nature arising out of, connected with, relating to or resulting from
the manufacture, purchase, sale, lease, ownership, installation, location,
maintenance, operation, condition (including latent and other defects, whether
or not discoverable) selection, delivery, return, or any accident in connection
therewith, of any Item or Items of Equipment, or by operation of law (including
any claim for patent, trademark or copyright infringement regardless of where,
how or by whom operated, excluding
<PAGE>
however, any of the foregoing resulting from the gross negligence or willful
misconduct of Lessor. The provisions of this paragraph shall survive the
termination or expiration of this Lease.
13. AUTHORITY OF LESSEE TO ENTER LEASE: With respect to this Lease and each
Schedule now or in the future annexed hereto, Lessee hereby represents, warrants
and covenants that: (i) the execution, delivery and performance thereof have
been duly authorized by Lessee; (ii) the individuals executing such have been
duly authorized to do so; (iii) the execution and/or performance thereof will
not result in any default under, or breach of, any judgment, order, law or
regulation applicable to Lessee, or of any provision of Lessee's articles of
incorporation, bylaws, or any agreement to which Lessee is a party; and (iv) all
financial statements and other information submitted by Lessee herewith or at
any other time is true and correct without any misleading omissions.
14. ASSIGNMENT: Lessee hereby agrees and acknowledges that Lessor may without
notice to Lessee assign all or any part of Lessor's rights, title and interest
in and to this Lease, any Schedule, the Equipment, and any of the rentals or
other sums payable hereunder, to any assignee ("Assignee") provided any such
assignment shall be made subject to the rights of Lessee herein and shall not
relieve Lessor of any of its obligations hereunder. Lessee hereby acknowledges
that any such assignment would not materially change the duties of, nor the
burden of risk imposed on the Lessee and that Lessee shall not look to Assignee
to perform any of Lessor's obligations hereunder and shall not assert against
Assignee any defense, counterclaim or setoff it may have against Lessor. Lessee
agrees that after receipt of written notice from Lessor of any such assignment
Lessee shall pay, if directed by Lessor, any assigned rental and other sums
payable hereunder directly to Assignee and will execute and deliver to Assignee
such documents as Assignee may reasonably request in order to confirm the
interest of Assignee in this Lease. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT,
LESSEE SHALL NOT ASSIGN, TRANSFER, ENCUMBER, SUBLET OR SELL THIS LEASE, ANY
SCHEDULE, ANY OF THE EQUIPMENT, OR ANY OF ITS INTEREST THEREIN, IN ANY FORM OR
MANNER.
15. FURTHER ASSURANCES: Upon Lessor's request, Lessee, promptly and at its
expense, shall execute and/or deliver such documents, instruments and/or
assurances, and shall take such further action, as Lessor deems prudent in order
to establish and/or protect the rights, interests and remedies of Lessor, and
for the confirmation, assignment and/or perfection of this Lease and any
Schedule hereto, and for the assurance of performance of Lessee's obligations
hereunder, such as (but not limited to): a secretary's certificate certifying
the authority of the person(s) signing, and/or the resolutions authorizing, this
Lease and/or any Schedule; delivery and/or acceptance certificates; insurance
certificates; an opinion of Lessee's counsel; financial statements and other
credit information as reasonably requested by Lessor; and a landlord/mortgagee
waiver of rights and interests in the Equipment. If Lessee fails to complete
when due any such requested item, Lessor, in its sole discretion and
notwithstanding the provisions of Section 4. (Term) herein, may elect to delay
the Final Commencement Date of the affected Schedule until any or all such
requested items are completed. Until duly executed by an authorized officer of
Lessor, Lessee agrees that this Lease and any Schedule executed by Lessee shall
constitute an offer by Lessee to enter into the Lease with Lessor and that
Lessee shall not withdraw its offer for a period of at least twenty business
days after Lessor's receipt of such offer and that, during such time, Lessee
shall assist Lessor in obtaining any financial and/or other information
prudently requested for use in its review of the proposed transaction.
16. DEFAULT: The occurrence of any of the following shall constitute an event
of default hereunder ("Event of Default"): (a) Lessee fails to pay when due any
installment of rent or any other amount due hereunder and such failure continues
for a period of ten days after receipt of written notice thereof; (b) any
financial or other information or any other representation or warranty given to
Lessor herein or in connection herewith proves to be false or misleading in any
material respect; (c) Lessee assigns, transfers, encumbers, sublets or sells
this Lease, any Schedule, any of the Equipment, or any of its interest therein,
in any form or manner, without Lessor's prior written consent; (d) Lessee fails
to observe or perform any other covenant, condition or obligation to be observed
or performed by it under this Lease and such failure continues for a period of
fifteen days after receipt of written notice hereof; (e) Lessee's credit
worthiness materially deteriorates as a result of a leveraged buyout, sale,
merger, leveraged equity dilution, leveraged acquisition, or any other
substantial change in ownership, without Lessor's prior written consent; (f)
Lessee ceases doing business as a going concern, makes an assignment for the
benefit of creditors, admits in writing its insolvency, files a voluntary
petition in bankruptcy, is adjudicated bankrupt or insolvent, files a petition
seeking for itself any reorganization, liquidation, dissolution or similar
arrangement under any present or future statute, law or regulation, or files an
answer admitting the material allegations of a petition filed against it in any
such proceeding, consents to or acquiesces in the appointment of a trustee,
receiver, or liquidator of it or of any substantial part of its assets, or it or
its shareholders take any action looking to its dissolution or liquidation; or
(g) within sixty days after the commencement of any proceedings against Lessee
seeking reorganization, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceedings shall not have
been dismissed, or if within sixty days after the appointment without Lessee's
consent or acquiescence of any trustee, receiver or liquidator of it or of any
substantial part of its assets, such appointment shall not be vacated.
17. REMEDIES: If an Event of Default shall occur and be continuing, Lessor may,
at its option but not limited thereto, do any or all of the following: (a)
proceed, by appropriate court action either at law or in equity, to enforce
performance by Lessee of the applicable covenants of this Lease and to recover
damages for the breach thereof; (b) by written notice to Lessee, terminate this
Lease and/or all or any Schedules hereto and Lessee's rights hereunder and/or
thereunder; (c) personally or by its agents enter the premises where any of the
Equipment is located and take immediate possession of the Equipment without
court order or other process of law and free from all claims by Lessee; and (d)
by written notice to Lessee, recover all amounts then due and owing plus, as
liquidated damages for loss of a bargain and not as a penalty, accelerate and
declare to be immediately due and payable the present value calculated using a
discount rate of six percent per annum of the unpaid balance of the aggregate
rent and other sums payable reserved hereunder, without any presentment, demand,
protest or further notice (all of which are expressly waived by Lessee). In the
event Lessor repossesses any of the Equipment, Lessor may sell, lease or
otherwise dispose of said Equipment in such manner, at such times, and upon such
terms as Lessor may reasonably determine, and apply to the account of Lessee (to
the extent of Lessee's obligations with respect to the Event of Default), or
reimburse to Lessee (to the extent of liquidated damages paid by Lessee with
respect to the Event of Default) if all of Lessee's obligations have been
fulfilled, after deducting all costs and expenses, including attorneys' fees, in
connection with such disposition: (i) in the case of a sale, the sale proceeds
less the fair market value of said Equipment when the Event of Default occurred,
as reasonably determined by Lessor; or (ii) in the case of a release, the
proceeds from the release rental charges which are applicable for the remainder
of the lease term in effect under this Lease when said Equipment was
repossessed. In addition to the remedies set forth herein, Lessor may pursue any
other remedy available at law or in equity. The exercise of any of the foregoing
remedies by Lessor shall not constitute a termination of this Lease or of any
Schedule unless Lessor so notifies Lessee in writing. All remedies of Lessor
shall be deemed cumulative and may be exercised concurrently or separately. The
waiver by Lessor of any breach of any obligation of Lessee shall not be deemed a
waiver of a breach of any other obligation or of any future breach of the same
obligation. The subsequent acceptance of rental payments hereunder by Lessor
shall not be deemed a waiver of any prior or existing breach by Lessee
regardless of Lessor's knowledge of such breach.
18. PERFORMANCE OF LESSEE'S OBLIGATIONS BY LESSOR: If Lessee fails to perform
any of its obligations hereunder, then, upon ten days prior written notice to
Lessee. Lessor shall have the right, but shall not be obligated, to perform the
same for the account of Lessee without thereby waiving Lessee's default. Any
amount paid and any expense, penalty or other liability incurred by Lessor in
such performance shall become due and payable by Lessee to Lessor upon demand.
19. PURCHASE AGREEMENTS: In the event any of the Equipment is subject to any
"Acquisition Agreement" between Lessee
<PAGE>
and the Manufacturer and/or vendor, then Lessee, as part of this Lease and upon
approval by Lessor of the applicable Schedule, transfers and assigns to Lessor
any and all of Lessee's rights, title and interest (excepting that which is
inherent to or granted by this Lease), but none of its obligations (except
Lessee's obligation to pay for the Equipment which Lessor shall do within thirty
days, or longer if allowed by the Acquisition Agreement, of Lessee's acceptance
of the Equipment provided all documentation required by Lessor has been
completed and that Lessor's approval remains valid), in and to the Acquisition
Agreement(s) and the subject Equipment. In the event Lessee issues a purchase
order to Lessor with respect to this Lease, any Schedule, or any of the
Equipment, it is agreed that at any such purchase order is issued for Lessee's
internal purposes only and that none of its terms and conditions shall modify
this Lease or any related documentation, or affect either parties'
responsibilities as defined in this Lease.
20. FAIR MARKET VALUE PURCHASE OR RENEWAL OPTION: Unless otherwise provided in
writing, Lessee may purchase or renew this Lease for all but not less than all
of the Equipment subject to any Schedule as of the expiration of the Base Term
or any Extension Term at its then fair market value, as mutually agreed by
Lessee and Lessor, provided Lessee is not in default hereunder and upon at least
six months but not more than twelve months advance written notice to Lessor of
Lessee's election. In the event Lessee elects to purchase the Equipment, the
fair market value purchase price shall be due upon the expiration of the
respective lease term and, upon receipt, Lessor shall transfer to Lessee any and
all of its rights, title and interest in the subject Equipment, as is, where is,
without any warranties, express or implied. In the event Lessee elects to renew
the Lease with respect to any Schedule, the renewal shall be based upon the fair
market value of the Equipment and shall be subject to the then prevailing
interest rates, Lessee's credit standing, and such other terms and conditions to
be mutually agreed upon by Lessee and Lessor. In the event Lessee and Lessor
cannot agree on a fair market value, then the fair market value shall be
determined by the average appraisal of three appraisers, the cost of which shall
be borne by Lessee, with one chosen by Lessee, one by Lessor, and one mutually
agreed upon by Lessee and Lessor, and all of whom shall be independent with
respect to Lessee and Lessor, instructed to determine the fair market value
of the Equipment based upon the price that would be obtained in an arm's length,
retail transaction between informed and willing parties under no compulsion to
buy or sell including taxes, transportation, installation and any other services
required to render such equipment fully acceptable for use by an end-user.
21. NOTICES: All notices hereunder shall be in writing and shall be given by
personal delivery or sent by certified mail, return receipt requested, or
reputable overnight courier service, postage/expense prepaid. to the address of
the other party as set forth herein or to any later address last known to the
sender. All notices to Lessor shall be addressed to the attention of Vice
President, Contracts. Notice shall be effective upon signed receipt or other
evidence of delivery.
22. TERMINATION BY LESSOR: Time is of the essence of this Lease. If the
Commencement Date for any Item of Equipment does not occur for any reason within
sixty days of the date of Lessor's approval of the respective Schedule, then
Lessor, anytime thereafter until the Final Commencement Date with respect to
said Schedule, may elect, in its sole discretion, and upon ten days prior
written notice to Lessee, to terminate this Lease and it obligations to Lessee
with respect to any or all Items of Equipment subject to said Schedule wherein
the Commencement Date has not yet occurred, in which event the rental amount
shall be adjusted accordingly in order to reflect only those Items still subject
to said Schedule.
23. APPLICABLE LAW: This Lease shall be construed in accordance with and shall
be governed by the laws of the State of California. The prevailing party in any
legal action to enforce any of the terms of this Lease or to recover for any
breach of this Lease shall be entitled to recover all attorneys' fees and costs
of suit from the other party. The Lessee agrees that any litigation arising out
of this Lease or any breach thereof shall be filed and conducted in the
California Superior Court for the County of Orange, unless Lessor or its
Assignee selects an alternative venue of litigation. If any provision of this
Lease or any Schedule is held by applicable jurisdiction to be invalid, illegal,
unenforceable or otherwise prohibited, then such provision, as to such
jurisdiction, shall be: (a) ineffective to the extent of such prohibition
without invalidating the remaining provisions hereof; and (b) replaced with a
mutually acceptable, valid, legal and enforceable provision which comes closest
to the intention of the parties. Any such prohibition in any jurisdiction shall
not invalidate such provision in any other jurisdiction, and, where the
provisions of any such applicable law may be waived, they are hereby waived by
Lessee and Lessor to the full extent permitted to the end that this Lease and
any Schedule shall be deemed a valid and binding agreement in accordance with
its terms. No rental, delinquency, liquidated damage or any other charges herein
or with respect to any Schedule are intended to exceed the maximum amount
permitted by applicable law. If any such charges exceed such maximum, then such
charges shall be reduced to the legally permitted maximum charge and Lessee will
not be obligated to pay any amount in excess of that permitted by law or, if
already paid, such excess shall be refunded.
24. GENERAL: Neither this Lease nor any Schedule shall bind Lessor in any
manner, and no obligations of Lessor shall arise, until the respective
instrument is duly executed by an authorized officer of Lessor. If more than one
Lessee is named in this Lease, the liability of each shall be joint and several.
This Lease and each Schedule shall inure to the benefit of and be binding upon
Lessor, Lessee and their respective successors except as expressly provided for
herein. All representations, warranties, indemnities and covenants contained
herein, or in any document now or at any other time delivered in connection
herewith, which by their nature would continue beyond the termination or
expiration of this Lease, shall continue in full force and effect and shall
survive the termination or expiration of this Lease.
25. ENTIRE AGREEMENT: This Lease, together with all duly executed Schedules,
constitutes the entire agreement between Lessee and Lessor with respect to the
Equipment and shall supersede any and all prior proposals, negotiations and/or
other communications, oral or written, with respect to the Equipment. NO
MODIFICATION TO THIS AGREEMENT SHALL BE EFFECTIVE UNLESS MADE IN WRITING AND
DULY EXECUTED BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR No oral or written
guaranty, promise, condition, representation or warranty shall be binding unless
made a part of this Lease by duly executed addendum. Unless specified otherwise,
in the event any such duly executed modification is attached to and made a part
of any specific Schedule, the terms and conditions of such modification shall
apply only to that specific Schedule and shall not apply to any other Schedule.
<TABLE>
<S> <C>
Lessee: Rainmaker Systems Inc. Lessor: CELTIC LEASING CORP.
--------------------------------- ---------------------------------
Signature: /s/ Michael Silton Signature:
--------------------------------- ---------------------------------
Name: Michael Silton Name: Todd R. Meyer
--------------------------------- ---------------------------------
Title: Chief Executive Officer Title: Vice President
--------------------------------- ---------------------------------
Date Offered: 5/5/99 Date Accepted: ____________________________
-----------------------------
</TABLE>
PLEASE INITIAL BELOW TO CERTIFY YOUR ACKNOWLEDGMENT AND AGREEMENT THAT NO
MODIFICATIONS TO THIS LEASE SHALL BE EFFECTIVE UNLESS IN WRITING AND SIGNED
BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR.
Lessee Initials: ___________ Lessor Initials:_______
<PAGE>
[LETTERHEAD OF CELTIC LEASING CORP. APPEARS HERE]
<TABLE>
<S> <C>
Lessee : Rainmaker Systems, Inc.
--------------------------------------------------------------------------------------------------------------------------
Corporate
Address : 1800 Green Hills Road, Scotts Valley, CA 95066
--------------------------------------------------------------------------------------------------------------------------
Contact : Steven M. Karp Title: Director of Financial Planning & Treasury Phone No. 831-461-4798
------------------ ----------------------------------------- ----------------------------
Equipment
Location: 1800 Green Hills Road, Scotts Valley, CA 95066
--------------------------------------------------------------------------------------------------------------------------
__________________________________________________________________________________________________________________________
Contact : Same Title: Phone No.
--------------------------------------- --------------------------------------- -----------------------------
</TABLE>
- --------------------------------------------------------------------------------
This Schedule is issued pursuant to the Master Lease referenced above between
Lessee and Lessor. All of the terms and conditions of the Master Lease are
incorporated herein and made a part hereof as if such terms and conditions were
set forth in this Schedule. By their execution and delivery of this Schedule,
the parties hereby reaffirm all of the terms and conditions of the Master Lease.
- --------------------------------------------------------------------------------
Equipment Leased:
ITEM QTY SERIAL NO. DESCRIPTION
- ---- --- ---------- -----------------------------------------------
VENDOR: Rubric, Inc., San Mateo, CA
----------------------------------------------
1. Various Rubric EMA Platform software, 2 CPUS, consisting of
Base EMA system, Automated Services (events,
collateral, inquiries), Oracle reports (5 developer
licenses, end user view licenses, Rubric pre-built
reports).
2. (01) Annual maintenance of Rubric EMA Platform software @
20% cost.
3. (01) Rubric 2 day training for Rubric EMA Platform software
VENDOR(S): to be determined
----------------
4.-? various Additional Items of Equipment expected to include:
Enterprise reporting software, web commerce software
and Microsoft desktop license upgrades, and/or other
related and/or accessory property. Items 4. and on
shall be enumerated and described in further detail,
including location and vendor name, at a later date on
the related applicable Acceptance Certificate(s).
NOTE: Equipment cost to Lessor not to exceed: $500,000.00*
------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
BASE TERM DEPOSIT APPLIED TO FINAL
MONTHLY RENT IN MONTHS LAST BILLING CYCLE BILLING CYCLE COMMENCEMENT DATE
--------------- --------------- -------------------- --------------- -------------------
<S> <C> <C> <C> <C>
$ 15,600.00 thirty six (36) ONE MONTH'S RENT [_] MONTHLY [X] QUATERLY
(APPLICABLE TAXES TO BE BILLED) [_] BIANNUALLY [_] ANNUALLY
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
By execution hereof, the parties hereby reaffirm their acknowledgment and
agreement that no modification to this Lease shall be effective unless in
writing and signed by Lessee and an authorized officer of Lessor.
<TABLE>
<CAPTION>
OFFER ACCEPTANCE
----- ----------
<S> <C>
Lessee: Rainmaker Systems. Inc. Lessor: CELTIC LEASING CORP.
-------------------------------------- -----------------------------------------
Signature: /s/ Michael Silton Signature:______________________________________
-----------------------------------
Name: Michael Silton Name: Todd R. Meyer
---------------------------------------- -------------------------------------------
Title: Chief Executive Officer Date: 5/5/99 Title: Vice President Date: _____________
------------------------- -------- -----------------------
</TABLE>
<PAGE>
Addendum "A"
-
to
Lease Schedule No. 01 (the "Schedule"),
--
dated ______________, 1999,
-
to
Master Lease Agreement No. CML-0823-A,
------
dated ______________, 1999,
-
by and between
CELTIC LEASING CORP., as Lessor,
and
Rainmaker Systems, Inc., as Lessee (the "Lease")
-----------------------
Notwithstanding the terms and conditions contained in the above referenced
Lease, and to the limited extent hereof, Lessor and Lessee hereby agree to the
following with respect only to the above referenced Schedule:
1. At the conclusion of the term of the Lease with respect to said
Schedule, provided no event of default has occurred and is
continuing, and provided there are no accrued but unpaid late
charges, taxes, penalties or any other sums due under the
Lease, Lessee may purchase all of Lessor's rights, title and
interest in and to the Equipment subject to the Schedule for
$1.00.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the
date last set forth below.
<TABLE>
<S> <C>
Lessee: Rainmaker Systems, Inc. Lessor: CELTIC LEASING CORP.
--------------------------------- --------------------------------
Signature: /s/ Michael Silton Signature:_____________________________
------------------------------
Name: Michael Silton Name: Todd R. Meyer
----------------------------------- ----------------------------------
Title: Chief Executive Officer Title: Vice President
---------------------------------- ---------------------------------
Date: 5/5/99 Date: _________________________________
-----------------------------------
</TABLE>
<PAGE>
[LOGO OF CELTIC LEASING CORP.]
CELTIC LEASING CORP.
- --------------------------------------------------------------------------------
Equipment Financing Specialist
LESSEE REQUEST FOR PARTIAL FUNDING(S)
-------------------------------------
Date: 5/5/99
Rainmaker Systems, Inc.
1800 Green Hills Road
Scotts Valley, CA 95066
RE: Lease Schedule No. 01, dated __________ (the "Schedule"), to Master Lease
Agreement No. CML-0823-A, dated ____________ (the "Lease"), by and between
Celtic Leasing Corp., as Lessor, and Rainmaker Systems, Inc., as Lessee,
and all duly executed supplemental documentation relating to said Lease
and Schedule (collectively, the Lease, the Schedule, and all related
supplemental documentation, is herein referred to as the "Transaction").
Ladies/Gentlemen:
Notwithstanding anything to the contrary contained in the above referenced
Transaction, and to the limited extent hereof, this Letter Agreement amends and
supersedes said Transaction and is hereby incorporated by reference therein.
It is hereby acknowledged that not all "Items" of "Equipment" (as defined in the
above referenced Lease) subject to the Transaction are expected to be delivered
and installed simultaneously. Therefore, Lessee has requested that Lessor,
within a commercially reasonable time, pay for individual Items as they are
accepted by Lessee, as evidenced by appropriate Acceptance Certificates
delineating each Item's Commencement Date. In consideration of Lessor's paying
for individual Items prior to all Items being accepted by Lessee, Lessee hereby
agrees to pay and rent shall be due, on a pro rata basis, based only on the
Items that have been accepted, for each day from the accepted Item's
Commencement Date until the first day of the calendar quarter after the date
that the final Item has been accepted by Lessee, which date shall serve as the
"Final Commencement Date" to be set forth on the above referenced Schedule and
as is more fully described in said Lease under Sections 4. TERM and 5. RENT. The
individual Items' daily pro rata rent shall be the amount of one-thirtieth
(1/30) of the Items' proportional monthly rent and shall be due and payable
within five (5) days of receipt of invoice therefor. Subject to continuing
renewals of Lessor's approval of the Transaction, it is further acknowledged
that said Final Commencement Date is not expected to occur until approximately
Late July of 1999, or later, depending on how long it takes for all Items to be
- -----------------
accepted by Lessee: However, Lessor's approval of the Transaction is subject to
update and renewal every thirty (30) days. Therefore, if at any time prior to
the Final Commencement Date, Lessor elects, at its sole option, not to extend or
renew said approval, or if for any reason Lessor's Assignee (if any) elects not
to renew its approval of the Transaction to Lessor, then Lessor may at its sole
option elect either to: (a) treat the last accepted Item's Commencement Date, or
such other date as is mutually agreed to by Lessor and Lessee, as the Final
Commencement Date, and delete any or all
<PAGE>
LESSEE REQUEST FOR PARTIAL FUNDING(S) [LOGO OF CELTIC LEASING CORP.]
Rainmaker Systems, Inc.
Page 2
- -------------------------------------
Items under the Schedule not already accepted by Lessee and adjust the final
rental amount accordingly; or (b) terminate the Schedule in its entirety. If
Lessor elects option (b), then Lessee shall promptly reimburse Lessor for any
purchase payments or other disbursements previously paid or to be paid by Lessor
for any Item(s) of Equipment, in addition to the payment of all applicable pro
rata rent, taxes, late fees, and any other charges which may be due and/or owing
under the Lease, up to the day of reimbursement of Lessor by Lessee. In the
event Lessee does not promptly reimburse Lessor hereunder, Lessor shall have all
of its available rights and remedies as defined under the Transaction and at Law
or in Equity.
It is further acknowledged that the monthly rent as set forth on the Schedule is
subject to adjustment every thirty days, up to and including the day the final
Item of Equipment subject to the Schedule is funded by Lessor or its Assignee,
if any, in order to reflect any increase in market rates.
Finally, it is hereby acknowledged that Lessor intends to assign certain rights
it has under the Transaction to National City Bank of Kentucky ("Assignee"), and
------------------------------
in consideration of Lessee's obligations under the Transaction, including this
Letter Agreement, Lessor may fund the payment for some Items through such an
assignment by Lessor to Assignee. Lessee agrees that all of its promises,
representations and warranties that it has made under the Transaction are
effective as to Assignee, and further agrees that Assignee may enforce those
promises, representations and warranties. In particular, in the event the
Schedule is terminated pursuant to the above, Lessee agrees to reimburse
Assignee directly, if directed in writing by Assignee, upon receipt of an
invoice, for any payment(s) made by Assignee relating to any Items of Equipment,
and, if further directed in writing by Assignee, to also pay the applicable pro
rata rent directly to Assignee.
In all other respects, the terms of the Transaction as currently set forth shall
remain in full force and effect. Please acknowledge your acceptance of this
Letter Agreement by your authorized signature below and return the original to
Celtic Leasing Corp. within ten days.
Sincerely,
CELTIC LEASING CORP.
ACKNOWLEDGED AND AGREED:
______________________________ Rainmaker Systems, Inc.
Todd R. Meyer
Vice President By : /s/ Michael Silton
----------------------------------
Name: Michael Silton
---------------------------------
Title: Chief Executive Officer Date: 5/5/99
------------------------ -------
<PAGE>
[LOGO OF CELTIC LEASING CORP.]
CELTIC LEASING CORP
- --------------------------------------------------------------------------------
Equipment Financing Specialist
LESSEE REQUEST FOR LESSOR TO MAKE PROGRESS PAYMENT TO VENDOR
------------------------------------------------------------
Date:__________________
Rainmaker Systems, Inc.
1800 Green Hills Road
Scotts Valley, CA 95066
RE: Lease Schedule No. 01 dated __________ (the "Schedule"), to Master Lease
Agreement No. CML-0823-A, dated ____________ (the "Lease"), by and between
Celtic Leasing Corp., as Lessor, and Rainmaker Systems, Inc., as Lessee,
and all duly executed supplemental documentation relating to said Lease
and Schedule (collectively, the Lease, the Schedule, and all related
supplemental documentation, is herein referred to as the "Transaction").
Ladies/Gentlemen:
Notwithstanding anything to the contrary contained in the above referenced
Transaction, and to the limited extent hereof, this Letter Agreement amends and
supersedes said Transaction and is hereby incorporated by reference therein.
It is hereby acknowledged that the vendor of equipment item(s) 1.-3. subject to
the above referenced Schedule (the "Item(s)"), Rubric, Inc. (the "Vendor")--said
Item(s) and the Vendor both having been selected by Lessee--requires a 70%
deposit/down payment/progress payment prior to delivery of the Item(s). Lessee
has requested and Lessor has agreed to make said payment. In consideration of
Lessor's disbursement of said payment, Lessee hereby agrees to pay and rent
shall be due, on a pro rata basis, based only on 70% of the Item(s) proportional
monthly rent, for each day from the day of Lessor's disbursement of said payment
until the day the Item(s) is/are accepted in full as evidenced by appropriate
Acceptance Certificate(s) delineating each Item's Commencement Date. As of each
Item's Commencement Date the pro rata rent increases to 100% of the Item(s)
proportional monthly rent and continues for each day until the first day of the
calendar quarter after the date that the final item of Equipment subject to said
Schedule has been accepted by Lessee, which date shall serve as the "Final
Commencement Date" to be set forth on the Schedule and as is more fully
described in the above referenced Lease under Sections 4. TERM and 5. RENT.
Daily pro rata rent shall be the amount of one-thirtieth (1/30) of the
applicable proportional monthly rent and shall be due and payable within five
(5) days of receipt of invoice therefor. Subject to continuing renewals of
Lessor's approval of the Transaction, it is further acknowledged that said Final
Commencement Date is not expected to occur until approximately Late July of
------------
1999, or later, depending on how long it takes for all items of Equipment
- ----
subject to the Schedule to be accepted by Lessee. However, Lessor's approval of
the Transaction is subject to update and renewal every thirty days. Therefore,
if, at any time prior to the Final Commencement Date, Lessor elects, at its sole
option, not to extend or renew said approval, or if for any reason Lessor's
Assignee (if any) elects not to renew its
<PAGE>
LESSEE REQUEST FOR LESSOR TO MAKE PROGRESS PAYMENT TO VENDOR [LOGO]
Rainmaker Systems, Inc.
Page 2
- ------
approval of the Transaction to Lessor, then Lessor may at its sole option elect
either to: (a) treat the Commencement Date of the last accepted item of
Equipment subject to the Schedule, or such other date as is mutually agreed to
by Lessor and Lessee, as the Final Commencement Date, and delete any or all
items of Equipment subject to the Schedule not already accepted by Lessee and
adjust the final rental amount accordingly; or (b) terminate the Schedule in its
entirety. If Lessor elects either option (a) or (b), above, then Lessee shall
promptly reimburse Lessor for any deposits/down payments/progress payments,
purchase payments, or other disbursements previously paid or to be paid by
Lessor relating to any items of Equipment eliminated from the Schedule, in
addition to the payment of applicable pro rata rent, taxes, late fees, and any
other charge which may be due and/or owing under the Lease, up to the day of
reimbursement of Lessor by Lessee. In the event Lessee does not promptly
reimburse Lessor hereunder, Lessor shall have all of its available rights and
remedies as defined under the Transaction and at Law or in Equity.
It is further acknowledged that the monthly rent set forth on the Schedule is
subject to adjustment every thirty days, up to and including the day the final
item of Equipment subject to the Schedule is funded by Lessor or its assignee,
if any, in order to reflect any increase in market rates.
Finally, it is hereby acknowledged that Lessor intends to assign certain rights
it has under the Transaction to National City Bank of Kentucky ("Assignee"), and
------------------------------
in consideration of Lessee's obligations under the Transaction, including this
Letter Agreement, Lessor may fund the payment for some Items through such an
assignment by Lessor to Assignee. Lessee agrees that all of its promises,
representations and warranties that it has made under the Transaction are
effective as to Assignee, and further agrees that Assignee may enforce those
promises, representations and warranties. In particular, in the event the
Schedule is terminated pursuant to the above, Lessee agrees to reimburse
Assignee directly, if directed in writing by Assignee, upon receipt of an
invoice, for any payment(s) made by Assignee relating to any Items of Equipment,
and, if further directed in writing by Assignee, to also pay the applicable pro
rata rent directly to Assignee.
In all other respects, the terms of the Transaction as currently set forth shall
remain in full force and effect. Please acknowledge your acceptance of this
Letter Agreement by your authorized signature below and return the original to
Celtic Leasing Corp. within ten days.
Sincerely,
CELTIC LEASING CORP.
ACKNOWLEDGED AND AGREED:
_________________________ Rainmaker Systems, Inc.
Todd R. Meyer
Vice President By. /s/ Michael Silton
-----------------------------------------
Name: Michael Silton
---------------------------------------
Title : Chief Executive Officer Date: 5/5/99
------------------------ -------
<PAGE>
CELTIC LEASING CORP.--Lessor
2061 BUSINESS CENTER DRIVE. SUITE 200 . IRVINE, CALIFORNIA 92612 .
(9491 263-3880 . FAX: (949) 263-1331
NOTICE OF ASSIGNMENT
--------------------
May 3, 1999
Rainmaker Systems, Inc.--Lessee
1800 Green Hills Road
Scotts Valley, CA 95066
RE: LEASE SCHEDULE No. 01, dated____________, annexed to
--
MASTER LEASE No. CML-0823-A, dated __________________(the "Agreement").
------
Gentlemen:
The purpose of this letter is to advise you that Celtic Leasing Corp. ("Lessor")
will be assigning a certain portion of the above referenced Agreement to
National City Bank of Kentucky, P.O. Box 36040, Louisville, KY 40233 ("Bank").
- --------------------------------------------------------------------
Lessee is hereby directed, and by signature below agrees, to pay directly to
Bank at the address set forth below, all assigned rental and other payments
required to be paid by Lessee under the terms of the Agreement including, but
not limited to, rental and lease payments, casualty, loss or termination
payments, accelerated payments upon default, reasonable attorney's fees and
expenses of collection and enforcement of the Agreement.
All monies from time to time payable under the Agreement to Lessor that will be
assigned to Bank and shall be paid to Bank are as follows: _________________
consecutive quarterly payments of $_____________ commencing on _________________
and one final payment of $_____________ due on ________________ payable to:
Attn: Leasing Industry Financing
National City Bank of Kentucky
P.O. Box 36040
Louisville, KY 40233
This assignment is purely a financial arrangement between Bank and Celtic
Leasing Corp. Any inquiries you have regarding our Agreement should continue to
be referred directly to Celtic Leasing.
The undersigned Lessee acknowledges that upon Bank's receipt of the final
payment due and assigned to Bank under this assignment, all original
documentation will be reassigned to Celtic Leasing Corp., 2061 Business Center
Dr., Irvine, CA 92612.
Sincerely, ACKNOWLEDGED AND AGREED:
CELTIC LEASING CORP. Lessee: Rainmaker Systems, Inc.
------------------------------------
_________________________ Signature: /s/ Michael Silton
----------------------------------
Todd R. Meyer Print Name: Michael Silton
---------------------------------
Vice President Title: Chief Executive Officer Date: 5/5/99
------------------------ --------
<PAGE>
MISDIRECTED INVOICE/ASSIGNMENT OF INVOICE/BILL OF SALE
------------------------------------------------------
relating to
Lease Schedule No. 01 (the "Schedule"),
--
dated ______________ 1999,
to
Master Lease Agreement No. CML-0823-A,
----------
dated _____________ 1999,
-
by and between
CELTIC LEASING CORP., as Lessor,
and
Rainmaker Systems, Inc., as Lessee (the "Lease")
-----------------------
This is to acknowledge that it has been the intent of the above named Lessee at
all times since prior to delivery of all equipment now or hereafter subject to
the above referenced Schedule (the "Equipment") to lease said Equipment.
However, the billing for the sale of some Items of Equipment may have been(may
be) misdirected to Lessee at one time or another by the subject vendor(s),
instead of to the above named Lessor. Any such misdirected invoices have not
been(will not be) paid by Lessee (unless clearly documented otherwise) but
rather have been(will be) forwarded to Lessor for direct payment to the subject
vendor(s). Lessee hereby acknowledges that it was(is) not its intention to
acquire any rights, title or interest in any of the Equipment (except for those
rights and interests granted under the Lease), and, therefore, for valuable
consideration, receipt of which is hereby acknowledged, hereby assigns, sets
over, and transfers to Lessor any and all rights, title and interest it may have
inadvertently acquired, or may acquire, as a result of any such misdirected
invoicing, and further acknowledges that, upon Lessor's (or its assignee's)
payment of any such misdirected invoices, Lessor shall acquire free and clear
title to the subject equipment.
READ, ACKNOWLEDGED AND AGREED TO:
Lessee: Rainmaker Systems. Inc. Lessor: CELTIC LEASING CORP.
------------------------ ---------------------------------
Signature: /s/ Michael Silton Signature:
---------------------- -----------------------
Name: Michael Silton Name: Todd R. Meyer
--------------------------- ----------------------------
Title: Chief Executive Officer Date: 5/5/99 Title: Vice President Date:_____
------------------------ ------- ---------------
<PAGE>
[LOGO OF CELTIC LEASING CORP. APPEARS HERE]
- --------------------------------------------------------------------------------
Equipment Financing Specialist
May 19, 1999
Rainmaker System, Inc.
1800 Green Hills Road
Scotts Valley, CA 95066
RE: Master Lease Agreement No. CML-0823-A, dated 05/05/99, by and between Celtic
------ --------
Leasing Corp., as Lessor, and Rainmaker Systems, Inc., as Lessee (the
"Lease").
Ladies/Gentlemen:
It is hereby acknowledged that the above named Lessee inadvertently forgot to
initial its acknowledgement of certain language at the of the end above
reference Lease. Therefore, PLEASE SIGN BELOW TO CERTIFY YOUR ACKNOWLEDGEMENT
AND AGREEMENT THAT NO MODIFICATION TO SAID LEASE SHALL BE EFFECTIVE UNLESS IN
WRITING AND SIGNED BY LESSEE AND AN AUTHORIZED OFFICER OF LESSOR.
Sincerly,
CELTIC LEASING CORP.
ACKNOWLEDGE AND AGREED:
________________________ Rainmaker System, Inc.
Todd R. Meyer
Vice President By: /s/ Michael Silton
-------------------------------------
Name: Michael Silton
-------------------------------------
Title: Chief Executive Officer Date: 5/20/99
----------------------- -------
<PAGE>
EXHIBIT 10.14
[LOGO OF METLIFE CAPITAL] LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT entered into as of the 28/th/ day of October,
1997 by and between MetLife Capital Corporation, a Delaware corporation, whose
address is 10900 NE 4th Street, Suite 500, Bellevue, WA 98004 ("Lender") and
UniDirect Corporation a California corporation, whose address is 1800 Green
Hills Road, Suite #201 Scotts Valley, Ca 95066 ("Borrower").
WHEREAS, Lender has agreed to make a commercial loan or loans to Borrower;
and
WHEREAS, as a condition to making the loans, and in order to secure the
repayment thereof, Lender has required Borrower to execute and deliver to Lender
this Loan and Security Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Borrower and Lender agree as follows:
1. Creation of Security Interest. As security for the due and punctual
-----------------------------
payment of any and all of the present and future obligations of the Borrower to
Lender, whether direct or contingent or joint or several, Borrower hereby
conveys, assigns and grants to Lender a continuing security interest in all of
Borrower's rights, title and interests in and to the equipment described in the
Supplemental Security Agreement(s) entered into pursuant to this Loan and
Security Agreement from time to time ("Equipment") including all present and
future additions, attachments and accessories thereto, all substitutions
therefor and replacements thereof and all proceeds thereof, including all
proceeds of insurance (such Equipment and property hereinafter called
"Collateral").
2. The Loans. (a) Subject to the terms and conditions of this Loan and
---------
Security Agreement, Lender agrees to make a loan or loans to Borrower. The
maximum principal amount of any loan or loans to be made by Lender to Borrower
shall be within Lender's discretion, subject to the exercise of Lender's
reasonable business judgment, and shall be as stated in the loan commitment
letter issued by Lender to Borrower, or in the event a commitment letter is not
issued by Lender, in Lender's internal credit approval (each such loan or loans
shall be referred to as "the Loan Amount").
(b) The Loan Amount shall be repaid by Borrower as a term loan or term
loans ("Term Loan"). The Term Loan shall be evidenced by a promissory
note or notes in the form attached hereto as Exhibit "A" ("Term
Note"). The payment provisions of each Term Note shall be stated
therein.
(c) If requested by Borrower, and in accordance with the terms and
conditions of Section 3 hereof, Lender shall make interim fundings to
Borrower of a Term Loan as partial advances of the Loan Amount
("Interim Loans"). The Interim Loans shall either be for the payment
of the acquisition cost of any items of Equipment delivered and
accepted by Borrower prior to the expiration date of Lender's loan
commitment to Borrower ("Commitment Expiration Date") or to fund
progress payments to the vendor or manufacturer of the Equipment, if
the making of progress payments was agreed to by Lender in its
commitment or approval to make the loan or loans to Borrower. The
Interim Loans shall be evidenced by promissory notes in the form
attached hereto as Exhibit "B" ("Interim Note"). Interest on all
Interim Loans shall be payable as provided therein. The principal
amount due under the Interim Loans shall be due as provided in the
Interim Notes, at which time, provided no Event of Default hereunder
has occurred and is continuing or event which with the passing of time
or giving of notice or both would become an Event of Default hereunder
has occurred and is continuing, Lender shall consolidate all Interim
Loans and convert them to a Term Loan evidenced by a Term Note or
Notes. Whether or not a Term Loan is evidenced by one or more Term
Notes shall be as agreed between Lender and Borrower, or in the
absence of such an agreement, as decided by Lender in the exercise of
its reasonable business judgment.
(d) In the event that the amount loaned pursuant to the Interim Loans is
less than the Loan Amount, subject to Borrower's compliance with the
terms and conditions of this Loan and Security Agreement including the
satisfaction of the conditions of borrowing set forth in Section 7 of
this Loan and Security Agreement, including but not limited to
providing Lender with a description of the items of Equipment), Lender
shall disburse to Borrower the balance of the Loan Amount on the same
date that the Interim Loans are converted into a term loan.
3. Method For Borrowing On Interim Loan. Borrower shall give Lender at
-------------------------------------
least five (5) business days written notice of a request for the disbursement of
an Interim Loan ("Request"), specifying the date on which the Interim Loan is to
be disbursed. Such Request shall be in the form attached hereto as Exhibit "C".
Such Request shall be accompanied by an original copy of the invoice or invoices
to be paid from the interim Loan. Such Request shall constitute a representation
and warranty by the Borrower that (i) as of the date of the Request no Event of
Default or event which with the passing of time or the giving of notice or both
would constitute an Event of Default hereunder has occurred and is continuing
and (ii) in the event items of Equipment have been delivered to the Borrower,
Borrower has unconditionally accepted the Equipment from the vendor thereof.
Subject to the conditions of this Loan and Security Agreement, Lender shall
disburse the Interim Loan to the invoicing party, or if Borrower shall have paid
the amount of such invoice, Lender shall reimburse Borrower, upon receipt of
proof of payment from Borrower.
4. Cross Collateral/Cross Default. All Collateral shall secure the
------------------------------
payment and performance of all of Borrower's liabilities and obligations to
Lender hereunder and under any of the loan documents relating hereto including,
but not limited to, all Interim Notes and all Term Notes (the Loan and Security
Agreement, the Interim Notes, the Term Notes, the Supplemental Security
Agreement(s) and all other loan documents may be referred to herein collectively
as the "Loan Documents"). Lender's security interest in the Collateral shall not
be terminated until and unless all of Borrower's obligations to Lender under any
of the Loan Documents are fully paid and performed. The occurrence of an event
of default under any other of the Loan Documents shall be deemed to be an Event
of Default hereunder and an Event of Default hereunder shall be deemed to be an
event of default under any other of the Loan Documents.
5. Representations And Warranties. Borrower hereby represents and
------------------------------
warrants as follows:
a) Power and Authorization. Borrower has the full power and (corporate)
authority to execute, deliver and perform Borrower's obligations under
the Loan Documents. The execution and delivery of the Loan Documents
have been authorized by all requisite corporate (or partnership)
action on the part of Borrower. The execution, delivery and
performance of the Loan Documents have not constituted and will not
constitute a breach, default, or violation of or under Borrower's
articles of incorporation, by-laws (partnership agreement), or any
other agreement, indenture, contract, lease, law, order, decree,
judgment, or injunction to which Borrower is a party or may be bound
and have not resulted and will not result in the creation of any lien
upon the Equipment pursuant to any agreement, indenture, lease,
contract or other instrument to which Borrower is a party, except the
lien created by this Loan and Security Agreement.
(b) Existence. If Borrower is a corporation, Borrower (i) is duly
incorporated, validly existing and in good standing under the laws of
its state of incorporation, (ii) has all corporate powers and all
governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, and (iii) is duly qualified
to transact business as a foreign corporation in each jurisdiction
where the Equipment will be located and in the jurisdiction where its
principal place of business is located. If Borrower is a partnership,
Borrower (i) has been duly formed as a (limited or general)
partnership under the laws of the state of its organization, (ii) is
comprised of the general partner(s) listed on the Schedule of
Partners attached to this Loan and Security Agreement, and (iii) is in
good standing under the laws of the state of its formation.
<PAGE>
(C) Binding Effect. This Loan and Security Agreement constitutes the valid and
binding agreement of the Borrower; the Interim Notes and the Term Note, when
executed and delivered, will constitute the valid and binding obligations of
the Borrower; and the Loan Documents are enforceable in accordance with
their terms except as (i) the enforceability thereof may be limited by the
bankruptcy laws, and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(d) Litigation. There is no action, suit or proceeding pending against, or to
the knowledge of the Borrower, threatened against or affecting the Borrower,
before any court or arbitrator or any governmental body, agency or official
which has not been previously disclosed to the Lender in writing and in
which there is a reasonable possibility of an adverse decision which could
materially adversely affect the business, financial condition or results of
operations of the Borrower or which would in any manner draw into question
the validity of any of the Loan Documents.
(e) Filing of Tax Returns. The Borrower has filed all tax returns required to
have been filed and has paid all taxes shown to be due and payable on such
returns, including interest and penalties, and all other taxes which are
payable by it, to the extent the same have become due and payable. The
Borrower knows of no proposed tax assessment against it and all tax
labilities of the Borrower are adequately provided for.
(f) Title. The Borrower has or shall have at the time it executes the Term Note
good and indefeasible title to the Collateral free and clear of all liens
other than the Lender's lien.
(g) Compliance with Law. The business and operations of the Borrower have been
and are being conducted in accordance with all applicable laws, rules and
regulations, other than violations which could not (either individually or
collectively) have a material adverse effect on the financial condition or
operations of the Borrower.
(h) Full Disclosure. All documents, records, instruments, certificates,
statements (including, but not by way of limitation, financial statements of
Borrower) and information provided to Lender by Borrower in connection with
this Loan and Security Agreement are true and accurate in all material
respects and do not contain any untrue statement, or fail to contain any
statement of a material fact necessary to make the statements contained
herein or therein not misleading. There is no fact known to the Borrower
that Borrower has not disclosed in writing which could materially and
adversely affect the financial condition or operations of Borrower.
(i) Security Interest. The security interest granted to Lender hereunder is a
valid, first priority security interest in the Collateral and has been or
promptly after the execution of the Supplemental Security Agreement
describing the Collateral will be, perfected in accordance with the
requirements of all states in which any item of the Collateral is located.
(j) Personal Property. Under the laws of the state(s) in which the Collateral is
to be located, the Collateral is deemed to consist solely of personal
property.
(k) Pollution and Environmental Control. Borrower has obtained all permits,
licenses and other authorizations which are required under and is in
material compliance with, all federal, state, and local laws and
regulations relating to pollution, reclamation, or protection of the
environment. Including laws relating to omissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into air, water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes. Borrower shall maintain all such permits, licenses, and
authorizations current.
6. Covenants. Borrower hereby agrees and covenants as follows:
---------
(a) Payment. Borrower shall pay the indebtedness secured hereby as provided
herein and in the Interim Notes and Term Notes.
(b) Location of Collateral. Borrower will keep the Collateral located at the
location or locations stated on the Supplemental Security Agreements,
provided, however, that Borrower may change the location of the collateral
with Lender's prior written consent.
(c) No Liens. Except for the security interest granted hereby or under any other
agreement under which Lender is the secured party, whether as mortgagee,
beneficiary or otherwise, Borrower shall keep the Collateral free and clear
of any security interest, lien or encumbrance of any kind and Borrower shall
not sell, assign (by operation of law or otherwise) exchange or otherwise
dispose of any of the Collateral.
(d) Insurance. Borrower shall procure and continuously maintain and pay for (a)
all risk physical damage and property insurance covering loss or damage to
the equipment for not less than the full replacement value thereof naming
Lender as loss payee and (b) bodily injury and property damage combined
single limit liability insurance, all in such amounts and against such risks
and hazards as are reasonably required by Lender, with insurance companies
and pursuant to contracts or policies and with deductibles satisfactory to
Lender. All contracts and policies shall include provisions for the
protection of Lender notwithstanding any act or neglect of or breach or
default by Borrower, shall provide for payment of insurance proceeds to
Lender, shall provide that they may not be modified, terminated or cancelled
unless Lender is given at least thirty (30) days' advance written notice
thereof, and shall provide that the coverage is "primary coverage" for the
protection of Borrower or Lender notwithstanding any other coverage carried
by Lender protecting against similar risks. Borrower shall promptly notify
any appropriate insurer and Lender of each and every occurrence, which may
become the basis of a claim or cause of action against the insured and
provide Lender with all data pertinent to such occurrence. Borrower shall
furnish Lender with certificates of such insurance or copies of policies
upon request and shall furnish Lender with renewal certificates not less
than thirty (30) days prior to the renewal date Proceeds of all insurance
are payable first to Lender to the extent of its interest.
(e) Financing Statements. At the request of Lender, Borrower will join Lender
in executing one or more financing statements pursuant to the Uniform
Commercial Code and other documents deemed necessary by Lender under
applicable law to record or perfect its Security interest in the Collateral,
including continuation statements, in form satisfactory to Lender and will
pay the cost of filing the same in all public offices wherever filing is
deemed by Lender to be necessary or desirable. Borrower hereby authorizes
Lender, in such jurisdictions where such action is authorized by law, to
effect any such recordation or filing of financing statements or other
documents without Borrower's signature thereto.
(f) Change of Name or Address. Borrower will immediately notify Lender in
writing of any change in its place of business or the adoption or change of
any tradename or fictitious business name, and will upon request of Lender,
execute any additional financing statements or other similar documents
necessary to perfect or maintain its security interest.
(g) Use of Equipment, Maintenance. Borrower will cause the Equipment to be used
in a careful and proper manner, will comply with and conform to all
governmental laws, rules and regulations relating thereto, and will cause
the Equipment to be operated in accordance with the manufacturer's or
supplier's instructions or manuals and only by competent and duly qualified
personnel. Borrower will cause the Equipment to be kept and maintained in
good repair, condition and working order and will furnish all parts,
replacements, mechanisms, devices and servicing required therefor so that
the value, condition and operating efficiency thereof will at all times be
maintained and preserved, normal wear and tear excepted. All such repairs,
parts, mechanisms, devices and replacements shall immediately, without
further act, become part of the Equipment and subject to the security
interest created by this Loan and Security Agreement. Borrower will not
make any improvement, change, addition or alteration to the Equipment if
such improvement, change, addition or alteration will impair the originally
intended function or use of the Equipment or impair the value of the
Equipment as it existed immediately prior to such improvement, change,
addition or alteration. Any part added to the Equipment in connection with
any improvement, change, addition or alteration shall immediately, without
further act, become part of the Equipment and subject to the security
interest created by this Loan and Security Agreement.
(h) Inspection. Lender may at any reasonable time or times inspect the Equipment
and may at any reasonable time or times inspect the books and records of
Borrower.
(i) Taxes. Borrower shall promptly pay, when due, all charges, fees, assessments
and taxes (excluding all taxes measured by Lenders income) which may now or
hereafter be imposed upon the ownership, leasing, possession, sale or use of
the Collateral.
(j) Performance by Lender. If Borrower fails to perform any agreement or
obligation contained herein, Lender may itself perform, or cause the
performance of such agreement or obligation. Borrower will pay, or reimburse
Lender, on demand, for any and all fees, including attorneys fees, costs
and expenses of whatever kind or nature incurred by Lender in connection
with (i) the creation, preservation and protection of Lender's security
interest in the Collateral, including without limitation, all fees and
taxes in connection with the recording or filing of instruments and
documents in public offices, (ii) payments or discharge of any taxes or
liens upon or in respect of the Collateral, (iii) premiums for insurance
with respect to the Equipment and (iv) this Loan and Security Agreement and
with protecting, maintaining or preserving the Collateral and Lender's
interests therein, whether through judicial proceedings or otherwise, or in
connection with defending or prosecuting any actions, suits or proceedings
arising out of or related to the Loan and Security Agreement and the Loan
Documents or in connection with any debt restructuring, loan workout
negotiations or bankruptcy or insolvency cases or proceedings. All such
amounts shall constitute obligations of Borrower secured by the
<PAGE>
Collateral. In the event that Borrower fails to perform any of its
agreements contained herein. Borrower will, on demand, reimburse
Lender for all such expenditures, together with interest thereon from
the date of such expenditure until fully reimbursed at the rate of two
percent (2%) per month on the outstanding balance of such expenditures
or the highest rate permitted by law, whichever is less.
(k) Power of Attorney. Borrower hereby irrevocably appoints Lender
Borrower's attorney-in-fact, with full authority in the place and
stead of Borrower and in the name of Borrower or otherwise, from time
to time in the Lender's discretion, to take any action and to execute
any instrument which Lender may deem necessary or advisable to
accomplish the purposes of this Loan and Security Agreement,
including, without limitation: (i) to obtain, compromise and adjust
Insurance required to be paid to Lender; (ii) to ask, demand, collect,
sue for, recover, receive, and give acquittance and receipts for
moneys due and to become due under or in respect of any of the
Collateral: (iii) to receive, endorse, and collect any drafts or other
instruments, documents, and chattel paper in connection with clause
(i) or (ii) above: and (iv) to file any claims or take any action or
institute any proceedings which Lender may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce
the rights of Lender with respect to any of the Collateral.
(i) No Duties. The powers conferred on Lender hereunder are solely to
protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of
any Collateral in its possession and the accounting for moneys
actually received by it hereunder. Lender shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any
Collateral.
(m) Financial Data. Borrower will furnish to Lender and will cause any
guarantor of Borrower's obligations to furnish to Lender on request
(i) annual balance sheet and profit and loss statements prepared in
accordance with generally accepted accounting principles and practices
consistently applied and, if Lender so requires, accompanied by the
annual audit report of an independent certified public accountant
reasonably acceptable to Lender, and (ii) all other financial
information and reports that Lender may from time to time reasonably
request, including, if Lender so requires, income tax returns of
Borrower and any guarantor of Borrower's obligations hereunder.
7. Conditions of Borrowing. Lender shall not be obligated to make any
-----------------------
loan hereunder unless:
(a) The Interim Notes or Term Notes evidencing such loan shall have been
duly executed and delivered to Lender:
(b) Borrower shall have executed and delivered to Lender the Supplemental
Security Agreement describing the Collateral and stating, except with
respect to progress payment fundings, the location thereof;
(c) Except with respect to progress payment fundings, Lender shall have
received evidence (as described in Section 6d hereof) that insurance
has been obtained in accordance with the provisions of this Loan and
Security Agreement:
(d) Lender shall have received any and all third party consents, waivers
or releases deemed necessary or desirable by it in connection with the
loan and the Collateral being financed, including, without limitation,
Uniform Commercial Code lien releases and the consent and waiver, in
form and substance satisfactory to Lender, of each and every realty
owner, landlord and mortgagee holding an Interest in or encumbrance on
the real property where any of the Collateral is to be located;
(e) All filings, recordings and other actions deemed necessary or
desirable by Lender in order to establish, protect, preserve and
prefect its security interest in the Collateral being financed by such
loan as a valid perfected first priority security interest shall have
been duly effected, including, without limitation, the filing of
financing statements and the recordation of landlord (owners) and/or
mortgagee waivers or disclaimers, all in form and substance
satisfactory to Lender, and all fees, taxes and other charges relating
to such filings and recordings shall have been paid by Borrower;
(f) The representations and warranties contained in this Loan and Security
Agreement shall be true and correct in all respects on and as of the
date of the making of any loan hereunder with the same effect as if
made on and as of such date:
(g) In the Sole judgment of Lender, there shall have been no material
adverse change in the financial condition, business or operations of
Borrower from the earliest date of any financial statement, credit
report, business report or similar document submitted to Lender for
its review:
(h) All Loan Documents shall be Satisfactory to Lender's attorneys: and
(i) Lender shall have received, in form and substance satisfactory to
Lender, such other documents as Lender shall require including, but
not limited to a Request, proof of payment, vendor invoices and
certificates of authority and incumbency.
8. Default. The occurrence of any of the following events, following the
-------
giving of any required notice and/or the expiration of any applicable period of
grace, shall constitute an event of default ("Event of Default") hereunder;
(a) Borrower's default in payment of any installment of the principal of
or interest on any Interim Note or Term Note when and after the same
shall become due and payable, whether at the due date thereof or by
acceleration or otherwise, which default shall continue unremedied for
ten (10) days; or
(b) The failure by Borrower to make payment of any other amount payable
hereunder or under any interim Note or Term Note, and the continuance
of such failure for more than ten (10) days after written notice
thereof by Lender to Borrower: or
(c) The failure by Borrower to perform or observe any covenant, condition,
obligation or agreement to be performed or observed by it hereunder,
which failure shall continue unremedied for thirty (30) days after
written notice thereof by Lender to Borrower; or
(d) The occurrence of a default described in Section 4 [hereof; or
(e) Any warranty, representation or statement made or furnished with
respect to the Borrower or the Collateral to Lender by or on behalf
of Borrower, in connection with this Loan and Security Agreement, or
the indebtedness secured hereby, shall prove to have been false in
any adverse, material respect when made or furnished: or
(f) Borrower shall become insolvent or bankrupt or make an assignment for
the benefit of creditors or consent to the appointment of a trustee or
receiver: or a trustee or a receiver shall be appointed for Borrower
or for a substantial part of its property without its consent and
shall not be dismissed for a period of sixty (60) days; or bankruptcy,
reorganization, liquidation, Insolvency or dissolution proceedings
shall be instituted by or against Borrower and, if instituted against
Borrower, shall be consented to or be pending and not dismissed for a
period of sixty (60) days; or any execution or writ of process shall
be issued under any action or proceeding against Borrower in such
capacity whereby any of the Collateral may be taken or restrained;
Borrower shall cease doing business as a going concern; or without the
prior written consent of Lender, Borrower shall sell, transfer or
dispose of all or substantially at of its assets or property; or
(g) The liquidation, merger, consolidation, reorganization, conversion to
an "S" status or dissolution, if Borrower is a corporation or
partnership, of Borrower, it in Lender's reasonable opinion, such act
shall materially and adversely affect Borrower's ability to perform
under any of the Loan Documents: or
(h) Any item of Collateral is seized or levied on under legal or
governmental process or for any reason Lender deems itself insecure.
Lender shall be entitled to deem itself insecure when some event
occurs, fails to occur or is threatened or some objective condition
exists or is threatened which significantly impairs the prospects that
any of Borrower's obligations to Lender will be paid when due, which
significantly impairs the value of the Collateral to Lender or which
significantly affects the financial or business condition of Borrower.
The occurrence of an Event of Default shall terminate any
commitment or obligation by Lender to make any of the loans
contemplated by this Loan and Security Agreement.
9. Remedies Upon Default. Upon the occurrence of an Event of Default
---------------------
hereunder, Lender may, at its option, do any one or more of the following:
(a) Declare all obligations of Borrower to Lender to be immediately due
and payable, whereupon all unpaid principal of and interest on said
indebtedness and other amounts declared due and payable shall be and
become immediately due and payable:
(b) Take possession of all or any of the Collateral and exclude therefrom
Borrower and all others claiming under Borrower, and thereafter hold,
store, use, operate, manage, maintain and control, make repairs,
replacements, attentions, additions and improvements to and exercise
all rights and powers of Borrower in respect to the Collateral or any
part thereof. In the event Lender demands, or attempts to take
possession of the Collateral in the exercise of any rights under this
Loan and Security Agreement, Borrower promises and agrees to promptly
turn over and deliver complete possession thereof to Lender;
(c) Require Borrower to assemble the Collateral, or any portion thereof,
at a place designated by Lender and reasonably convenient to both
parties, and promptly to deliver such Collateral to Lender, or an
agent or representative designated by it:
(d) Sell, lease or otherwise dispose of the Collateral at public, or
private sale, without having the Collateral at the place of sale, and
upon terms and in such manner as Lender may determine (and Lender may
be a purchaser at any sale); and
(e) Exercise any remedies of a secured party under the Uniform Commercial
Code as adopted in the state where the Collateral is located or any
other applicable law,
Except as to portions of the Collateral which are perishable or
threaten to decline speedily in value or are of a type customarily
sold on a recognized market, Lender shall give Borrower at least ten
(10)
<PAGE>
days' prior written notice of the time and place of any public or private
sale of the Collateral or other intended dispostion thereof to be made.
Such notice may be mailed to Borrower at the address set forth in the
first paragraph of this Loan and Security Agreement. Borrower hereby
specifically agrees (to the extent that applicable law and public policy
allows it to effectively do so) that any public or private sale held in
accordance with the terms of this Loan and Security Agreement shall, for
the purpose of the Uniform Commercial Code as adopted in the state where
the Collateral is located and for all other purposes, be deemed to have
been conducted in a commercially reasonable manner and in good faith.
The proceeds of any sale under Section 9(d) shall be applied as
follows:
(i) To the repayment of the costs and expenses of retaking,
holding and preparing for the sale and the selling of the
Collateral (including legal expenses and attorneys' fees) and
the discharge of all assessments, encumbrances, charges or
liens, if any, on the Collateral prior to the lien hereof
(except any taxes, assessments, encumbrances, charges or
liens subject to which such sale shall have been made);
(ii) To the payment of the whole amount then due and unpaid of the
indebtedness of Borrower to Lender;
(iii) To the payment of other amounts then secured hereunder; and
(iv) The surplus, if any shall be paid to the Borrower or to
whomsoever may be lawfully entitled to receive the same.
Lender shall have the right to enforce one or more remedies hereunder,
successively or concurrently, and such action shall not operate to estop
or prevent Lender from pursuing any further remedy which it may have,
and any repossession or retaking or sale of the Collateral pursuant to
the terms hereof shall not operate to release Borrower until full payment
of any deficiency has been made in cash.
10. Limitation on Interest: It is the intent of the parties to this
----------------------
Loan and Security Agreement to contract in strict compliance with applicable
usury laws from time to time in effect. In furtherance thereof, the parties
stipulate and agree that none of the terms and provisions contained in the Loan
Documents shall ever be construed to create a contract to pay for the use,
forbearance or detention of money at a rate in excess of the maximum interest
rate permitted to be charged by applicable law from time to time in effect.
11. Personal Property/Tags. No item of Equipment will be attached or
----------------------
affixed to realty or any building without Lender's prior knowledge and written
consent and waiver of the landlord and the mortgagee, if any, of the real
property. If so requested by Lender, Borrower will affix tags supplied by
Lender, reflecting Lender's security interest in the Equipment.
12. Loss and Damage. Borrower shall bear the risk of damage, loss,
---------------
theft, or destruction, partial or complete of the Equipment, whether or not such
loss or damage is covered by insurance, except that while Borrower is not in
default, Lender agrees to apply toward payment of obligations of Borrower
insurance proceeds payable to Lender by reason of such damage, loss, theft, or
destruction. In the event of any damage, loss, theft, or destruction, partial or
complete, of any item of Equipment, Borrower shall promptly notify Lender in
writing and at the option of Lender (a) repair or restore the Equipment to good
condition and working order, or (b) replace the Equipment with similar
equipment good repair, condition and working order, or (c) pay Lender, in cash
an amount equal to the unamortized equipment cost for the item or if the
Equipment was not purchased with the loan proceeds, the pro rata portion of the
outstanding principal balance due under the Interim Note or Term Note, as the
case may be, and all other amounts relating to that item of Equipment then due
and owing hereunder, and upon payment of that amount. Lender's lien shall be
terminated with respect to that item of Equipment only, and Lender will release
its interest in that item of Equipment.
13. Assignment. Borrower may not assign or transfer any rights under this
----------
Loan and Security Agreement or to the Collateral without Lender's prior written
consent.
14. Indemnification. Borrower shall indemnity and hold harmless Lender
---------------
from and against any and all claims, losses, liabilities, causes of action,
costs and expenses (including the fees of Lender's attorneys) ("Claims") in any
way relating to or arising out of this Loan and Security Agreement, the other
Loan Documents or the Collateral, except for any Claims resulting solely and
directly from Lender's gross negligence or willful misconduct.
15. Notices. Whenever Borrower or Lender shall desire to give or serve
-------
any notice, demand, request or other communication with respect to this Loan and
Security Agreement, each such notice, demand, request or communication shall be
in writing and shall be effective only if the same is physically delivered or is
by certified mall, postage prepaid, return receipt requested, or by overnight
courier, postage prepaid, mailed to the parties at the addresses set forth in
the first paragraph of this Loan and Security Agreement, with a copy to
Lender's Vice President of Credit. Any party hereto may change its address for
such notices by delivering or mailing to the other parties hereto, as aforesaid,
a notice of such change.
16. No Waiver by Lender. By exercising or falling to exercise any of its
-------------------
rights, options or elections hereunder, Lender shall not be deemed to have
waived any breach or default on the part of Borrower or to have released
Borrower from any of the obligations secured hereby, unless such waiver or
release is in writing and is signed by Lender. In addition, the waiver by Lender
of any breach hereof for default in payment of an indebtedness secured hereby
shall not be deemed to constitute a waiver of any succeeding breach or default.
17. Further Agreements. From time to time, Borrower will execute such
------------------
further instruments as Lender may reasonably require, in order to protect,
preserve, and maintain the security interest granted hereby.
18. Binding upon Successors. All agreements, covenants, conditions and
-----------------------
provisions of this Loan and Security Agreement shall apply to and bind the
successors and assigns of all parties hereto.
19. Governing Laws. This Loan and Security Agreement; shall be governed
--------------
by the laws of the State of Washington.
----------
20. Amendment. This Loan and Security Agreement can be modified or
---------
rescinded only by a writing expressly referring to this Loan and Security
Agreement, signed by both of the parties hereto.
21. Invalidity of Provisions. Every provision of this Loan and Security
------------------------
Agreement is intended to be severable. In the event that any term or provision
hereof is declared by a court to be illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the balance of the
terms and provisions hereof, which terms and provisions shall remain binding and
enforceable, then to the extent possible all of the other provisions shall
nonetheless remain in full force and effect.
IN WITNESS WHEREOF, Borrower and Lender have duly executed this Loan and
Security Agreement the day and year first above written.
<TABLE>
<S> <C>
Lender: MetLife Capital Corporation Borrower: UniDirect Corporation
----------------------------- ------------------------------------------
By: /s/ [ILLEGIBLE] By: /s/ Robert Mason
--------------------------------- -------------------------------------------------
(Print Name):________________________ (Print Name): ROBERT MASON
--------------------------------------
Title: V.P. Title: C.F.O
------------------------------- ---------------------------------------------
Social Security Number:_____________________________
(If Borrower is an individual)
Federal Tax Indentification Number: 33-0442860
----------------
</TABLE>
<PAGE>
SUPPLEMENTAL SECURITY AGREEMENT NO. THREE
LOAN #79
This Supplemental Security Agreement is executed by Rainmaker Systems, Inc.
("Borrower") pursuant to the terms of a Loan and Security Agreement dated
October 28, 1997 between Borrower and General Electric Capital Business Asset
Funding Corporation ("Lender"). All capitalized terms used herein that are not
otherwise defined herein shall have the respective meanings given to such terms
in the Loan and Security Agreement.
In order to provide security for the payment and performance of Borrower's
obligations under the Loan Documents, Borrower has granted to Lender a first
priority security interest in the Collateral. In addition to said grant,
Borrower intends by this Supplemental Security Agreement to grant to Lender a
first priority security interest in the items of Equipment identified herein.
1. To further secure the payment and performance of all of Borrower's
obligations to Lender under the Loan Documents, Borrower hereby grants to Lender
a first priority security interest in the items of Collateral described below,
including all present and future additions, attachments and accessories thereto,
all substitutions therefor and replacements thereof and all proceeds thereof,
including all proceeds of insurance:
<TABLE>
<CAPTION>
Qty. Model/Mfr. Description Serial No. Cost or Appraised Value
<S> <C> <C> <C> <C>
To be provided Telephone System and Miscellaneous $500,000.00
at a later date Computer Hardware
</TABLE>
2. Borrower hereby (a) affirms that the representations and warranties set
forth in Section 5 of the Loan and Security Agreement are true and correct as of
the date hereof; (b) represents and warrants that Lender has a first priority
security interest in the Collateral; and (c) represents and warrants that the
above described equipment will be maintained at the following location(s):
1800 Green Hills Road, Suite #201,
Scotts Valley, CA 95066
3. The Loan Amount for loans to be made pursuant to this Supplemental Security
Agreement is $500,000.00.
4. The Commitment Expiration Date for loans to be made pursuant to this
Supplemental Security Agreement is December 31, 1999.
5. The amount of liability insurance required to be maintained by Borrower
pursuant to Section 6(d) of the Loan and Security Agreement is $300,000.00.
6. All of the terms and provisions of the Loan and Security Agreement are
hereby incorporated in and made a part of this Supplemental Security Agreement
to the same extent as if fully set forth herein.
In witness whereof, Borrower has executed and delivered this Supplemental
Security Agreement this 5 day of May, 1999.
Borrower: Rainmaker Systems, Inc.
-----------------------------
By: /s/ Frank A. Drasin
-----------------------------
(Print Name) FRANK DRASIN
-----------------------------
Title: VP of Finance
-----------------------------
<PAGE>
CROSS DEFAULT AND
CROSS COLLATERALIZATION AGREEMENT
This Cross Default and Cross Collateralization Agreement (hereinafter the
"Agreement") is entered into this 5 day of May 1999 by and between Rainmaker
Systems, Inc. ("Borrower") and General Electric Capital Business Asset Funding
Corporation its assigns), ("Lender").
W I T N E S S E T H:
-------------------
WHEREAS, Rainmaker Systems, Inc., as Borrower, and Lender, as secured
party, entered into certain Loan and Security Agreement dated October 28, 1997,
secured by certain miscellaneous computer and office equipment and furniture
---------------------------------------------------------
financed under schedules 79-001 and 79-002: and
- ------------------------------------------
WHEREAS, Borrower now desires Lender to make an additional loan to be
secured by computer hardware and telephone system to be financed under schedule
--------------------------------------------------------------------
79-003: and
- ------
WHEREAS, Lender is willing to enter into such additional loan transactions
only upon Borrower's consent to and agreement with the following cross-default
and cross-collateralization provisions,
NOW THEREFORE, in consideration of the additional loan to be provided to
Borrower by Lender the parties hereby agree as follows:
1. Definitions. The above described loan agreements are herein referred
-----------
to individually as a "Loan" and collectively as the "Loans."
2. Cross Default. The occurrence of any event of default with respect to
-------------
any obligation of Borrower to Lender under any Loan shall constitute an event of
default with respect to all Loans of Borrower with Lender.
3. Cross Collateralization. Borrower hereby grants to Lender a continuing
-----------------------
security interest in all equipment or other collateral pledged, mortgaged or
otherwise hypothecated to Lender, until all obligations of Borrower currently
owing to Lender, or hereafter arising, are paid in full. If an event of default
shall have occurred under any Loan, all equipment covered thereby, or by a
security interest in any other collateral granted by Borrower to Lender, may be
sold and/or auctioned for the purpose of satisfying such default, and any excess
proceeds of same may be applied to any obligation then outstanding under any
Loan.
4. Rights Cumulative. All rights and remedies of Lender herein specified
-----------------
are intended to be cumulative and not in substitution for any right or remedy
otherwise available. Nothing contained herein shall be construed as to limit the
rights and remedies of Lender to proceed against Borrower under any Loan or as
provided by law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first hereinabove written.
General Electric Capital Business Rainmaker Systems, Inc.
Asset Funding Corporation
By: _________________________________ By: /s/ Frank A. Drasin
----------------------------
Its: Vice President Its: VP of Finance
--------------------------------- ----------------------------
By: ____________________________
Its: ____________________________
<PAGE>
EXHIBIT 10.15
COMPENSATION AGREEMENT
----------------------
This Agreement is made as of the 1st day of January, 1995 by and
between UniDirect Corporation, a California corporation (the "Corporation"), and
Richard Marotta ("Optionee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, in consideration for services performed by Optionee, the
Corporation granted Optionee a stock option on January 1, 1995, to purchase
31,500 shares of the Corporation's Common Stock (the "Option") upon the terms
and conditions set forth in the documentation evidencing such Option.
NOW, THEREFORE, in consideration of the above premises, the parties
hereto agree as follows:
1. The Corporation and Optionee acknowledge and agree that the
Option is granted solely as compensation for services rendered the Corporation
by Optionee and not for any capital-raising purposes or in connection with any
capital-raising activities.
2. The Option shall not be transferable or assignable except in
connection with Optionee's death.
3. This Agreement is intended to constitute a written compensation
contract within the meaning of Rule 701 of the Securities Act of 1933, as
amended.
4. This Agreement is intended solely to memorialize the agreement
and understanding which exists between Optionee and the Corporation concerning
the grant of the Option. Nothing herein or in the documentation evidencing the
Option is intended to provide Optionee with the right to remain in the
Corporation's service for any specific period, and Optionee's services may be
terminated at any time by the Corporation, for any reason, with or without
cause.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date first above written.
OPTIONEE UNIDIRECT CORPORATION
_______________________________ By: _______________________________
Title: _______________________________
<PAGE>
Grant No. 110
UNIDIRECT CORPORATION
NOTICE OF GRANT OF STOCK OPTION
-------------------------------
UNVESTED SHARES
---------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of UniDirect Corporation (the
"Corporation"):
Optionee: Richard Marotta
--------
Grant Date: January 1, 1995
----------
Vesting Commencement Date: January 1, 1995
-------------------------
Exercise Price: $0.12 per share
--------------
Number of Option Shares: 31,500 shares
-----------------------
Expiration Date: December 31, 2004
---------------
Type of Option: ______ Incentive Stock Option
--------------
X Non-Statutory Stock Option
------
Date Exercisable: Immediately Exercisable
----------------
Vesting Schedule: The Option Shares shall be unvested and subject to
----------------
repurchase by the Corporation at the Exercise Price paid per share.
Optionee shall acquire a vested interest in, and the Corporation's
repurchase right will accordingly lapse with respect to, (i) twenty-
five percent (25%) of the Option Shares upon Optionee's completion of
one (1) year of Service measured from the Vesting Commencement Date
and (ii) the balance of the Option Shares in equal successive monthly
installments upon Optionee's completion of each of the next thirty-six
(36) months of Service measured from and after the first anniversary
of the Vesting Commencement Date. In no event shall any additional
Option Shares vest after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Stock Option Agreement attached hereto
as Exhibit A.
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
-----------------
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS
No Employment or Service Contract. Nothing in this Notice or in the
---------------------------------
Plan shall confer upon Optionee any right to continue in Service for any period
of specific duration or
<PAGE>
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining Optionee) or of Optionee,
which rights are hereby expressly reserved by each, to terminate Optionee's
Service at any time for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED AS OF: January 1, 1995
UNIDIRECT CORPORATION
By:______________________________________
Title:___________________________________
_________________________________________
OPTIONEE
Address:_________________________________
_________________________________________
ATTACHMENT
- ----------
Exhibit A - Stock Option Agreement
2
<PAGE>
EXHIBIT A
---------
STOCK OPTION AGREEMENT
----------------------
<PAGE>
UNIDIRECT CORPORATION, INC.
STOCK OPTION AGREEMENT
----------------------
RECITALS
- --------
A. The Board has deemed it appropriate to grant Optionee an option to
purchase shares of Common Stock of the Corporation.
B. Optionee is to render valuable services to the Corporation or a Parent
or Subsidiary, and this Agreement is executed in connection with the
Corporation's grant of an option to Optionee.
C. The granted option is issued to Optionee in compensation for the
services which Optionee is to render to the Corporation and not for any capital-
raising purposes or in connection with any capital-raising activities.
D. All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of
---------------
the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
2. Option Term. This option shall have a term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. Limited Transferability. This option may be assigned in accordance
-----------------------
with the terms of a Qualified Domestic Relations Order. If so assigned, the
assigned option shall be exercisable only by the person or persons who acquire a
proprietary interest in the option pursuant to such Qualified Domestic Relations
Order. The terms applicable to the assigned option (or portion thereof) shall be
the same as those in effect for this option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the
Corporation may deem appropriate.
4. Dates of Exercise. This option shall become exercisable for the
-----------------
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
<PAGE>
5. Cessation of Service. The option term specified in Paragraph 2
--------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason
(other than death or Disability) while this option is outstanding, then Optionee
shall have a period of three (3) months (commencing with the date of such
cessation of Service) during which to exercise this option, but in no event
shall this option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance with
the laws of descent and distribution shall have the right to exercise this
option. Such right shall lapse and this option shall cease to be outstanding
upon the earlier of (i) the expiration of the twelve (12)-month period measured
-------
from the date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Disability while
this option is outstanding, then Optionee shall have a period of six (6) months
(commencing with the date of such cessation of Service) during which to exercise
this option. However, should such Disability be deemed to constitute Permanent
Disability, then the period during which this option is to remain exercisable
shall be extended by an additional six (6) months so that the exercise period
shall be the twelve (12)-month period following the date of Optionee's cessation
of Service by reason of such Permanent Disability. In no event shall this option
be exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
vested Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited exercise
period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any vested Option Shares for which the option has
not been exercised. To the extent Optionee is not vested in the Option Shares at
the time of his/her cessation of Service, this option shall immediately
terminate and cease to be outstanding with respect to those shares.
6. Special Termination of Option.
-----------------------------
(a) In the event of a Corporate Transaction, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or parent thereof in connection with such Corporate
Transaction.
(b) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
2.
<PAGE>
7. Adjustment in Option Shares.
---------------------------
(a) In the event any change is made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the total number and/or class of securities
subject to this option and (ii) the Exercise Price in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder.
(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price payable shall remain the same.
--------
8. Shareholder Rights. The holder of this option shall not have any
------------------
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased Option Shares.
9. Manner of Exercising Option.
---------------------------
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Purchase
Agreement for the shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
or
(B) a promissory note payable to the Corporation,
but only to the extent approved by the Board in accordance with
Paragraph 14.
Should the Common Stock be registered under Section 12(g) of the
1934 Act at the time the option is exercised, then the Exercise Price
may also be paid as follows:
(C) in shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings
3.
<PAGE>
for financial reporting purposes and valued at Fair Market Value on
the Exercise Date; or to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale transaction.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must be made on the Exercise Date.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to
comply with the applicable requirements of Federal and state securities
laws.
(v) Make appropriate arrangements with the Corporation or
Parent or Subsidiary employing or retaining Optionee for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.
(b) As soon after the Exercise Date as practical, the
Corporation shall mail or deliver to or on behalf of Optionee (or any other
person or persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE
-----------------
OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.
4.
<PAGE>
11. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or of the Nasdaq National Market
if applicable) on which the Common Stock may be listed at the time of such
exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
12. Successors and Assigns. Except to the extent otherwise provided
----------------------
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
13. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. Financing. The Board may, in its absolute discretion and without
---------
any obligation to do so, permit Optionee to pay the Exercise Price for the
purchased Option Shares by delivering a promissory note. The terms of any such
promissory note (including the interest rate, the requirements for collateral
and the terms of repayment) shall be established by the Board in its sole
discretion.
15. Governing Law. The interpretation, performance and enforcement of
-------------
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
5.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean the Corporation's common stock.
------------
E. Corporate Transaction shall mean either of the following shareholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. Corporation shall mean UniDirect Corporation, Inc., a California
-----------
corporation.
G. Disability shall mean the inability of Optionee to engage in any
----------
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Board on the basis of such
medical evidence as the Board deems warranted under the circumstances.
Disability shall be deemed to constitute Permanent Disability in the event that
such Disability is expected to result in death or has lasted or can be expected
to last for a continuous period of twelve (12) months or more.
H. Domestic Relations Order shall mean any judgment, decree or order
------------------------
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
I. Employee shall mean an individual who is in the employ of the
--------
Corporation or any Parent or Subsidiary, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
J. Exercise Date shall mean the date on which the option shall have been
-------------
exercised in accordance with Paragraph 9 of the Agreement.
A-1.
<PAGE>
K. Exercise Price shall mean the exercise price per share as specified in
--------------
the Grant Notice.
L. Expiration Date shall mean the date on which the option expires as
---------------
specified in the Grant Notice.
M. Fair Market Value per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as the price is reported
by the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Board to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then such Fair
Market Value shall be determined by the Board after taking into account
such factors as the Board shall deem appropriate.
N. Grant Date shall mean the date of grant of the option as specified in
----------
the Grant Notice.
O. Grant Notice shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
P. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
--------
Q. Non-Statutory Option shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
R. Option Shares shall mean the number of shares of Common Stock subject
-------------
to the option.
S. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
A-2.
<PAGE>
T. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. Qualified Domestic Relations Order shall mean a Domestic Relations
----------------------------------
Order which substantially complies with the requirements of Code Section 414(p).
The Board shall have the sole discretion to determine whether a Domestic
Relations Order is a Qualified Domestic Relations Order.
V. Service shall mean the provision of services to the Corporation or any
-------
Parent or Subsidiary by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant.
W. Stock Exchange shall mean the American Stock Exchange or the New York
--------------
Stock Exchange.
X. Subsidiary shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
<PAGE>
EXHIBIT 10.16
COMPENSATION AGREEMENT
----------------------
This Agreement is made as of the 1st day of November, 1995 by and
between UniDirect Corporation, a California corporation (the "Corporation"), and
Richard Marotta ("Optionee").
W I T N E S S E T H
-------------------
WHEREAS, in consideration for services performed by Optionee, the
Corporation granted Optionee a stock option on November 1, 1995, to purchase
32,585 shares of the Corporation's Common Stock (the "Option") upon the terms
and conditions set forth in the documentation evidencing such Option.
NOW, THEREFORE, in consideration of the above premises, the parties
hereto agree as follows:
1. The Corporation and Optionee acknowledge and agree that the
Option is granted solely as compensation for services rendered the Corporation
by Optionee and not for any capital-raising purposes or in connection with any
capital-raising activities.
2. The Option shall not be transferable or assignable except in
connection with Optionee's death.
3. This Agreement is intended to constitute a written compensation
contract within the meaning of Rule 701 of the Securities Act of 1933, as
amended.
4. This Agreement is intended solely to memorialize the agreement
and understanding which exists between Optionee and the Corporation concerning
the grant of the Option. Nothing herein or in the documentation evidencing the
Option is intended to provide Optionee with the right to remain in the
Corporation's service for any specific period, and Optionee's services may be
terminated at any time by the Corporation, for any reason, with or without
cause.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date first above written.
OPTIONEE UNIDIRECT CORPORATION
____________________________________ By: __________________________________
Title:__________________________________
<PAGE>
Grant No. 165
UNIDIRECT CORPORATION
NOTICE OF GRANT OF STOCK OPTION
-------------------------------
UNVESTED SHARES
---------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of UniDirect Corporation (the
"Corporation"):
Optionee: Richard Marotta
--------
Grant Date: November 1, 1995
----------
Vesting Commencement Date: November 1, 1995
-------------------------
Exercise Price: $0.63 per share
--------------
Number of Option Shares: 32,585 shares
-----------------------
Expiration Date: October 31, 2005
---------------
Type of Option: ______ Incentive Stock Option
--------------
X Non-Statutory Stock Option
------
Date Exercisable: Immediately Exercisable
----------------
Vesting Schedule: The Option Shares shall be unvested and subject to
----------------
repurchase by the Corporation at the Exercise Price paid per share.
Optionee shall acquire a vested interest in, and the Corporation's
repurchase right will accordingly lapse with respect to, (i) twenty-
five percent (25%) of the Option Shares upon Optionee's completion of
one (1) year of Service measured from the Vesting Commencement Date
and (ii) the balance of the Option Shares in equal successive monthly
installments upon Optionee's completion of each of the next thirty-six
(36) months of Service measured from and after the first anniversary
of the Vesting Commencement Date. In no event shall any additional
Option Shares vest after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Stock Option Agreement attached hereto
as Exhibit A.
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
-----------------
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS
<PAGE>
No Employment or Service Contract. Nothing in this Notice or in the
---------------------------------
Plan shall confer upon Optionee any right to continue in Service for any period
of specific duration or interfere with or otherwise restrict in any way the
rights of the Corporation (or any Parent or Subsidiary employing or retaining
Optionee) or of Optionee, which rights are hereby expressly reserved by each, to
terminate Optionee's Service at any time for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED AS OF: November 1, 1995
UNIDIRECT CORPORATION
By:____________________________________
Title:_________________________________
_______________________________________
OPTIONEE
Address:_______________________________
_______________________________________
ATTACHMENT
- ----------
Exhibit A - Stock Option Agreement
2
<PAGE>
EXHIBIT A
---------
STOCK OPTION AGREEMENT
----------------------
<PAGE>
UNIDIRECT CORPORATION, INC.
STOCK OPTION AGREEMENT
----------------------
RECITALS
- --------
A. The Board has deemed it appropriate to grant Optionee an option to
purchase shares of Common Stock of the Corporation.
B. Optionee is to render valuable services to the Corporation or a Parent
or Subsidiary, and this Agreement is executed in connection with the
Corporation's grant of an option to Optionee.
C. The granted option is issued to Optionee in compensation for the
services which Optionee is to render to the Corporation and not for any capital-
raising purposes or in connection with any capital-raising activities.
D. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of
---------------
the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
2. Option Term. This option shall have a term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. Limited Transferability. This option may be assigned in
-----------------------
accordance with the terms of a Qualified Domestic Relations Order. If so
assigned, the assigned option shall be exercisable only by the person or persons
who acquire a proprietary interest in the option pursuant to such Qualified
Domestic Relations Order. The terms applicable to the assigned option (or
portion thereof) shall be the same as those in effect for this option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Corporation may deem appropriate.
4. Dates of Exercise. This option shall become exercisable for the
-----------------
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
<PAGE>
5. Cessation of Service. The option term specified in Paragraph 2
--------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason
(other than death or Disability) while this option is outstanding, then Optionee
shall have a period of three (3) months (commencing with the date of such
cessation of Service) during which to exercise this option, but in no event
shall this option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance with
the laws of descent and distribution shall have the right to exercise this
option. Such right shall lapse and this option shall cease to be outstanding
upon the earlier of (i) the expiration of the twelve (12)-month period measured
-------
from the date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Disability while
this option is outstanding, then Optionee shall have a period of six (6) months
(commencing with the date of such cessation of Service) during which to exercise
this option. However, should such Disability be deemed to constitute Permanent
Disability, then the period during which this option is to remain exercisable
shall be extended by an additional six (6) months so that the exercise period
shall be the twelve (12)-month period following the date of Optionee's cessation
of Service by reason of such Permanent Disability. In no event shall this option
be exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
vested Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited exercise
period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any vested Option Shares for which the option has
not been exercised. To the extent Optionee is not vested in the Option Shares at
the time of his/her cessation of Service, this option shall immediately
terminate and cease to be outstanding with respect to those shares.
6. Special Termination of Option.
-----------------------------
(a) In the event of a Corporate Transaction, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or parent thereof in connection with such Corporate
Transaction.
(b) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
2.
<PAGE>
7. Adjustment in Option Shares.
---------------------------
(a) In the event any change is made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the total number and/or class of securities
subject to this option and (ii) the Exercise Price in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder.
(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price payable shall remain the same.
--------
8. Shareholder Rights. The holder of this option shall not have any
------------------
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased Option Shares.
9. Manner of Exercising Option.
---------------------------
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Purchase
Agreement for the shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
or
(B) a promissory note payable to the Corporation,
but only to the extent approved by the Board in accordance with
Paragraph 14.
Should the Common Stock be registered under Section 12(g) of the
1934 Act at the time the option is exercised, then the Exercise Price
may also be paid as follows:
(C) in shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings
3.
<PAGE>
for financial reporting purposes and valued at Fair Market Value on
the Exercise Date; or to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale transaction.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must be made on the Exercise Date.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to
comply with the applicable requirements of Federal and state securities
laws.
(v) Make appropriate arrangements with the Corporation or
Parent or Subsidiary employing or retaining Optionee for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.
(b) As soon after the Exercise Date as practical, the
Corporation shall mail or deliver to or on behalf of Optionee (or any other
person or persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE
-----------------
OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.
4.
<PAGE>
11. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or of the Nasdaq National Market
if applicable) on which the Common Stock may be listed at the time of such
exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
12. Successors and Assigns. Except to the extent otherwise provided
----------------------
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
13. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. Financing. The Board may, in its absolute discretion and without
---------
any obligation to do so, permit Optionee to pay the Exercise Price for the
purchased Option Shares by delivering a promissory note. The terms of any such
promissory note (including the interest rate, the requirements for collateral
and the terms of repayment) shall be established by the Board in its sole
discretion.
15. Governing Law. The interpretation, performance and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
5.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean the Corporation's common stock.
------------
E. Corporate Transaction shall mean either of the following shareholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. Corporation shall mean UniDirect Corporation, Inc., a California
-----------
corporation.
G. Disability shall mean the inability of Optionee to engage in any
----------
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Board on the basis of such
medical evidence as the Board deems warranted under the circumstances.
Disability shall be deemed to constitute Permanent Disability in the event that
such Disability is expected to result in death or has lasted or can be expected
to last for a continuous period of twelve (12) months or more.
H. Domestic Relations Order shall mean any judgment, decree or order
------------------------
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
I. Employee shall mean an individual who is in the employ of the
--------
Corporation or any Parent or Subsidiary, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
J. Exercise Date shall mean the date on which the option shall have been
-------------
exercised in accordance with Paragraph 9 of the Agreement.
A-1.
<PAGE>
K. Exercise Price shall mean the exercise price per share as specified in
--------------
the Grant Notice.
L. Expiration Date shall mean the date on which the option expires as
---------------
specified in the Grant Notice.
M. Fair Market Value per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as the price is reported
by the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Board to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then such Fair
Market Value shall be determined by the Board after taking into account
such factors as the Board shall deem appropriate.
N. Grant Date shall mean the date of grant of the option as specified in
----------
the Grant Notice.
O. Grant Notice shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
P. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
--------
Q. Non-Statutory Option shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
R. Option Shares shall mean the number of shares of Common Stock subject
-------------
to the option.
S. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
A-2.
<PAGE>
T. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. Qualified Domestic Relations Order shall mean a Domestic Relations
----------------------------------
Order which substantially complies with the requirements of Code Section 414(p).
The Board shall have the sole discretion to determine whether a Domestic
Relations Order is a Qualified Domestic Relations Order.
V. Service shall mean the provision of services to the Corporation or any
-------
Parent or Subsidiary by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant.
W. Stock Exchange shall mean the American Stock Exchange or the New York
--------------
Stock Exchange.
X. Subsidiary shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
<PAGE>
EXHIBIT 10.17
SEPARATION AGREEMENT AND RELEASE
--------------------------------
THIS SEPARATION AGREEMENT AND RELEASE ("RELEASE") of all claims is
made by and between UniDirect Corporation (hereinafter "Company") and Berni
Jubb, an individual residing in California (hereinafter "Jubb").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Jubb has been President, Chief Executive Officer, and a
director of Company; and
WHEREAS, Company wishes to engage a new President and Chief Executive
Officer but wishes Jubb to continue serving on its board of directors; and
WHEREAS, the parties agree that Jubb shall resign as President, Chief
Executive Officer, and as an employee as of September 30, 1997; and
WHEREAS, the parties wish to sever their relationship in a way which
will preserve the good will which exists between them and to settle all disputes
and avoid litigation;
NOW, THEREFORE, for and in consideration of the foregoing premises,
which are incorporated by reference into this RELEASE, and of the mutual
promises set forth below, the parties agree as follows.
<PAGE>
ARTICLE ONE
-----------
PROMISES BY COMPANY
-------------------
1. Consulting Fee. Company shall pay to Jubb a consulting fee
--------------
equivalent to Jubb's current base salary, payable periodically at the same time
that Company regularly pays its employees, less withholdings required by law,
each month from October 1, 1997 through and including September 30, 1998.
2. Car Allowance. Company shall pay to Jubb his $2,000 car allowance
-------------
each month from October 1, 1997 through and including September 30, 1998.
3. Bonuses. Company shall pay to Jubb a quarterly bonus of $15,000
-------
(less required withholding) for the third and fourth quarters of 1997 and for
the first quarter of 1998, at the same time that it pays bonuses to its
employees.
4. Purchase of Jubb's Company Shares.
---------------------------------
a. Terms of Purchase if Jubb's Shares Are Acquired by September 30,
----------------------------------------------------------------
1998.
- ----
(1) Purchase by Investor. Company shall use commercially
--------------------
reasonable efforts to locate an investor who will purchase at least $1 million
worth of Jubb's Company shares on or before September 30, 1998, at the following
price:
(a) the same per share price paid by
2.
<PAGE>
that investor for all other Company shares which he or it then acquires in an
arm's length transaction, or (if no other shareholder accepts that investor's
share purchase offer),
(b) at any price which Jubb elects to accept, or (if Jubb
and the investor fail to agree on a price),
(c) at a per share price established by use of the appraisal
procedure described in Paragraph 4.d below, in which event all references to
"Company" in Paragraph 4.d shall be deemed to be replaced by the word
"investor."
(2) Purchase by Company. Alternatively, the Company itself may
-------------------
purchase at least $1 million worth of Jubb's shares. In that event, Company
shall pay Jubb the per share price established by Paragraph 4.d below.
b. Terms of Purchase If Jubb's Shares Are Acquired Between October
---------------------------------------------------------------
1, 1998 and September 30, 1999. If no one has purchased at least $1 million
- ------------------------------
worth of Jubb's shares by September 30, 1998, then Company shall continue to pay
Jubb the consulting fee described in Paragraph 1 above, at the times there
specified, until the earlier of (1) September 30, 1999 or (2) the date on which
any person has purchased at least $1 million worth of Jubb's shares. If that
share purchase occurs by September 30, 1999, then Jubb shall reimburse Company
the total net (after tax) consulting payments which he has received from Company
between October 1, 1998 and the date on which he receives full payment for his
purchased shares.
3.
<PAGE>
c. Terms of Purchase If Jubb's Shares Are Acquired After September
---------------------------------------------------------------
30, 1999
- --------
(1) Purchase by Company. If no one has purchased at least $1
-------------------
million worth of Jubb's shares by September 30, 1999, then Company shall do so
as soon as practicable thereafter, pursuant to the valuation methods described
in Paragraph 4.d below, unless Company is prevented from making that purchase by
law (including but not limited to California Corporations Code Sections 500 et
seq.), loan requirements, board fiduciary responsibilities, or financial
covenants of Company.
(2) Payments to Jubb If Company Does Not Purchase His Shares.
--------------------------------------------------------
Should Company be prevented from purchasing Jubb's shares for any of the reasons
stated in the preceding subsection, then Company shall continue to pay Jubb 50
percent of the consulting fee payments described in Paragraph 1 above, at the
times there specified, until the earlier of (a) September 30, 2002 or (b) the
purchase by any person of at least $1 million worth of Jubb's shares. If that
share purchase occurs before September 30, 2002, then Jubb shall reimburse
Company the total net (after tax) consulting payments which he has received from
Company between October 1, 1998 and the date on which he receives full payment
for his purchased shares.
4.
<PAGE>
d. Valuation of Jubb's Shares In Event of Purchase by Company.
----------------------------------------------------------
(1) Purchase Price Established by Market Price for Shares. If
-----------------------------------------------------
Company acquires Jubb's shares, it shall purchase them at the per share price
last paid by any outside investor in a bona fide arm's length purchase within
the 90 day period preceding the Company's purchase of Jubb's shares. If no
outside investor has purchased Company shares within the 90 days preceding
Company's purchase of Jubb's shares, then Company shall pay Jubb the per share
price fixed by the appraisal method described in subsection 4.d(2) below.
(2) Purchase Price Established by Appraisal. Alternatively,
---------------------------------------
Company and Jubb shall each engage one independent appraiser. Both appraisers
will value Company's shares based on its net fair market value as a going
concern. If the two appraisers' valuations are within ten percent of each other,
Company shall pay Jubb the average of the two valuations to purchase his shares.
If the two appraisers' valuations differ by more than ten percent, then they
shall engage a third appraiser, whose valuation of Company's shares shall be
final and conclusive on the parties. Each party shall be solely responsible to
pay the fees and costs of the appraiser which he or it engages; each party shall
pay half of the fees and costs of the third appraiser.
5.
<PAGE>
5. COBRA Payments. If Jubb provides Company with a completed COBRA
--------------
election form on or before October 30, 1997, Company shall pay Jubb's COBRA
premiums from October 1, 1997 (the day after his employee benefits coverage will
otherwise expire) through the earlier of (a) March 30, 1999, or (b) the date on
which Jubb becomes eligible for employee health insurance coverage from another
employer.
6. Outplacement Assistance. Company shall reimburse Jubb for the
-----------------------
reasonable expense of outplacement assistance, in an amount not to exceed
$25,000, if Company receives written verification from a bona fide outplacement
services provider that Jubb incurred the obligation to pay those expenses prior
to June 1, 1998. If Jubb does not engage an outplacement firm, Company shall
reimburse Jubb up to $10,000 for the reasonable, verified expenses which he
incurs in searching for other jobs and which are submitted to Company for
reimbursement before June 1, 1998.
7. Forgiveness of Relocation Loan. Company hereby forgives and cancels
------------------------------
Jubb's relocation loan of $21,000.
8. Release by Company. In consideration of Jubb's warranties, covenants
------------------
and promises contained in this RELEASE, and for other good and sufficient
consideration, receipt of which is hereby acknowledged, Company fully and
forever releases and
6.
<PAGE>
discharges Jubb from, and covenants not to sue or otherwise institute or cause
to be instituted any legal or administrative proceedings against Jubb with
respect to, any matter arising out of or relating to his employment with
Company, whether or not now known or ascertained, which have arisen at any time
up through the date on which Jubb executes this RELEASE.
Notwithstanding the foregoing paragraph, however, Company does not hereby
release any claim against Jubb which is (a) based upon or attributable to Jubb
gaining in fact any personal profit or advantage to which he was not legally
entitled, or (b) brought about or contributed to by Jubb's dishonesty or
intentional wrongdoing.
9. Confidentiality. Company agrees that its directors and officers
---------------
(including both appointed and elected officers) will not, without compulsion of
legal process, disclose to others the fact or terms of this RELEASE (except that
it may disclose its terms, including but not limited to the terms of Jubb's
covenants in this agreement, as it deems reasonably necessary to enforce those
covenants), except that Company may disclose them to its attorneys, accountants
or other professional advisors to whom the disclosure is necessary to effect the
purposes for which it has consulted such professional advisors, and it may
disclose them to its prospective and existing investors, lenders, auditors, and
to any person with whom Company
7.
<PAGE>
is negotiating with regard to a merger or an acquisition of Company, so long as
such person agrees in advance to treat the terms of this RELEASE as
confidential.
ARTICLE TWO
-----------
COVENANTS BY JUBB
-----------------
1. Resignation and Transition Support.
----------------------------------
a. Resignation from Employment. Jubb hereby resigns as
---------------------------
President and Chief Executive Officer of Company, effective September 30, 1997,
and agrees to execute the resignation notice attached as Exhibit "A" at the same
time he executes this RELEASE.
b. Continued Service on Board. Jubb shall remain on Company's
--------------------------
board of directors for the remainder of his current term, and may stand for re-
election for future terms to the extent permitted by Company's articles and
bylaws. Jubb shall promptly resign from the board as soon as his ownership falls
below five percent of Company's outstanding common stock.
c. Transition Support. Jubb further covenants and agrees to
------------------
support the Company in its search for and retention of a new President and Chief
Executive Officer, and to provide all assistance and support reasonably
requested of him by Company in effecting an orderly and positive transition to a
new President.
8.
<PAGE>
2. Agreement to Sell Company Shares. Jubb hereby agrees to sell at least
--------------------------------
$1 million worth of his Company shares to any outside investor, to Company, or
to any person or entity to whom Company assigns its rights to purchase Jubb's
shares, on the terms and at the times specified in Article One, Paragraph 4.
3. Acknowledgment of Payment. Jubb acknowledges and agrees that he has
-------------------------
received all compensation and benefits due to him through September 30, 1997,
and that he is not eligible or entitled to receive any future payments, employee
benefits, or other consideration from Company except as expressly provided in
this RELEASE. Jubb hereby further represents that he knows of no basis for any
worker's compensation claim which he might assert against Company.
4. Consulting Services. In consideration for the payments and benefits
-------------------
provided by Company to Jubb in this RELEASE, Jubb shall provide consulting
services to Company, upon its request and reasonable advance notice, for the
longer of (a) the full interval during which Jubb continues to receive payments
of the consulting fees specified in Article One, Paragraphs 1, 4.b, and 4.c(2),
and (b) three years following the date on which Jubb receives full payment for
at least $1 million worth of his Company shares. Company shall reimburse Jubb's
reasonable and verified expenses incurred in performing those services, pursuant
9.
<PAGE>
to then-existing Company expense reimbursement policies for its employees. Jubb
shall provide up to ten hours per week of consulting services to Company for so
long as this consulting covenant remains effective.
5. General Release by Jubb. In consideration of the payments and other
-----------------------
promises made by Company in this RELEASE, Jubb, for himself, his heirs,
executors, administrators, assigns, successors and spouses, fully and forever
releases and discharges Company, its officers, directors, agents and employees,
individually and in their corporate capacity (collectively, "releasees") from,
and covenants not to sue or otherwise institute or cause to be instituted any
legal or administrative proceedings against releasees with respect to, any
matter arising at any time up through the date of his execution of this RELEASE,
including any and all liabilities, claims, demands, contracts, debts,
obligations and causes of action of every nature, kind and description, in law,
equity, or otherwise (hereafter collectively referred to as "Claims"), whether
or not now known or ascertained, which heretofore do or may exist.
Jubb understands and agrees that in further consideration of the
foregoing he is waiving any rights he may have had, now has, or in the future
may have to pursue any and all remedies available to him under any employment-
related causes of action, including without limitation, claims of wrongful
10.
<PAGE>
discharge, breach of contract, breach of the covenant of good faith and fair
dealing, fraud, violation of public policy, defamation, physical injury,
emotional distress, claims under Title VII of the 1964 Civil Rights Act, as
amended, the California Fair Employment and Housing Act, the Equal Pay Act of
1963, California Labor Code Section 1197.5, the Age Discrimination in Employment
Act of 1967, the Civil Rights Act of 1866, the Americans with Disabilities Act
of 1990, claims for unpaid wages under California Labor Code section 201, claims
for penalties for failure to pay wages under California Labor Code section 203,
and any other laws and regulations relating to employment discrimination.
6. No Admission of Liability. In addition, and in further consideration
-------------------------
of the foregoing, Jubb hereby agrees that nothing contained in this RELEASE
shall constitute or be treated as an admission of liability or wrongdoing by
Company.
7. Confidentiality. Jubb agrees that he will not, without compulsion of
---------------
legal process, disclose to others the fact or terms of this settlement, the
amounts referred to in this RELEASE, or the fact of the payment of said amounts,
except that he may disclose them to his attorneys, accountants or other
professional advisors to whom the disclosure is necessary to effect the purposes
for which he has consulted such professional
11.
<PAGE>
advisors, and he may also disclose them to his immediate family and fiancee, so
long as he first obtains their promises to hold the terms of this RELEASE in
confidence.
8. No Solicitation of Employees. Jubb further hereby agrees that for one
----------------------------
year following the effective date of this RELEASE, he will not directly or
indirectly solicit the services of any Company employee, or otherwise induce or
attempt to induce current Company employees to sever their employment
relationship with Company. If, however, Jubb acquires any Company line of
business through an agreement executed by Company which authorizes him to hire
Company employees who work in that line of business, Jubb's hiring of those
persons shall not be deemed to breach this non-solicitation covenant.
9. Competitive Activities.
----------------------
a. Customer Solicitation. Jubb further hereby agrees that, for so
---------------------
long as his consulting covenant remains in effect, he will not directly or
indirectly call on, solicit or take away customers of Company, or otherwise
induce or attempt to induce those customers to sever their existing business
relationship with Company, either for himself or for any other person, firm or
corporation.
b. Competition with Company. Jubb further hereby agrees that, for so
------------------------
long as his consulting covenant
12.
<PAGE>
remains effective, he shall not directly or indirectly engage in, or have any
interest in, any person, firm, corporation, or business (whether as an employee,
officer, director, agent, security holder, partner, creditor, consultant or
otherwise) that engages in any business which is the same as or substantially
similar to the business then engaged in by Company, in any county in which
Company is then doing business; provided, however, that nothing herein shall
prohibit Jubb from owning less than five percent of the capital stock of a
corporation whose common stock is publicly traded on a national securities
exchange or through NASDAQ.
c. Permitted Activities. Notwithstanding the provisions of
--------------------
Paragraphs 9.a and 9.b above, Jubb may engage in customer solicitation and/or
competitive activities which would be prohibited by those provisions if he has
--
first received the prior written consent of Company's chairman of the board to
those activities, which consent may be withheld for any reason, in Company's
sole discretion. Furthermore, if no one has purchased at least $1 million worth
of Jubb's stock by September 30, 1999, Jubb may elect, in his sole discretion,
to waive his right to the continued consulting fee payments promised to him in
Article One, Paragraph 4.c(2) above. If Jubb waives that continued payment
right, then his covenants in this Paragraph 9 shall automatically terminate as
of the date on which Company's chairman of the board receives that written
waiver.
13.
<PAGE>
d. Reasonableness of These Covenants. Jubb hereby acknowledges and
---------------------------------
agrees that, if at least $1 million worth of his shares are purchased by any
person, that conveyance shall be deemed to convey a substantial ownership
interest in Company and to be a transfer of a substantial portion of Company's
goodwill within the meaning of California Business & Professions Code Section
16601. Jubb further acknowledges and agrees that his covenant not to compete
with Company following his sale of his shares is a reasonable protection of
Company's valid business interests, and that the duration and geographic scope
of his covenants in this Paragraph are reasonable.
10. Proprietary Information. Jubb further acknowledges that while employed
-----------------------
by Company, he has had access to, acquired or assisted in the development of
confidential and proprietary information, relating to the present and
anticipated business operations of Company. Jubb agrees not to disclose or
communicate to anyone outside Company or to use in any way any of the above-
described confidential and/or proprietary information which Jubb may have
learned as a result of his employment with Company. Information shall be
considered to be proprietary or confidential within the meaning of this RELEASE
if California law would so deem it.
11. Arm's Length Agreement. Jubb hereby acknowledges
-----------------------
14.
<PAGE>
that he has read and understands the foregoing RELEASE and that he signs it
voluntarily and without coercion. Jubb further acknowledges that he was given
twenty-one (21) days within which to consider this RELEASE and the opportunity
to consult with an attorney of his own choosing concerning the waivers contained
in this RELEASE, that he has done so and that the waivers he has made herein are
knowing, conscious and with full appreciation that he is forever foreclosed from
pursuing any of the rights so waived. Jubb further acknowledges that this
RELEASE was negotiated at arms' length by him and Company and that, as a result,
any ambiguity in its text shall not be construed against Company.
12. Right to Rescind. Jubb understands that for a period of seven (7) days
----------------
after signing this RELEASE he has the right to revoke it and that this RELEASE
shall not become effective or enforceable until after those seven (7) days have
elapsed without Company having received notice of revocation from Jubb. If Jubb
elects to revoke this RELEASE, he must deliver written notice of revocation to
Company's Chairman no later than 5:00 p.m. on the seventh day following his
execution of this RELEASE, and he shall in that event have no right to receive
any of the consideration offered by Company in this RELEASE.
ARTICLE THREE
-------------
15.
<PAGE>
MUTUAL PROVISIONS
-----------------
1. No Disparagement.
----------------
a. Covenant by Jubb. Jubb agrees that he will refrain from making
----------------
any representation, statement, comment or any other form of communication
(hereinafter collectively referred to as "representation"), whether written or
oral, to any person or entity, including but not limited to the customers,
suppliers and competitors of the Company and/or its affiliates, which
representation reflects any opinion, judgment, observation or representation of
fact, which has the effect or tendency or could have the effect or tendency to
disparage, denigrate, criticize or otherwise reflect negatively on the Company,
its affiliates, and/or their products, services, officers, directors,
shareholders, employees or investors.
b. Covenant by Company. Company agrees that its elected and
-------------------
appointed officers and its directors will refrain from making any
representation, statement, comment or any other form of communication
(hereinafter collectively referred to as "representation"), whether written or
oral, to any person or entity, including but not limited to the customers,
suppliers and competitors of Company and/or its affiliates, which representation
reflects any opinion, judgment, observation or representation of fact, which has
the effect or tendency or could have the effect or tendency to disparage,
denigrate, criticize or
16.
<PAGE>
otherwise reflect negatively on Jubb.
2. Equitable Remedies. Both parties understand that their covenants
------------------
contained in this RELEASE are material inducements to the other party for the
making of this settlement and that, for the breach thereof, the non-breaching
party will be entitled to pursue his or its legal and equitable remedies,
including without limitation the right to recover damages and seek injunctive
relief.
3. Governing Law. This RELEASE shall be deemed to have been entered into
-------------
in the State of California and shall be construed and interpreted in accordance
with the laws of that state.
4. Section 1542 Waiver. In addition, and in further consideration of the
-------------------
foregoing, each party hereby expressly waives any and all rights and benefits
conferred upon him or it by the provisions of Section 1542 of the Civil Code of
the State of California, which states as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
17.
<PAGE>
5. No Extrinsic Promises. Each party acknowledges and agrees that no
---------------------
promises or representations were made which do not appear written herein and
that this RELEASE contains the entire agreement of the parties as to the subject
matter hereof.
6. Attorney's Fees and Costs. In the event it becomes necessary for
-------------------------
either Company or Jubb to retain counsel to enforce any provision of this
RELEASE or to commence an action for the breach thereof, the prevailing party
shall have the right to recover its costs, expenses and a reasonable attorney's
fee.
7. Severability. If any provision of this RELEASE is hereafter held to be
------------
invalid or unenforceable for any reason, all remaining provisions of this
RELEASE shall remain valid and effective.
8. Assignment. Because Jubb's covenants in this RELEASE are personal
----------
ones, he may not assign either his rights or his obligations under this RELEASE
to any other person, and any such attempted assignment shall be void. Company
may assign its rights and obligations under Paragraph 4 of this RELEASE to any
other person or entity, without Jubb's consent, and may assign any or all of its
rights and obligations under this RELEASE to any affiliate, any successor to all
or substantially all of Company's assets or any successor by merger.
18.
<PAGE>
EMPLOYEE:
Date: 10/2/97 /s/ Berni Jubb
------------------- ------------------------------
Berni Jubb
EMPLOYER:
Date: 9/30/97 /s/ Michael Silton
------------------- ------------------------------
UniDirect Corporation
By Michael Silton
its Chairman of the Board
19.
<PAGE>
AMENDMENT NO.1 TO SEPARATION AGREEMENT AND RELEASE
--------------------------------------------------
This Amendment No. 1 ("Amendment No. 1") to the Separation Agreement and
Release of all claims (the "Separation Agreement and Release") between Rainmaker
Systems, Inc. (formerly known as UniDirect Corporation and hereinafter, the
"Company") and Berni Jubb, an individual residing in California (hereinafter
"Jubb") is made between the Company and Jubb as of January 27, 1999.
WITNESSETH:
----------
WHEREAS, the Company and Jubb desire to amend the Separation Agreement and
Release to provide for the terms and conditions of Jubb's resignation as a
director of the Company.
NOW, THEREFORE, for and in consideration of the foregoing and other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree to amend the Separation Agreement and Release as follows:
ARTICLE ONE
-----------
AMENDMENTS TO THE SEPARATION AGREEMENT AND RELEASE
--------------------------------------------------
1. Section 4.b. of Article One of the Separation Agreement and Release is
amended and restated as follows:
"b. Terms of Purchase If Jubb's Shares Are Acquired Between October
---------------------------------------------------------------
1, 1998 and September 30, 1999. If no one has purchased at least $1 million
- ------------------------------
worth of Jubb's shares by September 30, 1998, then Company shall continue to pay
Jubb the consulting fee described in Paragraph 1 above, at the times there
specified, until the earlier of (1) September 30, 1999 or (2) the date on which
any person has purchased at least $1 million worth of Jubb's shares. If that
purchase occurs by September 30, 1999, then Jubb shall reimburse Company an
amount which is $50,000 less than the total net (after tax) consulting payments
which he has received from Company between October 1, 1998 and the date on which
he receives full payment for his purchased shares."
2. Sections 10 and 11 of Article One of the Separation Agreement and
Release are added as follows:
"10. Loan Upon Resignation As Director. On the effective date of
---------------------------------
Jubb's resignation as a director of Company, Company shall provide Jubb with an
interest-free loan in the amount of $100,000, which amount shall be repaid by
Jubb from proceeds received by Jubb in the Redemption (as defined and described
in that certain Stock Purchase Agreement to be entered into by Company and the
investors in Series C Convertible Participating Preferred Stock named therein).
Jubb hereby authorizes Company to withhold $100,000 of the proceeds to be
received by Jubb in the Redemption to satisfy that debt.
<PAGE>
11. Vesting of Jubb's Options. On the effective date of Jubb's
--------------------------
resignation as a director of Company, Jubb's options to purchase 10,000 shares
of Company's Common Stock (which options were received by Jubb for his services
as a director) shall be fully vested and shall no longer be subject to Company's
right of repurchase. Such shares will remain subject to all other transfer
restrictions set forth in the stock purchase agreement deliverable by Jubb upon
exercise of his options."
3. Section 1.b. of Article Two of the Separation Agreement and Release
is amended and restated as follows:
"b. Continued Service on Board. Jubb shall remain on Company's board
--------------------------
of directors for the remainder of his current term, and may stand for re-
election for future terms to the extent permitted by Company's articles and
bylaws. Jubb shall promptly resign from the board upon the earlier to occur of
(i) February 5, 1999 or (ii) the date on which Jubb no longer owns at least five
percent of the Company's capital stock on a fully-diluted basis."
ARTICLE TWO
-----------
EFFECT ON THE SEPARATION AGREEMENT AND RELEASE
----------------------------------------------
Except as specifically amended above, the Separation Agreement and Release
shall remain in full force and effect and is hereby ratified and confirmed. In
addition, in consideration of the payments and other promises made by Company in
this Amendment No. 1, Jubb covenants that the general release provided for in
Section 5 of Article Two of the Separation Agreement and Release shall apply to
any matter arising at any time up through the date of his execution of this
Amendment No. 1, including any Claims, whether or not now known or ascertained,
which heretofore do or may exist.
ARTICLE THREE
-------------
COUNTERPARTS
------------
This Amendment No. 1 may be executed in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same instrument.
[Remainder of page intentionally left blank]
2
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed, or caused its duly
authorized officer to execute, this Amendment No. 1 as of the date first written
above.
EMPLOYEE
/s/ Berni Jubb
-------------------------------
Berni Jubb
5/th/ February 1999
EMPLOYER
_________________________________
Rainmaker Systems, Inc.
By Michael Silton
Chairman, Chief Executive Officer
and President
3
<PAGE>
PROMISSORY NOTE AND SECURITY AGREEMENT
$100,000 February 5, 1999
FOR VALUE RECEIVED, Bernard P. Jubb ("Borrower"), agrees to pay to RAINMAKER
SYSTEMS, INC., a California corporation (the "Company"), principal office at
1800 Green Hills Road, 2nd Floor, Scotts Valley, California 95066 the principal
sum of One Hundred Thousand Dollars ($100,000).
The principal owing hereunder shall be paid upon the date which shares of the
Company's common stock held by Borrower are repurchased by the Company (the
"Redemption"). Borrower agrees that Company may withhold such amount of
Borrower's proceeds from the Redemption as repayment of the principal amount
due hereunder.
PAYMENT OF THIS NOTE IS SECURED BY 60,975 SHARES (THE "PLEDGED SHARES") OF
COMMON STOCK OF THE COMPANY HELD BY BORROWER.
As security for the payment and performance of this Note and Security Agreement,
Borrower hereby pledges, assigns, transfers, hypothecates and sets over to the
Company, and hereby grants to the Company a security interest in, all of
Borrower's right, title and interest in, to and under (i) the Pledged Shares and
(ii) all rights, interests and claims with respect to the Pledged Shares, in
each case whether presently existing or owned or hereafter arising or acquired
and wherever located.
Borrower agrees that this Note and Security Agreement shall create a continuing
security interest in and pledge of the Pledged Shares.
Borrower represents and warrants (a) that this Note and Security Agreement is a
legal, valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its terms; (b) the Borrower is the legal and beneficial owner of
the Pledged Shares and has and will have good and marketable title to the
Pledged Shares, subject to no lien; and (c) no approval or consent of any other
person or entity is required for the due execution, delivery or performance of
this Note and Security Agreement.
Borrower agrees that (a) he will not surrender or lose possession of (other than
to Borrower or, with the prior consent of Borrower), exchange, sell, convey,
transfer, assign or otherwise dispose of or transfer the Pledged Shares or any
right, title or interest in the Pledged Shares; (b) he will not create, incur or
permit to exist any liens upon the Pledged Shares, other than the security
interest of and pledge to the Company created by this Note and Security
Agreement; (c) any breach of the foregoing covenants will constitute an event of
default under which Borrower may declare the amount due hereunder to be
immediately due and payable; and (d) Borrower shall have, in addition to all
other rights and remedies granted to it in this Note and Security Agreement, all
rights and remedies of a secured party under the Uniform Commercial Code and
other applicable laws (from now until the end of time and beyond).
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This Note and Security Agreement shall be binding on Borrower and its successors
and assigns, and shall be binding upon and inure to the benefit of the Company,
any future holder of this Note and Security Agreement and their respective
successors and assigns. Borrower may not assign or transfer this Note and
Security Agreement or any of its obligations hereunder without the Company's
prior written consent.
THIS NOTE AND SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF CALIFORNIA.
/s/ Bernard P. Jubb
---------------------------------
Bernard P. Jubb
February 5/th/ 1999
ACCEPTED AND AGREED TO:
RAINMAKER SYSTEMS, INC.
By:______________________
Name:
Title:
<PAGE>
EXHIBIT 10.18
SEPARATION AGREEMENT AND RELEASE
--------------------------------
THIS SEPARATION AGREEMENT AND RELEASE (hereinafter "RELEASE") of all
claims against RAINMAKER SYSTEMS, INC., its parents, subsidiaries, related
entities, predecessors, successors, officers, agents, employees and
assigns (hereinafter collectively called "Company"), is made by Chris
Sterbenc (hereinafter "Sterbenc").
WITNESSETH:
----------
WHEREAS, Sterbenc was an employee of Company from May 1, 1995
until April 1, 1999; and
WHEREAS, a question has arisen concerning the continuation of
Sterbenc's employment; and
WHEREAS, the parties agree that Sterbenc's employment with
Company shall be terminated; and
WHEREAS, the parties wish to sever their relationship in a way
which will preserve the good will which exists between them and to
settle all disputes and avoid litigation;
NOW, THEREFORE, for and in consideration of the payment by
Company to Sterbenc of the items and sums recited in paragraphs 1,
2, 3, 4, 5, 6, 7, and 8 below, items and sums to which but for this
settlement Sterbenc is not otherwise entitled, Sterbenc, fully and
forever releases and discharges Company from, and covenants not to
sue or otherwise institute or cause to be instituted any legal or
administrative proceedings against Company with respect to, any
matter arising out of or relating to his employment with Company,
including any claims and causes of action relating to termination of
his employment
1. Company shall pay to Sterbenc 6 months of salary continuation
pay equivalent to Sterbenc's current monthly base salary of
$8750.00 per month, payable on regularly scheduled paydays,
less applicable payroll taxes and insurance premium
contributions. Sterbenc's last day of employment shall be
April 1, 1999. Salary continuation period will begin April 2,
1999 and end October 1, 1999.
2. Company shall pay 1999 Ql bonus at 100% achievement according
to Sterbenc's Compensation Plan through March 30, 1999, to be
paid within the regular bonus pay check cycle; and
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3. Company shall pay 1999 Q2 bonus at 100% achievement equating
to $23,750 according to Sterbenc's Compensation Plan through
June 30, 1999, to be paid within the regular bonus pay check
cycle; and
4. Company shall pay Sterbenc's COBRA payments for his health,
dental and vision benefits beginning on May 1, 1999 until
October 31, 1999. Sterbenc understands, that for purposes of
calculating the 18-month period of continuation coverage under
the Consolidated Omnibus Reconciliation Act ("COBRA"), the
insurance carrier will conclude that the 18-month period began
to run on May 1, 1999, the first of the month following the
date of his actual termination. All other benefits not covered
under COBRA will cease; and
5. Sterbenc's car allowance will cease as of April 1, 1999; and
6. Sterbenc further agrees that the Company's obligation to
continue his salary, commission, and paying COBRA expenses as
set forth in paragraphs 1, 2, 3, and 4 of this Agreement,
shall cease if Sterbenc either directly or indirectly,
including without limitation through partnership, joint
venture, corporation or other entity or as a consultant,
director, independent contractor or employee, provides
services for a person or entity that is a customer of Company
or that competes with any line of business in which Company is
currently engaged or is engaged during the term of this
Agreement. Sterbenc acknowledges that in the event he
performs services for a customer or competing person or
entity, his right to receive payment under paragraphs 1, 2, 3,
and 4 of this Agreement shall terminate.
7. Sterbenc agrees he has 303,749 VESTED Stock Options as of
April 1, 1999 and he understands he has 3 months (90 days)
from his last day of employment (April 1, 1999) in which to
exercise his options and purchase his vested shares at a price
of $28,006.07, in accordance with the Company's stock option
plan and the stock option agreement.
8. Sterbenc will retain his lap top personal computer. The value
of the computer, 3,586.00 will be added to his 1999 W-2.
9. Company shall pay to Sterbenc Federal and State Tax penalties
and interest related exclusively to the incorrect reporting of
Sterbenc's personal earnings at Rainmaker during 1996. State
reimbursement amounts to $363.37 and Federal reimbursement
will be made upon receiving proper documentation as to exact
amount.
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<PAGE>
A. Sterbenc warrants that he has sought and obtained independent advice
regarding the tax consequences of the payments made hereunder and that he
will defend, indemnify and hold Company harmless from any claim for
withholding taxes, penalties and any other assessments that may hereafter
be asserted against Company by any tax authority.
B. Sterbenc fully and forever releases and discharges Company from, and
covenants not to sue or otherwise institute or cause to be instituted any
legal or administrative proceedings against Company with respect to, any
matter arising out of or relating to Employee's employment, or the
termination thereof, or any acts of Company, including, without limitation,
any claims and causes of action against Company which relates to conduct
occurring before and up to the date this RELEASE is executed. Moreover,
Sterbenc hereby releases, acquits, and discharges Company, and each of
their agents, predecessors and/or successors in interest from any and all
rights, actions, claims, demands, costs, contracts, allegations,
liabilities, obligations, damages and causes of action, whether known,
suspected or unknown, which Sterbenc had or now has or may claim to have
had by reason of any matter or thing from the beginning of time through and
including the date of this RELEASE.
C. Sterbenc understands and agrees that in further consideration of the
foregoing he is waiving any rights he may have had, now has, or in the
future may have to pursue any and all remedies available to him under any
employment-related causes of action, including without limitation, claims
of wrongful discharge, breach of contract, breach of the covenant of good
faith and fair dealing, fraud, violation of public policy, defamation,
physical injury, emotional distress, claims under Title VII of the 1964
Civil Rights Act, as amended, the California Fair Employment and Housing
Act, the Equal Pay Act of 1963, California Labor Code Section 1197.5, the
Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1866,
the Americans with Disabilities Act of 1990, and any other laws and
regulations relating to employment discrimination.
D. In addition, and in further consideration of the foregoing, Sterbenc hereby
agrees that nothing contained in this RELEASE shall constitute or be
treated as an admission of liability or wrongdoing by Company.
E. Sterbenc agrees that he will not, without compulsion of legal process,
disclose to others the fact or terms of this settlement, the amounts
referred to in this RELEASE, or the fact of the payment of said amounts,
except that he may disclose them to his attorneys, accountants or other
professional advisors to whom the disclosure is necessary to effect the
purposes for which he has consulted such professional advisors.
F. In addition and in further consideration of the foregoing, Sterbenc hereby
agrees that for one year following the effective date of this RELEASE, he
will not directly or indirectly solicit the services of any Company
employee, or otherwise induce or
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<PAGE>
attempt to induce current Company employees to sever their employment
relationship with Company.
G. Sterbenc further acknowledges that while employed by Company, he may have
had access to, acquired or assisted in the development of confidential and
proprietary information, relating to the present and anticipated business
operations of Company. Sterbenc acknowledges that he is bound by the terms
of the Confidentiality Agreement which he signed dated May 1, 1995 (copy
attached). Sterbenc agrees not to disclose or communicate to anyone outside
Company or to use in any way any of the above-described confidential,
and/or proprietary information which Sterbenc may have learned as a result
of his employment with Company.
H. Sterbenc agrees that he will refrain from making any representation,
statement, comment or any other form of communication (hereinafter
collectively referred to as "representation"), whether written or verbal,
to any person or entity, including but not limited to the principals,
customers, suppliers and competitors of the Company, which representation
reflects any opinion, judgment, observation or representation of fact,
which has the effect or tendency or could have the effect or tendency to
disparage, denigrate, criticize or otherwise reflect negatively on the
Company and/or its products, services, officers, directors, shareholders,
employees or investors.
I. Sterbenc understands that the covenants contained in this RELEASE,
including the covenants contained in Paragraphs D, E, F, G and H of this
RELEASE, are material inducements to Company for the making of this
settlement and that, for the breach thereof, Company will be entitled to
pursue its legal and equitable remedies, including without limitation the
right to recover damages and seek injunctive relief.
J. This RELEASE shall be deemed to have been entered into in the State of
California and shall be construed and interpreted in accordance with the
laws of that state.
K. In addition, and in further consideration of the foregoing, Sterbenc hereby
expressly waives any and all rights and benefits conferred upon him by the
provisions of Section 1542 of the Civil Code of the State of California,
which states as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED
HIS SETTLEMENT WITH THE DEBTOR".
L. Sterbenc acknowledges and agrees that no promises or representations were
made which do not appear written herein and that this RELEASE contains the
entire agreement of the parties as to the subject matter thereof. This
agreement can only be modified or amended by a written agreement signed by
both Sterbenc and an Executive Officer of Company.
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<PAGE>
M. Company and Sterbenc agree to bear their own costs and attorneys' fees
incurred with respect to this RELEASE. In the event it becomes necessary
for either Company or Sterbenc to retain counsel to enforce any provision
of this RELEASE or to commence an action for the breach thereof, the
prevailing party shall have the right to recover its costs and a reasonable
attorney's fee.
N. In addition, and in further consideration of the foregoing, Sterbenc agrees
that he will not in the future apply for or be considered for employment
with Company.
O. Sterbenc represents that he has not violated any federal or state laws in
connection with his employment during the period he was employed by
Company.
P. By signing this RELEASE, Sterbenc acknowledges that he will return all
confidential information and property that belongs to Company. This would
include, but is not limited to: sales information, customer lists, product
lists, financial reports or records, survey results, Company building keys,
computer equipment and loaned equipment by April 5, 1999. Failure to return
all confidential information and property by April 5, 1999 would release
Company from it's commitments made in this RELEASE.
Q. Sterbenc hereby acknowledges that he has read and understands the foregoing
RELEASE and that he signs it voluntarily and without coercion. Sterbenc
further acknowledges that he was given the opportunity by Company to
consult with an attorney of his own choosing concerning the waivers
contained in this RELEASE, that he has done so and that the waivers he has
made herein are knowing, conscious and with full appreciation that he is
forever foreclosed from pursuing any of the rights so waived.
Executed this 8 day of April, 1999.
/s/ Michael Silton /s/ Chris Sterbenc
- ----------------------- ------------------------
Michael Silton Chris Sterbenc
President and CEO
Rainmaker Systems
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EXHIBIT 10.19
DISTRIBUTOR AGREEMENT
---------------------
This Agreement is made and entered into on the date last signed by and between
The Santa Cruz Operation, Inc. (hereinafter "SCO"), a corporation of the State
of California, with its place of business at 400 Encinal Street, Santa Cruz,
California, 95060, and UniDirect Corporation (hereinafter "UniDirect"), a
corporation of the State of California with its place of business at One
Venture, #150, Irvine, California 92718.
WHEREAS, SCO is a licensor, manufacturer and distributor of SCO software and
related products and services, including future versions, ("the Products"), as
set forth on Exhibit A attached hereto which may be modified from time to time
as agreed by the parties.
WHEREAS, UniDirect is a reseller and distributor of computer products, and
WHEREAS, the parties are desirous of UniDirect remarketing the Products to its
customers.
In consideration of the mutual covenants contained in this Agreement, SCO and
UniDirect agree as follows:
1.0 APPOINTMENT OF UNIDIRECT
------------------------
A. SCO hereby appoints UniDirect as a non-exclusive "Distributor".
UniDirect shall have the right to license, advertise and market the
Products via telesales to customers throughout the United States and
Canada. UniDirect may not open, modify or change the Products in any
manner. In addition, UniDirect shall not make or cause to be made any
copy of any part of the Products without SCO's prior written consent.
B. SCO grants to UniDirect a non-transferable, non-exclusive license to
use SCO's name, trademarks and service marks related to the Products
in UniDirect's performance of its obligations hereunder.
C. UniDirect shall distribute with each applicable Product, the end user
"break-the-seal" license agreement included by SCO in the Product
package, substantially similar to Exhibit B attached hereto. UniDirect
may use it's own end user software license agreement, provided it has
been approved in writing by SCO. In the event that UniDirect shall use
a license other than "break-the-seal," UniDirect shall retain any
executed license agreements and shall provide them to SCO upon SCO's
request or upon expiration or termination of this Agreement. For SCO
UNIX and SCO Open Desktop Products, UniDirect shall allow UNIX Systems
Laboratories (USL) to audit such executed licenses, if USL desires.
UniDirect grants to SCO the right to enforce such agreements on
UniDirect's behalf should UniDirect fail to enforce said agreement.
D. Notwithstanding the foregoing, during the term of this Agreement, SCO
shall not contract with any third party for the purpose primarily of
marketing the Products via telesales within the U.S. or Canadian
marketplaces provided that UniDirect has performed substantially as
set forth in the performance milestones as may be agreed upon by the
parties from time to time. Further, in no event shall SCO offer
certain Products as set forth in Exhibit C to any third party
whatsoever for distribution, resale or remarketing purposes within the
U.S. or Canadian marketplaces during the term
Distributor Agreement
Page 1
<PAGE>
hereof provided that UniDirect has performed substantially as set
forth in said milestones, provided, however, that SCO may continue to
honor existing contractual commitments with third parties and further
provided that SCO may, in the future, offer upgrade, update and
trade-in Products to third parties such as government prime
contractors, OEMs, large VARs (in excess of $100,000 in sales of SCO
product annually and licensed to reproduce certain SCO products), and
Advanced Product Centers which do not, in general, serve the same
customer base as UniDirect.
2.0 GENERAL OBLIGATIONS OF UNIDIRECT
--------------------------------
A. UniDirect shall use commercially reasonable efforts to respond to
inbound telephone inquiries from customers as described in Part I of
Exhibit D attached hereto.
B. UniDirect shall promote, represent, advertise and otherwise support
the license of Products as one of UniDirect's highest level featured
products.
C. UniDirect shall use commercially reasonable efforts to meet its
customers' orders for Products in a timely fashion as well as, upon
request by SCO, provide an inventory status.
D. UniDirect shall make no representations to customers regarding the
Products other than those made by SCO product literature or as
otherwise provided by SCO in writing.
E. UniDirect shall modify or translate the Products, advertising artwork,
promotional literature, Products names, and/or package design only
with SCO's prior written approval. SCO shall use commercially
reasonable efforts to reject or approve such translations, artwork, or
promotional literature within five (5) business days.
3.0 OBLIGATIONS OF THE PARTIES
--------------------------
A. Transition Manager
Through April 15, 1995, SCO shall make available a highly-skilled
employee familiar with the Products who is acceptable to UniDirect.
Such employee shall be available at all times during normal business
hours as reasonably requested by UniDirect. Such employee shall travel
to UniDirect's facilities as reasonably requested by UniDirect,
provided that UniDirect shall pay reasonable travel and lodging
expenses.
B. Customer Database
Upon execution of this Agreement, SCO shall promptly deliver to
UniDirect the then current customer databases and related
documentation and provide UniDirect reasonable assistance in
implementing the databases on UniDirect's data processing facilities,
and maintaining the ongoing communications link between SCO's system
and UniDirect's system.
Upon termination of this Agreement, ownership of customer records and
all modifications, additions, and updates thereto shall be determined
as follows:
Original Data. Each party shall retain ownership of the customer
records existing in their respective customer databases, which
are proprietary
Distributor Agreement
Page 2
<PAGE>
and copyrightable, prior to the merger of the
parties' data (including customer records which are
found in both parties' databases).
Subsequent Additions/Updates. All customer records
which are created exclusively as a result of
inquiries on the 800-SCO-UNIX telephone line (or a
single designated alternate telephone line for SCO
telesales), or as a result of SCO customer
registrations shall be owned by SCO; provided that
UniDirect shall share ownership with SCO of any
customer records (whether from original data or
subsequent additions/updates or otherwise) which
pertain to customers that have purchased products
from UniDirect during the term of the Agreement.
SCO's customer databases shall be treated as Confidential pursuant to
Section 14 below, except as agreed by the parties.
C. Telephone Facilities
The parties shall perform the necessary steps for transferring the
applicable telephone service from SCO to UniDirect for the term of
this Agreement. Notwithstanding anything else in this Agreement, all
inquiries received by SCO pertaining to the Products shall be
transferred to UniDirect. The parties shall each bear their own costs
relating to such transfer. UniDirect shall use commercially
reasonable efforts to acquire additional switching capabilities to
support its obligations under this Agreement.
D. Personnel
UniDirect shall offer employment to certain SCO employees as forth in
Part II of Exhibit D hereto. UniDirect shall offer such SCO employees
compensation and benefits which are overall comparable to those
offered them by SCO.
E. Kickstart
Upon the execution date of this Agreement, SCO shall continue its
marketing efforts regarding the Products at the same or higher level
in effect during the ninety (90) day period preceding the execution of
this Agreement. During SCO's second fiscal quarter of FY95, SCO's
marketing efforts shall be as set forth on Exhibit E.
F. Product Use
Upon execution of this Agreement, and as new Products are released,
SCO shall provide UniDirect a reasonable number of copies of such
Products. SCO hereby grants UniDirect a personal, nontransferable
license to use said Products solely for customer support and internal
use.
G. Support
UniDirect shall provide reasonable support to its customers. SCO shall
provide reasonable second line support to UniDirect to allow UniDirect
to support its customers and internal systems.
Distributor Agreement
Page 3
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4.0 REPORTING
---------
A. UniDirect shall provide SCO with a rolling twelve (12) month good
faith forecast of its requirements for Products updated on a quarterly
basis. This forecast shall be for SCO's planning purposes only and
shall be non-binding, provided, however, no later than the fifteenth
(15th) day of each fiscal quarter, UniDirect shall provide SCO with an
irrevocable purchase order for Product to be shipped during said
quarter. In addition, UniDirect shall provide SCO with monthly reports
in a form reasonably requested by SCO within ten (10) days of the end
of each month. These reports shall list Products distributed by unit
and dollar volume for each of UniDirect's customers, detailing each
individual shipping location of UniDirect's customers having multiple
shipping locations.
B. Upon SCO's reasonable request, UniDirect shall provide the customer's
name, address, zip code, and telephone number, and the Products name,
Products model number, unit cost and units sold.
5.0 FEES AND PAYMENT
----------------
A. UniDirect shall make payments to SCO in United States dollars. Fees
are specified in Exhibit A.
B. Payment for Products ordered and received by UniDirect shall be due
thirty (30) days after receipt of such Products by UniDirect. Payment
for Products consigned to UniDirect shall be due thirty (30) days
after sale of such Products by UniDirect.
C. SCO may revise its product list and prices with thirty (30) days'
prior notice.
D. UniDirect shall pay the prices stated in this Agreement which are
exclusive of shipping, handling, and any federal, state, municipal or
other governmental taxes, duties, licenses, fees, excises or tariffs
now or hereinafter imposed on the production, storage, licensing,
sale, transportation, import, export or use of Products. UniDirect
agrees to pay such charges or, in lieu thereof, UniDirect shall
provide an exemption certificate acceptable to SCO and the applicable
taxing authority. SCO, however, shall be responsible for all taxes
based upon its net income.
E. SCO reserves the right to impose a monthly late payment charge
equivalent to the lesser of one and one-half percent (1 1/2%), or the
highest rate allowed by law, of the late balance when payments
provided for in this Agreement are not paid when due. The imposition
of late payment charges is not intended to be SCO's sole remedy and in
no way precludes SCO's use of additional available remedies.
6.0 TERM AND OBLIGATIONS UPON TERMINATION
-------------------------------------
A. This Agreement shall be in effect for an initial term of three (3)
years and shall continue thereafter for periods of one (1) year
commencing upon each anniversary date, provided, however, that either
party shall have the right to terminate this Agreement for any reason
whatsoever and with no liability arising therefrom, by providing the
other party written notice not less than ninety (90) days prior to the
third anniversary date or any subsequent anniversary date.
Distributor Agreement
Page 4
<PAGE>
B. Notwithstanding the foregoing, in the event UniDirect shall fail to
perform substantially as set forth in the performance milestones as
may be agreed upon by the parties from time to time, SCO shall have
the right to terminate this Agreement at any time upon ninety (90)
days written notice without any liability arising therefrom. Further,
should either party breach any material provision of this Agreement
and fail to remedy such breach within thirty (30) days of written
notice thereof, the injured party may terminate this Agreement
immediately and, at its option, rescind any purchase orders submitted
by UniDirect and accepted by SCO, as well as pursue any other rights
and remedies provided by law or equity or this Agreement.
C. Further, either party may terminate this Agreement immediately if the
other party admits in writing its inability to pay its debts as they
mature, makes an assignment for the benefit of creditors, files or has
filed against it by a third party any petition under any Bankruptcy
Act, or an application for a receiver of the other party is made by
anyone and such petition or application is not resolved favorably to
the other party within sixty (60) days.
D. In the event of termination, UniDirect shall be entitled to, at its
option, sell remaining Product inventory, if any, or return such
Product which is new and unused and which has been provided by SCO in
the past six weeks, or in the case of Products set forth in Exhibit C,
the past ninety (90) days, to SCO for a full refund of UniDirect's
purchase price. Further, in the event SCO terminates this Agreement
pursuant to Subparagraph A above, UniDirect may, at its option, return
to SCO any Product acquired directly from SCO within one hundred
eighty (180) days of the effective date of termination at the price
paid for such Product, provided such Product is in unopened, shrink-
wrapped, complete packaging.
E. Notwithstanding the foregoing, in the event of termination arising out
of UniDirect's default, SCO may request the return of any or all
Product in inventory for a full refund.
F. Upon termination, UniDirect shall immediately cease using any SCO
logos, trademarks, trade names and the like, except for purposes of
selling remaining inventory, and shall return to SCO any SCO property,
including, but not limited to, marketing materials.
7.0 WARRANTY
--------
A. SCO does not warrant that the function contained in the Products will
meet UniDirect's or any user's requirements or that its operation will
be uninterrupted or error free. SCO warrants that the Products
substantially conform to the specifications and functional
descriptions contained in the pertinent documentation; and that the
reproduction of the software on the media material provided by SCO is
correct; and that the documentation is correctly printed to SCO's
standard at the time of execution of the Agreement. Provided UniDirect
notifies SCO of any non-conformance within ninety (90) days of its
receipt of Products, SCO shall at its sole discretion either 1) repair
non-conforming Products, 2) replace the non-conforming Products, or 3)
accept return of same and refund or credit any fees paid by UniDirect
for such returned Products.
B. Further, SCO warrants the SCO supplied media on which the SCO software
component of the Products resides to be error free from defects in
material and workmanship under normal use for a period of ninety (90)
days from date of delivery
Distributor Agreement
Page 5
<PAGE>
by UniDirect to its customer, not to exceed one hundred eighty (180)
days from SCO's shipment to UniDirect and shall at its sole discretion
either 1) repair the defective media, 2) replace the defective media,
or 3) accept return of same and refund or credit any fees paid by
UniDirect for such returned Products.
C. EXCEPT AS PROVIDED HEREIN, LICENSED PRODUCT IS PROVIDED "AS IS"
WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED; INCLUDING,
BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
F1TNESS FOR A PARTICULAR PURPOSE.
D. SCO MAKES NO WARRANTY DIRECTLY TO UNIDIRECTS END USER CUSTOMERS.
8.0 LIMITATION OF LIABILITY
-----------------------
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, SPECIAL, PUNITIVE,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND SUSTAINED OR INCURRED IN
CONNECTION WITH THIS AGREEMENT AND THE SOFTWARE THAT IS SUBJECT TO THIS
AGREEMENT REGARDLESS OF THE FORM OF ACTION AND WHETHER OR NOT SUCH DAMAGES
ARE FORESEEABLE, AND EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH LOSS. IN NO CASE WILL ONE PARTY HERETO BE LIABLE FOR ANY
REPRESENTATION OR WARRANTY MADE TO ANY THIRD PARTY BY THE OTHER PARTY OR
ANY AGENT OF THE OTHER PARTY.
9.0 INDEMNIFICATION
---------------
UniDirect shall indemnify and hold harmless SCO against any and all claims
and expenses, including reasonable attorney's fees, arising out of
UniDirect's performance hereunder which are due to UniDirect's negligent
acts or omissions or due to UniDirect's willful misconduct. Unidirect's
indemnification obligations hereunder are subject to SCO providing it (a)
prompt notice of any claim or threat, (b) the sole right to control defense
and settlement, (c) the right to approve any settlements, and (d)
reasonable assistance as requested by UniDirect.
10.0 ACTS BEYOND PARTIES' CONTROL
----------------------------
Neither party shall be liable for any delay or failure in its performance
hereunder due to any cause beyond its control provided, however, that this
provision shall not be construed to relieve UniDirect of its obligation to
make any payments pursuant to this Agreement.
11.0 NON-INFRINGEMENT
----------------
SCO warrants that is has sufficient right, title and interest in the
Products to enter into this Agreement and that the Products do not infringe
a United States Patent or United States copyright or violate a trade secret
or other proprietary right afforded protection under United States law.
UniDirect shall promptly notify SCO of any alleged claim of infringement
and shall cooperate with SCO in the defense or settlement of same. SCO
shall defend, hold harmless and indemnify UniDirect from and against any
and all claims, demands, causes of action, expenses (including, without
limitation, attorneys' fees), damages and liability caused by, arising out
of or resulting from the Products, any breach of SCO's covenants or
warranties hereunder, or the exercise by UniDirect of the license granted
under this Agreement. SCO's indemnification obligations hereunder are
subject to UniDirect providing it (a) prompt notice
Distributor Agreement
Page 6
<PAGE>
of any claim or threat, (b) the sole right to control defense and
settlement, (c) the right to approve any settlements, and (d) reasonable
assistance as requested by SCO.
12.0 RESTRICTED RIGHTS LEGEND
------------------------
UniDirect agrees that the Products are commercial computer software and,
together with any related documentation, is subject to the restrictions on
U.S. Government use, duplication or disclosure as set forth in subparagraph
(c)(i)(ii) of Department of Defense Federal Acquisition Regulations
Supplement (DFARS) 52.227-7013 or in subparagraph (g) (3) (i) of Federal
Acquisition Regulations (FAR) 52.227-14, Alternate III, as applicable.
UniDirect shall ensure that said software media and documentation are
marked with the appropriate Restricted Rights Legend in accordance with
said DFARS and FAR provisions prior to delivery to any U.S. Government
agency. For other than packaged products, SCO shall provide UniDirect with
the correct Restricted Rights Legend Labeling instructions and verbiage, in
writing. UniDirect shall not modify such Labeling without written
permission from SCO.
13.0 PROTECTION OF PATENT, COPYRIGHT AND TRADEMARK RIGHTS
----------------------------------------------------
A. UniDirect acknowledges that, subject only to the rights specifically
granted herein, all rights, title, and interest in the Products
provided to UniDirect are and shall remain at all times the property
of SCO and/or SCO's suppliers.
B. UniDirect further acknowledges that the Product is copyrighted and
that UniDirect is not authorized to reproduce or modify any copies of
the Product nor authorize any other party to do so. In no event shall
UniDirect reverse engineer or decompile the Products.
C. UniDirect shall not alter or remove any copyright notices or other
proprietary notices on or in the Products. Except as required to
install the Product for the end user's convenience, UniDirect shall
not alter, tamper with, or otherwise open Product packaging prior to
delivery of the Products to the end user customer.
D. UniDirect and resellers will cause to appear in any advertisement,
publication, public presentation, packaging and external
correspondence the appropriate designation for SCO products, either
(C) or (R) or (TM) or (SM), as applicable, for all copyrights,
trademarks and service marks. The appropriate trademark symbol must be
used at least once for each Product.
14.0 CONFIDENTIALITY
---------------
A. Each party (as receiving party) shall retain in confidence, with the
same degree of care that it uses for its own proprietary information,
confidential information and know-how, that has been supplied to it by
the other party (as disclosing party). This duty shall apply to any
material in writing or other tangible form and clearly marked or
identified in writing as 'confidential' or similar legend at the time
of disclosure. It shall also apply to information divulged orally,
provided that the receiving party was informed of the confidential
nature of the information prior to receiving it, and provided that the
subject matter of the information is reduced to writing and identified
in writing to be confidential within seven (7) days of disclosure.
Neither party shall make use of such information and know-how except
under the terms and for the duration of this Agreement.
Distributor Agreement
Page 7
<PAGE>
B. Neither party (as receiving party) shall have any obligation under
this Section with respect to any information received from the other
party (as disclosing party) that:
(1) is or becomes hereafter in the public domain through no fault of
the receiving party to its obligation hereunder,
(2) was already known by the receiving party prior to disclosure by
the disclosing party,
(3) is subsequently rightfully received by the receiving party from
third party free from obligation of non-disclosure or
(4) is independently developed by employees of the receiving party.
C. The parties agree that all the terms and condition of the Agreement
and Exhibits hereto shall be treated as confidential material and
shall not be disclosed without prior written consent.
D. The parties' obligations of confidentiality shall survive any
termination of this Agreement by five (5) years.
15.0 PROHIBITION AGAINST ASSIGNMENT OF RIGHTS
----------------------------------------
This Agreement shall not be assigned by either party nor rights under it
granted to others without the prior written approval of the other party.
16.0 CONTROLLING LAW
---------------
This Agreement shall be construed under and controlled by the laws of the
State of California without regard to the conflict of laws provisions
thereof.
17.0 SOLE AGREEMENT
--------------
This Agreement sets forth the entire agreement and understanding between
the parties as to the subject matter hereof and merges all prior and
contemporaneous discussions, communications, writings or agreements between
them. Any executory agreement made hereafter shall be ineffective to
change, modify, discharge or effect an abandonment of this Agreement in
whole or part, unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge
or abandonment is sought.
18.0 SEVERABILITY
------------
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby. The parties will seek in good faith to agree on
replacing an invalid, illegal, or unenforceable provision with a. valid,
legal, and enforceable provision which, in effect, will, from an economic
viewpoint, most nearly and fairly approach the effect of the invalid,
illegal, or unenforceable provision.
Distributor Agreement
Page 8
<PAGE>
19.0 BINDING EFFECT
--------------
Subject to the limitations herein expressed, this Agreement will benefit
and be binding upon the parties, their successors, administrators, heirs
and assigns.
20.0 THE PARTIES AS INDEPENDENT CONTRACTORS
--------------------------------------
The parties shall at all times be independent contractors and shall so
represent themselves to all other parties. No party has granted to the
other the right to bind it in any manner or thing whatsoever and nothing
herein shall be deemed to constitute a party the agent or legal
representative of the other, nor to constitute the parties as joint
venturers.
21.0 WAIVER
------
The waiver of one breach or default hereunder shall not constitute the
waiver of any subsequent breach or default.
22.0 TERMS CONTROL
-------------
The terms of this Agreement shall control any conflicting or inconsistent
standard terms or conditions on any purchase order or invoice of either
party, notwithstanding any provision to the contrary in any such purchase
order or invoice.
In witness whereof, the parties hereto have executed this Agreement,
effective as of the last date properly executed by both parties. All signed
copies of this Agreement shall be deemed originals.
THE SANTA CRUZ OPERATION, INC. UNIDIRECT CORPORATION
BY: /s/ Steven M. Sabbath BY: /s/ Michael Silken
--------------------------- --------------------------
Steven M. Sabbath Michael Silken
- ------------------------------ -----------------------------
Name (print) Name (print)
Vice President Chairman
- ------------------------------ -----------------------------
Title Title
24 January 1995 24 January 1995
- ------------------------------ -----------------------------
Date Date
Distributor Agreement
Page 9
<PAGE>
EXHIBIT A
---------
Products and Prices
1. FEES
----
A. Licenses
1) License fees shall be SCO's then current United States prices,
less the following discounts:
Primary Products [***]
Upgrades and Updates
All items listed in SCO Upgrade Catalog Effective October 1st, 1994
Page 11-18
Trade-Ins
---------
All items listed in SCO Upgrade Catalog Effective October 1st, 1994,
Page 5-10
SES/SOS
-------
As described on Page 4-5 of SCO Customer Services Price Guide for SCO
channel providers effective October 24, 1994 or updated as agreed to
in revised SES packaging referred to in Exhibit E of this Agreement.
Training Courses Kits
---------------------
All currently sold by SCO
Secondary Products [***]
Training Seats in courses given by SCO
--------------------------------------
All items listed in Training schedule Dec 94 - March 95 and other
classes as agreed to
Service Contracts
-----------------
As described on Page 6-18 of SCO Customer Services Price Guide for SCO
channel providers effective October 24, 1994
Developer Releases
------------------
Items listed as Product Kits or Stand-alone products on the SCO
Developer Alliance Partners Program Effective Jan 1994
Auto-Licensing
SCO shall use commercially reasonable efforts to offer to UniDirect
applicable Products via auto-licensing as soon as is commercially
reasonable. Products offered via auto-licensing shall not be subject
to the inventory, stock balancing or returns provisions of this
Agreement.
Distributor Agreement
Page 10
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
2) SCO product list and prices are subject to change with thirty
(30) days prior notice. Products will be invoiced at the prices
on the previously published price list, if it is ordered and
scheduled to be shipped within thirty (30) days from SCO's
publication of a new price list. All shipments are F.O.B. Santa
Cruz, California.
B. Collateral Materials
SCO shall use commercially reasonable efforts to promptly provide
collateral materials to UniDirect, as requested by UniDirect from time
to time. Such material shall be provided at cost plus ten percent
(10%) to UniDirect. SCO shall keep UniDirect informed of new
collateral materials as they are developed by SCO. UniDirect, at its
option, may develop and publish collateral material for use in
marketing the Products with SCO's prior written consent.
3. LICENSE FEE MINIMUM PURCHASE COMMITMENT/MINIMUM PURCHASE SCHEDULE
-----------------------------------------------------------------
A. UniDirect's performance milestones are as listed below. SCO reserves
the right to terminate this Agreement or to terminate UniDirect's
limited exclusivity in the event UniDirect fails to meet performance
milestones.
Performance Milestones
Q1FY96 [***] greater than [***]
Q3FY96 [***] greater than [***]
FY97 [***] greater than [***]
FY98 and beyond [***] greater than [***]
Should SCO's overall revenue decline, there shall be a pro-rata adjustment
to the milestones.
B. The following reflects UniDirect's initial non-binding sales forecast:
Non-Binding Sales Forecast
Q3FY95 [***]
Q4FY95 [***]
Q1FY96 [***]
Q2FY96 [***]
Q3FY96 [***]
Q4FY96 [***]
(All references to Quarters and Fiscal Years shall related to SCO's fiscal
calendar.)
4. INCENTIVE CREDITS
-----------------
A. RMA to Sales Ratio
If, in any calendar quarter, the value of UniDirect's Return
Merchandise Authorizations (RMAs) is equal to or less than, [***] of
UniDirect's purchases, net of returns and allowances, UniDirect shall
also be entitled to an additional [***] credit for all Products
purchases for that quarter.
Distributor Agreement
Page 11
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
B. "[***]" Credit
If UniDirect pays an invoiced amount on or before fifteen (15) days
from the invoice date, then SCO will credit UniDirect with [***] of
that invoiced amount. For accounting reference, these payment terms
will be known as "[***]".
C. INCENTIVE CREDIT TERMS AND CONDITIONS
Each incentive credit described above may be applied against future
purchases of Products by UniDirect and shall lapse ninety (90) days
after the expiration of the quarter. Credit shall be granted to
UniDirect on a quarterly basis. SCO shall issue a credit statement
within forty-five (45) days after the end of each quarter. If the
Agreement is terminated, SCO may, at its option, pay UniDirect cash in
lieu of the credit. UniDirect shall fulfill the above requirements
each quarter in order to qualify for a credit.
5. VALUE ADDED ACCRUAL FUND CREDITS AND GENERAL OBLIGATIONS
--------------------------------------------------------
A. Support Accrual Fund Credit
Three percent (3%) of UniDirect's net quarterly purchases will accrue
in a support fund. At the end of each quarter, UniDirect may submit a
claim against fund balance for expenses related to pre- and post-sales
support. Eligible expenses include wages of SCO ACE certified support
personnel, training expenses, and technical support lab maintenance.
B. Reseller Incentive Fund Accrual
[***] of UniDirect's net quarterly purchases will accrue in a Reseller
incentive fund. At the end of each quarter, UniDirect may submit a
claim against fund balance for expenses related to sales and technical
training.
C. Co-Op Marketing
[***] of UniDirect's net quarterly purchases shall accrue in a Co-op
Marketing Fund as set forth in Exhibit F.
D. Pass Through Co-Op Programs and Value Added Accrual
Each value added accrual fund credit described in paragraphs A and B
above may be applied against future purchases of SCO products by
UniDirect. Credits accrue and expire during a rolling six (6) month
period. UniDirect will have a six (6) month window in which to spend
the credits it accrues during any given month. Upon audit verification
and reconciliation from SCO, Accrual Fund claims will be applied to
the oldest monthly accrual balance. Any accrued credits not used
within the six (6) month window will be forfeited. If the Agreement is
terminated, SCO may, at its option, pay UniDirect cash in lieu the
credit.
E. SCO will endeavor to amend the accrual of the funds set forth in A, B
and C above from quarterly to monthly.
Distributor Agreement
Page 12
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
F. UniDirect's account with SCO must be in good standing in order to
qualify for the value added accrual fund credits.
6. STOCK BALANCING AND UNSALABLE PRODUCT RETURNS
---------------------------------------------
To the extent UniDirect carries any inventory of the Products,
UniDirect may balance its stock of Products by returning to SCO not
more than twenty-five (25%) percent of its inventory of Products
during the first thirty (30) days of any calendar quarter, along with
an irrevocable order for licensed Product equal to at least the net
dollar amount of Products returned to SCO by UniDirect, provided the
Products returned by UniDirect do not exceed six (6%) percent of the
Products purchased by UniDirect in the most recent three (3) months.
Returned Product must be in its original, shrink-wrapped packaging,
sealed, undamaged, and unopened. UniDirect shall pay all freight
charges for shipment of Products under this Section.
7. STOCK ROTATION
--------------
Within thirty (30) days from written notice by SCO of first customer
shipments of a new version of Products, UniDirect may return the
previous version of Products for a credit. Such credit shall be equal
to at least the net dollar amount UniDirect paid SCO for the previous
version of such Products. UniDirect may return such Products provided
it also orders, at SCO's then current price for UniDirect, the same
number of copies of the new version of Products. UniDirect shall pay
all freight charges for shipment of Products under this Section.
8. PRICE PROTECTION
----------------
If SCO lowers the U.S. or Canadian tiered list price for any Product,
SCO will grant UniDirect a credit for units of such Products held in
UniDirect's inventory at the time such price decrease takes effect.
The credit will be equal to the difference between the previous price
for such Products and the lowered price for such Products, multiplied
by UniDirect's discount for such Products, and multiplied by the
number of units of such Products held in UniDirect's inventory. Credit
will only be given provided: (1) a UniDirect officer certifies to SCO
the number of units of such Products held in UniDirect's inventory
when such price decrease takes effect; and (2) such inventory of
Products has been acquired from SCO within sixty (60) days of the
price decrease. No refunds will be provided under this Section.
Distributor Agreement
Page 13
<PAGE>
EXHIBIT B
---------
End User License Agreement (Minimum Provisions)
1. Certain SCO Products will exhibit modified functioning if they are not
registered as required.
2. Sublicensor grants Sublicensee (the Software User) and Sublicensee accepts
from Sublicensor, the following non-exclusive rights. Sublicensee is not
granted any other right in the Software. All proprietary rights in or
related to the Software are and will remain the exclusive property of
Sublicensor or its licensors. Sublicensee further acknowledges that the
Software contains confidential information owned by Sublicensor or its
licensors and agrees to take reasonable steps to protect the
confidentiality of such information.
3. Sublicensee may load, copy or transmit the Software in whole or in part,
only as necessary to use the Software on a single personal computer or
workstation, unless the Software is designated on the registration document
as being for use on a multiuser or multiple system configuration, in which
case Sublicensee must take reasonable means to assure that the number of
Users does not exceed the permitted number of Users. In addition,
Sublicensee may make back-up or archival copies of the Software.
4. SUBLICENSEE MAY NOT COPY THE PRINTED DOCUMENTATION.
5. All trademarks, service marks, patents, copyright and other proprietary
notices must be reproduced when making copies in whole or in part.
6. Sublicensee may not reverse compile the Software for any purpose. If
Sublicensee wishes to exercise any rights under Article 6.1 b of the EC
Directive on the Legal Protection of Software, (Directive 91/250),
Sublicensee shall, in the first instance, write to Sublicensor's Legal
Department. Sublicensee may not copy or adapt the Software for the purpose
of correcting errors in it.
7. Sublicensee may not export or re-export, directly or indirectly, the
Product, the media, or any related technical information or materials
unless Sublicensee has obtained an appropriate authorization from the U.S.
Commerce Department and any other relevant government authority.
8. The Software is derived from third party software and no such third party
warrants the Software, assumes any liability regarding the use of the
Software, or undertakes to furnish any support or information relating to
the software.
9. SUBLICENSOR'S SUPPLIERS SHALL NOT BE HELD TO ANY LIABILITY FOR ANY
DAMAGES SUFFERED OR INCURRED BY SUBLICENSEE, INCLUDING BUT NOT LIMITED
TO GENERAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING FROM OR IN
CONNECTION WITH THE DELIVERY, USE OR PERFORMANCE OF THE SOFTWARE.
10. This Product is commercial computer software. If Sublicensee is a U.S.
Government End-User, this license is granted subject to the U.S. Government
End-User provisions set forth in the Documentation; and the Product
together with its related documentation is subject to the restrictions of
U.S. Government use, duplication or disclosure as set forth in
Distributor Agreement
Page 14
<PAGE>
subparagraph (c) (1) (ii) of DFARS 252.227-7013 or subparagraph (g)(3)(i)
of FAR 52.227-14, Alt. III, as applicable. Contractor/Manufacturer is The
Santa Cruz Operation, Inc.
11. Upon any transfer of the Software permanently to another Software User, the
original Sublicensee must notify Sublicensor and the new Sublicensee must
certify to Sublicensor their agreement to be bound by the terms of the
Agreement. Except for such permanent transfer, Sublicensee may not assign,
sublicense, rent, lend, lease, pledge or otherwise transfer or encumber the
Software, this Agreement or Sublicensee's rights or obligations hereunder
without Sublicensor's approval.
Distributor Agreement
Page 15
<PAGE>
EXHIBIT C
---------
Exclusive Products
Upgrades and Updates
--------------------
All items listed in SCO Upgrade Catalog Effective October 1st, 1994 Page
11-18
Trade-Ins
---------
All items listed in SCO Upgrade Catalog Effective October 1st, 1994 Page
5-10
SES/SOS
-------
As described on Page 4-5 of SCO Customer Services Price Guide for SCO
channel providers effective October 24, 1994 or updated as agreed to in
revised SES packaging referred to in Schedule 2 of this document
Training Courses Kits
---------------------
All currently sold by SCO
Training Seats in courses given by SCO
--------------------------------------
All items listed in Training schedule Dec 94 - March 95 and other classes
as agreed to
Service Contracts
-----------------
As described on Page 6-18 of SCO Customer Services Price Guide for SCO
channel providers effective October 24, 1994
Developer Releases
------------------
Items listed as Product Kits or Stand-alone products on the SCO Developer
Alliance Partners Program Effective Jan 1994
Distributor Agreement
Page 16
<PAGE>
EXHIBIT D
---------
Part I. New Triage function and 800-SCO-UNIX Phone Line
The inbound calls to 800-SCO-UNIX (or a single designated
alternate telephone line for SCO telesales) will be front ended
by a similar voice menu as is currently used by SCO. UniDirect
assumes about 90% of the traffic will not be going directly to
SCO thus the 800-SCO-UNIX line would be routed to UniDirect's
office. The literature, support, training and sales/upgrade
responses will route with a pre-transfer announcement that "you
are being transferred to SCO Service Sales" or such other
announcement as agreed by the parties. The other responses for
Partner Sales or specialized SCO programs will route into SCO
directly. Calls coming into UniDirect's office for sales will
drop immediately to a sales person - other calls will "appear" in
Triage. The job in Triage is to emulate the current functions as
follows:
. get information out
. get the customer hooked up with a local resource e.g. AEC or
APC
. register new SCO users by phone, fax or email
. get the customer to sales
UniDirect has some concern about the people power needed to
ensure this "non-revenue" function is handled properly. We had
considered a per call or transaction billing but since this area
will undergo close scrutiny and analysis to get it working well
under the new program, we are suggesting reviewing it in 6 months
and initially looking at is as a necessary cost.
Note that this function is only one part of an effort to increase
-------------
sales of services, SES and upgrades. Additional ad/mail/fax
programs will run to drive inbound sales directly onto the
UniDirect sales phone lines (bypassing Triage) and independent of
the advertising SCO may utilize with the 800-SCO-UNIX number.
Part II. Personnel/Employment
Two SCO functional groups known as Triage and Telesales will be
offered employment at Unidirect Corporation. Triage currently
comprises approximately 4 people, Telesales comprises
approximately 7 people plus 1 Systems Engineer (if available).
Employment offers will be made at the employees current salary
plus commission/bonus ($31K to $46K) that is equivalent in value
at 100% performance. Employees may elect to carry over COBRA (if
available) or may elect to move to a UniDirect Group
health/dental coverage as of the date of the employment offer.
All UniDirect employees are eligible for a 401K plan. Some key
employees may also be offered stock option plans as part of the
overall compensation package.
Distributor Agreement
Page 17
<PAGE>
EXHIBIT E
---------
SCO'S Marketing Efforts
Q2/FY95
Marketing Programs
SCO to make best efforts to repackage and re-price SES and provide
promotion by March 31st 1995.
$45,000 at SCO cost for list acquisition and cleanup/profiling. MPAR to be
developed and agreed to by M.Silton and G.P.R. by Jan 25, 1995.
Including March SCO World ad with early Jan deadline
Advertising and direct mail portions of MPAR#10558 to be assigned to
UniDirect's direction or control.
UniDirect to provide SCO with list of IS needs for software integration
support between customer databases. SCO will make best effort to comply in
a timely manner.
Distributor Agreement
Page 18
<PAGE>
D. All UniDirect advertising and promotional activity featuring SCO
Products requires prior approval from an SCO Vice President or
his or her designee. Programs eligible for reimbursement are:
seminars, training materials (when available), promotional
product (when available), literature, direct mail, catalogs
directed to end users, radio tag spots, trade shows, trade
advertising, special promotions, sales incentives, and other
acceptable marketing vehicles, approved in advance by SCO.
E. All SCO Products featured in printed media must meet requirements
regarding inclusion of descriptive copy, Product illustrations,
logo and trademark usage. In broadcast media, SCO must be
mentioned at least as often as UniDirect and other manufacturers.
The time devoted to SCO must be at least equal to the time
devoted to other manufacturers.
F. SCO national advertisements may not be reprinted without prior
written permission from SCO. If approval is granted, UniDirect
agrees to pay production costs to SCO. The costs will be deducted
from UniDirect's Marketing Fund. The deduction will be detailed
on UniDirect's Marketing Fund Statement.
G. SCO will not reimburse advertising or marketing of any kind in
any media whose principal area of coverage is outside the
boundaries of the United States or Canada.
H. SCO will not directly reimburse a publication, broadcasting
station, advertising agency, or any other supplier for
advertising or marketing costs incurred by a dealer.
I. SCO will not pay any claims in excess of the amount of Marketing
Fund credits accrued to the date of the claim.
4. PRIOR APPROVAL
--------------
A. To obtain prior approval, UniDirect shall send details of the
proposed advertising or promotional program (including strategy,
media, layout, copy, distribution, and costs) to SCO Vice
President, Marketing (The Americas) or his designee.
B. Not later than ten (10) business days after receipt of request,
SCO will advise you if approval is granted or, if not, what is
required to receive approval.
5. CLAIMING AND REIMBURSEMENT
--------------------------
A. UniDirect must submit all advertising and/or promotional program
Marketing Fund claims within ninety (90) days of the ad run date
to:
The Santa Cruz Operation, Inc.
400 Encinal Street
Santa Cruz, CA 95061
Attn: Vice President, Marketing (The Americas)
Distributor Agreement
Page 20
<PAGE>
B. Claims will be reimbursed for one hundred percent (100%) of the
actual net cost based on UniDirect's accrued co-op funds. SCO
reserves the right to adjust claim credits where the amount of
the claim does not properly reflect UniDirect's accrued co-op
funds.
C. After audit verification and reconciliation, but in no case later
than thirty (30) days, SCO will issue a credit memo against
UniDirect's account.
D. Adjusted claims rejected for non-compliance if the claim is
correctable are eligible for resubmission. These claims must be
returned within thirty (30) days with the required documentation
on the original claim. Claims previously denied or partially
denied due to lack of funds are not eligible for resubmission.
E. SCO will pay claims solely by issuing a credit memo against
UniDirect's three percent (3%) Marketing Fund balance. Total
Marketing Fund payments to UniDirect cannot exceed three percent
(3%) total net shipments. UniDirect must reference all credit
memo numbers when taking deductions.
F. SCO reserves the right to reject claims in excess of this
Agreement's guidelines and claims in excess of prior approved
amount.
5. MODIFICATIONS
-------------
SCO may modify the terms of this Program upon thirty (30) days notice
to UniDirect. Such modification will not affect claims for
advertisements run prior to the effective date of the modification.
Notwithstanding the foregoing, SCO shall not reduce the marketing fund
accrual as set forth in paragraph 5.C. of Exhibit A hereto.
Distributor Agreement
Page 21
<PAGE>
AMENDMENT NO. 1
TO
DISTRIBUTOR AGREEMENT
This Amendment is made and entered into on the date last executed by and between
The Santa Cruz Operation, Inc., a corporation of the State of California, with
its place of business at 400 Encinal Street, Santa Cruz, California, 95060
(hereinafter "SCO"), and UniDirect Corporation, a corporation of the State of
California, having a place of business at One Venture, Suite 150, Irvine,
California 92718 (hereinafter "UniDirect"), and amends the Distributor Agreement
(contract #90034) signed by the same on 24 January 1995 (hereinafter the
"Agreement").
The parties hereby agree to amend the Agreement as follows:
1. The parties hereby agree to replace Section 6.0, Subsection A with the
following:
"This Agreement shall be in effect beginning on the Effective Date and
shall continue through 30 September 2000 and shall continue thereafter for
periods of one (1) year commencing on each anniversary date, provided,
however, that either party shall have the right to terminate this Agreement
for any reason whatsoever and with no liability arising therefrom, by
providing the other party written notice not less than one hundred eighty
(180) days prior to any such anniversary date."
2. The parties hereby agree to adjust UniDirect's Performance Milestones
listed in Exhibit A, Section 3 for the third Quarter of Fiscal Year 1996 to
[***]. The performance milestones thereafter shall be as follows:
<TABLE>
<CAPTION>
Time Period Performance Milestone
----------- ---------------------
<S> <C>
FY1997 [***]
FY1998 [***]
FY1999 [***]
FY2000 and beyond [***]
</TABLE>
3. If the sales of SCO packaged upgrades through UniDirect exceeds [***] to
SCO distributors, both parties agree that they shall meet to negotiate in
good faith to adjust the commissions earned by UniDirect for sales of such
packaged upgrades to SCO distributors. In consideration, UniDirect shall be
the exclusive, subject to Section 1.0., Subsection D of the Agreement,
distributor of packaged upgrades and Software Enhancement Services (SES).
4. SCO hereby makes available to UniDirect, on a non-exclusive basis, the
following SCO products as Primary Products:
. The following SCO Client Integration Products, including any successor
versions:
IXI Premier Motif 1.2
Motif/Wintif User Pack 1.2
Panorama Virtual Window Manager
X.desktop 3.5
Deskworks
Eye2Eye
SCO Termvision Release 1.10
SCO Supervision Release 1.10
XVision 6
SCO SQL-Retriever Release 3.2.2
PC Connect Version 6.2.1
PAGE 1 DISTRIBUTOR AGREEMENT
AMENDMENT NO. 1
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
. The following SCO Layered Products, including any successor
versions:
SCO Merge Release 3.2
SCO Wabi Release 2.0
Microsoft LAN Manager for SCO Systems Release 2.2
SCO Security Services Release 1.0.3
SCO Distributed Administration Service Release 1.0.3
SCO DCE Release 1.0.3
SCO SMP Release 5
SCO Virtual Disk Manager Release 1.0
SCO may add or remove products by providing sixty (60) days prior written
notice to UniDirect.
5. SCO shall make UnixWare products available to UniDirect under the same
terms and conditions as current SCO products, subject to any prior
contracts agreed between Novell, Inc. and its customers which could
preclude the exclusive grant set forth in the Agreement. The parties hereby
acknowledge that certain product and program offerings (such as SES) do not
yet exist for the UnixWare product line, but will be made available to
UniDirect as such product and programs offerings are generally made
available to SCO's customers. The parties further agree that SCO is not
making full packaged UnixWare products available to UniDirect, except as
may be provided for developer internal use.
6. The parties hereby agree to modify the license fees described in Exhibit A,
Section 1.A(l) as follows:
<TABLE>
<CAPTION>
Primary Products Amount to be remitted to SCO:
---------------- ----------------------------
<S> <C>
Upgrades/Updates, Trade Ins, SES, [***] of the license fee received by
SCO Client Integration Products, UniDirect's from its customers, or
and SCO Layered Products [***] of the US list price, whichever
is greater.
Training Course Kits [***] of the license fee received by
UniDirect's from its customers, or
[***] of the US list price, whichever
is greater.
Secondary Products Amount to be remitted to SCO:
------------------ ----------------------------
Service Contracts [***] of the license fee received by
UniDirect's from its customers, or
[***] of the US list price, whichever
is greater.
Developer Releases [***] of the license fee received by
UniDirect's from its customers, or
[***] of the US list price, whichever
is greater.
</TABLE>
7. The parties hereby agree to add the following to Exhibit D, Part I:
"Effective 1 January 1996, SCO shall pay UniDirect for answering SCO's 1-
800-SCO-UNIX numbers at a rate of [***] per call for each call above the
first [***] each calendar month, which are not electronically screened
(only for those call which are ultimately answered by an employee of
UniDirect). UniDirect must, however, implement any efficiencies SCO directs
UniDirect to do and pass on savings to SCO in the form of a reduced per-
call cost above the [***] threshold. All such payments hereunder shall be
made by SCO on a quarterly basis."
PAGE 2 DISTRIBUTOR AGREEMENT
AMENDMENT NO. 1
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
8. Except as modified herein, all other terms and conditions of the Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment, effective
as of the last date properly executed by both parties. All signed copies of this
Amendment shall be deemed originals.
The Santa Cruz Operation, Inc. UniDirect Corporation
By: /s/ David E. McCrabb, Jr. By: /s/ [ILLEGIBLE]^^
--------------------------------- ---------------------------------
Name David E. McCrabb, Jr. Name: /s/ [ILLEGIBLE]^^
-------------------------------- -------------------------------
Title: VP Marketing & Channel Sales Title: President, UniDirect GRP
------------------------------ ------------------------------
Date: March 29, 1996 Date: 4/8/96
------------------------------- -------------------------------
PAGE 3 DISTRIBUTOR AGREEMENT
AMENDMENT NO. 1
<PAGE>
[LOGO]
SCO
To: Michael Silton, Ed Adams November 5, 1997
From: Ben Tinetti, x408-427-7087.
Subject: Contract Amendment Number 2
Attached is signed contract. Ed signed it under the assumption that the change
to section 3f did not change the following intent:
UniDirect must market, offer and promote the exclusive products listed in
Exhibit C of the Agreement with reasonable diligence. UniDirect will sell all
products on Exhibit C, however, in certain situations, may focus marketing
efforts on specific products. M
------------------------
(initial Michael Silton)
<PAGE>
AMENDMENT NO.2
TO
DISTRIBUTOR AGREEMENT
This Amendment is made and entered into on the date last executed by and between
The Santa Cruz Operation, Inc., a corporation of the State of California, with
its place of business at 425 Encinal Street, Santa Cruz, California, 95060
(hereinafter "SCO"), and UniDirect Corporation, a corporation of the State of
California, having a place of business 1800 Green Hills Road, Suite 201, Scotts
Valley, CA 95066 (hereinafter "UniDirect"), and amends the Distributor Agreement
(contract #90034) signed by the same on 24 January 1995 (hereinafter the
"Agreement").
1. The parties agree to change paragraph 4 of the preamble to the Agreement to
read:
"WHEREAS, the parties are desirous of UniDirect re-marketing the Products,
through it's sales operation SCO Services Sales (SCOSS) to it's customers.
2. The parties hereby agree to replace Section 2.0, Subsection B with the
following:
"Effective January 1, 1998, UniDirect through it's sales operation SCOSS
will exclusively promote, market, advertise, and otherwise support the
products and services listed in Exhibit C of this Agreement. UniDirect
through it's sales operation SCOSS shall not promote, market, advertise,
and otherwise support any other products or services until added to this
Agreement by a mutually executed Amendment." This paragraph applies to the
SCO Services Sales.
3. The parties hereby agree to add Subsection F & G to Section 2.0 as follows:
F. UniDirect must market, offer and promote the exclusive products
listed in Exhibits C of this Agreement with reasonable diligence. In
the event that one or all of the exclusive products in Exhibit C are
not reasonably promoted by UniDirect, this shall be considered a
breach of contract and UniDirect will be given 60 days written notice,
to the president, to remedy the situation. If not resolved in 60 days
UniDirect shall lose the exclusive right to market and sell the
product at issue.
G. UniDirect shall maintain SCOSS as a independent operating
division by having SCOSS reside in it's own separate area, maintaining
separate telephone lines, performing the essential functions of Pre-
Sales, Customer Care Center (formally known as Triage) and Sales,
exclusively for the performance of this contract. Additionally
1-800-SCO UNIX phone line shall be dedicated to the performance of
UniDirect's obligations under this contract.
4. The parties hereby agree to add Subsection H I & J to Section 3.0 as
follows:
F. SCO agrees, to credit UniDirect's account if SCO directly or
indirectly sells any UniDirect exclusive products, as listed in
Exhibit C, and such sale was not in accordance with Section 1.0,
subsection D. The amount of the credit shall be equal to the amount of
fee UniDirect would have received had it sold the product directly,
under the same terms, conditions and price as it was sold by SCO,
exclusive of Support, Reseller or Co-Op funds which shall not accrue.
This does not imply it is acceptable to breach the contract.
G. SCO will, over the term of this contract, use commercially
reasonable efforts to enforce and safeguard UniDirect's rights to the
exclusive products listed in Exhibit C.
H. UniDirect and SCO shall initiate the following service in support
of this Agreement:
PAGE 1 DISTRIBUTOR AGREEMENT 90034
AMENDMENT NO. 2
<PAGE>
Pre-Sales
---------
Currently Pre-Sales, as defined by "has not purchased yet", is handled
by various areas of the company. Infomail, Customer Service, Field
Sales Engineers, Support, and SCO Services Sales, are a few of the
groups handling the calls. It is important for the customers to be
able to reach a live body, whose knowledge will help make them more
productive and better able to evaluate the product. The end result
leading to more sales. SCO Service Sales can play a major role in Pre-
Sales. The 800 number is already the front line to SCO. This is where
nearly all of the SCO advertising, marketing and web pages will point.
SCO Services Sales has the phone systems in place to handle the high
volume of calls, and is a natural place to handle the pre-sales
questions. SCO Service Sales will be your inside sales channel
partner. Here's the Pre-sales model:
Origin of calls:
Customer Service 800# WEB Sales PREMIER/AR's
---------------- ---- --- ----- ------------
Tier 1 support
--------------
SCO Services Sales
Escalation's
------------
Tier 2 Support SCO SE's
--------------
Escalation's
------------
Tier 3 Support SCO Support
--------------
Levels of knowledge needed for Pre-Sales Support
------------------------------------------------
Qualified people should have a technical understanding of the
following products: UnixWare, Open Server, CID, Layered and Internet
products offered by SCO, and should know the functionality and
benefit's of the products. They should be up to date on all product
announcements from SCO. ACE Certification is a goal. SCO will provide
the Engineers access to SCO's internal web.
Training
--------
SCO Services Sales pre-sales support employees will be able to
participate in SCO support new hire training (3-4 week training), New
products training from the PBU, Reoccurring training from support and
AEC's, and SE training. To the extent SCO is already offering these
classes to their employees and there is no incremental cost. These
classes will be free to SCO Services Sales pre-sales support staff.
Monitoring services levels (metrics)
-----------------------------------
In order to assure quality and help highlight abusers SCO Services
Sales should track the following:
I) Time to respond.
-- ---------------
If UniDirect chooses to leverage pre-sales with other areas of the
company SCO Services Sales should get priority in the Queue. It is
anticipated that 75% of the calls should be picked up with in 5
minutes, depending on the call volume.
PAGE 2 DISTRIBUTOR AGREEMENT 90034
AMENDMENT NO.2
<PAGE>
II) Tracking of calls.
--- -----------------
Below are examples of areas to track. UniDirect will take
direction from SCO on what is most appropriate to track. SCO will
not ask UniDirect to track anything that is labor intensive. It
is anticipated that most of the examples can be automated and
easily tracked as call notes.
5. Exhibit A, Section 5, subsection A shall be modified to add the
following sentences.
SCO agrees to approve requests for reimbursement for wages of SCO ACE
and Non-ACE personnel who hold Pre-Sales positions within UniDirect.
SCO shall credit UniDirect up to $22,000 for ACE personnel and up to
$17,000 for Non-ACE personnel per quarter. This statement constitutes
pre-approval of the costs, but does not relieve UniDirect of any other
requirements, restrictions, or process required by the SCO Value
Accrual Fund Program. In the event that more funding is needed above
the support accrual funds available, SCO will have the option of
funding additional resources on a pre-approval basis.
6. The parties agree to delete Exhibit A, Section 4 subsection A in it's
entirety.
7. Exhibit A, Section 5 subsection C shall be replaced with the
following:
[***] of UniDirect's net quarterly purchases will accrue in a Co-op"
8. The parties here by agree to replace Section 6.0, Subsection A with
the following:
"This Agreement shall remain in effect through 30 September 2002.
After that date the Agreement shall continue for one (1) year periods
until terminated by either party, for any reason whatsoever and with
no liability arising therefrom, upon at least one hundred and eighty
(180) days prior written notice to the other party."
9. The parties hereby agree to change Section 6.0, Subsection B with the
following:
Replace in line 6, "...thirty (30)..." with "...sixty (60)"
10. The Parties agree to add the following subsection to Exhibit A,
Section 1:
Other Products
SCO will offer a new line of SCO branded support programs by
contracting with ASC's to provide such services. The cost SCO must pay
to the ASC's for such support shall determine Cost of Goods Sold
(COGS).
SCO Brand ASC Support Each party shall receive fees totaling
(This product shall earn [***] of the remainder of:
3% Co-Op in lieu of 10%.)
(SCOSS sale price minus SCO's Cost of
Goods sold)
* SCO will pass all administrative duties of and reporting to SCO
ASC's to UniDirect
SCO will develop a new line of SCO branded support programs for CID
products.
CID SUPPORT UniDirect shall receive [***] of the
sale price of CID Support until March
31, 1999. At that time a new mutually
agreed to rate of return will be
negotiated.
PAGE 3 DISTRIBUTOR AGREEMENT 90034
AMENDMENT NO.2
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
SCO ASC Program Membership 10% of Dues received.
UniDirect will invoice and collect all ASC franchise fees and
remit 90% of collections.
11. The Parties agree to add the following products to Exhibit C,
Exclusive Products section:
SCO Branded ASC Support
SCO CID Support
SCO ASC Program Memberships
12. The Parties agree to add a new section to Exhibit C, entitled, "Non-
Exclusive Products" as follows:
. The following SCO Client Integration Products, including any
successor versions:
IXI Premier Motif 1.2
Motif/Wintif User Pack 1.2
Panorama Virtual Window Manager
X.desktop 3.5
Deskworks
Eye2Eye
SCO Termvision Release 1.10
SCO Supervision Release 1.10
XVision 6
SCO SQL-Retriever Release 3.2.2
PC Connect Version 6.2.1
. The following SCO Layered Products, including any successor
versions:
SCO Merge Release 3.2
SCO Wabi Release 2.0
Microsoft LAN Manager for SCO Systems Release 2.2
SCO Security Services Release 1.0.3
SCO Distributed Administration Service Release 1.0.3
SCO DCE Release 1.0.3
SCO SMP Release 5
SCO Virtual Disk Manager Release 1.0
SCO may add or remove products for this, the non-exclusive products
list, by providing sixty (60) days prior written notice to UniDirect.
13. The parties agree that Paragraph 7 of Amendment 1 to this Agreement
last signed on April 8, 1996, which was added to Exhibit D, Part is
deleted in it's entirety and replaced with the following three
paragraphs:
a) Lead Routing
---------------
UniDirect will route leads collected from this phone number per SCO
direction and make requested changes to the lead routing on a timely
basis. SCO Channel Marketing will provide direction for changes. The
SCO will be responsible for making the changes to the SCO lead routing
tables. Leads will be reviewed quarterly. Quarterly
PAGE 4 DISTRIBUTOR AGREEMENT 90034
AMENDMENT NO.2
<PAGE>
reviews will be managed by UniDirect and include reports on volume of
leads, suggested changes and results of changes previously made. Cost
of changes paid for out of the SCO Value Accrual Fund Program.
b) Registering Users
--------------------
UniDirect will profile users and capture phone, email, and fax. All
customer records created as a result of inquires on the 800-SCO-Unix
line, or as a result of customer registrations and marketing programs
will not be used, sold, distributed or divulged, by UniDirect to
market competitive products. All such customer records shall be
considered confidential information in accordance with Section 14
"Confidentiality" of this Agreement.
c) Performance Metrics
----------------------
UniDirect will earn the following quarterly credits to their account
for maintaining Good Performance
Good Performance - 75% of all calls are answered within 30 seconds and
75% of all calls are answered accurately. Net Sales -- amount of
dollars received by SCO from UniDirect sales, exclusive of Project
Deals.
Good Performance Credit - 1.8% of net sales.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment, effective
as of the last date properly executed by both parties. All signed copies of this
Amendment shall be deemed originals. All other terms and conditions of this
Agreement shall remain unchanged.
The Santa Cruz Operation, Inc. UniDirect Corporation
By: /s/ Ed Adams By: /s/ Michael Silton
----------------------------- -----------------------------
Name: Ed Adams Name: Michael Silton
--------------------------- ---------------------------
Title: SRVP Title: President
-------------------------- --------------------------
Date: 11-5-97 Date: Nov. 4, 1997
-------------------------- ---------------------------
PAGE 5 DISTRIBUTOR AGREEMENT 90034
AMENDMENT NO. 2
<PAGE>
Amendment No. 3
To
Distribution Agreement
This Amendment is made and entered into on the date last executed by and between
The Santa Cruz Operation, Inc., a corporation in the State of California, with
its place of business at 425 Encinal Street, Santa Cruz, California, 95060
(hereinafter "SCO"), and Rainmaker Systems Inc., a corporation of the State of
California, having a place of business at 1800 Green Hills Road, Suite 201,
Scott Valley, CA 95066 (hereinafter "SCO Services Sales"), and amends the
Distributor Agreement (contract #90034) signed by the same on 24 January 1995
(hereinafter the "Agreement").
The parties hereby agree to amend the Agreement as follows:
. Products
A. The parties agree to [***] the margin that SCO Services Sales receives
listed on Exhibit A, Section l.A.l, from the current [***] of the tiered
list price to [***] of the tiered list price on the sales of the following
products:
Upgrades/Updates
Trade-Ins
CID Products
Layered Products
Training Curriculum
Manuals and Documentation
B. The parties also agree to [***] the co-op and support accruals listed on
Exhibit A, Section 5, that SCO Services Sales receives on the sale of these
products from the current [***] of net sales to [***] of net sales.
C. The parties further agree to combine all Co-Op and Support Accrual Funds
listed on Exhibit A, Section 5, into one Co-Op accrual fund. All accrual
fund policies and procedures remain as stated in the Agreement.
D. The margin reduction and co-op and support accrual changes shall be
effective June 1, 1999.
. Electronic Licensing
A. Both parties agree that SCO shall be entitled to sell upgrades via the
Electronic Licensing Program ("Program") directly to its distributors. SCO
shall pay to SCO Services Sales a [***] margin of all sales to North
American distributors, via the Program, and SCO Services Sales will earn
[***] accrual fund on all net Program sales.
B. SCO shall provide SCO Services Sales weekly reports on the total Program
revenue sold to the North American distributors. SCO will provide
reasonable commercial efforts in moving to supply these revenue reports on
a daily basis. In addition, SCO shall provide monthly reporting and credit
for the margin due from such sales via the Program to SCO Services sales
within five (5) business days after the end of each month.
C. The margin reduction regarding the Program shall be effective June 1, 1999.
. Projects
A. The parties agree that "project business" refers to the sale of SCO
products to an SCO Named Account customer that is listed on the then
published SCO Named Account List. SCO Services Sales agrees to reduce their
margin, according to the existing project deal matrix, for these sales.
Page 1 Distributor Agreement Amend. No. 3
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
B. For Non-Named Account Deals which have been approved via the template
process and meet the following criteria:
. Orders with greater then 40% discount to the customer
. Orders that are greater than $50K in List Price
SCO Services Sales agrees to reduce their standard margin percentage on a
one to one basis by the additional discount percentage given for that
project/template. SCOSS will receive a minimum margin of [***] on all such
transactions.
. Miscellaneous
A. The parties agree that upon execution of this Amendment SCO shall retain
[***] dollars of the current balance of SCO Services Sales support accrual
funds. The remaining support accrual fund balance will be available for use
by SCO Services Sales under the standard policies and procedures for the
support accrual fund as outlined in the Agreement. The parties further
agree that SCO will retain the credits for the disputed amounts owed to
Rainmaker Systems for previously earned UniDirect reseller rebates and no
additional claims will be made regarding UniDirect reseller rebates by
Rainmaker Systems.
B. SCO Services Sales agrees to use reasonable commercial efforts to move
quickly to maximize the use of electronic licenses, when available, from
SCO's Partnerstore or another mutually agreed upon electronic delivery
system.
C. The parties agree that SCO Services sales performance milestones shall be
modified to ten percent (10%) growth in net sales on an annual basis.
D. The parties hereby agree to modify Section 6.0, Subsection A with the
following:
This Agreement shall remain in effect through 30 September 2002. After that
date the Agreement shall continue for one (1) year periods until terminated
by either party, for any reason whatsoever and with no liability arising
therefrom, upon at least one hundred and eighty (180) days prior written
notice to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment, effective
as of the last date properly executed by both parties. All signed copies of this
Amendment shall be deemed originals. All other terms and conditions of this
Agreement shall remain unchanged.
The Santa Cruz Operations, Inc. Rainmaker Systems, Inc.
By: /s/ Sheila Baker By: /s/ Michael Silton
--------------------------- ---------------------------
Name: Sheila Baker Name: Michael Silton
------------------------- -------------------------
Title: VP, US Channel Sales Title: CEO, Rainmaker Systems
------------------------ ------------------------
Date: March 16, 1999 Date: March 16, 1999
------------------------- -------------------------
Page 2 Distributor Agreement Amend. No. 3
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
SCO PARTNER STORE AMENDMENT
This AMENDMENT is entered into on the date last signed by and between THE SANTA
CRUZ OPERATION, INC, (hereinafter `SCO') a company incorporated under the laws
of California, with its place of business at 400 Encinal Street, Santa Cruz,
California 95060 and Rainmaker, a corporation of the state of California with
its place of business at 1800 Green Hills Road, Suite 201, Scott Valley, CA
95066.
WHEREAS SCO desires to speed up and simplify the process of distribution of its
software products and licenses for those products by using electronic services
such as those available over the World Wide Web ("the WEB"), and to that end has
created the SCO Partnerstore Program, and
WHEREAS Company is an existing distributor of SCO software products and wishes
to participate in this Program,
THEN THEREFORE the parties agree as follows:
1. This Amendment is supplemental to the SCO Distributor Agreement,
("Agreement") Contract #90034, between the parties, which remains the basis
for trading between them. The terms of this Amendment shall take precedence
over conflicting terms in the SCO Distributor Agreement.
2. SCO agrees, to provide Company with licenses for certain Licensed Products
electronically, in accordance with SCO's Partnerstore Program ("the
Program"). SCO may change details of, or end the Program at any time, and
will endeavour to give Company reasonable notice of such changes. Company
shall notify SCO of the name of an individual nominated as its contact for
issues relating to the Program.
3. Company shall have regular access to a computer system which reliably
connects to the Web and which uses a current internet browser.
4. Transactions confirmed by Company in accordance with the Program shall be
binding, and Company agrees to make payment to SCO against invoices issued in
connection with those transactions. The model numbers and quantities
contained in the electronic transaction shall be deemed to represent the
intentions of Company, and may be altered post-transaction only with SCO's
written agreement. SCO will correct promptly any invoice errors caused by
incorrect data or processing.
5. The SCO Presentation Screen (The WEB page on which the license number
document is displayed) may be stored electronically and printed. It may not
be modified. The document printed from the screen may be provided to only one
customer.
6. The printed version of the SCO Presentation Screen shall be deemed to be a
copy of a unique license document, but not a legal document in its own right,
except as expressly provided for herein. It shall have the effect of granting
rights to the person who uses only if 1) there exists an auditable chain of
transactions which identify the unique license number contained on it, and 2)
it is printed on security paper provided by SCO for the purpose. Company
shall use reasonable efforts to keep records so as to maintain an auditable
transaction chain for each unique license number, so that any end user
customer may be sure that they have a legitimate license.
7. The following provisions apply to Company's distribution of license numbers.
The parties agree that these rules are for the benefit of the end user
customer of Licensed Product:
. Company agrees to provide license numbers only in printed form, exactly
as provided by SCO.
<PAGE>
EXHIBIT 10.20
SUNSOFT CONFIDENTIAL Agreement No.8944
SUN SOFTWARE SUBSCRIPTION SERVICES OUTSOURCING AND DISTRIBUTION AGREEMENT
This Agreement is made and entered into by and between SunSoft, Inc., a
California corporation, located at 2550 Garcia Avenue, Mountain View, California
94043 ("Sun") and UniDireet Corporation, located at 1800 Green Hills Drive,
Suite 201, Scotts Valley, California 95066 ("Customer").
Customer's "Territory" shall mean North America.
-------------
The parties agree as follows:
Sun. Customer:
By: /s/ Dave Walker By: /s/ Bernard Gibb
------------------------------ ----------------------------
Name: DAVE WALKER Name: BERNARD GIBB
------------------------------ ----------------------------
(printed or typed) (printed or typed)
Title: VP, WORLDWIDE FIELD OPS Title: PRESIDENT, UNIDIRECT CORP.
------------------------------ ----------------------------
Date: 3-18-97 Date: 3/4/97
------------------------------ ----------------------------
General Terms and Conditions
1.0 DEFINITIONS.
1.1 "Agreement" means this Sun Software Subscription Services Outsourcing and
Distribution Agreement and all Attachments hereto.
1.2 "Attachment(s)" means Attachment 1 (End User Binary Code License);
Attachment 2 (Annual Activity Level Matrix); and, subsequent to execution of
this Agreement by the parties, any other addenda, exhibits, or attachments that
are signed by both parties and incorporated into this Agreement.
1.3 "Binary Code License" or "BCL" means an End User license to use the
Software Product(s) and the Per Incident Upgrades. The BCL is located either on
the outside of or inside the product packaging containing the Software Product
or Per Incident Upgrade media. The BCL is accepted by End User opening the
product packaging if the BCL is located outside the package and is visible to
the End User; otherwise, if the BCL is located inside of the product packaging,
by opening the package, reading the BCL, and installing the Software Product or
Per Incident Upgrade on End User's computer platform or system. If the Per
Incident Upgrades are delivered in electronic format, an electronic BCL
accompanies the products, which is accepted by the End User loading the Per
Incident Upgrade onto End User's computer platform or system, reading the BCL
and clicking on the "Accept" button to initiate installation of the product
media. Copy of Sun's standard BCL is attached hereto and marked as Attachment 1.
1.4 "Confidential Information" means that information which Customer and/or Sun
desire to protect against unauthorized disclosure or use and which the
disclosing party designates as confidential (i) in writing, if communicated in
writing, or (ii) orally, prior to any oral disclosure of the Confidential
Information. Confidential Information may include information of third parties.
The terms and conditions of this Agreement shall be considered Confidential
Information of Sun.
1.5 "Dollar" or "$" means the currency of the United States of America.
1.6 "Effective Date" means the date defined below in Section 6.0 (Term;
Termination; and Survival).
1.7 "End User" means the entity to whom the BCL applies and to whom Customer
furnishes the Subscription Kits and/or Per Incident Upgrades for internal use
and not for resale, marketing, or leasing.
1.8 "End User Documentation" means users' manuals, programmers' guides and
system guides that Sun may provide for use with the Per Incident Upgrades and
which are specified in the Price List, if any.
1.9 "Error" means any reproducible failure of the Software Product(s) to
perform its intended functions or any significant inaccuracies in the End User
Documentation.
1 of 12
<PAGE>
SUNSOFT CONFIDENTIAL Agreement No. 8944
1.10 "Error Correction" means a modification, addition, procedure or routine
intended to correct the practical adverse effect of an Error.
1.11 "Fees" means the amounts due Sun for Subscription Kits and Per Incident
Upgrades as described in the Price List.
1.12 "Per Incident Upgrade(s)" means the binary code version of the Updates,
Version Releases, or Product Releases designated in the Price list as Sun
Software Subscription program product(s) that may be delivered to Customer in
prepackaged shrink-wrap form, or, on media that is not contained in product
packaging.
1.13 "Price List" means the geographical specific release of the Sun OEM and
Reseller License Fee and Royalty Schedule current at time of the Effective Date
of this Agreement including any subsequent price changes made by Sun.
1.14 "Product Release" means a release of a Software Product which is
designated by Sun in its sole discretion as a change in the digit(s) to the left
of the decimal point in the Software Product version number [(x).x.x].
1.15 "Software Product(s)" means the machine-readable, executable code for
the Sun computer software product(s) previously licensed by End User under terms
of the applicable BCL and for which the Subscription Kit and/or Per Incident
Upgrade is being acquired hereunder.
1.16 "Sun Software Subscription Certificate Kit(s)" or" Subscription Kit(s)"
means the tangible paper copy or electronically downloadable materials
designated in the Price list as Sun Software Subscription program product and
may be delivered to Customer in a tangible pre-packaged kit or electronic form.
The Subscription Kit contains a certificate for the Sun Software Subscription
services entitling an End User to receive drop-shipments of Updates, Version
Releases, Product Releases and Error Corrections directly from Sun; the Sun
Software Subscription services program terms and conditions; the registration
and acceptance form for End User(s) to complete and return to Sun; and,
miscellaneous End User marketing collateral.
1.17 "Tax" means sales, use, rental, receipt, personal property, value-
added, consumption, goods and services, or other tax which may be levied or
assessed in connection with this Agreement, excluding tax based on Sun's income.
1.198te" means a release of a Software Product which is designated by Sun in its
sole discretion as a change in the digit(s) to the right of the tenths digit in
the Software Product version number [x.x.(x)].
1.19 "Version Release" means a release of a Software Product which is
designated by Sun in its sole discretion as a change in the tenths digit in the
Software Product version number [x.(x).x].
2.0 LICENSE TERMS AND CONDITIONS
2.1 License Grant.
(a) Subject to and in consideration of the conditions and restrictions set
forth in this Agreement, Sun grants to Customer a nontransferable, non-
exclusive, fee-bearing, limited license to distribute Subscription Kits and Per
Incident Upgrades directly to End Users. Such distribution shall be limited to
distribution within the Territory. Customer acknowledges that the Per Incident
Upgrades delivered hereunder may be delivered in either electronic downloadable
form or in prepackaged shrink-wrap form. Customer may not open the tangible
paper copy of the Subscription Kits nor the Per Incident Upgrades package prior
to delivery to End Users. The foregoing license grant shall be contingent upon
Customer establishing and maintaining to the reasonable satisfaction of Sun,
procedures and processes necessary to segregate Customer's activities and
databases associated with performing under this Agreement, from the activities
and databases of Customer associated with providing outsourcing services on
behalf of its other customers.
(b) Customer may not distribute Subscription Kits provided to it under this
Agreement unless the End User has first provided satisfactory proof of its
license for the most current version of the Software Product(s). Proof of End
User's current license will be satisfied by the End User showing Customer copies
of its license or install disk, or cover page of the install disk manual, or
other form of proof satisfactory to Sun that End User is licensed to the current
Software Product version level.
(c) If the Per Incident Upgrades furnished to Customer are not accompanied
with a BCL, each distribution by Customer to an End User must be made pursuant
to a BCL that incorporates, in substance and is no less restrictive than, the
terms and conditions of the Attachment 1. It is expressly acknowledged and
agreed that in the United States and in other jurisdictions where enforceable
copyright protection covering such Per Incident Upgrades exists, the BCL may be
a written agreement on or accompanying Customer's product packaging containing
the Per Incident Upgrade media and must comply with applicable law relating to
agreements of such type. In all other jurisdictions, the BCL must be a written
agreement signed by the End User and Customer, who shall be the "Licensor" under
any such licenses. Sun does not undertake to inform Customer of the
jurisdictions where such copyright protection exists. Product packaging produced
by Customer shall look exactly like Sun's packaging unless Sun gives prior
written approval to the contrary. Sun reserves the right to approve all such
product packaging, and Customer agrees to promptly modify any materials that do
not comply with this Section. Sun hereby grants Customer a limited trademark
license for the Per Incident Upgrades described herein for the purpose of
fulfilling the requirements of this Section. It is expressly acknowledged and
agreed that nowhere in this Agreement is Customer granted the right to make
copies of the licensed Per Incident Upgrades.
2.2 End User Documentation Distribution. If specified in the Price List,
one (1) copy of End User Documentation is provided with each copy of the Per
Incident Upgrade(s). Each additional copy of End User Documentation requires
payment of applicable Fees as set forth in the Price List.
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2.3 Trademarks. As between Sun and Customer, Sun owns any and all trademarks
for the Subscription Kits and Per Incident Upgrades. Such trademarks shall
include all names, logos, designs and other designations or brands used by Sun
in connection with the Subscription Kits and Per Incident Upgrades. Except as
expressly stated herein, Customer is granted no right or license to, and shall
not use or display any Sun trademark in any manner whatsoever on any product or
document, unless otherwise expressly granted such right within this Agreement.
Customer shall have the right to refer to the Subscription Kits and Per Incident
Upgrades by their associated Sun trademarks in Customer's advertising or
marketing materials; provided that, the Sun trademarks are (i) used only in the
text of such materials (e.g., not in headlines or graphics) in the same typesize
and typestyle as the surrounding text, (ii) used as adjectives and not as nouns,
(iii) marked with the applicable (R) or (TM) notices, and (iv) attributed to Sun
Microsystems, Inc. in an appropriate location in such materials. Sun reserves
the right to approve all such materials, and Customer agrees to promptly modify
any materials that do not comply with this Section.
2.4 Governmental Approvals. Customer shall, at its own expense, obtain and
arrange for the maintenance in full force and effect of all governmental
approvals, consents, licenses, authorizations, declarations, filings and
registrations as may be necessary for the performance of the terms and
conditions of the Agreement, including without limitation, fair trade approvals,
under all laws, regulations and other legal requirements within the Territory
that apply to this Agreement, including tax and foreign exchange legislation.
2.5 No Other Rights. Except as expressly stated herein, no other license,
right or interest is granted to Customer for any other purpose.
3.0 SUN OBLIGATIONS
3.1 Start-Up Funding. Upon execution of this Agreement by both parties and
Sun's acceptance of Customer's marketing plan as set forth in Attachment 2
(Annual Activity Level Matrix), Sun shall pay to Customer the total sum of
twenty thousand dollars ($20,000) as advance start up funding against ten (10)
percent of its first two hundred thousand dollars ($200,000) in sales for the
Marketing Rebate it may qualify for under Attachment 2. In the event of
termination of this Agreement due to Customer's breach, ceasing to conduct
business, or bankruptcy, Customer shall refund to Sun, the full amount of the
twenty thousand payment, provided such breach, ceasing to conduct business, or
bankruptcy occurred within ninety (90) days from the Effective Date of this
Agreement. In the event of termination of this Agreement within ninety (90) days
from the Effective Date for other than breach by Customer, the parties agree to
negotiate in good faith a fair and equitable settlement of the amount to be
refunded to Sun, if any. In the event Customer fails to achieve the sales target
of two hundred thousand dollars, the full amount of the twenty thousand payment
shall be refunded to Sun.
3.2 Customer Access to Sun Database. Customer shall have access to Sun's
customer database, which shall be considered the Confidential Information of
Sun.
3.3 Software Subscription Services Option On 1.800.Sun.Soft. Sun will include
an option prompt on the Sun toll-free eight hundred (800) telephone number that
will enable callers selecting this option to be automatically transferred to
Customer. Customer will answer the caller by stating: "Sun Software Subscription
Services Program".
4.0 CUSTOMER REPORTING REQUIREMENTS; REFUNDS; AND STOCK ROTATIONS
4.1 Customer Reports. Customer shall provide Sun with the following reports
concerning the Subscription Kits and Per Incident Upgrades in such formats as
and containing such information Sun may establish from time to time: Reports;
Annual Audited Financial Statements; Annual Business Plans; Monthly "Sales-Out"
Activity (including but not limited to reseller name and address, dollar volume,
and type and quantity of Subscription Kits and Per Incident Upgrades
sublicensed; and Yearly Forecasts).
4.2 Return of Product and Refund of Fees Paid.
(a) In the event the End User does not accept the Sun Software Subscription
services program terms and conditions and elects within fifteen (15) days of
purchase to return, shipping prepaid and retaining all risk of loss or damage,
to Customer the Subscription Kit for a refund of the Fees paid, Customer will
accept return of the Subscription Kit from End User and refund the Fees paid to
End User. Customer may return, shipping prepaid, to Sun, the Subscription Kit
returned by End User to Customer for a refund of the Fees paid to Sun by
Customer, provided, however, that: (i) the Subscription Kit was properly
returned to Customer by the End User within fifteen days of its purchase; and,
(ii) Customer requests and has received an RMA number from Sun within five (5)
business days of the Subscription Kit's return by the End User to Customer.
(b) In the event the End User, upon reading the BCL, elects to return the Per
Incident Upgrade, the Customer will accept return, shipping prepaid and
retaining all risk of loss or damage, of the Per Incident Upgrades opened
because the BCL was inside of the product packaging and unopened Per Incident
Upgrades delivered to Customer in prepackaged shrink-wrap form and shall refund
the license fee to the End User. Customer may return, shipping prepaid, to Sun
the Per Incident Upgrades returned by End User to Customer for a refund of the
Fees paid to Sun by Customer, provided, however, that the Per Incident Upgrade
was not installed on End User's computer platform or system
4.3 Stock Rotation.
(a) Not more than once every three (3) months, beginning with the Effective
Date, Customer may return, shipping prepaid and retaining all risk of loss or
damage, to Sun, Per Incident Upgrades opened because the BCL was inside of the
product packaging, and unopened Per Incident Upgrades delivered to Customer in
prepackaged shrink-wrap form, whose total payment amount shall not exceed ten
percent (10%) of the net cumulative Fees for such products shipped to Customer
during the immediately prior three (3) month period. Sun shall credit Customer
with the total payment amount Customer paid for such products if the return is
accompanied by a firm order for the immediate delivery of other Per Incident
Upgrades whose total payment amount at least equals that of the returned
product(s).
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(b) Before returning any Per Incident Upgrades under the above provisions,
Customer shall contact Sun and obtain a "Return Material Authorization" ("RMA").
Sun shall not be responsible for Per Incident Upgrades returned without an RMA.
For requested return of products per any stock rotation provisions herein, Sun
will issue an RMA within five (5) business days of the request.
5.0 SUN PRODUCT UPGRADES AND OBSOLESCENCE
5.1 Upgrades. Customer shall have the right, as described below, to upgrade Per
Incident Upgrades delivered to Customer in its inventory that were shipped to
Customer not more than sixty (60) days before the date that Sun commences
shipment of a new Update, Version Release, and/or Product Release ("Commencement
Date"). Upgrades to Per Incident Upgrades shipped to Customer more than sixty
(60) days before the Commencement Date may be made available to Customer and
Sun, in its sole discretion, may charge an additional Fee for such upgrade.
(a) Updates: Updates from the immediately preceding Update version will be
provided to Customer at no charge. Customer shall provide Sun with a written
request for such Updates and shall provide serial numbers for all preceding
Update versions to be updated.
(b) Version Releases and/or Product Releases. Provided that Sun's Fees do not
increase between Version Releases and/or Product Releases, upgrades to such
Version Releases and/or Product Releases from the immediately preceding Version
Release shall be provided to Customer at no charge. Version Releases and/or
Product Releases for which Sun increases its Fees may be made available to
Customer at Sun's then-current upgrade fee.
(c) Shipping charges for all upgrades shall be paid by Customer. Customer is
limited to two (2) written requests for upgrades per Update, Version Release
and/or Product Release. The first request for upgrade must be received by Sun
within thirty (30) days of the Commencement Date and the second request for
upgrade must be received by Sun within sixty (60) days of the Commencement Date.
If Customer fails to make such requests within the timeframe described, Customer
shall no longer have the right to upgrade the Per Incident Upgrades hereunder.
5.2 Obsolescence. For a period of sixty (60) days after Sun discontinues
offering a Per Incident Upgrade, Customer shall have the right to return,
shipping prepaid and retaining all risk of loss or damage, to Sun, any such Per
Incident Upgrades delivered to Customer. Sun shall credit Customer with the
total payment amount Customer paid for such Per Incident Upgrade if the return
is accompanied by a firm order for the immediate delivery of other Per Incident
Upgrades whose total payment amount at least equals that of the returned Per
Incident Upgrades.
6.0 TERM; TERMINATION; AND SURVIVAL.
6.1 Effective Date. This Agreement shall commence on the date of its execution
by Sun. However, this Agreement shall commence 1ater if Sun will be liable for a
penalty without an approval, registration, or filing as referred to in Section
2.5 (Government Approvals); or, should Sun require a US export license, the date
of such approval, registration, filing, or granting of that license
(collectively, the "Effective Date").
6.2 Term. This Agreement shall have an initial term of one (1) year, and at the
end of such term, shall be automatically renewed for an additional one (1) year
period, unless, prior to the end of the initial term, either party gives the
other party ninety (90) days advance written notice of its intent not to renew
for such additional one year period (the "Term").
6.3 Termination.
(a) If either party fails to comply with any of the terms and conditions of
this Agreement, the other party may terminate this Agreement upon thirty (30)
days written notice to the breaching party specifying any such breach, unless
the breach specified therein has been remedied within such thirty (30) day
period. In the event of Customer's breach, Sun may terminate this Agreement in
its entirety or as to any individual Subscription Kit or Per Incident Upgrade.
(b) After this Agreement has been in effect for a period of nine (9) months
from the Effective Date, either party may terminate this Agreement for its
convenience and without cause for any reason whatsoever, upon thirty (30) days
written notice to the other party.
(c) Either party may terminate this Agreement immediately in the event that the
other party ceases to conduct its operations in the normal course of business,
or files for or becomes the subject of a Bankruptcy petition, or is placed in
receivership, or attempts to assign this Agreement to creditors or otherwise
without prior written consent of the other party.
(d) In the event of the direct or indirect taking over or assumption of control
of Customer or substantially all of its assets by any government authority or
other third party, Sun shall have the right to terminate this Agreement upon
first giving written notice to Customer.
6.4 Effect of Termination.
(a) For Breach by Customer: Upon termination of this Agreement for breach by
Customer, Customer shall discontinue distributing the Subscription Kits and Per
Incident Upgrades, shall return all such products and all copies thereof in its
possession to Sun or destroy all such products and all copies thereof in
Customer's possession and certify in writing by an officer of Customer that the
Subscription Kits and/or Per Incident Upgrades and all copies thereof were so
destroyed.
(b) For Other Than Breach by Customer: Upon termination of this Agreement for
all other reasons, Customer, for a period of ninety (90) days, may continue
to distribute its inventory of Subscription Kits and Per Incident Upgrades.
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SUNSOFT CONFIDENTIAL Agreement No. 8944
(c) Effect on BCLs Granted Prior to Termination and Fees due to Sun. BCL's for
the Per Incident Upgrades granted prior to the effective date of termination
shall continue in accordance with their terms and conditions. Customer's
obligation to pay Fees accrued prior to the termination of this Agreement shall
not terminate.
6.5 No Liability For Termination. To the full extent allowed by any applicable
law and except as expressly provided in this Agreement, Customer agrees that it
shall have no rights to damages or indemnification of any nature due to any
expiration or rightful termination of this Agreement by Sun. The foregoing
restriction shall include without limitation, commercial severance pay whether
by way of loss of future profits, expenditure for promotion of the Subscription
Kits and Per Incident Upgrades, payment for goodwill generated or other
commitments made in connection with the business contemplated by this Agreement
or other similar matters. Customer will not be entitled under local law or
otherwise to receive any payment from Sun due to such expiration or rightful
termination, whether for actual, consequential, indirect, special or incidental
damages, costs or expenses, whether foreseeable or unforeseeable, any right to
which Customer hereby waives and disclaims. CUSTOMER EXPRESSLY WAIVES AND
RENOUNCES ANY CLAIM TO COMPENSATION OR INDEMINITIES FOR ANY TERMINATION OF
BUSINESS RELATIONSHIP BY A FOREIGN BUSINESS ENTITY, WHICH MAY EXIST UNDER THE
LAWS OF ANY APPLICABLE JURISDICTION.
6.6 Survival of this Agreement. Those rights and obligations that by their
nature extend beyond the term of this Agreement shall survive any termination or
expiration of this Agreement.
7.0 PAYMENTS; ANNUAL ACTIVITY LEVEL; AND TAXES
7.1 Payment Terms. Subscription Kits may be acquired by Customer on a
consignment basis from Sun. In the event Customer elects to acquire Subscription
Kits on consignment, commencing on the thirtieth (30) day following the
Effective Date of this Agreement, Customer agrees to provide monthly reports to
Sun detailing the type and quantity of Subscription Kits distributed to End
Users in the prior month. In consideration of the rights granted to Customer
hereunder, Customer shall pay to Sun the Fees and other payments for the
applicable Subscription Kits and Per Incident Upgrades within thirty (30) days
from Sun's invoice date. Sun's acceptance of this Agreement and any associated
order(s) does not imply Sun's approval of an open line of credit. Credit terms
are established by Sun based in part upon Customer's financial and payment
records. Sun reserves the right to place Customer on credit hold in the event
Customer's financial condition ceases to warrant the credit terms described
above. Customer may not be required to pay the disputed portion of any invoice,
pending resolution of that dispute; provided, however, that notice of the
dispute has been forwarded to Sun in writing within fifteen (15) days of the
date of the invoice.
7.2 Payment of Fees and Annual Activity Level. Customer shall pay Sun a Fee
equal to the amount(s) set forth in the Price List for the Subscription Kits and
Per Incident Upgrades less the applicable discount based on the "Activity
Level", as agreed to by the parties and set forth in Attachment 2 (Annual
Activity Level Matrix) hereto. The "Annual Activity Level" shall represent
Customer's projected annual minimum commitment of Fees it will pay Sun for the
Subscription Kits and Per Incident Upgrades during each year of the term. Should
Customer reach an annual commitment, for the periods defined below in Section
7.3 (Minimum Payments), that is different than its projected annual commitment
of Fees at the time of execution of this Agreement, Sun may pursue any of the
options identified below in Section 7.3.
7.3 Minimum Payments.
a) Customer must accept delivery of products ordered in excess of the chosen
Annual Activity Level according to the following schedule. The schedule shall be
as follows: (i) delivery of products equal or in excess of fifty percent (50%)
of the chosen Annual Activity Level within the first nine (9) months of the term
of the Agreement, and (ii) delivery of products equal or in excess of one-
hundred percent (100%) of the chosen Annual Activity Level within the first
fifteen (15) months of the term of the Agreement. If Customer does not accept
delivery of products in accordance with such schedule, the discount for the
remainder of the Agreement may be adjusted by Sun at its discretion.
b) If, after one half (1/2) of the Term, Customer determines that it will
accept delivery of Subscription Kits and Per Incident Upgrades of more than the
maximum aggregate dollar volume for its Annual Activity Level, Customer shall
notify Sun. Upon Sun's approval, the discount will be reset for future orders at
a higher Annual Activity Level. Any such increased discount shall not be
retroactively applied to products already delivered to Customer.
c) If Customer has not accepted delivery of Subscription Kits and Per Incident
Upgrades resulting in the minimum aggregate dollar volume for its Annual
Activity Level, then Customer's Annual Activity Level for any subsequent
Agreement term will be determined by the actual amount delivered or Fees
incurred and/or paid during the current Term or such other Annual Activity Level
agreed to by the parties. Customer will not be allowed to increase its Annual
Activity Level during that subsequent Agreement term due to changes in
forecasts.
7.4 Updates, Version Releases and Product Releases. The Fees specified in this
Agreement are for the then current release at time of the Effective Date for
this Agreement of the Subscription Kits and Per Incident Upgrades only.
Subsequent Subscription Kits, Updates, Version Releases and Product Releases may
require additional payment and/or additional terms and conditions hereunder. Sun
shall have the right, at its sole discretion and without incurring any liability
to Customer, to modify the Subscription Kits and/or Per Incident Upgrades or
discontinue their manufacture, sale or support and will provide Customer with
thirty (30) days prior notice. Such change shall not require Customer's
approval.
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7.5 Price Changes. Sun reserves the right to change the Price List, discounts
and/or fees for any Sun products at any time. Price decreases will take effect
immediately upon announcement. In the event of a price increase, Sun shall
provide Customer with thirty (30) days prior notice. Such change shall not
require Customer's approval. If, during the term of this Agreement, Sun
decreases the Fee for any Subscription Kit and/or Per Incident Upgrade, Customer
will be allowed a credit toward new orders for any Subscription Kit and/or Per
Incident Upgrade placed within thirty (30) days of receiving such notice from
Sun. This credit will be equal to the difference between the new Fee and the
previous Fee for all such unopened products in Customer's inventory as of the
date of such notice which were shipped to Customer not more than ninety (90)
days before such notice and whose serial numbers are submitted to Sun with
Customer's written request for credit. All orders for Subscription Kits and/or
Per Incident Upgrades scheduled for shipment or in transit to Customer at the
time of such notice shall be adjusted to the decreased Fee.
7.6 Taxes.
(a) Subject to Subsection (b) below, all amounts payable by Customer under this
Agreement are exclusive of any Tax, levy or similar governmental charge that may
be assessed by any jurisdiction, whether based on gross revenue, the delivery,
possession or use of the Subscription Kits and/or Per Incident Upgrades, the
execution or performance of this Agreement or otherwise, except for net income,
net worth or franchise taxes assessed on Sun. If, under the local law, Customer
is required to withhold any Tax on such payments, then the amount of the payment
actually remitted to Sun will be net of all Taxes. Customer will promptly
furnish Sun with the official receipt of payment of these Taxes to the
appropriate taxing authority. Customer will pay all other Taxes, levies or
similar governmental charges or provide Sun with a certificate of exemption
acceptable to the taxing authority.
(b) Notwithstanding Subsection (a) above, Customer may deduct from payments any
income tax or tax of a similar nature imposed by any non-United States
government ("Foreign Government Income Tax") on the income of Sun from such
payment and actually paid by Customer for the account of Sun. In the event that
Customer deducts any such income tax from any such payment, Customer shall
furnish Sun with evidence acceptable to Sun and to the United States Government
to sufficiently establish that such Foreign Government Income Tax has been paid
for the account of Sun.
8.0 RECORD KEEPING; RIGHT to AUDIT; AND FORECASTING
8.1 Record Keeping. Customer shall maintain for a three (3) year period revenue
records sufficient to determine that Customer is in compliance with this
Agreement as it relates to the correctness of the Fees and other payments
hereunder.
8.2 Right to Audit. Sun shall have the right to audit the records and accounts
of Customer required to be kept in accordance with this Agreement. The auditor
shall be adequately bound to keep confidential the Confidential Information of
Customer learned during the course of or pursuant to the audit. Any such audit
shall be performed only during Customer's normal business hours, no more
frequently than once per calendar year, and shall be performed in such a manner
as to avoid unreasonable interference with Customer's business operations; and
the auditor shall be limited to reporting the adequacy of Customer's records and
accounts, including, but not limited to, whether Customer is in compliance with
the terms of this Agreement. This right to audit provision shall continue
throughout the term of this Agreement and shall survive the termination of this
Agreement insofar as applicable to payment obligations accrued prior to such
termination.
8.3 Forecasting. On the first business day of each Sun calendar quarter,
Customer shall provide Sun with a rolling six (6) month nonbinding written
forecast of Customer's projected shipments for each Subscription Kit and Per
Incident Upgrade licensed hereunder.
9.0 CONFIDENTIAL INFORMATION
9.1 Restrictions. Each party shall hold in confidence any Confidential
Information received by it from the other and shall protect the confidentiality
of such with the same degree of care that it exercises with respect to its own
information of like import, but in no event less than reasonable care, for a
period of five (5) years from the date of disclosure.
9.2 Exceptions. Notwithstanding any provisions herein concerning non-disclosure
and non-use of the Confidential Information, the obligations of the preceding
paragraph shall not apply to any portion of the Confidential Information which:
(a) is now or which hereafter through no act or failure to act on the part of
the receiving party becomes generally known in the computer systems industry
without restriction on disclosure;
(b) is hereafter furnished to the receiving party by a third party as a matter
of right without restriction on disclosure;
(c) is independently developed by the receiving party, without the use of the
Confidential Information;
(d) is disclosed to others without restriction;
(e) is required to be disclosed pursuant to a legal, judicial, administrative
procedure or otherwise required by law; providing, the disclosing party gives
the other party notice of the proposed disclosure with sufficient time to seek
relief and that such disclosure, if made, is made in a fashion as to maximize
the protection of the information from further disclosure;
(f) is already known to Customer without restriction on disclosure; or
(g) is approved for release or use without restriction by written authorization
of an officer of the party making the disclosure.
9.3 Advising Employees and Suspected Violations. Customer shall inform its
employees and/or contractors having access to Confidential Information of
Customer's limitations, duties and obligations regarding non-disclosure and
copying of Sun Confidential Information imposed by (i) this Agreement and/or
(ii) third parties who have supplied information and/or technology to Sun.
Customer shall
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obtain or have obtained its employees' and/or contractors' agreement to comply
with such limitations, duties and obligations. Customer agrees to provide notice
to Sun immediately after learning of or having reason to suspect a breach of any
of the proprietary restrictions set forth in this Section.
9.4 Returning Confidential Information. Except as provided herein, within
thirty (30) days after termination of this Agreement, all materials containing
Confidential Information of Sun shall be returned to Sun.
10.0 WARRANTIES AND DISCLAIMERS
10.1 Customer's Limited Warranty: Sun warrants that for a period of ninety
(90) days from the date of delivery to Customer: (i) the media on which the Per
Incident Upgrade is furnished will be free of defects in materials and
workmanship under normal use; and (ii) the Per Incident Upgrade contains the
features described in the Price List. Except for the foregoing, to the full
extent allowed by applicable law, the Subscription Kits and Per Incident
Upgrades are provided "AS IS". Customer's exclusive remedy and Sun's entire
liability under this limited warranty will be at Sun's option to repair or
replace the Subscription Kit and/or Per Incident Upgrade.
10.2 High Risk Activities. CUSTOMER ACKNOWLEDGES THAT THE PER INCIDENT
UPGRADES MAY CONTAIN ERRORS AND ARE NOT DESIGNED OR INTENDED FOR USE IN ON-LINE
CONTROL EQUIPMENT IN HAZARDOUS ENVIRONMENTS REQUIRING FAIL-SAFE PERFORMANCE,
INCLUDING WITHOUT LIMITATION, THE OPERATION OF NUCLEAR FACILITIES, AIRCRAFT
NAVIGATION OR COMMUNICATION SYSTEMS, AIR TRAFFIC CONTROL, DIRECT LIFE SUPPORT
MACHINES OR WEAPONS SYSTEMS ("HIGH RISK ACTIVITIES") IN WHICH THE FAILURE OF THE
PER INCIDENT UPGRADES WOULD LEAD DIRECTLY TO DEATH, PERSONAL INJURY OR SEVERE
PHYSICAL OR ENVIRONMENTAL DAMAGE. CUSTOMER REPRESENTS AND WARRANTS THAT IT WILL
NOT USE, DISTRIBUTE OR LICENSE THE PER INCIDENT UPGRADES FOR HIGH RISK
ACTIVITIES.
10.3 No Other Warranties. TO THE FULL EXTENT ALLOWED BY APPLICABLE LAW, EXCEPT
AS SPECIFIED IN THIS AGREEMENT, ALL EXPRESS OR IMPLIED CONDITIONS,
REPRESENTATIONS AND WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-
INFRINGEMENT, ARE HEREBY DISCLAIMED.
11.0 LIMITATION OF LIABILITY
TO THE FULL EXTENT ALLOWED BY ANY APPLICABE LAW, EXCEPT FOR EXPRESS UNDERTAKINGS
UNDER SECTION 10.2 (HIGH RISK ACTIVITIES) AND OBLIGATIONS TO DEFEND UNDER
SECTION 12.0 (INTELLECTUAL PROPERTY CLAIMS) OF THIS AGREEMENT, EACH PARTY'S
LIABILITY TO THE OTHER FOR CLAIMS RELATING TO THIS AGREEMENT, WHETHER FOR BREACH
OR IN TORT, SHALL BE LIMITED TO ONE HUNDRED PERCENT (100%) OF THE AMOUNT HAVING
THEN ACTUALLY BEEN PAID BY CUSTOMER TO SUN FOR ALL COPIES LICENSED HEREUNDER FOR
THE PARTICULAR SUBSCRIPTION KIT AND/OR PER INCIDENT UPGRADE GIVING RISE TO SUCH
CLAIM, IF ANY. THE FOREGOING LIMITATION DOES NOT REDUCE CUSTOMER'S OBLIGATION TO
PAY SUN THE LICENSE FEES DUE AND OWING FOR THE SUBSCRIPTION KITS AND/OR PER
INCIDENT UPGRADES. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY INDIRECT,
PUNITIVE, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR
ARISING OUT OF TILLS AGREEMENT (INCLUDING WITHOUT LIMITATION, LOSS OF PROFITS,
USE, DATA, OR OTHER ECONOMIC ADVANTAGE), HOWEVER IT ARISES, WHETHER FOR BREACH
OF THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, BREACH OF WARRANTY, OR IN
TORT, EVEN IF THAT PARTY HAS BEEN PREVIOUSLY ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE. THE FOREGOING LIMITATION OF LIABILITY OF CUSTOMER TO SUN SHALL NOT APPLY
IF CUSTOMER'S ACTIONS OR INACTION RESULT IN THE UNAUTHORIZED DISCLOSURE,
DISTRIBUTION OR USE OF THE SUBSCRIPTION KITS AND/OR PER INCIDENT UPGRADES OR
CONFIDENTIAL INFORMATION.
12.0 INTELLECTUAL PROPERTY CLAIMS
(a) Sun will defend or settle at its option and expense any legal proceeding
brought against Customer, to the extent that it is based on a claim that Sun
products directly infringe a copyright or U.S. patent, and will pay all damages
and costs awarded by a court of final appeal attributable to such claim,
provided that Customer: (i) gives written notice of the claim promptly to Sun;
(ii) gives Sun sole control of the defense and settlement of the claim; (iii)
provides to Sun all available information and assistance; and (iv) has not
compromised or settled such claim.
(b) If any Sun products are found to infringe, or in Sun's opinion are likely
to be found to infringe, Sun may elect to: (i) obtain for Customer the right to
use such products; (ii) replace or modify the products so that they become non-
infringing; or, if neither of these alternatives is reasonably available, (iii)
remove the products and refund Customer's net book value for these products.
(c) Sun has no obligation under this Section for any claim which results
from: (i) use of Sun products in combination with any non-Sun-provided
equipment, software or data; (ii) Sun's compliance with designs or
specifications of Customer; (iii) modification of Sun products; or (iv) use of
an allegedly infringing version of any Sun products, if the alleged infringement
could be avoided by the use of a different version made available to customer.
(d) This Section states the entire liability of Sun and exclusive remedies of
Customer for claims of infringement.
13.0 MAINTENANCE AND SUPPORT
13.1 As between Sun and Customer, this Agreement does not include maintenance
and support of the Per Incident Upgrades by Sun.
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SUNSOFT CONFIDENTIAL Agreement No. 8944
14.0 GOVERNMENT CONTRACTS
14.1 U.S. Government
(a) If Customer is acquiring Subscription kits and/or Per Incident Upgrades,
including accompanying End User Documentation, on behalf of the U.S. Government,
the following provisions apply: if Subscription Kits or Per Incident Upgrades
are supplied to the Department of Defense ("DOD"), such products are subject to
"Restricted Rights" including a legend to be affixed to such products, as that
term is defined in the DOD Supplement to the Federal Acquisition Regulations
("DFAR") in paragraph 252.227-7013(c)(1). If Subscription Kits or Per Incident
Upgrades are supplied to any unit or agency of the U.S. Government other than
DOD, the U.S. Government's rights in such products will be as defined in
paragraph 52.227-19(c)(2) of the Federal Acquisition Regulations ("FAR").
Customer shall indemnify Sun for any claims or damages arising from any claim by
the US Government to more than Restricted Rights in and to the Subscription Kits
or Per Incident Upgrades resulting from Customer's failure to provide a
Restricted Rights legend as required herein. Any failure by Sun to affix a
Restricted Rights legend on the Subscription Kits or Per Incident Upgrades shall
not be deemed to constitute a waiver of any limitation on Customer's rights
imposed by this Agreement.
(b) Under no circumstances shall Sun be obligated to comply with any
requirements imposed by the United States government (the "US Government")
regarding submission of or the request for exemption from submission of cost or
pricing data or cost accounting requirements for any distribution or license of
Subscription Kits or Per Incident Upgrades that would require compliance by Sun
with US Governmental requirements relating to cost or pricing data or cost
accounting requirements.
14.2 Other Sovereign Governments
At its own cost and expense, Customer will take all necessary steps in making
proposals and agreements with sovereign governments other than the U.S.
Government which involve Subscription Kits or Per Incident Upgrades and End User
Documentation to ensure that Sun's proprietary rights in such products receive
the reasonably necessary protection available from such foreign governments for
commercial computer software and related documentation developed at private
expense.
15.0 MISCELLANEOUS
15.1 Force Majeure. A party is not liable for non-performance of this
Agreement, to the extent to which the non-performance is caused by events or
conditions beyond that party's control, and the party gives prompt notice to the
other party and makes all reasonable efforts to perform. In no event will this
provision affect Customer's obligation to make payments under this Agreement.
15.2 Severability. In the event that any part of this Agreement is held to be
unenforceable, in whole or in part, such holding will not affect the validity of
the other parts of this Agreement, unless Sun deems the unenforceable part to be
essential to this Agreement, in which case Sun may terminate this Agreement,
effective immediately upon notice to Customer.
15.3 Relationship of the Parties. Neither Customer nor any of its employees,
consultants, contractors or agents are agents, employees, franchisees or joint
venturers of Sun, nor do they have any authority to bind Sun by contract or
otherwise to any obligation. They will not represent to the contrary, either
expressly, implicitly or otherwise.
15.4 Choice of Law; Jurisdiction and Venue. This Agreement is made under and
shall be governed by and construed in accordance with the laws of the State of
California, United States of America (except that body of law controlling
conflict of laws) and specifically excluding from application to this Agreement
that law known as the United Nations Convention on the International Sale of
Goods. The parties hereby exclusively submit to the personal jurisdiction of,
and waive any objection against, the United States District Court for the
Northern District of California, and the state courts of the State of California
for the County of Santa Clara.
15.5 Import and Export Laws. Products, including without limitation,
technical data are subject to U.S. export control laws and may be subject to
export or import regulation in other countries. Customer agrees to comply
strictly with all such regulations and acknowledges that it has the
responsibility to obtain such licenses to export, re-export or import
Subscription Kits and Per Incident Upgrades as may be required after delivery to
Customer.
15.6 No Assignment. This Agreement, including any licenses and rights granted
hereunder, may not be sold, leased, assigned, or otherwise transferred, in whole
or in part, by Customer without the prior written consent of Sun.
15.7 Notices. All notices required hereunder must be in writing and delivered
either in person or by a means evidenced by a delivery receipt, to the address
specified below or as otherwise notified in writing. Such notice will be
effective upon receipt.
<TABLE>
<S> <C>
Sun's notice contact shall be: With a copy to:
SunSoft, Inc. SunSoft Legal Department
Attn: Vice President Sales Attn: Vice President and General Counsel
2550 Garcia Avenue, MPKO8-203 2550 Garcia Avenue, MPK18-206
Mountain View, California 94043: Mountain View, California 94043
Telephone: Telephone: 415.786.4663
Facsimile: Facsimile: 415.786.4597
Email Address: [email protected]
</TABLE>
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SUNSOFT CONFIDENTIAL Agreement No. 8944
<TABLE>
<S> <C>
Customer's notice contact shall be: With a copy to:
UniDirect Corporation UniDirect Corporation
Attn: John Erdag Attn: Bernie Jubb
Address: 1800 Green Hills Drive, Suite 201, Address: 1800 Green Hills Drive, Suite 201,
Scotts Valley, California 95066 Scotts Valley, California 95066
Telephone: 408.461.4799 Telephone: 408.461.4799
Facsimile: 408.461.5055 Facsimile: 408.461.5055
Email Address: [email protected] Email Address: [email protected]
</TABLE>
15.8 No Waiver. Failure by either party to enforce any provision of this
Agreement shall not be deemed a waiver of future enforcement of that or any
other provision.
15.9 No Rights in Third Parties. This Agreement is made for the benefit of
the parties hereto, and not for the benefit of any third parties unless
otherwise stated herein or agreed to in writing by the parties.
15.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which will
constitute but one and the same instrument.
15.11 Headings. The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
15.12 Construction. This Agreement has been negotiated by the parties hereto
and by their respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party. The original of this Agreement has been written in
English, and such version shall be the governing version of the Agreement. To
the extent allowed under applicable law, Customer waives any right it may have,
if any, under any law or regulation to have this Agreement written in a language
other than English.
15.13 Orders. This Agreement does not constitute an order for Sun products,
but rather a commitment to order Subscription Kits and Per Incident Upgrades as
set forth in the Attachment 2 (Annual Activity Level Matrix). Purchase orders
for Sun products shall be submitted to Sun by Customer pursuant to the terms of
this Agreement and any terms or conditions set forth on such purchase order,
check, or other document of Customer shall have no force or effect whatsoever.
Customer further acknowledges that it does not take title to the Subscription
Kits or Per Incident Upgrades, with the exception of the media and printed
materials, but rather licenses the Sun products pursuant to the terms and
conditions of this Agreement.
15.14 Deliveries. Subscription Kits and Per Incident Upgrades shall be
delivered F.O.B. Sun's designated shipping facility unless otherwise agreed to
by the parties in writing. Sun may make partial deliveries and such deliveries
will not relieve Customer of its obligation to accept the remainder of that
order in whole or in part. Sun may allocate Subscription Kits and Per Incident
Upgrades to fairly accommodate orders received by Sun from all customers at
anytime demand exceeds the available supply.
15.15 Equitable Relief. Because the licenses granted under this Agreement are
personal and unique, and because Customer will have access to and become
acquainted with confidential and proprietary information of Sun, the
unauthorized use or disclosure of which would cause irreparable harm and
significant injury which would be difficult to ascertain and which would not be
compensable by damages alone, both parties agree that, in addition to any and
all legal remedies available to Sun for Customer's breach of this Agreement, Sun
shall be entitled to equitable relief and to avail itself of actions against
Customer and/or third parties for seizure and injunctive relief. If
an unauthorized use or disclosure occurs, Customer will promptly notify Sun and
take, at Customer's expense, all steps which are necessary to recover the
confidential and proprietary information of Sun and to prevent its subsequent
unauthorized use or dissemination.
15.16 Entire Agreement. This Agreement, including all Attachments hereto,
constitutes the entire agreement between the parties with respect to the subject
matter hereof, and supersedes and replaces all prior or contemporaneous
understandings or agreements, written or oral, regarding such subject matter.
Unless otherwise provided herein, this Agreement may not be modified, amended,
rescinded, or waived, in whole or part, except by a written instrument signed by
the authorized representatives of both parties.
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SUNSOFT CONFIDENTIAL Agreement No. 8944
Attachment 1
End User Binary Code License
SUN IS WILLING TO LICENSE THE ACCOMPANYING SOFTWARE TO YOU ONLY UPON THE
CONDITION THAT YOU ACCEPT ALL OF THE TERMS CONTAINED IN THIS LICENSE AGREEMENT.
READ THE TERMS AND CONDITIONS OF THIS LICENSE CAREFUlLY BEFORE OPENING THE
SOFTWARE MEDIA PACKAGE. BY OPENING THE SOFTWARE MEDIA PACKAGE, YOU AGREE TO THE
TERMS AND CONDITIONS OF THIS AGREEMENT. IF YOU ARE NOT WILLING TO BE BOUND BY
THIS AGREEMENT, RETURN THE SOFTWARE UNUSED WITHIN FIFTEEN (15) DAYS OF
PURCHASE FOR A REFUND OF THE LICENSE FEE PAID.
1. License to Use. Customer is granted a non-exclusive and non-transferable
license ("License") for the use of the accompanying binary software in machine-
readable form, together with accompanying documentation ("Software"), by the
number of users and the class of computer hardware for which the corresponding
fee has been paid.
2. License to Develop. This License authorizes Customer to develop software
programs utilizing the Software. However, in the event that Customer desires to
develop software programs which incorporate portions of Software ("Developed
Programs"), the following provisions apply, to the extent applicable: Developed
Programs are to have an application programming interface that is the same as
Software; fonts within Software are to remain associated with their toolkit or
server; Developed Programs may be used and distributed, but only on computer
equipment licensed to utilize Software, unless an additional Developer's License
Agreement has been executed by Sun and Customer; Customer is not licensed to
develop printing applications or print unless Customer has secured a valid
printing license; incorporation of portions of Motif(R) in Developed Programs
may require reporting of copies of Developed Programs to Sun; and Customer
agrees to indemnify, hold harmless and defend Sun and its Licensors from and
against any claims or suits, including attorneys' fees, which arise or result
from distribution or use of Developed Programs to the extent such claims or
suits arise from the development performed by Customer.
3. Restrictions. Software is copyrighted and title to all copies is retained
by Sun and/or its licensors. Customer shall not make copies of Software, other
than a single copy of Software for archival purposes and, if applicable,
Customer may, for its internal use only, print the number of copies of on-line
documentation for which the applicable fee has been paid, in which event all
proprietary rights notices on Software shall be reproduced and applied. Except
as specifically authorized in Paragraph 2 above or unless enforcement of this
provision is prohibited by applicable law, Customer shall not modify, decompile,
disassemble, decrypt, extract, or otherwise reverse engineer Software. Software
is not designed or licensed for use in on-line control equipment in hazardous
environments such as operation of nuclear facilities, aircraft navigation or
control, or direct life support machines.
4. Confidentiality. Software is confidential and proprietary information of
Sun and/or its licensors. Customer agrees to take adequate steps to protect
Software from unauthorized disclosure or use.
5. Limited Warranty. Sun warrants that for a period of ninety (90) days from
the date of purchase, as evidenced by a copy of the receipt; (i) the media on
which Software is furnished will be free of defects in materials and workmanship
under normal use; and (ii) the Software contains the features described in the
Sun price list. Except for the foregoing, the Software is provided "AS IS". This
limited warranty extends only to Customer as the original licensee. Customer's
exclusive remedy and Sun's entire liability under this limited warranty will be
at Sun's option to repair or replace the Software.
6. Disclaimer of Warranty. EXCEPT AS SPECIFIED IN THIS LICENSE, ALL EXPRESS OR
IMPLIED CONDITIONS, REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-
INFRINGEMENT, ARE HEREBY EXCLUDED to THE EXTENT ALLOWED BY APPLICABLE LAW.
7. Limitation of Liability. IN NO EVENT WILL Sun BE LIABLE FOR ANY LOST
REVENUE, PROFIT OR DATA, OR FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR
PUNITIVE DAMAGES HOWEVER CAUSED AND REGARDLESS OF THE THEORY OF LIABILITY
ARISING OUT OF THE USE OF OR INABILITY to USE SOFTWARE, EVEN IF Sun HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. In no event shall Sun's liability to
Customer, whether in contract, tort (including negligence), or otherwise, exceed
the license fee paid by Customer for Software. The foregoing limitations shall
apply even if the above stated warranty fails of its essential purpose.
8. Termination. This License is effective until terminated. Customer may
terminate this License at any time by destroying all copies of Software
including any documentation. This License will terminate immediately without
notice from Sun if Customer fails to comply with any provision of this License.
Upon termination, Customer must destroy all copies of Software.
9. Export Regulations. Software, including technical data, is subject to U.S.
export control laws, including the U.S. Export Administration Act and its
associated regulations, and may be subject to export or import regulations in
other countries. Customer agrees to comply strictly with all such regulations
and acknowledges that it has the responsibility to obtain licenses to export,
re-export, or import Software.
10. U.S. Government Restricted Rights. If Customer is acquiring Software
including accompanying documentation on behalf of the U.S. Government, the
following provisions apply. If software is supplied to the Department of Defense
("DOD"), software is subject to "Restricted Rights", as that term is defined in
the DOD Supplement to the Federal Acquisition Regulations ("DFAR") in paragraph
252.227-7013(c)(1). If Software is supplied to any unit or agency of the United
States Government other than DOD, the Government's rights in Software will be as
defined in paragraph 52.227-19(c)(2) of the Federal Acquisition Regulations
("FAR"). Use, duplication,
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SUNSOFT CONFIDENTIAL Agreement No. 8944
reproduction or disclosure by the Government is subject to such restrictions or
successor provisions. Contractor/Manufacturer is: Sun, Inc., 2550 Garcia Ave.,
Mountain View, CA 94043.
11. Governing Law. This Agreement is made under, shall be governed by and
construed in accordance with the laws of the State of California, U.S.A.,
excluding its choice of law provisions.
12. Severability. If any of the above provisions are held to be in violation of
applicable law, void, or unenforceable in any jurisdiction, then such provisions
are herewith waived to the extent necessary for the License to be otherwise
enforceable in such jurisdiction. However, if in Sun's opinion deletion of any
provisions of the License by operation of this paragraph unreasonably
compromises the rights or liabilities of Sun or its licensors, Sun reserves the
right to terminate the License and refund the fee paid by Customer as Customer's
sole and exclusive remedy.
13. Integration. This Agreement is the entire agreement between Customer and
Sun relating to Software and: (i) supersedes all prior or contemporaneous oral
or written communications, proposals and representations with respect to its
subject matter; and (ii) prevails over any conflicting or additional terms of
any quote, order, acknowledgment, or similar communication between the parties
during the term of this Agreement. No modification to the Agreement will be
binding, unless in writing and signed by a duly authorized representative of
each party.
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SUNSOFT CONFIDENTIAL Agreement No. 8944
Attachment 2
Annual Activity Level Matrix
I. Sun Annual Activity Level/discount Matrix
Discount(s) provided to Customer under this Attachment for the the
Subscription Kit and Per Incident Upgrade products shall be as follows:
<TABLE>
<CAPTION>
<S> <C>
1. Aggregate Annual Activity Level (all Sun products): [***]
2. Quarterly Sales Targets: [***]
3. Discount:
Annual Volume Discount Product Categories*: [***]
4. Value Added Discount [***]. If Customer
provides the following additional services to Sun's satisfaction,
Customer will qualify to receive this discount:
- Actively market and support the Subscription Kits and Per Incident
Upgrades to create and continually increase End User market
demand, including but not limited to, participating in all
applicable Sun marketing programs, which may include features
such as cooperative advertising and promotions.
- Submit on-time monthly sales reporting, including but not limited
to, lead tracking activity, disposition and follow-up, sales
forecast, point-of-sales and other reporting identified in Section
4.1 of the Agreement.
- Actively recruit and train field sales representatives on the
Subscription Kits and Per Incident Upgrades.
- Maintain a minimum of two technical pre-sales support staff, one
dedicated product marketing person, and at least three full time
dedicated sales personnel.
Customer's performance of the foregoing activities will be evaluated
quarterly and determination of whether or not Customer performed such
activities satisfactorily will be made solely by Sun.
5. Marketing Rebate based on number of products sold to End Users in
previous quarter [***]. This fund will be
available to Customer to fund a variety of promotional activities to
create End User demand for the Subscription Kits and Per Incident
Upgrades (e.g., print advertising, trade shows, sales seminars, direct
mail marketing collateral, sales promotions and training expenses). To
qualify for this funding, within ten (10) days from the Effective
Date, Customer must submit to Sun a marketing plan for Sun's approval,
and thereafter, Customer must provide Sun with a quarterly marketing
plan detailing the prior quarter's marketing activities and plans for
the next quarter's marketing activities.
</TABLE>
________________
* Decrease in product categories is anticipated July 1, 1997.
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__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
Amendment One
to
Software Subscription Services Outsourcing and Distribution Agreement
between
Sunsoft, Inc.
and
UniDirect Corporation
This Amendment One includes the attached Exhibit 1 and Attachment 3
(collectively, the "Amendment") and is made to the Software Subscription
Services Outsourcing and Distribution Agreement No. 8944, effective March 18,
1997 (the "Agreement"). This Amendment is made and entered into this 20th day of
May, 1997 (the "Amendment Effective Date"), by and between SunSoft, Inc., a
California corporation ("Sun") and UniDirect Corporation, ("Customer"). All
capitalized terms used herein shall have the same meaning set forth in the
Agreement.
In witness whereof, the parties have caused this Amendment One to be executed
by their authorized representatives.
Sun: Customer:
By: /s/ S. Nelson French Jr. By: /s/ Bernard Jubb
----------------------------- ---------------------------------
S. Nelson French Jr.
Name: Dave Walker Name: Bernard Jubb
---------------------------- -------------------------------
Title: VP, WORLDWIDE FIELD OPS. Title: PRESIDENT, UNIDIRECT CORP.
--------------------------- ------------------------------
Date: 6-2-97 Date: 5/20/97
--------------------------- ------------------------------
1. Territory. Definition for Territory is deleted in its entirety and replaced
with the following: Customer's "Territory" shall mean the geographical region
specified in Attachment 3 (Product Attachment and Territory).
2. Paragraph 1.0 (Definitions). The following paragraphs are deleted in their
entirety and replaced with the following:
(a) Paragraph 1.12. - "Per Incident Upgrade(s)" means the binary code
version of the Updates, Version Releases, or Product Releases designated in the
Price List as Sun Software Subscription program product(s) that may be delivered
to Customer in prepackaged shrink-wrap form, or, on media that is not contained
in product packaging. The Software Product(s) for which the Per Incident
Upgrade(s) is being acquired is listed on Attachment 3.
(b) Paragraph 1.16- "Sun Software Subscription Certificate Kit(s) " or
"Subscription Kit(s)" means the tangible paper copy or electronically
downloadable materials designated in the Price List as Sun Software Subscription
program product that may be delivered to Customer in a tangible pre-packaged kit
or electronic form. The Subscription Kit contains a certificate for the Sun
Software Subscription services entitling an End User to receive drop-shipments
of Updates, Version Releases, Product Releases and Error Corrections directly
from Sun; the Sun Software Subscription services program terms and conditions;
the registration and acceptance form for End User(s) to complete and return to
Sun; and, miscellaneous End User marketing collateral. The Software Product(s)
for which the Subscription Kit(s) is being acquired is listed on Attachment 3.
(c) Paragraph "l.198te" is a typo and is deleted in its entirety and
replaced with the following: 1.18 "Update" means a release of a Software Product
which is designated by Sun in its sole discretion as a change in the digit(s) to
the right of the tenths digit in the Software Product version number [x.x.(x)].
3. Paragraph 2.1 (License Grant). Subparagraph (a) of the Agreement is deleted
in its entirety and replaced with the following:
(a) Subject to and in consideration of the conditions and restrictions set
forth in this Agreement, Sun grants to Customer a non-transferable, non-
exclusive, fee-bearing, limited license to distribute the Subscription Kits and
Per Incident Upgrades specified on
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Sun Confidential Agreement No. 9280
Attachment 3 directly to End Users. Such distribution shall be limited to
distribution within the Territory. Customer acknowledges that the Per Incident
Upgrades delivered hereunder may be delivered in either electronic downloadable
form or in prepackaged shrink-wrap form. Customer may not open the tangible
paper copy of the Subscription Kits nor the Per Incident Upgrades package prior
to delivery to End Users. The foregoing license grant shall be contingent upon
Customer establishing and maintaining to the reasonable satisfaction of Sun,
procedures and processes necessary to segregate Customer's activities and
databases associated with performing under this Agreement, from the activities
and databases of Customer associated with providing outsourcing services on
behalf of its other customers.
4. Paragraph 2.3 (Trademarks). Paragraph 2.3 of the Agreement is deleted in
its entirety and replaced with the following:
2.3 Trademarks.
(a) Protection of Sun Trademarks. "Sun Trademark(s)" means the
SUNSOFTSERVICES portion of the "WWW.UNIDIRECT.COM/SUNSOFTSERVICES/" URL domain
name or such additional or replacement mark(s) as Sun may provide from time-to-
time under this Agreement (collectively, the "URL Domain Name Mark(s)"), and all
names, marks, logos, designs, trade dress and other brand designations used by
Sun in connection with its products. Customer acknowledges that Sun is the sole
owner of all right, title and interest in and to the Sun Trademarks and the
goodwill associated therewith, and that any use of any Sun Trademark by Customer
shall inure to the sole benefit of Sun. Customer is granted no right, title,
license to, or interest in, any Sun Trademark. Customer agrees not to: (i) do
anything that might harm the reputation or goodwill of any Sun Trademark; (ii)
challenge Sun's rights or interests in or attempt to register any Sun Trademark
or any mark or logo similar thereto; (iii) take any action inconsistent with
Sun's ownership of the Sun Trademarks; (iv) remove, alter, nor, except as
otherwise expressly provided for below in regards to the URL Domain Name Mark,
add to any Sun Trademark or co-logo with any Customer products; and, (v)
incorporate, except as otherwise expressly provided for below in regards to the
URL Domain Name Mark, any Sun Trademark into Customer's trademarks, service
marks, company names, internet addresses, domain names, or any other similar
designations. Should Customer acquire by operation of law or otherwise any
rights in any Sun Trademark, it shall immediately upon request by Sun and at no
expense to Sun assign to Sun all such rights and associated goodwill and related
instruments (e.g., applications and/or registrations). Customer shall assist Sun
as necessary to protect and maintain Sun's rights worldwide in the Sun
Trademarks, including giving prompt notice to Sun of any potential infringement
thereof, and cooperating with Sun in the preparation, execution and recording of
legal documents necessary to register or otherwise protect the Sun Trademarks.
Customer may refer to Sun products by their associated Sun Trademarks in
Customer's advertising or marketing materials, provided that the Sun trademarks
are (i) attributed to Sun Microsystems, Inc according to the trademark legend in
the TM Guidelines and in an appropriate location in such materials; and, (ii)
such reference is not misleading and complies with the then current "Sun
Trademark and Logo Policies" and "Advertising Guide" (the "TM Guidelines"), both
of which may be modified from time-to-time. Sun reserves the right to approve
all such materials, and Customer agrees to promptly modify any materials that do
not comply with this Paragraph (a). Copy of the current TM Guidelines may be
obtained by contacting the Sun Trademark - Intellectual Property Group at
415.785.8095, or email to [email protected].
(b) Logo Use Permission. Customer may use the "Sun Software Subscription"
logo and "Sun Channel Affiliate" special program logo (collectively, the
"Logos") depicted in Exhibit A only: (i) in the exact form of approved camera-
ready logo artwork provided by Sun; (ii) in pre-sale advertising and marketing
materials that prominently display Customer's own corporate name and logo, but
not on or in product, product media, shipping containers, packaging,
documentation, or other items that accompany Customer's products at or after the
point of sale; (iii) if the following legend on the page where the Logos appear
is used: "The Sun Software Subscription logo and The Sun Channel Affiliate
special program logo are trademarks or registered trademarks of Sun
Microsystems, Inc., in the U.S. and other countries"; (iv) in a manner no more
prominent than Customer's corporate name and logo; and, (v) in accordance with
the then current TM Guidelines.
(c) URL Domain Name Mark Use Permission. Customer may use the URL Domain
Name Mark incorporated into the URL domain name
WWW.UNIDIRECT.COM/SUNSOFTSERVICES/, regardless of where registered, only: (i) on
and in connection with a single web site that is maintained by Customer; (ii) if
the single web site is resident on a server in the United States; (iii) if the
single web site is dedicated to Sun Software Subscription Certificate Kit
products, services, technologies, and information; and, (iv) if the single web
site conforms to the Quality Standards set forth below. The single web site
maintained by Customer satisfying the conditions stated in subparts (i) through
(iv) shall mean the "Customer's Web Site".
(d) Quality Standards. Customer's Web Site shall conform to all standards
and requirements set forth in this subparagraph (d) (the "Quality Standards").
Customer shall give prompt written notice to Sun of any compliant or other
indication by any customer, user, or other third party that Customer's Web Site
may not conform to the Quality Standards. Upon notice from Sun at any time,
Customer shall correct any lack of compliance with the Quality Standards by
promptly making any modifications to Customer's Web Site necessary to meet the
Quality Standards and shall provide to Sun written confirmation of the specific
modifications or steps taken to ensure conformance.
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Sun Confidential Agreement No. 9280
(i) Content. Content of Customer's Web Site shall include
advertising, news, pertinent information, downloadable
Subscription Kits, and hotlinks. Customer's Web Site shall also
contain sufficient advertising space exclusively for Sun's use
to promote the Subscription Kits.
(ii) Industry Standards. Customer's Web Site shall meet an overall
standard of quality as high or higher than: (a) the standard of
quality met by all other web sites of Customer; (b) the
standard of quality met by the Sun Microsystems, Inc. web site;
and, (c) the standard of quality met by the web sites of other
prominent and reputable companies in the computer industry.
Customer's Web Site shall be accurate, up-to-date, visually and
aurally appealing, and in no way misleading or deceptive.
(iii) Hotlinks. All hotlinks Customer wishes to include on Customer's
Web Site shall be approved in advance by Sun, which approval
shall be within Sun's sole discretion. Customer shall provide
Sun with notice identifying each new hotlink it wishes to add
to Customer's Web Site and Sun shall either approve or reject
the hotlink in writing within five (5) business days. Upon
five (5) business days notice from Sun, Customer shall remove
from Customer's Web Site any hotlink specified by Sun within
it's sole discretion.
(iv) Advertising. Within fifteen (15) business days prior to
placement of any advertisement on Customer's Web Site, Customer
shall provide an advertising schedule to Sun for Sun's
approval. Sun will either approve or reject the advertising
schedule in writing within ten (10) business days. Upon five
(5) business days notice from Sun, Customer shall remove from
Customer's Web Site any advertisement specified by Sun within
it's sole discretion.
(v) Support and Performance Measures. Customer will provide to Sun
for its approval information on staffing, support, reliability,
and response time for Customer's Web Site.
(vi) Compliance with Laws. Customer shall comply with all applicable
Import and Export laws, all other applicable laws, rules and
regulations in the operation and maintenance of Customer's Web
Site and shall not violate or infringe any rights of third
parties.
(vii) Damage to Sun's Reputation. Customer will not operate
Customer's Web Site or use the URL Domain Name Mark in any
manner which, within Sun's sole opinion, would be deemed to be
obscene, pornographic, excessively violent or otherwise in poor
taste or unlawful.
(viii) Evaluation and Termination by Sun. Within ten (10) business
days prior to Customer launching Customer's Web Site live,
Customer will provide to Sun samples or mock-ups showing
Customer's intended use of Customer's Web Site. Sun shall
promptly review and approve such intended use in writing, or
shall within five (5) business days provide Customer with
objections and recommended revisions. In the event of Sun's
rejection, Customer shall then have two (2) business days to
either implement Sun's recommended revisions or submit an
alternative proposal.
Within ten (10) business days prior to any significant redesign
of previously approved Customer's Web Site, Customer shall
provide to Sun samples or mock-ups showing such intended
redesign. Sun shall promptly review and approve such redesign
in writing, or within such ten day period provide Customer with
objections and recommended revisions. In the event of Sun's
rejection, Customer shall have ten (10) business days to either
implement Sun's recommended revisions or submit an alternative
proposal.
Sun shall have the right to review and evaluate Customer's Web
Site throughout Term of this Agreement for conformance to the
Quality Standards. Customer will provide all assistance
reasonably necessary for Sun to conduct such review and
evaluation. In the event of Customer's failure to comply with
the Quality Standards upon written notice to Customer, Sun
shall have the right to immediately terminate Customer's
permission to use the URL Domain Name Mark, without further
notice to Customer.
(e) No other Permissions: Revision of Logos and/or URL Domain Name Marks.
Sun grants to Customer no other permission to use the Logos and/or URL Domain
Name Marks. Customer shall promptly modify any use of the Logos and/or URL
Domain Name Marks that do not comply with this Agreement upon notice from Sun
specifying the non-compliance, which noncompliance shall be determined within
Suns sole discretion. At its sole discretion and at any time, Sun may change the
Logos and/or URL Domain Name Marks, or create new Logos and/or URL Domain Name
Marks to replace the Logos and/or URL Domain Marks currently in use. Upon
reasonable notice from Sun, Customer shall promptly modify its use of the Logos
and/or URL Domain Name Marks to conform to any such changed or new Logo and or
URL Domain Name Marks specifications, such that Customer remains, at all times,
in compliance with this Agreement.
(f) DISCLAIMER OF WARRANTIES. SUN MAKES NO WARRANTIES OF ANY KIND,
INCLUDING THE VALIDITY OF SUN'S RIGHTS IN THE LOGOS AND/OR URL DOMAIN NAME
MARKS IN ANY COUNTRY, AND DISCLAIMS ALL WARRANTIES, CONDITIONS, AND SATISFACTORY
QUALITY THAT MIGHT BE IMPLIED BY APPLICABLE LAWS, INCLUDING WARRANTIES AGAINST
INFRINGEMENT OF THIRD PARTY TRADEMARKS.
3 of 6
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Sun Confidential Agreement No. 9280
(g) LIMITATION OF LIABILITY. SUN SHALL NOT BE LIABLE FOR INDIRECT,
PUNITIVE, CONSEQUENTIAL, INCIDENTAL, OR SPECIAL DAMAGES (INCLUDING LOST PROFITS
OR OTHER ECONOMIC ADVANTAGE) UNDER THIS AMENDMENT OR OTHERWISE RELATED TO USING
THE LOGOS AND/OR URL DOMAIN NAME MARKS OR TO TERMINATION OF THIS AMENDMENT,
REGARDLESS OF THE LEGAL THEORY OF RECOVERY, OR WHETHER SUN HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
(h) Indemnification. Customer shall indemnify, defend, and hold Sun
harmless against any loss, liability, damage, cost or expense, including
reasonable attorneys' fees and all consequential and incidental damages, arising
out of any claim or action brought against Sun alleging liability on the basis
of the manufacture, marketing, advertising, distribution, export, sale or use by
any person of any of Customer's products and/or services marketed with the
Logos, or on the basis of any use of the Logos and/or URL Domain Name Marks by
Customer, or on the basis of any maintenance or operation of Customer's Web Site
by Customer; provided, however, that Customer shall not be obligated to
indemnify or defend Sun on account of any claim of trademark infringement to the
extent that Customer is in compliance with this Amendment.
4 of 6
<PAGE>
Sun Confidential Agreement No. 9280
Exhibit A
Depiction of Logo(s)
[LOGO OF SUN MICROSYSTEMS APPEARS HERE]
[LOGO OF SUN SOFTWARE SUBSCRIPTION APPEARS HERE]
5 of 6
<PAGE>
Sun Confidential Agreement No. 9280
Attachment 3
Product Attachment and Territory
Subscription Kit and/or Per Incident Upgrade Product(s) Territory
------------------------------------------------------- ---------
1. Subscription Kit for Software Products listed on U.S. and Canada
Price List
2. Subscription Kit for Catalyst Developer CD/4/ Worldwide
__________________
* This Software Product will receive the Category "B" Annual Volume Discount
as listed on Attachment 2 (Annual Activity Level Matrix) to the Agreement.
6 of 6
<PAGE>
Sun Confidential Agreement No. 9508
Amendment Three
to
Software Subscription Services Outsourcing and Distribution Agreement
between
SunSoft, Inc.
and
UniDirect Corporation
This Amendment Three including Exhibit 1 (the "Amendment") is made to the
Software Subscription Services Outsourcing and Distribution Agreement No. 8944,
effective March 18, 1997, as amended, (the "Agreement"). This Amendment is made
and entered into by and between SunSoft, Inc., a California corporation, located
at 2550 Garcia Avenue, Mountain View, California 94043 ("Sun") and UniDirect
Corporation ("Customer"). This Amendment will be effective on the date signed by
Sun (the "Effective Date"). This Amendment augments the Agreement. To the extent
there is a conflict between the Agreement and this Amendment, the terms of this
Amendment will take precedence over the Agreement with regard to the subject
matter described herein. All capitalized terms used herein shall have the same
meaning set forth in the Agreement, unless otherwise stated.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by
their authorized representatives. All other terms and conditions of the
Agreement shall remain in full force and effect, unless otherwise stated.
<TABLE>
<S> <C>
Sun: Customer:
By: /s/ Brian C. Gentile By: /s/ Bernard Jubb
------------------------------------------ ------------------------------------------
Name: Brian C. Gentile Name: Bernard Jubb
------------------------------------------ ------------------------------------------
(printed or typed) (printed or typed)
Title: V.P., Marker Development Software Services Title: PRESIDENT, UNIDIRECT CT CORP.
------------------------------------------ ------------------------------------------
Date: 6-16-99 6/10/97
------------------------------------------ ------------------------------------------
</TABLE>
General Terms and Conditions
1.0 DEFINITIONS
The following shall be added as a new clause:
1.20 "Sun Developer CD" means the machine-readable, executable code for the Sun
computer software product containing the tools, code samples, white papers, and
miscellaneous information on Sun's current and emerging technologies. The Sun
Developer CD is published four (4) times annually and licensed to End Users on a
subscription basis under terms of the BCL.
2.0 LICENSE TERMS AND CONDITIONS
2.1 License Grant
(a) The license grant clause shall also include license to distribute Sun
Developer CD on a worldwide basis. All references to the Subscription Kit for
Catalyst Developer CD in Amendment One to the Agreement, effective May 20, 1997,
are hereby deleted in their entirety and will have no force and effect
whatsoever
3.0 SUN OBLIGATIONS
The following shall be added as a new clause:
3.4 Promotional Copies of Sun Developer CD. Sun will provide Customer with a
reasonable number of copies of Sun Developer CD at no cost to Customer, up to a
maximum of fifty (50) copies for each publication. Customer is restricted to
using the promotional CDs for activities intended to promote and create End User
demand for the Sun Developer CD subscription (e.g., demonstrations, sales
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<PAGE>
Sun Confidential Agreement No. 9508
promotions, training. etc.). Customer is prohibited from copying or distributing
the promotional CDs, or from using for any other purpose other than as expressly
set forth herein.
.0 CUSTOMER REPORTING REQUIREMENTS; REFUNDS; AND STOCK ROTATIONS
4.1 Reports Customer is obligated to provide to Sun will also include
information concerning the Sun Developer CD. The following shall be added as new
clauses:
4.4 Subscription Renewals. Customer will implement and manage the subscription
renewal process for all Sun Developer CD End User subscribers.
4.5 End User Subscription Database. Customer will cooperate and work with the
database vendor selected by Sun to establish and maintain a current End User
subscriber database. Customer will, at its expense, forward information
pertaining to the End User Sun Developer CD subscriber directly to the database
vendor.
6.0 TERM; TERMINATION; AND SURVIVAL
The following shall be added as a new clause:
6.7 Applicability to this Amendment. All provisions of this Section 6.0 shall
also apply to Sun Developer CD; however, this Amendment may be renewed or
terminated pursuant to terms of this Section 6.0 independently of renewal or
termination of any individual Subscription Kit or Per Incident Upgrade.
7.0 PAYMENT; ANNUAL ACTIVITY LEVEL; AND TAXES
The following clause shall be applicable to Sun Developer CD:
7.1 Payment Terms. In consideration of the rights granted to Customer
hereunder, Customer shall pay to Sun the Fees and other payments for the Sun
Developer CD within thirty (30) days from Sun's invoice date. Sun's acceptance
of this Amendment and any associated order(s) does not imply Sun's approval of
an open line of credit. Credit terms are established by Sun based in part upon
Customer's financial and payment records. Sun reserves the right to place
Customer on credit hold in the event Customer's financial condition ceases to
warrant the credit terms described above. Customer may not be required to pay
the disputed portion of any invoice, pending resolution of that dispute;
provided, however, that notice of the dispute has been forwarded to Sun in
writing within fifteen (15) days of the date of the invoice.
7.2 Payment of Fees and Annual Activity Level. The Annual Activity Level
Matrix for Sun Developer CD is set forth in Exhibit 1 to this Amendment.
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<PAGE>
Sun Confidential Agreement No. 9508
Exhibit 1
Annual Activity Level Matrix
I. Sun Annual Activity Level/Discount Matrix
Discount(s) provided to Customer under this Attachment for the Sun
Developer CD shall be as follows:
<TABLE>
<S> <C>
1. Aggregate Annual Activity Level for Sun Developer CD only: [***]
2. Quarterly Sales Targets: [***]
3. Annual Volume Discount: [***]
4. Value Added Discount [***]. If Customer provides the following
additional services to Sun's satisfaction, Customer will qualify to
receive this discount:
- Actively market and support the Sun Developer CD to
create and continually increase End User market demand,
including but not limited to, participating in all
applicable Sun marketing programs, which may include
features such as cooperative advertising and
promotions.
- Submit on-time monthly sales reporting, including but
not limited to, lead tracking activity, disposition and
follow-up, sales forecast, point-of-sales and other
reporting identified in Section 4.1 of the Agreement.
- Actively recruit and train field sales representatives
on the Sun Developer CD.
- Maintain a minimum of two technical pre-sales support
staff, one dedicated product marketing person, and at
least three full time dedicated sales personnel.
Customer's performance of the foregoing activities will be
evaluated quarterly and determination of whether or not Customer
performed such activities satisfactorily will be made solely by
Sun.
5. Marketing Rebate based on number of products sold to End Users in
previous quarter [***]. This fund will be available to Customer
to fund a variety of promotional activities to create End User
demand for the Sun Developer CD (e.g., print advertising, trade
shows, sales seminars, direct mail marketing collateral, sales
promotions and training expenses). To qualify for this funding,
within ten (10) days from the Effective Date, Customer must
submit to Sun a marketing plan for Sun's approval, and
thereafter, Customer must provide Sun with a quarterly marketing
plan detailing the prior quarter's marketing activities and plans
for the next quarter's marketing activities.
</TABLE>
______________________
* First quarter starts on June 1, 1997 and ends on September 30, 1997.
3 of 3
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
SUN CONFIDENTIAL Agreement No. 11399
Amendment Four to
Software Subscription Services Outsourcing and Distribution Agreement
between
Sun Microsystems, Inc. (successor to SunSoft, Inc.)
and
Rainmaker Systems, Inc. (formerly known as UniDirect Corporation)
This Amendment Four including Exhibit A (the "Amendment") is made to the
Software Subscription Services Outsourcing and Distribution Agreement No. 8944,
as amended (the "Agreement") and entered into by and between Sun Microsystems,
Inc., the successor to SunSoft, Inc. ("Sun") and Rainmaker Systems, Inc.
formerly known as UniDirect Corporation ("Customer"), and is effective as of the
date signed by Sun below. This Amendment is in addition to the Agreement. To the
extent there is a conflict between the Agreement and this Amendment, the terms
of this Amendment shall take precedence over the Agreement with regard to the
subject matter described herein. All capitalized terms used herein shall have
the same meaning set forth in the Agreement, unless otherwise stated. The
parties agree as follows:
1. Paragraph 2.3(b) of the Agreement is deleted in its entirety and replaced by
the following:
(b) Logo Use Permission. Customer may use only the "Authorized Software
Subscriptions" special program logo (the "Logos") depicted in Exhibit A, and
only: (i) in the exact form of approved camera-ready logo artwork provided by
Sun; (ii) in pre-sale advertising and marketing materials that prominently
display Customer's own corporate name and logo, but not on or in product,
product media, shipping containers, packaging, documentation, or other items
that accompany Customer's products at or after the point of sale; (iii) if the
following legend on the page where the Logos appear is used: "Sun, Sun
Microsystems, and the Sun logo are trademarks or registered trademarks of Sun
Microsystems, Inc. in the U.S. and other countries"; (iv) in a manner no more
prominent than Customer's corporate name and logo; and (v) in accordance with
the then current TM Guidelines.
2. Exhibit A (Depiction of Logo(s)) of the Agreement is deleted in its entirety
and replaced by Exhibit A (Depiction of Logo(s)) attached hereto.
3. The last sentence of Paragraph 3.3 of the Agreement is deleted in its
entirety and replaced by the following sentence:
Customer will answer the caller by stating: "Sun Authorized Software
Subscriptions."
Except as expressly amended herein, the Agreement shall remain unaltered and in
full force and effect.
<TABLE>
<S> <C>
Sun Microsystems, Inc. Rainmaker Systems, Inc.
By: /s/ Jay Puri By: /s/ Robert Mason
--------------------------------- ---------------------------------
Name: Jay Puri Name: Robert Mason
--------------------------------- ---------------------------------
Title: VP WW Software & Technology Sales Title: CFO
--------------------------------- ---------------------------------
Date: 4/30/99 Date: 1-15-99
--------------------------------- ---------------------------------
</TABLE>
1
<PAGE>
SUN CONFIDENTIAL Agreement No. 11399
Exhibit A
Depiction of Logo(s)
[LOGO OF SUN(R) MICROSYSTEMS APPEARS HERE]
------------------------------------------
AUTHORIZED SOFTWARE
---------------------------------------
SUBSCRIPTIONS
---------------------------------------
2
<PAGE>
SUN CONFIDENTIAL Agreement No. 14856
Amendment Five to
Software Subscription Services Outsourcing and Distribution Agreement
between
Sun Microsystems, Inc. (successor to SunSoft, Inc.)
and
Rainmaker Systems, Inc. (formerly known as UniDirect Corporation)
This Amendment Five (the "Amendment") is made to the Software Subscription
Services Outsourcing and Distribution Agreement No. 8944, as amended (the
"Agreement") and entered into by and between Sun Microsystems, Inc., the
successor to SunSoft, Inc. ("Sun") and Rainmaker Systems, Inc. formerly known as
UniDirect Corporation ("Customer"), and is effective as of the date signed by
Sun below ("Effective Date"). This Amendment is in addition to the Agreement. To
the extent there is a conflict between the Agreement and this Amendment, the
terms of this Amendment shall take precedence over the Agreement with regard to
the subject matter described herein. All capitalized terms used herein shall
have the same meaning set forth in the Agreement, unless otherwise stated. The
parties agree as follows:
Customer may perform under the Agreement using the registered dba "IN STEP
Solutions" and using the IN STEP Solutions logo current as of the Effective Date
("IN STEP Logo"). Specifically, Customer may use the IN STEP Solutions name and
IN STEP Logo where the Agreement requires use of the Customer's own corporate
name and logo. Customer may not, however, use the IN STEP Solutions name or Logo
in a manner to confuse third parties or the public as to the origin of goods or
services distributed or offered by Customer.
Notwithstanding any of the foregoing, Customer remains bound by and subject to
all terms and conditions of the Agreement, and acknowledges that Customer is
fully responsible for all acts and omissions carried out under the name IN STEP
Solutions.
Except as expressly amended herein, the Agreement shall remain unaltered and in
full force and effect.
<TABLE>
<S> <C>
Sun Microsystems, Inc. Rainmaker Systems, Inc.
By: /s/ Jay Puri By: /s/ Robert Mason
--------------------------------- ---------------------------------
Name: Jay Puri Name: Robert Mason
--------------------------------- ---------------------------------
Title: VP WW Software & Technology Sales Title: CFO
--------------------------------- ---------------------------------
Date: 4/30/99 Date: 2-12-99
--------------------------------- ---------------------------------
</TABLE>
1
<PAGE>
SUN CONFIDENTIAL Agreement No. 15171
Amendment Six to
Software Subscription Services and Distribution Agreement
between
Sun Microsystems, Inc. (successor to SunSoft, Inc.)
and
Rainmaker Systems, Inc. (formerly known as UniDirect Corporation)
This Amendment Six ("the Amendment") is made to the Software Subscription
Services Outsourcing and Distribution Agreement No. 8944, as amended
(the "Agreement") and entered into by and between Sun Microsystems,
Inc., the successor to Sunsoft, Inc. ("Sun") and Rainmaker Systems, Inc.
formerly known as UniDirect corporation ("Customer"), and is effective
as of the date signed by Sun below ("Effective Date"). This Amendment is
in addition to the Agreement. To the extent there is a conflict between
the Agreement and this Amendment, the terms of this Amendment shall
take precedence over the Agreement with regard to the subject matter
described herein. All capitalized terms used herein shall have the same
meaning set forth in the Agreement, unless otherwise stated. The parties
agree as follows:
The term of the Agreement is extended for an additional 30 days, ending on
April 16, 1999.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their authorized representatives. All other terms and
conditions of the Agreement shall remain in full force and effect, unless
otherwise stated.
Sun Microsystems, Inc. Rainmaker Systems, Inc.
<TABLE>
<S> <C>
Sun Microsystems, Inc. Rainmaker Systems, Inc.
By: /s/ Jay Puri By: /s/ Michael Silton
--------------------------------- ---------------------------------
Name: Jay Puri Name: Michael Silton
--------------------------------- ---------------------------------
Title: VP WW Software & Technology Sales Title: CEO
--------------------------------- ---------------------------------
Date: 4/30/99 Date: 3-29-99
--------------------------------- ---------------------------------
</TABLE>
<PAGE>
SUN CONFIDENTIAL Agreement No. 15321
Amendment Seven to
Software Subscription Services Outsourcing and Distribution Agreement
between
Sun Microsystems, Inc. (successor to SunSoft, Inc.)
and
Rainmaker Systems, Inc. (formerly known as UniDirect Corporation)
This Amendment Seven (the "Amendment") is made to the Software Subscription
Services Outsourcing and Distribution Agreement No. 8944, as amended (the
"Agreement") and entered into by and between Sun Microsystems, Inc., the
successor to SunSoft, Inc. ("Sun") and Rainmaker Systems, Inc. formerly known as
UniDirect Corporation ("Customer"), and is effective as of the date signed by
Sun below ("Effective Date"). This Amendment is in addition to the Agreement. To
the extent there is a conflict between the Agreement and this Amendment, the
terms of this Amendment shall take precedence over the Agreement with regard to
the subject matter described herein. All capitalized terms used herein shall
have the same meaning set forth in the Agreement, unless otherwise stated. The
parties agree as follows:
1. The first two lines of Paragraph 2.3(c) of the Agreement are deleted in
their entirety and replaced with the following;
"(c) URL Domain Name Mark Use Permission. Customer may use the URL Domain Name
Mark incorporated into the URL domain name WWW.INSTEPSOLUTIONS.COM/
SUNAUTHORIZEDSOFTWARESUBSCRIPTIONS/, regardless of where registered, only: (i)
on and in Connection with a..."
2. Paragraph 3.2 of the Agreement is deleted in its entirety and replaced with
the following:
"32 Customer Access to Sun Database. Customer shall have access to Sun's
Software and Technologies customer database ("SWAT Database"), which is
Confidential Information of Sun, only via a third party, bonded mail house
preapproved by Sun ("Approved Mailhouse"), under the following conditions:
(a) All Customer mailers relaying any information on Sun products and/or
services must be approved by Sun prior to mailing.
(b) The Sun SWAT Database will only be sent or disclosed to an Approved
Mailhouse upon Sun's preapproval of Customer's mailer program and the mailer
itself.
(c) Each SWAT Database pull that is sent to the Approved Mailhouse can only be
used once, for the approved mailer program.
(d) Sun-designated Sun employees must be included in each drop of every mailing
relating to Sun products and/or services.
(e) All nixies/returns and other database updates must be sent by Customer to a
Sun specified vendor on a monthly basis or as otherwise determined by Sun.
1
<PAGE>
SUN CONFIDENTIAL Agreement No. 15321
(f) electronic-mail communications from or on behalf of Customer to any contact
or entry in the SWAT Database are prohibited.
(g) Customer must fully comply with the Sun Privacy Policy and any other rules,
regulations and guidelines set by Sun regarding copy, creative, layout, list
strategy, privacy, database usage and any other procedures/policies related to
direct marketing and telesales.
(h) Except as expressly permitted herein, Customer may not use the SWAT
Database or any part thereof, or sell, exchange, rent, distribute or transfer
the SWAT Database or any part thereof in any way to any partner, vendor, channel
member, organization or third party."
3. Paragraph 6 of the Agreement is modified as follows:
"The term of the Agreement shall extend from April 16, 1999 to March 17, 2000
(the "Extended Term"), and at the end of the Extended Term, shall be
automatically renewed for an additional one (1) year period, unless at least
sixty (60) days prior to the end of the Extended Term either party gives the
other written notice of its intent not to renew for such additional one year
period."
Except as expressly amended herein, the Agreement shall remain unaltered and in
full force and effect.
Sun Microsystems, Inc. Rainmaker Systems, Inc.
By: /s/ Glenn Cross By: /s/ Michael Silton
------------------------ ------------------------
Name: Glenn Cross Name: Michael Silton
------------------------ ------------------------
Title: VP Sales Title: CEO
------------------------ ------------------------
Date: 5/19/99 Date: 5/5/99
------------------------ ------------------------
2
<PAGE>
SUN CONFIDENTIAL Agreement No. 10925
ASSIGNMENT OF TERMS AND CONDITIONS
OF OUTSOURCING AGREEMENT
AND APPROVAL OF ASSIGNMENT
This Assignment is made and entered into by and between Sun Microsystems, Inc.
("Sun"), UniDirect Corporation (the "Assignor"), and Rainmaker Systems, Inc., a
california corporation, located at 1800 Green Hills Road, Scotts Valley, CA
95066 (the "Assignee"), and is effective on the date set forth below on which
the Assignment is signed by Sun. The parties agree as follows:
1. Sun and Assignor entered into the Sun Software Subscription Services
Outsourcing and Distribution Agreement No. 8944, effective March 18, 1997,
including all amendments thereto (the "Agreement"). Under the Agreement,
Assignor obtained the right to distribute Subscription Kits and Per Incident
Upgrades as defined in the Agreement. Paragraph 15.6 of the Agreement requires
Sun's prior written approval of any assignment or transfer of the Agreement by
Assignor.
2. Assignor has changed its corporate name from UniDirect Corporation to
Rainmaker Systems, Inc. and has requested Sun's approval for assignment of the
Agreement to the Assignee.
3. Subject to the following conditions, Sun hereby gives its approval to the
assignment and transfer of the Agreement from the Assignor to the Assignee:
(a) Assignee accepts and agrees to all the terms and conditions
of the Agreement, including but not limited to the payment
obligations of Assignor and agrees to be bound thereby, and
Assignee agrees to perform all duties and obligations set
forth in such Agreement.
4. In witness whereof, the parties have caused this Assignment to be executed
by their authorized representatives.
Assignor Accepts Assignee Accepts: Sun Approved:
Name: Robert Mason Name: Robert Mason Name: ________________
----------------- -----------------
By: /s/ Robert Mason By: /s/ Robert Mason By:___________________
------------------- -------------------
Title: CFO & Secretary Title: CFO & Secretary Title:________________
--------------- ---------------
Date: 8-25-98 Date: 8-25-98 Date:_________________
--------------- ---------------
1
<PAGE>
EXHIBIT 10.21
UNIDIRECT CORPORATION
OUTSOURCING SERVICES AGREEMENT
This Outsourcing Services Agreement ("Agreement") is entered as of
July 21, 1997 ("Effective Date") by and between UniDirect Corporation
("UniDirect"), a California corporation, with its principal place of business at
1800 Greenhills Road, Suite 201, Scotts Valley, California 95066, and FTP
Software, Inc. ("FTP"), a Massachusetts corporation, with its principal place of
business at 100 Brickstone Square, Fifth Floor, Andover, Massachusetts 01810.
AGREEMENT
---------
In consideration of the mutual covenants contained in this Agreement
and for other good and valuable consideration, the adequacy and receipt of which
are hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
a. "Business Unit" shall mean FTP'S VIP Network(TM) Applications
Business Unit, through which copies of Products, including Support Services and
Subscription Services, are sold.
b. "FTP Gross Sales" shall mean the Business Unit's gross
sales in the Territory of Subscription Services, Support Services and Upgrades.
c. "Net Sales" shall mean UniDirect's gross sales made pursuant to
this Agreement less all applicable discounts actually given and returns actually
made.
d. "Products" shall mean, collectively, all software products,
Support Services and Subscription Services offered by the Business Unit for
commercial sale as of the Effective Date or during the term of this Agreement.
e. "Retail Prices" shall mean the prices for the Subscription
Services, Support Services and Upgrades as set forth on Attachment A hereto. FTP
------------
may amend the Retail Prices from time to time by attaching an amended Attachment
----------
A and providing such amended attachment to UniDirect, such amendment to be
- -
effective thirty (30) days after UniDirect's receipt thereof.
f. "Subscription Services" shall mean Business Unit Product
update services whereby the purchaser shall receive from FTP, or an authorized
FTP agent, during the period specified therein, all new versions of the Products
including major releases (including, without limitation, incremented version
numbers to the left of a decimal point), minor releases (i.e., incremented
version numbers to the right of a decimal point), all new or previously released
versions of
<PAGE>
the Product for different computer platforms (i.e., different hardware and
system software) and eligibility to participate in certain promotional offers
made by FTP (i.e., any upgrade promotions for new FTP products).
g. "Support Services" shall mean Business Unit Product support
services whereby the purchaser is entitled to receive from FTP, or an authorized
FTP agent, for the period specified therein and during FTP's normal business
hours, technical assistance for the Products. Such support shall be available by
telephone, U.S. mail, electronic mail and fax.
h. "Territory" shall mean the United States and Canada.
i. "Upgrade" shall mean a one-time Product upgrade whereby the
purchaser shall receive from FTP, or an authorized FTP agent, all new versions
of the Products made commercially available by FTP as of the Effective Date
including major releases (including, without limitation, incremented version
numbers to the left of a decimal point), minor releases (i.e., incremented
version numbers to the right of a decimal point), all new or previously released
versions of the Product for different computer platforms (i.e., different
hardware and system software) and eligibility to participate in certain then
effective promotional offers made by FTP (i.e., any upgrade promotion for new
FTP products).
2. Outsourcing Services.
---------------------
a. FTP hereby grants to UniDirect for the term of this Agreement,
and UniDirect accepts, a non-sublicenseable, non-assignable, non-transferable
appointment and license to market, sell and distribute Support Services,
Subscription Services and Upgrades to end users of the Products.
b. Beginning thirty (30) days after the Outsource Start Date, the
license granted by FTP to UniDirect in Section 2.a above shall be exclusive with
regard to all sales during the term of this Agreement of Support Services and
Subscription Services which do not occur upon the initial Product license
grants. Such license is non-exclusive with regard to all other sales. During the
thirty (30) days described above, the parties will work in good faith to
transition the outsource services described herein and UniDirect will receive
from FTP payment for the full value of UniDirect's fulfillment discount (as set
forth in Section 4 below) for all FTP sales pursuant to this Section 2.b which,
following such thirty (30) day period, would have been within UniDirect's
exclusive rights hereunder.
c. UniDirect will use its best efforts to successfully market
(including, without limitation, maintaining a well-staffed and Product educated
sales force, adequate inventory and prompt creation of appropriate promotional
materials), sell and distribute the Support Services, Subscription Services and
Upgrades on a continuing basis and to comply with good business practices,
2
<PAGE>
industry standards and all laws and regulations relevant to this Agreement or
the subject matter hereof.
d. The Support Services, Subscription Services and Upgrades shall be
in every way identical to the support services, subscription services and
upgrades made commercially available by the Business Unit to its customers for
the software Products.
e. FTP acknowledges and agrees that the Support Services and
Subscription Services sold by UniDirect to end user customer hereunder contain
certain terms and conditions between FTP and an end user customer upon such
customer's acceptance thereof. FTP agrees to honor and be bound by the terms and
conditions of all such agreements.
3. FTP Software Services.
---------------------
a. FTP hereby grants, and UniDirect accepts, a non-exclusive,
non-sublicenseable, non-assignable, non-transferable, personal, royalty-free
license to use FTP's trademarks, service marks, logos and the trade name "FTP
Software" (collectively the "Marks") in connection with the outsourcing services
performed by UniDirect hereunder in accordance with the license terms set forth
in this Section 3. UniDirect shall submit all materials bearing the Marks,
including without limitation, advertisements, promotional materials and
invoices, to FTP for review and written approval prior to initial release, which
approval shall not be unreasonably withheld or delayed. UniDirect shall
initially perform the services described in this Agreement using the name "FTP
Software Services" ("FTPSS"). UniDirect shall not use any marks confusingly
similar to the Marks during or after the term of this Agreement. It is the
parties' intention that UniDirect will begin performance hereunder as FTPSS six
(6) weeks following the Effective Date, or the earliest commercially reasonable
date, if later (hereinafter, the date on which UniDirect begins its outsourcing
performance as FTPSS shall be referred to as the "Outsource Start Date")).
b. (i) UniDirect shall comply with reasonable standards regarding
the Marks supplied to UniDirect by FTP from time to time in order to maintain
the quality set by, and under the control of, FTP. At FTP's request, UniDirect
shall provide FTP with samples and specimens of all materials bearing the Marks
for FTP's inspection. UniDirect acknowledges FTP's representation of its
ownership of the Marks, agrees that UniDirect shall do nothing inconsistent with
such ownership and agrees that all use of the Marks shall inure to the benefit
of FTP. UniDirect agrees that neither by virtue of this Agreement nor
performance contemplated hereunder does UniDirect acquire any rights, title, or
interest in or to the Marks other than the license granted in this Section 3.
UniDirect shall not attack FTP's title to the Marks. Upon termination or
expiration of this Agreement, the license granted in this section shall
terminate and UniDirect shall immediately
3
<PAGE>
discontinue all use of the Marks including, without limitation, within
UniDirect's catalog, not later than UniDirect's next printing of its catalog,
which shall in no event occur no later than six (6) months from the date of such
termination or expiration, and shall destroy all printed or other materials
bearing any of the Marks. The goodwill associated therewith shall remain the
property of FTP and shall not be derogated by UniDirect.
(ii) UniDirect shall not remove any FTP or FTP supplier's
markings, logos, colors or other insignia which are affixed to Products at the
time of FTP's shipment. Only Products licensed from FTP shall bear FTP's
markings, logos or other insignia. UniDirect shall not add any additional logos,
markings or other insignia to the Products.
(iii) FTP expressly prohibits any other direct or indirect use,
registration or reference to FTP's name, trademarks, trade names, logos or other
insignia, or any name, trademark, trade name, logo or other insignia confusingly
similar thereto, except as may be explicitly authorized by FTP herein.
4. Fulfillment Discount.
--------------------
a. Within ten (10) business days of the Effective Date, the parties
will agree on a "Baseline." For purposes of this Agreement, the Baseline shall
be the average quarterly FTP Gross Sales of Subscription Services and Support
Services during the previous four (4) consecutive quarters calculated by adding
such quarterly FTP Gross Sales figures for the period beginning July 1, 1996 and
ending June 30, 1997 and dividing the result by four (4). To the extent the FTP
Gross Sales figure relied upon by the parties in calculating the Baseline is
subsequently determined to be overstated, the Baseline shall be recalculated
using the FTP Gross Sales for such period as reduced by the overstated amount.
b. Beginning on the Outsource Start Date and continuing until such
time as UniDirect's Net Sales of Subscription Services and Support Services
during a particular calendar quarter exceed the Baseline, UniDirect shall
receive the following discounts from the Retail Prices for the remainder of such
quarter:
(i) For UniDirect's first [***] of Net Sales of Support Services
per calendar month, [***] off the Retail Price; this discount shall increase to
[***] for all sales of Support Services during such month which exceed [***]
(ii) For UniDirect's first [***] combined Net Sales of
Subscription Services and Upgrades per calendar month, [***] off the Retail
Price; this discount shall increase to [***] for all sales of Subscription
Services and
4
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
Upgrades during such month which exceed [***]
(iii) In furtherance of the foregoing, UniDirect shall submit to
FTP monthly reports within five (5) days after the end of such month, which
reports shall each specify, by end user, the Support Services, Subscription
Services and Upgrades sold during such month. Each such report shall be in a
form mutually acceptable to both parties.
c. Beginning on the first day of the first quarter following a
quarter in which UniDirect's Net Sales of Subscription Services and Support
Services exceed the Baseline, and continuing thereafter for duration of this
Agreement, UniDirect shall receive the following discounts from the Retail
Prices:
(i) For UniDirect's first [***] Net Sales of Support Services
per month, [***] off the Retail Price; this discount shall increase to [***] for
all sales of Support Services during such month which exceed [***]
(ii) For UniDirect's first [***] Net Sales of Subscription
Services and Upgrades combined per month, [***] off the Retail Price; this
discount shall increase to [***] for all sales of Subscription Services and
Upgrades during such month which exceed [***]
d. Within six (6) months after the Outsource Start Date and
continuing thereafter, [***] Failure to achieve this milestone at any six (6)
month interval after the Effective Date shall be a material breach of the
Agreement pursuant to which FTP may terminate the Agreement or remove
exclusivity, at its option.
e. (i) For the period beginning on the first (1st) day of the
seventh (7th) month following the Outsource Start Date and ending on the last
day of the twelfth (12th) month following the Outsource Start Date, [***]
Failure to achieve this milestone shall be a material breach of the Agreement
pursuant to which FTP may terminate the Agreement or remove exclusivity, at its
option.
(ii) For the period beginning on the first (1st) day of the
thirteenth (13th) month following the Outsource Start Date and ending on the
last day of each six (6) month period thereafter, [***]
5
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
[***] For each such six (6) month period, failure to achieve this milestone over
the course of such period shall be a material breach of the Agreement pursuant
to which FTP may terminate the Agreement or remove exclusivity, at its option.
5. Payment and Supply Terms.
------------------------
a. Each month UniDirect shall order from FTP and store such
quantities of Upgrades and Products required in UniDirect's normal performance
of outsourcing services under this Agreement as are anticipated by UniDirect to
fulfill one (1) month of customer orders; provided, however, that UniDirect
shall limit its orders of such Upgrades and Products from FTP to four (4) such
orders per month during the first six (6) months following the Outsource Start
Date and to three (3) such orders per month thereafter. All such purchases are
on a consignment basis. All right, title and interest in and to the consigned
inventory shall, at all times, remain with FTP. UniDirect shall have no right,
title or interest in such consigned inventory. UniDirect shall have no right to
pledge, mortgage or otherwise encumber, and UniDirect shall keep free of any
pledge mortgage or other encumbrance, all of the Products received by UniDirect.
Except as disclosed prior to FTP, UniDirect will not store or hold any of the
consigned Products at any location other than the UniDirect facility to which
FTP ships such inventory and UniDirect will not locate its executive offices
outside the United States. UniDirect shall keep all Products segregated (whether
physically or electronically) from all other goods and property held by
UniDirect, including, without limitation, any other FTP products which UniDirect
may possess pursuant to other, separate agreements with FTP. UniDirect shall not
open or remove the shrink wrap or other license from the Products. UniDirect
shall deliver to FTP, within five (5) business days after the end of each
calendar month, a purchase order for all such Upgrades and Products sold by
UniDirect during the previous month.
b. For each Upgrade or other Product returned to and accepted by
UniDirect in compliance with FTP's policies and procedures for product returns,
including without limitation, appropriate FTP approvals, UniDirect shall receive
a credit from FTP for such return in an amount equal to UniDirect's Net Sale for
such Upgrade or other Product. FTP shall credit the aggregate amount of returns
for such previous month against amounts due FTP from UniDirect and FTP shall
accordingly reduce FTP's invoice to UniDirect by a corresponding amount.
c. All payments hereunder shall be due and payable thirty (30) days
after the date of FTP invoice and shall be paid in U.S. dollars drawn on a U.S.
bank. All shipments to UniDirect shall be made F.O.B. FTP Collect. Each party
shall be responsible for all taxes (except taxes based on the other party's
income), duties and other governmental assessments applicable to such party.
6
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
6. Cooperative Sales and Marketing.
-------------------------------
a. FTP shall provide UniDirect, within three (3) weeks of the end of
each calendar quarter, with a cooperative marketing advertising credit in the
amount of [***] of UniDirect's Net Sales for copies of Product sold
by Unidirect as reported pursuant to Section 4(b)(iii) and for which UniDirect
has submitted payment to FTP, to be used by UniDirect within one hundred twenty
(120) days after the beginning of the calendar quarter for which the credit was
provided and solely for marketing and promoting the Support Services,
Subscription Services and Upgrades consistent with FTP's Cooperative Marketing
Guidelines. In addition to these advertising credits, FTP may, from time to time
and subject to its prior written approval, provide UniDirect with market
development funds to assist UniDirect in achieving the milestones set forth in
Section 4 above. No later than thirty (30) days after the Effective Date, FTP
shall approve and pay to UniDirect an initial market development fund of [***].
b. UniDirect will keep accurate records of leads forwarded to it by
FTP technical support personnel, including the name of the referring person and
whether or not such referral resulted in a sale by UniDirect. UniDirect shall
deliver such reports to FTP on a monthly basis (within five (5) days after the
end of each month) for FTP's use in connection with its business.
7. Customer/Lead Databases and Information.
---------------------------------------
a. The parties acknowledge that access to certain Business Unit's
customer information is critical to UniDirect's ability to meet its obligations
under this Agreement. FTP therefore shall deliver to UniDirect, within four (4)
weeks after the Effective Date, copies of (i) all relevant Business Unit
customer and lead/prospect databases that FTP maintains in connection with the
Business Unit's sales, marketing and promotional activities, including but not
limited to the Business Unit's service, registration, customer, lead/prospect
and credit databases and (ii) all other documents and information relating to
such databases which are reasonably necessary or appropriate for UniDirect's use
of the database information. FTP shall transfer the information specified in
this Section 7.a to UniDirect in electronic format (such format to be as
mutually agreed upon by the parties in good faith). FTP shall provide UniDirect
with reasonable and appropriate assistance in implementing such databases on
UniDirect's data processing system. All information provided by FTP to UniDirect
pursuant to this Section 7.a shall be Proprietary Information (defined below);
provided, however, that such information shall not be deemed Proprietary
Information of FTP to the extent it (a) is or becomes (through no improper
action or inaction of UniDirect) generally available to the public, (b) was
rightfully disclosed to UniDirect by a third party, or (c) was independently
developed by UniDirect's employees who had no access to such information.
7
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
b. In connection with obligations under this Section 7, FTP will
assist UniDirect, and in good faith, in generating and acquiring names,
addresses, telephone numbers and other information regarding new customers and
leads/prospects. FTP shall regularly (at such intervals as agreed upon in good
faith by the parties) update its customer and lead/prospect databases and shall
provide such updated information to UniDirect at such times and in such formats
as requested by UniDirect.
c. Promptly after the Effective Date, the parties will implement a
program and/or process for the exchange of updated information from their
respective customer and lead/prospect databases.
d. Upon termination of this Agreement pursuant to Section 14:
(i) Each party shall retain ownership of the customer and
lead/prospect databases, records and related information which that party
possessed and owned prior to the effectiveness of this Agreement. Each of
UniDirect and FTP shall destroy all records and other information not co-owned
by such party as specified in Section 7.d(ii), below and which are owned by the
other party;
(ii) The parties shall jointly own all records and databases (a)
pertaining to customers who purchase from UniDirect any Support Service,
Subscription Service or Upgrade during the term of this Agreement, where such
customers were not under contract for or did not purchase any Support Services,
Subscription Services and/or Upgrades during the six (6) months prior to the
Effective Date, and (b) which UniDirect creates or modifies as a result of its
performance of outsourcing services under this Agreement during the term of the
Agreement with FTP's prior written consent. UniDirect shall not use any
information in the records and databases described in this Section d(ii) to
solicit or sell products which are competitive with the Products. No further
rights to records or databases as contained in the paragraph shall accrue upon
expiration or other termination of this Agreement.
8. Other Obligations of the Parties.
--------------------------------
a. During the term of this Agreement, UniDirect shall promptly
forward all customer inquiries and requests in connection with the Products to
FTP or an authorized FTP agent or reseller, as designated by FTP. FTP shall
forward all appropriate customer inquiries regarding the Support Services,
Subscription Services and Upgrades to UniDirect. In addition, FTP shall maintain
its toll-free customer service telephone number, (800) 282-4FTP, and shall
provide in connection therewith a recorded customer service greeting and an
automatic forwarding option to UniDirect (directly to such telephone number(s)
designated by
8
<PAGE>
UniDirect or as otherwise agreed to by the parties) for orders for and inquiries
about Support Services, Subscription Services and Upgrades.
b. UniDirect shall be available a minimum of 6:00 a.m. to 5:00 p.m.,
Pacific time, Monday through Friday, on normal business days. UniDirect shall
answer the telephone as "FTP Software Services" and obtain all appropriate
customer information.
c. Upon receipt of a telephone order from an FTP customer, UniDirect
shall process the order, including credit card verification. UniDirect shall be
responsible for all credit card discounts and charge back fees. UniDirect shall
then ship the Products within one (1) business day of such order in accordance
with good commercial practices to, among other things, avoid damage to the
Product. UniDirect shall be solely responsible for all costs and expenses
associated therewith.
d. UniDirect shall not, without FTP's prior written consent, use any
Proprietary Information or Product (including, without limitation, transfers or
use between, by or among UniDirect or any affiliate) received pursuant to this
Agreement regarding FTP customers for any purpose other than as contemplated by
this Agreement. During the term of this Agreement, UniDirect may not sell other
FTP products or other entities' products to FTP prospects and customers without
the prior written consent of FTP.
e. The parties shall each designate on Attachment B a contact person
------------
("Contact Person"); a party may amend its designation of its Contact Person from
time to time by attaching an amended Attachment B signed by such party and
------------
providing the amended Attachment B to the other party in accordance with the
------------
notice provisions of Section 17.d, such amendment to be effective upon receipt
by the party to whom it is being noticed. Each Contact Person shall communicate
on a regular basis with the other Contact Person regarding the marketing, sales
and distribution activities of the parties' hereto and shall seek to determine
ways in which to coordinate the respective marketing, sales and distribution
activities of the parties.
f. For no fewer than sixty (60) days following the Effective Date,
FTP shall designate a product manager or other highly skilled, qualified and
knowledgeable individual capable of providing technical support for and training
regarding the Products and who will, at such times as mutually agreed upon by
the parties, provide Product technical support and training to UniDirect's
employees and contractors.
9
<PAGE>
g. FTP shall provide and license to UniDirect with a reasonable
number of copies of the Products (as mutually determined by the parties) for use
exclusively in support of UniDirect's performance hereunder and subject to all
the terms and conditions of FTP's end user license as provided therewith.
h. FTP may, in its discretion, make its current and any future
electronic point-of-sale system and electronic distribution system available to
UniDirect in connection with UniDirect's activities hereunder.
i. FTP shall provide, maintain and display on its worldwide web page
a "Buy Button" for the Support Services, Subscription Services and Upgrades. For
purposes of this Agreement, a "Buy Button" means an appropriately labeled
graphical image which may be selected by a user using a worldwide web browser
such as Netscape Navigator or Microsoft Internet Explorer and which contains a
hyperlink to a worldwide web page provided and maintained by UniDirect. FTP
acknowledges and agrees that the Buy Button shall be the exclusive non-point of
sale means for purchasing Support Services, Subscription Services and Upgrades
electronically.
9. Limited Liability; Force Majeure. IN NO EVENT SHALL FTP BE
--------------------------------
LIABLE FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES INCLUDING WITHOUT
LIMITATION LOSS OF INCOME, DATA, USE OR INFORMATION EVEN IF FTP HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL THE LIABILITY OF FTP
EXCEED TWENTY-FIVE THOUSAND DOLLARS ($25,000) OR THE AMOUNT PAID FOR THE PRODUCT
OR SERVICE GIVING RISE TO THE CLAIM, WHICHEVER IS GREATER, REPAIR, REPLACEMENT
OR REFUND (AT FTP'S OPTION) IS THE EXCLUSIVE REMEDY FOR A DEFECT. EXCEPT FOR
PAYMENT OBLIGATIONS HEREUNDER, NEITHER PARTY SHALL BE LIABLE FOR ANY FAILURE OR
DELAY DUE TO MATTERS BEYOND ITS REASONABLE CONTROL.
10. Reports; Examination of Books. No later than the fifth (5th)
-----------------------------
business day of each month, UniDirect shall submit to FTP a written report
detailing UniDirect's FTPSS activities during the previous month, including
UniDirect's sales of Support Services, Subscription Services and Upgrades.
UniDirect shall submit all such reports to FTP in electronic form and in the
ASCII format specified in Attachment C hereto or as otherwise agreed. FTP may,
------------
at its sole expense, during UniDirect's normal business hours and with seventy
two (72) business hours' prior written notice, but in no event more than two (2)
times each calendar year, have an independent certified public accountant
examine the relevant books and records of UniDirect to verify UniDirect's
compliance with its obligations under this Agreement; provided such accountant
is bound in writing to maintain in strict confidence and not to disclose or use
any UniDirect information except as necessary to disclose to FTP for the above
purposes. Prior to the
10
<PAGE>
Outsource Start Date, UniDirect shall permit FTP or the authorized
representative to perform an inventory audit consistent with the terms described
above.
11. Indemnification.
---------------
a. Notwithstanding Section 9 above, FTP will indemnify UniDirect for
reasonable costs, damages, and attorney's fees finally awarded against UniDirect
or agreed to by FTP in any settlement resulting from any claim that the Products
infringe a valid United States and/or Canada patent, copyright, trademark or
trade secret, and FTP will, at its option and expense, (i) procure for UniDirect
the right to continue distributing the Products, (ii) replace or modify the
Products so they become non-infringing, or (iii) refund the license fee for the
infringing Products prorated on a straight line basis over five (5) years,
provided UniDirect (a) promptly notifies FTP of the action, (b) immediately
discontinues distributing the Products, and (c) allows FTP sole control of such
action and gives FTP reasonable assistance in the defense of the action. FTP
shall have no liability for any claim based upon (1) the combination, operation
or use of the Products with products not furnished by FTP to the extent such
claim results from such combination or (2) modifications to the Products not
made by FTP or made in compliance with UniDirect's instructions. FTP's
obligation to indemnify UniDirect under this Section 11.a shall be limited to
[***]. This Section 11.a sets forth FTP's entire liability and sole obligation
and UniDirect's exclusive remedy in the event of any claim of intellectual
property infringement.
b. Subject to Section 9 above, FTP will indemnify UniDirect for
reasonable costs, damages, and attorney's fees incurred by UniDirect in
connection with any claim or action brought or threatened against UniDirect due
to its doing business as FTPSS, where such action or claim does not otherwise
arise from the acts or omissions of UniDirect; provided, however, that FTP shall
have no obligations under this Section 11.b unless UniDirect (i) promptly
notifies FTP of the claim or action and (ii) allows FTP sole control of such
claim or action and gives FTP reasonable assistance in the defense thereof.
c. Subject to Section 9 above, UniDirect shall indemnify FTP for
reasonable costs, damages and attorney's fees finally awarded FTP, or agreed to
in any settlement (subject to UniDirect's prior written consent to such
settlement), arising from a claim of UniDirect's negligence or willful
misconduct with respect to its distribution of Products; provided, however, that
the indemnification provided by this Section 9.c shall be conditioned upon FTP
(i) promptly notifying UniDirect of the action and (ii) allowing UniDirect sole
control of such action and gives UniDirect reasonable assistance in the defense
of the action. UniDirect shall have no obligation under this Section 11.c to
indemnify FTP for any claim based upon or arising from any claimed defect in a
Product, Upgrade, Support Service or Subscription Service.
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
11
<PAGE>
12. Relationship of Parties. The parties hereto expressly understand
-----------------------
and agree that UniDirect is an independent contractor in the performance of each
and every part of this Agreement, is solely responsible for all of its employees
and agents and its labor costs and expenses arising in connection therewith and
is responsible for any and all claims, liabilities, damages, debts, settlements,
costs, attorneys' fees, expenses and liabilities of any type whatsoever that may
arise on account of UniDirect's activities, or those of its employees or agents.
FTP is in no manner associated with or otherwise connected with the actual
performance of this Agreement on the part of UniDirect, nor with UniDirect's
employment of other persons or incurring of other expenses.
13. Assignment. Neither party may assign or transfer, in whole or in
----------
part, this Agreement or its rights and obligations hereunder without the prior
written consent of the non-assigning party, except for an assignment by FTP to
any parent or affiliate of FTP or transferee of all or substantially all of the
Business Unit's assets.
14. Term and Termination.
--------------------
a. Unless terminated earlier as provided herein, this Agreement
shall have a three (3) year term commencing with the Effective Date. The Parties
may agree to renew the term of this Agreement for additional one (1) year terms,
by providing the other party written notice ninety (90) days prior to the third
anniversary date or any subsequent anniversary date hereof. If the parties
continue to do business with each other after such termination without full
documentation, the relevant terms hereof will continue to govern the
relationship unless otherwise expressly agreed in writing and except that the
relationship may be terminated (except with regard to payment) unilaterally by
either party merely by ceasing to do business with the other.
b. This Agreement may be terminated by a party for cause immediately
by written notice upon the occurrence of any of the following events:
(i) if the other ceases to do business, or otherwise
terminates its business operations;
(ii) if UniDirect breaches Section 4.d and e hereof; or
(iii) if the other materially breaches any material provision of
this Agreement and fails to fully cure such breach within thirty (30) days of
written notice describing the breach; or
(iv) if the other becomes insolvent or seeks protection under
any bankruptcy, receivership, trust deed, creditors arrangement, composition or
comparable proceeding, or if any such proceeding is instituted against the
other.
12
<PAGE>
c. Each party understands that the rights of termination hereunder
are absolute. Neither party shall incur any liability whatsoever for any damage,
loss or expenses of any kind suffered or incurred by the other arising from or
incident to any termination of this Agreement by such party that complies with
the terms of this Agreement whether or not such party is aware of any such
damage, loss or expenses.
d. Termination is not the sole remedy under this Agreement and,
whether or not termination is effected, all other remedies will remain
available.
e. In addition to any provisions that survive termination according
to their terms, the following sections shall survive termination of this
Agreement: Sections 1, 9 through 12 and 14 through 17.
15. Confidentiality.
---------------
a. Each party understands that the other party has disclosed or may
disclose information relating to the disclosing party's business including,
without limitation, business, financial, customer and service development,
plans, forecasts and strategies ("Proprietary Information"). Each receiving
party hereby agrees: (i) to treat the disclosing party's Proprietary Information
as strictly confidential and to hold such information in confidence and to take
reasonable precautions to protect such Proprietary Information; and (ii) not to
divulge any Proprietary Information to any third party; and (iii) not to make
any use whatsoever at any time of such Proprietary Information except as
required in the execution of such receiving party's obligations under this
Agreement. Each party agrees that it has or shall obtain written agreements with
all employees and consultants who are, in accordance with the terms of this
Agreement, permitted access to Proprietary Information which agreements impose
confidential obligations sufficient to meet the obligations set forth in this
Section 15. The terms of this Agreement shall be Proprietary Information.
b. Without granting any right or license, the disclosing party agrees
that the obligations of the receiving party in Section 15.a above shall not
apply with respect to any information following three (3) years after such
information's disclosure to the receiving party or which the receiving party can
document: (i) is or becomes (through no improper action or inaction of the
receiving party) generally available to the public; or (ii) was rightfully
disclosed to it by a third party; or (iii) was independently developed by
employees of the receiving party who had no use of or access to the disclosing
party's Proprietary Information.
16. Arbitration. Except that either party may seek equitable or
-----------
similar relief from a court, any dispute, controversy or claim arising out of or
in relation to this Agreement or at law, or the breach, termination or
invalidity
13
<PAGE>
thereof, that cannot be settled amicably by agreement of the parties hereto,
shall be finally settled by "expedited arbitration" in accordance with the
arbitration rules of the American Arbitration Association ("AAA"), then in
force; provided, however, that arbitration proceedings may not be instituted
until the party alleging breach of this Agreement by the other party has given
the other party not more than thirty (30) days to remedy any alleged breach and
the other party has failed to do so. Such arbitration must result in a final
binding decision, without a right of appeal, in no more than thirty (30) days
from the date of the notice of a dispute under this section from any party to
another. Such arbitration shall be conducted in English by three (3)
arbitrators. Such arbitrators shall be selected by the mutual agreement of the
parties or, failing such agreement, shall be selected according to the relevant
AAA rules. The parties shall bear the costs of such arbitrators equally. The
prevailing party in any such arbitration or in any judicial enforcement or
review proceeding shall be entitled to its reasonable attorneys' fees and costs
in addition to any other amount of recovery ordered by such arbitrator or court.
The arbitrator may not award punitive or multiple damages. The arbitration will
take place in Santa Clara County, California (if instituted by FTP) or Boston,
Massachusetts (if instituted by UniDirect). The award rendered shall be final
and binding upon both parties. Judgment upon the award may be entered in any
court having jurisdiction, or application may be made to such court for judicial
acceptance of the award and/or an order of enforcement as the case may be.
17. General.
-------
a. Amendment and Waiver - Except as otherwise expressly provided
herein, any provision of this Agreement may be amended and the observance of any
provision of this Agreement may be waived (either generally or any particular
instance and either retroactively or prospectively) only with the written
consent of the parties.
b. Governing Law and Legal Actions - This Agreement shall be governed
by and construed under the laws of the State of California and the United States
without regard to conflicts of laws provisions thereof. The sole jurisdiction
and venue for actions related to the subject matter hereof shall be the state
and U.S. federal courts located in Santa Clara County, California (if such
action instituted by FTP) or Boston, Massachusetts (if such action is instituted
by UniDirect). Both parties consent to the jurisdiction of such courts and agree
that process may be served as allowed by applicable state and U.S. federal law.
In any action or proceeding to enforce rights under this Agreement, the
prevailing party shall be entitled to recover costs and reasonable attorneys'
fees.
c. Headings - Headings and captions are for convenience only and are
not to be used in the interpretation of this Agreement.
14
<PAGE>
d. Notices - Notices under this Agreement shall be sufficient only if
personally delivered, delivered by a major commercial rapid delivery courier
service or mailed by certified or registered mail, return receipt requested to a
party at its addresses first set forth herein or as amended by notice pursuant
to this subsection. If not received sooner, notice by mail shall be deemed
received five (5) days after deposit in the U.S. mails.
e. Entire Agreement - This Agreement supersedes all proposals, oral
or written, all negotiations, conversations, or discussions between or among
parties relating to the subject matter of this Agreement and all past dealing or
industry custom.
f. Severability - If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or unenforceable, that
provision shall be limited or eliminated to the minimum extent necessary so that
this Agreement shall otherwise remain in full force and effect and enforceable.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date set forth above.
UNIDIRECT CORPORATION
By: /s/ Bernard Jubb
-----------------------------------
Name: Bernard Jubb
---------------------------------
Title: PRESIDENT, UNIDIRECT CORP.
--------------------------------
FTP SOFTWARE, INC.
By: /s/ Dennis Leibl
-----------------------------------
Name: Dennis Leibl
---------------------------------
Title: President, Network Applications Business Unit
------------------------------------------------
16
<PAGE>
ATTACHMENT A
RETAIL PRICES
[to be provided]
17
<PAGE>
ATTACHMENT B
CONTACT PERSONS
[to be provided]
18
<PAGE>
ATTACHMENT C
ASCII FORMAT FOR REPORTS
[to be provided]
19
<PAGE>
Amendment No. 1 to UniDirect Corporation
Outsourcing Services Agreement dated July 21, 1997
THIS AMENDMENT No.1 entered into as of September 12, 1997 ("Amendment") to
the Outsourcing Services Agreement by and between FTP Software, Inc., a
Massachusetts corporation, with a principal place of business at 100 Brickstone
Square, Fifth Floor, Andover, Massachusetts 01810 U.S.A. ("FTP"), and UniDirect
Corporation, a California corporation, with its principal place of business at
1800 Greenhills Road, Suite 201, Scotts Valley, CA 95066 ("UniDirect").
WHEREAS, the parties desire to amend the Outsourcing Services Agreement
entered as of July 21, 1997 by and between FTP and UniDirect (the "Agreement")
to, among other things, allow UniDirect to fulfill orders for software product.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound, the parties hereby agree as
follows:
1.The Agreement is hereby amended as follows:
a. Section 1(e): Replace "Support Services and Subscription Services" with
------------
"Products".
b. Delete "Upgrades" wherever it appears.
c. Section 2(a): Delete Section 2(a) in its entirety and replace with the
------------
following: "FTP hereby grants to UniDirect for the term of this
Agreement, and UniDirect accepts, a non-sublicenseable, non-assignable,
non-transferable appointment and license to market, sell and distribute
to end users of the Products (i) Support Services and Subscription
Services and (ii) volume licenses for software Products, in accordance
with FTP's then-current policies. Notwithstanding the foregoing,
UniDirect shall not sell copies of software Product to the named
corporations forwarded to UniDirect in writing by FTP or its resellers
("Protected Accounts"). Should UniDirect fulfill an order for software
Product for any Protected Account, it shall immediately forward any
revenue or purchase orders received from such Protected Account to FTP
or the appropriate reseller. Any breach of the above-mentioned
requirement shall be a material breach of the Agreement with respect to
the outsource of software Product, for which UniDirect shall have thirty
(30) days to cure. In connection with the sale of volume licenses as
described above, UniDirect shall issue license certificates in the form
and format provided by FTP to UniDirect, which form shall not be
modified in any way without FTP's prior written approval, other than to
fill in customer-specific information as required by the form."
d. Section 2(b): Add the following after the first sentence: "Any sale of
------------
Support Services and/or Subscription Services which occur within thirty
(30) days of the initial Product license grant shall be deemed to have
occurred upon the initial Product license grant."
e. Section 2(c): Replace "Support Services, Subscription Services and
------------
Upgrades" with "Products". Add the following at the end of this section:
"Each individual working within the FTPSS operation shall have signed an
employee confidentiality agreement which obligates such individual to
maintain the confidentiality of Proprietary Information."
f. Section 4(b): Add the following as new subclause (iii) and renumber
------------
accordingly: "For all licenses of software Products by UniDirect in
accordance with this Agreement, UniDirect shall receive a discount equal
to [***].
20
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
g. Section 4(b)(iv): Replace "Support Services, Subscription Services and
----------------
Upgrades" with "Products".
h. Section 4(d): Add the following after "UniDirect" in the second line
------------
thereof: "for sales of Support Services and Subscription Services
i. Section 4(e): Add the following after "Net Sales" wherever it appears:
------------
"for the sale of Support Services and Subscription Services
j. New Section 4(f): "On or before October 15, 1997, the parties will agree
----------------
on performance milestones to be achieved by UniDirect in connection with
the sale of copies of software Products. The performance milestones shall
be measured at [***] after the Effective Date. Failure to achieve the
performance milestones at any [***] shall be a material breach of this
Agreement."
k. Section 5(a): In the sixth sentence, add the following after the initial
------------
clause: "UniDirect will maintain appropriate insurance on the consigned
Products consistent with industry standards and". Replace "Products" with
"Support Services and Subscription Services" in the last sentence."
1. Section 5(c): Add the following after "invoice" in the second line: "or
------------
sales out report, as the case may be".
m. Section 6(a): Replace "Product" in the third line thereof with "Support
------------
Services and Subscription Services".
n. Section 10: Replace "Support Services, Subscription Services and
----------
Upgrades" in the fourth line thereof and replace it with "Products".
o. Section 14(a): Replace the first sentence of this section with the
-------------
following: "Unless terminated earlier as provided herein, this Agreement
shall have a three (3) year term with respect to the outsource of Support
Services and Subscription Services and a one (1) year term with respect
to the outsource of software Products, in each case commencing on the
Effective Date."
p. Section 14(b): Add the following immediately preceding the colon: "A
-------------
breach of the software Product outsource shall not automatically be
deemed a breach of the Support Services and Subscription Services
outsource."
q. New Sections 17-20: Add the following before current Section 17 and
------------------
renumber accordingly:
17. Title to Product: UniDirect agrees that the Product contains
----------------
valuable proprietary trade secrets of FTP and/or its suppliers.
Title, ownership and all rights in and to copyrights, patents,
trademarks, trade secrets and all other proprietary rights in the
Products remain in FTP and/or its suppliers. No source code rights
are granted under this Agreement. UniDirect agrees not to (a)
modify, translate, reverse engineer or otherwise alter the Product
or (b) use the Product for any purpose other than as authorized by
this Agreement. Localization or translation of the Product
requires a separate written agreement between the parties.
18. Product Warranty: End User warranties are addressed in the
----------------
applicable FTP license agreement contained within the Product
and/or packaging. EXCEPT AS PROVIDED IN FTP'S LICENSE AGREEMENT,
THE PRODUCT IS PROVIDED
21
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
"AS IS." FTP MAKES NO REPRESENTATIONS OR WARRANTY OF ANY KIND, AND
HEREBY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED AS TO
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER
MATTER WITH RESPECT TO THE PRODUCT, WHETHER USED ALONE OR IN
CONJUNCTION WITH ANY OTHER SOFTWARE OR PRODUCT.
19. U.S. Government Restricted Rights: Products described or
---------------------------------
referenced in this Agreement are commercial computer software
programs developed at private expense. Use, duplication or
disclosure by the U.S. Government are subject to the provisions of
the license agreement contained in or with the software product as
prescribed by the applicable provisions of the DOD FAR supplement
and similar regulations of other U.S. Federal agencies applicable
to the delivery of commercial software including the restrictions
set forth in FAR 52.227-19(c)(2).
20. International/Export: UniDirect agrees to comply with U.S. export
--------------------
laws and, in that regard, shall not export or re-export any
Product, including software, documentation or technical data
received from FTP or any direct product thereof, directly or
indirectly, to any country, entity or person prohibited by the
U.S. Government. UniDirect acknowledges that compliance with U.S.
export laws may cause delays in shipments and/or prohibit FTP from
exporting certain Products to certain countries and entities for
certain uses. In no event shall FTP be liable for any such delays
or prohibition. UniDirect shall also comply with the laws and
regulations of other applicable countries which prohibit export or
diversion of certain technical products to certain countries and
individuals and any other applicable law. UniDirect shall comply
with the U.S. Foreign Corrupt Practices Act. The parties expressly
agree that the U.N. Convention on the International Sale of Goods
shall not apply to this Agreement. English shall be the governing
language of this Agreement.
2. All other terms and conditions of the Agreement remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year set forth above.
UNIDIRECT CORPORATION FTP SOFTWARE, INC.
By: /s/ Bernard Jubb By: /s/ [ILLEGIBLE]^^
---------------------------- ----------------------------
Name: BERNARD JUBB Name: /s/ [ILLEGIBLE]^^
---------------------------- ----------------------------
Title: President & CEO Title: C.O.O., Net. Apps. By
---------------------------- ----------------------------
22
<PAGE>
IP Technology Business Unit Addendum to UniDirect Corporation
Outsourcing Services Agreement dated July 21, 1997
THIS ADDENDUM entered into as of October 1, 1997 ("Addendum") to the
Outsourcing Services Agreement by and between FTP Software, Inc., a
Massachusetts corporation, with a principal place of business at 100 Brickstone
Square, Fifth Floor, Andover, Massachusetts 01810 U.S.A ("FTP"), and UniDirect
Corporation, a California corporation, with its principal place of business at
1800 Greenhills Road, Suite 201, Scotts Valley, CA 95066 ("UniDirect"). The
Effective Date for purposes of this Addendum, and the Agreement as amended
hereby, shall be October 1, 1997.
WHEREAS, the parties desire to amend the Outsourcing Services Agreement
entered as of July 21, 1997 by and between FTP and UniDirect (the "Agreement")
to allow UniDirect to fulfill orders for maintenance and conversion products
relating to software products offered by the IP Technology Group Business Unit
of FTP.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound, the parties hereby agree as
follows:
1. This Addendum shall apply to the IP Technology Group Business Unit of FTP
only and not to any other business unit or division of FTP. This Addendum
shall not affect the Agreement, as amended, as it applies to the VIP
Network(TM) Applications Business Unit. To that end, UniDirect represents
that the activities and services performed by it under the Agreement, as
modified by this Addendum (including without limitation, the UniDirect
employees chosen to perform the services described in this Addendum) shall
be separate and distinct from the other activities and services performed
by UniDirect on behalf the VIP Network(TM) Applications Business Unit of
FTP under the Agreement, as amended by Amendment No. 1 or otherwise.
2. The Agreement is hereby amended as follows:
a. For purposes of the Agreement, as amended by the IP Technology
Group Business Unit Addendum, the "Outsource Start Date" shall
mean the date that computer and other systems are fully
operational, which the parties expect to occur on or before
October 31, 1997.
b. Section 1(a): Delete Section 1(a) in its entirety and replace
------------
with the following; "'Business Unit' shall mean FTP's IP
Technology Group Business Unit through which copies of Products,
including Maintenance and Conversions, are sold."
c. Replace "Subscription Services, Support Services and Upgrades"
wherever they appear with "Maintenance and Conversions".
d. Section 1(d): Delete Section 1(d) in its entirety and replace
------------
with the following; "'Products' shall mean the software products,
Maintenance and Conversions offered by the Business Unit for
commercial sale as of the Effective Date or during the term of
this Agreement, as further described on Attachment 2 hereto as
incorporated herewith."
e. Section 1(e): Replace "Attachment A" thereto with Attachment 2
------------
hereto as incorporated herewith.
f. Section 1(f), Section 1(g) and Section 1(i): Delete these
-------------------------------------------
sections in their entirety.
1
<PAGE>
g. New Section 1(i): "Conversions" shall mean the software products
----------------
that convert any Nov*ix or Internet Gateway Product to the latest
Internet Gateway version 2.0 product.
h. New Section 1(k): "Maintenance" shall mean the combined telephone
----------------
support and upgrade subscription services which maintain the
Nov*ix or Internet Gateway Products or Conversions, as further
described on Attachment 3 hereto as incorporated herewith."
i. Section 2(b): Replace Section 2(b) in its entirety and replace
------------
with the following: "The license granted by FTP to UniDirect in
Section 2(a) above shall be exclusive with regard to all sales of
Maintenance renewals within the Territory to FTP's installed base
of end users which do not occur within thirty (30) days of the
initial Product license grants. Such license shall be non-
exclusive with regard to all other sales, including without
limitation, all sales of Conversions within the Territory.
Notwithstanding the foregoing, UniDirect shall not sell
Conversions to the named corporations forwarded to UniDirect in
writing by FTP or its resellers ("Protected Accounts"). Should
UniDirect fulfill an order for Conversions for any Protected
Account, it shall immediately forward any revenue or purchase
orders received from such Protected Account to FTP or the
appropriate reseller. Any breach of the above-mentioned
requirement shall be a material breach of the Agreement, for
which UniDirect shall have thirty (30) days to cure."
j. Section 2(c): Add the following at the end of this section: "Each
------------
individual working within the FTPSS operation shall have signed
an employee confidentiality agreement which obligates such
individual to maintain the confidentiality of Proprietary
Information."
k. Section 2(e): Delete this section in its entirety.
------------
l. Section 4(a), Section 4(b)(i) and (ii) and Section 4(c): Delete
-------------------------------------------------------
these sections in their entirety and replace with the following:
"4(a) For the initial term of this Agreement, the "Maintenance
Baseline" shall be $230,000. The "Conversion Baseline" shall be
$70,000. The Maintenance Baseline and the Conversion Baseline
shall be collectively referred to as "Baseline".
4(b) Beginning on the Effective Date and continuing until such time as
UniDirect's Net Sales of Maintenance during a particular calendar
quarter exceed the applicable Baseline, UniDirect shall receive
the following discounts from the Retail Prices for the remainder
of such quarter:
(i) Until UniDirect achieves the Maintenance Baseline, [***];
this discount shall [***] to [***] for UniDirect's
achievement of the Maintenance Baseline. Once UniDirect has
first achieved the Maintenance Baseline, for succeeding
quarters, the initial discount shall be [***], which
discount shall [***] to [***] upon UniDirect again achieving
the Maintenance Baseline in a particular quarter.
(ii) Until UniDirect achieves the Conversion Baseline, [***];
this discount shall [***] to [***] for UniDirect's
achievement of the Conversion Baseline. For succeeding
quarters, the initial discount shall be [***], which
discount shall [***] to [***] upon UniDirect again achieving
the Conversion Baseline in that particular quarter.
4(c) This section is deleted in its entirety.
j. Section 4(e): This section is deleted in its entirety.
------------
k. Section 5(a): In the sixth sentence, add the following after the
------------
initial clause: "UniDirect will maintain appropriate insurance on
the consigned Products consistent with industry standards"
2
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
l. Section 5(c): Add the following after "invoice" in the second
------------
line; "or sales out report, as the case may be".
m. Section 6(a): Replace this section with the following; "FTP shall
------------
provide UniDirect, within one hundred twenty (120) days of the
start of each calendar quarter, with a cooperative marketing
credit in the amount of [***] of UniDirect's Net Sales of
Maintenance and Conversions sold by UniDirect as reported
pursuant to Section 4(b)(iii) and for which UniDirect has
submitted payment to FTP, to be applied solely for marketing and
promoting Maintenance and Conversion in the Territory within one
hundred twenty (120) days from the beginning of the calendar
quarter for which the credit was provided. FTP may, at its
option, provide input and content to the marketing and
promotional activities conducted by UniDirect, which input and
content UniDirect shall reasonably include in any such
activities."
n. Section 6(e): Replace "Attachment B" thereto with Attachment 4
------------
hereto as incorporated herewith.
o. Section 14(a): Replace the first sentence of this section with
-------------
the following; "Unless terminated earlier as provided herein,
this Agreement shall have a one (1) year/term commencing on the
Effective Date."
p. Section 14(b): Add the following immediately preceding the colon:
-------------
"A breach of the Agreement, as amended by Amendment No. 1,
between UniDirect and the VIP Network(TM) Applications Business
Unit, shall not automatically be deemed a breach of the
Agreement, as amended by the Addendum dated October 1, 1997
between UniDirect and the IP Technology Group Business Unit."
q. New Sections 17-20: Add the following before current Section 17
------------------
and renumber accordingly:
17. Title to Product: UniDirect agrees that the Product
----------------
contains valuable proprietary trade secrets of FTP
and/or its suppliers. Title, ownership and all rights
in and to copyrights, patents, trademarks, trade
secrets and all other proprietary rights in the
Products remain in FTP and/or its suppliers. No source
code rights are granted under this Agreement. UniDirect
agrees no to (a) modify, translate, reverse engineer or
otherwise alter the Product or (b) use the Product for
any purpose other than as authorized by this Agreement.
Localization or translation of the Product requires a
separate written agreement between the parties.
18. Product Warranty: End User warranties are addressed in
----------------
the applicable FTP license agreement contained within
the Product and/or packaging. EXCEPT AS PROVIDED IN
FTP'S LICENSE AGREEMENT, THE PRODUCT IS PROVIDED "AS
IS," FTP MAKES NO REPRESENTATIONS OR WARRANTY OF ANY
KIND, AND HEREBY DISCLAIMS ANY AND ALL WARRANTIES,
EXPRESS OR IMPLIED AS TO MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR ANY OTHER MATTER WITH RESPECT TO
THE PRODUCT, WHETHER USED ALONE OR IN CONJUNCTION WITH
ANY OTHER SOFTWARE OR PRODUCT.
19. U.S. Government Restricted Rights: Products described
---------------------------------
or referenced in this Agreement are commercial computer
software programs developed at private expense. Use,
duplication or disclosure by the U.S. Government are
subject to the provisions of the license agreement
contained in or with the software product as prescribed
by the applicable provisions of the DOD PAR supplement
and similar
3
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
regulations of other U.S. Federal agencies applicable to the
delivery of commercial software including the restrictions set
forth in FAR 52.227-19(c)(2).
20. International/Export: UniDirect agrees to comply with U.S. export
--------------------
laws and, in that regard, shall not export or re-export any
Product, including software, documentation or technical data
received from FTP or any direct product thereof, directly or
indirectly, to any country, entity or person prohibited by the
U.S. Government. UniDirect acknowledges that compliance with U.S.
export laws may cause delays in shipments and/or prohibit FTP
from exporting certain Products to certain countries and entities
for certain uses. In no event shall FTP be liable for any such
delays or prohibition. UniDirect shall also comply with the laws
and regulations of other applicable countries which prohibit
export or diversion of certain technical products to certain
countries and individuals and any other applicable law. UniDirect
shall comply with the U.S.Foreign Corrupt Practices Act. The
parties expressly agree that the U.N. Convention on the
International Sale of Goods shall not apply to this Agreement.
English shall be the governing language of this Agreement.
3. All other terms and conditions of the Agreement remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum
to be duly executed as of the day and year set forth above.
UNIDIRECT CORPORATION FTP SOFTWARE, INC.
By: /s/ Michael Silton By: /s/ David Traynor
--------------------------- -----------------------------
Name: Michael Silton Name: David Traynor
------------------------- ---------------------------
Title: Chairman Title: VP NASales IP Tech Bu.
------------------------ --------------------------
4
<PAGE>
Effective January 1, 1998
September 13, 1994
Amendment 1
Pricing program adjustments
To encourage the early renewal process to occur, we propose that a late renewal
fee be imposed upon certain levels of delinquency of renewal. This will help to
encourage a sense of urgency from the FTP Customer base, and help increase the
overall renewal rate. Our experience has showed to us the fact that building
these types of re-occurring compelling events are paramount to the success of
any subscription based program. Given the proactive posture of FTPSS in sales,
we feel that we can touch and educate all identified renewable revenue long
before the expiration of the contract. With this "sooner than later" based
program, we should increase the closure rate.
We would like to run the following program, and pricing scheme with an ongoing
90 day review process, where both FTP and FTPSS can determine the success of the
program, and make adjustments to it accordingly.
FTP Maintenance Renewal Matrix
<TABLE>
<CAPTION>
---------------------------------------------------------
Renewal Sales Program
One
Time
Time Parameters Discount Structure charge
---------------------------------------------------------
<S> <C> <C> <C>
Regular Renewal Up To Exp Date [***] [***]
Lapsed Renewal Exp +1 to 90 days [***] [***]
Re-Adoption 91 days + [***] [***]
</TABLE>
Submitted Approved
Date: 11-11-97 Date: 11-11-97
- ------------------------ ----------------------------
/s/ Chris Sterbenc /s/
- ------------------------ ----------------------------
Chris Sterbenc FTP Software Authorized Signature
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
Amendment No.2 to UniDirect Corporation
Outsourcing Services Agreement dated July 21, 1997
THIS AMENDMENT No.2 entered into as of January 21, 1998 ("Amendment") to
the Outsourcing Services Agreement by and between FTP Software, Inc., a
Massachusetts corporation, with a principal place of business at 2 High Street,
North Andover, Massachusetts 01845 U.S.A. ("FTP"), and UniDirect Corporation, a
California corporation, with its principal place of business at 1800 Greenhills
Road, Suite 201, Scotts Valley, CA 95066 ("UniDirect").
WHEREAS, the parties desire to amend the Outsourcing Services Agreement
entered as of July 21, 1997 by and between FTP and UniDirect, as amended (the
"Agreement") to, among other things, allow UniDirect to fulfill orders in
competitive and promotional situations.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound, the parties hereby agree as
follows:
1. The parties acknowledge that, as of the date of this Amendment, FTP sells
Support Services and Subscription Services as one product known as
"maintenance" for the Retail Price set forth on the current Suggested Retail
Price List. Accordingly, all references in the Agreement to Support Services
and Subscription Services shall mean "maintenance
2. The Agreement is hereby amended as follows:
a. Section 2(a): Delete subclause (ii) in the first sentence thereof and
------------
the second sentence in its entirety with the following: "(ii) volume
licenses for software Products only where such sale is incidental to,
and a part of, a sale of Support Services and Subscription Services, in
accordance with FTP's then-current policies. In no event shall UniDirect
sell copies of software Product to the named corporations forwarded to
UniDirect in writing by FTP or its resellers ("Protected Accounts")."
b. Section 4(b)(i) and (ii): Delete subclauses (i) and(ii) in their
------------------------
entirety and replace them with the following: "(i) For UniDirect's first
[***] of Net Sales of Subscription and Support Services per calendar
month, [***]; this discount shall [***] to [***] for all sales of
Subscription and Support Services during such month which exceed [***].
c. Section 4(c): Delete subclauses (i) and (ii) in their entirety and
------------
replace them with the following: "(i) For UniDirect's [***] of Net Sales
of Subscription and Support Services per calendar month, [***]; this
discount shall [***] to [***] for all sales of Subscription and Support
Services during such month which exceed [***]."
d. Section 4(f): Delete this section in its entirety.
------------
e. Section 6(a): Replace "Support Services and Subscription Services" with
------------
"Products".
3. The parties acknowledge and agree that the only sale of Support or
Subscription Services permitted to be made by UniDirect to a federal, state
or local government entity or agency under the terms and conditions of the
Agreement shall be on a non-exclusive basis.
4. All other terms and conditions of the Agreement remain in full force and
effect.
1
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year set forth above.
UNIDIRECT CORPORATION FTP SOFTWARE, INC.
By:/s/ Michael Silton By:/s/
------------------------ -----------------------------
Name: Michael Silton Name:
---------------------- ---------------------------
Title: CEO Title:
--------------------- --------------------------
2
<PAGE>
[LETTERHEAD OF UNIDIRECT APPEARS HERE]
January 27, 1998
Pricing program adjustments
CHANGE IN PRICING NOMENCLATURE
------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
One
Time
Time Parameters Discount Structure Charge Current Proposed
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Up To Exp Date [***] [***] [***] [***]
Exp +1 to 90 days [***] [***] [***] [***]
91 days + [***] [***] [***] [***]
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
[***]
Effective January 27, 1998
Submitted Approved
Date: 1/28/98 Date: 1-28-98
------------------------------------ --------------------------
/s/ Michael Silton, President /s/
- ----------------------------------------- ------------------------------
UniDirect Corporation Authorized Signature FTP Software Authorized Signature
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
[LETTERHEAD OF UNIDIRECT APPEARS HERE]
January 27, 1998
FTP Software Services Guidelines
1.) Any "special pricing" requests must be sent through Ian Milne via email or
fax and sent to and approved by Robin Mercer. Any order that is processed
without written approval will be invoiced at list price less FTPSS standard
discount.
2.) All daily transactions where maintenance or additional seats to an existing
site are sold must contain the site license number. This must be reported
nightly through the daily transactions report.
3.) Add-on licenses may only be sold in conjunction with the maintenance
renewal sales motion. Due to the nature of our renewal process, potential
renewal opportunities will be contacted up to 60 days prior to the
expiration and the renewal process often extends out 30 days after the
expiration date when the customer does not renew in a timely fashion.
4.) FTP Software Services will sell product (add-on licenses) during this 90-
day window (60 days prior to expiration and 30 days after) and will
reference the maintenance renewal related to the sale in an email to Ian
Milne and Anne Formalerie.
All potential product opportunities identified by FTPSS that do not meet
the above criteria will be sent out to the channel partners as leads.
Effective January 1, 1998
Submitted Approved
Date: 1/28/98 Date: 1/28/98
------------------------------------ ----------------------------
/s/ Michael Silton, President /s/
- ----------------------------------------- ---------------------------------
UniDirect Corporation Authorized Signature FTP Software Authorized Signature
<PAGE>
[LETTERHEAD OF FTP SOFTWARE SERVICES APPEARS HERE]
26 May, 1998
Mr. Dennis Leibl
FTP Software
2 High Street
North Andover, Ma 01845
Dear Dennis,
Thank you for taking the time to speak with Michael Silton and me on
Friday. I am sending this letter to follow up on our discussion. In that
discussion, you agreed to move UniDirect to the [***] margin structure
laid out in the contract (more detail below) in recognition of the revenue
run rate established by UniDirect over the last few quarters. We agreed
that the effective date for the new margin levels was to be June 1, 1998.
Per the contract, (section 4(c)), going forward, the discount for the sales
of Subscription and Support Services will be [***]. The discount for all
Sales of Subscription and Support Services which exceed [***] in a given
month will be [***]. This discount structure shall be in effect June 1,
1998.
Please acknowledge your agreement by signing below
Sincerely,
/s/ Chris A.J. Sterbenc
Chris A.J. Sterbenc
Vice President of Sales
Acknowledged: /s/ Dennis Leibl 5/26/98
---------------------- -------
Dennis Leibl Date
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
August 11, 1998
Rainmaker Systems Inc.
1800 Green Hills Rd.
Scotts Valley, CA 95066
Re: Amendment No. 3
Attention: Michael Silton
Dear Mr. Silton:
Please find following Amendment No. 3 to the agreement between FTP Software Inc.
and UniDirect Corp., regarding the Internet Technology Group Business Unit.
Due to the sale of the Internet Technology Group product line by FTP Software
Inc. to Network Designers Ltd., as of August 1, 1998 FTP Software Services will
no longer sell the Internet Technology product line.
Sincerely,
/s/ Ian Milne
Ian Milne
Sales Manager
FTP Software Services
<PAGE>
Amendment No. 3 to UniDirect Corporation
Outsourcing Services Agreement dated July 21, 1997
THIS AMENDMENT No. 3 entered into as of____, 1998 ("Amendment") to the
Outsourcing Services Agreement by and between FTP Software, Inc., a
Massachusetts corporation, with a principal place of business at 2 High Street,
North Andover, Massachusetts 01845 U.S.A. ("FTP"), and UniDirect Corporation, a
California corporation, with its principal place of business at 1800 Greenhills
Road, Suite 201, Scotts Valley, CA 95066 ("UniDirect").
WHEREAS, the parties desire to amend the Outsourcing Services Agreement
entered as of July 21, 1997 by and between FTP and UniDirect, as amended by
Amendment Number One dated September 12, 1998, IP Technology Business Unit
Addendum dated October 1, 1997 and Amendment Number Two dated January 21, 1998
(the "Agreement") to delete FTP IP Technology Group Business Unit products as
set forth in IP Technology Business Unit Addendum dated October l, 1997;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound, the parties hereby agree as
follows:
1. Reference: IP Technology Group Business Unit Addendum dated October 1, 1997
a. Delete all terms and conditions of the Addenddum in its entirety.
----------------------------------------------------------------
2. All other terms and conditions of the Agreement remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Number
Three to be duly executed as of the day and year set forth above.
UNIDIRECT CORPORATION FTP SOFTWARE, INC.
By: Michael Silton By:________________________
--------------
Name. Michael Silton Name:______________________
--------------
Title: President Title:_____________________
---------
<PAGE>
EXHIBIT 10.22
Confidential Execution original
- --------------------------------------------------------------------------------
Outsource Services Agreement
between
Novell, Inc. and Rainmaker Systems, Inc.
This Outsource Services Agreement is entered by Novell, Inc., with offices 1555
North Technology Way, Orem, Utah 84097 ("Novell") and Rainmaker Systems, Inc.
with offices at 1800 Green Hills, Suite 201, Scotts Valley, CA 95066
("Rainmaker").
1. Purpose. The purpose of this Agreement is to establish the terms on which
Rainmaker will perform certain sales, marketing and fulfillment functions of
Novell's Subscription Services on behalf of Novell. Rainmaker will operate under
the name "Novell Subscription Services" and will adopt, to the extent
reasonable, such practices and programs as Novell directs Rainmaker to use from
time to time as apply to the development and support of the Novell sales
organization and the channels of distribution. All customer invoices, billing
documentation and dunning notices will have the "Novell Subscription Services"
look and feel, however they will also carry the disclaimer "under license to
Rainmaker from Novell Inc."
This Agreement replaces the Outsource Services Agreement between Novell, Inc.
and UniDirect, as amended which shall terminate on the Commencement date hereof.
2. Definitions.
a. Average Street Price means the price of a product as calculated in Schedule 3
--------------------
hereof.
b. Eligible Customers means any Novell product user who is not under a Novell
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licensing contract or upgrade protection contract (e.g. MLA, CLA, VLA, etc.)
with Novell or a Novell subsidiary for the purchase of Novell products.
c. Licensed Trademark means "Novell Subscription Services".
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d. Novell Products or Products means the products listed on Schedule 1 hereto.
---------------------------
Novell may add products to or subtract products from Schedule 1 upon thirty
days notice to Rainmaker.
e. OutSource Activities means all of the rights and duties related to
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Rainmaker's provision of the Novell Subscription Services granted under this
Agreement.
f. Recommended End User Prices for the Subscription Services and other Products
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sold hereunder are (i) the Average Street Price for the Upgrade portion of a
bundle containing Upgrades and Subscription Services, and (ii) Novell
Suggested List Price for a) the Subscription Services portion of a bundle
containing Upgrades and Subscription Services, b) stand-alone Subscription
Services, and c) stand-alone Upgrades and other Novell Products authorized
hereunder.
g. Subscription Services Program Description means a written description of the
-----------------------------------------
Subscription Services program, prepared by Novell and updated from time to
time.
h. Sell, Sale or Sold. The parties understand and acknowledge that end users
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receive only a license to use the Novell Products. No end user, reseller, or
distributor receives ownership of the Novell Products. Therefore, any
occurrence in this Agreement of the words sale, sell, or sold, in connection
with a Novell Product means a grant of a license to use the Product and not a
sale of a Product.
i. Subscription Services means a Novell Upgrade Protection product. This does
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not include upgrade protection as offered by Novell's MLA, VLA, CLA, or any
other upgrade protection program offered by Novell from time to time.
j. Resellers means resellers authorized by Novell to sell Novell products.
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k. Territory means the United States of America and Canada.
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3. Authorization and Ownership. Novell grants Rainmaker a limited, non-
transferable, non-assignable, non-exclusive right to sell Subscription Services
and certain other Novell Products to Eligible Customers and Resellers in the
Territory. All of the marketing materials, sales brochures, advertising and
other collateral materials referencing the Novell Products or incorporating the
Novell name or logo including materials placed on web sites, marketing
collateral, or other documentation developed by Rainmaker, that is specifically
prepared for and directly related to the Outsource Services shall be works made
for hire and therefore the property of Novell. If for any reason Rainmaker
writes or develops any such materials while performing the Outsource Activities
that are not considered a work made for hire, Rainmaker agrees to assign and
hereby assigns to Novell all right, title and interest therein, including all
rights of patent and copyright, and agrees to execute at Novell's request a
subsequent document as further evidence of this assignment. Notwithstanding the
foregoing, any databases, code, processes, business plans and other documents
that Rainmaker prepares or writes for its general business purposes or for other
customers will not be works for hire and shall remain the property of Rainmaker.
4. Term. This Agreement will commence on the date signed by both parties and
will continue for a period of two years unless terminated as provided herein.
5. Subscription Services Programs. The Novell Subscription Services will contain
the following programs and any other programs that are added to this Agreement
by written amendment. Additional details on these programs, products eligible
under these programs, and applicable fee structures will be provided in the
Subscription Services Program Description.
a. Point of Sale Program. Under the Point of Sale ("POS") program, Rainmaker is
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authorized to work with Novell Authorized Resellers to sell subscriptions at
the point of sale of Novell Products. The Reseller will sell a subscription
along with a product or product upgrade. If the Reseller goes to the
point-of-sale web site and transacts the purchase on behalf of the customer,
Rainmaker will pay direct to the Reseller a rebate equal to [***] of the
value of the Subscription purchase price. If the Customer goes to the web
site and transacts the purchase directly, Rainmaker will pay to the
Customer's designated Reseller a rebate equal to [***] of the value of the
Subscription purchase price. Novell will provide upgrades to subscribers when
qualifying upgrades are available. The parties understand and acknowledge
that Novell intends to bring the entire POS program in-house within the next
9 months. Rainmaker agrees to discontinue its participation in the POS
Program upon 30 days notice by Novell. Novell will honor Rainmaker's returns
as further provided herein and will bear the credit risk under POS.
b. Rescue Program. Under the Rescue Program, Rainmaker is authorized to deal
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with end users directly or to work with Novell Authorized Resellers to sell
subscriptions, product upgrades, or subscriptions and upgrades bundled
together to Novell customers who have rightfully acquired products more than
120 days earlier. Rainmaker will pay participating Resellers rebates equal to
[***] of the value of the upgrade and subscription price. Novell will provide
upgrades to subscribers when qualifying upgrades are available.
c. Reseller Rebate. In the Rescue program, if a reseller is not involved in the
---------------
sale to the customer, Rainmaker agrees to pay a rebate equal to [***]to a
reseller named by the customer, or, if the customer does not designate a
reseller, to a reseller designated by Novell. Novell will provide Rainmaker a
list of preferred resellers and a simple entitlement matrix.
6. Responsibilities of Rainmaker.
a. Subscription Service Outsource Team. Rainmaker will dedicate a team of sales
-----------------------------------
and marketing personnel to the sales of the Novell Subscription Services. The
project team will have the full support of Rainmaker management, marketing,
MIS and financial services. Staffing will include a director, sales manager,
product manager, and dedicated sales representatives. Rainmaker will add
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dedicated sales staff as sales increase. Generally, one new sales
representative will be added for each 1.6 million dollars of additional
revenue.
b. Sales of Subscription Services. Rainmaker will actively market Subscription
------------------------------
Services into the entire Novell installed customer base except as limited by
this Agreement. In addition, Rainmaker will be responsible for the renewal
process for each Subscription Services. Rainmaker is responsible for and will
make its best efforts to create demand for the Subscription Services and
Novell products sold under this Agreement. All such customer lists developed
by Rainmaker are the sole and exclusive property of Novell.
c. Reporting. Rainmaker will provide Novell with detailed reporting of its
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activities hereunder as required in Schedule 2 hereof. All reports shall be
submitted in a form prescribed from time to time by Novell.
d. Lead dissemination. Rainmaker agrees to submit to Novell or to resellers in a
------------------
manner described in the Program Description all leads of potential customers
for sales and services of such Novell products that are not covered by this
Agreement. This includes, but is not limited to, customers that purchase
Novell Products, services or subscriptions from Rainmaker. Novell will
provide Rainmaker a list of preferred resellers and a simple entitlement
matrix.
7. Responsibilities of Novell.
a. Novell Project Manager. Novell will make available a highly skilled employee
----------------------
familiar with the products and market. Such employee will be available during
normal business hours as reasonably requested by Rainmaker. This person will
assist in training processes reasonably required by Rainmaker personnel, and
will facilitate any organizational coordination necessary between Rainmaker
and Novell.
b. Accessibility of personnel and access to decision making authorities.
--------------------------------------------------------------------
Rainmaker's Novell Subscription Services Business Unit Manager will have
access to the Novell Project Manager. The Novell Project Manager will
coordinate and make available the appropriate resources and personnel.
c. Promotion. Novell will work in good faith with Rainmaker to promote the
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Novell Subscription Services programs and any subsequent Novell products
offered through Novell Subscription Services.
d. Non-solicit. If, during any term hereof, Novell offers employment to any
-----------
Rainmaker employee, and hires the employee, Novell will pay Rainmaker a fee
of [***] to offset the recruitment and training fees of replacement
employees. This provision will not apply to any Rainmaker employee who
responds to a general advertisement by Novell for positions other than sales
and marketing positions.
e. Support Process. Novell and Rainmaker will work together to coordinate data,
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channel support processes etc. as will be further defined in a Subscription
Services Program Description. Novell and Rainmaker will implement an ongoing
communications link to exchange updated information in both directions.
Upon termination of the Agreement, ownership of the customer records and all
modifications or additions shall be determined as follows:
Original Data: Each party shall retain ownership of the customer records
existing in their respective databases prior to the merger of the parties'
data (including records which are found in both parties' databases).
Subsequent Additions and modifications. All customer records which are
created, modified, and entered through Rainmaker's database as a result of
the marketing programs associated with the Outsource Activities shall be
owned by Novell. Rainmaker may obtain a copy of these records exclusively for
legal and tax purposes only.
f. Access to Novell databases. Access to customer information is critical to
--------------------------
Rainmaker's ability to sell into the customer base. Novell will work with
Rainmaker in good faith to acquire new names, and update customer records
and/or profiles.
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8. Inventory Management, Delivery, Shipping.
a. Delivery. Products may either be drop-shipped to end users by Novell at
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addresses provided by Rainmaker or delivered to Rainmaker for delivery to
customers.
i. For Products drop-shipped to customers, payment will be by customer to
Rainmaker and will be, at customer's choice, either (i) by credit card
when the order is placed, or (ii) per the terms of an invoice
accompanying the product. Delivery in the United States will be made
F.O.B. Novell's Dock, Customer's carrier, ground only, prepaid by
Novell to Customer's destination. All other freight arrangements will
be billed to Customer. For delivery outside the U.S., Novell will
select a carrier to transport deliverables to the port of entry and
will prepay shipping and handling charges. Customer will be
responsible for all applicable import duties and value added tax,
goods and services tax, or other similar taxes and fees.
ii. For delivery to Rainmaker, delivery in the United States will be made
CPT, Rainmaker's facility, Novell's preferred carrier, ground only.
For delivery to Rainmaker outside the United States, (if Rainmaker is
authorized in this Agreement to distribute Novell Product outside the
United States) will be made DDU, Port of Entry, Novell's preferred
carrier, ground only. All other U.S. freight arrangements will be
prepaid and billed to, or third party billed to the Rainmaker's
account.
b. Title and Risk of Loss.
----------------------
i. United States. In the case of shipments to shipping destinations in
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the United States, title (but only to the extent title passes) to the
Novell Products, exclusive of the rights retained under the Agreement
(Marks, patents, copyrights, trade names, trade secrets and other
intellectual property) and all risk of loss shall pass to Customer or
Rainmaker upon delivery at Novell's designated shipping facility to
the carrier. If Rainmaker is authorized in this Agreement or any
amendment hereto to distribute Novell Products outside the United
States, title and risk of loss to the Novell Products for any sale
consummated between Novell and Rainmaker will pass as in subsection
8.b.ii below. The parties agree that the passage of title and risk of
loss will pass from Novell to Customer or Rainmaker off the shores of
the United States.
ii. Outside the US. Reference in this Section to title passage with
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respect to all shipments of Novell Products from Rainmaker to
destinations in Canada or Latin America means title to the Novell
Products exclusive of all rights retained by Novell under the
Agreement in Marks, patents, copyrights, trade names, trade secrets
and intellectual property. The parties agree that beneficial and legal
title to, ownership of, right to possession of, control over, and
risks of loss and damage to, the Novell Products remains with Novell
until the shipment physically arrives at the port of entry in the
importing country. The time of payment, whether before or after
shipment, the method of shipment, the manner of consignment, whether
to Novell or its agent, to Rainmaker or Rainmaker's agent, or both,
or any document in relation to any sale under the Agreement will in no
way limit or modify the right of Novell as the legal and beneficial
owner of the Novell Products, its right to control and its right to
possession of the goods until they physically arrive at the port of
entry of the importing country. Any use of the terms "F. 0. B .,
""F. A. S.," "C.&F.," or "CFR" in the Agreement applies only to price
and not to title. It is expressly understood that the foregoing will
not be construed to mean that Novell has merely retained bare legal
title for security purposes, but rather retains legal title and full
beneficial ownership until the shipment arrives at the port of entry
of the country of destination. If Rainmaker insures the shipment,
insurance policies will protect the interest of Novell as the legal
owner of the merchandise until title transfers as set forth above.
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iii. Nothing in sections 8.a or 8.b authorizes Rainmaker to distribute
Novell Product outside the United States and Canada. If such
authorization is granted, it shall be granted in the definition of
the Territory.
c. Inventory Balancing. Once, during each Fiscal Quarter, Rainmaker may
-------------------
return for credit a quantity of excess inventory, the value of which
shall not exceed [***] of Rainmaker's net dollar sales invoiced by Novell
during the immediately preceding Fiscal Quarter for Novell Products. The
credit issued for the returned inventory will be the actual purchase
price paid by Rainmaker. This quarterly return may include defective
product and new and upgrade product not designated by Novell as Exception
Rotations in Section 8.e. In the event inventory was purchased on a
promotional price basis, credit issued will be based on the promotional
price Rainmaker paid for that Novell Product. This inventory balancing
privilege shall apply only if:
i. Rainmaker obtains a Novell Return Material Authorization (RMA)
prior to returning the Novell Products;
ii. Rainmaker fills out and submits a stock rotation request;
iii. Rainmaker returns the Novell Products no later than the end of the
second month of the Fiscal Quarter;
iv. At the time of the return, Rainmaker places an order for new
product in a volume equal to or greater than the return.
Novell reserves the right to make partial approvals of any stock rotation
request. Rainmaker will not return, and Novell will have no obligation to
accept, any product after one year past an announced obsolete date.
d. Debit Memos. In the event Rainmaker believes there is a discrepancy in
-----------
connection with an invoice or inventory balancing, or relating to
marketing fund accruals or grants issued by Novell, Rainmaker agrees to
give Novell written notice of the discrepancy within 90 days from the
date of the applicable invoice, inventory balancing or funding grant.
These discrepancies include but are not limited to short shipments, mis-
shipments, pricing variations or other discrepancies. If Rainmaker fails
to give such notice within the required time period, Rainmaker agrees
that Novell may conclusively presume the invoice, inventory balancing or
fund grant to have been accurate. Rainmaker also agrees not to use or
attempt to use a debit memo as a mechanism to resolve financial disputes
with Novell. Rainmaker agrees that any debit memo relating to any dispute
must be preceded by a credit memo issued by Novell covering that dispute.
e. Exception Rotations. From time to time, Novell will release new products
-------------------
or new versions of existing products that will render obsolete an
existing Novell product. Rainmaker shall have the right to return certain
of such obsoleted products to Novell for credit against an order of equal
volume placed at the time of the return. Products which qualify for
Exception Rotation under this Section and the associated rotation window
shall be listed in Novell Product Announcements. Exception Rotations
shall not be counted against Inventory Balancing set forth in Section
8.c. This exception rotation privilege shall apply only if:
i. Rainmaker obtains a Novell Return Material Authorization (RMA)
prior to returning the Novell Products;
ii. Rainmaker fills out and submits a stock rotation request; and
iii. Rainmaker returns the Novell Products no later than the end of the
second month of the Fiscal Quarter.
Novell reserves the right to make partial approvals of any stock rotation
request. Rainmaker agrees to pay a 15% handling fee on returns of
previously obsoleted products not returned within the announced exception
return window. Rainmaker will not return, and Novell will have no
obligation to accept, any product after one year past an announced
obsolete date.
9. Discounts, Reporting and Payment
a. Discount. Rainmaker will receive following discounts off the Recommended
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End User Prices for Novell Subscription Services and Novell Product sales
as follows:
POS [***]
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[***]
Novell reserves the right to change these discounts at any time upon with
30 days written notification to Rainmaker. Subscription Services are
licensed only for two-year terms and directly to end users. Novell and
Rainmaker may, from time to time, engage in special, limited-time
discount programs in addition to those provided herein. All such programs
must be approved in writing by the parties.
b. Calculation of Discounts. Rainmaker's discounts for Outsource Activities
------------------------
are calculated off the Recommended End User Price for each customer type.
This margin encompasses all standard services including personnel
staffing, demand generation activities including but not limited to
direct mail, telemarketing, telephone charges, outsource infrastructure,
outsource information reporting structures, and on-going MIS
consolidation and database synchronization, etc. Customized and/or
incremental MIS projects may be made available to Novell under a separate
fee structure.
c. Quarterly Quotas. Rainmaker and Novell will mutually determine quarterly
----------------
revenue objectives. The parties may establish additional fees on an
ongoing basis, if mutually agreed, for revenues in excess of the quotas.
d. Reporting and Payment
---------------------
i. Rainmaker will submit to Novell on a monthly basis reports of its
activities hereunder as required in Schedule 2.
ii. Rainmaker agrees to pay Novell for Novell Products within 45 days
of invoice and in accordance with such further credit and payment
terms as may be provided by Novell on the invoice or otherwise. In
the event of any inconsistencies between an invoice and this
agreement, the terms of this agreement will prevail. Novell
reserves the right to change credit and payment terms upon 60 days
notice.
iii. All payments hereunder shall be made in form and to such location
as directed from time to time by Novell. Payments made by check
from customers inside the United States and Canada must be made in
USD and sent to:
Novell, Inc.
P.O. Box 31001-0024
Pasadena CA 91110-0024
e. Sales Tax. Rainmaker is responsible for all applicable sales tax
---------
associated with the sale of the Products to an Eligible Customer.
f. Returns By Customers. Rainmaker agrees to accept all Products returns
--------------------
(not including Subscription Services) appropriately made by customers
under terms of the end user license agreement accompanying the Product.
All returns from Rainmaker to Novell must be accompanied by a standard
Novell Return Material Authorization (RMA) prior to return and made
within 45 days of Rainmaker's receipt of the product from customers. All
returns must reference the original purchase order and the RMA number.
All returns must be in their entirety. Novell agrees to refund to
Rainmaker an amount equal to the refunds Rainmaker makes to customers
under this paragraph.
10. Marketing.
a. Marketing Fund. Novell will make available an amount to be determined
--------------
quarter by quarter by Novell but in no event to exceed [***] per
quarter of Market Development Funds to help fund sales generation
programs. With those Funds, Novell will reimburse Rainmaker at a rate of
[***] for qualified expenses provided Rainmaker (a) submits written
proposals for each sales generation program, and (b) receives written
approval by Novell for the program.
11. Trademark License.
a. License Grant. Subject to the terms and conditions of this Agreement,
-------------
Novell grants Rainmaker a non-exclusive, indivisible, non-transferable
limited license to use the Licensed Trademark to the extent required
under this Agreement (as determined in Novell's sole discretion) and in
the manner or quality as
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determined by Novell's trademark usage guidelines or otherwise in
Novell's sole discretion.
b. No Conflicting Marks. Rainmaker represents and warrants that it does not
--------------------
currently and will not in the future claim any Novell trademark as a
trademark, service mark or other proprietary right.
c. Defense.
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i. Novell and Rainmaker will at all times use their commercially
reasonable efforts to preserve the value and validity of the
Licensed Trademark. Nothing in this Agreement shall be construed to
give Rainmaker any right, title, or interest in the Licensed
Trademark or any Novell trademark, except as expressly provided
herein. The right of Rainmaker to use the Licensed Trademark is
only by virtue of the license granted herein. Any trademark rights
accruing through the use of the Licensed Trademark by Rainmaker
shall accrue to the benefit of Novell alone.
ii. Rainmaker shall notify Novell of all infringements of the Licensed
Trademark or other Novell trademarks or of applications to register
trademarks which conflict with the Licensed Trademark of which
Rainmaker acquires actual knowledge. Novell shall have the sole
right to bring any action for or take any actions regarding
infringement of the Licensed Trademark, and Rainmaker shall render
any assistance required by Novell, at Novell's expense, in
enforcing or preserving the validity of the Licensed Trademark. Any
damages recovered for the infringement of The Licensed Trademark
shall belong solely to Novell.
12. Termination.
a. For Convenience. Either party may terminate this Agreement for
---------------
convenience by providing the other party written notice of not less than
ninety (90) days. In the event of a change of the discount by Novell as
provided in paragraph 9.a, Rainmaker may terminate this Agreement for
convenience by providing Novell written notice of not less than thirty
(30) days.
b. For Cause. Either party may terminate this Agreement for cause if the
---------
other party fails to observe any term or condition under this Agreement
and such failure continues for 30 days following receipt of written
notice from non-breaching party.
13. Confidentiality. The parties agree that any Confidential Information
provided under this Agreement shall be held and maintained in strict confidence.
Each party agrees to protect the confidentiality of such information in a manner
consistent with the way a reasonable person would protect similar Confidential
Information. "Confidential Information" means the information and materials
marked by a party as confidential and proprietary. "Confidential Information"
does not include information that (i) is already known to the receiving party at
the time it is disclosed and has not been obtained wrongfully, (ii) becomes
publicly known without fault of the receiving party, (iii) is independently
developed by the receiving party, (iv) is approved for release in writing by the
disclosing party, (v) is disclosed without restriction by the disclosing party
to a third party, or (vi) is disclosed pursuant to legal obligations beyond the
control of the disclosing and receiving parties.
14. Indemnification. Novell agrees to indemnify, defend and hold Rainmaker
harmless from any and all damages, liabilities, costs and expenses incurred by
Rainmaker as a result of any claim, judgment or adjudication against Rainmaker
which provides that the Novell Products, trade names or the Licensed Trademark
appropriately used by Rainmaker in connection with marketing the Novell Products
infringe any copyright, trademark, or US patent of any third party, provided:
(i) Rainmaker promptly notifies Novell in writing of the claim; and (ii)
Rainmaker agrees that Novell shall have the sole control of the defense of any
action and all negotiations for settlement and compromise. Novell's agreement to
provide a defense under this Section includes the hiring of counsel. Therefore,
costs and expenses to be borne by Novell do not include separate attorneys' fees
incurred by Rainmaker in defense of any claim unless Novell has requested in
writing the additional assistance of counsel. Novell's liability under this
Section will not exceed the greater of [***].
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[***], or adjudication referred to above.
Rainmaker agrees to indemnify, defend and hold Novell harmless from any and all
damages, liabilities, costs and expenses incurred by Novell and its officers,
directors, agents and employees resulting from the Rainmaker's sales and
distribution of Product arising from Rainmaker's negligence or willful
misconduct provided: (i) Novell promptly notifies Rainmaker in writing of the
claim; and (ii) Novell agrees that Rainmaker shall have the sole control of the
defense of any action and all negotiations for settlement and compromise.
Rainmaker's agreement to provide a defense under this Section includes the
hiring of counsel. Therefore, costs and expenses to be borne by Rainmaker do not
include separate attorneys' fees incurred by Novell in defense of any claim
unless Rainmaker has requested in writing the additional assistance of counsel.
Rainmaker's liability under this Section will not exceed the greater of [***].
15. WARRANTIES.
a. Limited Warranty. Novell provides, to End Users only, warranties for
----------------
Novell Products in the software license agreement which accompanies each
Novell Product. Novell does not warrant non-Novell products. They are
provided by Novell on an "AS IS" basis. Any warranty service for such
products will be provided by the manufacturer of the products in
accordance with the applicable manufacturer's warranty.
b. Year 2000 Warranty. Novell warrants that the latest and any subsequent
------------------
versions of NetWare Software, and those other products which are listed
as Y2000 Ready on Novell's Year 2000 site at
http://www.novell.com/p2000/product.html. are Year 2000 Compatible when
-----------------------------------------
used in accordance with the Documentation provided (i) the Software is
not modified unless by Novell or as authorized by Novell in writing, and
(ii) the Software is installed in a compatible system environment. Year
2000 Compatible means a Software product will, when all updates and fixes
as made available by Novell have been installed, and provided all other
products used with the Software properly exchange accurate date data with
it:
(1) Accurately process data involving dates beginning with January 1,
2000 through December 31, 2034, and,
(2) provide that date related functionalities and data fields include
the indication of century and millennium and perform calculations which
involve a four-digit year field, except that a date element may be
represented without a century and millennium if the correct century is
unambiguous for all manipulations involving that element.
This term of this warranty will begin when Rainmaker licenses the covered
Software products and ends the earlier of expiration of the Agreement or
March 31, 2000. Novell's only obligation under this warranty shall be
that if Rainmaker notifies Novell of a warranty breach during the
warranty term, Novell will at its option either remedy the problem with a
fix to the Software or by providing an upgrade to the Software that is
Year 2000 Compatible, or offer Licensee a refund of the Software purchase
price upon return of the Software. This warranty does not apply to third
party products supplied by Novell whether or not bundled with Novell
products.
c. Warranty Representations. Rainmaker is not authorized to make any
------------------------
warranty commitment on Novell's behalf, whether written or oral, other
than those contained in the applicable software license agreement.
d. LIMITATION OF WARRANTIES. THE WARRANTIES DESCRIBED IN THE APPLICABLE
------------------------
NOVELL SOFTWARE LICENSE AGREEMENT AND SECTION ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
16. LIMITATION OF REMEDIES. NOVELL'S ENTIRE LIABILITY AND RAINMAKER'S
EXCLUSIVE
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REMEDY FOR ANY CLAIMS CONCERNING THE AGREEMENT AND NOVELL PRODUCTS ACQUIRED
UNDER THE AGREEMENT ARE SET FORTH IN THIS SECTION AND SECTION 14.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE AGREEMENT, NEITHER PARTY SHALL
BE LIABLE TO THE OTHER (WHETHER IN CONTRACT, TORT OR UNDER ANY OTHER THEORY OF
LIABILITY) FOR ANY INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING
LOST PROFITS) SUSTAINED OR INCURRED IN CONNECTION WITH THE AGREEMENT AND THE
NOVELL PRODUCTS THAT ARE SUBJECT TO THE AGREEMENT, WHETHER OR NOT SUCH DAMAGES
ARE FORESEEABLE.
17. Assignment. The Agreement shall be binding upon and inure to the benefit of
the legal representatives, assigns, and successors-in-interest of the parties.
Rainmaker may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of Novell.
18. Entire Agreement. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter set forth herein and supersedes all
drafts and other communications and any other instrument purporting to be an
agreement of the parties hereto.
19. Expenses. Each party will bear its own expenses in the negotiation and
completion of this Agreement.
20. Applicable Law. This Agreement shall be subject to and governed by the laws
of the state of Utah. The parties consent to the jurisdiction and venue of the
state and federal courts sitting in the State of Utah.
21. Survival of Terms. The provisions of the Agreement which by their nature
extend beyond the Expiration Date or other termination of the Agreement will
survive and remain in effect until all obligations are satisfied.
22. Waiver. No waiver of any right or remedy on one occasion by either party
shall be deemed a waiver of such right or remedy on any other occasion.
23. Attorneys' Fees. If either party initiates legal proceedings to enforce a
term of the Agreement, the prevailing party will be entitled to recover
reasonable attorneys' fees and costs.
24. Notice. Unless otherwise agreed to by the parties, all notices required
under the Agreement shall be deemed effective when sent in writing by either (i)
registered mail, (ii) certified mail, return receipt requested, (iii) overnight
mail, properly addressed, or (iv) by telephone facsimile transfer appropriately
directed to the attention of the party executing the Agreement or that person's
successor.
25. U.S. Export Laws and Regulations. Rainmaker agrees to comply with all
applicable United States and foreign export/import laws and regulations.
Rainmaker agrees not to export any Novell Product directly or indirectly,
separately or as part of a system, without first obtaining proper authority to
do so from the appropriate governmental agencies or entities, as may be required
by law. Rainmaker acknowledges that U.S. export control laws and regulations
apply to technology and software supplied by Novell. If Novell's shipping
documents indicate that technology and/or software has been exported to
Rainmaker under License Exception TSR (Technical Software Restricted), Customer
agrees Section i. below applies. If Novell's shipping documents indicate that
software has been exported to Rainmaker under License Exception TMP (Temporary),
Customer agrees Section ii. below applies.
i. Rainmaker will not knowingly export or re-export the technology and/or
software supplied by Novell to any country or entity or for any use
prohibited by the U.S. Export Administration Regulations ("EAR")
unless authorized by the U.S. Government.
ii. Rainmaker certifies that this beta test software will only be used for
beta testing purposes, and will not be leased, sub-licensed, assigned
or otherwise transferred, or export any product, process or services
that is the direct product of the beta test software.
26. Records Examinations. During the term of this Agreement and for one year
thereafter, Rainmaker agrees to keep and maintain, in a true and accurate
9
<PAGE>
Confidential Execution original
- --------------------------------------------------------------------------------
manner, all usual and proper records and books of account. Rainmaker agrees to
allow Novell to examine its accounts and records to determine Rainmaker's
compliance or noncompliance with the Agreement. Any examination shall be at the
expense of Novell and shall be solely for the purpose of ensuring compliance
with the Agreement. However, if any such examination discloses underpayment by
Rainmaker by [***] or more, the cost of such examination shall be paid by
Rainmaker. Any examination shall be conducted only by an authorized
representative(s) of Novell, or its designee, and shall occur during regular
business hours at Rainmaker's offices and shall not interfere unreasonably with
Rainmaker's business activities. Examinations shall be made no more frequently
twice each year and Novell shall give Rainmaker 10 days or more prior written
notice of the date of each such examination and the name of the Novell
authorized representative who will be conducting the examination. All
information obtained by the Novell authorized representative conducting the
audit shall be maintained confidential by such representative. Notwithstanding,
the examiner shall give the parties an examination report containing only the
information necessary to indicate compliance or non-compliance with the
Agreement. To the extent that an audit reveals non-compliance with terms of the
Agreement or Program Description, Novell shall have the right to recover or
withhold as a set-off the amount lost.
27. Government Rights. Rainmaker agrees to (i) identify the Novell Products in
all proposals and agreements with the United States Government or any contractor
for the United States Government; and (ii) identify or mark the Novell Products
provided pursuant to any agreement with the United States Government or any
contractor for the United States Government as necessary to obtain protection
substantially equivalent to that afforded commercial computer software and
related documentation developed at private expense and provided with Restricted
Rights as defined in DOD FAR Supplement 48 C.F.R. 252.227-7013(c)(1)(ii) in
effect as of May 18, 1987 or any successor regulation.
10
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
Confidential Execution original
- --------------------------------------------------------------------------------
In witness whereof, the parties have caused this Agreement to be executed by
their duly authorized representatives.
Novell, Inc. Rainmaker Corporation
Signature /s/ Dave Trotter Signature /s/ Michael Silton
-------------------------- -------------------------
Name Dave Trotter Name Michael Silton
------------------------------ -----------------------------
Title VP Sales Title CEO
------------------------------ -----------------------------
Date 3/26/99 Date 3-19-99
------------------------------ -----------------------------
11
<PAGE>
Schedule 1
Upgrades and Subscription Services for:
NetWare
12
<PAGE>
Schedule 2
Reports
Rainmaker will prepare and submit the following reports in form and medium
prescribed by Novell from time to time on the time tables listed below.
1. Weekly Sales Report
-------------------
A Weekly Sales report will be due each Monday for the preceding week. This
report will include a sales summary by product classification and a detailed
report by SKU numbers. This report will be sent to Barbara Sauer in Excel
format.
2. Monthly Sales Report
--------------------
The Monthly Sales Report will contain all sales activities for the previous
month. This report will be due on the 10th day each month in ASCII format and
will be equal to Rainmaker's purchase order total below. This report will be
sent to ______________.
Monthly Sales Report
--------------------
. Contract Number
. Customer Name
. Customer Address, City, State County, Zip/Postal Code
. Novell part number/SKU
. Product Serial Number (if provided to Rainmaker by reseller or end user)
. Novell product description
. retail sales price
Discounted amount due Novell
. quantity sold/shipped
. start date of subscription period
. End Date of subscription period
. Customer Contact Name
Customer Contact Title
Customer Contact Phone
Customer Contact Fax
3. Purchase Orders
---------------
The purchase order will contain the following summarized by unique part
number/SKU and subscription billing periods (when applicable):
. Total Units sold
. List Price
. Discount Amount
Discount Percent
. Start Date of subscription period
End Date of subscription period
Each purchase order will clearly identify the reporting month and year.
4. Customer Commitment Information Report.
--------------------------------------
The Customer Commitment Information Report will contain all Customer
subscription information (as
- --------------------------------------------------------------------------------
13
<PAGE>
prescribed by Novell and as identified in addition to the above) gathered during
the previous month. The report shall be due by the 10/th/ day of each month.
5. Management Report.
-----------------
The Management Report will be due the 10/th/ of each month and will contain the
following:
. a six-month rolling forecast of sales activities and revenues.
6. Multiple-Server Customer Report.
-------------------------------
The Multiple-Server Customer Report will be due the 10/th/ of each month and
will contain subscription deliverable requirement for Customers who have
multiple serves and forecasts of Customer requirements for the fulfillment of
each Product update.
- --------------------------------------------------------------------------------
14
<PAGE>
Schedule 3
Average Street Price of Upgrades
[To be provided by Rainmaker]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NW5 NW5
Upgrade Upgrade NW5 Upgrade NW5 Upgrade NW5 Upgrade NW5 Upgrade NW5 Upgrade
NW5 Base 5-user 10-user 25-user 50-user 100-user 250-user 500-user
Server Additive Lic. Additive Lic. Additive Lic. Additive Lic. Additive Lic. Additive Lic. Additive Lic.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Upgrade Pricing
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CDW $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
** $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Microwarehouse $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
** $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Insight $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
** $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
NecxDirect $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
** $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Average $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Avg Call-in Price $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Avg. Street Price $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
MSRP $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***] $ [***]
- ------------------------------------------------------------------------------------------------------------------------------------
Avg. Discount
off Full Retail [***] [***] [***] [***] [***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------
Average discount
across all
stratifications [***]
- -----------------------------
15
__________
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with the
Securities & Exchange Commission.
<PAGE>
Schedule 4
Projected Revenue
- --------------------------------------------------------------------------------
16
