<PAGE>
As filed with the Securities and Exchange Commission on December 22, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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EMBEDDED SUPPORT TOOLS CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 3674 04-3034207
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number)Identification Number)
incorporation or
organization)
120 Royall Street
Canton, MA 02021
(781) 828-5588
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
--------------
PETER S. DAWSON
120 Royall Street
Canton, MA 02021
(781) 828-5588
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
Copies to:
JAMES POLLOCK, ESQ. TIMOTHY C. MAGUIRE, ESQ.
HOLLAND & KNIGHT LLP TESTA, HURWITZ & THIBEAULT, LLP
One Beacon Street High Street Tower
Boston, Massachusetts 02109 125 High Street
Telephone: (617) 523-2700 Boston, Massachusetts 02110
Telecopy: (617) 720-0325 Telephone: (617) 248-7000
Telecopy: (617) 248-7100
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date hereof.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration 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 number of the earlier effective registration statement for the
same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Offering Registration
Securities to be Registered Registered Per Share(1) Price Fee(2)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $.10 par value per
share.......................... 5,175,000 $12.00 $62,100,000.00 $16,394.40
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
(2) Calculated pursuant to Rule 457(a) based on an estimate of the proposed
maximum aggregate offering price.
--------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. EST +
+may not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state on where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--December 22, 1999
PROSPECTUS
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4,500,000 Shares
[LOGO]
Common Stock
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Embedded Support Tools Corporation is offering 4,100,000 shares and one
stockholder is offering 400,000 shares of common stock in an initial public
offering. Prior to this offering, there has been no public market for EST's
common stock.
EST designs, manufactures, sells and supports integrated hardware and software
tools for programming, testing and debugging embedded systems.
It is anticipated that the public offering price will be between $10.00 and
$12.00 per share. The shares of EST are expected to be quoted in the Nasdaq
National Market under the symbol "ESTC".
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price................................. $ $
Underwriting discounts and commissions................ $ $
Proceeds, before expenses, to EST..................... $ $
Proceeds, before expenses, to the selling stockholder. $ $
</TABLE>
See "Risk Factors" on pages 8 to 14 for factors that should be considered
before
investing in the shares of EST.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
- --------------------------------------------------------------------------------
The underwriters may, under certain circumstances, purchase up to 675,000
additional shares from EST and another stockholder at the public offering
price, less underwriting discounts and commissions. Delivery and payment for
the shares will be on February , 2000.
Prudential Volpe Technology Hambrecht & Quist
a unit of Prudential
Securities
Needham & Company, Inc.
PrudentialSecurities.com
, 2000
<PAGE>
EST is a leading provider of the development tools used for programming, testing
and debugging embedded systems.
To build these...
[GRAPHIC]
Cellular phones
Printers
Network switches
Automotive control systems
Medical equipment
Developers first need these...
[GRAPHIC]
Microprocessor connectivity
Host Software Tools
Real-time trace
Reference designs
Our tools are used in the development of embedded systems for today's high
growth industries, including:
. Communications . Data Communications
. Internet Infrastructure . Telecommunications
<PAGE>
EST's integrated hardware and software solutions accelerate embedded product
development
[Graphic with the following text with pictures of EST's products]
Microprocessor Connectivity
EST's run control hardware connects a developer's PC or workstation to an
embedded microprocessor
Host Software Tools
Our software tools include high level language debuggers and other graphical
utilities
Real-time Data Acquisition
EST's trace systems capture and acquire microprocessor data in real-time
Reference Designs
Our reference designs enable our customers to prototype and evaluate embedded
microprocessors during early product development
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 8
Forward-Looking Statements................................................ 15
Subchapter S Corporation and Termination of Subchapter S Corporation
Status................................................................... 16
Use of Proceeds........................................................... 17
Dividend Policy........................................................... 17
Capitalization............................................................ 18
Dilution.................................................................. 19
Selected Consolidated Financial Data...................................... 20
Management's Discussion and
Analysis of Financial Condition
and Results of Operations................................................ 22
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business................................................................... 32
Management ................................................................ 41
Certain Transactions....................................................... 46
Principal and Selling Stockholders......................................... 47
Description of Capital Stock............................................... 48
Shares Eligible for Future Sale............................................ 50
Underwriting............................................................... 52
Legal Matters.............................................................. 54
Experts.................................................................... 54
Available Information...................................................... 54
Index to Consolidated Financial
Statements................................................................ F-1
</TABLE>
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The terms "EST," "Company," "we," "our" and "us" refer to Embedded Support
Tools Corporation and its subsidiaries unless the context suggests otherwise.
The term "you" refers to a prospective investor. "EST," "ESTC," "CPMSpy,"
"visionPROBE," "visionICE," "visionCLICK," "visionEVENT" and "visionXD" are our
trademarks. This prospectus also contains trademarks and trade names of other
companies.
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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are
not making an offer of these securities in any jurisdiction where the offer or
sale is not permitted. You should not assume that the information contained in
this prospectus is accurate as of any date other than the date on the front
cover of this prospectus.
3
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
It is not complete and may not contain all of the information investors should
consider before investing in the common stock of EST. Investors should read the
entire prospectus carefully.
Embedded Support Tools Corporation
We are a leading provider of integrated hardware and software tools for
programming, testing and debugging embedded systems. Our products enable
developers to quickly and reliably program and debug the embedded systems that
manufacturers build into their industrial and consumer products. As the
complexity and speed of embedded systems increase, we believe that embedded
systems developers will require more efficient solutions to program their
products and that we are well positioned to offer these solutions.
A significant portion of our customers are in the communications industry,
including telecommunications, data communications and Internet infrastructure
equipment suppliers. Our largest customers by revenue include Alcatel, Cisco
Systems, Hewlett-Packard, Lucent Technologies, Motorola, Nortel Networks,
Tellabs Wireless and 3Com.
We were incorporated in Massachusetts in 1989. Our principal executive
offices are located at 120 Royall Street, Canton, Massachusetts 02021 and our
telephone number is (781) 828-5588. Our World Wide Web site address is
www.estc.com. The information contained on our Web site is not part of this
prospectus.
Our Market Opportunity
Embedded systems are the special purpose computers within intelligent
industrial and consumer products such as network switches and routers, cellular
base stations, process control systems, cell phones, printers and anti-lock
braking systems. As with all computers, embedded systems minimally consist of a
microprocessor, memory and software, and the level of complexity of that system
can be enhanced with additional components. Embedded systems differ from
general purpose computers, such as PCs, workstations and mainframes, in that
they are designed to run only the specific set of tasks required for the end
product to operate as intended. Manufacturers use embedded systems to enhance
functionality and performance, reduce cost and size, and improve reliability of
a broad variety of products, ranging from simple systems found in microwave
ovens to complex multiprocessor driven systems controlling the infrastructure
of the Internet. Embedded systems development tools enable the developer to
edit and compile code, transfer the operating system and application software
to the microprocessor, and test and debug the program and the functionality of
the embedded system as a whole.
According to industry and market research firms, at least 55% of the more
than 265 million microprocessors produced by the semiconductor industry in 1998
were used in embedded systems, while the remainder were used in general purpose
computers such as PCs. We participate in the market for the higher-end 32-bit
and greater embedded microprocessors, which is forecast to grow at a rate of
21%, from 106 million units in 1998 to 228 million units in 2002. Motorola is
the largest supplier of embedded microprocessors, with a market share of 35% in
1997, the latest year for which data is available. The market for embedded
software development tools is part of the overall embedded operating systems
and development tools market, which was approximately $550 million in 1998 and
is forecast to grow 14% annually through 2003.
4
<PAGE>
Our Solution
We design, manufacture, sell and support a comprehensive suite of high
performance, open and scalable embedded systems development tools, consisting
of both hardware and software components. Our tools enable development
engineers to program, test and debug embedded systems quickly and reliably at
each stage of the development process. We believe that our leadership position
arises from the following:
Superior Development Tools - Our tools offer the following advantages:
. Bundled - We bundle software debuggers and other graphical utilities
with hardware tools to produce a complete solution for early stage
hardware and firmware development;
. Open - We enable developers using our tools to incorporate a variety of
real-time operating systems into their products and to use a wide range
of software tools with our hardware products;
. Graphical - Our software tools provide a rich graphical user interface,
which gives programmers easy access to multiple in-depth views of
microprocessor data and development status; and
. Scalable - Our hardware tools are modular and designed to easily allow
developers to configure and scale their development environments to meet
their specific needs.
Microprocessor Knowledge Base - We were one of the first companies in the
industry to develop and market tools for debugging Motorola microprocessors
using its on-chip debug capabilities. We have been able to adapt our tools
to work with over 50 different microprocessors within the Motorola and IBM
families. Through our relationships with Motorola and IBM, we gain early
access to new microprocessor designs prior to commercial release.
Comprehensive Customer Support - We deploy a team of 41 field salespeople
and support engineers to assist our customers throughout the development
process. This support includes providing early development kits containing
single board computers and board support packages. We also offer our
customers formal one-day and three-day training sessions on microprocessor
architectures.
Our Strategy
Our goal is to maintain and enhance our position as a technological and
market leader in embedded systems development tools. In order to achieve this
goal, we intend to:
Extend Our Technological Leadership - We have established leadership in
development tools by bundling hardware and software solutions, and we must
insure that our products continue to embody the latest technologies and
features.
Continue Our Focus on Communications Applications - A significant number of
our customers build highly complex data communications, telecommunications
and Internet networking equipment. We plan to expand our product offerings
to address the specific needs of developers by leveraging our strengths
within these markets.
Increase Our Software Product Offerings - We intend to use our strengths in
the hardware bring-up development stage to extend and enhance our software
solutions, while remaining operating system independent.
Satisfy Customer Demand for Additional Microprocessor Architectures - Our
tools work with more than 50 different microprocessors from Motorola and
IBM. We intend to meet the needs of our customers by continuing to adapt
our development tools for an even wider range of microprocessor
architectures.
Strengthen and Develop Strategic Alliances - We have developed significant
relationships with Motorola and Wind River Systems, and we intend to
strengthen these relationships as well as seek new alliances.
5
<PAGE>
The Offering
<TABLE>
<S> <C>
Shares offered by EST............... 4,100,000 shares
Shares offered by the selling
stockholder ....................... 400,000 shares
Total shares outstanding after this
offering........................... 16,994,000 shares (1)
Use of proceeds by EST.............. To (i) make a distribution of previously
undistributed subchapter S corporation
income of approximately $4.6 million, (ii)
repay a $2.0 million line of credit and
(iii) for general corporate purposes,
including working capital and capital
expenditures.
Proposed Nasdaq National Market
Symbol............................. ESTC
</TABLE>
- --------
(1) The common stock to be outstanding after this offering is based on shares
outstanding as of December 17, 1999 and excludes 2,589,500 shares of common
stock issuable upon the exercise of options outstanding as of such date at
a weighted average exercise price of $3.36 per share and 1,410,500 shares
available for future grant under our stock plans. See Note 8 of Notes to
Consolidated Financial Statements.
Except as set forth in the consolidated financial statements or as otherwise
indicated, all information in the prospectus:
. reflects a two-for-one stock split effective December 21, 1999; and
. does not include the 475,000 shares offered by EST and the 200,000
shares offered by another selling stockholder if the underwriters
exercise their over-allotment option in full.
Risk Factors
You should consider the risk factors before investing in EST's common stock
and the impact from various events which could adversely affect our business.
6
<PAGE>
Summary Consolidated Financial Data
EST has been treated as a Subchapter S corporation for federal income tax
purposes since its organization on January 5, 1989. As a Subchapter S
corporation, EST has not been subject to federal and certain state income
taxes. The pro forma net income (loss) reflects the provision for income taxes
that would have been recorded had EST been a Subchapter C corporation, assuming
an effective tax rate of 40%, 40%, 32%, 34% and 40% for the years ended
December 31, 1994, 1995, 1996, 1997 and 1998, respectively, and 40% and 44% for
the nine months ended September 30, 1998 and 1999, respectively. See Notes 2
and 10 of Notes to Consolidated Financial Statements.
Pro forma as adjusted balance sheet data set forth below reflects the
distribution of an estimated $4.6 million, calculated as of December 31, 1998,
of cumulative undistributed Subchapter S corporation taxable income for which
stockholders of record prior to the closing of this offering have been taxed.
The distribution will be made out of the net proceeds of this offering. The
actual amount to be distributed is expected to remain the same based upon an
estimate of taxable earnings for the period from January 1, 1999 through the
closing of this offering, subject to certain limitations. The pro forma as
adjusted balance sheet data also reflects the sale of 4,100,000 shares of
common stock by us at an assumed initial public offering price of $11.00 per
share, after deducting the underwriting discounts and commissions and estimated
offering expenses payable by EST.
<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
------------------------------------ ---------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Total revenues........... $3,568 $4,787 $8,262 $11,766 $18,250 $13,171 $19,544
Total cost of revenues... 1,661 1,326 1,945 2,874 3,823 2,968 3,789
------ ------ ------ ------- ------- ------- -------
Gross profit............. 1,907 3,461 6,317 8,892 14,427 10,203 15,755
Selling and marketing.... 1,204 1,575 2,833 4,052 7,236 5,111 7,274
Research and development. -- 1,100 1,636 2,150 3,085 2,281 3,378
General and
administrative.......... 389 367 541 721 1,040 766 999
Stock-related
compensation expense(1). -- -- -- -- -- -- 9,363
------ ------ ------ ------- ------- ------- -------
Total operating expenses. 1,543 2,989 5,010 6,923 11,361 8,158 21,014
------ ------ ------ ------- ------- ------- -------
Income (loss) from
operations.............. 364 472 1,307 1,969 3,066 2,045 (5,259)
Net income (loss)........ $ 238 $ 269 $1,101 $ 1,860 $ 2,890 $ 1,909 $(5,645)
Pro Forma Statement of
Operations Data(2):
Pro forma net income
(loss).................. $ 218 $ 283 $ 874 $ 1,314 $ 1,865 $ 1,240 $(2,924)
====== ====== ====== ======= ======= ======= =======
Pro forma net income
(loss) per share - basic
and diluted............. $ 0.02 $ 0.03 $ 0.09 $ 0.13 $ 0.18 $ 0.12 $ (0.26)
====== ====== ====== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999
---------------------
Pro Forma
Actual As Adjusted
-------- -----------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................. $ 1,579 $37,873
Working capital........................................... 3,019 39,313
Total assets.............................................. 10,329 46,623
Long-term debt............................................ -- --
Redeemable common stock................................... 18,959 --
Total stockholders' equity (deficit)...................... $(14,544) $40,159
</TABLE>
- --------
(1) The stock-related compensation expense relates to the issuance of
2,783,000 shares of common stock to employees. See Note 8 to Notes to
Consolidated Financial Statements.
(2) Pro forma net income (loss) and net income (loss) per share data assumes:
(i) the termination of the redemption rights of certain common
stockholders and therefore excludes related accretion charges and
(ii) that EST was subject to income taxation as a Subchapter C corporation
for all periods presented. See Note 2 to Notes to Consolidated Financial
Statements.
7
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, in addition to
the other information in this prospectus, before purchasing shares of EST
common stock. Each of these risk factors could adversely affect our business,
operating results and financial condition as well as adversely affect the
value of an investment in our common stock and could cause you to lose some or
all of your investment. This offering involves a high degree of risk.
Risks Related To Our Business
We depend on embedded systems developers' continued acceptance of Motorola
microprocessors.
We have designed our tools to work principally with embedded systems using
Motorola microprocessor architectures. To date, substantially all of our
revenues have come from customers who use Motorola microprocessors in their
embedded systems. We would be harmed if Motorola microprocessor sales are
interrupted for any reason or if embedded systems developers who use our tools
choose another microprocessor family. We are in the process of creating
development tools to be used with microprocessors made by manufacturers in
addition to Motorola. If we are unsuccessful in developing tools that work
with microprocessors other than Motorola microprocessors, we may fail to grow
our business and our revenues and profits could be adversely affected.
If our early access to Motorola microprocessor designs is interrupted, our
business would suffer.
As part of our relationship with Motorola, our engineers communicate with
their counterparts at Motorola and have early access to new microprocessor
designs. With this knowledge, we are able to adapt our tools to these new
designs and make our tools available at the time our customers begin to
incorporate new Motorola microprocessor releases into their product designs.
Our relationship with Motorola is not the subject of any written agreement and
it is not exclusive. We could lose significant revenue if our early access to
design and product information from Motorola is interrupted for any reason.
If Motorola expands its operations to become a direct source of development
tools to a broad range of embedded systems developers our business may be
significantly adversely affected.
Motorola has traditionally relied on third-party vendors to provide tools
for its microprocessors. Motorola recently acquired Metrowerks, a maker of
software-only tools. If Motorola expands its operations to include selling
development tools to a broad range of embedded systems developers, our
revenues and profits could be negatively impacted.
If our relationship with Wind River Systems is interrupted for any reason,
our business could be significantly harmed.
Wind River Systems is a major provider of operating systems and development
tools. Currently, we collaborate with Wind River in marketing and selling our
respective product offerings. However, Wind River recently acquired Integrated
Systems, another provider of operating systems and development tools. This
acquisition could affect our relationship with Wind River, as Wind River could
expand its product offerings to include development tools similar to the
products we offer. Any interruption of our relationship, including direct
competition with Wind River, would likely undermine our joint marketing
efforts and could cause significant harm to our business.
We face intense competition in our industry and we cannot assure you that we
will be able to compete successfully.
The embedded systems development tools market is rapidly evolving and
intensely competitive. Competition could intensify even further if
microprocessor manufacturers were to enter into our marketplace.
8
<PAGE>
Competitors may develop and offer products and services similar to ours in the
future. Our business would be harmed if we are not able to compete
successfully against current or future competitors. Although we believe that
there are market opportunities for several providers of products and services
similar to ours, a single provider might obtain a dominant position. Increased
competition is likely to result in price reductions, reduced gross margins and
loss of market share, any of which could harm our business. A number of our
current and potential competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial,
marketing, technical and other resources than we do. Our competitors may be
able to devote significantly greater resources to marketing campaigns, adopt
more aggressive pricing policies and may expend substantially more resources
on product development. If we do not compete effectively, our revenues and
earnings may suffer.
If we lose the services of any of our key personnel, our business and stock
price could suffer.
In order to continue to provide quality services in our rapidly changing
business, we believe it is particularly important to retain personnel with
experience. Our business depends in large part on the continued service of a
number of key employees, including Peter Dawson, our President and Chief
Executive Officer, and James Watkins, our Chief Operating Officer and Senior
Vice President of Sales and Marketing. The loss of the services of Mr. Dawson,
Mr. Watkins or any of our other key personnel could seriously impede our
success. Our employees, other than Messrs. Dawson, Watkins, Lossky and
McGillivray, are not subject to employment contracts and are free to leave us
at any time. We might not be able to prevent key personnel, who may leave our
employ in the future, from disclosing or using our technical knowledge,
practices and procedures. One or more of our key employees could join a
competitor or form a competing company. Losing the services of one or more of
our key employees could impede our ability to develop new products, service
our customers or expand our operations.
There is intense competition for qualified engineers and sales and marketing
personnel, and our failure to recruit, retain and motivate such skilled
employees could affect our ability to increase our sales.
Our failure to attract and retain qualified employees could impair our
ability to grow our business. In order to maintain and increase our market
share, we must be able to hire, train, and retain and manage highly skilled
employees. To date, we have been successful in meeting our requirements for
highly skilled sales and support personnel and research and development
engineers. However, competition for such engineers is intense and likely to
become more so in the future. If our operations continue to grow, it may
become more difficult to recruit, train and retain skilled engineers and
managers. Failure to attract and retain qualified employees will impede our
ability to develop new products and service our customers and expand our
operations.
If our customers' new products do not use microprocessors for which we supply
development tools, we will lose significant sales in the future.
We do not provide development tools for many microprocessor families used
in embedded systems. Our success depends on our customers selecting
microprocessors that we provide development tools for as the standard for new
generations of their products. If our customers do not use these
microprocessors, our future sales would be reduced.
If customers are late in commencing their product development cycles, our
revenue would be negatively affected.
Developers generally buy our development tools at the beginning of a
product development cycle. If a customer delays its product development cycle,
it will likely also postpone the purchase of our development tools. There are
many reasons why a particular customer's project might experience delays. For
example, the customer's own design process could be slowed by technical
problems or unavailability of personnel.
9
<PAGE>
Our operating results may fluctuate and our stock price may decline if we do
not meet expectations of investors and analysts.
We expect that our quarterly and annual operating results will fluctuate
significantly due to many factors, some of which are outside our control,
including:
. demand for and market acceptance of our products and services;
. our ability to retain key customers or strategic partners;
. intense and increased competition;
. introductions of new products or services, by us and our competitors; and
. our ability to control our costs.
In addition, a substantial portion of our expenses, including most product
development and selling and marketing expenses, must be incurred in advance of
revenue generation. If our revenues do not meet our expectations, then our
operating profit, if any, may fall short of our expectations.
Any one or more of these factors could affect our business, financial
condition and results of operations, and this makes any prediction of results
of operations on a quarterly basis unreliable. As a result, we believe that
period-to-period comparisons of our historical results of operations are not
necessarily meaningful and that you should not rely on them as an indication
of future performance. Also, due to these and other factors, it is possible
that our quarterly results of operations may be below the expectations of
public market analysts and investors. This could adversely affect the price of
our common stock.
Difficulties presented by international economic, political and business
factors could negatively affect our business in international markets.
A significant portion of our sales are generated outside the United States.
As a result, our business is subject to political and economic fluctuations in
various countries. We must employ and retain personnel throughout the world
and employment laws vary widely from country to country. To date, we have been
able to successfully staff our international operations, but if we continue to
grow our operations, it may become more difficult to manage our business. We
have experienced long payment cycles and occasional problems in collecting
certain accounts receivable originating outside of the United States. We may
also experience foreign currency fluctuations which could have a significant
impact on our revenues, cash flow and ability to achieve and maintain
profitability as we attempt to grow our business. If we fail to manage our
international operations successfully, our ability to service our foreign
customers and grow our business in these countries will be seriously impeded.
We rely on a single source for supply of a circuit board component and our
business may be harmed if our supply of this component is disrupted.
We currently purchase a key component (field programmable gate arrays) from
Altera Corporation. We purchase this component as needed and have no long-term
contracts with Altera. Although we believe that there are alternative sources
for this component, switching to another source could require significant re-
engineering and result in product delays. Such a disruption in supply could
hurt our ability to deliver our products to our customers and negatively
affect our operating margins.
We generally do not have long term contracts, which makes revenue forecasting
difficult.
A majority of our revenue is derived from individual projects rather than
long-term contracts. We cannot assure you that a customer will purchase
additional products from us once a project is completed. A decrease in demand
for our products from one or more customers could occur with limited advance
notice and could have a material adverse effect on our results of operations
in any particular period.
10
<PAGE>
If we do not respond rapidly to technological changes, our business will
suffer.
Our customers are continuously developing new products to compete within
their own markets and are seeking to both shorten the time to market and
improve the quality of their products. In addition, microprocessor technology
is constantly changing and our competitors are constantly improving their
products in response. As a result, we must anticipate and react to changes in
our market, and we cannot assure you that we will be able to respond quickly or
effectively to such developments. The introduction of new products by
competitors, market acceptance of products based on new or alternative
technologies or the emergence of new industry standards could render our
existing or future products obsolete. Our business will suffer if we do not
modify our products or create new ones in order to meet customer needs on a
timely basis and match or surpass the advances in competitive products.
If our products do not perform to our customers' needs, we could lose
revenues.
Generally, engineering personnel from our customers test our products before
they give us an order. They will not place the order unless they are satisfied
that the product does what they need it to do. In addition, they will seek
assistance from our technical support team should any problems with our
products arise while they are being used. Any product dissatisfaction could
result in:
. lost or delayed revenues;
. additional costs to correct the problem;
. negative customer feedback; and
. possible claims against us.
We may be unable to manage future growth.
We seek continued growth by expanding our product line and extending it to
microprocessor platforms for which we do not currently provide tools. This
growth will:
. place a significant burden on our management;
. require our recruiting and retaining additional high-level executives;
. require the hiring of significantly more engineers;
. require significant outlays of cash for technically skilled sales persons
and sales efforts; and
. strain existing operational systems and controls.
We may not be able to meet our hiring needs for engineering and management
personnel because of the small number of qualified candidates and the intense
demand for their services. We are unable to assure that we will be able to
continue our growth and, if we do grow, whether we will be able to expand our
managerial and operational infrastructure to manage such growth successfully.
We could become involved in litigation regarding intellectual property rights
which could seriously harm our business.
We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property
rights. We also enter into nondisclosure agreements with our employees,
consultants and corporate partners, and control access to our proprietary
information. Litigation may be necessary in order to enforce our intellectual
property rights, to protect our trade secrets, to determine the validity and
scope of the proprietary rights of others or to defend against claims of
infringement. Although we are not aware of any third party intellectual
property rights that would prevent the use and sale of our products, we may
unknowingly infringe the proprietary rights of others. Any infringement could
result in significant liability to us. If we do infringe the proprietary rights
of others, we could be forced to either seek a
11
<PAGE>
license to those intellectual property rights or alter our products so that
they no longer infringe upon other's proprietary rights. Any such license could
be very expensive to obtain or may not be available at all. Similarly, changing
our products or processes to avoid infringing the rights of others may be
costly or impractical. Such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our
business, financial condition and results of operations.
Year 2000 non-compliance by our customers, vendors or third parties could
adversely impact our business.
Many computers use two-digit date fields to identify a given year. Year 2000
non-compliance is the failure of date sensitive computing systems and
applications to properly recognize and process dates into and after the year
2000. We believe that our own products do not contain any date sensitive
components. However, we are unable to evaluate whether our customers', vendors'
or third parties' products are Year 2000 compliant. Purchasing patterns may be
affected by Year 2000 issues if our customers are required to expend
significant resources to correct or replace their current systems. These
customers and potential customers may have fewer funds available to purchase
our products. Further, our vendors and suppliers may use computing systems that
are not Year 2000 compliant. If a limited or sole source supplier experienced
difficulties relating to their computer system, we may be forced to expend
resources in locating an alternative supplier. In addition, our internal
information and manufacturing systems are dependent upon personal computers
using date sensitive components. If any of these systems were to fail, our
business could be adversely affected.
Our former status as a Subchapter S corporation could expose us to liability.
We elected Subchapter S corporation status under the Internal Revenue Code
from our inception to the completion of this offering. Although we believe that
we met the Subchapter S corporation requirements under the Code during this
period, we have not requested, and the IRS has not made a determination, as to
our status. If the IRS were to challenge our status and determine that we did
not meet the Code requirements for Subchapter S corporations, we could be
liable for unpaid federal and state income taxes for all or a part of the time
that we elected Subchapter S corporation status, plus interest and possible
penalties.
Risks Related To This Offering
We are controlled by a small number of stockholders who could make decisions
that adversely affect other stockholders.
Peter Dawson, James Watkins and John Baggott will, in the aggregate, hold
57.1% of the outstanding shares of our common stock upon the closing of this
offering, or 55.6% if the underwriters exercise their over-allotment option in
full. As a result of their ownership share, these stockholders will have
significant control over management and operations and will have a significant
influence on all votes requiring stockholder approval, including votes to amend
our Restated Articles of Organization in certain respects or approve a merger,
sale of assets or other major corporate transactions.
Our stock price could be volatile and this volatility could affect your
ability to resell your shares at a profit.
The trading price of our common stock could be volatile. The stock market
has experienced significant price and volume fluctuations and, in particular,
the market prices of some technology company stocks have been highly volatile.
As a result, you may not be able to resell your shares at a price equal to or
greater than the initial public offering price.
The market price of our common stock may fluctuate significantly in response
to many factors, some of which are beyond our control, including the following:
. actual or anticipated fluctuations in our operating results;
12
<PAGE>
. changes in market valuations of other technology companies;
. announcements by us or our competitors of significant technical
innovations, contracts, acquisitions, strategic relationships, joint
ventures or capital commitments;
. termination of a strategic relationship; and
. sales of common stock in the future.
A significant number of shares are restricted from immediate resale but may
be sold into the market in the near future. This could cause the market price
of our common stock to drop significantly.
After this offering, we will have outstanding 16,994,000 shares of common
stock. This includes the 4,500,000 shares we and a selling stockholder are
selling in this offering, all of which may be resold in the public market
immediately. The remaining 12,494,000 shares of our total outstanding shares
are presently restricted but will become available for resale in the public
market as shown below.
As restrictions on resale end, the market price could drop significantly if
the holders of these restricted shares sell them or are perceived by the
market as intending to sell them.
<TABLE>
<CAPTION>
Number of Shares Date of availability for resale into public market
---------------- --------------------------------------------------
<C> <S>
8,689,900 180 days after the date of this prospectus due to a lock-up
agreement these stockholders have with Prudential Securities
Incorporated on behalf of the underwriting group. However,
Prudential Securities Incorporated can waive this restriction
at any time and without notice.
3,804,100 Between 180 and 365 days after the date of this prospectus
due to the requirements of the federal securities laws.
</TABLE>
After the date of this prospectus, we intend to file one or more
registration statements under the Securities Act to register all shares of
common stock issuable upon the exercise of outstanding stock options or
reserved for issuance under our Amended and Restated 1999 Stock Option Plan of
which 558,400 will be immediately exercisable as of March 1, 2000 and 528,400
shares will be exercisable within 60 days of December 1, 1999. Those
registration statements are expected to become effective immediately upon
filing, and subject to the vesting requirements and exercise of the related
options and the grant of stock awards as well as the terms of the lock-up
agreements, shares covered by those registration statements will be eligible
for sale in the public markets, except for any shares held by our
"affiliates."
Investors will experience immediate and substantial dilution.
The initial public offering price of our stock is substantially higher than
the net tangible book value per share of our common stock immediately after
this offering. Therefore, if you purchase our common stock in the offering,
you will incur immediate and substantial dilution of approximately $8.64 per
share in the net tangible book value per share of common stock from the price
you pay for a share of common stock in the offering based upon the assumed
initial public offering price of $11.00 per share. As of December 17, 1999,
there were options outstanding to purchase 2,589,500 shares of our common
stock at a weighted average exercise price of $3.36. To the extent any of
these options are exercised, you will suffer dilution greater than the $8.64
per share described above.
Our management will have broad discretion in the use of proceeds and they may
not effectively utilize those funds.
Our management will have broad discretion in how we use the net proceeds we
receive in this offering. Investors will be relying on the judgment of our
management regarding the application of the net proceeds of this offering. Our
management's decisions regarding use of the net proceeds may not be the most
effective utilization of those funds.
13
<PAGE>
Our charter and Massachusetts law may inhibit a takeover, which may limit the
price an investor is willing to pay for our common stock.
Certain provisions of our Restated Articles of Organization and Amended and
Restated Bylaws, and certain provisions of Massachusetts law could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of EST. Such
provisions could limit the price that investors might be willing to pay in the
future for the EST's common stock. These provisions permit the issuance of
"blank check" preferred stock by the Board of Directors without stockholder
approval, require super-majority approval to amend certain provisions in the
charter and Bylaws and impose various procedural and other requirements that
could make it more difficult for stockholders to effect certain corporate
actions. The application of such provisions also could have the effect of
delaying or preventing a change of control in the Company.
Our shares have never been publicly traded and a market may not develop or be
liquid.
Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which a trading market will develop or
how liquid that market might become. The initial public offering price for our
shares of common stock, determined by negotiations between us and
representatives of the underwriters, may not be indicative of prices that will
prevail in the trading market following this offering.
You should not expect to receive dividends from us.
We do not expect to declare or pay any cash dividends in the foreseeable
future.
14
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting the financial condition of
our business. These forward-looking statements are subject to a number of
risks, uncertainties and assumptions about us, including, among other things:
. General economic and business conditions, both nationally and in our
markets,
. Our expectations and estimates concerning future financial performance,
financing plans and the impact of competition,
. Anticipated trends in our business,
. Competition in our market, and
. Other risk factors set forth under "Risk Factors" in this prospectus.
In addition, in this prospectus, the words "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect" and similar
expressions, as they relate to us, our business or our management, are intended
to identify forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus may not occur and actual results
could differ materially from those anticipated or implied in the forward-
looking statements.
15
<PAGE>
SUBCHAPTER S CORPORATION AND TERMINATION OF SUBCHAPTER S CORPORATION STATUS
We have been treated as a Subchapter S corporation for federal income tax
purposes since we were organized on January 5, 1989. As a result, we have not
been liable for federal and certain state income taxes, and all of our earnings
have been subject to federal, and certain state, income taxation directly at
the stockholder level. Our Subchapter S corporation status will terminate upon
the closing of this offering, at which time we will become subject to corporate
income taxation under Subchapter C of the Internal Revenue Code and applicable
state income taxation law. Pro forma statement of operations data included in
this prospectus have been adjusted to include pro forma income tax provisions
as if we had been a Subchapter C corporation during the relevant periods.
As soon as practicable following the closing of this offering, we intend to
make a distribution to our stockholders of record on the day prior to the
effective date of the registration statement of $4.6 million, which is the
estimated amount of our cumulative Subchapter S income for the period we were a
Subchapter S corporation (from January 5, 1989 through the date of the closing
of this offering ) minus any distributions made to stockholders during this
period. Investors purchasing shares in this offering will not receive any
portion of the distribution.
We expect to enter into a Tax Indemnification Agreement with our existing
stockholders providing for, among other things, the stockholders to indemnify
us for any federal and state income taxes, including interest and penalties,
incurred by us if for any reason we are deemed to be treated as a Subchapter C
corporation during any period in which we reported our taxable income as a
Subchapter S corporation. The tax indemnification obligation of each existing
stockholder is limited to the aggregate amount of all distributions made to
such stockholders by us since the first day of the first tax year that we are
deemed to be treated as a Subchapter C corporation. We believe we have met the
requirements for a Subchapter S corporation and the Tax Indemnification
Agreement will provide for payment by our existing stockholders to us and by us
to our existing stockholders to adjust for any increases or decreases in tax
liability arising from a tax audit which affects our tax liability and results
in a corresponding adjustment to the tax liability of our existing
stockholders. The amount of any payment cannot exceed the amount of refund
received from the IRS by us or our existing stockholders attributable to the
adjustment.
16
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the 4,100,000 shares of
common stock to be sold by us will be approximately $40,943,000 ($45,802,250 if
the underwriters exercise their over-allotment option in full), assuming an
initial public offering price of $11.00 per share and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us. We will not receive any proceeds from the sales of common stock by the
selling stockholder. We intend to use these net proceeds for the following
specific purposes:
. to make a distribution of previously undistributed Subchapter S
corporation income of approximately $4.6 million;
. to repay a $2.0 million line of credit from BankBoston, N.A. to fund
payments of taxes to the Internal Revenue Service and state taxing
authorities incurred by seven key employee stockholders, other than the
recipients of the $4.6 million described above, who were awarded shares
of common stock in 1999; and
. for general working capital purposes.
We have broad discretion regarding the use of some of the proceeds to us
from this offering. We currently intend to use the remainder of the net
proceeds from this offering for general corporate purposes, including working
capital, product development, the hire of additional engineers and the
expansion of our sales force, and expansion of our international operations. We
may also use a portion of the net proceeds to acquire or invest in
complementary businesses or products or to obtain the right to use
complementary technologies. We have no specific understandings, commitments or
agreements with respect to any such acquisition or investment. Pending these
uses, we plan to invest the net proceeds of this offering in short-term,
interest-bearing, investment-grade securities or guaranteed obligations of the
U.S. government.
DIVIDEND POLICY
We do not anticipate declaring or paying cash dividends in the foreseeable
future. We currently intend to retain all future earnings, if any, to finance
the expansion of our business. We currently intend, subject to our contractual
obligations under the Tax Indemnification Agreement, to retain earnings for the
expansion and continued development of our business. Our current loan agreement
restricts the payment of dividends without prior written consent. Other
restrictions or limitations on the payment of dividends may be imposed in the
future under the terms of credit agreements or under other contractual
provisions. In the absence of such restrictions or limitations, the declaration
and payment of any dividends will be at the discretion of our Board of
Directors.
17
<PAGE>
CAPITALIZATION
The following table sets forth EST's capitalization as of September 30,
1999:
(i) on an actual basis,
(ii) on a pro forma as adjusted basis after giving effect to:
. the intended distribution to stockholders of approximately $4.6
million, calculated as of December 31, 1998, of cumulative
undistributed Subchapter S corporation taxable income for which
stockholders of record prior to the closing of this offering have
been taxed. The actual amount to be distributed is expected to
remain the same based upon an estimate of taxable earnings for
the period from January 1, 1999 through the closing of this
offering, subject to certain limitations,
. termination of the redemption rights of the existing holders of
common stock upon consummation of the initial public offering,
and
. the sale of 4,100,000 shares of common stock in this offering at
an assumed initial public offering price of $11.00 per share,
after deducting underwriting discounts and commissions and
estimated offering expenses.
<TABLE>
<CAPTION>
September 30, 1999
--------------------------------------
Pro Forma
Actual As Adjusted
----------------- -------------------
(in thousands, except share data)
<S> <C> <C>
Note payable............................ $ 359 $ 359
Redeemable common stock:
Common stock, $0.10 par value;
45,000,000 shares authorized;
10,111,000 shares issued and
outstanding; none issued and
outstanding, as adjusted............. 18,959 --
Note receivable from stockholder...... (550) --
----------------- ----------------
Total............................. 18,409 --
Stockholders' equity (deficit):
Common stock, $.10 par value;
45,000,000 shares authorized;
2,783,000 shares issued and
outstanding; 16,994,000 shares
issued and outstanding, as adjusted.. 278 1,699
Additional paid-in capital............ 7,190 47,723
Note receivable from stockholder...... -- (550)
Accumulated deficit................... (21,946) (8,647)
Accumulated other comprehensive loss.. (66) (66)
----------------- ----------------
Total stockholders' equity
(deficit).......................... (14,544) 40,159
----------------- ----------------
Total capitalization.............. $ 4,224 $ 40,518
================= ================
</TABLE>
The common stock to be outstanding after this offering is based on shares
outstanding as of December 17, 1999 and excludes 2,589,500 shares of common
stock issuable upon the exercise of options outstanding as of such date at a
weighted average exercise price of $3.36 per share. See Note 8 of Notes to
Consolidated Financial Statements.
18
<PAGE>
DILUTION
Purchasers of the common stock in the offering will experience immediate and
substantial dilution in the net tangible book value of the common stock from
the initial public offering price. The pro forma net tangible book value per
share represents the amount of the total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding. At
September 30, 1999, we had a pro forma net tangible book value of approximately
$3.9 million or $0.30 per share of common stock. After giving effect to the
sale of 4,100,000 shares of common stock offered by us at an assumed initial
public offering price of $11.00 per share and after the deduction of
underwriting discounts and commissions and estimated offering expenses, pro
forma net tangible book value at September 30, 1999 would have been
approximately $40.2 million or $2.36 per share. This represents an immediate
increase in net tangible book value of $2.06 per share to existing shareholders
and an immediate and substantial dilution of $8.64 per share to new investors
purchasing common stock in this offering. The following table illustrates this
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.......................... $11.00
Pro forma net tangible book value as of September 30, 1999... $0.30
Increase attributable to new investors....................... $2.06
Pro forma, as adjusted, net tangible book value after this
offering...................................................... 2.36
------
Dilution to new investors...................................... $ 8.64
======
</TABLE>
The following table summarizes, on the pro forma basis described above as of
September 30, 1999, the differences between existing stockholders and new
investors in this offering with respect to the number of shares of common stock
purchased from us, the total consideration paid to EST and the average
consideration paid per share at an assumed initial public offering price of
$11.00 per share, before the deduction of underwriting discounts and
commissions and estimated offering expenses payable by us.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.......... 12,894,000 75.9% $ 5,275,000 10.5% $ 0.41
New investors.................. 4,100,000 24.1% $45,100,000 89.5% $11.00
---------- ----- ----------- -----
Total........................ 16,994,000 100.0% $50,375,000 100.0%
========== ===== =========== =====
</TABLE>
The foregoing discussion and tables assume no exercise of the underwriters'
over-allotment option and no exercise of any stock options after December 17,
1999. As of December 17, 1999, there were 2,589,500 shares of common stock
issuable upon exercise of outstanding stock options, at a weighted average
exercise price of $3.36 per share. To the extent that these options are
exercised, there will be further dilution to new investors.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus. The
selected consolidated statement of operations data for the years ended December
31, 1996, 1997 and 1998, and the selected consolidated balance sheet data as of
December 31, 1997 and 1998, are derived from and are qualified by reference to
the audited consolidated financial statements included elsewhere in this
prospectus. The consolidated financial statement of operations data for the
year ended December 31, 1995 and the consolidated balance sheet data as of
December 31, 1995 and 1996, have been derived from audited consolidated
financial statements of EST that do not appear in this prospectus. The
consolidated statements of operations data for the year ended December 31, 1994
and the consolidated balance sheet as of December 31, 1994, are derived from
unaudited consolidated financial statements of EST that do not appear in this
prospectus. The consolidated statement of operations data for the nine month
periods ended September 30, 1998 and 1999 and the consolidated balance sheet
data as of September 30, 1999 are derived from the unaudited consolidated
financial statements included elsewhere in this prospectus. The unaudited
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statements and, in the opinion of our
management, include all adjustments, consisting only of normal recurring
adjustments except with respect to the stock-related compensation expense
recorded in June 1999, necessary for a fair presentation of the information set
forth therein. The historical results are not necessarily indicative of the
operating results to be expected in the future.
EST has been treated as a Subchapter S corporation under the applicable
provisions of the Internal Revenue Code since January 5, 1989. As a Subchapter
S corporation, EST has not been subject to federal and certain state income
taxes. Therefore, the historical net income (loss) and net income (loss) per
share data set forth below does not include provision for federal income taxes.
The pro forma net income (loss) reflects the provision for income taxes that
would have been recorded had EST been a Subchapter C corporation, assuming an
effective tax rate of 40%, 40%, 32%, 34% and 40% for the years ended December
31, 1994, 1995, 1996, 1997 and 1998, respectively and 40% and 44% for the nine
months ended September 30, 1998 and 1999, respectively. See Notes 2 and 10 to
Notes to Consolidated Financial Statements.
20
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended September 30,
---------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------- ------- ---------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $3,568 $4,787 $8,262 $11,766 $18,250 $ 13,171 $ 19,544
Cost of revenues........ 1,661 1,326 1,945 2,874 3,823 2,968 3,789
------ ------ ------ ------- ------- --------- ---------
Gross profit............ 1,907 3,461 6,317 8,892 14,427 10,203 15,755
Selling and marketing... 1,204 1,575 2,833 4,052 7,236 5,111 7,274
Research and
development............ -- 1,100 1,636 2,150 3,085 2,281 3,378
General and
administrative......... 389 367 541 721 1,040 766 999
Stock-related
compensation expense
(1).................... -- -- -- -- -- -- 9,363
------ ------ ------ ------- ------- --------- ---------
Total operating
expenses............... 1,543 2,989 5,010 6,923 11,361 8,158 21,014
Income (loss) from
operations............. 364 472 1,307 1,969 3,066 2,045 (5,259)
Interest income
(expense).............. -- -- (22) 22 42 21 37
------ ------ ------ ------- ------- --------- ---------
Income (loss) before
provision for
income taxes and
minority interest in
majority owned
subsidiary............. 364 472 1,285 1,991 3,108 2,066 (5,222)
Provision for income
taxes.................. 60 111 116 131 218 157 423
------ ------ ------ ------- ------- --------- ---------
Income before minority
interest in majority
owned subsidiary....... 304 361 1,169 1,860 2,890 1,909 (5,645)
Minority interest in
majority
owned subsidiary....... 66 92 68 -- -- -- --
------ ------ ------ ------- ------- --------- ---------
Net income (loss)....... 238 269 1,101 1,860 2,890 1,909 (5,645)
====== ====== ====== ======= ======= ========= =========
Accretion of redeemable
common stock to
redemption value...... -- 2,528 (1,264) (5,055) (5,056) (5,056) (2,528)
------ ------ ------ ------- ------- --------- ---------
Net income (loss) to
common stockholders.... 238 2,259 $ (163) $(3,195) $(2,166) $ (3,147) $ (8,173)
====== ====== ====== ======= ======= ========= =========
Historical net income
(loss) per share -
basic and diluted...... $ 0.02 $(0.22) $(0.02) $ (0.32) $ (0.21) $ (0.31) $ (0.73)
====== ====== ====== ======= ======= ========= =========
Pro forma statement of
operations data
(unaudited):
Historical income (loss)
before income taxes.... $ 364 $ 472 $1,285 $ 1,991 $ 3,108 $ 2,066 $ (5,222)
Pro forma provision for
income taxes assuming C
corporation tax........ 146 189 411 677 1,243 826 (2,298)
------ ------ ------ ------- ------- --------- ---------
Pro forma net income
(loss)................. $ 218 $ 283 $ 874 $ 1,314 $ 1,865 $ 1,240 $ (2,924)
====== ====== ====== ======= ======= ========= =========
Pro forma net income
(loss) per common
share - basic and
diluted................ $ 0.02 $ 0.03 $ 0.09 $ 0.13 $ 0.18 $ 0.12 $ (0.26)
====== ====== ====== ======= ======= ========= =========
<CAPTION>
December 31, September 30, 1999
---------------------------------------- --------------------
1994 1995 1996 1997 1998 Actual Pro Forma
------ ------ ------ ------- ------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 178 $ 232 $ 618 $ 1,158 $ 2,440 $ 1,579 $ 1,579
Working capital......... 272 507 1,513 2,321 3,848 3,019 3,019
Total assets............ 1,133 2,229 3,072 4,728 7,604 10,329 10,329
Redeemable common stock. 2,528 5,056 6,320 11,375 16,431 18,959 --
Total stockholders'
equity (deficit)....... (2,324) (4,526) (4,711) (8,690) (12,038) (14,544) 3,865
</TABLE>
- --------
(1) The stock-related compensation expense relates to the issuance of
2,783,000 shares of common stock to employees. See Note 8 to Notes to
Consolidated Financial Statements.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results
of operations of EST should be read in conjunction with "Selected Consolidated
Financial Data" and EST's consolidated financial statements and notes thereto
appearing elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks and uncertainties. You should not
place undue reliance on these forward-looking statements. Our actual results
may differ materially from those anticipated in these forward-looking
statements as a result of certain important factors, including, but not limited
to, those set forth under "Risk Factors" and elsewhere in this prospectus.
Overview
We are a leading provider of integrated hardware and software tools for
programming, testing and debugging embedded systems. Embedded systems are
special purpose computers within intelligent industrial and consumer products
such as network switches and routers, cellular base stations, process control
systems, cell phones, printers and anti-lock braking systems. Our products
enable developers to quickly and reliably program and debug the embedded
systems that manufacturers build into their industrial and consumer products.
Founded in January 1989 by our current president and chief executive
officer, Peter Dawson, we have experienced consistent annual growth in revenues
and operating profits (except for a loss in the nine months ended September 30,
1999 attributable to the compensation charge described further below). We have
financed this growth principally from operations and, to a lesser extent,
through periodic short-term bank borrowings. Prior to the offering, EST's
common stock was owned solely by its founder, officers and employees.
Over the three years ended December 31, 1998, revenues have grown at a
compound annual rate of 56%. We have experienced significant revenue growth
both internationally and domestically as a result of our late 1997 transition
from indirect sales through manufacturing representatives to direct sales
utilizing our own sales personnel; overall growth in industry demand; increased
penetration of major domestic and international accounts; our focus on adding
more functionality and features in an integrated hardware/software development
solution; and comprehensive customer support available from our experienced
development engineers, sales personnel and technical support teams.
Revenues are recognized when products are shipped against written purchase
orders. Service and extended warranty revenues, which are not significant, are
recognized as earned over the related contract periods. We sell our products
pursuant to purchase orders and do not have long term contracts with customers.
Because we typically ship within 30 days of receipt of an order, we do not have
a significant backlog. The lack of any substantial backlog could contribute to
fluctuations in quarterly operating results.
In June 1999 we recorded a compensation expense of $9.3 million related to
the fair value of common stock awarded to seven key employees in connection
with the termination of previously granted common stock rights and to partial
payment of related tax liabilities on behalf of those key employees. For more
information, please see Note 8 to the Notes to the Consolidated Financial
Statements.
Our business could over time be affected materially by competitive changes
in the embedded systems industry, including industry consolidation, decisions
by major industry elements to change their methods of securing tool support for
customer development, improved or restricted access to qualified engineering
employees (for sales and support as well as for research and development), our
present efforts to adapt our tools to support non-Motorola microprocessors, as
well as general industry conditions and trends in individual overseas
economies.
Costs of revenues as a percentage of sales could be affected by any number
of factors, including availability and prices of key components and
subassemblies. Any gradual improvement in margins as a result
22
<PAGE>
of greater software value and manufacturing efficiencies may well be offset by
higher expenses relating to customer and technical support.
Our policy is to hire sales, support and development engineers qualified in
the embedded systems field whenever they become available. We are currently
hiring aggressively to staff up for the development and introduction of tools
for new microprocessor families. Hiring in advance of budget could adversely
effect our quarterly results. We intend to continue and accelerate our policy
of maximizing growth in products, features and customer support with the view
of maximizing long-term shareholder value.
Results of Operations
The following table sets forth for the periods indicated the percentage of
total revenue of certain line items included in our statement of operations:
<TABLE>
<CAPTION>
Year Ended December Nine Months
31, Ended September 30,
---------------------- --------------------
1996 1997 1998 1998 1999
------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues................ 23.5 24.4 20.9 22.5 19.4
------ ------ ------ --------- ---------
Gross profit................ 76.5 75.6 79.1 77.5 80.6
------ ------ ------ --------- ---------
Operating expenses:
Selling and marketing......... 34.3 34.4 39.7 38.8 37.2
Research and development...... 19.8 18.3 16.9 17.3 17.3
General and administrative.... 6.5 6.1 5.7 5.8 5.1
Stock-related compensation
expense (1).................. -- -- -- -- 47.9
------ ------ ------ --------- ---------
Total operating expenses.... 60.6 58.8 62.3 61.9 107.5
------ ------ ------ --------- ---------
Income (loss) from operations... 15.9 16.8 16.8 15.6 (26.9)
Interest income (expense)....... (0.3) 0.2 0.2 0.2 0.2
------ ------ ------ --------- ---------
Income (loss) before provision
for income taxes and minority
interest in majority owned
subsidiary..................... 15.6 17.0 17.0 15.8 (26.7)
Provision for income taxes...... 1.4 1.1 1.2 1.2 2.2
------ ------ ------ --------- ---------
Income (loss) before minority
interest in majority owned
subsidiary..................... 14.2 15.9 15.8 14.6 (28.9)
Minority interest in majority
owned subsidiary .............. 0.8 -- -- -- --
------ ------ ------ --------- ---------
Net income (loss)............... 13.4% 15.9% 15.8% 14.6% (28.9)%
====== ====== ====== ========= =========
</TABLE>
- --------
(1) The stock-related compensation expense relates to the issuance of
2,783,000 shares of common stock to employees. See Note 8 to Notes to
Consolidated Financial Statements.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September
30, 1998
Revenues. Revenues increased to $19.5 million in the nine months ended
September 30, 1999 from $13.2 million in the nine months ended September 30,
1998, an increase of 48.4%. Domestic revenue increased from $9.4 million in the
nine months ended September 30, 1998 to $13.2 million in the nine months ended
September 30, 1999, an increase of 40.4%, while foreign revenue increased from
$4.5 million in the nine months ended September 30, 1998 to $6.3 million in the
nine months ended September 30, 1999, an increase of 75.9%. All significant
product lines participated in the revenue growth. Our subsidiaries in Japan and
the UK contributed strongly to growth in overseas revenues for the nine months
as compared with the comparable period in 1998.
23
<PAGE>
Cost of Revenues. Cost of revenues consists of materials (including
procurement costs of finished boards and subassemblies), manufacturing expenses
(final test, assembly and quality control), and costs associated with our
technical support department. For the nine months ended September 30, 1999
compared to the comparable period in 1998, cost of revenues increased to $3.8
million in 1999 from $3.0 million in the 1998 period, but declined as a
percentage of revenues from 22.5% to 19.4%. The decline in cost of revenues and
commensurate increase in gross margins is attributable to increased features
and functionality delivered in our bundled products, as well as to overall
manufacturing efficiencies on higher volumes.
Selling and Marketing. Selling and marketing expenses increased by 42.3%
from $5.1 million in the nine months ended September 30, 1998 to $7.3 million
in the nine months ended September 30, 1999, but decreased as a percentage of
revenue from 38.8% to 37.2% during this period. The increase in selling and
marketing expenses was principally due to a growth in sales and marketing
personnel, including salaries, related benefits, commissions, travel and other
personnel-related expenses, from 26 at September 30, 1998 to 35 at September
30, 1999. We intend to continue to increase the number of sales and marketing
personnel and these associated expenses are likely to continue to increase.
Research and Development. Research and development expenses increased to
$3.4 million in the nine months ended September 30, 1999 from $2.3 million in
the nine months ended September 30, 1998, an increase of 48.1%, and remained
constant at 17% as a percentage of revenue. The increase in research and
development expenses (which includes salaries and related benefits as well as
expenses for development materials and depreciation on computer facilities
related to personnel) was principally due to a growth in research and
development personnel from 21 at September 30, 1998 to 35 at September 30,
1999. Our plans to adapt our development tools for use with non-Motorola
microprocessor architectures, to add application specific features and to
provide software services to our tools suite, will result in increases in these
expenses in the future.
General and Administrative. General and administrative expenses increased to
$1.0 million in the nine months ended September 30, 1999 from $0.8 million in
the nine months ended September 30, 1998, an increase of 30.4%, but decreased
as a percentage of revenue from 5.8% in the nine months ended September 30,
1998 to 5.1% in the nine months ended September 30, 1999. The increase in
general and administrative expenses was principally due to a growth in general
and administrative personnel from three at September 30, 1998 to six at
September 30, 1999. We expect to add additional personnel and incur increased
infrastructure costs in support of growth and our status as a publicly-held
company.
Stock-Related Compensation Expense. Results for the nine months ended
September 30, 1999 include a charge of $9.3 million related to the fair value
of common stock awarded to seven key employees in connection with the
termination of previously granted stock rights and to partial payment of
related tax liabilities on behalf of those key employees. For more information,
please see Note 8 to Notes to the Consolidated Financial Statements.
Interest Income. Interest income increased to $37,000 in the nine months
ended September 30, 1999 from $21,000 in the nine months ended September 30,
1998, an increase of 76.2%. The increase in interest income was largely due to
higher average cash balances.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues. Revenues increased to $18.3 million in the year ended December 31,
1998 from $11.8 million in the year ended December 31, 1997, an increase of
55.1%. Domestic revenue increased from $9.0 million in the year ended December
31, 1997 to $12.9 million in the year ended December 31, 1998, an increase of
43.3%, while foreign revenue increased from $2.8 million in the year ended
December 31, 1997 to $5.3 million in the year ended December 31, 1998, an
increase of 89.3%. All product lines contributed to the revenue growth. The
increase in revenues was due to greater market penetration achieved through an
increase in direct sales personnel as a result of the shift from indirect to
direct selling, both domestically and internationally.
24
<PAGE>
Cost of Revenues. Cost of revenues increased to $3.8 million for the period
ended December 31, 1998 from $2.9 million for the period ended December 31,
1997, an increase of 33%, but declined as a percentage of revenues to 20.9%
from 24.4%. The corresponding increase in gross margin was principally due to
lower costs associated with direct sales in 1998 compared to sales through
manufacturers' representatives in 1997.
Selling and Marketing. Selling and marketing expenses increased to $7.2
million for the year ended December 31, 1998 from $4.1 million for the year
ended December 31, 1997, an increase of 78.6%, but increased as a percentage of
revenue from 34.4% to 39.6%. The year-to-year increase in expenses was due to
higher personnel and related costs associated with converting our distribution
channel from reliance on manufacturers' representatives to a direct sales
force. This conversion involved opening several new sales offices and forming
two new subsidiaries, and increasing selling and marketing personnel from 21 at
December 31, 1997 to 29 at December 31, 1998.
Research and Development. Research and development expenses increased to
$3.1 million in the year ended December 31, 1998 from $2.2 million in the year
ended December 31, 1997, an increase of 43.5%, but decreased as a percentage of
revenue from 18.3% to 16.9%. The increase in research and development expenses
was principally due to increased costs associated with an increase in research
and development personnel from 16 at December 31, 1997 to 23 at December 31,
1998.
General and Administrative. General and administrative expenses increased to
$0.8 million in the year ended December 31, 1998 from $0.7 million in the year
ended December 31, 1997, an increase of 44.2%, but decreased as a percentage of
revenue from 6.1% to 5.7%. The increase in general and administrative expenses
resulted from higher compensation awarded to key employees in the year ended
December 31, 1998.
Interest Income. Interest income increased to $42,000 in the year ended
December 31, 1998 from $22,000 in the year ended December 31, 1997, an increase
of 90.9%. The increase in interest income was largely due to higher average
cash balances.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Revenues increased to $11.8 million for the year ended December
31, 1997 from $8.3 million for the year ended December 31, 1996, an increase of
42.5%. Domestic revenue increased from $6.1 million for the year ended December
31, 1996 to $9.0 million for the year ended December 31, 1997, an increase of
47.5%, while foreign revenue increased from $2.1 million for the year ended
December 31, 1996 to $2.8 million for the year ended December 31, 1997, an
increase of 38.1%. All significant product lines participated in revenue
growth.
Cost of Revenues. Cost of revenues increased to $2.9 million for the period
ended December 31, 1997 from $1.9 million for the period ended December 31,
1996, an increase of 48%, and increased slightly as a percentage of revenues to
24.4% from 23.5%. The corresponding decline in gross margin was attributable to
increased technical support spending and other manufacturing expenditures.
Selling and Marketing. Selling and marketing expenses increased to $4.1
million for the year ended December 31, 1997 from $2.8 million for the year
ended December 31, 1996, an increase of 43.0%, remaining stable as a percentage
of revenue. The year-to-year increase in selling and marketing expenses related
directly with an increase in selling and marketing personnel from 13 at
December 31, 1996 to 21 at December 31, 1997.
Research and Development. Research and development expenses increased to
$2.2 million for the year ended December 31, 1997 from $1.6 million for the
year ended December 31, 1996, an increase of 31.4%, but decreased as a
percentage of revenue from 19.8% for the year ended December 31, 1996 to 18.3%
for the year ended December 31, 1997. The increase in research and development
expenses principally resulted from an increase in research and development
personnel from 10 at December 31, 1996 to 16 at December 31, 1997.
25
<PAGE>
General and Administrative. General and administrative expenses increased to
$0.7 million for the year ended December 31, 1997 from $0.5 million for the
year ended December 1996, an increase of 33.3%, but decreased as a percentage
of revenue from 6.5% for the year ended December 31, 1996 to 6.1% for the year
ended December 31, 1997. The increase in general and administrative expenses
was principally due to an increase in general and administrative salaries and
an increase in other expenses associated with an overall company-wide increase
in personnel.
Interest Income and Interest Expense. Interest income of $22,000 in the year
ended December 31, 1997 reflected higher average cash balances versus bank
borrowings in the year ended December 31, 1996 which created interest expense
of $22,000.
26
<PAGE>
Quarterly Results of Operations
The following tables set forth a summary of EST's unaudited quarterly
results for each of the seven quarters ended September 30, 1999. This
information has been derived from unaudited interim consolidated financial
statements that, in the opinion of management, have been prepared on a basis
consistent with the audited Consolidated Financial Statements contained
elsewhere in this prospectus and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of such
information. The operating results for any quarter are not necessarily
indicative of results for any future quarterly period.
Statement of Operations Data:
<TABLE>
<CAPTION>
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30,
1998 1998 1998 1998 1999 1999 1999
--------- -------- --------- -------- --------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.............. $3,476 $4,436 $5,259 $5,079 $5,530 $ 6,495 $7,519
Cost of revenues...... 791 1,201 976 855 1,083 1,282 1,424
------ ------ ------ ------ ------ ------- ------
Gross profit........ 2,685 3,235 4,283 4,224 4,447 5,213 6,095
------ ------ ------ ------ ------ ------- ------
Operating expenses:
Selling and marketing. 1,322 1,599 2,190 2,125 2,026 2,497 2,751
Research and
development.......... 710 740 831 804 1,041 1,043 1,294
General and
administrative....... 235 280 251 274 280 343 376
Stock-related
compensation expense. -- -- -- -- -- 9,363 --
------ ------ ------ ------ ------ ------- ------
Total operating
expenses........... 2,267 2,619 3,272 3,203 3,347 13,246 4,421
------ ------ ------ ------ ------ ------- ------
Income (loss) from
operations............. 418 616 1,011 1,021 1,100 (8,033) 1,674
Interest income......... 7 3 11 21 14 13 10
------ ------ ------ ------ ------ ------- ------
Income (loss) before
provision for income
taxes.................. 425 619 1,022 1,042 1,114 (8,020) 1,684
Provision for income
taxes.................. 41 53 63 61 113 136 174
------ ------ ------ ------ ------ ------- ------
Net income (loss)....... $ 384 $ 566 $ 959 $ 981 $1,001 $(8,156) $1,510
====== ====== ====== ====== ====== ======= ======
As a Percentage of Revenues:
<CAPTION>
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30,
1998 1998 1998 1998 1999 1999 1999
--------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........ 22.8 27.1 18.6 16.8 19.6 19.7 18.9
------ ------ ------ ------ ------ ------- ------
Gross profit.......... 77.2 72.9 81.4 83.2 80.4 80.3 81.1
------ ------ ------ ------ ------ ------- ------
Operating expenses:
Selling and marketing.. 38.0 36.0 41.6 41.8 36.6 38.4 36.6
Research and
development........... 20.4 16.7 15.8 15.8 18.8 16.1 17.2
General and
administrative........ 6.8 6.3 4.8 5.4 5.1 5.3 5.0
Stock-related
compensation expense.. -- -- -- -- -- 144.2 --
------ ------ ------ ------ ------ ------- ------
Total operating
expenses............. 65.2 59.0 62.2 63.1 60.5 204.0 58.8
------ ------ ------ ------ ------ ------- ------
Income (loss) from
operations............. 12.0 13.9 19.2 20.1 19.9 (123.7) 22.3
Interest income......... 0.2 0.1 0.2 0.4 0.3 0.2 0.1
------ ------ ------ ------ ------ ------- ------
Income (loss) before
provision for income
taxes.................. 12.2 14.0 19.4 20.5 20.1 (123.5) 22.4
Provision for income
taxes.................. 1.2 1.2 1.2 1.2 2.0 2.1 2.3
------ ------ ------ ------ ------ ------- ------
Net income (loss)....... 11.0% 12.8% 18.2% 19.3% 18.1% (125.6)% 20.1%
====== ====== ====== ====== ====== ======= ======
</TABLE>
27
<PAGE>
During the seven quarters ended September 30, 1999, revenues increased
consecutively with the exception of the fourth quarter of 1998, during which we
experienced a slowdown in revenue primarily attributable to new product
introductions and a temporary slowing in industry demand. Cost of revenues
increased to 27.1% of revenues in the quarter ended June 30, 1998 as a result
of book-to-physical inventory charges and cost adjustments to inventory
incurred during that period. Stock-related compensation expense during the
quarter ended June 30, 1999, attributable to the issuance of common stock to
seven key employees in connection with previously granted common stock rights,
distorted operating expenses and overall results for that period. Although
overall operating expenses during the seven quarters ended September 30, 1999
remained steady or declined slightly as a percentage of revenues, accelerated
spending on the development of tools for new microprocessor families could
significantly increase research and development expenses both in absolute
dollars and as a percentage of revenues in future quarters.
Historical and Pro forma (Unaudited) Income Taxes
EST has been treated as a Subchapter S corporation for federal income tax
purposes since its organization in 1989. As such, EST has not been subject to
federal and certain state income taxes. Therefore, historical provision for
income taxes reflects state and foreign tax provisions only. The increase in
the provision for income taxes over the period from the year ended December 31,
1996 through the year ended December 31, 1998 and for the nine months ended
September 30, 1998 as compared to the nine months ended September 30, 1999 is
due to increased revenues and profits before taxes in EST's foreign
subsidiaries.
The pro forma provision for income taxes reflects the estimated tax expense
EST would have incurred had it been subject to federal and state income taxes
as a Subchapter C corporation under the Internal Revenue Code. The pro forma
provisions reflect pro forma tax rates of 32%, 34% and 40% for the year ended
December 31, 1996, 1997 and 1998, respectively and 40% and 44% for the nine
months ended September 30, 1998 and 1999, respectively. The increase in the pro
forma tax rates over these periods is principally due to higher foreign taxes
and, for the nine months ended September 30, 1999, an increase in research and
development tax credits which increased the tax benefit generated.
Liquidity and Capital Resources
Since our inception, we have financed our operations and capital
requirements primarily through cash provided by operations and periodic short-
term borrowing.
Cash provided by operations was $0.9 million, $1.7 million and $2.8 million
for the fiscal years ended December 31, 1996, 1997 and 1998, respectively, and
$1.5 million and $1.8 million for the nine months ended September 30, 1998 and
1999, respectively. Cash provided by operations for the nine months ended
September 30, 1999 was primarily driven by operating profit, excluding
compensation expense (see Note 8 to Notes to Consolidated Financial Statements)
as well as increases in accounts payable and accrued liabilities, offset by
increases in accounts receivable.
Working capital at September 30, 1999 was approximately $3.0 million
compared to approximately $3.8 million and approximately $2.3 million at
December 31, 1998 and 1997, respectively. The decrease in working capital from
December 31, 1998 to September 30, 1999 was primarily due to increased
expenditures to support EST's growing expense base.
In December 1999, we borrowed $2.0 million from BankBoston, N.A. to fund in
part the payment of federal and state taxes incurred by us and seven key
employees upon their receipt of stock-related compensation. We intend to repay
this line of credit from the proceeds of this offering. In addition, certain
stockholders are expected to deliver promissory notes providing for the
repayment of approximately $500,000 of this amount on or before December 31,
2002, which notes will be collateralized by their shares of our common stock.
28
<PAGE>
We believe that the financial resources available to us, including the net
proceeds of the offering, our current working capital, and any future
availability under the working capital portion of our loan agreement, will be
sufficient to finance our planned operations and capital expenditures at least
through 2000. However, our future liquidity and capital requirements beyond
2000 will depend upon numerous factors, including the resources required to
further develop our marketing and sales organization domestically and
internationally, to expand manufacturing capacity, and to meet market demand
for our products.
Year 2000 Compliance
The Year 2000 problem stems from the fact that many currently installed
computer systems include software and hardware products that are unable to
distinguish dates after December 31, 1999. As a result, computer software
and/or hardware used by many companies and governmental agencies may need to be
upgraded to comply with Year 2000 requirements or risk system failure or
miscalculations causing disruptions to normal business activities.
We have defined Year 2000 compliant or Year 2000 readiness as the ability
to:
. Correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change;
. Function according to the product documentation provided for this date
change, without changes in operation, assuming correct configuration;
. Where appropriate, respond to two-digit date input in a way that
resolves the ambiguity as to century in a disclosed, defined and
predetermined manner;
. Store and provide output of date information in ways that are
unambiguous as to century if the date elements in interfaces and data
storage specify the century; and
. Recognize Year 2000 as a leap year.
State of Readiness. We have made an assessment of the Year 2000 readiness of
our mission critical operating, financial and administrative systems, including
the hardware and software that support our systems. This review included
assessing and validating and, where necessary, remediation, upgrading and
replacing noncompliant systems, hardware or software, as well as evaluating the
need for contingency planning.
We have completed our Year 2000 compliance efforts and believe that our
products are Year 2000 compliant in all material respects. For all other
mission critical internal information technology systems, we have determined
that all our critical hardware and software is up to date. A small number of
desktop computers and workstations whose operating systems are not Year 2000
compliant was identified, but are not used in ongoing business activities.
We are also conducting an assessment of our non-information technology
systems. Some aspects of our facilities and manufacturing equipment may include
embedded technology, such as microcontrollers. The Year 2000 problem could
cause a system failure or miscalculation in such facilities or manufacturing
equipment, which could disrupt our operations. Affected areas include voice
mail and phone systems and computer-based test equipment. We believe we have
identified and addressed all material systems for Year 2000 readiness.
Costs. Our costs to date associated with assessment, remediation and testing
activities concerning the Year 2000 problem have not been material. Costs
incurred for Year 2000 compliance for our products were included in the regular
costs of research and development. We estimate that we will not incur more than
approximately $5,000 of additional costs in connection with addressing Year
2000 compliance issues.
Worst Case Scenario. Our reasonably likely worst case Year 2000 scenario
would be that a material third party vendor or supplier, such as a limited or
sole source supplier or a microprocessor manufacturer or
29
<PAGE>
operating system supplier for which we develop tools, or a significant
customer, would, as a result of its own Year 2000 difficulties, fail to
successfully remediate Year 2000 problems in hardware, software or equipment
which is material to our business and operations. If this scenario occurred, we
may be required to seek out new vendors and suppliers, which may not be
available to us in a timely basis, if at all. Furthermore, we would be required
to certify certain new limited or sole source suppliers. If we are required to
seek out or certify new vendors or suppliers, it will be costly and divert
management attention and our resources, which could have a material adverse
effect on our business and operating results. If embedded systems manufacturers
were to cease using microprocessors or operating systems which our tools
support, our business would be harmed.
Contingency Plan. To date, we have no specific contingency plan to address
the effect of Year 2000 compliance failures. If, in the future, it comes to our
attention that certain of our products need modifications or certain of our
third party hardware, software and equipment are not Year 2000 compliant or
certain vendors are not Year 2000 compliant, then we will seek to make the
necessary modifications or substitutions. In such cases, we expect such
modifications or substitutions to be made on a timely basis and we do not
believe that the cost of such modifications or substitutions will have a
material effect on our business, financial condition and results of operations.
There can be no assurance, however, that we will be able to modify our
products, services, systems and equipment or find alternative vendors in a
timely and successful manner to comply with Year 2000 requirements, which could
have a material adverse effect on our business, financial condition and results
of operations.
Conversion to the Euro
On January 1, 1999, 11 European countries began using the euro as their
single currency, while still continuing to use their own notes and coins for
cash transactions. Bank notes and coins denominated in euros are expected to be
in circulation by 2002, at which time local notes and coins will cease to be
legal tender. We conduct a significant amount of business in these countries.
The introduction of the euro has not resulted in any material adverse impact
upon our operations, although we continue to monitor the effects of the
conversion.
Qualitative and Quantitative Disclosures About Market Risk
We are exposed to financial market risks, including changes in foreign
currency exchange rates and interest rates. Most of our revenue is transacted
in U.S. dollars. However, a significant portion of our international sales and
the expenses and capital spending of our international subsidiaries are
transacted in local currency. As a result, changes in foreign currency exchange
rates or weak economic conditions in foreign markets could affect our financial
results. We do not use derivative instruments to hedge our foreign exchange
risk. Our exposure to market risk for changes in interest rates relates
primarily to our cash and cash equivalents and loan agreement. The majority of
our investments are in short-term instruments and subject to fluctuations in
U.S. interest rates. Due to the short-term nature of our cash equivalents and
note payable, we believe that there is no material risk exposure.
Recent Accounting Pronouncements
In April 1998, the AcSEC issued SOP 98-5, "Reporting on the Costs of Start-
Up Activities." Start-up activities are defined broadly as those one-time
activities relating to opening a new facility, introducing a new product or
service, conducting business in new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SOP 98-5, the cost of start-up activities should be expensed as incurred.
SOP 98-5 is effective for EST's fiscal year 2000 financial statements and EST
does not expect its adoption to have a material effect on its financial
condition or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, (collectively referred to
as derivatives) and for hedging activities. We will adopt SFAS No. 133 as
required by SFAS 137, "Deferral of the
30
<PAGE>
Effective Date of FASB Statement No. 133," in fiscal year 2001. The adoption of
SFAS No. 133 is not expected to have an impact on our financial condition or
results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements." SAB 101
summarizes the application of generally accepted accounting principles to
revenue recognition in financial statements. EST does not expect SAB 101 to
have a material effect on its financial position or results of operations.
31
<PAGE>
BUSINESS
Overview
We are a leading provider of integrated hardware and software tools for
programming, testing and debugging embedded systems. Our products enable
developers to quickly and reliably program and debug the embedded systems that
are part of the industrial and consumer products they manufacture. As the
complexity and speed of embedded systems increase, we believe that embedded
systems developers will require more efficient solutions to debug their
products and that we are well positioned to offer these solutions.
A significant portion of our customers are in the communications industry,
including telecommunications, data communications and Internet infrastructure
equipment suppliers. Our largest customers by revenue include Alcatel, Cisco
Systems, Hewlett-Packard, Lucent Technologies, Motorola, Nortel Networks,
Tellabs Wireless and 3Com.
Industry Background
Embedded systems are the special purpose computers within intelligent
industrial and consumer products such as network switches and routers, cellular
base stations, process control systems, cell phones, printers and anti-lock
braking systems. As with all computers, embedded systems minimally consist of a
microprocessor, memory and software, and the level of complexity of that system
can be enhanced with additional components. Embedded systems differ from
general purpose computers, such as PCs, workstations and mainframes, in that
they are designed to run only the specific set of tasks required for the end
product to operate as intended. Manufacturers use embedded systems to enhance
functionality and performance, reduce cost and size, and improve reliability of
a broad variety of products, ranging from simple systems found in microwave
ovens to complex multiprocessor driven systems controlling the infrastructure
of the Internet.
According to industry and market research firms, at least 55% of the more
than 265 million microprocessors produced by the semiconductor industry in 1998
were used in embedded systems, while the remainder were used in general purpose
computers such as PCs. We participate in the market for the higher-end 32-bit
and greater embedded microprocessors, which is forecast to grow at a rate of
21%, from 106 million units in 1998 to 228 million units in 2002. Motorola is
the largest supplier of embedded microprocessors, with a market share of 35% in
1997, the latest year for which data is available. The market for embedded
software development tools is part of the overall embedded operating systems
and development tools market, which was approximately $550 million in 1998 and
is forecast to grow 14% annually through 2003.
The advancement in microprocessors to 32-bit and greater devices has enabled
the development of embedded systems capable of performing more complex tasks
more efficiently. As microprocessor prices have declined and performance has
increased, manufacturers have incorporated more powerful chips into embedded
systems in order to increase the end product's functionality, reduce product
size and cost, and enhance product reliability. As an example, the
implementation of more powerful embedded systems into increasing complex
communications infrastructure equipment has enabled the deployment of greater
network connectivity ranging from small local area networks to the Internet.
Building a complex embedded system requires significant technical expertise,
time and capital investment. Product manufacturers compete on the basis of the
functionality and quality of their products, and therefore must design and
develop increasingly complex embedded systems that possess greater speed,
performance and reliability. Competitive demands increase pressure to minimize
development costs and time to market. The necessity for product reliability and
interoperability leaves no margin for error or delay in the development cycle.
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<PAGE>
Complex embedded systems development projects require sophisticated
development tools. In their search for shorter time to market, increased
functionality, and assured reliability, embedded systems developers demand, and
product manufacturers must invest, in technically sophisticated tools that help
them accomplish these objectives quickly, economically and reliably.
Our Solution
We design, manufacture, sell and support a comprehensive suite of bundled
high performance, open and scalable embedded systems development tools
consisting of both hardware and software components. We are a leading worldwide
provider of integrated tools necessary to develop complex embedded systems. Our
tools enable development engineers to program, test and debug embedded systems
quickly, economically and reliably at each stage of the development process. We
believe that our leadership position arises from the following:
Superior Development Tools. Our tools, which support five different
microprocessor families encompassing more than 50 microprocessor derivatives,
offer the following advantages:
. Bundled - We bundle source level software debuggers and other graphical
utilities with hardware tools to produce a complete solution for early
stage hardware and firmware development. Traditional hardware tools
makers generally do not engineer and bundle software development tools
with hardware tools. Conversely, software tool makers do not develop
their own hardware connectivity products. Our integrated solution
enables developers to more effectively visualize the operation of the
application software on the embedded microprocessor.
. Open - We enable developers using our tools to incorporate a broad range
of real-time operating systems and a wide range of applications. For
example, during the early hardware/firmware bring-up stage of
development, our tools allow customers to optimize their system design
by choosing and incorporating the real-time operating system best suited
to their end product. In the later applications software development
phase, the customer may choose to maintain hardware connectivity using
our tools as a platform while integrating tools from other vendors as
appropriate.
. Graphical - Our software tools provide a rich graphical user-interface,
which gives developers easy access to multiple in-depth views of
microprocessor data and development status. For example, simultaneous
access to microprocessor registers and program data structures increases
developers' productivity.
. Scalable - Our hardware tools are modular and designed to easily allow
developers to configure and scale their development environments to meet
their specific needs. For example, developers using our entry level
products in the hardware/firmware bring-up stage can subsequently
upgrade to our trace analyzer, which provides visibility into the real
time issues typically associated with later phases of the development
cycle.
Microprocessor Knowledge Base. We were one of the first companies in the
industry to develop and market tools for debugging Motorola microprocessors
using its on-chip debug capabilities. We have been able to adapt our tools to
work with over 50 different microprocessors within the Motorola and IBM
families. We have done this through relationships with Motorola and IBM, which
gives us early access to new microprocessor designs prior to commercial
release. We are then able to identify new features and implement them in our
tools for the new microprocessors. We also provide customers with hardware and
software reference designs, which enable them to initiate early development of
their embedded systems.
Comprehensive Customer Support. We believe customer support and service is a
critical component of our success. Our in-depth knowledge of microprocessor
technology enables us to provide a high level of technical and informational
support to our customers. We deploy a team of 41 sales and support engineers to
assist our customers throughout their development cycles. We effect a major
knowledge transfer to our customers by providing early development kits
containing single board computers and board support packages. We also offer our
customers formal one-day or three-day training sessions on the microprocessor
architectures
33
<PAGE>
we support. Because we use embedded systems in our own products and test and
debug them with our own tools, we can anticipate and provide solutions for the
problems our customers are likely to face in the development cycle.
Our Strategy
Our goal is to maintain and enhance our position as a technological and
market leader in embedded systems development tools. In order to achieve this
goal, we intend to:
Extend Our Technological Leadership. The embedded systems industry is
characterized by the introduction of faster microprocessors and more complex
applications software. We have established leadership in development tools by
bundling hardware and software solutions, and we must insure that our products
continue to embody the latest technologies and features. To accomplish this, we
intend to substantially increase our investment in research and development and
expand the number of engineers with embedded systems experience.
Continue Our Focus On Communications Applications. We believe that the
communications network and Internet infrastructure markets provide us with
major growth opportunities. A significant number of our customers build highly
complex data communications, telecommunications and Internet networking
equipment. These customers require greater visibility into their network
applications during the development stage. We plan to expand our product
offerings to address the specific needs of these developers by leveraging our
existing strengths within the communications market. To do this, we will focus
on making our tools more application specific by adding additional features for
networking and network data acquisition.
Increase Our Software Product Offerings. Our customers increasingly demand
integrated hardware and software development solutions. We intend to use our
strengths in the hardware bring-up development stage to extend and enhance our
software solutions for embedded systems. We plan to:
. extend our graphical user interface products to provide an integrated
development environment; and
. provide systems developers with initialization code and diagnostics that
can be embedded into a user's end application.
A key aspect of our strategy is to remain operating system independent; that
is, we will build our products to interface with a wide variety of operating
systems.
Satisfy Customer Demand for Additional Microprocessor Architectures. The
embedded microprocessor market is increasingly competitive, with semiconductor
manufacturers introducing new architectures for embedded applications. We have
adapted our tools to work with more than 50 different microprocessors from
Motorola and IBM. As our customers are exposed to an even wider choice of
microprocessor architectures, we intend to meet their needs by continuing to
adapt our development products for those architectures. Our product design
incorporating field programmable logic devices allows for timely and cost-
effective adaptations to new architectures.
Strengthen and Develop Strategic Alliances. We believe that our customers
are best served by our having strategic alliances with market leaders. We have
developed significant relationships with both Motorola and Wind River Systems.
These relationships provide us with early access to new microprocessor
technology as well as expanded sales channels. We intend to strengthen these
relationships as well as seek new alliances. Moreover, we may seek additional
technology or distribution channels through selective acquisitions.
Customers
Our customers develop a wide range of products that incorporate embedded
systems. A significant portion of our customers are in the communications
industry, including telecommunications, data communications and
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Internet infrastructure equipment suppliers. In each of 1996, 1997, 1998 and
the first nine months of 1999, no customer accounted for more than ten percent
or more of our revenues. Each of the following customers was one of our top ten
customers by sales during either the years ended December 31, 1997 or 1998 or
the first nine months of 1999:
Advanced Fibre Communications Lucent Technologies
Alcatel Motorola
Ciena Next Level Systems
Cisco Systems Nortel Networks
General Instruments Tellabs Wireless
Hewlett-Packard 3Com
The following is a representative list of emerging growth companies who have
purchased products from us during the first nine months of 1999:
Diamond Lane Sycamore Networks
Castle Networks Sunrise Telecom
Copper Mountain Networks Tut Systems
Strategic Relationships
We have established and will continue to pursue strategic relationships with
significant industry leaders to increase our market penetration and to maintain
our technological leadership. Our principal relationships are with Motorola, a
leading supplier of microprocessors for embedded systems, and with Wind River
Systems, a leading supplier of real time operating systems and software tools
for embedded applications.
Motorola. Our first products introduced in 1989 were hardware tools which
connected an embedded system developer's workstation to Motorola
microprocessors. Since that time we have enjoyed a close informal relationship
with Motorola that provides us with silicon design documentation and the
related pre-release versions of new microprocessors. This enables us to design
and build tools concurrently with Motorola's microprocessor development cycle
and make these tools available to embedded systems developers at the same time
that Motorola delivers the new microprocessor. These tools, which include
reference designs, help embedded systems designers evaluate the microprocessor
and initiate their development efforts prior to investing in their own hardware
design. Motorola benefits from our relationship because our tools help
customers adopt new microprocessors rapidly into their embedded systems, thus
reducing Motorola's sales cycle.
Wind River Systems. We work closely with Wind River Systems, a leading
supplier of real time operating systems and software tools for embedded
applications. We have jointly designed our tools to provide seamless
integration with Wind River's Tornado(TM) development environment. This
integration provides Wind River customers with critical hardware connectivity
while increasing our target market. In June 1999 we became one of a limited
number of charter members of the Wind River Direct Program. Our membership
allows Wind River's direct sales force to sell our development tools. We are
the only hardware development tools vendor that is a charter member of this
program.
Products
We offer bundled hardware and software tools and reference designs for
programming, testing and debugging complex embedded systems throughout their
development cycle. Our products are categorized as follows:
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<PAGE>
Microprocessor Connectivity and Debug Run Control Products
We are a leader in hardware tools that connect a PC or workstation
programming station to a Motorola or IBM embedded microprocessor using on-chip
debug technology. On-chip debug is a set of services that silicon vendors
design into their microprocessors to allow developers to download and test
software running on the embedded system. Substantially all recent 32-bit and
64-bit microprocessors targeted for embedded applications have on-chip debug
capabilities designed into the microprocessor.
Product
Description
Benefits
visionPROBE
Entry-level on-chip . Easy control of the embedded
debug cable which microprocessor
connects a PC .Reduces development time
running visionCLICK .Enables flash programming
software to the .Used with over 50
embedded microprocessors
microprocessor
.All benefits of visionPROBE,
plus
-Turnkey network support
Scalable hardware -Scales with real-time trace
development tool option
connects PC or UNIX
programming station
to the
microprocessor via a
visionICE local area network
Host Software Tools
We develop, market and support software development tools which run on PCs
under Windows 9x/NT, as well as workstations under UNIX and Linux. The software
tools provide a graphical user interface designed to control and operate our
hardware connectivity tools and real-time data acquisition systems. The
software tools include C and C++ source-level debuggers. These high-level
language debuggers significantly increase developers' productivity by
correlating microprocessor data and status to the embedded program as
originally coded in the C or C++ programming language.
We bundle and sell our software tools in combination with our hardware tools
to form an integrated development solution. These tools are:
Product
Description
Benefits
visionCLICK Graphical User . Lets programmers control the
visionXD Interface and C/C++ embedded microprocessor
High Level Language . Multiple windows provide
Debuggers. easy and simultaneous access
visionCLICK runs to pertinent microprocessor
under PC/Windows; data and status
visionXD runs under . Correlates microprocessor
UNIX and Linux instructions and trace data
to high-level language
statements
Real-time Data Acquisition Systems
We market visionEVENT, a sophisticated real-time trace and data acquisition
system as a modular upgrade to visionICE. visionEVENT utilizes external
hardware to capture and store microprocessor activity while the microprocessor
continues to operate at full speed. Developers upload and analyze the captured
data in order to gain system visibility and identify complex software and
hardware bugs.
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Product Description Benefits
visionEVENT Modular real-time . Captures and stores
trace and data microprocessor code and data
acquisition system at full processor speed
. Developers analyze the
captured data to identify
real-time hardware and
software problems
. Provides detailed timing
information used to optimize
the embedded application
Reference Designs
We engineer, market, sell and support reference designs consisting of
microprocessor-based circuit boards, software examples and hardware design
documentation. These reference designs enable our customers to begin developing
systems with a new microprocessor in parallel with their own hardware
development. We also reduce our customers' total development time by
encouraging them to re-use much of the hardware and software components and
intellectual property included in the reference designs. We offer the following
reference designs to our customers:
Product Description Benefits
SBC8260 Reference designs . Board schematics, which
SBC8240 for specific accelerate customer hardware
SBC603/740/750 Motorola embedded development
MDP8xx microprocessors . Board support packages,
SBC520x which adapt operating
SBC5307 systems to target hardware,
SBC3xx reduce early software
SBC360 development time and enable
SBC34x software development in
parallel with hardware
development
- --------
x denotes that a design supports multiple microprocessor derivatives.
Sales and Marketing
Purchase decisions for development tools are generally not centralized.
Typically, project managers decide which development tools to use and their
decisions are based upon the nature of the project and the preferences of the
engineers using the tools. Therefore, our field salespeople may be
simultaneously pursuing multiple sales within the same company. We rely on our
field salespeople and support engineers to make and nurture these contacts with
customer decision makers.
Our field salespeople and support engineers market our products in North
America, Europe and Japan by direct contact, engineer to engineer, with project
managers and development engineers of existing and prospective customers. We
employ a total of 41 field salespeople and support engineers in North America,
Europe and Japan. We have eight offices in the major markets of North America,
and operate wholly-owned subsidiaries in Canada, France, Germany, Japan, Sweden
and the United Kingdom.
Our field salespeople and support engineers have on average 10 years
experience in selling to and supporting customers in the embedded systems
industry. We believe that the experience and expertise of our sales and support
staff has been critical in building and sustaining customer relationships.
We contract with distributors of embedded systems development tools in
China, India, Israel, Italy, Korea, Spain and Taiwan for sales and customer
support in these countries. We also utilize direct mail and phone promotions to
targeted prospects and participate in national and international trade shows.
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In June 1999, we became one of a limited number of charter members of the
Wind River Direct Program. Our membership allows Wind River's direct sales
force to sell our development tools. We are the only hardware development tools
vendor that is a charter member of this program.
Competition
The market for development tools used in the embedded systems market is
highly competitive and characterized by rapidly changing technological needs
and capabilities. Competition focuses on a variety of factors, including the
availability of tools that are compatible with the customer's chosen embedded
microprocessor, engineering workstation and other software development
equipment, performance characteristics and features such as high-speed
processing, real-time visibility and control, high-level programming language
and ease-of-use, product reliability, price/performance characteristics,
customer service and worldwide support, and product availability and delivery
time. We believe that the relative importance of each of these factors to a
prospective customer varies for each development project depending upon the
complexity of the embedded system design, the microprocessor to be used, the
project development schedule and the software engineer's budget and experience
level.
Increased competition could result in price reductions, reduced margins or
loss of market share, any of which could materially adversely affect the
Company's business financial condition and results of operations. If we are
unable to compete successfully against current and future competitors, our
business will be materially adversely affected. We compete primarily against
Applied Microsystems, Agilent Technologies and Lauterbach GmbH. We must
continue to differentiate our development tools from those available or under
development by our competitors or potential competitors, including
microprocessor vendors considering entry into the development tools market.
We anticipate that competition in the embedded systems market is likely to
intensify as competitors consolidate to broaden their product offerings. In
addition, microprocessor manufacturers may acquire or form alliances with
developers of development tools. We believe that much of the competition is
now, and will increasingly be, from companies larger than us and having
substantially greater technical, financial and marketing resources, as well as
larger customer bases and greater name recognition. To compete effectively, we
may find it necessary to enter into alliances with other tool makers, or to
acquire other technologies or product lines, in order to broaden our product
offerings.
Intellectual Property
Our success and ability to compete are dependent on our ability to develop
and maintain the proprietary aspects of our technology and products and operate
without infringing on the proprietary rights of others. We rely primarily on a
combination of trade secret, copyright law and contractual restrictions and to
a lesser extent patent law to protect the proprietary aspects of our products.
These legal protections afford only limited protection for our products. We
presently have one patent application pending in the United States and we
cannot be certain that a patent will be granted based on this or any other
application. We believe that our technological leadership is based on our know-
how, our in-depth expertise in microprocessor technology and our superior
utilization of known core technologies present in the industry.
For example, we utilize field programmable gate array technology to make our
tools programmable. This means that as we elect to adapt our tools to different
microprocessor architectures, we can do so by re-programming certain components
without having to effect a complete product redesign. At present, we have re-
programmed visionPROBE and visionICE to adapt to more than 50 different
microprocessors within the Motorola PowerPC(TM), ColdFire(TM) and CPU32
families and the IBM PowerPC(TM) family. We believe that this feature will also
enable us to re-program and adapt our tools for architectures from other major
microprocessor families.
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<PAGE>
visionEVENT is our version of high speed logic analysis, or trace, which is
used by programmers to correct extremely complex embedded software bugs. This
technology uses passive pod connectivity, which facilitates connections to the
target microprocessor and enables traces to the microprocessor at higher bus
frequencies than tools using traditional emulation techniques.
CPMSpy is a recently introduced software utility bundled with visionCLICK.
As visionEVENT captures data from the microprocessor's communications processor
module, CPMSpy uploads the communications data and presents the programmer with
a three pane window showing key information about packet transmission and
behavior.
Our products are susceptible to reverse engineering; however, we believe
such a process would be difficult, laborious and costly. In addition, we
believe that due to rapid technological change, factors such as the
technological and creative skills of our personnel, new product developments
and enhancements to existing products are more important to establishing and
maintaining a leadership position than the various legal protections afforded
our products.
Research and Development
We invest significant resources in research and development. In general, we
have invested in new product development and major enhancements to our existing
products through product engineering. A significant portion of our research and
development has focused on:
. Broadening the capabilities of our integrated development environment;
. Adding new features to address the needs of the communications industry;
and
. Extending our product line to new microprocessors.
As of September 30, 1999, we had 34 employees engaged in research and
development. We expended approximately $1.6 million, $2.1 million and $3.0
million for the years ended 1996, 1997 and 1998, respectively, and $3.3 million
for the nine months ended September 30, 1999, on research and development.
Manufacturing and Facilities
We conduct final assembly, test, quality assurance, packaging and shipping
of our products at our 28,878 square foot plant in Canton, Massachusetts. Our
purchase managers conduct all parts procurement from the Canton office. Parts
suppliers are selected for their reputation and experience and their output is
tested for quality assurance in Canton. Purchased parts are then collected into
kits and sent for board assembly at any one of several qualified board assembly
companies located in close proximity to our plant. The completed boards are
returned to us for final assembly and testing.
Typically, our customers place orders when they are about to commence a new
product development cycle. Because we maintain an adequate inventory of
components and are able to assemble products quickly, we can satisfy most
orders within a short period of time after receiving the order. As a result, we
do not have a significant backlog of unfilled orders. We believe that backlog
is neither a significant factor in understanding our business nor a useful
means to predict potential revenue in any particular future period. However,
our inability to predict order volume at any particular time can result in
unexpected increases in our assembly activity. This requires us to maintain
considerable inventory of product components to avoid delivery delays under
such circumstances.
We moved to our current location in Canton in 1992 and have leased
additional space there as needed from time to time. The present lease expires
on January 1, 2003. We believe that our currently leased facilities are
adequate for operations for the foreseeable future. We presently maintain sales
offices in Dana Point and San Jose, California, Colorado Springs, Colorado,
Westford, Massachusetts, Ambler, Pennsylvania and
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<PAGE>
Addison, Texas in the United States and Hampshire, England, Vallingby, Sweden,
Malsch, Germany, Tokyo, Japan, Montigny, France and Richmond, Canada. We expect
that we will need additional space if our business expands, and that we will be
able to obtain additional space on an as needed basis on commercially
reasonable terms.
Employees
As of September 30, 1999, we employed approximately 112 full time employees
world wide as follows: 34 in research and development; 45 in sales and
marketing; 10 in manufacturing; 8 in service and support; and 15 in
administration.
None of our employees is represented by a union. We believe that our
relationship with our employees is good.
Legal Proceedings
We are not a party to any material legal proceedings.
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MANAGEMENT
Directors and Executive Officers
The following table sets forth the directors and executive officers of EST,
their ages and the positions held by them.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Peter S. Dawson......... 44 Chairman of the Board of Directors, President and Chief Executive Officer
Mark F. Lapham.......... 53 Chief Financial Officer and Treasurer
James E. Watkins (1).... 37 Chief Operating Officer, Senior Vice President of Sales and
Marketing and Director
John T. W. Baggott (2).. 64 Vice President of Human Resources and Director
Nicolas Lossky.......... 36 Vice President of European Sales and Business Development
Daniel McGillivray...... 36 Vice President of Sales for North America and Asia
Howard V. Neff, Jr. (1). 51 Director
P. J. Plauger, Ph.D (2). 55 Director
John C. Edmunds (1)(2).. 52 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Peter S. Dawson has served as Chairman of the Board of Directors, President
and Chief Executive Officer of EST since he founded EST in January 1989. Prior
to 1989 Mr. Dawson was a principal software engineer and project leader at EMC
Corporation. Mr. Dawson attended the University of Hull in England where he
earned a B.S. in Electrical Engineering.
Mark F. Lapham has served as EST's Chief Financial Officer since April 1999
and as Treasurer since December 1999. From January 1995 to April 1998 Mr.
Lapham provided consulting services to several companies and in particular
served as Vice President of Corporate Development for MRS Technology. From
April 1998 to April 1999 he served as a consultant for Resources Connection.
Mr. Lapham received an A.B. from Harvard College and an M.B.A. from Babson
College.
James E. Watkins has served as EST's Senior Vice President of Sales and
Marketing from May 1991. Since September 1999 he has also served as Chief
Operating Officer of EST. Mr. Watkins holds a B.S. in Electrical Engineering
from the University of Missouri - Rolla. Mr. Watkins has served as a director
of EST since May 1991.
John T. W. Baggott joined EST in May 1991. He served as Vice President of
Finance and Treasurer of EST from May 1991 to December 1999. Since December
1999 he has served as Vice President of Human Resources of EST and has served
as a director since May 1991. Mr. Baggott was educated in England at S.W. Essex
College.
Nicolas Lossky joined EST in February 1993 as General Manager for EST
Corporation Europe and served in that position until August 1997. From August
1997 to February 1999 he served as Director of European Sales and Director of
Strategic Relationships. Since February 1999 Mr. Lossky has served as Vice
President of European Sales and Business Development. Mr. Lossky graduated from
Northeastern University and holds a B.S. in Computer Science.
Daniel McGillivray has served as the Vice President of Sales for North
America and Asia from April 1992 to January 1999. Mr. McGillivray holds an
M.B.A. from Boston University and a B.S. in Computer Science and Accounting
from Boston College.
Howard V. Neff, Jr. has served as a member of EST's Board of Directors since
June 1999. For the past five years, Mr. Neff has served as Senior Vice
President, Real Estate at Boston Mutual Insurance Company. Mr. Neff attended
Nichols College.
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<PAGE>
P.J. Plauger, Ph.D has served as a member of EST's Board of Directors since
June 1999. Since 1995 Dr. Plauger has been President of Dinkumware, Ltd., which
licenses certain software libraries and on-line documentation. Dr. Plauger has
also served since 1990 as Senior Editor of The C/C++ User's Journal, and a
Contributing Editor to Embedded Systems Programming. Dr. Plauger received a
Ph.D. in nuclear physics from Michigan State University and an A.B. in physics
from Princeton University.
John C. Edmunds has served as a member of EST's Board of Directors since
December 1999. Mr. Edmunds is Chairman of Finance Faculty at Babson College and
since June 1998 has served as Professor of Quantitative Methods at the Arthur
D. Little School of Management. He is also a director of Greenpoint Mortgage
Securities, Inc.
Election of Officers and Directors
The executive officers of EST are elected by the Board of Directors on an
annual basis and serve until their successors are duly elected and qualified.
Our Restated Articles of Organization and Amended and Restated Bylaws provide
that our board of directors will be divided into three classes of directors,
with the classes to be as equal in number as possible. Messrs. Edmunds and
Baggott will serve as Class I directors, whose terms expire at the annual
meeting of stockholders to be held in 2000. Messrs. Neff and Plauger will serve
as Class II directors, whose terms expire at the annual stockholders meeting to
be held in 2001. Messrs. Dawson and Watkins will serve as Class III directors,
whose terms expire at the annual meeting of the stockholders to be held in
2002.
Board Committees
On December 17, 1999 we established an Audit Committee and a Compensation
Committee. The Audit Committee, which currently consists of Messrs. Baggott,
Plauger and Edmunds, reviews our internal accounting procedures and consults
with and reviews the services provided by our independent accountants. The
Compensation Committee, which consists of Messrs. Watkins, Neff and Edmunds,
reviews and determines the compensation and benefits of all our officers and
reviews general policies relating to the compensation and benefits of employees
and administers our Amended and Restated 1999 Stock Option Plan.
Compensation Committee Interlocks and Insider Participation
Prior to December 1999, we did not have a separate compensation committee or
other board committee performing equivalent functions. These functions were
performed by our board of directors. In December 1999, we established a
compensation committee and appointed Messrs. Watkins, Neff and Edmunds to serve
on the compensation committee.
The compensation committee evaluates the salaries and incentive compensation
of management and employees of EST and administers our equity incentive plans
.Peter S. Dawson, Chairman of the Board, President and Chief Executive Officer,
participates in discussions and decisions regarding salaries and incentive
compensation for all employees and consultants of EST, except that he is
excluded from all discussions regarding his own salary and incentive
compensation. Other than Mr. Watkins, who serves as our Chief Operating Officer
and Senior Vice President of Sales and Marketing, no member of this committee
was at any time during the past year an officer or employee of EST or any of
its subsidiaries. Other than Mr. Watkins, no member of the compensation
committee owns any capital stock of EST. No interlocking relationships exist
between any member of the compensation committee and any member of any other
company's board of directors or compensation committee. No interlocking
relationship existed between any member of our board of directors and any
member of any other company's board of directors or compensation committee in
1998. Mr. Neff is a Senior Vice President, Real Estate of Boston Mutual
Insurance Company, the landlord of our principal office in Canton,
Massachusetts. We pay rent of $52,402 per month to Boston Mutual Insurance
Company.
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Director Compensation
We pay each non-employee director $6,000 annually as compensation. Each
director is reimbursed for reasonable travel and other out-of-pocket expenses
incurred in attending meetings of the Board of Directors or of any committee of
the board of directors. Non-employee directors are eligible to receive options
to purchase shares of our common stock pursuant to our Amended and Restated
1999 Stock Option Plan. During 1999 we granted options to purchase 20,000
shares of common stock to each of our non-employee directors.
Executive Compensation
The table below sets forth the total compensation paid or accrued for the
fiscal year ended December 31, 1998 for our chief executive officer and each of
our four most highly compensated other executive officers who received annual
compensation in excess of $100,000 for the fiscal year ended December 31, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------ ----------------------
Name and Principal Other Annual Number of Securities All Other
Position Salary Bonus Compensation Underlying Options Compensation
------------------ -------- -------- ------------ ---------------------- ------------
<S> <C> <C> <C> <C> <C>
Peter S. Dawson......... $497,115 $150,000 -- -- $21,821(1)
Chairman of the Board
of Directors, President
and Chief Executive
Officer
James E. Watkins........ $298,846 $ 75,000 -- -- $25,311(2)
Chief Operating Officer
and Senior Vice
President of
Sales and Marketing
John T. W. Baggott...... $249,135 $ 75,000 -- -- $19,911(3)
Vice President of Human
Resources
Nicolas Lossky.......... $185,268 $ 25,000 -- -- $24,021(4)
Vice President of
European Sales and
Business Development
Daniel McGillivray...... $242,839 -- -- -- $19,911(3)
Vice President of Sales
for North America and
Asia
</TABLE>
- --------
(1) Consists of $3,333 for 401(k) matching payments, $6,978 in 401(k) plan
contributions, $9,600 in defined contribution plan contributions and $2,910
in payments for a car allowance.
(2) Consists of $3,333 for 401(k) matching payments, $6,978 in 401(k) plan
contributions, $9,600 in defined contribution plan contributions and $5,400
in payments for a car allowance.
(3) Consists of $3,333 for 401(k) matching payments, $6,978 in 401(k) plan
contributions and $9,600 in defined contribution plan contributions.
(4) Consists of $3,333 for 401(k) matching payments, $6,978 in 401(k) plan
contributions, $9,600 in defined contribution plan contributions and $4,100
in payments for a car allowance.
Option Grants
No options were granted to named executive officers during the fiscal year
ended December 31, 1998. All options granted to other employees in fiscal year
1998 were cancelled. The table below sets forth grants of stock options granted
to each of the named executive officers during fiscal year 1999 as of December
17, 1999. The exercise price per share of each option was equal to the fair
market value of the common stock on the date
43
<PAGE>
of grant as determined by the board of directors. The potential realizable
value is calculated based on the term of the option at its time of grant (10
years). It is calculated assuming that the fair market value of common stock on
the date of grant appreciates at the indicated annual rate compounded annually
for the entire term of the option and that the option is exercised and sold on
the last day of its term for the appreciated stock price.
Option Grants
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Individual Grants Stock Price Appreciation for
-------------------------------------------- Option Term (2)
Number of Percent of
Securities Total
Underlying Options Exercise or
Options Granted to Base Price Expiration
Name Granted(1) Employees Per Share Date 5% 10%
- ------------------------ ---------- ---------- ----------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Peter S. Dawson......... -- -- -- -- -- --
James E. Watkins........ -- -- -- -- -- --
John T. W. Baggott...... -- -- -- -- -- --
Nicolas Lossky.......... 10,000 0.4% $1.73 7/01/09 $ 28,180 $ 44,872
50,000 2.0% $9.90 12/17/09 $ 806,303 $ 1,283,900
Daniel McGillivray...... 10,000 0.4% $1.73 7/01/09 $ 28,180 $ 44,872
50,000 2.0% $9.90 12/17/09 $ 806,303 $ 1,283,900
</TABLE>
- --------
(1) The dates of exercisability of the options are determined in accordance
with their respective vesting schedules. These options vest in five equal
installments.
Amended and Restated 1999 Stock Option Plan
Our Amended and Restated 1999 Stock Option Plan was adopted by the Board of
Directors on June 15, 1999 and approved by our stockholders on the same day. It
was amended and restated in December 1999. The Plan provides employees,
directors, independent contractors, consultants and advisers an opportunity to
acquire an ownership interest and a shared incentive. During 1999, we granted
options to purchase a total of 2,589,500 shares of common stock to our
employees, of which options for 520,000 shares were granted to our executive
officers. The Plan is administered by the Compensation Committee of the Board
of Directors. As of December 21, 1999, 4,000,000 shares of our common stock
were reserved for issuance under the Plan. The Plan provides for the grant of
incentive stock options and nonqualified stock options. However, eligibility
for the grant of incentive stock options is limited to employees. Options need
not have identical terms with respect to each optionee. Options shall have such
terms and be exercisable in such manner and at such times as the Compensation
Committee may determine. Each option must expire within 10 years from the grant
date. Each option is transferable only by will or the law of descent and
distribution and exercisable only by the optionee during his or her lifetime.
The Plan remains in effect until June 15, 2009 or earlier if terminated by
the Board of Directors. Any amendment is subject to the approval of
stockholders only to the extent required by applicable laws, regulations or
rules. Rights and obligations under any option may not be materially altered or
impaired without the optionee's consent.
Employment and Non-Competition Agreements
We have entered into employment agreements with Messrs. Dawson, Watkins,
Lossky and McGillivray, which become effective upon completion of this
offering:
Mr. Dawson has agreed to serve as President and Chief Executive Officer of
EST, Mr. Watkins has agreed to serve as Chief Operating Officer and Senior Vice
President of Sales and Marketing, Mr. Lossky has agreed to serve as Vice
President of European Sales and Business Development and Mr. McGillivray has
agreed to serve as Vice President of Sales for North America and Asia, each for
a period of three years. Their annual base salary will be $300,000, $240,000,
$150,000 and $170,000 respectively. Each will be entitled to an annual bonus if
certain performance targets established by them and our Compensation Committee
are met.
44
<PAGE>
Under the agreements, we may terminate either for cause or without cause. If
we terminate any of them without cause we must continue salary payments for the
lesser of 52 weeks or the balance of the employment term. Each may resign on
180-days notice. Their agreements contain non-competition covenants and
provisions limiting the solicitation of our employees for other jobs. These
provisions survive termination of employment for a period of one year.
On July 1, 1999, we entered into an Employment Agreement with Mr. Baggott
and amended such agreement on December 17, 1999. Mr. Baggott's Employment
Agreement currently provides for an annual salary of $250,000. From January 1,
2000 through December 31, 2000 Mr. Baggott will be paid an annual salary of
$125,000 and be required to work no more than 20 hours per week as Vice
President of Human Resources. After December 31, 2002, Mr. Baggott may continue
to provide services to EST at the same level of compensation, provided,
however, his compensation and related benefits shall be reduced proportionately
if he reduces his responsibilities or time commitment. Mr. Baggott's agreement
contains non-solicitation and non-competition provisions that are intended to
survive termination of his employment.
45
<PAGE>
CERTAIN TRANSACTIONS
First Amended and Restated Shareholders' Agreement
On July 1, 1999 we entered into the First Amended and Restated Founding
Shareholders' Agreement with each of Messrs. Dawson, Watkins and Baggott, each
a director, officer and stockholder of EST. This Agreement will terminate upon
completion of this offering. However, pursuant to the Agreement Messrs. Dawson,
Watkins and Baggott could require EST to purchase annually 10% of their total
common stock or extend to each of them a loan in lieu of such purchase. On July
1, 1999 Mr. Baggott borrowed $550,000 from EST pursuant to a promissory note
secured by a pledge of his EST common stock. Mr. Baggott will pay his
obligations under the promissory note from the proceeds he shall receive from
the sale of his common stock in the offering. On December 17, 1999, each waived
his rights under the Agreement to borrow funds from us, participate in any new
stock issuances and require us to re-purchase any of their shares of common
stock.
Stock Grants
We granted options to purchase 202,000 shares of common stock pursuant to
the 1997 Stock Option Plan and 1998 Stock Option Plan, and we issued an option
to purchase 659,000 shares of common stock to Nicolas Lossky which was not
pursuant to a plan. Further, in years prior to 1997, we granted 868,000 common
stock rights to Mr. McGillivray under our Mirror Stock Plan, entitling Mr.
McGillivray to receive cash or shares of EST common stock upon the occurrence
of certain events. In June 1999, we cancelled all outstanding stock options and
common stock rights granted to date. In lieu of cancelled options we issued new
options under our 1999 Stock Option Plan and in lieu of cancelled common stock
rights we issued to our employees 2,783,000 shares of common stock, which
included 659,000 shares to Mr. Lossky and 868,000 shares to Mr. McGillivray.
Additionally, we agreed to pay the employees' tax liability resulting from the
issuance of common stock, provided, however, that the employees have agreed to
repay an amount equal to their capital gains tax liability. Each has agreed to
evidence his or her obligations with a promissory note collateralized by his or
her common stock. Payment of these notes will be due no later than December 31,
2002.
Distributions
We have been treated as a Subchapter S corporation for federal income tax
purposes since our formation in January 1989. As a result, we have never paid
federal, and certain state income taxes. Instead, all of our earnings are
subject to federal, and certain state, income taxation directly at the
stockholder level. In each calendar year, we have distributed enough cash to
our stockholders for them to pay their personal federal and state tax
liabilities to the extent related to our Subchapter S income. Our Subchapter S
corporation status will terminate upon the closing of this offering, at which
time we will become subject to corporate income taxation under Subchapter C of
the Internal Revenue Code. As soon as practicable following the closing of this
offering, we intend to make a distribution to the stockholders of record on the
day prior to the effective date of the registration statement in the amount of
approximately $4.6 million, which is the estimated amount of undistributed
cumulative Subchapter S income from our date of formation through the closing
of this offering, less the sum of amounts previously distributed.
Lease
Mr. Neff, a director of EST, is the Senior Vice President, Real Estate of
Boston Mutual Insurance Company, the landlord for our principal office in
Canton, Massachusetts. We pay rent in the amount of $52,402 per month to Boston
Mutual Insurance Company.
46
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of
our common stock as of December 1, 1999, including the selling stockholders, as
adjusted to reflect sale of common stock offered by us in this offering by:
. each of our directors and the named executive officers;
. all of our directors and executive officers as a group; and
. each person who beneficially owns more than 5% of the outstanding shares
of our common stock.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting or investment power
with respect to shares. For purposes of calculating the percentage of shares
beneficially owned, the number of shares of our common stock outstanding as of
December 1, 1999 was 12,894,000 shares. Shares of common stock issuable by EST
to a person named below pursuant to stock options that are exercisable within
60 days after December 1, 1999 are deemed to be beneficially owned and
outstanding for computing the percentage ownership of the person holding the
options. However, these shares are not deemed to be beneficially owned and
outstanding for computing the percentage ownership of any other person.
Unless otherwise indicated below, to our knowledge, all persons named in the
table have sole voting and investment power with respect to their shares of
common stock, except to the extent authority is shared by spouses under
applicable law. Unless otherwise indicated, the address of each person listed
on the table is c/o Embedded Support Tools Corporation, 120 Royall Street,
Canton, Massachusetts 02021.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned
Prior to the Offering Shares After the Offering (1)(2)
----------------------------- Being ---------------------------------
Name of Beneficial Owner Number Percent Offered Number Percent
- ------------------------ --------------- -------------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Peter S. Dawson (3)..... 5,667,000 44.0% -- 5,667,000 33.3%
John T. W. Baggott (4).. 2,222,000 17.2 400,000 1,822,000 10.7
James E. Watkins ....... 2,222,000 17.2 -- 2,222,000 (5) 13.1
Nicolas Lossky (6)...... 659,000 5.1 -- 659,000 3.9
Daniel McGillivray (7).. 869,000 6.7 -- 869,000 5.1
Howard V. Neff, Jr...... -- * -- -- *
P. J. Plauger, Ph.D..... -- * -- -- *
John C. Edmunds......... -- * -- -- *
All current directors
and executive officers
as a group (8 persons) . 11,639,000 90.3% -- 11,239,000 66.1%
</TABLE>
- --------
* Beneficially owns less than 1% of the outstanding common stock.
(1) The number of shares of common stock deemed outstanding after this offering
includes the 4,100,000 shares of common stock being offered for sale in
this offering. The persons and entities named in the table have sole voting
and investment power with respect to the shares beneficially owned by them,
except as noted below. Share numbers include shares of common stock
issuable pursuant to outstanding options that may be exercised within the
60-day period following December 1, 1999.
(2) Assumes no exercise of the underwriters' over-allotment option.
(3) Includes 500,000 shares held in trust for the benefit of Mr. Dawson's minor
children. Mr. Dawson disclaims beneficial ownership of the shares.
(4) Includes 260,000 shares held in trust for the benefit of Mr. Baggott's
adult child. Mr. Baggott disclaims beneficial ownership of the shares.
(5) Includes the 200,000 shares of common stock to be sold in the event the
underwriters exercise their over-allotment option in full.
(6) Includes 58,000 shares held in trust for the benefit of Mr. Lossky's minor
children. Mr. Lossky disclaims beneficial ownership of these shares.
(7) Includes 87,000 shares held in trust for the benefit of Mr. McGillivray's
minor children. Mr. McGillivray disclaims beneficial ownership of the
shares.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue 45,000,000 shares of common stock, $.10 par value
per share, and 5,000,000 shares of preferred stock, $.10 par value per share.
Common Stock
As of December 21, 1999, there were 12,894,000 shares of common stock
outstanding and held of record by ten stockholders.
Following the filing of the Restated Articles of Organization all holders of
common stock shall be entitled to one vote for each share held on all matters
submitted to a vote of stockholders and will not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock entitled to
vote in any election of directors may elect all of the directors standing for
election. Holders of common stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefor, subject to any preferential dividend rights of any
outstanding preferred stock. Upon the liquidation, dissolution or winding up of
EST, the holders of common stock are entitled to receive ratably the net assets
of EST available after the payment of all debts and other liabilities, subject
to the prior rights of any outstanding preferred stock. Holders of the common
stock have no preemptive, subscription, redemption or conversion rights. The
outstanding shares of common stock are, and the shares offered by EST in this
offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock that EST may designate and issue in the future.
Preferred Stock
The Restated Articles of Organization authorize our Board of Directors,
subject to certain limitations prescribed by law and without further
stockholder approval, from time to time to issue up to an aggregate of
5,000,000 shares of preferred stock, $.10 par value per share, in one or more
series and to fix or alter the designations, preferences and rights, and any
qualifications, limitations or restrictions thereof, of the shares of each such
series, including the number of shares constituting any such series and the
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices and
liquidation preferences thereof. The issuance of preferred stock may have the
effect of delaying, deferring or preventing a change in control of EST. Upon
the closing of this offering, there will be no shares of preferred stock
outstanding. EST has no present plans to issue any shares of preferred stock.
Massachusetts Law and Certain Provisions of EST's Restated Articles of
Organization and Amended and Restated By-Laws
Our Amended and Restated By-Laws include a provision excluding EST from the
applicability of Massachusetts General Laws Chapter 110D, entitled "Regulation
of Control Share Acquisitions." In general, this statute provides that any
stockholder of a corporation subject to this statute who acquires 20% or more
of the outstanding voting stock of a corporation may not vote such stock unless
the other stockholders of the corporation so authorize. In addition,
Massachusetts General Laws Chapter 156B, Section 50A generally requires that
publicly-held Massachusetts corporations have a classified board of directors
consisting of three classes as nearly equal in size as possible, unless such
corporation elects to opt out of the statute's coverage. The Amended and
Restated By-Laws contain provisions which give effect to Section 50A.
The Amended and Restated By-Laws require that nominations for the Board of
Directors made by a stockholder of a planned nomination must be given not less
than 30 and not more than 90 days prior to a scheduled meeting, provided that
if less than 40 days' notice is given of the date of the meeting, a stockholder
will have 10 days within which to give such notice.
48
<PAGE>
The Amended and Restated By-Laws also require that a stockholder seeking to
have any business conducted at a regularly scheduled meeting of stockholders
generally give notice to EST not less than 120 calendar days prior to the date
EST's proxy statement was released to stockholders in connection with the
previous year's annual meeting. Proposals for meetings of stockholders that are
not regularly scheduled must be received a resonable time before EST begins to
print its proxy materials. The notice from the stockholder must describe the
proposed business to be brought before the meeting and include information
about the stockholder making the proposal, any beneficial owner on whose behalf
the proposal is made. The By-Laws require EST to call a special stockholders
meeting at the request of stockholders holding at least 40% of the voting
ownership of EST.
The Restated Articles of Organization provide that the directors and
officers of EST shall be indemnified by EST to the fullest extent authorized by
Massachusetts law, as it now exists or may in the future be amended, against
all expenses and liabilities reasonably incurred in connection with service for
or on behalf of EST. In addition, the Restated Articles of Organization provide
that the directors of EST will not be personally liable for monetary damages to
EST for breaches of their fiduciary duty as directors, unless they have
violated their duty of loyalty to EST or its stockholders, acted in bad faith,
knowingly or intentionally violated the law, including the securities laws,
authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors.
The Restated Articles of Organization provide that any amendment to the
Articles of Organization, the sale, lease or exchange of all or substantially
all of EST's property and assets, or the merger or consolidation of EST into or
with any corporation may be authorized by the approval of the holders of a
majority of the shares of each class of stock entitled to vote thereon, rather
than by two-thirds as otherwise provided by statute, provided that the
transactions have been authorized by a majority of the members of the Board of
Directors and the requirements of any other applicable provisions of the
Articles of Organization have been met.
The Restated Articles of Organization contain a provision excluding EST from
the applicability of Massachusetts General Laws Chapter 110F, which places
limitations on a Massachusetts corporation's ability to engage in business
combinations with certain stockholders for a period of three years.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is BankBoston, N.A.
49
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that such sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.
After this offering, 16,994,000 shares of common stock will be outstanding
(17,469,000 shares if the underwriters exercise their over-allotment option in
full). Of these shares, the 4,500,000 shares (5,175,000 shares if the
underwriters exercise their over-allotment option in full) sold in this
offering will be freely tradable without restriction under the Securities Act
except for any shares purchased by "affiliates" of the Company as defined in
Rule 144 under the Securities Act. The remaining 12,494,000 shares are
"restricted securities" within the meaning of Rule 144 under the Securities
Act. The restricted securities generally may not be sold unless they are
registered under the Securities Act or are sold pursuant to an exemption from
registration, such as the exemption provided by Rules 144 or 701 under the
Securities Act.
We, our officers, directors, all of our stockholders and a majority of our
optionholders, including the selling stockholders, have entered into lock-up
agreements pursuant to which we and they have agreed not to offer or sell any
shares of common stock or securities convertible into or exchangeable or
exercisable for shares of common stock for a period of 180 days after the date
of this prospectus without the prior written consent of Prudential Securities
Incorporated, on behalf of the underwriters. Transfers or dispositions can be
made in the case of gifts or estate planning transfers where the donee signs a
lock-up agreement. Prudential Securities Incorporated may, at any time and
without notice, waive any of the terms of these lock-up agreements specified in
the underwriting agreement. Following the lock-up period, these shares will not
be eligible for sale in the public market without registration under the
Securities Act unless such sales meet the conditions and restrictions of Rules
144 and 701 as described below.
As restrictions on resale end, the market price could drop significantly if
the holders of these restricted shares sell them, or are perceived by the
market as intending to sell them.
<TABLE>
<CAPTION>
Date of availability for resale
Number of shares into public market
---------------- -------------------------------
<C> <S>
8,689,900 180 days after the date of this prospectus due to a lock-up
agreement these
stockholders have with Prudential Securities Incorporated.
However, Prudential Securities Incorporated can waive this
restriction at any time and without notice.
3,804,100 Between 180 and 365 days after the date of this prospectus
due to the requirements
of the federal securities laws.
</TABLE>
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially
owned shares for a period of at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of
. 1% of the then-outstanding shares of common stock; and
. the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which the notice of
such sale on Form 144 is filed with the Securities and Exchange
Commission.
Sales under Rule 144 are also subject to certain provisions relating to
notice and manner of sale and the availability of current public information
about EST.
In addition, a person (or persons whose shares are aggregated) who has not
been an affiliate of EST at any time during the 90 days immediately preceding a
sale, and who has beneficially owned the shares for at least two years, would
be entitled to sell such shares under Rule 144(k) without regard to the volume
limitation and
50
<PAGE>
other conditions described above. Therefore, unless otherwise restricted, Rule
144(k) shares may be sold immediately upon the completion of this offering. The
foregoing summary of Rule 144 is not intended to be a complete description.
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 may be relied upon with respect to the resale of
securities orginally purchased from EST by its employees, directors, officers,
consultants or advisors prior to the date the issuer becomes subject to the
reporting requirements of the Exchange Act. To be eligible for resale under
Rule 701, shares must have been issued pursuant to written compensatory benefit
plans or written contracts relating to the compensation of such persons. In
addition, the SEC has indicated that Rule 701 will apply to typical stock
options granted by an issuer before it becomes subject to the reporting
requirements of the Exchange Act, along with the shares acquired upon exercise
of such options (including exercises after the date of the offering).
Securities issued in reliance on Rule 701 are restricted securities and,
subject to the contractual restrictions described above, beginning 90 days
after the date of this prospectus, may be sold by persons other than
affiliates, subject only to the manner of sale provisions of Rule 144, and by
affiliates, under Rule 144 without compliance with its one-year minimum holding
period requirement. The foregoing summary of Rule 701 is not intended to be a
complete description.
Ninety days following the consummation of this offering, EST intends to file
a registration statement under the Securities Act to register the shares of
common stock available for issuance pursuant to its stock option plans as of
the date of this prospectus. Shares issued pursuant to these plans after the
effective date of such registration statement will be available for sale in the
open market subject to the lock-up period and, for affiliates of EST, subject
to conditions and restrictions of Rule 144.
51
<PAGE>
UNDERWRITING
We and each of the selling stockholders have entered into an underwriting
agreement with the underwriters named below, for whom Prudential Securities
Incorporated, Hambrecht & Quist LLC, Needham & Company, Inc. and
PrudentialSecurities.com, a unit of Prudential Securities Incorporated are
acting as representatives. We and the selling stockholder are obligated to
sell, and the underwriters are obligated to purchase, all of the shares offered
on the cover page of this prospectus, if any are purchased. Subject to
conditions of the underwriting agreement, each underwriter has severally agreed
to purchase the shares indicated opposite its name:
<TABLE>
<CAPTION>
Number
Underwriters of Shares
------------ ---------
<S> <C>
Prudential Securities Incorporated....................................
Hambrecht & Quist LLC.................................................
Needham & Company, Inc................................................
PrudentialSecurities.com, a unit of Prudential Securities
Incorporated.........................................................
---------
Total............................................................... 4,500,000
=========
</TABLE>
The underwriters may sell more shares than the total number of shares
offered on the cover page of this prospectus and they have, for a period of 30
days from the date of this prospectus, an over-allotment option to purchase up
to 475,000 additional shares from us and up to 200,000 additional shares from
another selling stockholder. If any additional shares are purchased, the
underwriters will severally purchase the shares in the same proportion as shown
in the table above.
The representatives of the underwriters have advised us and the selling
stockholders that the shares will be offered to the public at the offering
price indicated on the cover page of this prospectus. The underwriters may
allow selected dealers a concession not in excess of $[ ] share and such
dealers may reallow a concession not in excess of $[ ] share to certain other
dealers. After the shares are released for sale to the public, the
representatives may change the offering price and the concessions. The
representatives have informed us that the underwriters do not intend to sell
shares to any investor who has granted them discretionary authority.
We and the selling stockholders have agreed to pay to the underwriters the
following fees, assuming both no exercise and full exercise of the
underwriters' over-allotment option to purchase additional shares:
<TABLE>
<CAPTION>
Total Fees
-------------------------------------------
Fee Without Exercise of Full Exercise
Per Share Over-Allotment Option Over-Allotment Option
--------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by us.......... $ $ $
Fees paid by the selling
stockholders............ $ $ $
</TABLE>
In addition, we estimate that we will spend approximately $1,000,000 in
expenses for this offering, including expenses for the selling stockholders.
We, the recipients of the Subchapter S distribution and the selling
stockholders have agreed to indemnify the underwriters against liabilities,
including liabilities under the Securities Act, or contribute to payments that
the underwriters may be required to make in respect of these liabilities.
We, our officers, directors and all stockholders, including the selling
stockholders, have entered into lock-up agreements pursuant to which we and
they have agreed not to offer or sell any shares of common stock or securities
convertible into or exchangeable or exercisable for shares of common stock for
a period of 180 days from the date of this prospectus without the prior written
consent of Prudential Securities Incorporated, on behalf of the underwriters.
Prudential Securities Incorporated may, at any time and without notice, waive
the terms of these lockup agreements specified in the underwriting agreement.
Prior to this offering, there has been no public market for our common
stock. The public offering price, negotiated between us and the
representatives, is based upon various factors such as our financial and
operating history and condition, our prospects, the prospects for the industry
we are in and prevailing market conditions.
52
<PAGE>
Prudential Securities Incorporated, on behalf of the underwriters, may
engage in the following activities in accordance with applicable securities
rules:
. Over-allotments involving sales in excess of the offering size, creating
a short position. Prudential Securities Incorporated may elect to reduce
this short position by exercising some or all of the over-allotment
option.
. Stabilizing and short covering: stabilizing bids to purchase the shares
are permitted if they do not exceed a specified maximum price. After the
distribution of shares has been completed, short covering purchases in
the open market may also reduce the short position. These activities may
cause the price of the shares to be higher than would otherwise exist in
the open market.
. Penalty bids permitting the underwriters to reclaim concessions from a
syndicate member for the shares purchased in the stabilizing or short
covering transactions that were retained by or released to the syndicate
member.
Such activities, which may be commenced and discontinued at any time, may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.
Each underwriter has represented that it has complied and will comply with
all applicable laws and regulations in connection with the offer, sale or
delivery of the shares and related offering materials in the United Kingdom,
including:
.the Public Offers of Securities Regulations 1995,
.the Financial Services Act 1986, and
.the Financial Services Act 1986, Investment Advertisements, Exemptions,
Order 1996 (as amended).
Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
Advisor SM, a full-service brokerage firm program, may view offering terms and
a prospectus online and place orders through their financial advisors.
53
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for EST
by Holland & Knight LLP, Boston, Massachusetts. Legal matters will be passed
upon for the underwriters by Testa, Hurwitz & Thibeault, LLP, Boston,
Massachusetts.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1998 and
for each of the three years in the period ended December 31, 1998 included in
this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission, a Registration
Statement on Form S-1 including the exhibits and schedules thereto under the
Securities Act with respect to the shares to be sold in this offering. This
prospectus does not contain all the information set forth in the Registration
Statement. For further information with respect to EST and the shares to be
sold in this offering, reference is made to the Registration Statement.
Statements contained in this prospectus as to the contents of any contract,
agreement or other document referred to, are not necessarily complete, and in
each instance reference is made to the copy of such contract, agreement or
other document filed as an exhibit to the Registration Statement, each
statement being qualified in all respects by a more complete description of the
matter involved, and each such statement shall be deemed incorporated by such
reference.
You may read and copy all or any portion of the Registration Statement or
any reports, statements or other information we file at the Commission's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.C.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of
these documents upon payment of a duplicating fee by writing to the Commission.
Please call the Commission at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Our filings, including the
Registration Statement will also be available to you on the Commission's
Internet site (http://www.sec.gov).
EST intends to send to its stockholders annual reports containing audited
consolidated financial statements and quarterly reports containing unaudited
Consolidated Financial Statements for the first three quarters of each fiscal
year.
54
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and September
30, 1999 (unaudited)..................................................... F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1997 and 1998 and for the nine months ended September 30, 1998 and
1999 (unaudited)......................................................... F-4
Consolidated Statements of Changes in Stockholders' Deficit for the years
ended December 31, 1996, 1997 and 1998 and for the nine months ended
September 30, 1999 (unaudited)........................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998 and for the nine months ended September 30, 1998 and
1999 (unaudited)......................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Embedded Support Tools Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' deficit and of cash
flows present fairly, in all material respects, the financial position of
Embedded Support Tools Corporation and its subsidiaries at December 31, 1997
and 1998, and the results of their operations and their cash flows for the
years ended December 31, 1996, 1997 and 1998 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of EST's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 5, 1999, except as to the information presented in Note 13, for which
the date is December 22, 1999
F-2
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, Pro Forma
----------------- September 30, September 30,
1997 1998 1999 1999
------- -------- ------------- -------------
(Note 2)
(unaudited)
(in thousands, except share amounts)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...... $ 1,158 $ 2,440 $ 1,579 $ 1,579
Accounts receivable, net of
allowance for doubtful
accounts of $25 and $91 at
December 31, 1997 and 1998 and
$80 at September 30, 1999
(unaudited), respectively..... 2,211 2,778 4,738 4,738
Inventory, net (Note 3)........ 883 1,757 3,072 3,072
Prepaid expenses and other
current assets................ 112 84 94 94
------- -------- -------- -------
Total current assets.......... 4,364 7,059 9,483 9,483
Property and equipment, net
(Note 4)....................... 354 505 824 824
Other assets.................... 10 40 22 22
------- -------- -------- -------
Total assets.................. $ 4,728 $ 7,604 $ 10,329 $10,329
======= ======== ======== =======
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable............... 453 964 1,235 1,235
Accrued expenses (Note 5)...... 1,107 1,692 3,974 3,974
Deferred revenue............... 483 555 896 896
Note payable................... -- -- 359 359
------- -------- -------- -------
Total current liabilities..... 2,043 3,211 6,464 6,464
Commitments and contingencies
(Note 11)
Redeemable common stock (Note
7):
Common stock, $0.10 par value;
45,500,000 shares authorized;
shares issued and outstanding:
10,111,000 at December 31,
1997 and 1998 and September
30, 1999; no shares on a pro
forma basis .................. 11,375 16,431 18,959 --
Note receivable from
stockholder (Note 7).......... -- -- (550) --
------- -------- -------- -------
11,375 16,431 18,409 --
Stockholders' equity (deficit):
Common stock, $.10 par value;
45,500,000 shares authorized;
shares issued and outstanding:
no shares at December 31, 1997
and 1998 and 2,783,000 at
September 30, 1999,
respectively (actual);
12,894,000 on a pro forma
basis......................... -- -- 278 1,289
Additional paid-in capital..... -- -- 7,190 7,190
Note receivable from
stockholder (Note 7) -- -- -- (550)
Accumulated deficit............ (8,655) (11,979) (21,946) (3,998)
Accumulated other comprehensive
loss.......................... (35) (59) (66) (66)
------- -------- -------- -------
Total stockholders' equity
(deficit).................... (8,690) (12,038) (14,544) 3,865
------- -------- -------- -------
Total liabilities and
stockholders' equity
(deficit)................... $ 4,728 $ 7,604 $ 10,329 $10,329
======= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months
Years Ended December Ended
31, September 30,
------------------------- ----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues.......................... $ 8,262 $11,766 $18,250 $13,171 $19,544
Cost of revenues.................. 1,945 2,874 3,823 2,968 3,789
------- ------- ------- ------- -------
Gross profit..................... 6,317 8,892 14,427 10,203 15,755
------- ------- ------- ------- -------
Operating expenses:
Selling and marketing............ 2,833 4,052 7,236 5,111 7,274
Research and development......... 1,636 2,150 3,085 2,281 3,378
General and administrative....... 541 721 1,040 766 999
Stock-related compensation
expense......................... -- -- -- -- 9,363
------- ------- ------- ------- -------
Total operating expenses........ 5,010 6,923 11,361 8,158 21,014
------- ------- ------- ------- -------
Income (loss) from operations..... 1,307 1,969 3,066 2,045 (5,259)
Interest income (expense)......... (22) 22 42 21 37
------- ------- ------- ------- -------
Income (loss) before provision for
income taxes and minority
interest in majority owned
subsidiary....................... 1,285 1,991 3,108 2,066 (5,222)
Provision for income taxes........ 116 131 218 157 423
------- ------- ------- ------- -------
Income (loss) before minority
interest in majority owned
subsidiary....................... 1,169 1,860 2,890 1,909 (5,645)
Minority interest in majority
owned subsidiary................. 68 -- -- -- --
------- ------- ------- ------- -------
Net income (loss)................. 1,101 1,860 2,890 1,909 (5,645)
======= ======= ======= ======= =======
Accretion of redeemable common
stock to redemption value....... (1,264) (5,055) (5,056) (5,056) (2,528)
------- ------- ------- ------- -------
Net loss to common stockholders... $ (163) $(3,195) $(2,166) $(3,147) $(8,173)
======= ======= ======= ======= =======
Historical net income (loss) per
share--basic and diluted......... $ (0.02) $(0.32) $ (0.21) $ (0.31) $ (0.73)
======= ======= ======= ======= =======
Shares used in computing
historical net income (loss) per
share--basic and diluted......... 10,111 10,111 10,111 10,111 11,202
======= ======= ======= ======= =======
Pro forma data (unaudited):
Historical income (loss) before
income taxes.................... $ 1,285 $ 1,991 $ 3,108 $ 2,066 $(5,222)
Pro forma provision for income
taxes assuming C corporation
tax............................. 411 677 1,243 826 (2,298)
------- ------- ------- ------- -------
Pro forma net income (loss)...... $ 874 $ 1,314 $ 1,865 $ 1,240 $(2,924)
======= ======= ======= ======= =======
Pro forma net income (loss) per
common share--basic and diluted.. $ 0.09 $ 0.13 $ 0.18 $ 0.12 $ (0.26)
======= ======= ======= ======= =======
Shares used in computing pro forma
net income (loss) per share--
basic and diluted................ 10,111 10,111 10,111 10,111 11,202
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-in Accumulated Comprehensive Comprehensive Stockholders'
Stock Capital Deficit Income (Loss) Income Deficit
------ ---------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... -- -- $ (4,551) $ 25 -- $ (4,526)
Distributions paid to
shareholders.......... -- -- (11) -- -- (11)
Accretion of redeemable
common stock to
redemption value...... -- -- (1,264) -- -- (1,264)
Comprehensive income:
Net income............ -- -- 1,101 -- 1,101 1,101
Foreign currency
translation
adjustments.......... -- -- -- (11) (11) (11)
-------
Comprehensive income.. 1,090
---- ------ -------- ---- ======= --------
Balance at December 31,
1996................... -- -- (4,725) 14 -- (4,711)
Distributions paid to
shareholders.......... -- -- (735) -- -- (735)
Accretion of redeemable
common stock to
redemption value...... -- -- (5,055) -- -- (5,055)
Comprehensive income:
Net income............ -- -- 1,860 -- 1,860 1,860
Foreign currency
translation
adjustments.......... -- -- -- (49) (49) (49)
-------
Comprehensive income.. -- -- -- -- 1,811 --
---- ------ -------- ---- ======= --------
Balance at December 31,
1997................... -- -- (8,655) (35) -- (8,690)
Distributions paid to
shareholders.......... -- -- (1,158) -- -- (1,158)
Accretion of redeemable
common stock to
redemption value...... -- -- (5,056) -- -- (5,056)
Comprehensive income:
Net income............ -- -- 2,890 -- 2,890 2,890
Foreign currency
translation
adjustments.......... -- -- -- (24) (24) (24)
-------
Comprehensive income.. -- -- -- -- 2,866 --
---- ------ -------- ---- ======= --------
Balance at December 31,
1998................... -- -- (11,979) (59) -- (12,038)
Distributions paid to
shareholders.......... -- -- (1,794) -- -- (1,794)
Accretion of redeemable
common stock to
redemption value...... -- -- (2,528) -- -- (2,528)
Issuance of common
stock under stock-
based compensation
program............... 278 (278) -- -- -- --
Compensation expense
associated with stock
award to employees.... -- 7,468 -- -- -- 7,468
Comprehensive income:
Net loss.............. -- -- (5,645) -- (5,645) (5,645)
Foreign currency
translation
adjustments.......... -- -- -- (7) (7) (7)
-------
Comprehensive income.. -- -- -- -- $(5,652) --
---- ------ -------- ---- ======= --------
Balance at September 30,
1999 (unaudited)....... $278 $7,190 $(21,946) $(66) $(14,544)
==== ====== ======== ==== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months
Year Ended December Ended
31, September 30,
---------------------- ---------------
1996 1997 1998 1998 1999
------ ------ ------ ------ -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................... $1,169 $1,860 $2,890 $1,909 $(5,645)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation of property and
equipment........................... 65 98 250 126 316
Compensation expense................. -- -- -- -- 7,468
Changes in operating assets and
liabilities:
Accounts receivable.................. (223) (829) (597) (1,037) (1,960)
Inventory............................ (129) 42 (876) (583) (1,315)
Prepaid expenses and other current
assets.............................. -- (97) (2) (91) 9
Accounts payable..................... (96) (135) 527 548 271
Accrued expenses..................... 63 553 582 574 2,282
Deferred revenue..................... 34 175 71 74 341
------ ------ ------ ------ -------
Net cash provided by operating
activities......................... 883 1,667 2,845 1,520 1,767
Cash flows from investing activities:
Purchases of property and equipment.. (222) (366) (401) (223) (636)
------ ------ ------ ------ -------
Net cash used in investing
activities......................... (222) (366) (401) (223) (636)
Cash flows from financing activities:
Note repayment....................... (253) -- -- -- --
Note receivable from stockholder..... -- -- -- -- (550)
Net borrowings on demand note
payable............................. -- -- -- -- 359
Distributions paid to stockholders... (11) (735) (1,158) (1,171) (1,794)
------ ------ ------ ------ -------
Net cash used by financing
activities......................... (264) (735) (1,158) (1,171) (1,985)
------ ------ ------ ------ -------
Effect of exchange rate changes on
cash................................. (11) (26) (4) 7 (7)
------ ------ ------ ------ -------
Net increase (decrease) in cash and
cash equivalents..................... 386 540 1,282 133 (861)
Cash and cash equivalents, beginning
of period............................ 232 618 1,158 1,158 2,440
------ ------ ------ ------ -------
Cash and cash equivalents, end of
period............................... $ 618 $1,158 $2,440 $1,291 $ 1,579
====== ====== ====== ====== =======
Supplemental disclosure of cash flow
information:
Cash paid during period for:
Income taxes......................... $ 111 $ 116 $ 131 $ 157 $ 423
====== ====== ====== ====== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business:
Embedded Support Tools Corporation (the "Company" or "EST") and its
subsidiaries operate in one segment. EST designs, manufactures, sells and
supports hardware and software tools used for development and debugging
embedded systems. Embedded systems are programmable semiconductor chips that
are used in a wide variety of data communications, computer networking,
automotive and consumer electronic applications. EST was incorporated in The
Commonwealth of Massachusetts on January 5, 1989 and is located in Canton,
Massachusetts.
2. Summary of Significant Accounting Policies:
Principles of Consolidation
The consolidated financial statements include the accounts of Embedded
Support Tools Corporation and its wholly-owned subsidiaries: E.S.T. Corp.
Europe SARL, a French corporation; Embedded Support Tools Corp. Nordic AB, a
Swedish corporation; E.S.T. KK, a Japanese Corporation; and E.S.T. Corp., UK
Ltd., a United Kingdom corporation. All significant intercompany accounts and
transactions have been eliminated.
Interim Financial Statements (Unaudited)
The consolidated balance sheet as of September 30, 1999, the consolidated
statements of operations and cash flows for the nine months ended September 30,
1998 and 1999 and the consolidated statement of stockholders' deficit for the
nine months ended September 30, 1999 and the related footnote disclosures are
unaudited, have been prepared on a basis substantially consistent with the
audited consolidated financial statements and, in the opinion of management,
include all adjustments, consisting of normal, recurring adjustments (except
with respect to the stock-related compensation expense recorded in June 1999.
See Note 8) necessary for a fair presentation of results for these interim
periods. The results for the nine months ended September 30, 1999 are not
necessarily indicative of results to be expected for the entire year, although
EST expects to incur a significant loss for the year ending December 31, 1999.
Pro Forma Balance Sheet Presentation (Unaudited)
The pro forma balance sheet reflects the termination, upon the closing of
EST's initial public offering, of the redemption rights of the existing holders
of common stock.
Historical and Pro Forma (Unaudited) Net Income (Loss) Per Share
EST computes basic and diluted earnings per share in accordance with
Statement of Financial Accounting Standards No. 128 ("SFAS 128") "Earnings per
Share." SFAS 128 requires both basic earnings per share, which is based on the
weighted average number of common shares outstanding, and diluted earnings per
share, which is based on the weighted average number of common shares
outstanding and all dilutive potential common equivalent shares outstanding.
The dilutive effect of options is determined under the treasury stock method
using the average market price for the period. Common equivalent shares are
included in the per share calculations where the effect of their inclusion
would be dilutive. The stock rights and stock options granted under stock-based
compensation plans in years prior to 1999 have been excluded from the
computation of diluted earnings per share because the employees' right to the
stock is contingent upon a future event.
F-7
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Historical net income (loss) and net income (loss) per share is not
meaningful as a result of accretion associated with redemption rights on
certain common stock which terminate upon the closing of this offering and
EST's planned conversion from a Subchapter S corporation to a Subchapter C
corporation upon the closing of this offering. Historical net income (loss) has
been adjusted to exclude the accretion and for the pro forma provision for
income taxes calculated assuming EST was subject to income taxation as a
Subchapter C corporation, at a pro forma tax rate of 32%, 34% and 40% for the
years ended December 31, 1996, 1997 and 1998 and 40% and 44% for the nine
months ended September 30, 1998 and 1999, respectively (unaudited, in
thousands).
<TABLE>
<CAPTION>
Year Ended December 31, Nine Months Ended September 30,
----------------------------------------------------- -------------------------------------
1996 1997 1998 1998 1999
----------------- ----------------- ----------------- ----------------- -------------------
Pro Pro Pro Pro Pro
forma Historical forma Historical forma Historical forma Historical forma Historical
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)....... $ 874 $ (163) $1,314 $(3,195) $1,865 $(2,165) $1,240 $(3,147) $(1,438) $(8,173)
Shares used in net
income (loss) per
common share, basic and
diluted................ 10,111 10,111 10,111 10,111 10,111 10,111 10,111 10,111 11,202 11,202
====== ====== ====== ======= ====== ======= ====== ======= ======= =======
Net income (loss) per
common share, basic and
diluted................ $ 0.09 $(0.02) $ 0.13 $ (0.32) $ 0.18 $ (0.21) $ 0.12 $ (0.31) $ (0.13) $ (0.73)
====== ====== ====== ======= ====== ======= ====== ======= ======= =======
</TABLE>
Cash and Cash Equivalents
EST considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. EST invests its excess
cash primarily in an overnight investment account that invests primarily in
money market accounts, commercial paper and treasury bills. The carrying value
of EST's cash and cash equivalents approximates their fair value. Accordingly,
these investments are subject to minimal credit and market risk.
Financial Instruments
The carrying value of EST's financial instruments, which include cash and
cash equivalents, accounts receivable, accounts payable and accrued expenses,
approximate their fair values.
Revenue Recognition
Revenue from product sales is recognized upon shipment provided that no
uncertainties regarding customer acceptance exist and collection of the related
receivable is probable. Revenue from maintenance services is recognized ratably
over the contract period, generally one year. Revenue from consulting and
training services is recognized when the services are provided.
Concentration of Credit Risk
Financial instruments which potentially expose EST to concentrations of
credit risk consist primarily of trade accounts receivable. Management
considers its concentration of credit risk with respect to accounts receivable
to be limited due to its credit evaluation policies, relatively short payment
terms, and geographical dispersion of sales. EST obtains letters of credit for
sales to certain foreign customers based on management's credit evaluation.
EST maintains reserves for potential credit losses. Such losses historically
have been minimal and within management's expectations.
Inventory
Inventory is stated at the lower of cost or market value, with cost being
determined by the first-in, first-out (FIFO) method.
F-8
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets or,
where applicable, over the lease term. The cost of additions and improvements
are capitalized, while expenditures for maintenance and repairs are charged to
expense as incurred. Upon retirement or sale, the cost of the disposed assets
and related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is credited or charged to income.
Research and Development and Computer Software Development Costs
Research and development costs are expensed as incurred. Software
development costs are expensed until technological feasibility is established
at which time, and until the product is available for general release to
customers, costs are capitalized. No software development costs were
capitalized during the years ended December 31, 1996, 1997, and 1998, since
costs incurred subsequent to establishment of technological feasibility were
not material.
Foreign Currency Translation
The functional currency of EST's foreign subsidiaries is the local currency.
Accordingly, the assets and liabilities of EST's foreign subsidiaries are
translated into U.S. dollars at exchange rates in effect at the balance sheet
date. Income and expense items are translated at average exchange rates for the
period. Foreign currency translation adjustments are included in accumulated
other comprehensive income as a separate component of stockholders' deficit.
Foreign currency transaction gain or losses are recorded in operating expenses
and were not significant for the years ended December 31, 1996, 1997 and 1998.
Product Warranty Costs
EST provides three months hardware warranty as part of its product sales.
Estimated future costs for initial product warranties are provided for at the
time of sale.
Advertising Expense
EST recognizes advertising expense as incurred. Advertising expense was
approximately $313,000, $256,000 and $310,000 for the years ended December 31,
1996, 1997 and 1998, respectively.
Accounting for Stock-Based Compensation
EST accounts for its stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
EST has adopted the disclosure only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation."
Income Taxes
Prior to its completed reorganization as a Subchapter C corporation
effective upon completion of the initial public offering, EST has been treated
as a Subchapter S corporation and is not required to pay federal income taxes.
Subchapter S corporation shareholders are required to report their respective
share of EST's taxable income or loss on their individual tax returns and are
personally liable for the related tax.
Comprehensive Income
Comprehensive income is defined as the change in equity of a company during
a period from transactions and other events and circumstances excluding
transactions resulting from investments by owners and
F-9
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
distributions to owners. At December 31, 1998 and 1997, accumulated other
comprehensive income was comprised solely of cumulative foreign currency
translation adjustments.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Areas particularly subject to estimation include the
allowance for doubtful accounts, inventory reserves and revenue reserves.
Actual results could differ from those estimates.
Recently Issued Accounting Pronouncements
In April 1998, the AcSEC issued SOP 98-5, "Reporting on the Costs of Start-
Up Activities." Start-up activities are defined broadly as those one-time
activities relating to opening a new facility, introducing a new product or
service, conducting business in new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SOP 98-5, the cost of start-up activities should be expensed as incurred.
SOP 98-5 is effective for EST's fiscal year 2000 financial statements and EST
does not expect its adoption to have a material effect on its financial
condition or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, (collectively referred to
as derivatives) and for hedging activities. We will adopt SFAS No. 133 as
required by SFAS 137, "Deferral of the Effective Date of FASB Statement No.
133," in fiscal year 2001. The adoption of SFAS No. 133 is not expected to have
an impact on EST's financial condition or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements." SAB 101
summarizes the application of generally accepted accounting principles to
revenue recognition in financial statements. EST does not expect SAB 101 to
have a material effect on its financial position or results of operations.
3. Inventory:
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
December
31, September 30,
----------- -------------
1997 1998 1999
---- ------ -------------
(unaudited)
<S> <C> <C> <C>
Raw material....................................... $353 $ 765 $1,638
Work-in-process.................................... 511 864 746
Finished goods..................................... 19 128 688
---- ------ ------
$883 $1,757 $3,072
==== ====== ======
</TABLE>
F-10
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Property and Equipment:
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
Estimated
Useful December 31, September 30,
Lives ------------- -------------
(Years) 1997 1998 1999
--------- ----- ------ -------------
(unaudited)
<S> <C> <C> <C> <C>
Computer software and equipment....... 3 $ 538 $ 839 $1,197
Furniture and fixtures................ 7 63 110 195
Office equipment...................... 5 29 79 176
Leasehold improvements................ 5 20 23 20
----- ------ ------
650 1,051 1,588
Less: accumulated depreciation........ (296) (546) (764)
----- ------ ------
Property and equipment, net........... $ 354 $ 505 $ 824
===== ====== ======
</TABLE>
5. Accrued Expenses:
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
------------- -------------
1997 1998 1999
------ ------ -------------
(unaudited)
<S> <C> <C> <C>
Wages and benefits............................... $ 574 $ 974 $ 957
Taxes............................................ 166 262 1,802
Commissions...................................... 257 248 252
Professional fees................................ 33 132 60
Other............................................ 77 76 903
------ ------ ------
$1,107 $1,692 $3,974
====== ====== ======
</TABLE>
6. Line of Credit:
At September 30, 1999, EST had a $2,000,000 revolving line of credit with
BankBoston, N.A. Borrowings under the line are payable on demand and bear
interest at the Base Rate determined by BankBoston N.A. (9.25% at September 30,
1999). Borrowings are collateralized by all of the assets of EST. Interest is
payable monthly in arrears. Under the terms of the agreement, EST is required
to comply with certain restrictive covenants. EST was in compliance with all
restrictive covenants at September 30, 1999. $359,000 of borrowings were
outstanding under the line of credit at September 30, 1999. See Note 13.
7. Redeemable Common Stock:
On January 1, 1998, EST's stockholders approved an increase in the
authorized shares of common stock, $0.10 par value, to 7,500,000. Also on
January 1, 1998, EST effected a five hundred-for-one stock split of its common
stock in the form of a stock dividend. Accordingly, all share amounts have been
adjusted to give retroactive effect to this stock split.
EST had an agreement with certain of its shareholders under which EST had
the right to repurchase all or part of the founders' shares of common stock at
a stated value per share, as defined, upon certain events including death,
termination of employment by EST, permanent disability or retirement. On July
1, 1999, EST
F-11
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
executed the First Amended and Restated Founding Shareholders Agreement
("Amended Shareholders Agreement") which amended and restated the Shareholders
Agreement. Under the Amended Shareholders Agreement, in addition to EST's right
to repurchase the founders' shares, during the period beginning on July 1, 1999
and ending on the earlier of either an initial public offering or a change in
control, at the election of each individual founder, EST shall be required to
purchase up to 10% per year of the founder's respective shares of common stock
at a redemption price in accordance with a redemption formula, as defined.
Alternatively, and in lieu of the right to redeem shares of common stock, each
founder is entitled to obtain loans from EST which are collateralized by a
pledge of shares of common stock. Accordingly, the carrying value of the common
stock has been recorded at its redemption value at December 31, 1998 and 1997.
On July 1, 1999, a loan totaling $550,000 was issued to a founder, which is
collateralized by a pledge of 220,000 shares of common stock.
The following table sets forth redeemable common stock activity of EST
(dollars in thousands).
<TABLE>
<CAPTION>
Shares Amount
---------- -------
<S> <C> <C>
Balance at December 31, 1995................................. 10,111,000 $ 5,056
Accretion of redeemable common stock to redemption value..... 1,264
---------- -------
Balance at December 31, 1996................................. 10,111,000 6,320
Accretion of redeemable common stock to redemption value..... 5,055
---------- -------
Balance at December 31, 1997................................. 10,111,000 11,375
Accretion of redeemable common stock to redemption value..... 5,056
Balance at December 31, 1998................................. 10,111,000 16,431
Accretion of redeemable common stock to redemption value..... 2,528
---------- -------
Balance at September 30, 1999 (unaudited).................... 10,111,000 $18,959
========== =======
</TABLE>
8. Stock-Based Compensation:
EST's Board of Directors approved the 1997 Stock Option Plan and 1998 Stock
Option Plan ("the Plans"). The Plans provided for the grant of nonqualified
stock options to employees. Options are granted under the Plans at fair value,
are exercisable only upon a change in control, as defined, and expire only upon
termination of employment. Options to purchase 202,000 shares of common stock
were granted under the Plans through the year ended December 31, 1998. In
addition, prior to 1998, EST issued an option to an employee to purchase
659,000 shares of common stock, which is exercisable only upon the occurrence
of certain events, as defined. Lastly, in years prior to 1997, EST granted
rights to certain employees that entitled the employees to receive cash or
shares of common stock only upon the occurrence of certain events, as defined.
At December 31, 1998, no stock options were exercisable and no rights had
converted to cash or common stock. No compensation expense has been recorded in
the years ended December 31, 1996, 1997 and 1998 or for the nine months ended
September 30, 1999 (unaudited), with respect to any stock options or common
stock rights granted in years prior to 1999 because exercise of the stock
options and common stock rights was contingent upon the occurrence of certain
future events.
During 1999, EST's Board of Directors approved the 1999 Stock Option Plan
(the "1999 Plan"). The 1999 Plan provides for the granting of incentive and
nonqualified stock options and stock bonus awards to officers, directors,
employees and consultants of EST. The exercise price of stock options granted
under the 1999 Plan is determined by the Board of Directors. However, incentive
stock options may not be granted at less than the fair market value of EST's
common stock as determined by the Board of Directors at the date of grant. The
maximum number of common shares that may be issued pursuant to the 1999 Plan is
4,000,000. During the nine months ended September 30, 1999, EST granted
2,118,000 options under the 1999 Plan. All options granted under the 1999 Plan
expire ten years from the date of grant and generally vest over a five-year
period.
F-12
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In June 1999, EST cancelled all outstanding stock options and common stock
rights granted prior to December 31, 1998. Also in June 1999, EST issued
2,783,000 shares of common stock to certain employees. EST has a right of first
refusal in any proposed transfer of the shares by the employee until EST
completes an initial public offering. Additionally, EST has a right, but not an
obligation, to repurchase the shares in the event of termination of employment
with EST at the fair value of the common stock as determined by the Board of
Directors. As a result of the issuance of the common shares, EST recorded a
compensation charge of $7,468,000 based on the fair value of the common stock
in June 1999. In connection with the issuance of the common stock, EST agreed
to pay a portion of the employee's tax liability resulting from the issuance of
the common stock. As a result, an additional charge of $1,895,000 was also
recorded in June 1999 (See Note 13).
9. Employee Benefit Plans:
EST maintains a defined contribution plan incorporating features under
section 401(a) of the Internal Revenue Code which covers substantially all
employees. Under the money purchase pension feature of the plan, employer
contributions are determined at a rate of eligible employees' salary. Under the
profit sharing feature of the plan, EST may make annual discretionary
contributions at a rate determined by the Board of Directors. Under the 401(k)
feature of the plan, eligible employees can elect to contribute up to 12% of
their salary limited to a total contribution of $10,000 a year. EST matches
these contributions at a rate of 33% for each dollar contributed by its
employees up to a maximum of 3% of the eligible employee's annual salary.
During the years ended December 31, 1996, 1997 and 1998, EST made contributions
of approximately $210,000, $300,000 and $500,000, respectively.
F-13
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Income Taxes:
The components of the income tax provision are as follows at December
31(000's):
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
State......................................................... $114 $ 28 $ 59
Foreign....................................................... 2 103 159
---- ---- ----
$116 $131 $218
==== ==== ====
</TABLE>
The Company has elected to be taxed as a Subchapter S Corporation for
federal and certain states income tax purposes and, as a result, is not subject
to federal taxation, but is subject to state taxation on income in certain
states. The stockholders are liable for individual federal and certain state
income taxes on their allocated portion of the Company's taxable income. The
foreign taxes primarily represent income taxes of EST's foreign subsidiaries
based upon the income reported in the respective jurisdictions.
As EST is not subject to federal income taxes, a reconciliation of the
effective tax rate to the federal statutory rate is not meaningful.
At December 31, 1997 and 1998, the components of the deferred tax asset and
deferred tax liability were immaterial.
11. Commitments and Contingencies:
Commitments
EST and its subsidiaries lease their facilities and certain office equipment
under operating leases in excess of one year.
Future minimum lease payments due under non-cancellable operating leases are
as follows at December 31, 1998 (000's):
<TABLE>
<S> <C>
1999................................................................ $ 339
2000................................................................ 329
2001................................................................ 329
2002................................................................ 329
2003................................................................ 104
Thereafter.......................................................... 116
------
Total minimum lease payments........................................ $1,546
======
</TABLE>
Total rent expense under operating leases was $94,000, $164,000, $288,000,
for the years ended December 31, 1996, 1997 and 1998, respectively.
Contingencies
EST outsources the assembly of its product components to a limited number of
subcontractors. Although there are several available vendors for assembly of
its products, management believes that the nature of its business requires
outsourcing to vendors who have expertise in assembling the components for
EST's products. A change in or loss of one or more of these subcontractors
could cause delays in meeting customer orders, delays in revenue recognition or
the loss of sales which could adversely affect results of operations.
F-14
<PAGE>
EMBEDDED SUPPORT TOOLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Segment Information:
EST operates in one reportable segment: the design, development,
manufacture, sale and support of development tools for embedded systems.
During the years ended December 31, 1996, 1997 and 1998, no single customer
accounted for greater than 10% of revenues.
Information by geographic area as of December 31, 1998, 1997 and 1996 and
for the years then ended, is summarized below (in thousands):
<TABLE>
<CAPTION>
Other
Year Ended December 31, United Foreign
1998 States France Subsidiaries Eliminations Consolidated
----------------------- ------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Unaffiliated Customers $12,936 $2,771 $2,543 -- $18,250
Intercompany 3,292 -- -- (3,292) --
Long-Lived Assets 436 17 52 -- 505
<CAPTION>
Other
Year Ended December 31, United Foreign
1997 States France Subsidiaries Eliminations Consolidated
----------------------- ------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Unaffiliated Customers $ 8,958 $2,449 $ 359 -- $11,766
Intercompany 2,222 -- -- (2,222) --
Long-Lived Assets 320 23 11 -- 354
<CAPTION>
Other
Year Ended December 31, United Foreign
1996 States France Subsidiaries Eliminations Consolidated
----------------------- ------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Unaffiliated Customers $ 6,116 $2,146 -- -- $ 8,262
Intercompany 1,054 -- (1,054) --
Long-Lived Assets 210 32 -- -- 242
</TABLE>
Revenue is presented geographically based on the country in which the sale
is recorded. Inventories are transferred to the Company's foreign subsidiaries
at previously established transfer prices, resulting in intercompany revenue
and receivables for the United States operation.
Other foreign subsidiaries is comprised of the United Kingdom, Sweden and
Japan at December 31, 1998, the United Kingdom and Sweden at December 31, 1997
and there were no other foreign subsidiaries at December 31, 1996. None of
these other foreign subsidiaries were considered significant during the periods
presented.
13. Subsequent Events:
In December 1999, EST borrowed $2,000,000 under its line of credit agreement
to fund in part the payment of federal and state taxes incurred by us and seven
key employees upon their receipt of stock-related compensation.
Also in December 1999, the Board of Directors approved an increase in the
authorized capital of the Company to 45,000,000 shares of common stock and
5,000,000 shares of preferred stock. The Board of Directors also approved a
two-for-one stock split effected in the form of a stock dividend. All share and
per share amounts have been adjusted to give retroactive effect to this stock
split.
F-15
<PAGE>
Report of Independent Accountants on Financial Statement Schedule
To the Board of Directors of Embedded Support Tools Corporation
Our audits of the consolidated financial statements referred to in our
report dated August 5, 1999, except as to the information presented in Note 13
for which the date is December 21, 1999, appearing elsewhere in this
Registration Statement also included an audit of the financial statement
schedule listed in Item 16(b) of this Registration Statement.
In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 5, 1999, except as to the information presented in
Note 13 for which the date is December 21, 1999
F-16
<PAGE>
EST Corporation Sales & Distribution Locations
[MAP OF EUROPE, AFRICA, ASIA, RUSSIA, JAPAN AND AUSTRALIA]
[EST LOCATIONS HIGHLIGHTED]
[MAP OF NORTH AMERICA AND SOUTH AMERICA]
[EST LOCATIONS HIGHLIGHTED]
United States & Canada
Corporate Headquarters
120 Royall St.
Canton, MA
Northern New England
Westford, MA
Southern New England
Canton, MA
Mid Atlantic
Ambler, PA
Southeast
Cummings, GA
Southwest
Dana Point, CA
Western
Fremont, CA
Mountain
Sandy, UT
Midwest
Poplar Grove, IL
Central
Dallas, TX
EST Corp. Canada
Vancouver, BC
Europe
EST Corp. Europe
Montigny-Le-Breionneux' France
EST Corp. UK
Hampshire, UK
EST Corp. Nordic AB
Vallingby, Sweden
EST Corp. Gmbii
Malsch, Germany
Pan Asia
Japan
EST KK
Tokyo, Japan
Taiwan
Netex Technology
Taipei, Taiwan R.O.C.
China
Micrek International
Taiwan, R.O.C.
Australia
Macro Dynamics Pry, Ltd.
Korea
Integrated Development Systems
Seoul, Korea
India
Embed Technologies, PLT LTD
Bangalore, India
[LOGO OF EST CORPORATION]
<PAGE>
- --------------------------------------------------------------------------------
Until March , 2000 all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
[ESTC LOGO]
Prudential Volpe Technology
a unit of Prudential Securities
Hambrecht & Quist
Needham & Company, Inc.
PrudentialSecurities.com
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee............................................ $ 16,394
NASD filing fee................................................. 6,710
Nasdaq National Market listing fee.............................. 95,000
Blue Sky fees and expenses...................................... 10,000
Transfer Agent and Registrar fees............................... 25,000
Accounting fees and expenses.................................... 375,000
Legal fees and expenses......................................... 300,000
Printing and mailing expenses................................... 125,000
Miscellaneous................................................... 46,896
==========
Total $1,000,000
==========
</TABLE>
Item 14. Indemnification of Directors And Officers.
Section 67 of Chapter 156B of the Massachusetts General Laws provides that a
corporation may indemnify its directors and officers to the extent specified in
or authorized by (1) the articles of organization; (2) a by-law adopted by the
stockholders; or (3) a vote adopted by the holders of a majority of the shares
of stock entitled to vote on the election of directors. In all instances, the
extent to which a corporation provides indemnification to its directors and
officers under Section 67 is optional. In its Restated Articles of Organization
(the "Articles of Organization"), the Registrant has elected to commit to
provide indemnification to its directors and officers in specified
circumstances. Generally, Article 6 of the Registrant's Articles of
Organization provides that the Registrant shall indemnify directors and
officers of the Registrant against liabilities and expenses arising out of
legal proceedings brought against them by reason of their status as directors
or officers or by reason of their agreeing to serve, at the request of the
Registrant, as a director or officer with another organization. Under this
provision, a director or officer of the Registrant shall be indemnified by the
Registrant for all costs and expenses (including attorneys' fees), judgments,
liabilities and amounts paid in settlement of such proceedings, even if he is
not successful on the merits, if he acted in good faith in the reasonable
belief that his action was in the best interests of the Registrant. The Board
of Directors may authorize advancing litigation expenses to a director or
officer at his request upon receipt of an undertaking by any such director or
officer to repay such expenses if it is ultimately determined that he is not
entitled to indemnification for such expenses.
Article 6 of the Registrant's Articles of Organization eliminates the
personal liability of the Registrant's directors to the Registrant or its
stockholders for monetary damages for breach of a director's fiduciary duty,
except to the extent Chapter 156B of the Massachusetts General Laws prohibits
the elimination or limitation of such liability.
Under Section 9 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act of 1933 (the "Securities Act").
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities.
Set forth below is information regarding shares of our common stock issued,
and options granted, by the Registrant within the past three years. Further
included is the consideration, if any, received by the Registrant for such
shares and options and information relating to the section of the Securities
Act, or rule of the Securities and Exchange Commission under which exemption
from registration was claimed.
Certain of the transactions described below involved directors, officers and
5% stockholders of the Registrant. See "Certain Transactions."
Certain Sales of Securities. Within the past three years, the Registrant has
issued the following securities that were not registered under the Securities
Act.
The Registrant's Board of Directors approved the 1997 Stock Option Plan and
1998 Stock Option Plan (the "Plans"). The Plans provided for the grant of
nonqualified stock options to employees. Options to purchase an aggregate of
202,000 shares of common stock were granted under the Plans. In addition, prior
to 1998, the Registrant issued an option to Nicolas Lossky to purchase 659,000
shares of common stock, which was exercisable only upon the occurrence of
certain events. In years prior to 1997, Registrant granted common stock rights
under its Mirror Stock Plan that entitled certain of its employees to receive
cash or shares of common stock upon the occurrence of certain events.
In June 1999, Registrant's Board of Directors approved the 1999 Stock Option
Plan. The 1999 Plan provides for the granting of incentive and nonqualified
stock options and stock bonus awards to officers, directors, employees and
consultants of EST. In December 1999 the Board of Directors amended and
restated the 1999 Plan to increase the maximum number of shares of common stock
of the Registrant that may be issued pursuant to the 1999 Plan from 2,000,000
to 4,000,000. As of December 17, 1999, Registrant granted 2,589,500 options at
a weighted average exercise price of $3.36 per share.
In June 1999, Registrant cancelled all outstanding stock options and common
stock rights granted pursuant to the Plans, as well as the common stock rights
granted to Nicolas Lossky under the Mirror Stock Plan. In exchange, Registrant
issued 2,783,000 shares of common stock to certain employees in lieu of any
options to purchase common stock under previously cancelled options and any
common stock rights under the Mirror Stock Plan. Additionally, EST has agreed
to pay the employees' tax liability resulting from the issuance of common
stock.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon exemptions from the registration provisions of
the Securities Act set forth in Sections 3(b) and 4(2) thereof relative to
sales by an issuer not involving any public offering or the rules and
regulations thereunder or, in the case of options to purchase common stock,
Rule 701 of the Securities Act. All of the foregoing securities are deemed
restricted securities for purposes of the Securities Act.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1* Form of Underwriting Agreement
3.1 Restated Articles of Organization
3.2 Amended and Restated By-Laws
4.1* First Amended and Restated Founding Shareholders' Agreement
4.2* First Amendment to First Amended and Restated Founding Shareholders'
Agreement
4.3 Specimen Certificate for shares of common stock, $0.10 par value, of
the Registrant
5.1* Opinion of Holland & Knight LLP with respect to the validity of the
securities being offered
10.1 1999 Stock Option Plan
10.2 Form of Option Agreement under 1999 Stock Option Plan
10.3 Amended and Restated 1999 Stock Option Plan
10.4 Form of Employment Agreement by and between Peter S. Dawson and the
Registrant
10.5 Form of Employment Agreement by and between James E. Watkins and the
Registrant
10.6 Employment Agreement by and between John T. W. Baggott and the
Registrant
10.7 First Amendment to Employment Agreement by and between John T. W.
Baggott and the Registrant
10.8 Employment Letter Agreement by and between Mark F. Lapham and the
Registrant
10.9 Lease dated October 1, 1999 between Boston Mutual Life Insurance and
the Registrant
10.10 Lease dated July 1, 1999 between Westford Plaza Trust and the
Registrant
10.11 Lease and Service Agreement dated July 8, 1998 between the Registrant
and ANI Dallas Inc.
10.12 Office Lease Agreement dated January 7, 1999 between Gwynedd Office
Park Associates, L.P. and the Registrant
10.13 Standard Industrial/Commercial Multi-Tenant Lease dated August 3,
1999 between the City of Dana Point and the Registrant
10.14 Business Lease Agreement dated August 30, 1999 between Pointe West,
Inc. and the Registrant
10.15 Agreement dated July 25, 1997 between Richmond House (Newbury)
Limited and the Registrant
10.16* Agreement between the Registrant and a counter-party relating to
lease of certain premises in Sweden
10.17 Lease Agreement between Kabushikikaisha Katori Shoten and the
Registrant relating to lease of certain premises in Japan
10.18 Lease Agreement dated September 17, 1999 between Samuel A. Lu,
Winston A. Lu and the Registrant
10.19* Standard Office Lease dated November 5, 1999 between Katherine
Amoukhteh and the Registrant
10.20* Agreement dated July 17, 1998 between the Registrant a counter-party
relating to lease of certain premises in France
10.21* Agreement dated January 3, 1999 between the Registrant and a counter-
party relating to lease of certain premises in Germany
10.22 Business Loan Agreement dated September 23, 1999 between BankBoston,
N.A. and the Registrant
10.23 Commercial Security Agreement dated September 23, 1999 between
BankBoston, N.A. and the Registrant
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.24 Form of Tax Indemnification Agreement between the Registrant and each
of its stockholders
10.25 Stock Pledge Agreement dated July 30, 1999 between John T. W. Baggott
and the Registrant
10.26 Secured Demand Promissory Note dated July 30, 1999 issued by John
T. W. Baggott in favor of the Registrant
10.27* Sourcebook Program Distribution Agreement dated July 19, 1999 between
Wind River Systems, Inc. and the Registrant
10.28 Confidential Disclosure Agreement dated May 9, 1999 between
International Business Machines, Inc., and the Registrant together
with Supplement relating thereto
10.29 PowerPC(TM) Confidential Disclosure Agreement dated June 25, 1998
between International Business Machines, Inc. and the Registrant,
together with Supplement relating thereto
10.30 Confidential Disclosure Agreement dated November 1, 1999 between
Hewlett-Packard and the Registrant
10.31 Agreement with Case Assembly dated May 11, 1999
10.32* Agreement for Licensing dated November 11, 1997 of IBM Software
between International Business Machines and the Registrant
10.33* Distributor Agreement with Toyo Corporation
10.34* Distributor Agreement dated September 18, 1998 between Microtek
International Inc. and the Registrant
10.35* Distributor Agreement dated April 1, 1998 between Microtask and the
Registrant
10.36* Distributor Agreement dated May 26, 1999 between New Level Telecom
and the Registrant
10.37* Distributor Agreement between DeSecam and the Registrant
10.38* Distributor Agreement dated October 10, 1997 between Diab Data, Inc.
and the Registrant
10.39* Nonexclusive Value Added Reseller Agreement between Microtec
Research, Inc. and the Registrant
10.40 Assignment and Assumption Agreement dated December 14, 1999 between
Achieve Software Corporation and the Registrant
10.41 Form of Employment Agreement by and between Nicolas Lossky and the
Registrant
10.42 Form of Employment Agreement by and between Daniel McGillivary and
the Registrant
11* Statement regarding computation of per share earnings
21* Subsidiaries of the Registrant
23.1* Consent of Holland & Knight LLP (included in Exhibit 5)
23.2 Consent of PricewaterhouseCoopers LLP, Independent Auditors
24 Powers of Attorney (included on page II-6)
27.1 Financial Data Schedule for the nine months ended September 30, 1999
27.2 Financial Data Schedule for the nine months ended September 30, 1998
27.3 Financial Data Schedule for the year ended December 31, 1998
27.4 Financial Data Schedule for the year ended December 31, 1997
27.5 Financial Data Schedule for the year ended December 31, 1996
</TABLE>
- --------
* To be filed by amendment
(b) Financial Statement Schedules:
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
II-4
<PAGE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions
contained in the Registrant's Restated Articles of Organization, the
Underwriting Agreement, the laws of the Commonwealth of Massachusetts, 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 that 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,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-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 Canton, Massachusetts on December
22, 1999.
EMBEDDED SUPPORT TOOLS CORPORATION
By /s/ Peter S. Dawson
-----------------------------------
Peter S. Dawson
President, Chief Executive Officer
and Chairman of the Board of
Directors
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Embedded Support Tools
Corporation, hereby severally constitute and appoint Peter S. Dawson, James E.
Watkins and Mark F. Lapham, and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement on
Form S-1 filed herewith and any and all pre-effective and post-effective
amendments to said Registration Statement, and any subsequent Registration
Statement for the same offering which may be filed under Rule 462(b), and
generally to do all such things in our names and on our behalf in our
capacities as officers and directors to enable Embedded Support Tools
Corporation to comply with the provisions of the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto or to any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Peter S. Dawson
- -------------------------------------
Peter S. Dawson President, Chief Executive December 22, 1999
Officer and Chairman of the
Board of Directors (Principal
Executive Officer)
/s/ Mark F. Lapham
- -------------------------------------
Mark F. Lapham Chief Financial Officer December 22, 1999
and Treasurer (Principal
Financial and Accounting
Officer)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ James E. Watkins
- --------------------------------------
James E. Watkins Chief Operating Officer, December 22, 1999
Senior Vice President of Sales
and Marketing and Director
/s/ John T. W. Baggott
- --------------------------------------
John T. W. Baggott Vice President and December 22, 1999
Director
/s/ Howard V. Neff
- --------------------------------------
Howard V. Neff Director December 22, 1999
/s/ P.J. Plauger, Ph.D
- --------------------------------------
P.J. Plauger, Ph.D Director December 22, 1999
/s/ John C. Edmunds
- --------------------------------------
John C. Edmunds Director December 22, 1999
</TABLE>
II-7
<PAGE>
Schedule II
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged to Balance at
beginning costs and end of
of year expenses Deductions year
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Year Ended December 31, 1996
Accounts receivable reserve......... $10 $ 2 $-- $12
Inventory obsolescence reserve...... $20 $ 3 $-- $23
Year Ended December 31, 1997
Accounts receivable reserve......... $12 $ 12 $-- $24
Inventory obsolescence reserve...... $23 $-- $ 1 $22
Year Ended December 31, 1998
Accounts receivable reserve......... $24 $ 66 $-- $90
Inventory obsolescence reserve...... $22 $ 22 $-- $44
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------- ----------- ----
<C> <S> <C>
1* Form of Underwriting Agreement...................................
3.1 Restated Articles of Organization................................
3.2 Amended and Restated By-Laws.....................................
4.1* First Amended and Restated Founding Shareholders' Agreement......
4.2* First Amendment to First Amended and Restated Founding
Shareholders' Agreement.........................................
4.3 Specimen Certificate for shares of common stock, $0.10 par value,
of the Registrant...............................................
5.1* Opinion of Holland & Knight LLP with respect to the validity of
the securities being offered....................................
10.1 1999 Stock Option Plan...........................................
10.2 Form of Agreement under 1999 Stock Option Plan...................
10.3 Amended and Restated 1999 Stock Option Plan......................
10.4 Form of Employment Agreement by and between Peter S. Dawson and
the Registrant..................................................
10.5 Form of Employment Agreement by and between James E. Watkins and
the Registrant..................................................
10.6 Employment Agreement by and between John T.W. Baggott and the
Registrant......................................................
10.7 First Amendment to Employment Agreement by and between John T.W.
Baggott and the Registrant......................................
10.8 Employment Letter Agreement by and between Mark F. Lapham and the
Registrant......................................................
10.9 Lease dated October 1, 1999 between Boston Mutual Insurance
Company and the Registrant......................................
10.10 Lease dated July 1, 1999 between the Registrant and Westford
Plaza Trust.....................................................
10.11 Lease and Service Agreement dated July 8, 1998 between the
Registrant and ANI Dallas, Inc. ................................
10.12 Office Lease Agreement dated January 7, 1999 between the
Registrant and Gwynedd Office Park Associates, L.P. ............
10.13 Standard Industrial/Commercial Multi-Tenant Lease dated August 3,
1999 between the Registrant and the City of Dana Point..........
10.14 Business Lease Agreement dated August 30, 1999 between Registrant
and Pointe West, Inc. ..........................................
10.15 Agreement dated July 25, 1997 between the Registrant and Richmond
House (Newbury) Limited ........................................
10.16* Agreement between the Registrant and a counter-party relating to
lease of certain premises in Sweden.............................
10.17 Lease Agreement between the Registrant and Kabushikikaisha Katori
Shoten relating to lease of certain premises in Japan...........
10.18 Lease Agreement dated September 17, 1999 between the Registrant
and Samuel A. Lu and Winston A. Lu..............................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------- ----------- ----
<C> <S> <C>
10.19* Standard Office Lease dated November 5, 1999 between the
Registrant and Katherine Amoukhteh............................
10.20* Agreement dated July 17, 1998 between the Registrant and a
counter-party relating to lease of certain premises in France.
10.21* Agreement dated January 3, 1999 between the Registrant and a
counter-party relating to lease of certain premises in
Germany.......................................................
10.22 Business Loan Agreement dated September 23, 1999 between the
Registrant and BankBoston, N.A. ..............................
10.23 Commercial Security Agreement dated September 23, 1999 between
the Registrant and BankBoston, N.A. ..........................
10.24 Form of Tax Indemnification Agreement between the Registrant
and each of its stockholders..................................
10.25 Stock Pledge Agreement dated July 30, 1999 between the
Registrant and John T.W. Baggott..............................
10.26 Secured Demand Promissory Note dated July 30, 1999 issued by
John T.W. Baggott in favor of the Registrant..................
10.27* Sourcebook Program Distribution Agreement dated July 19, 1999
between the Registrant and Wind River Systems, Inc. ..........
10.28 Confidential Disclosure Agreement dated May 9, 1999 between the
Registrant and International Business Machines, Inc., together
with Supplement relating thereto..............................
10.29 Power PC Confidential Disclosure Agreement dated June 25, 1998
between the Registrant and International Business Machines,
Inc., together with Supplement relating thereto...............
10.30 Confidential Disclosure Agreement dated November 1, 1999
between the Registrant and Hewlett-Packard....................
10.31 Agreement with Case Assembly dated May 11, 1999................
10.32* Agreement for Licensing of IBM Software between the Registrant
and International Business Machines dated November 11, 1997...
10.33* Distributor Agreement with Toyo Corporation dated ..........
10.34* Distributor Agreement dated September 18, 1998 between the
Registrant and Microtek International Inc. ...................
10.35* Distributor Agreement dated April 1, 1998 between the
Registrant and Microtask......................................
10.36* Distributor Agreement dated May 26, 1999 between the Registrant
and New Level Telecom.........................................
10.37* Distributor Agreement between the Registrant and DeSecam.......
10.38* Distributor Agreement dated October 10, 1997 between the
Registrant and Diab Data, Inc. ...............................
10.39* Nonexclusive Value Added Reseller Agreement between the
Registrant and Microtec Research, Inc. .......................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------- ----------- ----
<C> <S> <C>
10.40 Assignment and Assumption Agreement dated December 14, 1999
between the Registrant and Achieve Software Corporation.........
11* Statement regarding computation of per share earnings............
21* Subsidiaries of the Registrant...................................
23.1* Consent of Holland & Knight LLP (included in Exhibit 5)..........
23.2 Consent of PricewaterhouseCoopers LLP, Independent Auditors......
24 Powers of Attorney (included on page II-6).......................
27.1 Financial Data Schedule for the nine months ended September 30,
1999............................................................
27.2 Financial Data Schedule for the nine months ended September 30,
1998............................................................
27.3 Financial Data Schedule for the year ended December 31, 1998.....
27.4 Financial Data Schedule for the year ended December 31, 1997.....
27.5 Financial Data Schedule for the year ended December 31, 1996.....
</TABLE>
- --------
* To be filed by amendment
<TABLE>
<S> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 3.1
FEDERAL IDENTIFICATION
No. 04-3034207
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
----------------
I, Peter S. Dawson, President and Clerk
----------------------------------------------------------------------------
of Embedded Support Tools Corporation
----------------------------------------------------------------------------
(Exact name of corporation)
located at 120 ROYALL STREET, CANTON, MASSACHUSETTS 02021 do hereby certify that
the following Restatement of the Articles of Organization was duly adopted at a
meeting held on December 17, 1999, by vote of the directors/or:
_________ shares of COMMON out of 6,447,000 shares outstanding,
_________ ____________ _________
(type, class &
series, if any)
_________ shares of COMMON out of _________ shares outstanding, and
_________ ____________ _________
(type, class &
series, if any)
_________ shares of _______________ out of _________ shares outstanding,
(type, class &
series, if any)
being at least two-thirds of each type, class or series of stock outstanding and
entitled to vote thereon and of each type class or series of stock whose rights
are adversely affected thereby:
ARTICLE I
The name of the corporation is:
<PAGE>
Embedded Support Tools Corporation
ARTICLE II
The purpose of the corporation is to engage in the following
business activities:
C [ ] See Continuation Sheets 2A and 2B.
P [ ]
M [ ]
RA [ ]
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11
sheets of paper with a left hand margin of at least 1 inch.
Additions to more than one article may be made on a single sheet
so long as each article requiring each such addition is clearly
indicated.
CONTINUATION SHEET 2A
2. THE PURPOSES FOR WHICH THE CORPORATION IS FORMED ARE AS FOLLOWS:
To design, manufacture, sell, lease and license instruments of all kinds,
including electromechanical, electronic and mechanical gauges for the
measurement of pressure, temperature, acceleration, flow and level of liquids
and gases; to design, manufacture, sell, lease and license control systems
incorporating measuring devices, and control systems separate from measuring
devices, for the control of production processes and operations of all kinds; to
design, manufacture, sell, lease and license instrumentation for military use;
to design, manufacture, sell, lease and license instrumentation for use in
research laboratories, in industry, in educational institutions, for medical
purposes and for use elsewhere and for other purposes; and in general to design,
manufacture, sell, lease and license electro-mechanical, electronic and
mechanical devices of all kinds.
To buy and sell at wholesale and retail, or otherwise, to manufacture,
produce, adapt, repair, dispose of, export, import and in any other manner to
deal in goods, wares, merchandise, articles and things of manufacture or
otherwise of all materials, supplies and other articles and things necessary or
convenient for use in connection with any of said businesses or any other
business or any part thereof; and to manufacture, repair, purchase, sell, lease,
<PAGE>
dispose of and otherwise deal in machinery, tools, and appliances which are or
may be used in connection with the purchase, sale, production, adaption, repair,
disposition of, export, import or other dealings in said goods, wares,
merchandise, articles and things.
To purchase, lease or otherwise acquire as a going concern or otherwise
all or any part of the franchises, rights, property, assets, business, good will
or capital stock of any persons, firm, corporation, trust or association engaged
in whole or in part in any business in which this corporation is empowered to
engage, or in any other business; to pay for the same in whole or in part in
cash, stock, bonds, notes, securities or other evidence of indebtedness of this
corporation or in any other manner; to assume as part of the consideration or
otherwise any and all debts, contracts or liabilities, matured or unmatured,
fixed or contingent, of any such person, firm or corporation, trust or
association; and to operate, manage, develop and generally to carry on the whole
or any part of any such business under any name or names which it may select or
designate.
CONTINUATION SHEET 2B
To construct, lease, hire, purchase or otherwise acquire and hold or
maintain, and to rebuild, enlarge, improve, furnish, equip, alter, operate and
dispose of warehouses, factories, offices and other buildings, real estate,
structures or parts thereof, and appliances for the preparation, manufacture,
purchase, sale and distribution of goods, wares, merchandise, things, and
articles of all kinds.
To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage, or otherwise dispose of franchises, letters patent of the United
States or of any foreign country, patent rights, licenses and privileges,
inventions, improvements and processes, systems, copyrights, trade-marks and
trade names, relating to, or useful in connection with, any business of this
corporation.
To buy or otherwise acquire, to sell, assign, pledge, or otherwise
dispose of and deal in stocks, bonds, securities, notes and other obligations of
any person, firm or corporation, including this corporation, organized for or
engaged in similar or cognate purposes; also stocks, bonds, securities, notes,
and other obligations of any person, firm, or corporation, including this
corporation, which it may be found or deemed necessary, valuable, or convenient
for this corporation to acquire and deal in, in pursuance or furtherance of or
in connection with the businesses herein specified, or any other business.
To borrow money and contract indebtedness for all proper corporate
purposes, to issue bonds, notes, and other evidences of indebtedness, to secure
the same by pledge, mortgage, or lien on all or any part of the property of the
corporation, tangible or intangible; and to assume or guarantee or secure in
like manner or otherwise, the leases, contracts, or other obligations, fixed or
contingent, or the payment of any dividends on any stock or shares or of the
<PAGE>
principal or interest on any bonds, notes, or other evidences of indebtedness of
any person, firm, corporation, trust, or association in which this corporation
has a financial interest.
To enter into, make, and perform contracts of every name, nature, and
kind with any person, firm, association, or corporation which may be deemed
valuable, expedient, or convenient for this corporation in pursuance of or in
furtherance of or in connection with any of the objects of incorporation of this
corporation or in connection with any of the businesses or purposes herein
specified.
The enumeration of specific powers herein shall not be construed as
limiting or restricting in any way the general powers herein set forth.
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
----------------- --------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ---- ---------------- ---- ---------------- ---------
<S> <C> <C> <C> <C>
Common Common 45,000,000 $0.10
Preferred Preferred 5,000,000 $0.10
</TABLE>
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special and
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
See Continuation Sheets 4A, 4B and 4C
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
None
<PAGE>
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See Continuation Sheets 6A, 6B, 6C, 6D, 6E, 6F and 6G
**If there are no provisions state "None".
Note: the preceding six (6) articles are considered to be permanent and may
ONLY be changed by filing appropriate Articles of Amendment.
CONTINUATION SHEET 4A
The total number of shares of all classes of stock which the
corporation shall have authority to issue is 50,000,000 shares, consisting of
(i) 45,000,000 shares of Common Stock, $0.10 par value per share ("Common
Stock"), and (ii) 5,000,000 shares of Preferred Stock, $0.10 par value per share
("Preferred Stock").
CONTINUATION SHEET 4B
The following is a statement of the designation and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the corporation.
A. COMMON STOCK.
1. GENERAL. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. VOTING. The holders of the Common Stock are entitled to one vote for
<PAGE>
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
3. DIVIDENDS. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. LIQUIDATION. Upon the dissolution or liquidation of the corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series, each of
such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
CONTINUATION SHEET 4C
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, conversion rights, redemption privileges
and liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by Chapter 156B
of the Massachusetts General Laws. Without limiting the generality of the
foregoing, the resolutions providing for issuance of any series of Preferred
Stock may provide that such series shall be superior or rank equally or be
junior to the Preferred Stock of any other series to the extent permitted by
law. No vote of the holders of the Preferred Stock or Common Stock shall be a
prerequisite to the issuance of any shares of any series of the Preferred Stock
authorized by and complying with the conditions of the Articles of Organization,
the right to have such vote being expressly waived by all present and future
holders of the capital stock of the corporation.
<PAGE>
CONTINUATION SHEET 6A
6A. LIMITATION OF DIRECTOR LIABILITY
Except to the extent that Chapter 156B of the Massachusetts General
Laws prohibits the elimination or limitation of liability of directors for
breaches of fiduciary duty, no director of the corporation shall be personally
liable to the corporation or its stockholders for monetary damages for any
breach of fiduciary duty as a director, notwithstanding any provision of law
imposing such liability. No amendment to or repeal of this provision shall apply
to or have any effect on the liability or alleged liability of any director of
the corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
6B. INDEMNIFICATION
1. ACTIONS, SUITS AND PROCEEDINGS. The corporation shall indemnify each
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was, or has agreed to become, a director or officer of the corporation, or is or
was serving, or has agreed to serve, at the request of the corporation, as a
director or officer of, or in a similar capacity with, another organization or
in any capacity with respect to any employee benefit plan of the corporation
(all such persons being referred to hereafter as an "Indemnitee"), or by reason
of any action alleged to have been taken or omitted in such capacity, against
all expenses (including attorneys' fees), judgments and fines incurred by him or
on his behalf in connection with such action, suit or proceeding and any appeal
therefrom, unless the Indemnitee shall be finally adjudicated in such action,
suit or proceeding not to have acted in good faith in the reasonable belief that
his action was in the best interests of the corporation or, to the extent such
matter relates to service with respect to an employee benefit plan, in the best
interests of the participants or beneficiaries of such employee benefit plan.
Notwithstanding anything to the contrary in this Article, except as set forth in
Section 6 below, the corporation shall not indemnify an Indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
the Indemnitee unless the initiation thereof was approved by the Board of
Directors of the
<PAGE>
CONTINUATION SHEET 6B
corporation. Notwithstanding anything to the contrary in this Article, the
corporation shall not indemnify an Indemnitee to the extent such Indemnitee is
reimbursed from the proceeds of insurance, and in the event the corporation
makes any indemnification payments to an Indemnitee and the Indemnitee is
subsequently reimbursed from the proceeds of insurance, such Indemnitee shall
promptly refund such indemnification payments to the corporation to the extent
of such insurance reimbursement.
2. SETTLEMENTS AND COMPROMISE. The right to indemnification conferred
in this Article shall include the right to be paid by the corporation for
amounts paid in settlement or compromise of any such action, suit or proceeding
and any appeal therefrom, and all expenses (including attorneys' fees) incurred
in connection with such settlement or compromise, pursuant to a consent decree
or otherwise, unless and to the extent it is determined pursuant to Section 5
below that the Indemnitee did not act in good faith in the reasonable belief
that his action was in the best interests of the corporation or, to the extent
such matter relates to service with respect to an employee benefit plan, in the
best interests of the participants or beneficiaries of such employee benefit
plan.
3. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the corporation is so
notified, the corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
corporation to the Indemnitee of its election so to assume such defense, the
corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 3. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
CONTINUATION SHEET 6C
between the corporation and the Indemnitee in the conduct of the defense of such
<PAGE>
action or (iii) the corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the corporation, except
as otherwise expressly provided by this Article. The corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
4. ADVANCE OF EXPENSES. Subject to the provisions of Section 5 below,
in the event that the corporation does not assume the defense pursuant to
Section 3 of this Article of any action, suit, proceeding or investigation of
which the corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the corporation in advance of the final disposition of such matter;
PROVIDED, HOWEVER, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the corporation as authorized in
this Article. Such undertaking shall be accepted without reference to the
financial ability of the Indemnitee to make such repayment.
5. PROCEDURE FOR INDEMNIFICATION. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2 or 4 of this Article, the
Indemnitee shall submit to the corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the corporation of the written request
of the Indemnitee, unless the corporation determines within such 60-day period
that the Indemnitee did not meet the applicable standard of conduct set forth in
Section 1 or 2, as the case may be. Such determination shall be made in each
instance by (a) a majority vote of a quorum of the directors of the corporation,
(b) a majority vote of a
CONTINUATION SHEET 6D
quorum of the outstanding shares of stock of all classes entitled to vote for
directors, voting as a single class, which quorum shall consist of stockholders
who are not at that time parties to the action, suit or proceeding in question,
(c) independent legal counsel (who may, to the extent permitted by law, be
regular legal counsel to the corporation), or (d) a court of competent
jurisdiction.
6. REMEDIES. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the corporation denies such request, in whole or in part, or if
<PAGE>
no disposition thereof is made within the 60-day period referred to above in
Section 5. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the corporation. Neither the failure of the corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
corporation pursuant to Section 5 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the corporation.
7. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of this
Article or of the relevant provisions of Chapter 156B of the Massachusetts
General Laws or any other applicable laws shall affect or diminish in any way
the rights of any Indemnitee to indemnification under the provisions hereof with
respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
8. OTHER RIGHTS. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or directors or otherwise, both
CONTINUATION SHEET 6E
as to action in his official capacity and as to action in any other capacity
while holding office for the corporation, and shall continue as to an Indemnitee
who has ceased to be a director or officer, and shall inure to the benefit of
the estate, heirs, executors and administrators of the Indemnitee. Nothing
contained in this Article shall be deemed to prohibit, and the corporation is
specifically authorized to enter into, agreement with officers and directors
providing indemnification rights and procedures different from those set forth
in this Article. In addition, the corporation may, to the extent authorized from
time to time by its Board of Directors, grant indemnification rights to other
employees or agents of the corporation or other persons serving the corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this Article.
9. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under any
provision of this Article to indemnification by the corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement or compromise actually and reasonably incurred by him or on
his behalf in connection with any action, suit, proceeding or investigation and
any appeal therefrom but not, however, for the total amount thereof, the
corporation shall nevertheless indemnify the Indemnitee for the portion of such
<PAGE>
expenses (including attorneys' fees), judgments, fines or amounts paid in
settlement or compromise to which the Indemnitee is entitled.
10. INSURANCE. The corporation may purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the corporation or another organization or employee benefit plan against any
expense, liability or loss incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under Chapter 156B
of the Massachusetts General Laws.
11. MERGER OR CONSOLIDATION. If the corporation is merged into or
consolidated with another corporation and the corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
CONTINUATION SHEET 6F
12. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement or
compromise in connection with any action, suit, proceeding or investigation,
whether civil, criminal or administrative, including an action by or in the
right of the corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
13. SUBSEQUENT LEGISLATION. If the Massachusetts General Laws are
amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the corporation shall indemnify such persons to
the fullest extent permitted by the Massachusetts General Laws, as so amended.
6C. OTHER PROVISIONS
(a) The directors may make, amend, or repeal the By-Laws in whole or in
part, except with respect to any provision of such By-Laws which by law or these
Articles of Organization or the By-Laws requires action by the stockholders.
(b) Meetings of the stockholders of the corporation may be held
anywhere in the United States.
(c) The corporation shall have the power to be a partner in any
business enterprise which this corporation would have the power to conduct by
itself.
<PAGE>
(d) The corporation, by vote of at least sixty-six and two-thirds
percent (66 2/3%) of the stock outstanding and entitled to vote thereon (or if
there are two or more classes of stock entitled to vote as separate classes,
then by vote of at least sixty-six and two-thirds percent (66 2/3%) of each such
class of stock outstanding), may (i) authorize any amendment to its Articles of
Organization pursuant to Section 71 of Chapter 156B of the Massachusetts General
Laws, as amended from time to time, (ii) authorize the sale, lease or exchange
of all or substantially all of its property and assets, including its goodwill,
pursuant to Section 75 of Chapter 156B of the Massachusetts
CONTINUATION SHEET 6G
General Laws, as amended from time to time, and (iii) approve an agreement of
merger or consolidation pursuant to Section 78 of Chapter 156B of the
Massachusetts General Laws, as amended from time to time; PROVIDED, however,
that if any such (i) amendment to its Articles of Organization, (ii) sale,
lease, or exchange or (iii) merger or consolidation (each as more fully
described above) has been approved by a majority of the Board of Directors of
the corporation, then the corporation may authorize or approve such action by
vote of a majority of the stock outstanding and entitled to vote thereon (or if
there are two or more classes of stock entitled to vote as separate classes,
then by vote of a majority of each such class outstanding).
(e) Chapter 110D and 110F of the Massachusetts General Laws, as they may be
amended from time to time, shall not apply to the corporation.
ARTICLE VII
The effective date of the restated Articles of Organization of the corporation
shall be the date approved and filed by the Secretary of the Commonwealth. If a
later effective date is desired, specify such date which shall not be more
than thirty days after the date of filing.
ARTICLE VIII
The information contained in Article VIII is not a permanent part of the
Articles of Organization.
<PAGE>
a. The street address (post office box are not acceptable) of the principle
office of the corporation in Massachusetts is:
120 Royall Street, Canton, MA 02021
b. The name, residential address and post office address of each director and
officer of the corporation is as follows.
<TABLE>
<CAPTION>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
<S> <C> <C> <C>
President: Peter S. Dawson Embedded Support Tools Corporation
120 Royall Street
Canton, MA 02021
Treasurer: Mark F. Lapham Embedded Support Tools Corporation
120 Royall Street
Canton, MA 02021
Clerk Peter S. Dawson Embedded Support Tools Corporation
120 Royall Street
Canton, MA 02021
Asst. Clerk: Mark F. Lapham Embedded Support Tools Corporation
120 Royall Street
Canton, MA 02021
Asst. Clerk James Pollock Holland & Knight
One Beacon Street
Boston, MA 02108
Directors: Peter S. Dawson Embedded Support Tools Corporation
120 Royall Street
Canton, MA 02021
John T.W. Baggott Embedded Support Tools Corporation
120 Royall Street
Canton, MA 02021
James E. Watkins Embedded Support Tools Corporation
120 Royall Street
Canton, MA 02021
Howard V. Neff Embedded Support Tools Corporation
120 Royall Street
Canton, MA 02021
P. J. Plauger Embedded Support Tools Corporation
120 Royall Street
Canton, MA 02021
John C. Edmunds Embedded Support Tools Corporation
</TABLE>
<PAGE>
120 Royall Street
Canton, MA 02021
c. The fiscal year (i.e., tax year) of the corporation shall end on the last
day of the month of:
December
d. The name and business address of the resident agent, if any, of the
corporation is:
**We further certify that the foregoing Restated Articles of Organization affect
no amendments to the Articles of Organization of the corporation as heretofore
amended, except amendments to the following articles. Briefly describe
amendments below:
The authorized capital stock has been increased from 7,500,000 shares common,
$.10 par value, to 45,000,000 shares common, $.10 par value, and 5,000,000
shares preferred, $.10 par value; Articles 2, 4, 5 and 6 have been completely
rewritten.
SIGNED UNDER THE PENALTIES OF PERJURY, this ________________________ day of
___________________, 1999.
_____________________________________________________, President
_____________________________________________________, Clerk
*Delete the inapplicable words
**If there are no amendments, state "None."
CONTINUATION SHEET 8
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
_____________________________________________
I hereby approve the within Restated Articles
of Organization and, the filing fee in the
amount of $_______ having been paid, said
articles are deemed to have been filed with me
this ______ day of _____________, 19__.
Effective date:_______________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
________________________________________
________________________________________
________________________________________
Telephone:
- ----------------------------------------
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
EMBEDDED SUPPORT TOOL CORPORATION
ARTICLE I
NAME, LOCATION, CORPORATE SEAL, AND FISCAL YEAR
Section 1. NAME. The name of the corporation is Embedded Support Tools
Corporation.
Section 2. LOCATION. The principal office of the corporation in
Massachusetts shall be located at the place set forth on the form of the
Articles of Organization or on a certificate filed with the Secretary of State.
The Board of Directors may change the location of the principal office in
Massachusetts and establish such other offices as it deems appropriate.
Section 3. CORPORATE SEAL. The Board of Directors may adopt and alter the
form of seal of the corporation.
Section 4. FISCAL YEAR. Except as otherwise determined from time to time
by the Board of Directors, the fiscal year of the corporation shall in each year
end on December 31.
ARTICLE II
STOCKHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of stockholders shall be
held during the second week of May on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. The
purposes for which the annual meeting is to be held, in addition to those
prescribed by law, by the Articles of Organization or by these By-Laws, may be
specified by the Board of Directors or the President. If no annual meeting is
held in accordance with the foregoing provisions, a special meeting may be held
in lieu of the annual meeting, and any action taken at that special meeting
shall have the same effect as if it had been taken at the annual meeting, and in
such case all references in these By-Laws to the annual meeting of stockholders
shall be deemed to refer to such special meeting.
<PAGE>
Section 2. BUSINESS AT ANNUAL MEETINGS. Except as otherwise provided by
law, at an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a) specified in the notice
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must satisfy the eligibility
and procedural requirements set forth in Rule 14a-8, Regulation 14A as
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). To be timely, a stockholder's notice must be delivered in conformity with
the requirements set forth in Rule 14a-8 of Regulation 14A promulgated under the
Exchange Act. A stockholder's notice to the Clerk shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. No later than the fourteenth day following the
date of receipt of a stockholder notice pursuant to this Section 2, the Chairman
of the Board of Directors of the corporation shall, if the facts warrant,
determine and notify in writing the stockholder submitting such notice that such
notice was not made in accordance with the eligibility and/or other procedures
prescribed by the Exchange Act and these By-Laws. If no such notification is
mailed to such stockholder within such fourteen-day period, such stockholder
notice containing a matter of business shall be deemed to have been made in
accordance with the provisions of this Section 2, except that the corporation
need not provide notice of any deficiency of stockholders' notice if such
deficiency cannot be remedied, such as a failure by a stockholder to submit a
proposal by the corporation's properly determined deadline. Notwithstanding
anything in these By-Laws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
Section 2.
Section 3. SPECIAL MEETINGS. Special meetings of stockholders may be
called by the President or by the Board of Directors. In addition, upon written
application of one or more stockholders who are entitled to vote and who hold at
least the Required Percentage (as defined below) of the capital stock entitled
to vote at the meeting, special meetings shall be called by the Clerk, or in
case of the death, absence, incapacity or refusal of the Clerk, by any other
officer.
For purposes of this Section 3, the "Required Percentage" shall be (i) 10%
at any time at which the corporation shall not have a class of voting stock
registered
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<PAGE>
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
(ii) 40% at any time at which the corporation shall have a class of voting stock
registered under the Exchange Act.
Any request for a call of a special meeting of stockholders (a "Call") by
the holders of the Required Percentage of the capital stock entitled to vote at
the meeting (the "Voting Stock") shall be governed by and subject to the
following:
(a) Any stockholder of record seeking to solicit requests for a Call
pursuant to this Section 3 shall so notify the corporation in writing to the
Clerk of the corporation and such written notification shall set forth the
reason or reasons for the Call and the purpose of such special meeting.
(b) No solicitation of stockholder requests for a Call (a "Call
Solicitation") may be commenced (i) before the Call Request Record Date (as
defined in paragraph (c) of this Section 3) or (ii) during the period of 90 days
following the most recent meeting of the stockholders of the corporation.
(c) In order that the corporation may determine the stockholders
entitled to request a Call, the Board of Directors of the corporation shall fix
a record date (the "Call Request Record Date"). Any stockholder of record
seeking to solicit stockholder requests for a Call shall, with delivery to the
corporation of the written information specified in paragraph (a), request in
writing that the Board of Directors fix the Call Request Record Date. The Board
of Directors shall, within 10 days after the date on which such request is
received, adopt a resolution fixing the Call Request Record Date and such Call
Request Record Date shall be not more than 10 days after the date upon which
such resolution is adopted by the Board of Directors.
(d) All requests for a Call and revocations thereof shall be delivered
to the corporation no later than the 30th day (the "Delivery Date") after the
Call Request Record Date.
(e) Any stockholder may revoke a prior request for a Call or
opposition to a Call by an instrument in writing delivered prior to the Delivery
Date.
(f) Promptly after the Delivery Date, requests for a Call and
revocations thereof shall be counted and verified by an independent party
selected by the corporation.
(g) If, in response to any Call Solicitation, the holders of record of
the Required Percentage of the Voting Stock as of the Call Request Record Date
3
<PAGE>
submit valid and unrevoked requests for a Call no later than the Delivery Date,
the Board of Directors of the corporation shall fix a record date pursuant to
Section 6 of Article V hereof and a meeting date for the special meeting;
PROVIDED that the date to be fixed for such meeting shall be no earlier than 60
days or later than 90 days after the Delivery Date; and PROVIDED FURTHER that
the Board of Directors shall not be obligated to fix a meeting date or to hold
any meeting of stockholders within 60 days of the next scheduled meeting of the
stockholders of the corporation.
(h) In the absence of a quorum at any special meeting called pursuant
to a Call Solicitation, such special meeting may be postponed or adjourned from
time to time only by the officer of the corporation entitled to preside at such
meeting.
Section 4. TIME AND PLACE OF MEETINGS. All meetings of stockholders shall
be held at a suitable time at the principal office of the corporation or at such
other suitable place within Massachusetts or, to the extent permitted by the
Articles of Organization, elsewhere in the United States, as shall be selected
by the President or the Board of Directors in the case of an annual meeting and,
in the case of a special meeting, by the President, the Board of Directors or
the applying stockholders calling such meeting.
Section 5. NOTICE OF MEETINGS. A written notice of each meeting of
stockholders containing the place, date and hour, and the purposes for which it
is to be held, shall be given by the Clerk or, in the case of the death,
absence, incapacity, or refusal of the Clerk, by any other officer, at least
seven days before the date of the meeting, to each stockholder entitled to vote
at the meeting and to each stockholder who is otherwise entitled by law or by
the Articles of Organization or these By-Laws to such notice, by leaving such
notice with him or at his residence or usual place of business or by mailing it
postage prepaid and addressed to each stockholder at his address as it shall
appear in the stock and transfer records of the corporation. Notice of a meeting
need not be given to a stockholder if a written waiver of notice, executed
before or after the meeting by such stockholder or his attorney thereunto
authorized, is filed with the records of the meeting.
Section 6. QUORUM. The holder or holders of a majority in interest of all
stock issued, outstanding, and entitled to vote at a meeting, present in person
or represented by proxy, shall constitute a quorum, but the majority of a lesser
interest so present may, from time to time, postpone to a new time or place any
meeting and the postponed meeting may be held without further notice.
Section 7. VOTING AND PROXIES. Each stockholder entitled to vote shall
have one vote, to be exercised in person or by proxy, for each share of stock
held by him, and a proportionate vote for a fractional share. When a quorum is
present at
4
<PAGE>
any meeting the vote of the holders of a majority in interest of the stock
represented which is entitled to vote and voting shall decide any matter
properly brought before the meeting, except in the case of elections by
stockholders, which shall be decided by a plurality of the votes cast by
stockholders entitled to vote at the election, and except when a larger vote is
required by law, the Articles of Organization or these By-Laws. No vote need be
taken by ballot unless so requested by any stockholder entitled to vote thereon.
Proxies must be in writing and filed with the clerk of the meeting before being
voted. The person named in a proxy may vote at any adjournment of the meeting
for which the proxy was given, but the proxy shall terminate after final
adjournment of the meeting. No proxy dated more than six months before the
meeting named in it shall be valid. A proxy purporting to be executed by or on
behalf of a stockholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
A proxy with respect to stock held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to the exercise of the
proxy the corporation receives a specific notice to the contrary from any one of
them. Inspectors of election, if any, shall be appointed by the Board of
Directors or, in the absence of such appointment, by the officer presiding at
any meeting of the stockholders.
Section 8. ACTION BY CONSENT. Any action required or permitted to be taken
by stockholders may be taken without a meeting if all stockholders entitled to
vote on the matter consent in writing to the action and such written consents
are filed with the records of the meetings of stockholders. Such consents shall
be treated for all purposes as a vote at a meeting.
ARTICLE III
THE BOARD OF DIRECTORS
Section 1. NUMBER, ELECTION AND QUALIFICATION. The number of directors
which shall constitute the whole Board of Directors shall be determined by vote
of the stockholders or the Board of Directors, but shall consist of not less
than three directors (except that whenever there shall be only two stockholders
the number of directors shall be not less than two and whenever there shall be
only one stockholder or prior to the issuance of any stock, there shall be at
least one director). The number of directors may be decreased at any time and
from time to time either by the stockholders or by a majority of the directors
then in office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. No director need be a
stockholder of the corporation.
5
<PAGE>
Notwithstanding the foregoing provisions, if the corporation is a
"registered corporation" within the meaning of Section 50A of the Massachusetts
Business Corporation Law, as amended, and has not elected, pursuant to paragraph
(b) of such Section 50A, to be exempt from the provisions of Paragraph (a) of
such Section 50A, then:
(i) In accordance with paragraph (d), clause (iv) of such
Section 50A, the number of directors shall be fixed only by vote of the Board of
Directors.
(ii) In accordance with paragraph (a) of such Section 50A, the
directors of the corporation shall be classified with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible; the term of office of those of the first class ("Class I
Directors") to continue until the first annual meeting following the date the
corporation becomes subject to such paragraph (a) and until their successors are
duly elected and qualified; the term of office of those of the second class
("Class II Directors") to continue until the second annual meeting following the
date the corporation becomes subject to such paragraph (a) and until their
successors are duly elected and qualified; and the term of office of those of
the third class ("Class III Directors") to continue until the third annual
meeting following the date the corporation becomes subject to such paragraph (a)
and until their successors are duly elected and qualified. At each annual
meeting of the corporation, the successors to the class of directors whose term
expires at that meeting shall be elected to hold office for a term continuing
until the annual meeting held in the third year following the year of their
election and until their successors are duly elected and qualified.
Section 2. ENLARGEMENT OF THE BOARD. The number of directors may be
increased at any time and from time to time by a majority of the directors then
in office. Notwithstanding the foregoing provisions, if the directors of the
corporation are classified with respect to the time for which they severally
hold office pursuant to paragraph (a) of Section 50A of the Massachusetts
Business Corporation Law, as it may be amended from time to time, the Board of
Directors may be enlarged only in accordance with the provisions of paragraph
(d) of such Section 50A.
Section 3. TENURE. Except as otherwise provided by law, these By-Laws or
the Articles of Organization, each director shall hold office until the next
annual meeting of stockholders and until his successor is elected and qualified,
or until his earlier death, resignation or removal.
Section 4. VACANCIES. Unless and until filled by the stockholders, any
vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement of the Board, may be filled by vote of a majority
of the
6
<PAGE>
directors present at the meeting of directors at which a quorum is present. Each
such successor shall hold office for the unexpired term of his predecessor and
until his successor is chosen and qualified or until his earlier death,
resignation or removal. Notwithstanding the foregoing provisions, if the
directors of the corporation are classified with respect to the time for which
they severally hold office pursuant to paragraph (a) of Section 50A of the
Massachusetts Business Corporation Law, as it may be amended from time to time,
any vacancy in the Board of Directors, however occurring, shall be filled solely
in accordance with the provisions of paragraph (d) of such Section 50A.
Section 5. RESIGNATION. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Clerk. Such resignation shall be effective upon receipt unless it is specified
to be effective at some other time or upon the happening of some other event.
Section 6. REMOVAL. A director may be removed from office with or without
cause by vote of the holders of a majority of the shares entitled to vote in the
election of directors. However, the directors elected by the holders of a
particular class or series of stock may be removed from office with or without
cause only by vote of the holders of a majority of the outstanding shares of
such class or series. In addition, a director may be removed from office for
cause by vote of a majority of the directors then in office. A director may be
removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him. Notwithstanding the foregoing
provision, if the directors of the corporation are classified with respect to
the time for which they severally hold office pursuant to paragraph (a) of
Section 50A of the Massachusetts Business Corporation Law, as it may be amended
from time to time, directors may only be removed for cause pursuant to paragraph
(c) of such Section 50A.
Section 7. NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the procedures set forth in this Section 7 shall be eligible for
election as directors. Nominations of persons for election to the Board of
Directors of the corporation may be made at a meeting of stockholders of the
corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 7. Any such
nomination by a stockholder shall be made pursuant to timely notice in writing
to the Clerk of the corporation. To be timely, a stockholder's notice shall be
delivered to the principal executive offices of the corporation not less than 30
days nor more than 90 days prior to the date of the meeting; PROVIDED, HOWEVER,
that in the event that less than 40 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, timely notice by the
stockholder must be received not later than the close of business on the 10th
day following the day on which such notice of the date of the meeting was mailed
or such public disclosure was made. Such stockholder's notice shall set forth
(a) as to each person whom the stockholder
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<PAGE>
proposes to nominate for election or re-election as a director, (i) the name,
age, business address and residence address of such person (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
the corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors or is otherwise required in
each case pursuant to Regulation 14A under the Exchange Act (including without
limitation such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (b) as to the
stockholder giving the notice, (i) the name and address, as they appear on the
corporation's books, of such stockholder and (ii) the class and number of shares
of the corporation which are beneficially owned by such stockholder. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Clerk of the
corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No later than the tenth day
following the date of receipt of a stockholder nomination submitted pursuant to
this Section 7, the Chairman of the Board of Directors of the corporation shall,
if the facts warrant, determine and notify in writing the stockholder making
such nomination that such nomination was not made in accordance with the time
limits and/or other procedures prescribed by these By-Laws. If no such
notification is mailed to such stockholder within such ten-day period, such
nomination shall be deemed to have been made in accordance with the provisions
of this Section 7.
Section 8. POWERS. The business of the corporation shall be managed by a
Board of Directors, who may exercise all the powers of the corporation except as
otherwise provided by law, by the Articles of Organization or by these By-Laws.
In the event of a vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, may exercise the powers of the full Board
until the vacancy is filled.
Section 9. CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD. The Board
of Directors may appoint a Chairman of the Board. If the Board of Directors
appoints a Chairman of the Board, he shall perform such duties and possess such
powers as are assigned to him by the Board of Directors. If the Board of
Directors appoints a Vice-Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be vested in him by the Board
of Directors.
Section 10. REGULAR MEETINGS. Regular meetings of the Directors may be held
without call or notice at such places, within or without Massachusetts, and at
such times as the Directors may from time to time determine, provided that any
Director who is absent when such determination is made shall be given notice of
the determination. A regular meeting of the Directors may be held without a call
or
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<PAGE>
notice immediately after and at the same place as the annual meeting of
stockholders.
Section 11. SPECIAL MEETINGS. Special meetings of the Directors may be held
at any time and place, within or without Massachusetts, designated in a call by
the Chairman of the Board, President, Treasurer, two or more Directors or by one
Director in the event that there is only a single Director in office.
Section 12. MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or members of
any committee designated by the Board of Directors may participate in a meeting
of the Board of Directors or such committee by means of a conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other at the same time and participation by such
means shall constitute presence in person at a meeting.
Section 13. NOTICE OF SPECIAL MEETINGS. Notice of any special meeting of
the Board of Directors shall be given to each director by the Clerk or by the
officer or one of the directors calling the meeting. Notice shall be duly given
to each director (i) by notice given to such director in person or by telephone
at least 24 hours in advance of the meeting, (ii) by sending a telegram or
telex, or by delivering written notice by hand, to his last known business or
written notice to his last known business or home address at least 72 hours in
advance of the meeting. Notice need not be given to any director if a written
waiver of notice, executed by him before or after the meeting, is filed with the
records of the meeting, or to any director who attends the meeting without
protesting prior to the meeting or at its commencement the lack of notice to
specify the purposes of the meeting. If notice is given in person or by
telephone, an affidavit of the Clerk, officer or director who gives such notice
that the notice has been duly given shall, in the absence of fraud, be
conclusive evidence that such notice was duly given.
Section 14. QUORUM. At any meeting of the Board of Directors, a majority of
the directors then in office shall constitute a quorum. Less than a quorum may
adjourn any meeting from time to time without further notice.
Section 15. ACTION AT MEETING. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, by
the Articles of Organization or by these By-Laws.
Section 16. ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of the Board of Directors may be taken without a meeting if all
of the directors consent to the action in writing and such consents are filed
with the records of the meetings of the Board of Directors. Such consents shall
be treated for all purposes as a vote at a meeting.
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<PAGE>
Section 17. COMMITTEES. The Board of Directors may, by vote of a majority
of the directors then in office, elect from their number an executive committee
or other committees and may by like vote delegate to committees so elected some
or all of their powers to the extent permitted by law. Except as the Board of
Directors may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the directors or in
such rules, its business shall be conducted as nearly as possible in the same
manner as is provided by these By-Laws for the directors. The Board of Directors
shall have the power at any time to fill vacancies in any such committee, to
changes its membership or to discharge the committee.
Section 18. COMPENSATION OF DIRECTORS. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
OFFICERS
Section 1. DESIGNATION AND QUALIFICATION. The officers of the corporation
shall consist of a President, a Treasurer, a Clerk, and such other officers
including one or more Vice Presidents, Assistant Treasurers and Assistant Clerks
as the Board of Directors may elect. No officer need be a stockholder or a
director. The Clerk shall be a resident of The Commonwealth of Massachusetts
unless the corporation has a resident agent appointed to accept service of
process. A person may hold more than one office at the same time provided that
the President and Clerk may not be the same person except when there is only one
stockholder. Any officer may be required by the Board of Directors to give bond
for the faithful performance of his duties to the corporation in such amount and
with such sureties as the Board of Directors may determine.
Section 2. ELECTION AND TERM. The President, Treasurer and Clerk shall be
elected annually by the Board of Directors at the annual meeting of the Board of
Directors and shall hold office until the next annual meeting of the Board of
Directors and until their respective successors are chosen and qualified. All
other officers may be elected by the Board of Directors at any time and shall
hold office for such term as the Board of Directors determines.
Section 3. PRESIDENT. The President shall be the chief executive officer
of the corporation, except as the Board of Directors may otherwise provide, and
shall have general supervision and control of the business of the corporation
subject to the direction of the Board of Directors. The President shall also
have such other
10
<PAGE>
powers and duties as the Board of Directors may decide. It shall be his duty,
and he shall have the power, to see that all orders and resolutions of the
directors are carried into effect. Unless the Board of Directors provides
otherwise, the President or his designee shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors. Unless otherwise
directed by the Board of Directors, the President may on behalf of the
corporation vote or consent to any action with respect to or in connection with
any interest that the corporation may hold or have in any other corporation or
in any partnership, joint venture, association, trust, Proprietorship, business
entity or common undertaking whatsoever, and may appoint any other person or
persons to act as proxy or attorney-in-fact for the corporation, with or without
power of substitution. The Board of Directors may from time to time confer like
powers upon any other officer.
Section 4. VICE PRESIDENT. The Vice President or Vice Presidents, if any,
shall have such powers and perform such duties as may be assigned to them by the
Board of Directors or the President. In the absence of the President or in the
event of his inability to act, the Vice President, if any, or, if there is more
than one Vice President, the First Vice President, or, if no First Vice
President has been designed, the Vice President senior in office, shall have and
may exercise all the powers and duties of the President.
Section 5. TREASURER AND ASSISTANT TREASURERS. The Treasurer shall have,
subject to the direction of the Board of Directors, general charge of the
financial affairs of the corporation and shall keep full and accurate records
thereof, which shall always be open to the inspection of the President or of any
director. He shall render to the President or to the Board of Directors,
whenever either may require it, a statement of the accounts of his transactions
as Treasurer and of the financial condition of the corporation. The Treasurer
shall perform such duties and have such powers additional to the foregoing as
the directors may designate.
Any Assistant Treasurer shall have such powers and duties as the Board of
Directors may decide.
Section 6. CLERK AND ASSISTANT CLERKS. The Clerk shall record in books
kept for that purpose all votes, consents and the proceedings of all meeting of
the stockholders and of the Board of Directors. Record books of stockholders'
meetings shall be open at all reasonable times to the inspection of any
stockholder. The Clerk shall notify the stockholders and directors of all
meetings in accordance with the By-Laws.
In the absence of the Clerk from any meeting of the stockholders or from
any meeting of the directors, the Assistant Clerk, if one be elected, or, if
there be more than one, the one designated for the purpose by the directors, and
otherwise a
11
<PAGE>
temporary clerk designated by the person presiding at the meeting, shall perform
the duties of the Clerk.
Any Assistant Clerk shall have such other powers and duties as the Board of
Directors may decide.
Section 7. VACANCIES. A vacancy in any office may be filled by the Board
of Directors by the election of a successor to hold office for the unexpired
term of the officer whose place is vacant and until his successor is chosen and
qualified.
Section 8. REMOVAL. All officers may be removed from their respective
offices with or without cause by vote of a majority of the directors then in
office. An officer may be removed for cause only after a reasonable notice and
opportunity to be heard before the Board of Directors.
Section 9. RESIGNATION. Any officer may at any time resign his office by
delivering a written resignation to the Board of Directors, the President or the
Clerk. Such resignation, unless a later date is specified therein, shall take
effect upon receipt by the addressee or at the principal office of the
corporation, and acceptance thereof shall not be necessary to make it effective.
Section 10. SALARIES. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE V
CAPITAL STOCK
Section 1. CERTIFICATES OF STOCK. Each stockholder shall be entitled to a
certificate of the form approved by the Board of Directors stating the number,
class, and designation of series, if any, of the shares held by him. Such
certificate shall be signed by the President or a Vice President and by the
Treasurer or an Assistant Treasurer. Such signatures may be facsimiles if the
certificate is countersigned by a transfer agent, or by a registrar of
transfers, other than a director, officer or employee of the corporation. In
case any officer who has signed or whose facsimile signature has been placed on
such certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he was
such officer at the time of its issue.
Every certificate for shares of stock subject to any restriction on
transfer pursuant to the Articles of Organization, these By-Laws, or any
agreement to which the corporation is a party shall have the restriction noted
conspicuously on the
12
<PAGE>
certificate and shall also set forth on the face or back either in full text of
the restriction or a statement of the existence of such restriction and a
statement that the corporation will furnish a copy to the holder of such
certificate upon written request and without charge. If the corporation is
authorized to issue more than one class or series of stock, every certificate
issued shall set forth on its face or back either the full text of the
preferences, voting powers, qualifications and special and relative rights of
the shares of each class and series authorized to be issued or a statement of
the existence of such preferences, powers, qualification and rights, and a
statement that the corporation will furnish a copy thereof to the holder of such
certificate upon written request and without charge.
Section 2. TRANSFER. Shares of stock shall be transferred of record on the
books of the corporation only upon the surrender to the corporation or its
transfer agent of the certificate therefor properly endorsed for transfer (or
accompanied by a written assignment and power of attorney properly executed for
transfer; and only upon compliance with provisions, if any, respecting
restrictions on transfer contained in the Articles of Organization, these By-
Laws or any agreement to which the corporation is a party. The corporation may
require proof of the genuineness of the signature and the capacity of the party
presenting the certificate for transfer.
It shall be the duty of each stockholder to notify the corporation of his
post office address and of his taxpayer identification number.
Section 3. INTEREST NOT RECOGNIZED. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and shall not be bound to recognize any other claim to or interest in
such share or shares on the part of any other person except as may be otherwise
expressly provided by law.
Section 4. LOST, MUTILATED, OR DESTROYED CERTIFICATES. Subject to Section
8-405 of the Massachusetts Uniform Commercial Code, as amended from time to
time, the Board of Directors may determine the conditions upon which a new
certificate of stock may be issued in place of any certificate alleged to have
been lost, mutilated or destroyed. It may, in its discretion, require the owner
of a lost, mutilated or destroyed certificate, or his legal representative, to
give a bond, with or without surety, sufficient in its opinion to indemnify the
corporation against any loss, claim or expense which may arise by reason of the
issuance of a new certificate in place of such lost, mutilated or destroyed
stock certificate.
Section 5. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint a transfer agent or a registrar, or both, and require all stock
certificates to bear the signature or facsimile thereof of any such transfer
agent or
13
<PAGE>
registrar. Unless the Board of Directors shall appoint a transfer agent,
registrar or other officer or officers for the purpose, the Clerk shall be
charged with the duty of keeping, or causing to be kept, accurate records of all
stock outstanding, stock certificates issued, and stock transfers. Subject to
any other rules which may be adopted from time to time by the Board of
Directors, such records may be kept solely in the stock certificate books.
Section 6. SETTING RECORD DATE AND CLOSING TRANSFER RECORDS. The Board of
directors may fix in advance a time not more than sixty days before (i) the date
of any meeting of the stockholders or (ii) the date for the payment of any
dividend or the making of any distribution to stockholders or (iii) the last day
on which the consent or dissent of stockholders may be effectively expressed for
any purpose, as the record date for determining the stockholders having the
right to notice of, and to vote at such meeting or any adjournment thereof, or
the right to receive such dividend or distribution, or the right to give such
consent or dissent. If a record date is fixed by the Board of Directors, only
stockholders of record on such date shall have such rights notwithstanding any
transfer of stock on the records of the corporation after such date. Without
fixing such record ate, the Board of Directors may close the transfer records of
the corporation for all or any part of such sixty-day period.
If no record date is fixed and the transfer books are not closed, then the
record date for determining stockholders having the right to notice of or to
vote at a meeting of stockholders shall be at the close of business on the date
next preceding the day on which notice is given, and the record date for
determining stockholders for any other purpose shall be at the close of business
on the date on which the Board of Directors acts with respect thereto.
Section 7. ISSUE OF STOCK. Unless otherwise voted by the stockholders, the
whole or any party of any unissued balance of the authorized capital stock of
the corporation or the whole or any part of the capital stock of the corporation
held in its treasury may be issued or disposed of by vote of the Board of
Directors, in such manner, for such consideration and on such terms as the
directors may determine.
ARTICLE VI
INSPECTION OF RECORDS
The original, or attested copies of the Articles of Organization, By-Laws
and records of all meetings of the incorporators and stockholders, and the stock
and transfer records, which shall contain the names of all stockholders and the
record address and the amount of stock held by each, shall be kept in the
Commonwealth
14
<PAGE>
of Massachusetts at the principal office of the corporation, or at any office of
its transfer agent or of the Clerk or of its resident agent. Said copies and
records need not all be kept in the same office. They shall be available at all
reasonable times to the inspection of any stockholder for any proper purpose but
not so secure a list of stockholders for the purpose of selling said list or
copies thereof or of using the same for a purpose other than in the interest of
the applicant, as a stockholder, relative to the affairs of the corporation.
ARTICLE VII
CHECKS, NOTES, DRAFTS AND OTHER INSTRUMENTS
Checks, notes, drafts and other instruments for the payment of money drawn
or endorsed in the name of the corporation may be signed by any officer or
officers or person or persons authorized by the directors to sign the same. No
officer person shall sign any such instrument as aforesaid unless authorized by
the directors to do so.
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended by vote of the holders of at least sixty-six
and two-thirds percent (66 2/3%) of the shares of each class of the capital
stock at the time outstanding and entitled to vote at any annual or special
meeting of stockholders, if notice of the substance of the proposed amendment is
stated in the notice of such meeting. If authorized by the Articles of
Organization, the Board of Directors, by a majority of their number then in
office, may also make, amend or repeal these By-Laws, in whole or in part,
except with respect to (a) the provisions of these By-Laws governing (i) the
removal of directors and (ii) the amendment of these By-Laws and (b) any
provision of these By-Laws which by law, the Articles of Organization or these
By-Laws requires action by the stockholders.
Not later than the time of giving notice of the meeting of stockholders
next following the making, amending or repealing by the Board of Directors of
any By-Law, notice stating the substance of such change shall be given to all
stockholders entitled to vote on amending the By-Laws.
15
<PAGE>
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 1. TRANSACTIONS WITH INTERESTED PARTIES.
(a) A director who has a financial, family or other interest in a
contract or other transaction may be counted for purposes of establishing the
existence of a quorum at a meeting of the Board of Directors (or of a committee
of the Board of Directors) at which action with respect to the transaction is
taken and may vote to approve the transaction and any related matters.
(b) A contract or other transaction in which a director or officer
has a financial, family or other interest shall not be void or voidable for that
reason, if any one of the following is met:
(1) The material facts as to the director's or officer's
interest are disclosed or are known to the Board of Directors or
committee of the Board of Directors acting on the transaction, and the
Board of Directors or committee authorities, approves or ratifies the
transaction by the affirmative vote of a majority of the disinterested
directors (or, if applicable, the sole disinterested director) on the
Board of Directors or committee, as the case may be, even though the
disinterested directors be less than a quorum; or
(2) The material facts as to the director's or officer's
interest are disclosed or are known to the holders of the shares of
the corporation's capital stock then entitled to vote for directors
and such holders, voting such shares as a single class, by a majority
of the votes cast on the question, specifically authorize, approve or
ratify the transaction; or
(3) The transaction was fair to the corporation as of the time
it was entered into by the corporation. A failure to meet any of the
requirements in subparagraphs (1), (2) or (3) shall not create an
inference that the transaction is void or voidable for that reason.
Section 2. EVIDENCE OF AUTHORITY. A certificate by the Clerk or an
Assistant Clerk or a temporary Clerk as to any action taken by the stockholders,
the Board of Directors, any committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
16
<PAGE>
Section 3. ARTICLE OF ORGANIZATION. All references in these By-Laws to the
Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation, as amended and in effect from time to time.
Section 4. SEVERABILITY. Any determination that any provision of these By-
Laws is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
Section 5. PRONOUNS. All pronouns used in these By-Laws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
17
<PAGE>
Exhibit 4.3
DESCRIPTION: SPECIMEN CERTIFICATE REPRESENTING COMMON STOCK
Exhibit __
________________________________________________________________________________
[LOGO] EMBEDDED SUPPORT TOOLS CORPORATION
NUMBER SHARES
------------ -----------
EMBEDDED SUPPORT TOOLS CORPORATION
------------ -----------
COMMON STOCK
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
______________________________________________________________________
THIS CERTIFIES THAT
is the owner of
----------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, NO PAR VALUE OF
==================EMBEDDED SUPPORT TOOLS CORPORATION.================
transferable only the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are issued under
and subject to the laws of
<PAGE>
The Commonwealth of Massachusetts and to the Articles of Organization and By-
laws of the Corporation, all as amended from time to time. This Certificate is
not valid unless countersigned and registered by the Transfer Agent and
Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by
the facsimile signatures of its duly authorized
officers and a facsimile of its corporate seal to be hereunto affixed.
Dated:
/s/ Mark F. Lapham /s/ Peter Dawson
TREASURER [SEAL] PRESIDENT
COUNTERSIGNED AND REGISTERED:
BANKBOSTON, N.A.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
________________________________________________________________________________
EMBEDDED SUPPORT TOOLS CORPORATION
The Corporation has more than one class of stock authorized to be issued. The
Corporation will furnish without charge to each stockholder upon written
request, a copy of the full text of the preferences, voting powers,
qualifications and special and relative rights of the shares of each class of
stock (and any series thereof) authorized to be issued by the Corporation.
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ____ Guardian ____
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act _________________________
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, ___________________ hereby sell, assign and transfer unto
<PAGE>
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________
________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
____________________________________________________________________
____________________________________________________________________
______________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
___________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________
(Signature)______________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature Guaranteed: __________________________________________________________
ALL GUARANTEES MUST BE MADE BY A FINANCIAL INSTITUTION (SUCH AS A
BANK OR BROKER) WHICH IS A PARTICIPANT IN THE SECURITIES TRANSFER
AGENTS MEDALLION PROGRAM ("STAMP"), THE NEW YORK STOCK EXCHANGE,
INC. MEDALLION SIGNATURE PROGRAM ("MSP") OR THE STOCK EXCHANGES
MEDALLION PROGRAM ("SEMP") AND MUST NOT BE DATED. GUARANTEES BY A
NOTARY PUBLIC ARE NOT ACCEPTABLE.
<PAGE>
Exhibit 10.1
EMBEDDED SUPPORT TOOLS CORPORATION
1999 STOCK OPTION PLAN
1. Purpose. The purpose of this Embedded Support Tools Corporation 1999 Stock
Option Plan (the "Plan") is to further the interests of Embedded Support
Tools Corporation and its shareholders by providing incentives in the form
of grants of stock options to key employees and other persons who
contribute materially to the success and profitability of the Company.
2. Definitions. The following definitions shall apply to the Plan:
a. "Administrator" means the stock option committee appointed by the
Board for the purpose of administering the Plan. If the Board does not
appoint a stock option committee, "Administrator" means the Board.
b. "Board" means the board of directors of the Company
c. "Change In Control" occurs if (i) the Company becomes a party to any
merger, consolidation or corporate reorganization as a result of which
the Company is not the surviving corporation, (ii) any person or
entity acquires, directly or indirectly, more than 50 percent of the
outstanding shares of Common Stock or (iii) the Company sells all or
substantially all of its assets.
d. "Code" means the Internal Revenue Code of 1986, as amended.
e. "Common Stock" means the Common Stock, no par value per share, of the
Company, or such other class of shares or securities to which the Plan
may apply pursuant to Section 8 of the Plan.
f. "Company" means Embedded Support Tools Corporation, a Massachusetts
corporation.
g. "Date of Grant" of an Option means the later of the date on which the
Administrator completes the corporate action constituting an offer of
stock for sale to the Recipient or the date specified by the
Administrator.
h. "Disability" has the same meaning as that used in the Company's Long
Term Disability Plan for regular employees or any successor plan
thereto.
i. "Dispose Of" means pledge, hypothecate, give, assign, encumber, sell,
grant an option with respect to, or otherwise transfer, to any party
whether or not such party is a shareholder of the Company.
j. "Eligible Person" means any person who performs or has in the past
performed services for the Company, whether as a director, officer,
Employee, consultant or
<PAGE>
other independent contractor, and any person who performs services
relating to the Company as an employee or independent contractor of a
corporation or other entity that provides services for the Company.
k. "Employee" means any person employed on an hourly or salaried basis by
the Company.
l. "Fair Market Value" means the fair market value of the Common Stock.
If the Common Stock is not publicly traded on the date as of which
fair market value is being determined, the Administrator shall
determine the fair market value of the Shares, using such factors as
the Administrator considers relevant, such as the price at which
recent sales have been made, the book value of the Common Stock, and
the Company's current and projected earnings. If the Common Stock is
publicly traded on the date as of which fair market value is being
determined, the Fair Market Value is the closing sale price of the
Common Stock on the trading day next preceding such date as reported
on the registered national exchange providing the primary market in
the Common Stock, or if the Common Stock was not traded on such
market, the average of the closing bid prices as reported by the
Nasdaq Stock Market on that date.
m. "Incentive Stock Option" means a stock option, granted pursuant to
this Plan or any other Company plan, that satisfies the requirements
of Section 422 of the Code and that entitles the Recipient to purchase
Common Stock.
n. "Initial Public Offering" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and
declared effective under the Securities Act of 1933, as amended,
covering the offer and sale of the Common Stock.
o. "Nonqualified Stock Option" means a stock option, granted pursuant to
the Plan, that is not an Incentive Stock Option and that entitles the
Recipient to purchase Common Stock.
p. "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
q. "Option Agreement" means a written agreement, between the Company and
a Recipient, that sets out the terms and restrictions of an Option.
r. "Option Shareholder" means a Recipient who has acquired Shares upon
exercise of an Option.
s. "Option Shares" means Shares that a Recipient receives upon exercise
of an Option.
t. "Plan" means this Embedded Support Tools Corporation 1999 Stock Option
Plan, as amended from time to time.
-2-
<PAGE>
u. "Recipient" means an individual who receives an Option.
v. "Share" means a share of the Common Stock, as adjusted in accordance
with Section 8 of the Plan.
3. Administration. The Administrator shall administer the Plan. The
Administrator has the exclusive power to select the Recipients of Options
pursuant to the Plan, to establish the terms of the Options granted to each
Recipient, and to make all other determinations necessary or advisable. The
Administrator has the sole discretion to determine whether the performance
of an Eligible Person warrants an Option, and to determine the size and
type of the Option. The Administrator has full and exclusive power to
construe and interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, and to take all actions necessary or
advisable for the Plan's administration. The Administrator, in the exercise
of its powers, may correct any defect or supply any omission, or reconcile
any inconsistency in the Plan, or in any Agreement, in the manner and to
the extent it deems necessary or expedient to make the Plan fully
effective. In exercising this power, the Administrator may retain counsel
at the expense of the Company. The Administrator also has the power to
determine the duration and purposes of leaves of absence which may be
granted to a Recipient without constituting a termination of the
Recipient's employment for purposes of the Plan. Any of the Administrator's
determinations shall be final and binding on all persons. A member of the
Administrator shall not be liable for performing any act or making any
determination in good faith.
4. Shares Subject to Plan. Subject to the provisions of Section 8 of the Plan,
the maximum aggregate number of Shares that may be subject to Options is 1
million. If an unexercised Option expires or becomes unexercisable, the
unpurchased Shares subject to such Option shall be available for other
Options.
5. Eligibility. Any Eligible Person that the Administrator in its sole
discretion designates is eligible to receive an Option; provided, however,
that only an Employee may receive an Incentive Stock Option. The
Administrator's grant of an Option to a Recipient in any year does not
entitle the Recipient to an Option in any other year. Furthermore, the
Administrator may grant different Options to different Recipients. The
Administrator may consider such factors as it deems pertinent in selecting
Recipients and in determining the types and sizes of their Options.
Recipients may include persons who previously received stock, stock
options, stock appreciation rights, or other benefits under the Plan or
another plan of the Company, whether or not the previously granted benefits
have been fully exercised or vested. An Option shall not enlarge or
otherwise affect a Recipient's right, if any, to continue to serve the
Company in any capacity, and shall not restrict the right of the Company to
terminate at any time the Recipient's employment.
6. Options. The Administrator may grant Options to purchase Common Stock to
Recipients in such amounts as the Administrator determines in its sole
discretion. An Option may be in the form of an Incentive Stock Option or a
Nonqualified Stock Option. The Administrator may grant an Option alone or
in addition to another Option. Each Option shall satisfy the following
requirements:
-3-
<PAGE>
a. Written Agreement. Each Option granted to a Recipient shall be
evidenced by an Option Agreement. The terms of the Option Agreement
need not be identical for different Recipients. The Option Agreement
shall contain such provisions as the Administrator deems appropriate
and shall include a description of the substance of each of the
requirements in this Section 6.
b. Number of Shares. Each Option Agreement shall specify the number of
Shares that the Recipient may purchase upon exercise of the Option.
c. Exercise Price.
i. Incentive Stock Option. Except as provided in this Section 6, the
exercise price of each Share subject to an Incentive Stock Option
shall equal the exercise price designated by the Administrator,
but shall not be less than the Fair Market Value of the Share on
the Date of Grant.
ii. Nonqualified Stock Option. The exercise price of each Share
subject to a Nonqualified Stock Option shall equal the exercise
price designated by the Administrator.
d. Duration of Option.
i. Incentive Stock Option. Except as otherwise provided in this
Section 6, an Incentive Stock Option shall expire on the earlier
of the tenth anniversary of its Date of Grant or the date set by
the Administrator on the Date of Grant.
ii. Nonqualified Stock Option. Except as otherwise provided in this
Section 6, a Nonqualified Stock Option shall expire on the tenth
anniversary of its Date of Grant or, at such earlier or later
date set by the Administrator on the Date of Grant.
e. Vesting of Option. Each Option Agreement will specify the vesting
schedule applicable to the Option. The Administrator, in its sole
discretion, may accelerate the vesting of any Option at any time.
f. Death.
i. Incentive Stock Option. If a Recipient dies, an Incentive Stock
Option granted to the Recipient will expire on the one-year
anniversary of the Recipient's death, or if earlier, the date
specified in subsection 6.d. of the Plan, unless the
Administrator sets an earlier expiration date on the Date of
Grant.
ii. Nonqualified Stock Option. If a Recipient dies, a Nonqualified
Stock Option granted to the Recipient will expire on the one-year
anniversary of
-4-
<PAGE>
the Recipient's death, or if earlier, the date specified in
subsection 6.d. of the Plan, unless the Administrator sets an
earlier or later expiration date on the Date of Grant, or a later
expiration date subsequent to the Date of Grant but prior to the
one-year anniversary of the Recipient's death.
g. Disability.
i. Incentive Stock Option. If the Recipient terminates employment
with the Company because of his or her Disability, an Incentive
Stock Option granted to the Recipient will expire on the one-year
anniversary of the Recipient's last day of employment, or, if
earlier, the date specified in subsection 6.d. of the Plan.
ii. Nonqualified Stock Option. If the Recipient terminates employment
with the Company because of his or her Disability, a Nonqualified
Stock Option granted to the Recipient will expire on the one-year
anniversary of the Recipient's last day of employment, or, if
earlier, the date specified in subsection 6.d. of the Plan,
unless the Administrator sets an earlier or later expiration date
on the Date of Grant or a later expiration date subsequent to the
Date of Grant but prior to the one-year anniversary of the
Recipient's last day of employment.
h. Termination of Service. Subject to subsection 6.d. of the Plan, if the
Recipient's employment with the Company terminates for any reason
other than death or Disability, an Option granted to the Recipient
will expire 30 days following the last day of the Recipient's
employment with the Company, unless the Administrator sets an earlier
or later expiration date on the Date of Grant or a later expiration
date subsequent to the Date of Grant but prior to the 30th day either
(a) preceding the Recipient's last day of employment or (b) such date
at which the Company and the Recipient agree to any rights of the
Recipient upon his or her termination. The Administrator may not delay
the expiration of an Incentive Stock Option more than 90 days after
termination of the Recipient's employment. During any delay of the
expiration date, the Option will be exercisable only to the extent it
is exercisable on the date the Recipient's employment terminates,
subject to any adjustment under Section 8 of the Plan.
i. Cause. Notwithstanding any provisions set forth in the Plan, if the
Recipient (i) commits any act of malfeasance or wrongdoing affecting
the Company, (ii) breaches any covenant not to compete or employment
agreement with the Company, or (iii) willfully and continuously fails
to perform substantially his duties with the Company (other than any
failure due to the Recipient's death or Disability), any unexercised
portion of the Option shall expire immediately upon the earlier of the
occurrence of such event or the last day the Recipient is employed by
the Company. No act or failure to act shall be deemed willful unless
the Recipient acts or fails to act not in good faith and without
reasonable belief that his or her action or failure is in the best
interest of the Company.
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<PAGE>
j. Conditions Required for Exercise. An Option is exercisable only to the
extent it is vested according to the terms of the Option Agreement.
Furthermore, an Option is exercisable only if the issuance of Shares
upon exercise would comply with applicable securities laws. Each
Agreement shall specify any additional conditions required for the
exercise of the Option. The Administrator, in its sole discretion, may
accelerate the exercisability of any Option at any time.
k. Ten Percent Shareholders. An Incentive Stock Option granted to an
individual who, on the Date of Grant, owns stock possessing more than
10 percent of the total combined voting power of all classes of stock
of the Company, shall have an exercise price of 110 percent of Fair
Market Value on the Date of Grant and shall be exercisable only during
the five-year period immediately following the Date of Grant. For
purposes of calculating stock ownership of any person, the attribution
rules of Code Section 424(d) shall apply, and any stock that such
person may purchase under outstanding options shall not be considered.
l. Maximum Incentive Stock Option Grants. The aggregate Fair Market
Value, determined on the Date of Grant, of Shares with respect to
which any Incentive Stock Options under the Plan and all other plans
of the Company become exercisable by any individual for the first time
in any calendar year shall not exceed $100,000.
m. Method of Exercise. An Option shall be deemed exercised when the
person entitled to exercise the Option (i) delivers written notice to
the [President] of the Company (or his delegate, in his absence) of
the decision to exercise, (ii) concurrently tenders to the Company
full payment for the Shares to be purchased pursuant to the exercise,
and (iii) complies with such other reasonable requirements as the
Administrator establishes pursuant to Section 7 of the Plan. Payment
for Shares with respect to which an Option is exercised may be made
(i) in cash, (ii) by certified check, (iii) in the form of Common
Stock having a Fair Market Value equal to the exercise price, but only
to the extent that the Company will not incur a compensation charge
for accounting purposes, or (iv) by delivery of a notice instructing
the Company to deliver the Shares to a broker subject to the broker's
delivery of cash to the Company equal to the exercise price. No person
shall have the rights of a shareholder with respect to Shares subject
to an Option until a certificate or certificates for the Shares have
been delivered to him or her. A partial exercise of an Option shall
not affect the holder's right to exercise the remainder of the Option
from time to time in accordance with the Plan.
n. Loan from Company to Exercise Option. The Administrator may, in its
discretion and subject to the requirements of applicable law,
recommend to the Company that it lend the Recipient the funds needed
by the Recipient to exercise an Option. The Recipient shall apply to
the Company for the loan, completing the forms and providing the
information required by the Company. The loan shall be secured by such
collateral as the Company may require, subject to its underwriting
requirements and the requirements of applicable law. The Recipient
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<PAGE>
shall execute a full recourse promissory note and any other documents
deemed necessary by the Company.
o. Designation of Beneficiary. Each Recipient may file with the Company a
written designation of a beneficiary to receive the Recipient's
Options in the event of the Recipient's death prior to full exercise
of such Options. If the Recipient does not designate a beneficiary, or
if the designated beneficiary does not survive the Recipient, the
Recipient's estate shall be his beneficiary. Recipients may, by
written notice to the Company, change a beneficiary designation.
p. Nontransferability of Option. An Option granted under the Plan is not
transferable except by will or the laws of descent and distribution.
During the lifetime of the Recipient, all rights of the Option are
exercisable only by the Recipient.
q. Company's Right of First Refusal Regarding Option Shares. An Option
Shareholder who desires to Dispose Of any Option Shares acquired upon
exercise of an Option shall first offer the Option Shares to the
Company. The Option Shareholder shall provide notice signed by the
Option Shareholder to the Company indicating the Option Shareholder's
desire to Dispose Of Option Shares. The notice shall also specify the
number of Option Shares that the Option Shareholder intends to Dispose
Of. The Company shall have the irrevocable and exclusive first option,
but not the obligation, to purchase all or a portion of the Option
Shares, provided the Company provides notice of its election to
purchase the Option Shares within 60 days after the Company receives
the Option Shareholder's notice. The purchase price to be paid by the
Company for the Option Shares being offered by the Option Shareholder
shall be the Fair Market Value of the Option Shares on the date of the
Option Shareholder's notice, and payment shall be made in full in cash
at closing. If an Initial Public Offering occurs, the provisions of
this subsection 6.q. shall cease to be effective.
r. Company Right to Repurchase Option Shares. The Company shall have the
right to repurchase any Option Shares purchased by a Recipient
following such Recipient's termination of service or affiliation with
the Company for any reason. The price for repurchasing the Option
Shares shall be the Fair Market Value of the Option Shares on the date
the Company exercises its repurchase right. If the Company fails to
exercise such repurchase right within 60 days following the date of
such Recipient's termination of service or affiliation, the Company
shall be deemed to have waived such right. If an Initial Public
Offering occurs, the provisions of this subsection 6.r. shall cease to
be effective.
s. Restrictions on Exercise Relating to S-Election. The Company has made
a valid election to be treated as a Subchapter S corporation under the
Code. If such S-election is valid at the time a Recipient elects to
exercise his or her Option, the Administrator shall be authorized to
take reasonable steps to preserve the Company's S-election. The
Recipient agrees to indemnify and hold the Company
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and its other stockholders harmless from and against any and all
damages, costs, liabilities and expenses arising out of or in
connection with any breach of such representations and warranties or
violation of the Company's S-election caused by such Recipient's
exercise of his or her Option. Each Recipient recognizes and agrees
that the Company makes no representation or warranty whatsoever as to
the current status of the Company's subchapter S-election under the
Code, and the Company or any of its stockholders who own voting stock
of the Company may terminate or otherwise cause the Company to fail to
qualify as a subchapter S corporation, and each Recipient assumes all
investment, tax and all other economic risks and liabilities
associated with the Company's failure to qualify as an S-corporation,
including without limitation, any and all income tax and other
liability related thereto. The Recipient further acknowledges that if
he or she exercises his or her Option and if the Company at the time
has a valid S-election in effect, the Recipient may have certain tax
liabilities arising by virtue of his or her owning stock in a S-
corporation. The Recipient understands and acknowledges that the
Company shall be under no obligation to make distributions or other
payments to the Recipient in order to pay such tax obligations.
7. Taxes; Compliance with Law; Approval of Regulatory Bodies; Legends. The
Company shall have the right to withhold from payments otherwise due and
owing to the Recipient or his beneficiary or to require the Recipient or
his beneficiary to remit to the Company in cash upon demand an amount
sufficient to satisfy any federal (including FICA and FUTA amounts), state,
and/or local withholding tax requirements at the time the Recipient or his
beneficiary recognizes income for federal, state, and/or local tax purposes
with respect to any Option.
The Administrator may grant Options and the Company may deliver Shares
under the Plan only in compliance with all applicable federal and state
laws and regulations and the rules of all stock exchanges on which the
Common Stock is listed at any time. An Option is exercisable only if either
(i) a registration statement pertaining to the Shares to be issued upon
exercise of the Option has been filed with and declared effective by the
Securities and Exchange Commission and remains effective on the date of
exercise, or (ii) an exemption from the registration requirements of
applicable securities laws is available. The Plan does not require the
Company, however, to file such a registration statement or to assure the
availability of such exemptions. Any certificate issued to evidence Shares
issued under the Plan may bear such legends and statements, and shall be
subject to such transfer restrictions, as the Administrator deems advisable
to assure compliance with federal and state laws and regulations and with
the requirements of this Section 7. No Option may be exercised, and Shares
may not be issued under the Plan, until the Company has obtained the
consent or approval of every regulatory body, federal or state, having
jurisdiction over such matters as the Administrator deems advisable.
Each person who acquires the right to exercise an Option or to ownership of
Shares by bequest or inheritance may be required by the Administrator to
furnish reasonable evidence of ownership of the Option as a condition to
his exercise of the Option or receipt of Shares.
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<PAGE>
In addition, the Administrator may require such consents and releases of
taxing authorities as the Administrator deems advisable.
With respect to persons subject to Section 16 of the Securities Exchange
Act of 1934 ("1934 Act"), transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 under the 1934 Act, as
such Rule may be amended from time to time, or its successor under the 1934
Act. To the extent any provision of the Plan or action by the Administrator
or the Company fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Administrator.
8. Adjustments. If a stock dividend, stock split, share combination, exchange
of shares, recapitalization, consolidation, spin-off, reorganization, or
liquidation of or by the Company shall occur, the Administrator shall
adjust the number and class of Shares for which Options are authorized to
be granted, the number and class of Shares then subject to Options
previously granted, and the price per Share payable upon exercise of each
Option to the extent the Administrator deems appropriate to reflect the
applicable transaction. If a Change In Control occurs, then the
Administrator may elect to (i) reach an agreement with the acquiring or
surviving entity that the acquiring or surviving entity will assume the
obligation of the Company under each Option, (ii) reach an agreement with
the acquiring or surviving entity that the acquiring or surviving entity
will convert each Option into an option of at least equal value, determined
as of the date of the transaction, as to stock of the acquiring or
surviving entity, (iii) terminate all Options outstanding under the Plan
effective upon the date of the applicable transaction and make, within 60
days after the date of the applicable transaction, a cash payment to each
Recipient equal to the difference between the exercise price of the
Recipient's Option and the Fair Market Value, as of the date of the
applicable transaction, of the Shares subject to the Option, or (iv)
accelerate the expiration of all Options to a date not earlier than the
fifteenth day after the date of the applicable transaction.
9. Liability of the Company. The Company shall not be liable to any person for
any tax consequences incurred by a Recipient or other person with respect
to an Option.
10. Amendment and Termination of Plan. The Board may alter, amend, or terminate
the Plan from time to time without approval of the shareholders of the
Company. The Board may, however, condition any amendment on the approval of
the shareholders of the Company if such approval is necessary or advisable
with respect to tax, securities or other laws applicable to the Company,
the Plan, Recipients or Eligible Persons. Any amendment, whether with or
without the approval of shareholders of the Company, that alters the terms
or provisions of an Option granted before the amendment (unless the
alteration is expressly permitted under the Plan) shall be effective only
with the consent of the Recipient of the Option or the holder currently
entitled to exercise the Option.
11. Expenses of Plan. The Company shall bear the expenses of administering the
Plan.
12. Duration of Plan. Options may be granted only during the 10 years
immediately following the original effective date of the Plan.
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13. Notices. All notices to the Company shall be in writing and shall be
delivered to the Secretary of the Company. All notices to a Recipient shall
be delivered personally or mailed to the Recipient at his address appearing
in the Company's personnel records. The address of any person may be
changed at any time by written notice given in accordance with this Section
13.
14. Applicable Law. The validity, interpretation, and enforcement of the Plan
are governed in all respects by the laws of the Commonwealth of
Massachusetts and the United States of America.
15. Effective Date. The effective date of the Plan shall be the earlier of (i)
the date on which the Board adopts the Plan or (ii) the date on which the
Shareholders approve the Plan.
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Exhibit 10.2
EMBEDDED SUPPORT TOOLS CORPORATION
FORM OF INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement (the "Agreement"), effective as
of _________ __, ____ (the "Date of Grant"), is made by and between Embedded
Support Tools Corporation, a Massachusetts corporation (the "Company"), and
__________________ (the "Recipient").
Background
----------
The Company has established the Embedded Support Tools Corporation
1999 Stock Option Plan (the "Plan"). The Company wishes to grant to the
Recipient an Incentive Stock Option pursuant to the terms of the Plan.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
1. Grant of Option. In consideration of service to the Company and for other
good and valuable consideration, the Company grants to the Recipient an
Incentive Stock Option to purchase _____ shares of the Company's common
stock in accordance with the terms and conditions of the Plan and this
Agreement (the "Option"). The Option is intended by the parties to be, and
shall be treated as, an "incentive stock option" as such term is defined
under Section 422 of the Internal Revenue Code of 1986, as amended. The
Option is granted in accordance with the terms and conditions of the Plan,
the terms of which are incorporated herein by reference, and the Agreement
shall in all respects be interpreted in accordance with the Plan. Any term
used in the Agreement that is not otherwise defined in the Agreement shall
have the meaning assigned to it by the Plan.
2. Option Price. The purchase price of the shares of stock covered by the
Option shall be $____ per share, which is the Fair Market Value on the Date
of Grant.
3. Adjustments in Option. If a stock dividend, stock split, share
combination, exchange of shares, recapitalization, consolidation, spin-off,
reorganization, or liquidation of or by the Company shall occur, the
Administrator shall adjust the number and class of Shares then subject the
Option, and the price per Share payable upon exercise of the Option to the
extent the Administrator deems appropriate to reflect the applicable
transaction. If a Change In Control occurs, then the Administrator may
elect to (i) reach an agreement with the acquiring or surviving entity that
the acquiring or surviving entity will assume the obligation of the Company
under the Option, (ii) reach an agreement with the acquiring or surviving
entity that the
<PAGE>
acquiring or surviving entity will convert the Option into an option of at
least equal value, determined as of the date of the transaction, as to
stock of the acquiring or surviving entity, (iii) terminate the Option
effective upon the date of the applicable transaction and make, within 60
days after the date of the applicable transaction, a cash payment to the
Recipient equal to the difference between the exercise price of the Option
and the Fair Market Value, as of the date of the applicable transaction, of
the Shares subject to the Option, or (iv) accelerate the expiration of the
Option to a date not earlier than the fifteenth day after the date of the
applicable transaction. Notwithstanding the foregoing, however, the
Administrator may, in its sole and absolute discretion, delay for up to
twelve (12) months following a Change in Control, the payment of the
proceeds otherwise payable to the Recipient by virtue of the acceleration
of the vesting of the Recipient's Option to ensure that the Recipient
fulfills his obligation to continue in the employ of the acquiring or
surviving corporation pursuant to Section 8 below. The Administrator shall
not be entitled to withhold any payments payable to Recipient in connection
with the portion of Recipient's Option that had vested prior to the Change
in Control.
4. Person Eligible to Exercise Option. During the lifetime of the Recipient,
only the Recipient may exercise the Option or any portion thereof. After
the death of the Recipient, any exercisable portion of the Option may,
prior to the time when the Option becomes unexercisable under the terms of
the Plan, be exercised by the Recipient's personal representative or by any
other person empowered to do so under the Recipient's will, trust or under
then applicable laws of descent and distribution.
5. Manner of Exercise. The Option, or any portion thereof, may be exercised
only in accordance with the terms of the Plan and solely by delivery to the
Secretary of the Company of all of the following items prior to the time
when the Option or such portion becomes unexercisable under the terms of
the Plan:
(a) Notice in writing signed by the Recipient or the other person then
entitled to exercise the Option or portion thereof, stating that the
Option or portion thereof is thereby exercised, such notice complying
with all applicable rules (if any) established by the Administrator;
(b) Full payment for the shares with respect to which the Option or
portion thereof is exercised;
(c) Full payment (in cash or by certified check) upon demand of an amount
sufficient to satisfy any federal (including FICA and FUTA amounts),
state, and/or local withholding tax requirements at the time the
Recipient or his beneficiary recognizes income for federal, state,
and/or
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local tax purposes as the result of the receipt of Shares
pursuant to the exercise of the Option or portion thereof;
(d) A bona fide written representation and agreement, in a form
satisfactory to the Administrator, signed by the Recipient or other
person then entitled to exercise the Option or portion thereof,
stating that the shares of stock are being acquired for his own
account, for investment and without any present intention of
distributing or reselling said shares or any of them except as may be
permitted under the Securities Act of 1933, as amended (the "Act"),
and then applicable rules and regulations thereunder, and that the
Recipient or other person then entitled to exercise such Option or
portion will indemnify the Company against and hold it free and
harmless from any loss, damage, expense or liability resulting to the
Company if any sale or distribution of the shares by such person is
contrary to the representation and agreement referred to above. The
Administrator may, in its absolute discretion, take whatever
additional actions it deems appropriate to ensure the observance and
performance of such representations and agreement and to effect
compliance with all federal and state securities laws or regulations.
Without limiting the generality of the foregoing, the Administrator
may require an opinion of counsel acceptable to it to the effect that
any subsequent transfer of shares acquired on an Option exercise does
not violate the Act and may issue stop-transfer orders covering such
shares. The written representations and agreement referred to in the
first sentence of this subsection (d), however, shall not be required
if the shares to be issued pursuant to such exercise have been
registered under the Act, and such registration is then effective in
respect of such shares; and
(e) In the event the Option or any portion thereof shall be exercised
pursuant to Section 4 of the Agreement by any person or persons other
than the Recipient, appropriate proof, satisfactory to the
Administrator, of the right of such person or persons to exercise the
Option.
6. Conditions to Issuance of Stock Certificates. The shares of stock
deliverable upon the exercise of the Option, or any portion thereof, may be
either previously authorized but unissued shares or issued shares which
have been reacquired by the Company. Such shares shall be fully paid and
nonassessable.
7. Rights of Shareholders. The Recipient shall not be, nor have any of the
rights or privileges of, a shareholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and
until
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certificates representing such shares shall have been issued by the Company
to the Recipient.
8. Vesting and Exercisability. The Recipient's interest in the Option shall
vest according to the schedule described in this Section 8 and shall be
exercisable as to not more than the vested portion of the shares subject to
the Option at any point in time. To the extent the Option is either
unexercisable or unexercised, the unexercised portion shall accumulate
until the Option both becomes exercisable and is exercised, subject to the
provisions of Section 9 of the Agreement. The Option shall become vested
according to the following schedule:
Date Cumulative Vested Portion
---- -------------------------
______________ _____
______________ _____
______________ _____
______________ _____
______________ _____
In the event of a Change in Control, the Option shall become 100% vested
upon the earlier of (a) 12 months following a Change in Control in the
event of the Recipient's continued employment on substantially the same
terms and conditions with substantially the same salary and benefits
without any requirement on the part of the Recipient to relocate and (b)
termination of the Recipient's employment by the acquiring or surviving
corporation other than for the reasons specified in Section 9(d) below. In
the event Recipient terminates his or her employment with the acquiring or
surviving corporation or is terminated for any of the reasons specified in
Section 9(d) below during the 12-month period following the Change in
Control, the Recipient shall forfeit his or her rights to any payment for
the portion of this Option that was accelerated as a result of the Change
in Control.
Furthermore, the Administrator, in its sole and absolute discretion, may
accelerate the vesting of the Option at any time.
9. Duration of Option. The Option shall expire on the earliest of September
13, 2009, or the dates described in (a) through (d) of this Section 9.
(a) In the case of the Recipient's death, the Option shall expire on the
one-year anniversary of the Recipient's death.
(b) If the Recipient's employment or affiliation with the Company
terminates as a result of his Disability, the Option will expire on
the one-year anniversary of the recipient's last day of employment or
affiliation.
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(c) If the Recipient ceases employment or affiliation with the Company for
any reason other than death or Disability, the Option shall expire 30
days following the last day of the Recipient's employment or
affiliation.
(d) Notwithstanding any provisions set forth above in this Section 9, if
the Recipient shall (i) commit any act of malfeasance or wrongdoing
affecting the Company or its affiliates, (ii) breach any covenant not
to compete or employment agreement with the Company or any affiliate,
or (iii) engage in conduct that would warrant the Recipient's
discharge for cause, any unexercised part of the Option shall expire
immediately upon the earlier of the occurrence of such event or the
last day the Recipient is employed by the Company.
10. Administration. The Administrator shall have the power to interpret this
Agreement and to adopt such rules for the administration, interpretation
and application of the Agreement as are consistent herewith and to
interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Administrator in good faith
shall be final and binding upon the Recipient, the Company and all other
interested persons. No member of the Administrator shall be personally
liable for any action, determination or interpretation made in good faith
with respect to this Agreement or any similar agreement to which the
Company is a party.
11. Options Not Transferable. Neither the Option nor any interest or right
therein or part thereof shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition is voluntary or involuntary or by operation
of law, by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy) and any attempted disposition
thereof shall be null and void and of no effect; provided, however, that
this Section 11 shall not prevent transfers by will or by the applicable
laws of descent and distribution.
12. Matters Relating to S-Election. The Recipient acknowledges and agrees that
as of the Date of Grant, the Company has made a valid election to be
treated as a Subchapter S corporation under the Code. Therefore, the
Recipient hereby agrees to the following additional terms and conditions.
(a) The Recipient hereby represents and warrants to the Company that he or
she is as of the Date of Grant, a qualified S-shareholder under the
code, and that the exercise of this Option by the Recipient will not
adversely affect the Company's S-election.
(b) The Recipient agrees to indemnify and hold the Company and each of its
stockholders harmless from and against any and all claims,
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liabilities, damages, fines, losses and other costs arising out of or
incurred in connection with the Recipient's exercise of this Option
should such exercise adversely affect the Company's S-election. The
Recipient further covenants and agrees not to take any action after he
or she has exercised this Option that could adversely affect the
Company's S-election, including without limitation, transferring or
attempting to transfer any Option Shares to a third party who may not
be a qualified S-shareholder.
13. Company's Right of First Refusal Regarding Option Shares. If the Recipient
desires to Dispose Of any Option Shares acquired upon exercise of the
Option, the Recipient shall first offer such Option Shares to the Company.
The Recipient shall provide notice to the Company indicating the
Recipient's desire to Dispose Of Option Shares. The notice shall also
specify the number of Option Shares that the Recipient intends to Dispose
Of. The Company shall have the irrevocable and exclusive first option, but
not the obligation, to purchase all or a portion of the Option Shares,
provided the Company provides notice of its election to purchase the Option
Shares within 60 days after the Company receives the Recipient's notice.
The purchase price to be paid by the Company for the Option Shares being
offered by the Recipient shall be the Fair Market Value of the Option
Shares on the date of the Recipient's notice, and payment shall be made in
full in cash at closing. If an Initial Public Offering occurs, the
provisions of this Section 13 shall cease to be effective.
14. Company Right to Repurchase Option Shares. The Company shall have the
right to repurchase any Option Shares purchased by a Recipient following
such Recipient's termination of service or affiliation with the Company for
any reason. The price for repurchasing the Option Shares shall be the Fair
Market Value of the Option Shares on the date the Company exercises its
repurchase right. If the Company fails to exercise such repurchase right
within 60 days following the date of such Recipient's termination of
service or affiliation, the Company shall be deemed to have waived such
right. If an Initial Public Offering occurs, the provisions of this Section
14 shall cease to be effective.
15. Shares to be Reserved. The Company shall at all times during the term of
the Option reserve and keep available such number of shares of stock as
will be sufficient to satisfy the requirements of this Agreement.
16. Notices. Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its President and any
notice to be given to the Recipient shall be addressed to him at the
address given beneath his signature below. By a notice given pursuant to
this Section 16, either party may hereafter designate a different address
for
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notices to be given to him. Any notice which is required to be given to
the Recipient shall, if the Recipient is then deceased, be given to the
Recipient's personal representative if such representative has previously
informed the Company of his status and address by written notice under this
Section 16. Any notice shall have been deemed duly given when enclosed in a
properly sealed envelope addressed as aforesaid, deposited (with postage
prepaid) in a United States postal receptacle.
17. Notification of Disposition. The Recipient shall give prompt notice to the
Company of any disposition or other transfer of any Shares acquired under
this Agreement if such disposition or transfer is made within two years
from the date of the grant of the Option or one year from the date of the
exercise of the Option. Such notice shall specify the date of the
disposition or other transfer and the amount realized by the Recipient in
such disposition or other transfer.
18. No Contract of Employment. Nothing contained in this Agreement is to be
construed to change any existing contract of employment for any term of
years, or to confer upon the Recipient any additional rights to continue to
be employed by the Company in Recipient's present capacity or in any other
capacity.
19. Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
The Company and the Recipient have executed this Agreement as of the date
first written above.
EMBEDDED SUPPORT TOOLS CORPORATION, a
Massachusetts corporation
By:________________________________
___________________________________
___________________________________
Signature of Recipient
____________________
____________________
____________________
____________________
____________________________________
Date
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DocInfo: BOS1 #1003649 v1
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<PAGE>
Exhibit 10.3
EMBEDDED SUPPORT TOOLS CORPORATION
AMENDED AND RESTATED
1999 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Amended and Restated 1999 Stock Option Plan (the
-------
"Plan") is to encourage employees of Embedded Support Tools Corporation (the
"Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations"), and other individuals who render
services to the Company or a Related Corporation, by providing opportunities to
purchase stock in the Company pursuant to options granted hereunder which
qualify as "incentive stock options" ("ISOs") under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code") and options which do not
qualify as ISOs ("Non-Qualified Options"). Both ISOs and Non-Qualified Options
are referred to hereafter individually as an "Option" and collectively as
"Options." As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation," respectively, as those terms are
defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
--------------------------
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by the
---------------------------------
Board of Directors of the Company (the "Board") or by a committee appointed by
the Board (the "Committee"). Hereinafter, all references in this Plan to the
"Committee" shall mean the Board if no Committee has been appointed. Subject to
ratification of the grant or authorization of each Option by the Board (if so
required by applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine to whom (from among the
class of employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and entities eligible
under paragraph 3 to receive Non-Qualified Options) Non-Qualified Options may be
granted; (ii) determine the time or times at which Options shall be granted;
(iii) determine the exercise price of shares subject to each Option, which price
shall not be less than the minimum price specified in paragraph 6; (iv)
determine whether each Option granted shall be an ISO or a Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options and the nature of such restrictions, if any; and (viii)
interpret the Plan and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that such Option is not treated as
an ISO. The interpretation and construction by the Committee of any provisions
of the Plan or of any Option granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem advisable. No member of
the Board or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Option granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members as its
-----------------
chairman, and shall hold meetings at such time and places as it may determine. A
majority of the Committee shall constitute a quorum and acts by a majority of
the members of the Committee at a meeting at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of the Committee
(if consistent with applicable state law), shall constitute the valid acts of
the Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
<PAGE>
C. GRANT OF OPTIONS TO BOARD MEMBERS. Options may be granted to members of
---------------------------------
the Board. All grants of Options to members of the Board shall in all respects
be made in accordance with the provisions of this Plan applicable to other
eligible persons. Members of the Board who either (i) are eligible to receive
grants of Options pursuant to the Plan or (ii) have been granted Options may
vote on any matters affecting the administration of the Plan or the grant of any
Options pursuant to the Plan, except that no such member shall act upon the
granting to himself or herself of Options, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board during which
action is taken with respect to the granting to such member of Options.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may take
------------------------------
such action as may be necessary to ensure that Options granted under the Plan
qualify as "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code and applicable regulations promulgated thereunder
("Performance-Based Compensation"). Such action may include, in the Board's
discretion, some or all of the following (i) if the Board determines that
Options granted under the Plan generally shall constitute Performance-Based
Compensation, the Plan shall be administered, to the extent required for such
Options to constitute Performance-Based Compensation, by a Committee consisting
solely of two or more "outside directors" (as defined in applicable regulations
promulgated under Section 162(m) of the Code), (ii) if any Non-Qualified Options
with an exercise price less than the fair market value per share of Common Stock
are granted under the Plan and the Board determines that such Options should
constitute Performance-Based Compensation, such Options shall be made
exercisable only upon the attainment of a pre-established, objective performance
goal established by the Committee, and such grant shall be submitted for, and
shall be contingent upon shareholder approval and (iii) Options granted under
the Plan may be subject to such other terms and conditions as are necessary for
compensation recognized in connection with the exercise or disposition of such
Option or the disposition of Common Stock acquired pursuant to such Option, to
constitute Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees of the
-----------------------------
Company or any Related Corporation. Non-Qualified Options may be granted to any
employee, officer or director (whether or not also an employee) or consultant of
the Company or any Related Corporation. The Committee may take into
consideration a optionee's individual circumstances in determining whether to
grant an ISO or a Non-Qualified Option. The granting of any Option to any
individual or entity shall neither entitle that individual or entity to, nor
disqualify such individual or entity from, participation in any other grant of
Options.
4. STOCK. The stock subject to Options shall be authorized but unissued shares
-----
of Common Stock of the Company, par value $0.10 per share (the "Common Stock"),
or shares of Common Stock reacquired by the Company in any manner. The aggregate
number of shares which may be issued pursuant to the Plan is 4,000,000, subject
to adjustment as provided in paragraph 13. If any Option granted under the Plan
shall expire or terminate for any reason without having been exercised in full
or shall cease for any reason to be exercisable in whole or in part or shall be
repurchased by the Company, the shares subject to such Option shall again be
available for grants of Options under the Plan. No employee of the Company or
any Related Corporation may be granted Options to acquire, in the aggregate,
more than 500,000 shares of Common Stock under the Plan during any fiscal year
of the Company. If any Option granted under the Plan shall expire or terminate
for any reason without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part or shall be repurchased by the
Company, the shares subject to such Option shall be included in the
determination of the aggregate number of shares of Common Stock deemed to have
been granted to such employee under the Plan.
2
<PAGE>
5. GRANTING OF OPTIONS. Options may be granted under the Plan at any time after
-------------------
June 1, 1999 and prior to June 15, 2009. The date of grant of an Option under
the Plan will be the date specified by the Committee at the time it grants the
Option; provided, however, that such date shall not be prior to the date on
which the Committee acts to approve the grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
-------------------------------------
A. PRICE FOR NON-QUALIFIED OPTIONS. Subject to Paragraph 2D (relating to
-------------------------------
compliance with Section 162(m) of the Code), the exercise price per share
specified in the agreement relating to each Non-Qualified Option granted under
the Plan shall in no event be less than the minimum legal consideration required
therefor under the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
B. PRICE FOR ISOs. The exercise price per share specified in the agreement
--------------
relating to each ISO granted under the Plan shall not be less than the fair
market value per share of Common Stock on the date of such grant. In the case of
an ISO to be granted to an employee owning stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date of grant.
For purposes of determining stock ownership under this paragraph, the rules of
Section 424(d) of the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee may be
-----------------------------------------
granted Options treated as ISOs only to the extent that, in the aggregate under
this Plan and all incentive stock option plans of the Company and any Related
Corporation, ISOs do not become exercisable for the first time by such employee
during any calendar year with respect to stock having a fair market value
(determined at the time the ISOs were granted) in excess of $100,000. The
Company intends to designate any Options granted in excess of such limitation as
Non-Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is granted
----------------------------------
under the Plan, the Company's Common Stock is publicly traded, "fair market
value" shall be determined as of the date of grant or, if the prices or quotes
discussed in this sentence are unavailable for such date, the last business day
for which such prices or quotes are available prior to the date of grant and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for over-
the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market. If the Common Stock is not publicly traded at the time an
Option is granted under the Plan, "fair market value" shall be deemed to be the
fair value of the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in paragraphs 9
---------------
and 10 or in the agreement relating to such Option, each Option shall expire on
the date specified by the Committee, but not more than (i) ten years from the
date of grant in the case of Options generally and (ii) five years from the date
of grant in the case of ISOs granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Corporation, as determined under paragraph
6(B). Subject to earlier termination as
3
<PAGE>
provided in paragraphs 9 and 10, the term of each ISO shall be the term set
forth in the original instrument granting such ISO, except with respect to any
part of such ISO that is converted into a Non-Qualified Option pursuant to
paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through 12,
------------------
each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the date of
-------
grant or shall become exercisable thereafter in such installments as the
Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable it
----------------------------
shall remain exercisable until expiration or termination of the Option, unless
otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at any
----------------
time or from time to time, in whole or in part, for up to the total number of
shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
-----------------------
accelerate the date on which any installment of any Option becomes exercisable;
provided that the Committee shall not, without the consent of an optionee,
accelerate the permitted exercise date of any installment of any Option granted
to any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would violate the annual
vesting limitation contained in Section 422(d) of the Code, as described in
paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
-------------------------
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability as
defined in paragraph 10, no further installments of his or her ISOs shall become
exercisable, and his or her ISOs shall terminate after the passage of three
months from the date of termination of his or her employment, but in no event
later than on their specified expiration dates, except to the extent that such
ISOs (or unexercised installments thereof) have been converted into Non-
Qualified Options pursuant to paragraph 16. For purposes of this paragraph 9,
employment shall be considered as continuing uninterrupted during any bona fide
leave of absence (such as those attributable to illness, military obligations or
governmental service) provided that the period of such leave does not exceed 90
days or, if longer, any period during which such optionee's right to
reemployment is guaranteed by statute or by contract. A bona fide leave of
absence with the written approval of the Committee shall not be considered an
interruption of employment under this paragraph 9, provided that such written
approval contractually obligates the Company or any Related Corporation to
continue the employment of the optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in the Plan shall be deemed to give any optionee the right to be retained in
employment or other service by the Company or any Related Corporation for any
period of time.
10. DEATH; DISABILITY.
-----------------
A. DEATH. If an ISO optionee ceases to be employed by the Company and all
-----
Related Corporations by reason of his or her death, any ISO owned by such
optionee may be exercised, to the extent otherwise exercisable on the date of
death, by the estate, personal representative or beneficiary who has acquired
the ISO by will or by the laws of descent and distribution, until the
4
<PAGE>
earlier of (i) the specified expiration date of the ISO or (ii) 180 days from
the date of the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by the Company and
----------
all Related Corporations by reason of his or her disability, such optionee shall
have the right to exercise any ISO held by him or her on the date of termination
of employment, to the extent of the number of shares with respect to which he or
she could have exercised it on that date, until the earlier of (i) the specified
expiration date of the ISO or (ii) 180 days from the date of the termination of
the optionee's employment. For the purposes of the Plan, the term "disability"
shall mean "permanent and total disability" as defined in Section 22(e)(3) of
the Code or any successor statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by the optionee
-------------
except by will, or by the laws of descent and distribution, and during the
lifetime of the optionee shall be exercisable only by such optionee. Options
other than ISOs shall be transferable to the extent set forth in the agreement
relating to such Option.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by instruments
-------------------------------
(which need not be identical) in such forms as the Committee may from time to
time approve. Such instruments shall conform to the terms and conditions set
forth in paragraphs 6 through 11 hereof and may contain such other provisions as
the Committee deems advisable which are not inconsistent with the Plan,
including restrictions applicable to shares of Common Stock issuable upon
exercise of Options. The Committee may specify that any Non-Qualified Option
shall be subject to the restrictions set forth herein with respect to ISOs, or
to such other termination and cancellation provisions as the Committee may
determine. The Committee may from time to time confer authority and
responsibility on one or more of its own members and/or one or more officers of
the Company to execute and deliver such instruments. The proper officers of the
Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
-----------
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall be
--------------------------------
subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with or
-------------------------
acquired by another entity in a merger or other reorganization in which the
holders of the outstanding voting stock of the Company immediately preceding the
consummation of such event, shall, immediately following such event, hold, as a
group, less than a majority of the voting securities of the surviving or
successor entity, or in the event of a sale of all or substantially all of the
Company's assets or otherwise (each, an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, either (i)
make appropriate provision for the continuation of such Options by substituting
on an equitable basis for the shares then subject to such Options either (a) the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (b) shares of stock of the surviving or
successor corporation or (c) such other
5
<PAGE>
securities as the Successor Board deems appropriate, the fair market value of
which shall not materially exceed the fair market value of the shares of Common
Stock subject to such Options immediately preceding the Acquisition; or (ii)
upon written notice to the optionees, provide that all Options must be
exercised, to the extent then exercisable or to be exercisable as a result of
the Acquisition, within a specified number of days of the date of such notice,
at the end of which period the Options shall terminate; or (iii) terminate all
Options in exchange for a cash payment equal to the excess of the fair market
value of the shares subject to such Options (to the extent then exercisable or
to be exercisable as a result of the Acquisition) over the exercise price
thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization
----------------------------------
or reorganization of the Company (other than a transaction described in
subparagraph B above) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock,
an optionee upon exercising an Option shall be entitled to receive for the
purchase price paid upon such exercise the securities he or she would have
received if he or she had exercised such Option prior to such recapitalization
or reorganization.
D. MODIFICATION OF ISOs. Notwithstanding the foregoing, any adjustments
--------------------
made pursuant to subparagraphs A, B or C with respect to ISOs shall be made only
after the Committee, after consulting with counsel for the Company, determines
whether such adjustments would constitute a "modification" of such ISOs (as that
term is defined in Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification of such
ISOs or would cause adverse tax consequences to the holders, it may refrain from
making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
--------------------------
liquidation of the Company, each Option will terminate immediately prior to the
consummation of such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
-----------------------
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the Plan
-----------------
and the optionee shall receive from the Company cash in lieu of such fractional
shares.
H. ADJUSTMENTS. Upon the happening of any of the events described in
-----------
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Options which previously have
been or subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described in such subparagraphs. The Committee or
the Successor Board shall determine the specific adjustments to be made under
this paragraph 13 and, subject to paragraph 2, its determination shall be
conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment thereof)
---------------------------
shall be exercised by giving written notice to the Company at its principal
office address, or to such transfer agent as the Company shall designate. Such
notice shall identify the Option being exercised and specify the number of
shares as to which such Option is being exercised, accompanied by full payment
of the purchase price therefor either (a) in United States dollars in cash or by
check, (b) at the discretion of the Committee, through delivery of shares of
Common Stock having a fair market value equal as of the date of the exercise to
the cash exercise price of the Option, (c) at the discretion
6
<PAGE>
of the Committee, by delivery of the optionee's personal recourse note bearing
interest payable not less than annually at no less than 100% of the lowest
applicable Federal rate, as defined in Section 1274(d) of the Code, (d) at the
discretion of the Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the proceeds
from the sale of the Common Stock acquired upon exercise of the Option and an
authorization to the broker or selling agent to pay that amount to the Company,
which sale shall be at the participant's direction at the time of exercise, or
(e) at the discretion of the Committee, by any combination of (a), (b), (c) and
(d) above. If the Committee exercises its discretion to permit payment of the
exercise price of an ISO by means of the methods set forth in clauses (b), (c),
(d) or(e) of the preceding sentence, such discretion shall be exercised in
writing at the time of the grant of the ISO in question. The holder of a Option
shall not have the rights of a shareholder with respect to the shares covered by
his Option until the date of issuance of a stock certificate to such holder for
such shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. The 1999 Stock Option Plan was adopted by the
--------------------------
Board on June 15, 1999 and approved by the stockholders of the Company on June
15, 1999. This Plan was adopted by the Board on December 17, 1999. The Plan
shall expire at the end of the day on June 15, 2009 (except as to Options
outstanding on that date). Subject to the provisions of paragraph 5 above,
Options may be granted under the Plan prior to the date of stockholder approval
of the Plan. The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the stockholders obtained within 12
months before or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be issued under the
Plan may not be increased(except by adjustment pursuant to paragraph 13); (b)
the provisions of paragraph 3 regarding eligibility for grants of ISOs may not
be modified; (c) the provisions of paragraph 6(B) regarding the exercise price
at which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to paragraph 13); and (d) the expiration date of the Plan
may not be extended. Except as otherwise provided in this paragraph 15, in no
event may action of the Board or stockholders alter or impair the rights of an
optionee, without such optionee's consent, under any Option previously granted
to such optionee.
16. MODIFICATIONS OF ISOs; CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS.
--------------------------------------------------------------------
Subject to Paragraph 13D, without the prior written consent of the holder of an
ISO, the Committee shall not alter the terms of such ISO (including the means of
exercising such ISO) if such alteration would constitute a modification (within
the meaning of Section 424(h)(3) of the Code). The Committee, at the written
request or with the written consent of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but shall not be limited to, extending the exercise period
or reducing the exercise price of the appropriate installments of such ISOs. At
the time of such conversion, the Committee (with the consent of the optionee)may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's ISOs converted into Non-
Qualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action. Upon the taking of such action, the Company
shall issue separate certificates to the optionee with respect to Options that
are Non-Qualified Options and Options that are ISOs.
7
<PAGE>
17. COMPANY'S RIGHT OF FIRST REFUSAL REGARDING OPTION SHARES. An optionee who
--------------------------------------------------------
desires to dispose of any shares acquired upon exercise of an Option shall first
offer the shares to the Company. The optionee shall provide notice signed by
the optionee to the Company indicating the optionee's desire to dispose of the
shares. The notice shall also specify the number of shares that the optionee
intends to dispose of. The Company shall have the irrevocable and exclusive
first option, but not the obligation, to purchase all or a portion of the
shares, provided the Company provides notice of its election to purchase the
shares within 60 days after the Company receives the optionee's notice. The
purchase price to be paid by the Company for the shares being offered by the
optionee shall be the Fair Market Value of the shares on the date of the
optionee's notice, and payment shall be made in full in cash at closing. If an
Initial Public Offering occurs, the provisions of this paragraph 17 shall cease
to be effective.
18. COMPANY'S RIGHT TO REPURCHASE OPTION SHARES. The Company shall have the
-------------------------------------------
right to repurchase any shares purchased by an optionee following such
optionee's termination of service or affiliation with the Company for any
reason. The price for repurchasing the shares shall be the Fair Market Value of
the shares on the date the Company exercises its repurchase right. If the
Company fails to exercise such repurchase right within 60 days following the
date of such optionee's termination of service or affiliation, the Company shall
be deemed to have waived such right. If an Initial Public Offering occurs, the
provisions of this paragraph 18 shall cease to be effective.
19. RESTRICTIONS ON EXERCISE RELATING TO S-ELECTION. The Company has made a
-----------------------------------------------
valid election to be treated as a Subchapter S corporation under the Code. If
such S-election is valid at the time an optionee elects to exercise his or her
Option, the Committee shall be authorized to take reasonable steps to preserve
the Company's S-election. The optionee agrees to indemnify and hold the Company
and its other stockholders harmless from and against any and all damages, costs,
liabilities and expenses arising out of or in connection with any breach of such
representations and warranties or violation of the Company's S-election caused
by such optionee's exercise of his or her Option. Each optionee recognizes and
agrees that the Company makes no representation or warranty whatsoever as to the
current status of the Company's subchapter S-election under the Code, and the
Company or any of its stockholders who own voting stock of the Company may
terminate or otherwise cause the Company to fail to qualify as a subchapter S
corporation, and each optionee assumes all investment, tax and all other
economic risks and liabilities associated with the Company's failure to qualify
as an S-corporation, including without limitation, any and all income tax and
other liability related thereto. The optionee further acknowledges that if he
or she exercises his or her Option and if the Company at the time has a valid S-
election in effect, the optionee may have certain tax liabilities arising by
virtue of his or her owning stock in a S-corporation. The optionee understands
and acknowledges that the Company shall be under no obligation to make
distributions or other payments to the optionee in order to pay such tax
obligations.
20. APPLICATION Of FUNDS. The proceeds received by the Company from the sale of
--------------------
shares pursuant to Options granted under the Plan shall be used for general
corporate purposes.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO granted
----------------------------------------------
under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
22. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non-Qualified
--------------------------------------
Option, the transfer of a Non-Qualified Stock Option pursuant to an arm's-length
transaction, the
8
<PAGE>
making of a Disqualifying Disposition (as defined in paragraph 21), the vesting
or transfer of restricted stock or securities acquired on the exercise of a
Option hereunder, or the making of a distribution or other payment with respect
to such stock or securities, the Company may withhold taxes in respect of
amounts that constitute compensation includible in gross income. The Committee
in its discretion may condition (i) the exercise of an Option, (ii) the transfer
of a Non-Qualified Stock Option, or (iii) the vesting or transferability of
restricted stock or securities acquired by exercising an Option, on the
optionee's making satisfactory arrangement for such withholding. Such
arrangement may include payment by the optionee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
optionee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
23. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver shares
-----------------------
of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares. Government regulations may impose reporting or other
obligations on the Company with respect to the Plan. For example, the Company
may be required to send tax information statements to employees and former
employees that exercise ISOs under the Plan, and the Company may be required to
file tax information returns reporting the income received by optionees in
connection with the Plan.
24. LIABILITY OF THE COMPANY. The Company shall not be liable to any person for
------------------------
any tax consequences incurred by an optionee or other person with respect to an
Option.
25. GOVERNING LAW. The validity and construction of the Plan and the instruments
-------------
evidencing Options shall be governed by the laws of the Commonwealth of
Massachusetts, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
9
<PAGE>
Exhibit 10.4
EXECUTIVE EMPLOYMENT AGREEMENT
-------------------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this ____ day of
____________, ____ is entered into by and between Embedded Support Tools
Corporation, a Massachusetts corporation with its principal place of business at
120 Royall Street, Canton, Massachusetts 02021(the "Company"), and Peter Dawson
of Canton, MA (the "Executive").
WHEREAS, the Company desires to employ the Executive, and the Executive is
willing to be employed by the Company, upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the
------------------
Executive, and the Executive hereby accepts employment with the Company, upon
the terms set forth in this Agreement, for the three-year period commencing on
the completion of a public offering of its common stock (the "Employment
Period"). This Agreement will take effect immediately but shall expire without
any further force and effect if no public offering is completed by May 1, 2000.
2. Title; Capacity. Executive shall serve as President and Chief
---------------
Executive Officer. Executive shall be based at the Company' principal place of
business. Executive shall be subject to the supervision of, and shall have such
authority and duties as is delegated to him by, the Board of Directors (the
"Board"). Executive hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board shall from time to time reasonably assign to the
Executive. The Executive agrees to devote his entire business time, attention
and energies to the business and interests of the Company during the Employment
Period. The Executive agrees to abide by the rules, regulations, instructions,
personnel practices and policies of the Company and any changes therein which
may be adopted from time to time by the Company.
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Company shall pay the Executive in an annual salary of
------
$300,000 during the Employment Period in installments conforming to the
prevailing Company-wide payroll policies.
3.2 Bonus. In addition to base salary, Executive shall be entitled in
-----
each year during the Employment Period to a bonus equal to $200,000 upon the
Company's achieving financial performance targets set by the Board for that
year.
3.3 Fringe Benefits. Executive shall be entitled to participate in all
---------------
bonus and benefit programs that the Company establishes and makes available to
its key employees, if any, to the extent that Executive's position, tenure,
salary, age, health and other qualifications make the
<PAGE>
Executive eligible to participate therein. Executive shall be entitled to 4
weeks paid vacation per year.
3.4 Reimbursement of Expenses. The Company shall reimburse the Executive
-------------------------
for all reasonable travel, entertainment and other expenses incurred or paid by
the Executive in connection with, or related to, the performance of the
Executive's duties, responsibilities or services under this Agreement, upon
presentation by the Executive of documentation, expense statements, vouchers
and/or such other supporting information as the Company may request, provided,
--------
however, that the amount available for such travel, entertainment and other
- -------
expenses shall be fixed in advance by the Board.
3.5 Death of Executive. In the event of the death of the Executive during
------------------
the term of this Agreement, the Executive's salary and benefits earned through
the date of his death shall be paid to the legal representatives of the
Executive at the times specified in this Section 3.
4. Proprietary Information and Developments.
----------------------------------------
4.1 Proprietary Information.
-----------------------
(a) Executive agrees that all information and know-how, not in the public
domain or known within the industry, whether or not in writing, of a private,
secret or confidential nature concerning the Company's business, operations,
marketing, research and development or financial affairs (collectively,
"Proprietary Information") is and shall be the exclusive property of the
Company. Executive acknowledges that in the course of his employment, the
Executive will have access to and contact with Proprietary Information. By way
of illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, marketing plans and customer
and supplier lists. Proprietary Information shall also include "Developments"
(as defined below).
(b) Executive will not disclose any Proprietary Information to others
outside the Company or use the same for any unauthorized purposes without
written approval by the President of the Company, either during or after his or
her employment, unless and until such Proprietary Information has become public
knowledge without fault by the Executive.
(c) Executive agrees that all files, letters, memoranda, reports, records,
data, sketches, drawings, laboratory notebooks, program listings, or other
written, photographic, electronic or other material containing Proprietary
Information, whether created by the Executive or others, which shall come into
his or her custody or possession, shall be and are the exclusive property of the
Company to be used by the Executive only in the performance of his or her duties
for the Company.
(d) Executive agrees that the Executive's obligation not to disclose or
use information, know-how and records of the types set forth above, also extends
to such types of information, know-how, records and other property of customers
of the Company or suppliers to
-2-
<PAGE>
the Company or other third parties who may have disclosed or entrusted the same
to the Company or to the Executive in the course of the Company's business.
(e) Upon termination of this Agreement or at any other time upon request
by the Company, Executive shall promptly deliver to the Company all records,
files, memoranda, notes, designs, data, reports, price lists, customer lists,
drawings, plans, computer programs, software, software documentation, sketches,
laboratory and research notebooks and other documents and materials (and all
copies or reproductions of such materials) relating to the business of the
Company.
4.2 Developments.
------------
(a) Executive will make full and prompt disclosure to the Company of all
inventions, improvements, discoveries, methods, developments, software, and
works of authorship, whether or not patentable or copyrightable, which are
created, made, conceived or reduced to practice by the Executive or under the
Executive's direction or jointly with others during the Employment Period,
whether or not during normal working hours or on the premises of the Company
(all of which are collectively referred to in this Agreement as "Developments").
(b) Executive agrees to assign and does hereby assign to the Company (or
any person or entity designated by the Company) all of his or her right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications for no additional
consideration. However, this Section 4.2(b) shall not apply to Developments
which do not relate to the present or planned business or research and
development of the Company and which are made and conceived by the Executive not
during normal working hours, not on the Company's premises and not using the
Company's tools, devices, equipment or Proprietary Information.
(c) Notwithstanding the foregoing, copyrightable developments shall be
considered to be "works made for hire" (as such term is defined in the U.S.
Copyright Act), and as such shall be created by the Executive for the exclusive
benefit of the Company. To the extent that any Development does not qualify as
a "work made for hire," all right, title and interest in and to such
Development, or portion thereof, shall be assigned by the Executive to the
Company for no additional consideration in accordance with the preceding
paragraph.
(d) Executive agrees to cooperate fully with the Company, both during and
after the Employment Period, with respect to the procurement, maintenance and
enforcement of copyrights, patents and all other intellectual property rights
(both in the United States and foreign countries) relating to Developments.
Executive shall sign all papers, including, without limitation, copyright
applications, patent applications, declarations, oaths, formal assignments,
assignment of priority rights, and powers of attorney, which the Company may
deem necessary or desirable in order to protect its rights and interests in any
Development.
(e) Executive represents that his or her engagement by the Company and the
performance of his or her duties on behalf of the Company does not, and shall
not, breach any agreement that obligates Executive to keep in confidence any
trade secrets or confidential or proprietary information of any other party or
to refrain from competing, directly or indirectly,
-3-
<PAGE>
with the business of any other party. Executive shall not disclose to the
Company any trade secrets or confidential or proprietary information of any
other party.
(f) Executive acknowledges that the Company from time to time may have
agreements with other persons or with the United States Government, or agencies
thereof, that impose obligations or restrictions on the Company regarding
inventions made during the course of work under such agreements or regarding the
confidential nature of such work. Executive agrees to be bound by all such
obligations and restrictions and to take all action necessary to discharge the
obligations of the Company under such agreements.
4.3 Remedies. Executive acknowledges that any breach of the provisions of
--------
this Section 4 shall result in serious and irreparable injury to the Company for
which the Company cannot be adequately compensated by monetary damages alone.
Executive agrees, therefore, that, in addition to any other remedy it may have,
the Company shall be entitled to enforce the specific performance of this
Agreement by Executive and to seek both temporary and permanent injunctive
relief (to the extent permitted by law) without the necessity of proving actual
damages.
4.4. Retroactive Confirmation. For the same consideration received upon
------------------------
entering into this agreement, Executive hereby confirms that from the time he
first entered the Company's employment, all Developments which he may claim as
attributable to him during that period of employment have been disclosed and
assigned to the Company or may be considered "works for hire" created for the
exclusive benefit of the Company, all as if the provisions of section 4.2,
including without limiting the generality of the foregoing provisions of section
4.2(d), were in full force and effect and binding upon the Executive during
that period of employment.
5. Employment Termination. The employment of the Executive by the
----------------------
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
5.1 Expiration of the Employment Period unless it is theretofore extended
by mutual written agreement of the parties hereto;
5.2 At the election of the Company, for cause, immediately upon written
notice by the Company to the Executive. For the purposes of this Section 5.2,
cause for termination shall be upon (a) a good faith finding by the Board of
Directors of the Executive's dishonesty, gross negligence or misconduct, or (b)
the conviction of the Executive of, or the entry of a pleading of guilty or nolo
contendere by the Executive to, any crime involving moral turpitude or any
felony;
5.3 Immediately upon the death or disability of the Executive. As used in
this Agreement, the term "disability" shall mean the inability of the Executive,
due to a physical or mental disability, for a period of 180 days, whether or not
consecutive, during any 365-day period to perform the services contemplated
under this Agreement. A determination of disability shall be made by a
physician satisfactory to both the Executive and the Company, provided that if
-------- ----
the Executive and the Board of Directors do not agree on a physician, the
Executive and the Company shall each select a physician and these two together
shall select a third physician, whose determination as to disability shall be
binding on all parties;
-4-
<PAGE>
5.4 At the election of the Executive, upon not less than one hundred and
eighty (180) days' prior written notice to the Company; or
5.5 At the election of the Company, upon its payment to the Executive of
his base salary for the earlier of (a) a period of 12 months following the
termination date and (b) the balance of the Employment Period.
6. Effect of Termination. In the event the Executive's employment is
---------------------
terminated for any reason, the Company shall pay to the Executive the
compensation and benefits otherwise payable to him under Section 3 through the
last day of the Executive's actual employment by the Company except as may be
provided otherwise under section 5.5. The provisions of Sections 4 shall
survive the termination of this Agreement.
7. Non-Competition.
---------------
7.1 Executive hereby acknowledges that the Company has developed and will
develop substantial and valuable goodwill with its past, present and future
customers as a result of substantial investments of time, effort and capital.
Executive further acknowledges that he has acquired, and will continue to
acquire, a high level of skill and expertise in the Company's field of business
as a direct result of the Executive's employment by the Company, and that the
Company will likely suffer serious competitive damage if Executive were to
utilize that skill and expertise for the benefit of a competitor of the Company.
Accordingly, Executive hereby covenants and agrees that, during the Employment
Period or any extension thereof and for a period of one (1) year after
termination of his employment by the Company for any reason or no reason, or
from the date of any final judgment upholding the provisions of this Section 7,
whichever is later, Executive shall not, anywhere in North America, Europe and
the Pacific Rim countries, or any other state in which the Company conducts its
business, engage directly, work for or become employed by or associated with any
person or entity, in the same or similar lines of business as the Company.
7.2 Executive acknowledges that the Company has a place of business, has
employees or representatives, or has advertised or sold products or services in
the restricted geographic region referenced in Section 7.1, thereby warranting
such geographic restriction. The Company and Executive agree that the duration
and geographic scope of the non-competition provisions set forth in this Section
7 are reasonable. In the event that any court determines that the duration or
the geographic scope, or both, are unreasonable and that either such provision
is to that extent unenforceable, the parties hereto agree that the provision
shall remain in full force and effect for the greatest time period and in the
greatest area that would not render it unenforceable. Executive expressly
grants to the Company for a period of up to one (1) year, as the case may be,
following the termination of this Agreement the right to notify any person at
any time of the terms of this restrictive covenant.
7.3 The provisions of this Section 7 shall survive any termination of this
Agreement.
8. Notices. Any notice required or permitted by this Agreement shall be
-------
given by registered or certified mail, return receipt required, addressed to the
Company at its then principal office, or to the Executive at his address
specified below, or to either party hereto at
-5-
<PAGE>
such other address or addresses as he or it may from time to time specify for
the purpose in a notice similarly given.
9. Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties relating to the subject matter hereof, and there are no agreements,
representations or warranties not herein set forth. No modification of this
Agreement shall be valid unless in writing and signed by the parties hereto.
The waiver or breach of any term or condition of this Agreement shall not be
deemed to constitute a waiver of any subsequent breach of the same or any other
term or condition.
10. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Executive.
11. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
12. Successors and Assigns. This Agreement shall extend to and be binding
----------------------
upon the Executive, his legal representative or representatives and testate or
intestate distributees, and this Agreement shall extend to and be binding upon
the Company, its successors and assigns. The term "Company" as used herein
shall include such successors and assigns. The term "successors and assigns" as
used herein shall mean a corporation or other entity acquiring all or
substantially all the assets and business of this Company (including this
Agreement) whether by operation of law or otherwise.
13. Remedies. The rights and remedies of the parties hereunder shall not
--------
be mutually exclusive, i.e., the exercise of one or more of the provisions
hereof shall not preclude the exercise of any other provisions hereof. Each of
the parties confirms that damages at law will be an inadequate remedy for a
breach or threatened breach of this Agreement and agrees that, in the event of a
breach or threatened breach of any provision hereof, the respective rights and
obligations hereunder shall be enforceable by specific performance, injunction
or other equitable remedy, but nothing herein contained is intended to, nor
shall it, limit or affect any rights at law or by statute or otherwise of any
party aggrieved as against the other for a breach or threatened breach of any
provision hereof, it being the intention by this Section to make clear the
agreement of the parties that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as well as at law or otherwise.
Anything in the contrary notwithstanding, neither party shall seek or be
entitled to punitive damages for any breach alleged of the other and each party
hereby waives his or its right to a jury trial on any matters in dispute under
the Agreement.
14. Severability. In the event that any section of this Agreement, or any
------------
provision of any such section, shall for any reason be held to be wholly
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other section hereof, or any other
provisions of any affected section, and this Agreement shall be construed as if,
and enforced as fully as if, such invalid, illegal or unenforceable section or
provisions had never been contained herein. In the event any section, or any
provision thereof, is found to be partially invalid, illegal or unenforceable
(on the ground, for example, that it is excessive in scope), then such section
or
-6-
<PAGE>
provision shall be enforced to the extent not invalid, illegal or unenforceable,
and its partial invalidity, illegality or unenforceability shall not affect any
other section of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement under seal as of the day, month and year first above.
COMPANY: EMBEDDED SUPPORT TOOLS CORPORATION,
a Massachusetts corporation
By:______________________________
Name:
Title:
EXECUTIVE: __________________________________
Print Name:_______________________
Address:_______________________
_______________________
-7-
<PAGE>
ACKNOWLEDGMENT UPON
TERMINATION OF EMPLOYMENT
-------------------------
On this ____ day of ____________________, 20__, I have reread the Executive
Employment Agreement dated as of ____________________, ___ by and between the
undersigned and agree to abide by its terms.
EXECUTIVE: ____________________________________
Print Name: ________________________
Address: ________________________
________________________
COMPANY: Embedded Support Tools Corporation, a
Massachusetts corporation
By: ______________________________
Name:
Title:
-8-
<PAGE>
Exhibit 10.5
EXECUTIVE EMPLOYMENT AGREEMENT
-------------------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this ____ day of
____________, ____ is entered into by and between Embedded Support Tools
Corporation, a Massachusetts corporation with its principal place of business at
120 Royall Street, Canton, Massachusetts 02021(the "Company"), and James Watkins
of Boston, MA (the "Executive").
WHEREAS, the Company desires to employ the Executive, and the Executive is
willing to be employed by the Company, upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Executive,
------------------
and the Executive hereby accepts employment with the Company, upon the terms set
forth in this Agreement, for the three-year period commencing on the completion
of a public offering of its common stock (the "Employment Period"). This
Agreement will take effect immediately but shall expire without any further
force and effect if no public offering is completed by May 1, 2000.
2. Title; Capacity. Executive shall serve as Senior Vice President of
---------------
Sales and Marketing and Chief Operating Officer. Executive shall be based at the
Company' principal place of business. Executive shall be subject to the
supervision of, and shall have such authority and duties as is delegated to him
by, the Board of Directors (the "Board"). Executive hereby accepts such
employment and agrees to undertake the duties and responsibilities inherent in
such position and such other duties and responsibilities as the Board shall from
time to time reasonably assign to the Executive. The Executive agrees to devote
his entire business time, attention and energies to the business and interests
of the Company during the Employment Period. The Executive agrees to abide by
the rules, regulations, instructions, personnel practices and policies of the
Company and any changes therein which may be adopted from time to time by the
Company.
3. Compensation and Benefits.
-------------------------
3.1 Salary. The Company shall pay the Executive in an annual salary of
------
$240,000 during the Employment Period in installments conforming to the
prevailing Company-wide payroll policies.
3.2 Bonus. In addition to base salary, Executive shall be entitled in
-----
each year during the Employment Period to a bonus equal to $60,000 upon the
Company's achieving financial performance targets set by the Board for that
year.
3.3 Fringe Benefits. Executive shall be entitled to participate in all
---------------
bonus and benefit programs that the Company establishes and makes available to
its key employees, if any, to the
<PAGE>
extent that Executive's position, tenure, salary, age, health and other
qualifications make the Executive eligible to participate therein. Executive
shall be entitled to 4 weeks paid vacation per year.
3.4 Reimbursement of Expenses. The Company shall reimburse the Executive
-------------------------
for all reasonable travel, entertainment and other expenses incurred or paid by
the Executive in connection with, or related to, the performance of the
Executive's duties, responsibilities or services under this Agreement, upon
presentation by the Executive of documentation, expense statements, vouchers
and/or such other supporting information as the Company may request, provided,
--------
however, that the amount available for such travel, entertainment and other
- -------
expenses shall be fixed in advance by the Board.
3.5 Death of Executive. In the event of the death of the Executive during
------------------
the term of this Agreement, the Executive's salary and benefits earned through
the date of his death shall be paid to the legal representatives of the
Executive at the times specified in this Section 3.
4. Proprietary Information and Developments.
----------------------------------------
4.1 Proprietary Information.
-----------------------
(a) Executive agrees that all information and know-how, not in the public
domain or known within the industry, whether or not in writing, of a private,
secret or confidential nature concerning the Company's business, operations,
marketing, research and development or financial affairs (collectively,
"Proprietary Information") is and shall be the exclusive property of the
Company. Executive acknowledges that in the course of his employment, the
Executive will have access to and contact with Proprietary Information. By way
of illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, marketing plans and customer
and supplier lists. Proprietary Information shall also include "Developments"
(as defined below).
(b) Executive will not disclose any Proprietary Information to others
outside the Company or use the same for any unauthorized purposes without
written approval by the President of the Company, either during or after his or
her employment, unless and until such Proprietary Information has become public
knowledge without fault by the Executive.
(c) Executive agrees that all files, letters, memoranda, reports, records,
data, sketches, drawings, laboratory notebooks, program listings, or other
written, photographic, electronic or other material containing Proprietary
Information, whether created by the Executive or others, which shall come into
his or her custody or possession, shall be and are the exclusive property of the
Company to be used by the Executive only in the performance of his or her duties
for the Company.
(d) Executive agrees that the Executive's obligation not to disclose or
use information, know-how and records of the types set forth above, also extends
to such types of information, know-how, records and other property of customers
of the Company or suppliers to
-2-
<PAGE>
the Company or other third parties who may have disclosed or entrusted the same
to the Company or to the Executive in the course of the Company's business.
(e) Upon termination of this Agreement or at any other time upon request
by the Company, Executive shall promptly deliver to the Company all records,
files, memoranda, notes, designs, data, reports, price lists, customer lists,
drawings, plans, computer programs, software, software documentation, sketches,
laboratory and research notebooks and other documents and materials (and all
copies or reproductions of such materials) relating to the business of the
Company.
4.2 Developments.
------------
(a) Executive will make full and prompt disclosure to the Company of all
inventions, improvements, discoveries, methods, developments, software, and
works of authorship, whether or not patentable or copyrightable, which are
created, made, conceived or reduced to practice by the Executive or under the
Executive's direction or jointly with others during the Employment Period,
whether or not during normal working hours or on the premises of the Company
(all of which are collectively referred to in this Agreement as "Developments").
(b) Executive agrees to assign and does hereby assign to the Company (or
any person or entity designated by the Company) all of his or her right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications for no additional
consideration. However, this Section 4.2(b) shall not apply to Developments
which do not relate to the present or planned business or research and
development of the Company and which are made and conceived by the Executive not
during normal working hours, not on the Company's premises and not using the
Company's tools, devices, equipment or Proprietary Information.
(c) Notwithstanding the foregoing, copyrightable developments shall be
considered to be "works made for hire" (as such term is defined in the U.S.
Copyright Act), and as such shall be created by the Executive for the exclusive
benefit of the Company. To the extent that any Development does not qualify as
a "work made for hire," all right, title and interest in and to such
Development, or portion thereof, shall be assigned by the Executive to the
Company for no additional consideration in accordance with the preceding
paragraph.
(d) Executive agrees to cooperate fully with the Company, both during and
after the Employment Period, with respect to the procurement, maintenance and
enforcement of copyrights, patents and all other intellectual property rights
(both in the United States and foreign countries) relating to Developments.
Executive shall sign all papers, including, without limitation, copyright
applications, patent applications, declarations, oaths, formal assignments,
assignment of priority rights, and powers of attorney, which the Company may
deem necessary or desirable in order to protect its rights and interests in any
Development.
(e) Executive represents that his or her engagement by the Company and the
performance of his or her duties on behalf of the Company does not, and shall
not, breach any agreement that obligates Executive to keep in confidence any
trade secrets or confidential or proprietary information of any other party or
to refrain from competing, directly or indirectly,
-3-
<PAGE>
with the business of any other party. Executive shall not disclose to the
Company any trade secrets or confidential or proprietary information of any
other party.
(f) Executive acknowledges that the Company from time to time may have
agreements with other persons or with the United States Government, or agencies
thereof, that impose obligations or restrictions on the Company regarding
inventions made during the course of work under such agreements or regarding the
confidential nature of such work. Executive agrees to be bound by all such
obligations and restrictions and to take all action necessary to discharge the
obligations of the Company under such agreements.
4.3 Remedies. Executive acknowledges that any breach of the provisions of
--------
this Section 4 shall result in serious and irreparable injury to the Company for
which the Company cannot be adequately compensated by monetary damages alone.
Executive agrees, therefore, that, in addition to any other remedy it may have,
the Company shall be entitled to enforce the specific performance of this
Agreement by Executive and to seek both temporary and permanent injunctive
relief (to the extent permitted by law) without the necessity of proving actual
damages.
4.4 Retroactive Confirmation. For the same consideration received upon
------------------------
entering into this agreement, Executive hereby confirms that from the time he
first entered the Company's employment, all Developments which he may claim as
attributable to him during that period of employment have been disclosed and
assigned to the Company or may be considered "works for hire" created for the
exclusive benefit of the Company, all as if the provisions of section 4.2,
including without limiting the generality of the foregoing provisions of section
4.2(d), were in full force and effect and binding upon the Executive during
that period of employment.
5. Employment Termination. The employment of the Executive by the Company
----------------------
pursuant to this Agreement shall terminate upon the occurrence of any of the
following:
5.1 Expiration of the Employment Period unless it is theretofore extended
by mutual written agreement of the parties hereto;
5.2 At the election of the Company, for cause, immediately upon written
notice by the Company to the Executive. For the purposes of this Section 5.2,
cause for termination shall be upon (a) a good faith finding by the Board of
Directors of the Executive's dishonesty, gross negligence or misconduct, or (b)
the conviction of the Executive of, or the entry of a pleading of guilty or nolo
contendere by the Executive to, any crime involving moral turpitude or any
felony;
5.3 Immediately upon the death or disability of the Executive. As used in
this Agreement, the term "disability" shall mean the inability of the Executive,
due to a physical or mental disability, for a period of 180 days, whether or not
consecutive, during any 365-day period to perform the services contemplated
under this Agreement. A determination of disability shall be made by a
physician satisfactory to both the Executive and the Company, provided that if
-------- ----
the Executive and the Board of Directors do not agree on a physician, the
Executive and the Company shall each select a physician and these two together
shall select a third physician, whose determination as to disability shall be
binding on all parties;
-4-
<PAGE>
5.4 At the election of the Executive, upon not less than one hundred and
eighty (180) days' prior written notice to the Company; or
5.5 At the election of the Company, upon its payment to the Executive of
his base salary for the earlier of (a) a period of 12 months following the
termination date and (b) the balance of the Employment Period.
6. Effect of Termination. In the event the Executive's employment is
---------------------
terminated for any reason, the Company shall pay to the Executive the
compensation and benefits otherwise payable to him under Section 3 through the
last day of the Executive's actual employment by the Company except as may be
provided otherwise under section 5.5. The provisions of Sections 4 shall
survive the termination of this Agreement.
7. Non-Competition.
---------------
7.1 Executive hereby acknowledges that the Company has developed and will
develop substantial and valuable goodwill with its past, present and future
customers as a result of substantial investments of time, effort and capital.
Executive further acknowledges that he has acquired, and will continue to
acquire, a high level of skill and expertise in the Company's field of business
as a direct result of the Executive's employment by the Company, and that the
Company will likely suffer serious competitive damage if Executive were to
utilize that skill and expertise for the benefit of a competitor of the Company.
Accordingly, Executive hereby covenants and agrees that, during the Employment
Period or any extension thereof and for a period of one (1) year after
termination of his employment by the Company for any reason or no reason, or
from the date of any final judgment upholding the provisions of this Section 7,
whichever is later, Executive shall not, anywhere in North America, Europe and
the Pacific Rim countries, or any other state in which the Company conducts its
business, engage directly, work for or become employed by or associated with any
person or entity, in the same or similar lines of business as the Company.
7.2 Executive acknowledges that the Company has a place of business, has
employees or representatives, or has advertised or sold products or services in
the restricted geographic region referenced in Section 7.1, thereby warranting
such geographic restriction. The Company and Executive agree that the duration
and geographic scope of the non-competition provisions set forth in this Section
7 are reasonable. In the event that any court determines that the duration or
the geographic scope, or both, are unreasonable and that either such provision
is to that extent unenforceable, the parties hereto agree that the provision
shall remain in full force and effect for the greatest time period and in the
greatest area that would not render it unenforceable. Executive expressly
grants to the Company for a period of up to one (1) year, as the case may be,
following the termination of this Agreement the right to notify any person at
any time of the terms of this restrictive covenant.
7.3 The provisions of this Section 7 shall survive any termination of this
Agreement.
8. Notices. Any notice required or permitted by this Agreement shall be
-------
given by registered or certified mail, return receipt required, addressed to the
Company at its then principal office, or to the Executive at his address
specified below, or to either party hereto at
-5-
<PAGE>
such other address or addresses as he or it may from time to time specify for
the purpose in a notice similarly given.
9. Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties relating to the subject matter hereof, and there are no agreements,
representations or warranties not herein set forth. No modification of this
Agreement shall be valid unless in writing and signed by the parties hereto.
The waiver or breach of any term or condition of this Agreement shall not be
deemed to constitute a waiver of any subsequent breach of the same or any other
term or condition.
10. Amendment. This Agreement may be amended or modified only by a written
---------
instrument executed by both the Company and the Executive.
11. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts.
12. Successors and Assigns. This Agreement shall extend to and be binding
----------------------
upon the Executive, his legal representative or representatives and testate or
intestate distributees, and this Agreement shall extend to and be binding upon
the Company, its successors and assigns. The term "Company" as used herein shall
include such successors and assigns. The term "successors and assigns" as used
herein shall mean a corporation or other entity acquiring all or substantially
all the assets and business of this Company (including this Agreement) whether
by operation of law or otherwise.
13. Remedies. The rights and remedies of the parties hereunder shall not
--------
be mutually exclusive, i.e., the exercise of one or more of the provisions
hereof shall not preclude the exercise of any other provisions hereof. Each of
the parties confirms that damages at law will be an inadequate remedy for a
breach or threatened breach of this Agreement and agrees that, in the event of a
breach or threatened breach of any provision hereof, the respective rights and
obligations hereunder shall be enforceable by specific performance, injunction
or other equitable remedy, but nothing herein contained is intended to, nor
shall it, limit or affect any rights at law or by statute or otherwise of any
party aggrieved as against the other for a breach or threatened breach of any
provision hereof, it being the intention by this Section to make clear the
agreement of the parties that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as well as at law or otherwise.
Anything in the contrary notwithstanding, neither party shall seek or be
entitled to punitive damages for any breach alleged of the other and each party
hereby waives his or its right to a jury trial on any matters in dispute under
the Agreement.
14. Severability. In the event that any section of this Agreement, or any
------------
provision of any such section, shall for any reason be held to be wholly
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other section hereof, or any other
provisions of any affected section, and this Agreement shall be construed as if,
and enforced as fully as if, such invalid, illegal or unenforceable section or
provisions had never been contained herein. In the event any section, or any
provision thereof, is found to be partially invalid, illegal or unenforceable
(on the ground, for example, that it is excessive in scope), then such section
or
-6-
<PAGE>
provision shall be enforced to the extent not invalid, illegal or unenforceable,
and its partial invalidity, illegality or unenforceability shall not affect any
other section of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement under seal as of the day, month and year first above.
COMPANY: EMBEDDED SUPPORT TOOLS CORPORATION,
a Massachusetts corporation
By:______________________________
Name:
Title:
EXECUTIVE: _________________________________
Print Name:______________________
Address:______________________
______________________
-7-
<PAGE>
ACKNOWLEDGMENT UPON
TERMINATION OF EMPLOYMENT
-------------------------
On this ____ day of ____________________, 20__, I have reread the Executive
Employment Agreement dated as of ____________________, ___ by and between the
undersigned and agree to abide by its terms.
EXECUTIVE: ____________________________________
Print Name: ________________________
Address: ________________________
________________________
COMPANY: Embedded Support Tools Corporation, a
Massachusetts corporation
By: ______________________________
Name:
Title:
-8-
<PAGE>
Exhibit 10.6
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (the "Agreement"), is made as of the 1/st/ day of
---------
July, 1999 (the "Effective Date") by and between Embedded Support Tools
--------------
Corporation, a Massachusetts corporation with its principal place of business at
120 Royall Street, Canton, Massachusetts (the "Company"), and John T. W.
-------
Baggott, an individual residing at 88 Wayside Inn Road, Marlborough,
Massachusetts ("Baggott").
-------
WHEREAS, Baggott is one of the founders of the Company and is currently
employed by the Company.
WHEREAS, Baggott, other founders of the Company and the Company have
entered into a certain First Amended and Restated Founding Shareholders
Agreement as of the date hereof (the "Shareholders Agreement"), pursuant to
----------------------
which Baggott is entitled to redeem a portion of his capital stock in the
Company each year and obtain loans from the Company, which loans shall be
secured by his capital stock of the Company;
WHEREAS, Baggott now wishes to reduce his involvement with and
responsibilities for the Company, but has agreed to continue to provide services
to the Company, and the Company has agreed to extend his employment with the
Company, all in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the terms, conditions, agreements and
covenants hereinafter set forth, the parties hereto acting in reliance upon the
representations and warranties of the others contained in this Agreement, agree
as follows:
1. Continued Employment of Baggott
-------------------------------
1.1 As of the Effective Date, the title of "Chief Financial Officer"
of the Company and day-to-day responsibilities associated
therewith shall be transferred from Baggott to Mark F. Lapham.
From the Effective Date through December 31, 1999 (the
"Transition Period"), Baggott shall (i) retain the titles of
-----------------
"Treasurer" and "Vice-President," and (ii) perform the
responsibilities associated with such positions. In consideration
of Baggott's agreement to perform such services, the Company
hereby agrees to pay to Baggott a salary of Two Hundred Fifty
Thousand Dollars ($250,000) per year (pro-rated) during the
Transition Period. In addition, during the Transition Period,
Baggott shall be entitled to participate in all benefit programs
that the Company makes available to its employees, to the extent
that his position, tenure, age, health and other qualifications
make him eligible to participate. During the Transition Period,
Baggott shall not be required to be in the offices of the Company
more than 20 hours per week, on average, but he shall be
available by telephone during normal business hours upon
reasonable notice. Notwithstanding the foregoing, from the
Effective Date through August 31, 1999 Baggott is entitled to
take a paid leave of absence while retaining the aforementioned
positions and benefits, during which time he will not be required
to be in the offices of the Company or be available by telephone.
<PAGE>
1.2 Upon the expiration of the Transition Period, Baggott shall
resign as Treasurer but shall remain on the Board of Directors of
the Company, subject to the terms of Section 12 of the
Shareholders Agreement. During the period from January 1, 2000
through December 31, 2000, Baggott shall assume the role of Vice-
President, Human Resources and shall fulfill the duties of such
position as directed by the President of the Company, provided,
however, that Baggott shall not be required to spend more than 20
hours per week, on average, providing such services to the
Company. During this one-year period, Baggott shall be paid an
annual salary of One Hundred Twenty-Five Thousand Dollars
($125,000) and shall be entitled to participate in all benefit
programs that the Company makes available to its employees, to
the extent that his position, tenure, age, health and other
qualifications make him eligible to participate.
1.3 After December 31, 2000, Baggott may, in his sole discretion,
continue to provide services to the Company at the same level of
compensation and benefits through December 31, 2002, provided,
however, that if Baggott reduces his responsibilities or time
commitment to the Company, his [compensation and benefits
dependent upon amount of compensation] shall be proportionately
reduced.
2. Employment Termination.
----------------------
2.1 It is hereby understood and agreed by the parties hereto that the
Company shall not be entitled to terminate Baggott's employment
prior to December 31, 2000 (and if Baggott elects to extend such
employment pursuant to Section 1.3 above, then prior to December
31, 2002, subject to subsection 2.2 below) other than for cause.
For purposes hereof, "cause"shall be defined as (i) a good faith
finding by the Board of Directors (which shall not include
Baggott if he is a Director at such time) of failure by Baggott
to perform his assigned duties for the Company, dishonesty, gross
negligence or misconduct or (ii) the conviction of Baggott of or
the entry of a plea of guilty or nolo contendre by Baggott to,
any crime involving moral turpitude or any felony.
2.2 Notwithstanding any provision contained in this Agreement to the
contrary, in the event of a Change in Control (as defined in the
Shareholders Agreement), or an IPO (as defined in the
Shareholders Agreement), the Company shall be entitled to
terminate Baggott's engagement by and/or employment with the
Company with or without cause upon two (2) weeks' notice any time
after December 31, 2000 without any obligation to pay severance
or other amounts in lieu thereof.
3. Proprietary Information
-----------------------
3.1 Baggott acknowledges that his relationship with the Company is
one of high trust and confidence and that in the course of
performing services for the Company, he has had and will have
access to and contract with Proprietary Information (as defined
below). Baggott agrees that he will
-2-
<PAGE>
not, during the time he is providing services to the Company, or
at any time thereafter, disclose to others, or use for his
benefit or the benefit of others, any Proprietary Information.
For purposes of this Agreement, Proprietary Information shall
mean, by way of illustration and not limitation, all information
(whether or not patentable and whether or not copyrightable)
owned, possessed or used by the Company or any affiliate of the
Company, including, without limitation, any invention, formula,
vendor, information, customer information, apparatus, equipment,
trade secret, process, research, report, technical data, know-
how, computer program software, software documentation, hardware
design, technology, marketing or business plan, forecast,
unpublished financial statement, budget, license, price, cost and
employee list that is communicated to, learned of, developed or
otherwise acquired by Baggott in the course of his employment by
the Company.
3.2 Baggott's obligations under this Section 3 shall not apply to any
information that (a) is or becomes known to the general public
under circumstances involving no breach by Baggott or others of
the terms of this Section 3,(b) is generally disclosed to third
parties by the Company without restriction on such third parties,
(c) is approved for release by written authorization of the Board
of Directors of the Company, or (d) which Baggott can show was
independently developed or acquired by him without reliance in
any way on Proprietary Information.
3.3 Upon termination of Baggott's engagement by the Company or at any
other time upon request by the Company, Baggott shall promptly
deliver to the Company all records, files, memoranda, notes,
designs, data, reports, price list, customer lists, drawings,,
plans, computer programs, software, software documentation,
sketches, laboratory and research notebooks and other documents
(and all copies or reproductions of such materials) relating to
the business of the Company.
3.4 Baggott acknowledges that the Company from time to time may have
agreements with third parties that impose obligations or
restrictions on the Company regarding inventions made during the
course of work under such agreements or regarding the
confidential nature of such work. Baggott agrees to be bound by
all such obligations and restrictions that are known to him and
at no cost or expense to himself to take all action within the
scope of his position(s) and duties at the Company necessary to
discharge the obligations of the Company under such agreements.
3.5 Baggott acknowledges that any breach of the provisions of this
Section 3 shall result in serious and irreparable injury to the
Company for which the Company cannot be adequately compensated by
monetary damages alone. Baggott agrees, therefore, that, in
addition to any other remedy it may have, the Company shall be
entitled to enforce the specific performance of this Agreement
and to seek both temporary and permanent injunctive
-3-
<PAGE>
relief (to the extent permitted by law) without the necessity of
proving actual damages.
4. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject
matter of this Agreement.
5. Amendment; Survival. This Agreement may be amended or modified only
-------------------
by a written instrument executed by both the Company and Baggott.
Sections 3 and 7 of this Agreement shall survive termination of this
Agreement for any reason.
6. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of
Massachusetts.
7. Successors and Assigns; No Third Party Beneficiaries. This Agreement
----------------------------------------------------
shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Baggott may not assign
his rights or obligations hereunder without the prior written consent
of the Company. The Company may assign its rights hereunder only in
connection with a Change in Control. Otherwise, the Company may not
assign its rights and obligations hereunder without the prior written
consent of Baggott.
Except as expressly set forth herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or give to
any person or entity other than the parties hereto and their
successors or permitted assigns, any rights or remedies under or by
reason of this Agreement.
8. Miscellaneous.
-------------
8.1 No delay or omission by the any party to this Agreement in
exercising any right under this Agreement shall operate as a
waiver of that or any other right. A waiver or consent given by
any party to this Agreement on any one occasion shall be
effective only in that instance and shall not be construed as a
bar or waiver of any right on any other occasion.
8.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or
affect the scope or substance of any section of this Agreement.
8.3 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be
affected or impaired thereof.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
COMPANY: EMBEDDED SUPPORT TOOLS
CORPORATION,
a Massachusetts corporation
By: _________________________
Peter Dawson, President
BAGGOTT: By: _________________________
John T.W. Baggott
-5-
<PAGE>
Exhibit 10.7
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------------
Agreement made this 17 day of December, 1999 by and between John T. W.
--
Baggott ("Baggott") and Embedded Support Tools Corporation ("Company").
Reference is made to a certain Employment Agreement dated July 1, 1999
between Baggott and the Company (the "Agreement").
WHEREAS, in order to facilitate the Company's prospects for successful
completion of a public offering of its shares of common stock and Baggott's
opportunity to include a portion of his shares in such offering, the parties
wish to effect certain changes in the Agreement.
NOW, THEREFORE, in consideration of the terms, conditions, agreements and
covenants hereinafter set forth, the parties hereto acting in reliance upon the
representations and warranties of the others contained in this Agreement, agree
as follows:
1. Section 1.1 of the Agreement is hereby amended such that the phrase
reading "From the Effective Date through December 31, 1999 (the "Transition
Period") shall henceforth read "From the Effective Date through December 17,
1999".
2. The "Transition Period" as used in Section 1.1 of the Agreement shall
end on December 17, 1999 for all purposes, including without limiting the
generality of the foregoing, the date as of which Baggott shall resign as
Treasurer and Vice-President of the Company and assume the role of Vice-
President, Human Resources except, however, that Baggott's current salary shall
continue through December 31, 1999 at the rate of $250,000 per year and shall
change to $125,000 effective only upon January 1, 2000.
Except as set forth above, the Agreement shall remain unchanged and in full
force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
COMPANY: EMBEDDED SUPPORT TOOLS
CORPORATION,
a Massachusetts corporation
By: /s/ Peter Dawson
----------------
Peter Dawson, President
BAGGOTT: By: /s/ John T.W. Baggott
---------------------
John T.W. Baggott
<PAGE>
Exhibit 10.8
Mr. Mark F. Lapham
The White Farm
Old Northfield Road
Ashby, MA 01431
Dear Mark:
We are pleased on offer you the position of Chief Financial Officer of EST
Corporation reporting to Peter Dawson, Chief Executive Officer. You will manage
and be responsible for accounting, finance, operations, facilities, information
technology and such other areas as Peter may task you with by agreement.
You are welcome to come into the office starting March 22, 1999 on an informal
basis. Your official start date shall be March 29, 1999 and options granted to
you shall commence for vesting purposes from that date. During a transition
period you will work with and be supervised by John Baggott, outgoing CFO and
continuing Treasurer and Director of the Company. This transition period shall
terminate at John's decision but at no later date than July 1, 1999. Following
such transition period John has agreed to absent himself from EST for a period
of a minimum of 45 days to permit to establish your authority, following which
he will return in the capacity of Human Resources Director reporting directly to
Peter Dawson.
You shall be compensated at an annual rate of ___________ with potential for
receiving bonuses, profit-sharing and 401K match as per existing company plans
with which you have been made acquainted. You are by this letter guaranteed by
the undersigned members of EST's Board of Directors the grant of options to
purchase 200,000 common shares at a price of $3 per share, vesting annually in
increments of 20% per year with an employment date of March 29, 1999 and an
initial (20%) vesting date of March 29, 2000. In the event that your employment
with EST is terminated, all uninvested options are forfeited and extinguished.
You shall have 15 days in which to exercise any options vested at that time and
all options shall be exercised at
<PAGE>
that time or none at all. In the event EST Corporation or substantial control of
it is sold or merged pursuant to negotiations initiated during your employment,
vesting of your options shall accelerate to permit full vesting and
participation in proceeds of sale. An Initial Public Offering of securities
shall expressly NOT constitute an event to trigger such accelerated vesting.
Your signature below will constitute acceptance of this offer. We look forward
to a long and mutually profitable acquaintance.
Peter Dawson, President and Chief Executive Officer /s/ PETER DAWSON
John Baggott, Senior Vice President and Treasurer /s/ JOHN BAGGOTT
Jim Watkins, Senior Vice President /s/ JIM WATKINS
Dated March 12, 1999
/s/ MARK F. LAPHAM
- ------------------------------
Accepted, Mark F. Lapham, date
cc: Clint Browning MRI
<PAGE>
EXHIBIT 10.9
LEASE
Date of Lease: October 1, 1999
Landlord: Boston Mutual Life Insurance Company
having an address at:
120 Royall Street
Canton, MA 02021
Tenant: Embedded Support Tools, Corp., a Massachusetts corporation
120 Royall Street
Canton, MA 02021
The Building: The building known and numbered as 120 Royall Street, Canton,
Massachusetts.
Appurtenant Land and
Improvements: All landscaped grounds, trees, shrubbery, flower beds, parking
lots, driveways, including the driveway from Royall Street,
walkways, and other improvements located within the ten (10)
acres (more or less) on which the Building is located.
The Premises: The Premises containing approximately 28,878 rentable square
feet located on the second and fourth floors of the Building
together with the right to use in common with others entitled
thereto, the common lobbies, hallways and stairways necessary
for access to said Premises; washrooms; main entrance,
elevators, cafeteria and service entrance of the Building;
driveways, parking lots, and common walkways located within
the Appurtenant Land and Improvements and necessary for access
to the Building. The approximate square footage given in
paragraph 3.1 below for each space comprising the Premises is
stated for identification purposes only; the rents set forth
in paragraph 3.1 are fixed, despite any later remeasurement of
the space. Notwithstanding the immediate prior sentence,
Tenant may, with Landlord's consent, use the space currently
used as the hallway for purposes other than passage, whereupon
the area of such hallway space, the restrooms and service
rooms shall be added to the total square footage for the
Second Floor Space (25,635 square feet), shall be recalculated
to include such hallway space, the rest rooms and service
rooms, and Minimum
<PAGE>
Rent and Tenant's Pro Rate Share of Taxes and Operating
Expenses shall be adjusted accordingly. Minimum Rent for the
additional hallway, restrooms and service rooms shall be the
greater of the then market rent or $22.00 per square foot.
Whether or not Tenant has sought Landlord's consent for a
change of use of said hallway, if, in Landlord's
determination, Tenant is using such hallway space for purposes
other than passage, including storage or reception, the total
square footage for the Second Floor Space shall be
recalculated to include such hallway space, rest rooms and
service rooms, and Minimum Rent and Tenant's Pro Rata Share of
Taxes and Operating Expenses shall be adjusted accordingly as
of the date Tenant's use of the hallway space commenced.
Original Term: Three (3) years and six (6) months.
Commencement
Date: October 1, 1999
Expiration Date: March 31, 2003
Pro Rata Share
of Taxes: Square footage of the Premises divided by the total square
footage of the Building (108,010 sq. ft.). Base year: 1997
fiscal year.
Pro Rata Share of
Operating Costs: Square footage of the Premises divided by the total square
footage of the Building. Base year: 1997 calendar year.
Security Deposit: N/A
Minimum Rent: See Article 3.
Use of Premises: General research and development and light assembly.
Number of Parking
Spaces in reserved
parking area: Ten (10) spaces.
-2-
<PAGE>
LEASE
LEASE dated as of the first date above, by and between Landlord and Tenant.
1. Premises
--------
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord,
for the term herein set forth, upon and subject to the agreements and conditions
of this Lease, the Premises.
2. Term
----
The Term of this Lease shall commence on the Commencement Date and expire
on the Expiration Date. Notwithstanding the foregoing, Tenant shall be bound by
all obligations upon the Tenant contained in this Lease from and after the
execution and delivery hereof except for Tenant's rent obligations, which shall
commence on the Commencement Date of the term hereof.
3. Minimum Rent
------------
3.1 Original Term. Tenant shall pay Landlord Minimum Rent according to
-------------
the following schedule:
Approximate
Square Footage Former Space Name Rental Rate Total
7,820* AMCO X $22.00 = $172,040.00
3,192* Sedgwick X $22.00 = 70,224.00
7,282* SR Research X $22.00 = 160,204.00
1,766* Achieve Piece X $22.00 = 38,852.00
3,243 4th Floor X $20.00 = 64,860.00
5,575* Achieve X $22.00 = 122,650.00
- ------ -----------
28,878 Square Feet TOTAL ANNUAL RENT DUE $628,830.00
MONTHLY RENT $ 52,402.50
*Second Floor Space.
3.2 Installments of Minimum Rent. All Minimum Rent hereunder shall be
----------------------------
payable in equal monthly installments of one-twelfth of the applicable annual
amount, in advance on the first day of each and every calendar month during the
term hereof. All payments of Rent (Minimum Rent, real estate taxes payable
pursuant to Article 4, operating cost escalation payments payable pursuant to
Article 5, noon-time meal service fees payable pursuant to Article 5 and
electrical
-3-
<PAGE>
usage charges pursuant to Article 9 are hereinafter collectively referred to as
Rent) shall be made payable to Landlord and sent to Landlord at the place to
which notices to Landlord are required to be sent or to such other person or
address as Landlord shall from time to time designate by notice to Tenant. Rent
for any partial month of any rental period shall be prorated. All Rent hereunder
shall be paid without any deduction, set-off or counterclaim whatsoever (except
as otherwise herein set forth), and without any notice or demand therefor. Any
payment of rent or any other monetary sum due under this Lease which is not paid
within ten (10) days following the date due shall bear interest at the rate of
1-1/2 percent per month.
4. Real Estate Tax Escalation
--------------------------
The Tenant shall pay to the Landlord as additional rent Tenant's Pro-Rata
Share of any increase in real estate taxes, including municipal betterments
levied against the Appurtenant Land and Improvements and Building, over those
incurred or levied during the fiscal year ending June 30, 1997, as finally
determined after tax abatement proceedings (the "Base Fiscal Tax Year.") This
increase shall be prorated should this Lease terminate before the end of any
fiscal year. The Tenant shall make payment of such tax escalation amount, if
any, within twenty days after Landlord has submitted to Tenant a bill for the
tax escalation amount. Landlord shall submit a bill to Tenant for each tax
installment payment due during any Fiscal Tax Year in which real estate taxes
exceed those incurred in the Base Fiscal Tax Year. The bill submitted by
Landlord shall include a copy of Landlord's tax bill for the current tax period,
and the first such bill rendered to Tenant shall also include a copy of
Landlord's tax bill for the Base Fiscal Tax Year. The bill shall state the real
estate taxes levied upon or assessed against the Building and Appurtenant Land
and Improvements in the Base Fiscal Tax Year and in the current tax year, and
Tenant's share of the increase. In the event of abatement in the real estate
taxes on the Appurtenant Land and Improvements and Building, the Landlord shall
refund to the Tenant the Tenant's pro-rata share of any such abatement, less the
Tenant's pro-rata share of the fees and costs incurred by the Landlord in
securing such abatement; provided, however, that Tenant shall receive no refund
to the extent that the abatement reduces the taxes below those levied during the
Base Tax Fiscal Year.
5. Operating Cost Escalation
-------------------------
5.1 Operating Costs. As used in this Article, "Operating Costs" shall
---------------
mean all costs accrued or incurred and expenditures made by the Landlord in the
operation and management of the Building and the Appurtenant Land and
Improvements (hereinafter collectively called the Property), exclusive of
financing expenses, as determined in accordance with generally accepted
accounting principles. Operating costs include, without limitation, costs of
cleaning, security and janitorial service (including costs of materials and
equipment); utilities and
-4-
<PAGE>
other costs related to the provision of heat, electricity, telephones and air
conditioning (excluding the cost of electricity for Landlord's electronic data
processing equipment); maintenance and repairs to the Property (including snow
and ice removal, landscaping and gardening, repair and maintenance of parking
areas, and repair of heating and air conditioning equipment, elevators and other
Building components); payments under all service contracts relating to the
operation and maintenance of the Property; management fees; wages, salaries,
benefits, payroll taxes and unemployment compensation insurance for employees of
Landlord or any contractor of Landlord engaged in the cleaning, operation,
maintenance or security of the Property; insurance relating to the Property;
legal fees related to the management of tenants and operation of the Property;
auditing, expenses; amortized capital expenditures made by Landlord; payments
other than taxes (as hereinafter defined) to the Town of Canton (including, but
not limited to, water and sewer charges, fire service fees and other user fees),
supplies and all other expenses customarily incurred in connection with the
operation of first class office buildings.
5.2 Base Operating Cost Amount and Operating Cost Excess. If in any
----------------------------------------------------
calendar year occurring during the term of this Lease, the Operating Costs for
such year exceed the amount of Operating Costs for calendar year 1997, (the
"Base Operating Cost Amount"), Tenant shall pay to Landlord an amount equal to
Tenant's Pro Rata Share of such excess (the "Operating Cost Excess"). Such
amount shall be due and payable within twenty (20) days following receipt by
Tenant of an Operating Cost escalation statement for such year. The Operating
Cost escalation statement shall show in reasonable detail the Operating Costs
for the just-completed year, the total Operating Costs for the Base Year, and
the amount payable by Tenant. If this Lease shall commence or terminate in the
middle of a calendar year, Tenant shall be liable for only that portion of the
Operating Cost Excess in respect of such calendar year represented by a fraction
the numerator of which is the number of days of the term which falls within the
calendar year and the denominator of which is three hundred sixty-five (365).
5.3 Noon-Time Meal Service. In accordance with Exhibit C hereto, Landlord
----------------------
shall provide a noon-time meal service in the Building. Landlord shall offer to
Tenant's employees purchasing lunches at the Building meal service the same
discount on meal prices which Landlord provides to its own employees. In the
first year of the Term, Tenant will pay $0.97 per square foot per year for noon-
time meal service (the "Meal Fee"). In each succeeding year of the Term, Tenant
shall pay the Meal Fee plus such additional amount which Landlord reasonably
calculates covers the increase in expense from the previous year for providing
such meal service. Meal Fees and escalations shall be due and payable quarterly
within twenty (20) days following receipt by Tenant of a meal service statement
for such quarter. Tenant may elect not to participate in the discount meal
program by giving Landlord prior written notice of such election. Tenant's
obligations to pay
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<PAGE>
the Meal Fee and Landlord's discount meal program shall terminate as of the date
sixty (60) days following Tenant's notice.
6. Security Deposit
----------------
Intentionally Omitted.
7. Possession of Premises and Construction
---------------------------------------
Landlord shall be under no obligation to make any repairs, alterations or
improvements to the Premises prior to or at the commencement of the term hereof,
and it is understood and agreed that Tenant will accept the Premises in their
existing physical condition as of the Commencement Date.
8. Use of Premises
---------------
8.1 Tenant agrees that during the term of this Lease the Premises will be
used and occupied solely for the purposes stated on page 2 of this Lease. Tenant
farther agrees that during the term of this Lease: nothing will be done upon or
about the Premises which shall be unlawful, improper, noisy or offensive, or
which may be injurious to or adversely affect the quality or tone of the
Premises or the Building; the Premises will not be overloaded, damaged or
defaced; Tenant will procure all licenses and permits which may be required for
any use made of the Premises (Landlord making no representation, however, that
such licenses or permits will be available); Tenant will not do, or suffer to be
done, or keep or suffer to be kept, or omit to do anything in, upon or about the
Premises which may prevent the obtaining of any insurance on the Premises or any
other portions of the Building, including without limitation, fire, extended
coverage and public liability insurance, or which may make void or voidable any
such insurance, or which may create any extra premiums for, or increase the rate
of, any such insurance. If anything shall be done or kept or omitted to be done
in, upon or about the Premises which shall create any extra premiums for, or
increase the rate of, any such insurance, Tenant shall pay the increased costs
of the same to Landlord upon demand. Such payment shall not, however, constitute
a waiver of any right of Landlord on account of such breach hereunder by Tenant.
9. Services, Repairs, and Alterations
----------------------------------
9.1 Services. (a) Landlord shall provide the services set forth in
--------
Exhibit C attached hereto. Landlord reserves the right to interrupt, curtail,
stop and suspend the furnishing of any services, including without limitation
noon-time meal service and cleaning services, and the operation of elevators and
of the plumbing, electrical, heating, ventilating and air conditioning systems
when necessary by reason of accident or emergency or for repairs, alterations,
replacements or improvements which may become necessary or when it cannot secure
supplies or labor, or by
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<PAGE>
reason of any other cause beyond its control, without liability or any abatement
of rent being due thereby.
(b) Except in the case of emergency repairs, the Landlord shall famish to
the Premises, at the direct expense of Tenant as hereinafter provided,
reasonable electricity for Tenant's permitted office purposes. Landlord shall
grant to Tenant an allowance equal to Two Dollars ($2.00) per square foot per
year for electrical usage for HVAC wall units, electrical outlets and lighting
located within the Premises. At Landlord's election, Landlord may pay for the
installation of a separate electrical meter. If Tenant shall require
electricity in excess of such allowance, Tenant shall, upon demand, reimburse
Landlord quarterly for such additional cost. If Tenant shall require special
data or communication systems or quantities of electricity in excess of normal
office requirements and if (i) in Landlord's judgment, Landlord's facilities are
inadequate for such excess requirements, or (ii) such excess use shall result in
an additional burden on the Building utility systems and additional costs to
Landlord on account thereof, as the case may be, Landlord, in its sole
discretion, and at the sole cost and expense of Tenant, may furnish and install
such additional wires, conduits, feeders, lines, switchboards and related
equipment as reasonably may be required to supply such additional requirements
of Tenant. Tenant shall pay when due all charges made by public or private
utility companies for telephone and other utilities and utility services,
supplied to or consumed upon the Premises, and service inspections made therefor
during the Term (other than those expressly required to be provided by Landlord
hereunder), whether initially charged to Landlord or Tenant and whether
designated as a charge, tax, assessment, fee or otherwise.
9.2 Maintenance and Repair. (a) Tenant shall, at its sole cost and
----------------------
expense, maintain the Premises in good order, condition and repair and shall
make all foreseen and unforeseen and ordinary and extraordinary changes and
repairs required to keep the Premises in good repair and condition including,
without limitation, repairs to doors, locks, hardware, carpets, walls, ceilings,
fixtures, sinks, plumbing within the Premises and interior and exterior glass in
the Premises and cleaning of carpets. Landlord may (but shall be under no
obligation to do so) offer to perform any such maintenance activity for a
reasonable fee to be established by Landlord and paid by Tenant to Landlord in
addition to any other payments pursuant to the terms of this Lease. Tenant shall
wash any dishes and perform any cleaning necessary to maintain in a clean and
sanitary condition, free of all vermin, any kitchen areas or any other areas in
the Premises in which beverages or foods may be prepared or dispensed. If Tenant
fails to maintain the kitchen areas in a clean and sanitary condition, then
Landlord may clean the kitchen areas and Tenant shall pay to Landlord as
additional rent hereunder a reasonable charge determined by Landlord for such
cleaning services.
(b) Landlord shall (i) keep the Building structure, doors, locks and
hardware, and the plumbing not within the Premises, electrical, heating,
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ventilating and air conditioning systems and utility service lines famished by
Landlord in good and serviceable condition and repair (except for any repair or
replacement occasioned by any act or neglect of Tenant, its servants, agents,
customers, contractors, employees or licenses); (ii) keep the sidewalks, common
corridors, stairways, elevators and all other public portions of the Building in
serviceable repair and in a reasonably clean and safe condition; and (iii)
comply with applicable governmental rules, regulations, laws and ordinances
affecting the Building, unless the violation is caused by Tenant or Tenant's use
of the Premises or Tenant's neglect in connection therewith.
9.3 Tenant Improvements and Alterations. Prior to commencing any
-----------------------------------
improvements or alterations to the Premises, including the installation or
modification of telephone communication or data wires, cables and boxes, Tenant
shall obtain the written approval of Landlord, which approval shall not be
unreasonably withheld or delayed, in connection with which Tenant shall submit
to Landlord, prior to commencing such work, detailed plans and specifications,
showing all such work, and the names of all proposed contractors. Electrical
work required by the Tenant will only be performed by the electrician then hired
by the Landlord as the Building Electrician. Tenant shall give Landlord the
opportunity to make the proposed improvements or alterations, at Tenant's
expense. Tenant agrees that it will procure all necessary permits, licenses, and
approvals before commencing any construction upon the Premises. Tenant agrees
that all construction, repairs, installations, alterations, improvements and
removals not done by Landlord ("Tenant Construction") will be done in a good and
workmanlike manner, with a contractor approved by Landlord, in conformity with
all laws, ordinances and regulations of all public authorities and all insurance
inspection or rating bureaus having jurisdiction, and that the structure of the
Building will not be endangered or impaired and that Tenant will repair any and
all damage caused by or resulting from any such Tenant Construction, including,
without limitation, the filling of holes. Tenant must obtain from Landlord prior
written approval (which shall not be unreasonably withheld or delayed) of
proposed work hours and of the timing of delivery of materials and equipment.
Tenant agrees to pay promptly when due all charges for labor and materials in
connection with any work done by Tenant or anyone claiming under Tenant or by
Landlord on behalf of Tenant upon the Premises, so that the Premises will at all
times be free of liens. Tenant agrees to save Landlord harmless from, and
indemnify Landlord against, any and all claims for injury, loss or damage to
person or property caused by or resulting from the doing of any such work.
10. Indemnity and Insurance
-----------------------
10.1 Indemnity. Tenant agrees to save Landlord harmless from, and
---------
indemnify Landlord against, to the extent permitted by law, any and all injury,
loss or damage, and any and all claims for injury, loss or damage, of whatever
nature (i) caused by or resulting from, or claimed to have been caused by or to
have resulted
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<PAGE>
from, any act, omission or negligence of Tenant or anyone claiming under Tenant
(including without limitation, employees and contractors of Tenant), no matter
where occurring, or (ii) occurring upon or about the Premises, unless caused by
the gross negligence of Landlord, its agents, contractors or employees. Landlord
agrees to save Tenant harmless from, and indemnify Tenant against, to the extent
permitted by law, any and all injury, loss or damage, and any and all claims for
injury, loss or damage, of whatever nature caused by or resulting from, or
claimed to have been caused by or to have resulted from, any act, omission or
negligence of Landlord or anyone claiming under Landlord (including without
limitation, employees and contractors of Landlord), no matter where occurring.
This indemnity and hold harmless agreement shall include indemnity against all
costs, expenses and liabilities incur-red in connection with any such injury,
loss or damage or any such claim, or any proceeding brought thereon or in the
defense thereof. To the maximum extent that this agreement may be made effective
according to law, Tenant agrees to use and occupy the Premises and to use such
other portions of the Building as it is herein given the right to use at its
sole risk, and without limiting the generality of the foregoing, if Tenant or
anyone claiming under Tenant or the whole or any part of the property of Tenant
or anyone claiming under Tenant shall be injured, lost or damaged by theft,
fire, water or steam or in any other way or manner, whether similar or
dissimilar to the foregoing, no part of such injury, loss or damage is to be
borne by Landlord or its agents. Tenant agrees that Landlord shall not be liable
to Tenant or anyone claiming under Tenant for any injury, loss or damage that
may be caused by or result from the fault or negligence of any persons occupying
other leased premises within the Building.
10.2 Tenant's Insurance. Tenant shall throughout the term hereof maintain
------------------
general comprehensive public liability insurance with respect to the Premises
and its appurtenances, issued by well-rated insurance companies authorized to do
business in the Commonwealth of Massachusetts and naming Landlord and Tenant as
insureds, in amounts not less than One Million Dollars ($1,000,000) with respect
to injuries suffered in any one accident and not less than Five Hundred Thousand
Dollars ($500,000) with respect to property. Tenant shall keep all personal
property of Tenant and all leasehold improvements made by Tenant fully insured
(for 100% of replacement cost), in well-rated insurance companies authorized to
do business in the Commonwealth of Massachusetts, naming Landlord as additional
insured and Tenant as insured as their respective interests may appear. Tenant
shall deliver to Landlord the policies of all of such insurance, or certificates
thereof, at least thirty (30) days prior to the Commencement Date, and each
renewal policy, or certificate thereof, at least fifteen (15) days prior to the
expiration of the policy it renews. Each such policy shall provide that it may
not be canceled without at least thirty days prior written notice to Landlord.
10.3 Contractor's Indemnity and Insurance. With respect to any additions
------------------------------------
or alterations performed by the Tenant, the Tenant shall require that any
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<PAGE>
contractor indemnify and hold both the Tenant and the Landlord harmless from and
against any liability, claims, losses and expenses arising out of, related to or
resulting from the actions or the conduct of the contractor, its sub-
contractors, employees, agents, or their employees, in the performance of the
work required by the Tenant, whether performed on the Premises of the Tenant or
elsewhere. The contractor shall purchase and maintain insurance that will
protect him from claims which may arise out of or result from the contractor's
operation, whether such operations be by himself or by any sub-contractor or by
anyone directly or indirectly employed by any of them or by anyone for whose
acts any of them may be liable.
11. Access to Premises
------------------
11.1 Landlord's Access. Landlord shall have the right to enter upon the
-----------------
Premises or any part thereof, without charge, at all reasonable times and, in
case of emergency, at any time, to inspect the same, to show the Premises to
prospective purchasers or tenants, and to make or facilitate any repairs,
alterations, additions or improvements to the Premises or any other part of the
Building. Tenant shall not be entitled to any abatement or reduction of rent or
damages by reason of any of the foregoing. No forcible entry shall be made by
Landlord unless such entry shall be reasonably necessary to prevent serous
injury, loss or damage to person or property.
11.2 Tenant's Access: During the period prior to Tenant's occupancy of the
---------------
Additional Space, Tenant shall provide J.J. Wild Inc. of New England access to
the room containing J.J. Wild's telephone equipment. Such access shall be at
reasonable times and during usual business hours.
12. Fire and Other Casualty; Eminent Domain
---------------------------------------
12.1 Fire and Other Casualty. Should a substantial portion of the
-----------------------
Premises, or of the Building be substantially damaged by fire or other casualty,
the Landlord may elect to terminate this Lease. (The terms "substantial" and
"substantially damaged" are herein defined to mean damage as determined by
Landlord's architect to be of a character as cannot reasonably be expected to be
repaired or the Premises restored within 180 days from the time that such repair
or restoration work would be commenced.) The Tenant may elect to terminate this
Lease if:
(a) The Landlord fails to give written notice within sixty (60) days
of its intention to restore the Premises, or
(b) The Landlord fails to restore the Premises to a condition
substantially suitable for Tenant's intended use within one hundred and
eighty (180) days of the date that Landlord notified Tenant of its
intention to restore the Premises.
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<PAGE>
When such fire, casualty, or taking renders the Premises substantially
unsuitable for Tenant's intended use, a just and proportionate abatement of rent
shall be made until the Premises shall be repaired or restored, as aforesaid.
12.2 Eminent Domain.
--------------
(a) If after the execution of this Lease and prior to the expiration
of the term of this Lease the whole of the Premises shall be taken under the
power of eminent domain, then the term of this Lease shall cease as of the time
when Landlord shall be divested of its title in the Premises.
(b) If only a part of the Premises shall be taken under the power of
eminent domain, and if as a result thereof the floor area of the Premises shall
be reduced by more than twenty percent and the part remaining shall not be
reasonably adequate for the operation of the business conducted in the Premises
prior to the taking, Landlord or Tenant may, at its election, terminate the term
of this Lease, by giving the other notice of the exercise of its election within
twenty (20) days after it shall receive notice of such taking, and the
termination shall be effective as of the time that possession of the part so
taken shall be required for public use. If only a part of the Premises shall be
taken under the power of eminent domain and if the term of this Lease shall not
be terminated as aforesaid, then the term of this Lease shall continue in full
force and effect and Landlord shall, within a reasonable time after possession
is required for public use, repair and rebuild what may remain of the Premises
so as to put the same into condition for use and occupancy by Tenant and a just
proportion of the minimum rent according to the nature and extent of the injury
to the Premises shall be suspended or abated until what may remain of the
Premises shall be put into such condition by Landlord, and thereafter a just
proportion of the minimum rent according to the nature and extent of the part so
taken shall be abated for the balance of the term of this Lease. Notwithstanding
the foregoing, Landlord shall not be required to expend in connection with such
repair and rebuilding more than the eminent domain award actually received by
Landlord and allocable to the Premises, nor shall Landlord be required to
restore any leasehold improvements or personal property of Tenant.
(c) Landlord reserves to itself, and Tenant assigns to Landlord, all
rights to damages accruing on account of any taking under the power of eminent
domain or by reason of any act of any public or quasi public authority for which
damages are payable. Tenant agrees to execute such instruments of assignment as
may be reasonably required by Landlord in any proceeding for the recovery of
such damages if required by Landlord, and to turn over to Landlord any damages
that may be recovered in such proceeding. It is agreed and understood, however,
that Landlord does not reserve to itself, and Tenant does not assign to
Landlord, any damages payable for movable fixtures installed by Tenant at
Tenant's sole cost or for moving expenses of Tenant.
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<PAGE>
13. Defaults
--------
13.1 Grace Periods, Defaults, Lease Termination. (A) If Tenant shall
------------------------------------------
default in the payment of rent or any other payment required of Tenant, or (B)
if Tenant shall default in the performance or observance of any other agreement
or condition on its part to be performed or observed hereunder, and such default
shall not be corrected within fifteen (15) days after written notice thereof, or
(C) if any person shall levy upon, or take this leasehold interest or any part
thereof upon, execution, attachment or other process of law, or (D) if Tenant
shall make an assignment of its property for the benefit of creditors, or (E) if
Tenant shall be declared bankrupt or insolvent according to law, or (F) if any
bankruptcy or insolvency proceedings shall be commenced by or against Tenant, or
(G) if a receiver, trustee or assignee shall be appointed for the whole or any
part of Tenant's property, or (H) if the individual tenant named herein shall
die or become disabled or shall otherwise cease to be the "principal" and
manager of the business conducted by Tenant in the Premises, or (I) if Tenant
abandons the Premises, then, in any of such cases, Landlord lawfully may,
immediately or at any time thereafter, and without any further notice or demand,
enter into and upon the Premises, or any part thereof in the name of the whole,
by force or otherwise, and hold the Premises as if this Lease had not been made,
and expel Tenant and those claiming under it and remove its or their property,
without being taken or deemed to be guilty in any manner of trespass (or
Landlord may send written notice to Tenant of the termination of the term of
this Lease), and upon entry as aforesaid (or in the event that Landlord shall
send to Tenant notice of termination as above provided, on the fifth (5th) day
next following the date of the sending of the notice), the term of this Lease
shall terminate. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed for any cause, or in the event Landlord terminates this
Lease as provided in this article.
13.2 Rent Indemnity. In case of any such termination, Tenant shall
--------------
indemnify Landlord each month against all loss of rent and all obligations which
Landlord may incur by reason of any such termination between the time of
termination and the expiration of the term of this Lease, or, at such election
of Landlord, exercised at the time of the termination or at any time thereafter,
Tenant shall pay to Landlord as damages the aggregate amount of rent and other
payments provided herein to be paid by Tenant to Landlord through the time when
the term of this Lease would have expired but for the default by Tenant, on an
accelerated basis. It is understood and agreed that at the time of the
termination or at any time thereafter Landlord may rent the Premises, and for a
term which may expire after the expiration of the term of this Lease, without
releasing Tenant from any liability whatsoever, that Tenant shall be liable for
any expenses incurred by Landlord in connection with obtaining possession of the
Premises with removing from the Premises property of Tenant and persons claiming
under Tenant (including warehouse charges), with putting the Premises into
condition for reletting and with
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<PAGE>
any reletting, including without limitation, attorneys' fees and brokers' fees,
and that any monies collected from any reletting shall be applied first to the
foregoing expenses and then to the payment of Rent and all other payments due
from Tenant to Landlord.
14. Subordination to Mortgages
--------------------------
This lease is subject and subordinate in all respects to all mortgages
which may be hereafter be placed on or affect this Lease, the Building, or
Landlord's interest or estate therein, and to each advance made or hereafter to
be made under any such mortgages, and to all renewals, modifications,
consolidations, replacements, and extensions thereof and all substitutions
therefor. This Section shall be self-operative and no further instrument of
subordination shall be required. In confirmation of such subordination, Tenant
shall execute and deliver within ten (10) days any certificate acknowledging or
confirming such subordination that Landlord or any mortgagee or their respective
successors in interest may request.
15. Estoppel Certificate
--------------------
Within seven (7) days after each request by Landlord, Tenant shall deliver
to Landlord and/or to any mortgagee a certificate stating that Tenant has
entered into occupancy of the Premises in accordance with the provisions of this
Lease, that this Lease is in full force and effect, and any other information
reasonably requested.
16. Assignment, Subletting, Other Transfer
--------------------------------------
16.1 Prohibited Transfers. Tenant shall not assign, mortgage, pledge or
--------------------
otherwise encumber this Lease or any interest herein, or sublet the whole or any
part of the Premises, or permit the occupancy thereof by anyone other than
Tenant, or, if Tenant shall be a corporation or partnership, permit any change
in the control of Tenant, whether by transfer of stock, transfer of partnership
interest or otherwise without Landlord's prior written consent which consent
shall not be unreasonably withheld or delayed. Notwithstanding the immediately
preceding sentence, Tenant may assign this Lease to a corporation which owns and
controls Tenant's stock or a wholly-owned subsidiary of Tenant.
16.2 Tenant's Continuing Liability; Excess Rent; Landlord's Expenses. If
---------------------------------------------------------------
this Lease is assigned, or if the Premises or any part thereof be sublet and
occupied by anybody other than Tenant and its employees, Tenant shall remain
liable to Landlord for the payment of all rent and for the full performance of
the covenants and conditions of this Lease. In the event of an assignment or
sublease of this Lease by the Tenant at a Rent (including the additional charges
hereinabove described) in excess of that then being charged the Tenant then an
amount equal to such excess shall be paid by the Tenant to the Landlord.
Landlord shall be entitled to any consideration received by Tenant in connection
with the assignment/sublease
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<PAGE>
of the Premises. Tenant shall, upon demand, reimburse Landlord for the legal
fees and expenses incurred by Landlord in processing such assignment or
sublease.
17. Surrender
---------
The Tenant shall at the expiration or other termination of this Lease
remove all Tenant's goods and effects from the Premises, including, without
hereby limiting the generality of the foregoing, all signs and lettering affixed
or painted by the Tenant, either inside or outside the Premises, and Tenant's
telephone, data and communication wiring. Tenant shall deliver to the Landlord
the Premises and all keys, locks thereto and other fixtures connected therewith
and all alterations and additions made to or upon the Premises, in the same
condition as they were put in during the term hereof, reasonable wear and tear
and damage by fire or other casualty only excepted. In the event of the
Tenant's failure to remove any of the Tenant's property from the Premises,
Landlord is hereby authorized, without liability to Tenant for loss or damage
thereto, and at the sole risk of Tenant, to remove and store any of the property
at Tenant's expense, or to retain same under Landlord's control or to sell at
public or private sale, without notice, any or all of the property not so
removed and to apply the net proceeds of such sale to the payment of any sum due
hereunder, or to destroy such property.
18. Holding Over
------------
If Tenant or anyone claiming under Tenant shall remain in possession of the
Premises or any part thereof after the expiration of the term of this Lease
without any agreement in writing between Landlord and Tenant with respect
thereto, the person remaining in possession shall prior to acceptance of rent by
Landlord be deemed a tenant at sufferance and after acceptance of rent by
Landlord a tenant at will, subject to the provisions of this Lease insofar as
the same may be made applicable to a tenancy at will, provided that minimum rent
shall be payable during such period as such person shall continue to hold the
Premises or any part thereof at twice the highest rate payable during the term
hereof.
19. Waivers
-------
Failure of either Landlord or Tenant to complain of any act or omission on
the part of the other, no matter how long the same may continue, shall not be
deemed to be a waiver by Landlord or Tenant of any of its respective rights
hereunder. No waiver by Landlord or Tenant at any time, express or implied, of
any breach of any provision of this Lease shall be deemed a waiver of a breach
of any other provision of this Lease or a consent to any subsequent breach of
the same or any other provision.
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<PAGE>
20. Rules and Regulations
---------------------
Tenant shall observe and comply with, and shall cause its subtenants and
concessionaires and its and their employees and agents to observe and comply
with, reasonable building rules and regulations from time to time promulgated by
Landlord.
21. Failure of Performance
----------------------
21.1 Right to Cure. If Tenant shall default in the performance or
-------------
observance of any agreement or condition in this Lease contained on its part to
be performed or observed, other than an obligation to pay money, and shall not
cure such default within thirty (30) days after notice from Landlord specifying
the default, Landlord may, at its option, without waiving any claim for damages
for breach of agreement, at any time thereafter cure such default for the
account of Tenant, and any amount paid or any contractual liability incurred by
Landlord in so doing shall be deemed paid or incurred for the account of Tenant,
Tenant agreeing to reimburse Landlord promptly therefor or save Landlord
harmless therefrom. Landlord may cure any such default as aforesaid prior to the
expiration of said waiting period, but after notice to Tenant, if the curing of
such default prior to the expiration of said waiting period is reasonably
necessary to protect the real estate or Landlord's interest therein or to
prevent injury or damage to persons or property. If Tenant shall fail to
reimburse Landlord upon demand for any amount paid for the account of Tenant
hereunder, such amount shall be added to and become due as a part of the next
payment of rent due hereunder.
21.2 Costs of Enforcement. If Landlord shall commence legal proceedings
--------------------
against Tenant on account of a default by Tenant in the performance or
observance of any agreement or condition in this lease contained on the part of
Tenant to be performed or observed, in addition to all other amounts payable by
Tenant under this Lease, Tenant shall pay to Landlord, as additional rent, on
demand the costs and expenses, including but without limitation reasonable
attorneys' fees, incurred by Landlord in connection with such proceedings.
22. Definitions and Interpretations
-------------------------------
22.1 "Landlord" and "Tenant." The words "Landlord" and "Tenant" and the
------------------------
pronouns referring thereto, as used in this Lease, shall mean, where the context
requires or admits, the persons named herein as Landlord and as Tenant
respectively, and their respective heirs, legal representatives, successors and
assigns, irrespective of whether singular or plural, masculine, feminine or
neuter. The foregoing shall not be construed to give any rights to Tenant that
shall conflict with the terms of Article 16. The word "Landlord" as used herein
shall mean, however, only the owner for the time being of the landlord's
interest in this lease, i.e., in the event of any transfer of the landlord's
interest in this Lease the
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<PAGE>
transferor shall cease to be liable for, and shall be released from all
liability for the performance and observance of, any agreements or conditions on
the part of Landlord to be performed or observed subsequent to the time of such
transfer, it being understood and agreed that from and after such transfer
Tenant shall look solely to the transferee for the performance and observance of
such agreements and conditions.
22.2 Joint and Several Liability. If Tenant shall consist of more than one
---------------------------
person or if there shall be a guarantor of Tenant's obligations under this
Lease, then the liability of all such persons, including the guarantor, if any,
shall be joint and several, and the word "Tenant" as used in clauses (D), (E),
(F) and (G) of Paragraph 13.1 of this Lease shall be deemed to mean any one or
more of such persons.
22.3 Interpretation. It is agreed that if any provisions(s) of this Lease
--------------
shall be determined to be void by any court of competent jurisdiction such
determination shall not affect any other provision(s) of this Lease, all of
which other provisions shall remain in full force and effect, and it is the
intention of the parties hereto that if any provision of this Lease is capable
of two constructions one of which would render the provision void and the other
of which would render the provision valid, the provision shall have the meaning
which renders it valid.
22.4 Entire Agreement. This instrument contains the entire and only
----------------
agreement between the parties, and no oral statements or representations or
prior written matter not contained in this instrument shall have any force or
effect. This Lease may not be modified in any way except by a writing subscribed
by both parties.
22.5 Limitation of Landlord's Liability. The term "Landlord", as used in
----------------------------------
this Lease, so far as covenants or obligations to be performed by Landlord are
concerned, shall be limited to mean and include only the owner or owners at the
time in question of the Building, and in the event of any transfer or transfers
of title to said Building, the Landlord herein named (and in case of any
subsequent transfers or conveyances, the then grantor) shall be automatically
freed and relieved from and after the date of such transfer or conveyance of all
liability as respects the performance of any covenants or obligations on the
part of the Landlord contained in this Lease thereafter to be performed, it
being intended hereby that the covenants and obligations contained in this Lease
on the part of Landlord shall, subject as aforesaid, be binding on the Landlord,
its successors and assigns, only during and in respect of their respective
successive periods of ownership of the Property. Tenant, for itself and for its
successors and assigns, agrees it shall not assert nor seek to enforce any claim
for breach of this Lease against any of Landlord's assets other than Landlord's
interest in the Building and Appurtenant Land and Improvements and in the rents,
issues and profits thereof, and Tenant agrees to look solely to such interest
for the satisfaction of any liability of or claim
-16-
<PAGE>
against Landlord under this Lease, it being specifically agreed that in no event
whatsoever shall Landlord(which term shall include, without limitation, any
beneficiary of any trust of which Landlord is a trustee) ever be personally
liable for any such liability.
23. Notices
-------
All notices and other communications authorized or required hereunder shall
be in writing and shall be given by mailing the same by certified or registered
mail, return receipt requested, postage prepaid. If given to Tenant the same
shall be mailed to Tenant at the Premises, or to such other address as Tenant
may hereafter designate by notice to Landlord; if given to Landlord the same
shall be mailed to Landlord at the address on page 1 of this Lease or such other
address as the Landlord may from time to time advise in writing.
24. Headings
--------
The headings for the various articles and paragraphs of this Lease are used
only as a matter of convenience for reference, and are not to be considered a
part of this Lease or to used in determining the intent of the parties to this
Lease.
25. Governing Law
-------------
This lease is made pursuant to and shall be governed by and construed in
accordance with the Laws of the Commonwealth of Massachusetts.
[this page ends here]
-17-
<PAGE>
In Witness Whereof, Landlord and Tenant have caused this Lease to be
executed, as a sealed instrument, as of the day and year first above written.
WITNESS LANDLORD:
BOSTON MUTUAL LIFE
INSURANCE COMPANY
/s/ Joseph F. Keilty By: /s/ William J. Wahl
- ------------------------------------- -------------------
Title: William J. Wahl, Second Vice
/s/ Nancy B. Cavarretta President
- -------------------------------------
TENANT:
EMBEDDED SUPPORT TOOLS,
CORP.
/s/ Scotty Cole By:/s/ Mark F. Lapham
- ------------------------------------- -------------------------------
Controller, North American Operations Title: CFO, Mark F. Lapham
- ------------------------------------- By: /s/ Peter S. Dawson
-------------------------------
Title: President, Peter S. Dawson
EXHIBITS:
- --------
A - Floor Plans
B - Landlord's Improvements
C - Landlord's Services
D - Rules and Regulations
-18-
<PAGE>
OFFICE LEASE
EXHIBIT A
FLOOR PLANS
-19-
<PAGE>
OFFICE LEASE
EXHIBIT B
LANDLORD'S IMPROVEMENTS
None.
-20-
<PAGE>
OFFICE LEASE
EXHIBIT C
SERVICES PROVIDED BY LANDLORD
Attached to and Made Part of Lease Dated 10/1, 1999
BETWEEN
BOSTON MUTUAL LIFE INSURANCE COMPANY, LANDLORD
AND
EMBEDDED SUPPORT TOOLS, CORP.
A. Water.
B. Heat and air conditioning at levels generally accepted for normal office
use between the hours of 8:00 a.m. and 6:00 p.m., Monday through Friday of
each week except legal holidays. Saturday, Sunday and holidays only by
permission of Landlord. Written requests for Saturday, Sunday and holiday
are required to be given to Landlord prior to 3:00 p.m. on Friday or the
day preceding the holiday. Excessive use during non-normal office hours
will be billed to Tenant.
C. Electricity for normal lighting of the main lobby, elevators, washrooms and
stairs but not for the Premises.
D. Fully automatic elevator service for access to and from the floor on which
the Premises are located.
E. Noon-time meal service Monday through Friday of each week, except legal
holidays or as scheduled by the Landlord.
F. Cleaning of premises and appurtenant areas in accordance with standards
established for Landlord's own area in the Building.
G. Cleaning of window glass, inside and out, once a year.
H. Free use of parking lot for employees and visitors. Tenant will be
provided with the number of reserved parking spaces in Landlord's reserved
parking area set forth on page 2 of this Lease.
-21-
<PAGE>
RULES AND REGULATIONS
---------------------
1. LESSEE may only move or have delivered one office of furniture and
equipment at a time. In the event LESSEE wishes to move or have delivered
more than one office of furniture and equipment at a time, LESSEE must do
so during non-business hours during the week or on a Saturday upon
obtaining LESSOR's approval.
2. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors and halls shall not be obstructed or encumbered by any
LESSEE, nor shall they be used for any purpose other than ingress and
egress to and from the Premises. LESSOR shall keep the sidewalks and curbs
directly in front of said Premises, clean and free from ice and snow.
3. A building directory will be maintained in the lobby of the building at the
expense of the LESSOR and the number of such listings shall be at the sole
discretion of the LESSOR. Such listing shall include the name of LESSEE and
its floor location. No sign, advertisement, notice or other lettering shall
be exhibited, inscribed, painted or affixed by any LESSEE on any part of
the outside or inside of the Premises or building, without the prior
written consent of the Lessor. In the event of violation of the foregoing
by any LESSEE, LESSOR may remove same without any liability and may charge
the expense incurred by such removal to any LESSEE violating this rule.
Interior Premises signs shall be at LESSEE's expense, and shall be of a
size, color and style acceptable to the LESSOR .
4. The sashes, sash doors, skylights, windows and doors that reflect or admit
light and air into the halls, passageways or other public places in the
building shall not be covered or obstructed by any LESSEE, nor shall any
bottles, parcels or other articles be placed on the windowsills.
5. No show cases or other articles shall be put in front of, or affixed to any
part of the exterior of the building, nor placed in the halls, corridors,
vestibules or fire escapes, without the prior written consent of the
LESSOR.
6. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein. All
damages resulting from any misuses of the fixtures shall be borne by the
LESSEE who, or whose servants, employees, agents, visitors, or licensees,
shall have caused same .
7. No LESSEE shall mark, paint, drill into, or in any way deface any part of
the Premises or the building of which they form a part. No boring, cutting
or
-22-
<PAGE>
stringing of wires shall be permitted, except with the prior written
consent of LESSOR, and as the LESSOR may direct.
8. No bicycles, vehicles or animals of any kind shall be brought in or kept
about the Premises, and no cooking shall be done or permitted by LESSEE on
said Premises. No LESSEE shall cause or permit any unusual or objectionable
odors to be produced upon or permeate from the Premises.
9. No space in the building except as provided in individual Leases shall be
used for manufacturing, for the storage of merchandise, or for the sale of
merchandise, goods or property of any kind at auction.
10. No LESSEE shall make, or permit to be made, any unsettling or disturbing
noises or disturb or interfere with occupants of this or neighboring
buildings or premises, or those having business with them, whether by the
use of any musical instrument, radio talking machine, unmusical noise,
whistling, singing, or in any other way. No LESSEE shall throw anything out
of doors, windows, skylights or down the passageways.
11. No LESSEE, nor any of LESSEE's servants, employees, agents, visitors or
licensees, shall at any time bring or keep upon the Premises any flammable,
combustible or explosive fluid, chemical and substance.
12. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any LESSEE, nor shall any changes be made in existing
locks or the mechanism thereof. Each LESSEE must, upon the termination of
his tenancy, return to the LESSOR, all keys for storage and offices, either
furnished to, or otherwise procured by, such LESSEE, and in the event of
the loss of any keys so furnished, such LESSEE shall pay the LESSOR the
cost thereof.
13. All removals, or the carrying in or out of any safes, freight, furniture or
bulky matter of any description must take place during the hours and in the
manner which the LESSOR or its agents may determine from time to time. The
LESSOR reserves the right to inspect all freight to be brought into the
building and to exclude from the building, all freight which violates any
of these Rules and Regulations or the Lease of which these Rules and
Regulations are a part.
14. No LESSEE shall occupy or permit any portion of the Premises leased to him
to be occupied for the possession, storage, manufacture or sale of liquor,
narcotics, dope or any other illegal purpose.
15. LESSOR shall have the right to prohibit any advertising by any LESSEE
which, in LESSOR's opinion, tends to impair the reputation of the building
or its desirability as a building for offices, and upon written notice
from
-23-
<PAGE>
LESSOR, LESSEE shall refrain from or discontinue such advertising.
LESSEE shall not use the name of the building or its owner in any
advertising without the express written consent of the LESSON.
16. No LESSEE shall install or permit the installation or foods, Beverages
cigarettes, machines dispensing goods for sale, including without
limitation, foods, beverages, cigarettes or cigars. No food or beverage
shall be carried in the public halls and elevators of the buildings, except
in closed containers.
17. The Premises shall not be used for lodging or sleeping or for any immoral
or illegal purpose.
18. Canvassing, soliciting and peddling in the building is prohibited and each
LESSEE shall cooperate to prevent the same by notifying the LESSOR. LESSOR
reserves the right to inspect any parcel or package being removed from the
building by LESSEE, its employees, representatives and business invitees.
19. There shall not be used in any space or in the public halls of any
building, either by a LESSEE or by jobbers or others in the delivery of or
receipt of merchandise, any hand trucks, except those equipped with rubber
tires and side guards.
20. All persons employed in the Boston Mutual Life Building are required to
sign the Employee Log Book located at the front door Security Station for
access to the building prior to 7:00 a.m. and after 7:00 p.m. weekdays and
all day Saturday, Sundays and Holidays .
21. All persons employed in the Boston Mutual Life Building are to complete a
Vehicle Registration Card for the motor vehicle they will be parking in
building parking lot. Vehicle registration is to be updated as persons
obtain or change vehicles.
22. On a periodic basis as requested by LESSOR, LESSEE is to provide a list of
its current employees to LESSOR.
-24-
<PAGE>
Exhibit 10.10
LEASE
BY AND BETWEEN
DAVID V. POPOLIZIO TRUSTEE OF
WESTFORD PLAZA TRUST,
LESSOR
AND
EST CORP,
LESSEE
FOR PREMISES LOCATED AT
WESTFORD PLAZA
175 LITTLETON ROAD
WESTFORD, MASSACHUSETTS 01886
LEASE COMMENCEMENT DATE:
JULY 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE NUMBER
<S> <C>
1. PARTIES........................................................ 4
2. PREMISES....................................................... 4
3. SECURITY DEPOSIT............................................... 4
4. TERM........................................................... 4
5. BASIC RENT..................................................... 5
6. RENT ADJUSTMENT................................................ 5
7. COMMON AREA OPERATION.......................................... 5
8. UTILITIES...................................................... 6
9. USE OF LEASED PREMISES......................................... 6
10. COMPLIANCE WITH LAWS........................................... 6
11. FIRE INSURANCE................................................. 6
12. MAINTENANCE OF PREMISES........................................ 7
13. ALTERATIONS AND ADDITIONS...................................... 7
14. ASSIGNMENT/SUB LEASING......................................... 8
15. SUBORDINATION.................................................. 8
16. LESSOR'S ACCESS................................................ 8
17. INDEMNIFICATION AND LIABILITY.................................. 9
18. LESSEE'S LIABILITY INSURANCE................................... 9
19. FIRE, CASUALTY, EMINENT DOMAIN................................. 9
20. DEFAULT AND BANKRUPTCY......................................... 10
21. NOTICE......................................................... 11
22. SURRENDER...................................................... 11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
23. ESTOPPEL CERTIFICATE................................................. 11
24. LESSEE'S WARRANTIES.................................................. 11
25. AMENDMENTS........................................................... 12
26. WAIVER............................................................... 12
27. SIGNAGE.............................................................. 12
28. NOTICE OF LEASE...................................................... 12
29. COVENANT OF QUIET ENJOYMENT.......................................... 12
30. LESSEE'S SELF HELP CLAUSE............................................ 12
31. LESSOR'S EXCULPATION FROM LIABILITY.................................. 13
32. LESSEE AND EMPLOYEE PARKING.......................................... 13
</TABLE>
EXHIBIT A: DESCRIPTION OF PREMISES
EXHIBIT B: RULES AND REGULATIONS
<PAGE>
LEASE
1. PARTIES
David V. Popolizio Trustee of Westford Plaza Trust, LESSOR, which
expression shall include its heirs, successors, and assigns where the context so
admits, does hereby lease to: EST Corp,
LESSEE, which expression shall include its successors, executors,
administrators, and assigns where the context so admits, and the LESSEE hereby
leases the following described premises: Unit 1
2. PREMISES
Being a portion of the building located at 175 Littleton Road in Westford,
Middlesex County, Massachusetts, known as Westford Plaza, ("The Premises")
together with the right to use in common, with others entitled thereto, a
certain space situated in and upon said real estate as shown on a floor plan of
Westford Plaza attached hereto and marked "Exhibit A", containing approximately
609 square feet of floor space, the hallways, stairways, and elevators,
- ---
necessary for access to said leased premises and lavatories nearest thereto,
together with the right to use the parking areas in common with the other
tenants at the Westford Plaza.
3. SECURITY DEPOSIT
Upon execution of this Lease, the LESSEE shall deposit with the LESSOR $600
----
which shall be held as security deposit for the LESSEE'S performance as herein
provided and shall be refunded to the LESSEE at the expiration of this Lease
subject to the LESSEE'S satisfactory compliance with the conditions hereof.
4. TERM
The term of this Lease shall be for two (2) years commencing on 07-01-99
------- --------
and ending on 06-30-01. At the expiration of the initial term of this. Lease,
--------
the LESSEE may cause this Lease to be extended for xxxxx additional xxxxx year
----- -----
term(s). The LESSEE'S right to exercise its right to extend for such xxxxx,
-----
xxxxx year term(s) xxxxx shall be contingent upon LESSEE having delivered
- ----- -----
written notification to LESSOR of its intent to extend this Lease ninety (90)
days prior to the expiration of the original lease term and for each of the
xxxxx term(s); further contingent upon said LESSEE not being in material default
- -----
with respect to any of the terms and conditions of this Lease.
<PAGE>
5. BASIC RENT
The LESSEE shall pay to the LESSOR basic rent at the rate of $7200 per
year, payable in advance in monthly installments of $600 for the first two years
of this Lease. Rents are due and payable on the first of each and every month.
Any rent payments made after the 5th of the month are subject to a 5% penalty.
"Consumer Price Index" as used herein means the Consumer Price Index for
ALL Urban Consumers for Boston, Massachusetts (base year 1982-84=100) known as
the CPI-U, published by the Bureau of Labor statistics of the United States
Department of Labor; or if such Index shall not then be in use, the price index
most nearly comparable thereto, then published by the said Department or
successor thereto.
"Year" shall mean a twelve month period beginning on the commencement date
of this Lease or any anniversary thereof. In no event shall the annual rent
increase be less than 5% each year nor more than 10%.
6. RENT ADJUSTMENT
The LESSEE shall pay to the LESSOR as additional rent the following:
The LESSEE agrees to pay its proportionate share of the real estate taxes
monthly in advance on the first day of each month in twelve (12) equal monthly
installments, but not including any increases to real estate taxes attributable
to improvements made by other tenants in the building.
D. The LESSEE agrees to pay its water bill comprised of actual usage charge
plus the minimum charge as imposed by the Town of Westford, incurred by LESSOR
(or LESSEE if separately metered), as applied to the leased unit, and any
charges or costs associated in procuring proper billing and reading in regard to
said premises, to the extent that such water use is separately metered.
F. Any and all increases shall be prorated should this lease terminate
before the end of any fiscal year. The LESSEE shall make payment within thirty
(30) days of written notice from the LESSOR that such operating expenses, or
increased taxes, are payable by the LESSOR.
7. COMMON AREA OPERATION
LESSOR or LESSOR'S assigns shall continuously throughout the term operate,
manage, equip, light, repair, and maintain the common areas for their intended
purposes and provide for the plowing of snow and sanding and salting of ice on
the parking areas, walk ways, and driveways in the common areas, provided
however that the tenant shall be responsible for the removal of ice and snow
from the sidewalk area directly in front of the described premises. Operation of
the
<PAGE>
common areas shall include, without limitation, landscaping, outdoor lighting,
parking lot maintenance, line painting, sanitary control, sweeping, and trash
removal.
8. UTILITIES
The LESSOR shall provide to the unit, the LESSEE shall pay for the use of
LESSEE'S utilities.
LESSOR shall furnish and LESSEE shall pay for all gas, electricity, heating
fuel, and other utilities required on the leased premises. LESSOR shall be
responsible for cost of metering. LESSOR shall furnish to the LESSEE cold water
and the LESSEE shall pay the minimum quarterly water charges imposed by the Town
of Westford as per subsection d, Section 6 above.
9. USE OF LEASED PREMISES
1. The LESSEE shall use the leased premises for the purpose of an office
and doing all things reasonably connected therewith and shall use the leased
premises for no other purpose without the prior written consent of the LESSOR.
2. The LESSEE agrees that the LESSOR may make, amend, modify, delete, or
add reasonable Rules and Regulations for the use and care of the demised
property, the building for which such is a part, and the common use area, for
the purpose of preventing interference of one tenant with another' s business
and generally resulting in the use of the premises to the benefit of all
LESSEE'S. The LESSEE agrees to comply with all such Rules and Regulations upon
notice to the LESSEE from the LESSOR or upon posting the same in such place
within the building of which the demised property is situated as the LESSORS may
designate; provided that such Rules and Regulations shall apply uniformly to all
of the tenants of such building (see Rules and Regulations attached hereto as
Exhibit B). In addition, the LESSEE and all invitees, licenses, customers, and
guests of the LESSEE shall comply with such Rules and Regulations.
10. COMPLIANCE WITH LAWS
The LESSEE acknowledges that no trade or occupation shall be conducted in
the leased premises or use made thereof which will be unlawful, improper, noisy,
offensive, or contrary to any law or any municipal bylaw or ordinance in force
in the city or town in which the premises are situated.
11. FIRE INSURANCE
The LESSEE shall not permit any use of the leased premises which will make
voidable any insurance on the property of which the leased premises are a part,
or on the contents of said property or which shall be contrary to any law or
<PAGE>
regulation from time to time established by the New England Fire Insurance
Rating Association, or any similar body succeeding to its powers. The LESSEE
shall on demand reimburse the LESSOR, and all other tenants, all extra insurance
premiums caused by the LESSEE'S use of the leased premises, including by not
limited to any increase in fire insurance premiums.
12. MAINTENANCE OF PREMISES
The LESSEE agrees to maintain the leased premises in the same condition as
they are at the commencement of the term or as they may be put in during the
term of this Lease, reasonable wear and tear, damage by fire and other casualty
only excepted, and whenever necessary, to replace plate glass and other glass
therein, acknowledging that the leased premises are now in good order and the
glass whole. The LESSEE shall not permit the leased premises to be overloaded,
damaged, stripped, or defaced, nor suffer any waste.
LESSOR shall be responsible for structural maintenance, keeping in good
order and repair the foundation, roof and exterior of the building, drains,
downspouts, gutters, outside sewer and water service lines and electrical
service to the panes, on the leased premises and sidewalks within Westford
Plaza, as the same were in on the beginning date of this Lease or may be put in
thereafter by the LESSOR, reasonable use and wear and unavoidable casualty and
taking by public authority alone excepted, the LESSEE acknowledges that the same
are now whole and in good order. LESSOR shall not be liable for failure to make
or to install the same to any cause beyond LESSOR'S control. LESSOR agrees that
within a reasonable period of time after written notice specifying the necessary
repairs to him by the LESSEE, he will make such repairs as are reasonably
required.
Provided, however, that any such structural maintenance or repairs required
by the reason of damage to the leased premises due to any act or omission of the
LESSEE, or anyone acting through or under LESSEE, or third persons transacting
business with LESSEE, or if such damage is covered by any policy or policies of
insurance then maintained in effect by the LESSEE, shall be performed by LESSEE
at LESSEE'S expense. LESSEE shall maintain and keep in good order and repair
(and replace if necessary) the remainder of the leased premises not covered by
the foregoing section, including without in any way limiting the generality of
the foregoing, all painting, wall coverings, floor coverings, ceiling,
partitions, windows, doors, fixtures and appurtenances, plumbing, electrical,
air conditioning equipment, and heating equipment.
13. ALTERATIONS AND ADDITIONS
The LESSEE shall not make structural alterations or additions to the leased
premises, but may make nonstructural alterations provided the LESSOR consents
thereto in writing, which consents thereto in writing, which consent shall not
be
<PAGE>
unreasonably withheld or delayed. All such allowed alterations shall be at
LESSEE'S expense and shall be in quality at least equal to the present
construction. Any and all work involved in any alteration or improvement shall
be borne by the LESSEE and such work shall not interfere with the rights or
structures of adjoining and other tenants. LESSEE shall not permit any
mechanics' liens, or similar liens, to remain upon the leased premises for labor
and material furnished to LESSEE or claimed to have been furnished to LESSEE in
connection with work of any character performed at the direction of LESSEE and
shall cause any such lien to be released of record forthwith without cost to
LESSOR. Any alterations or improvements made by the LESSEE shall remain the
property of the LESSOR at the termination of occupancy as provided herein,
unless otherwise agreed to. LESSEE may remove trade fixtures at its cost and the
cost of restoring the premises following the removal of such fixtures shall be
borne by the LESSEE. The cost of removing or dismantling any alterations or
improvements shall be borne by the LESSEE.
14. ASSIGNMENT/SUB LEASING
The LESSEE shall not assign or sublet the whole or any part of the leased
premises without LESSOR'S prior written consent, which consent shall not be
unreasonably withheld or delayed. Not withstanding such consent, LESSEE shall
remain liable to LESSOR for the payment of all rent and for the full performance
of the covenants and conditions of this lease.
15. SUBORDINATION
This Lease shall be subject and subordinate to any and all mortgages, deeds
of trust, and other instruments in the nature of a mortgage, now or at any time
hereafter, a lien or liens on the property of which the leased premises are a
part and provided that the holder of any such mortgage, deed of trust or lien
shall have agreed in writing to recognize this Lease and not disturb LESSEE'S
tenancy hereunder and the LESSEE shall, when requested, promptly execute and
deliver such written instruments as shall be necessary to show the subordination
of this Lease to said mortgages, deeds of trust, or other such instruments in
the nature of a mortgage, provided that LESSEE shall receive written
conformation of the said recognition and non-disturbance of its tenancy.
16. LESSOR'S ACCESS
The LESSOR or agents of the LESSOR may, at reasonable times, enter to view
the leased premises and may remove placards and signs not approved and affixed
as herein provided, and make repairs and alterations as LESSOR should elect to
do and may show the leased premises to others, and at any time within three (3)
months before the expiration of the term, may affix to any suitable part of the
leased premises a notice for letting of the leased premises or property of which
<PAGE>
the leased premises are a part and keep the same so affixed without hindrance or
molestation.
17. INDEMNIFICATION AND LIABILITY
The LESSEE shall save the LESSOR harmless from all loss and damage
occasioned by the use or escape of water or by the bursting of pipes, not caused
by LESSOR, as well as from any claim or damage resulting from the neglect in not
removing snow and ice from the sidewalks bordering upon the premises so leased,
or by any nuisance made or suffered on the leased premises. The LESSOR shall not
be liable for any damage arising from acts of owners or occupants of adjacent or
contiguous property.
18. LESSEE'S LIABILITY INSURANCE
The LESSEE shall maintain with respect to the leased premises and the
property, of which the leased premises are a part, comprehensive public
liability insurance in the amount of $2,000,000 in responsible companies
qualified to do business in Massachusetts and in good standing therein insuring
the LESSOR as well as LESSEE against injury to person or damage to property as
provided. Said property damage insurance to include coverage of any and all
plate glass or other glass on the premises leased by LESSEE. The LESSEE shall
deposit with the LESSOR certificates for such insurance at or prior to the
commencement of the terms, and thereafter within thirty (30) days prior to the
expiration of any such policies. All such insurance certificates shall provide
that such policies shall not be canceled without at least ten (10) days prior
written notice to each assured named therein. LESSOR shall carry public
liability insurance, fire insurance and other hazard insurance as is necessary
hereunder.
19. FIRE, CASUALTY, EMINENT DOMAIN
Should a substantial portion of the leased premises, or of the property of
which they are a part, be substantially damaged by fire or other casualty, or be
taken by eminent domain, the LESSOR may elect to terminate this lease. Provided
however that if such damage insurance proceeds together with sums provided by
the LESSEE are sufficient to repair such damage of replaced property so taken to
the satisfaction of LESSEE then premises shall be repaired or such property
taken replaced. When such fire, casualty, or taking renders the leased premises
substantially unsuitable for their intended use, a just and proportionate
abatement of rent shall be made, and the LESSEE may elect to repair or replace
the leased premises at LESSEE'S expense or to terminate this Lease if:
A. The LESSOR fails to give written notice within the thirty (30) days of
said fire, casualty or taking of his intention to restore leased premises, or
<PAGE>
B. The LESSOR fails to restore the leased promises to a condition
substantially suitable for their intended use within ninety (90) days of said
fire, casualty, or taking.
The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights which
the LESSEE may have for damages or injury to the leased premises for any taking
by eminent domain, except for damage to the LESSEE'S fixtures, property, or
equipment.
20. DEFAULT AND BANKRUPTCY
LESSOR shall retain all rights to recover possession as provided by law,
upon LESSEE'S failure to pay rent or to honor any other covenant as herein
agreed.
The LESSEE covenants and agrees to indemnify and hold harmless the LESSOR
from and against any and all loss of rent, damages and other expenses, including
reasonable attorneys fees, brokerage, and costs of reletting incurred by the
LESSOR by reason of termination due to LESSEE'S default; the reasonable cost
incurred in cleaning and repainting the premises in order to relet the same; and
moving and storage charges incurred by LESSOR in moving LESSEE'S belongings
pursuant to eviction proceedings. The LESSEE further agrees that it will upon
demand pay to the LESSOR in the event of such termination a sum equal to the
amount by which the rent and other charges herein reserved for the balance of
the term herein above specified exceeds the fair rental value of the premises
for the balance of said term. It is mutually agreed and understood that in case
at any time default shall be made by the LESSEE in the payment of any rent upon
the day when the same shall become due and payable and such default shall
continue for ten (10) days, or in case default shall be made by the LESSEE in
the performance of any of the other terms, conditions or covenant of said Lease
by said LESSEE to be performed, other than the covenant for the payment of rent,
and said default shall continue for a period or thirty (30) days after the
service of written notice of such default by the LESSOR (no notice of default in
the payment of rent being necessary) then the LESSOR may enter into and upon the
demised premises or any part thereof and repossess the same, with or without
termination this Lease and without prejudice to any of his remedies for rent or
breach of covenant and in any such event may at his election terminate said
Lease by giving written notice of his election so to do, or may, at this option,
let the premises or any part thereof as the agent of the LESSEE or otherwise.
The foregoing rights and remedies given to the LESSOR are, and shall be deemed
to be an election excluding the exercise by LESSOR at any other or different
time of a different or inconsistent remedy, and shall be deemed to be given to
said LESSOR by the terms of this Lease or by law; and the failure upon the part
of the LESSOR at any time to exercise any rights or remedy hereby given to him
shall not by deemed to operate as a waiver by him of his right to exercise such
right or remedy at any other or future time.
<PAGE>
21. NOTICE
Any notice from the LESSOR to the LESSEE relating to the leased premises or
to the occupancy thereof, shall be deemed duly served, if left at the leased
premises addressed to the LESSEE or, if mailed to the leased premises, certified
mail, return receipt requested, postage prepaid, addressed to the LESSOR at such
address as the LESSOR may from time to time advise in writing. All rent and
notices shall be paid and sent to the LESSOR at 175 Littleton Road, Westford, MA
01886. Service by Constable showing delivery to the premises, in case of LESSEE,
or to LESSOR'S address as described herein shall be an acceptable method of
giving notice.
22. SURRENDER
The LESSEE shall at the expiration or other termination of this Lease
remove all LESSEE'S goods and effects from the leased premises, (including,
without hereby limiting to trade fixtures). LESSEE shall deliver to the LESSOR
the leased premises and all keys, locks thereto, and other fixtures connected
therewith, and all alterations and additions made to or upon the leased
premises, broom clean and in the same condition as they were at the commencement
of the terms, or as they were put in during the term hereof, reasonable wear and
tear and damage by fire or other casualty only excepted. In the event of the
LESSEE'S failure to remove any of LESSEE'S property from the premises, LESSOR is
hereby authorized without liability to LESSEE for loss or damage thereto, and at
the sole risk of LESSEE, to remove and store any of the property at LESSEE'S
expense, or to retain same under LESSOR'S control or to sell at public or
private sale without notice, any or all of the property not so removed and to
apply the net proceeds of such sale to the payment of any sum due hereunder, or
to destroy such property.
23. ESTOPPEL CERTIFICATE
Each party shall from time to time, upon not less than twenty (20) days
prior to written request by the other, execute, acknowledge, and deliver to the
other a statement in writing certifying that this Lease is in full force and
effect as modified, and stating the modifications and the date to which the
rental and other charges have been paid in advance, if any, it being intended
that any such statement may be relied upon by any prospective purchaser of the
fee, mortgagee, assignee, or sublessee of the leasehold estate.
24. LESSEE'S WARRANTIES
LESSEE warrants and represents to the LESSOR that it is authorized to enter
into this Lease and that the LESSEE is authorized pursuant to the laws of the
Commonwealth of Massachusetts to conduct business in Massachusetts.
<PAGE>
25. AMENDMENTS
This Lease may be modified only in writing and signed by the LESSOR and
LESSEE. Said amendment will take effect and be binding to the LESSOR and LESSEE
upon the execution of the amendment. Upon the request of either party, and if
necessary, a written declaration of amendment will be executed and duly
recorded.
26. WAIVER
One or more waivers of the breach of covenant or condition by either party
shall both be construed as a waiver of a further breach of the same covenant or
condition of this Lease.
27. SIGNAGE
LESSEE, receiving written consent from LESSOR may erect and maintain a sign
attached to the storefront of the leased premises, both of which shall comply
with the requirements of the Town of Westford Zoning Bylaws. No individual
freestanding sign shall be allowed. In any event, no sign may be erected
anywhere on the leased premises without LESSORS express written approval.
28. NOTICE OF LEASE
This Lease is not to be recorded. However, at LESSOR'S request, the parties
hereto shall execute a Notice of Lease in a form sufficient to be recorded at
the appropriate Registry of Deeds.
29. COVENANT OF QUIET ENJOYMENT
LESSOR covenants that upon LESSEES compliance with the terms of this Lease,
LESSEE may use and occupy the leased premises throughout the full term,
including extensions, without any disturbance by LESSOR or any party claiming
by, through, or under LESSOR.
30. LESSEE'S SELF HELP CLAUSE
In the event that LESSOR shall fail to make any repair, or to perform any
obligation to maintain required by this Lease within thirty (30) days after
written notice from LESSEE, then LESSEE may, upon the ten (10) days prior
written notice to LESSOR, make such repairs or perform such maintenance at
LESSOR'S expense and LESSOR shall pay LESSEE for sums incurred or paid in
connection therewith upon presentment of written itemization of costs incurred.
<PAGE>
31. LESSOR'S EXCULPATION FROM LIABILITY
If the LESSOR sells or transfers its fee interest in the property, he will
be relieved of responsibility for future LESSOR obligations under the Lease.
Furthermore, the LESSOR is not to be personally responsible under the Lease by
recourse can only be made to the premises in the event of a LESSOR default.
32. LESSEE AND EMPLOYEE PARKING
LESSEE and LESSEE'S employees are to park in the rear of the premises or in
the parking area nearest Rt 110, and in no event will they be allowed to park in
the parking area directly in front of the Westford Plaza.
IN WITNESS WHEREOF, the LESSOR and LESSEE set their hands and seals this
14th day of June, 1999.
---- ----
/s/ David Popolizio, Trustee /s/ John T. W. Baggott Vice President
- ---------------------------- --------------------------------------
EST Corp.
LESSOR: Westford Plaza Trust LESSEE:
By: David V. Popolizio, Trustee
______________________________________
LESSEE:
In consideration of the covenants contained herein, the execution of the
LEASE by the LESSOR and the sum on One ($1.00) Dollar paid by the LESSOR to the
undersigned Guarantor, the receipt and sufficiency of which is hereby
acknowledged, the undersigned does hereby guarantee performance by the LESSEE of
each and every covenant of the LESSEE and shall stand bound jointly and
severally to the terms and conditions of the Lease as if named herein as LESSEE.
Witness my hand seal this ____ day of ____________, _____.
_____________________________________
By: , Individually
Receipt of the security deposit totaling $600 is hereby acknowledged.
----
/s/ David V. Popolizio, Trustee
-------------------------------
By: Westford Plaza Trust
David V. Popolizio, Trustee
<PAGE>
EXHIBIT "B"
RULES AND REGULATIONS ATTACHED TO
AND MADE PART OF THIS LEASE
---------------------------
1. No sign, placard, picture, advertisement, name, or notice shall be
inscribed, displayed, printed, or affixed on, or to any part of the outside of
the building without prior written consent of LESSOR. LESSOR shall have the
right to remove any such sign, placard, advertisement, name or notice without
notice to and at the expense of LESSEE.
All approved signs or lettering on doors shall be printed, painted,
affixed, or inscribed at the expense of LESSEE by a person approved of by
LESSOR. LESSEE shall submit to LESSOR a proposed sign for review by LESSOR
pursuant to this paragraph. LESSEE shall not pace anything or allow anything to
be placed near the glass of any window, door, partition, or wall which may in
LESSOR'S opinion appear unsightly from outside the premises.
2. No LESSEE shall have property stored outside, except with the prior consent
of LESSOR.
3. All sidewalks, halls, passages, exits, entrances, elevators, and stairways
of the building, if any, shall not be obstructed by any LESSEE or used by him
for any purpose other then for ingress to and egress from his respective
premises. Entrance doors to the premises will not be held open by any means
except an approved door stop. No LESSEE and no employees or invitees of LESSEE
shall go up on the roof of the building.
4. LESSEE shall not alter any lock nor install any new or additional locks or
any bolts on any door of the premises without prior written consent of LESSOR.
The LESSOR shall be furnished with a copy of keys to LESSEE'S rental space.
5. LESSEE shall not overload the floor of the premises or mark, drive nails,
screw, or drill into the partitions, woodwork, or plaster, or in any way deface
the premises or any part thereof.
6. LESSEE shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the premises, or permit or suffer the premises to be
occupied or used in a manner offensive or objectionable to LESSOR or other
occupants of the building by reason of noise, odors, and/or vibrations, or
interfere in any way with other LESSEES or those having business therein, nor
shall any animals or birds be kept in or about the premises of the building.
7. No cooking shall be done or permitted by LESSEE on the premises, nor shall
the premises be used for washing clothes, for lodging, or for any improper,
objectionable, or immoral purposes.
<PAGE>
8. LESSEE shall not use or keep in the premises any kerosene, gasoline, or
inflammable or combustible fluid or material, or use any method of heating or
air conditioning other than that supplied by LESSOR.
9. LESSOR will direct electricians as to where and how telephone and telegraph
wires are to be introduced. No boring or cutting for wires will be allowed
without the written consent of LESSOR. The location of telephones, call boxes,
and other office equipment affixed to the premises shall be subject to the
written approval of LESSOR.
10. Each LESSEE, upon the termination of his Lease, shall deliver to the LESSOR
the keys of the offices, rooms, and toilet rooms which shall have been furnished
to LESSEE or which the LESSEE shall have had made, and in the event of loss of
any keys so furnished, shall pay the LESSOR therefor.
11. LESSOR reserves the right to exclude or expel from the building any person
who, in the judgment of LESSOR, is intoxicated or under the influence of liquor
or drugs, or who shall in any manner do any act in violation of any of the Rules
and Regulations of this building.
12. No vending machine or machines of any description shall be installed,
maintained, or operated upon the premises without the written consent of the
LESSOR.
13. LESSEE shall not disturb, solicit, or canvass any occupant of the building
and shall cooperate to prevent the same.
14. LESSEE'S use of the Common Areas shall be limited to access and parking
purposes and under no circumstances shall LESSEE be permitted to store any goods
or equipment, conduct any operations or construct or place any improvements,
barriers or obstructions in the Common Areas, or otherwise adversely affect the
appearance thereof.
15. The moving of equipment, furniture, and freight into or out of the demised
premises shall occur only on previous notice to LESSOR and at such times as
LESSOR shall designate. The person employed to move such equipment, furniture,
or freight in and out of the building must be acceptable to LESSOR. No
equipment, furniture, or freight of any description shall be received into the
building except the hours designated by LESSOR.
LESSOR shall in all cases have and retain the power to prescribe the
weight, proper position, and manner of support under all heavy furniture,
equipment, and freight, and all damage done to the building by moving in or
moving out any equipment, furniture, or freight, or during the time it is in or
on the premises, shall be repaired at the expense of LESSEE, but by contractors
or mechanics named by LESSOR.
<PAGE>
16. No pets are to be kept by LESSEE in or on the premises, or allowed to enter
the premises, except in the case of a "seeing eye" dog.
17. LESSOR reserves the right to make such other and further nondiscriminatory
Rules and Regulations as in its judgment may be necessary or desirable for the
safety, care, and cleanliness of the premises and the building, for the
preservation of good order therein.
18. Where the provisions of the Rules and Regulations conflict with the main
body of Lease, the terms of the Lease shall control.
LESSOR'S Initials ___________________ LESSEE'S Initials ______________
<PAGE>
EXHIBIT 10.11
LEASE AND SERVICE AGREEMENT
This Agreement is made this 8/th/ day of July, 1998, by and between ANI Dallas,
----- ---- ----
Inc., dba ALLIANCE Business Centers ("Lessor") having offices known and numbered
as Suite 600 (the "Facility") in the building located at Madison (the
"Building") and Embedded Support Tools Corp., ("Lessee") a(n) (corporation) with
an address of 15851 N. Dallas Parkway, Dallas, TX 75248. The parties for
themselves, their heirs, legal representatives, successors and assigns, agree as
follows:
1. Demise and Description of Property.
----------------------------------
a. Lessor leases to Lessee and Lessee leases from Lessor, the "Premises"
(defined below), being a subpart of Lessors total leased Facility space, for the
term and subject to the conditions and covenants hereinafter set forth and to
all encumbrances, restrictions, zoning laws, regulations or statutes affecting
the Building, Facility or Premises.
b. The Premises consists of Facility office space number(s) 665 as shown
in the floor plan annexed hereto. Lessor hereby grants Lessee the privilege to
use in common with other lessees and parties that Lessor may designate certain
office amenities located in the Facility; the use of all of which are subject to
such reasonable rules and regulations as Lessor currently has in place and may
adopt from time to time. The amenities are more particularly described in
attached Exhibit "A." "The Operating Standards" as presently in place and
governing the use of the Premises and the Facility are attached in Exhibit "B".
2. Use.
---
a. The Premises shall be used by Lessee solely for (general business use)
and such other normally incident uses and for no other purpose, in strict
accordance with the Operation Standards. Additionally, Lessee shall not offer at
the Premises any services which Lessor provides to its lessees, including, but
not limited to those amenities or services described in attached Exhibit "A". In
the event Lessee breaches any provision of this paragraph, Lessor shall be
entitled to exercise any rights or remedies available to the Lessor pursuant to
this Agreement together with such other rights and remedies as the Lessor may
otherwise have and choose to exercise.
b. Lessee shall not make nor permit to be made any use of the Premises
which would violate any of the terms of this Agreement or which, directly or
indirectly, is forbidden by statute, ordinance or government regulations, which
may be dangerous to life, limb or property, which may invalidate or increase the
premium of any policy of insurance carried on the Building or on the Facility,
which will suffer or permit the Premises to be used in any manner or anything to
be
<PAGE>
brought into or kept there which, in the sole judgment of Lessor, shall in any
way impair or tend to impair the high quality character, reputation or
appearance of the Building or the Facility, or which may or tend to impair or
interfere with any services performed by Lessor for Lessee or for others.
3. Term.
----
a. The term of this Agreement shall be for a period of 6 months,
commencing 9:00 a.m. on the 15th day of July, 1998, and ending 5:00 p.m. on the
15th day of January, 1999, unless renewed as provided in paragraph "3(b)"
herein.
b. Upon the ending term date set forth herein or any extension thereof,
the Agreement shall be extended for the same period of time as the initial term
and upon the same terms and conditions as herein contained except for the amount
of base rental charges, which shall each be increased by seven percent (7%),
unless either party notifies the other in writing by certified or registered
mail, return receipt requested, or delivered by hand that the Agreement shall
not be extended within the period hereinafter specified or automatically
renewed. If Lessee has less than three offices, such notice shall be given at
least 60 days prior to the expiration date of this Agreement. If Lessee has
three or more offices, such notice shall be given at least 90 days prior to the
expiration date of this Agreement.
c. In the event the entire Premises or the Facility are damaged, destroyed
or taken by eminent domain or acquired by private purchase in lieu of eminent
domain so as to render the Premises fully untenantable and unrestorable in
Lessor's sole judgment, then within 90 days thereafter by written notice to the
other party, either party shall be able to terminate this Agreement, which will
terminate as of the date thereof.
4. Rent.
----
a. For and during the term of this Agreement, Lessee shall pay Lessor as
rent for the Premises a total semi-annual rental of $4,410, payable in equal
monthly installments of $735, each payable in advance of the first day of each
calendar month after the commencement of the term, or a daily prorated amount
for any partial calendar month during the term. If any payment of rent or other
charges due under this Agreement is not received within five (5) calendar days
after its due date, the Lessee will also pay, as additional rent, a late payment
charge which shall be an amount equal to 10% of any amount owed to Lessor or $50
whichever is greater.
b. It is additionally specifically covenanted and agreed that the
financial terms of this Agreement are strictly confidential and Lessee agrees
not to knowingly or willfully divulge this information to any other Lessee or
potential Lessee of Lessor. Any such disclosure by the Lessee of the financial
terms of this Agreement as set forth herein above, shall constitute a material
breach of this Lease.
-2-
<PAGE>
c. The first such payment of rental as well as the payment of the Deposit
as set forth in below shall be paid by Lessee simultaneously with execution of
this Agreement. Should the Lessee fail to make such payment prior to die
commencement of the term of this Agreement, then, at Lessor's sole option, the
Agreement shall be null and void and of no further effect.
d. The rental payable during the term of this Agreement shall be increased
oil the first day of the month following notification of any rental increase
(however designated) which the Lessor might receive from (the Lessor's over-
landlord ("Building"). The term " direct expenses" as used herein shall refer to
the same items and costs is are used by the Building in its determination of
expenses and costs passed on to Lessor. Lessor shall immediately notify Lessee
in writing of any such increase, and shall bill Lessee for its pro rata share
thereof, which bill Lessee shall pay promptly upon such notification for each
and every month thereafter for the balance of the term.
e. Rent charges are based on the value of the rental Premises and services
to be used by 1 person(s) only. If more than said number of person(s) habitually
use the Premises or services, the Fixed Monthly Rental Charges will be increased
by a factor of $150 for each additional person who habitually uses the Premises.
f. If a Lessee check is returned for any reason, Lessee will pay an
additional charge of $100.00 per returned check and, for the purpose of
considering default and/or late charges, it will be as if the payment
represented by the returned check had never been made.
5. Security Deposit.
----------------
a. Lessee shall deposit with Lessor $735, or the equivalent of one months
rent, in good or certified funds, as a non-interest bearing security deposit.
Lessor may use the security deposit to cure any default of Lessee under this
Agreement, restore the Premises including any and all furniture, fixtures and
equipment provided by Lessor and vendors at the Premises to their original
condition and configuration, reasonable wear and tear excepted, to pay for
repairs to any damage to the Premises, Executive Suite or Building, caused by
Lessee or Lessee's guests, to pay any rent or other charges which Lessee owes
Lessor at or prior to the expiration of this Agreement, and to reimburse Lessor
for costs or expenses arising from any other obligation of Lessee which Lessee
has failed to perform. If Lessor transfers control or ownership of the Premises
and Lessor transfers the security deposit to such purchaser, Lessee will look
solely to the new Lessor for the return of the security deposit, and the Lessor
named in this Agreement shall be released from all liability for the return of
the security deposit.
b. The security deposit (less any sums used by Lessor in accordance with
the terms and conditions of this Agreement) will be returned within sixty (60)
days after the termination of any services
-3-
<PAGE>
rendered or expiration of the term hereof. The security deposit shall not under
any circumstance be applied in lieu of the final payment(s) of Fixed Monthly
Rental charges or service charges under this Agreement.
c. In the event that, by reason of the Lessee's default in its obligations
pursuant to this Agreement or otherwise, including but not limited to the
payment of the Fixed Monthly Rental Charge, any amounts due by reason of the
Lessee's use of additional services hereto and/or by reason of the Lessee's use
of telephone services as supplied pursuant to this Agreement, Lessor shall be
entitled to apply any of the security deposits pursuant to this Agreement to any
outstanding sums due or owing to the Lessor, and Lessor shall have the right to
charge the Lessee, as additional rent, such sums as are necessary to replenish
any and all amounts applied so as to cause the security to be returned to its
entire amount. The failure to pay such amounts as are necessary to replenish the
security shall be considered a breach of this Agreement and shall entitle the
Lessor to exercise any of its rights pursuant to this Agreement or otherwise.
6. Delivery of Possession.
----------------------
If, for any reason whatsoever, Lessor cannot deliver possession of the
Premises to Lessee at the commencement of the term, this Agreement shall not be
void nor voidable nor shall Lessor be liable to Lessee for any loss or damage
resulting therefrom; but there shall be an abatement of rent for the period
between the stated term commencement and the time when Lessor does deliver
possession of the Premises.
7. Services.
--------
a. So long as Lessee is not in default hereunder, Lessor shall make
available certain amenities to Lessee as more particularly described in Exhibit
"A." Such services shall be offered to Lessee, in conjunction with such
services being offered by Lessor to its other lessees, without charge for the
reasonable use of the same.
b. In addition, provided Lessee is not in default hereunder and provided
the cost thereof does not exceed the Security Deposit, Lessor shall make
available to Lessee certain other services the cost of which shall be billed to
the Lessee as additional rent and the payment of which shall be subject to the
same terms and conditions as those governing the payment of the Fixed Monthly
Rental Charge herein regardless of when such charges are billed to the Lessee.
8. Telephone Services.
------------------
a. Provided Lessee is not in default of any of the terms, covenants,
conditions or provisions of this Agreement, Lessor will make available to Lessee
a telecommunications package, for an additional fee, which will consist of some
combination of telephone equipment, numbers, lines, conference calling, voice
mail, local, long distance and international service, and directory listing.
All
-4-
<PAGE>
components of the telecommunications package including any telephone numbers
used by Lessee will remain at all times the property of Lessor and Lessee will
acquire no rights in the components beyond the term specified by Lessor.
b. Upon Lessee's written request, Lessee shall be entitled to appoint
Lessor as its exclusive agent for the sole purpose of procuring and arranging
Lessees local "white pages" listings. Lessor shall have no involvement nor
responsibility for any "yellow pages" listings desired by Lessee.
c. Lessor shall not be liable for any interruption or error in the
performance of its services to Lessee under this Section. Lessee waives any
recourse against the Lessor for any claimed liability arising from the provision
of telecommunication services including, but not limited to; injuries to persons
or property arising out of mistakes, omissions, interruptions, delays, errors or
defects in transmissions occurring in the course of furnishing
telecommunications services provided same are not caused by the willful acts of
the Lessor, as well any claim for business interruption and for consequential
damages.
d. Lessor shall use reasonable efforts to provide Telephone Services to
Lessee in a first-class, professional manner. Telephone service charges shall be
as per Lessor's then scheduled rates for the same, or as the same may be amended
by Lessor from time to time.
e. In the event that any toll fraud is traceable to telecommunications
services employed by Lessee, such toll fraud shall be deemed to be a material
default in the Lessee's obligations hereunder. Lessee further hereby agrees to
indemnify, hold harmless and to reimburse Lessor for all charges associated with
any such toll fraud including, but not limited to, unauthorized use of calling
cards or telephone lines.
f. It is expressly acknowledged and agreed that Lessor shall be the sole
and exclusive provider of telecommunication services to Lessee, Lessee hereby
agrees and covenants that it will not use any other telephone service or
telephone carrier to provide it service in the Premises. In the event that
Lessee uses or acquires any other telephone service at the Premises, such use
and/or installation shall constitute a material default in the Lessee's
obligations hereunder.
9. [Intentionally Omitted]
10. Insurance: Waiver of Claims.
---------------------------
a. Lessor has no obligation to and will not carry insurance for Lessee's
benefit. Lessor will not be liable to Lessee or to any other person for damages
on account of loss, damage or theft, to any business or personal property of
Lessee. Lessee hereby waives any claims against Lessor from any loss, cost,
liability, or expense (including reasonable attorneys' fees) arising from
Lessee's
-5-
<PAGE>
use of the Premises or any common areas made available to Lessee by Lessor or
from the conduct of Lessee's business, or from any activity, work, or thing done
in the Premises or common areas by Lessee or Lessee's agents, contractors,
visitors or employees. To the extent that Lessor has any liability for any of
the foregoing pursuant to any law, ordinance or statute, Lessee shall seek
recovery for such loss(es)/or damage(s) from its own insurance company as
provided for in subparagraph (c) herein prior to making any claims against
Lessor.
b. The Lessor shall not be liable or responsible to the Lessee for any
injury or damage resulting from the acts or omissions of Lessor, its employees,
persons leasing office space or obtaining services from the Lessor, or other
persons occupying any part of the Premises or Building, or for any failure of
services provided such as water, gas or electricity, HVAC or for any injury or
damage to person or properly caused by any person except for such loss or damage
arising from the willful or grossly negligent misconduct of the Lessor, its
agents, servants, or employees or from the Lessor's failure to make repairs
which it is obligated to make hereunder. Neither Lessor or any of its agents,
employees, officers or directors shall be responsible for damages resulting from
any error, omission or defect in any work performed or provided as part of the
services rendered, whether uncompensated services or compensated services.
c. Lessee shall provide Lessor with a certificate of insurance evidencing
General/Public Liability coverage with liability limits of not less than One
Million Dollars ($1,000,000) per occurrence for Bodily Injury and/or Property
Damage Liability and One Hundred Thousand Dollars ($100,000) per occurrence for
Fire/Legal Liability. Said insurance coverage shall remain in force during the
term of this Agreement and renewals thereof. The Lessor, Alliance National,
Inc., and Alliance Business Centers, Inc. shall be named as an additional named
insured on each of these policies. Lessee's failure to provide or maintain such
insurance shall not reduce or otherwise alter Lessee's liability or
responsibility to pay any judgment rendered against Lessee for such Liability
and Damages. Failure to maintain such insurance and/or to name the Lessor and
its designees, as set forth above, shall constitute a material breach of this
Agreement.
d. Both parties hereby agree to defend, indemnify and hold the other
harmless from and against any and all claims, damages, injury, loss and expenses
to or of any person or property resulting from the acts or negligence of their
agents, employees, invitees and/or licensees while in the Building, Executive
Suite and/or Premises.
e. Any fire and extended risk casualty insurance that Lessee maintains
shall include a waiver of subrogation in favor of Lessor and Building Landlord,
and any fire and extended risk insurance carried on the
-6-
<PAGE>
Facility by Lessor shall likewise contain a waiver of subrogation in favor of
Lessee.
11. Waiver of Breach.
----------------
Should Lessor not insist upon the strict performance of any term or
condition of this Agreement or to exercise any right or remedy available for a
breach thereof, no acceptance of full or partial payment during the continuance
of any such breach shall constitute a waiver of any such breach or any such term
or condition. No term or condition of this Agreement required to be performed by
Lessee and no breach thereof, shall be waived, altered or modified, except by a
written instrument executed by Lessor. No waiver of any breach shall affect or
alter any term or condition in this Agreement, and each term or condition shall
continue in full force and effect with respect to any other then existing or
subsequent breach thereof.
12. Operating Standards.
-------------------
The Operating Standards attached to this Agreement as Exhibit "B" are
hereby made an integral part of this Agreement. Lessee, its employees, agents,
guests, invitees, visitors and/or any other persons caused to be present in and
around the Premises by the Lessee shall perform and abide by the rules and
regulations and any amendments or additions to said rules and regulations as
Lessor may make. In addition, Lessee, its employees and agents shall abide by
all applicable governmental rules, regulations, statutes and ordinances relating
in any way to the Premises or the Facility or Lessee's use or occupancy of the
Premises or the Facility; failing which Lessee shall be in default hereunder and
shall pay any fines or penalties imposed for such violation(s) directly to the
appropriate governmental authority or to Lessor, if Lessor has paid such amount
on behalf of Lessee. Such remedy shall not be exclusive. It is hereby further
explicitly agreed and understood that full compliance with the Operating
Standards as set forth constitutes a material obligation of this Agreement, and
that the failure to so comply shall constitute a violation of this Agreement
entitling the Lessor to exercise any of its remedies pursuant to this Agreement
or otherwise.
13. Employment of Lessor's Employees.
--------------------------------
a. Lessee agrees that it will not, during the term of this Agreement and
any renewals thereof, or for a period of one year after the expiration or sooner
termination of this Agreement, hire or issue an offer to employ any person who
is or has been an employee of Lessor or Lessor's agent without prior consent
from Lessor. If Lessee either hires an employee of Lessor or Lessor's agent; or
hires any person who has been an employee of Lessor or its agent within six
months prior to the time they are hired by Lessee, Lessee will, at Lessors sole
option, be liable to Lessor for liquidated damages equal to six months wages of
the employee, at the rate last paid that employee by Lessor.
-7-
<PAGE>
b. If Lessor assists in hiring an employee for Lessee, Lessee shall pay to
the Lessor a commission equal to 20% of that employee's annual salary. The
provisions hereof shall survive the expiration or sooner termination of the term
thereof.
14. Alteration.
----------
If Lessee requires any special wiring or office alterations for
extraordinary business machines or other purposes not consistent with the
current wiring, extraordinary telephone equipment or computer equipment, such
alteration shall be done (i) only with the express written permission of the
Lessor, and if said permission is granted, then (ii) by an agent designated by
Lessor at Lessee's cost. The electrical current shall be used for ordinary
lighting purposes only, unless written permission to do otherwise shall first
have been obtained from Lessor at an agreed cost to Lessee. Lessor further
reserves (lie sole and exclusive right to limit the number and type of lines and
telephone equipment Lessee call install in the leased Premises.
15. Re-Entry.
--------
Lessor and its agents shall have the right to enter the Premises at any
time for the purpose of making any repairs, alterations, inspections which it
shall deem necessary for the preservation, safety or improvements of said
Premises, without in any way being deemed or held to have committed an eviction
(constructive or otherwise) of or trespass against Lessee.
16. Relocation.
----------
a. Lessee agrees that the Lessor may, in its sole discretion, relocate the
Lessee from its present Premises to a like or similar office space within the
same facility upon ten (10) days notice to the Lessee. In the event that the
Lessor requires the Lessee to relocate, the Lessor hereby agrees to bear the
reasonable cost of any such relocation, which cost shall be limited to the cost
associated with the physical transfer of the Lessee's property to any different
office which the Lessor may designate.
b. In the event that any such relocation is effected, the Lessee hereby
acknowledges that, unless otherwise agreed in writing, that all of the terms and
conditions of this Agreement shall remain in full force and effect.
17. Assignment and Subletting.
-------------------------
No assignment or subletting of the Premises, this Agreement or any part
thereof shall be made by Lessee without Lessor's prior written consent, which
consent may be withheld for any or no reason in Lessor's sole discretion.
Neither all nor any part of Lessee's interest in the Premises or this Agreement
shall be encumbered, assigned or transferred, in whole or in part, either by act
of the Lessee or by operation of law.
18. Surrender.
---------
a. On expiration of the term, any extended term, or sooner
-8-
<PAGE>
termination of this Agreement, Lessee shall promptly surrender and deliver the
Premises to Lessor, without demand, and in as good condition as when let,
ordinary wear and tear excepted.
b. Upon Lessee serving a notice of cancellation as provided in 3b herein
Lessor shall have the right to show Lessee's Premises during the 60 day period
(for one or two offices) or 90 day period (for three or more offices) as the
case may be.
c. Without prior written approval of Lessor, Lessee shall not move any of
its property from the Premises upon termination of this Agreement or at any
other time, except during Lessor's normal business hours. In the event Lessor
consents to Lessee's removing property before or after normal business hours,
any expenses incurred by Lessor as a result, including but not limited to
expenses for personnel, security, elevator, utilities and the like shall be paid
by Lessee in advance, to the extent determinable by Lessor, by certified and/or
bank check.
d. If Lessee vacates the Premises and leaves behind any property,
whatsoever, same will be deemed abandoned by Lessee and may be disposed of by
Lessor at Lessee's expense. If Lessee defaults in the payment of sums due to
Lessor, and Lessor changes the locks, removes Lessee's property, or otherwise
denies access to Lessee, Lessor shall not be liable for conversion or partial,
actual and/or constructive eviction.
19. Holding Over.
------------
a. In the event that Lessee should not renew this Agreement in accordance
with the terms and conditions hereof, and/or fail to surrender the Premises upon
the expiration of the term of the Agreement as provided herein, Lessee agrees to
pay Lessor, as liquidated damages, a sum equal to twice the monthly rent and all
additional charges for services provided by Lessor to Lessee, for each month
that Lessee retains possession of the Premises or any part thereof, provided,
however, that the acceptance of such sums, representing liquidated damages shall
not be deemed to be permission to Lessee to continue in possession of the
Premises.
20. Default and Remedies.
--------------------
a. If the Lessee shall default in fulfilling any of its terms, conditions,
covenants or provisions of this Agreement, including but not limited to:
1. Payment of fixed Monthly Rental Charges and/or any other charges
hereunder within ten days of the date such charges become due;
2. Becomes insolvent, makes an assignment for benefit of creditors, or
files a voluntary petition under any bankruptcy or insolvency law, or has filed
against it an involuntary petition under any such law;
3. Defaults in fulfilling any of the terms, conditions, covenants or
provisions of this Agreement including
-9-
<PAGE>
but not limited to the breach of any of the terms and conditions set forth in
the exhibits attached hereto;
4. The abandonment and/or vacatur of the Premises by the Lessee; then,
after five days notice of any such default(s), the Lessor may, at its sole
discretion, terminate this Agreement upon five days notice to the Lessee, and
upon the expiration of such notice period, the Lessee shall quit and surrender
the Premises to the Lessor. In the event that the Lessee fails to quit and
surrender the Premises, the Lessor may reenter and take possession of the
Premises and remove all persons and property therefrom, as well as disconnect
any telephone lines installed for the benefit of Lessee, without any liability
whatsoever to Lessee. In addition, Lessor may elect concurrently or alternately
to accelerate all of Lessee's obligations hereunder including without limitation
the rental, direct expenses, Schedule B Costs, and Telephone Services costs,
and/or the re-letting of the Premises or any part thereof, for all or any part
of the remainder of said term, to a party satisfactory to Lessor, at any monthly
rental rate. Lessor, in its sole discretion, shall have no obligation, implied
or otherwise, to mitigate its damage(s) under such circumstances.
b. Should Lessor be unable to re-let the Premises, or should each monthly
re-rental be less than the rental, Lessee is obligated to pay under this
Agreement or any renewal thereof, and at Lessor's option Lessee shall pay the
amount of such deficiency, plus the expenses of relating, immediately in one
lump sum (if allowable under law) to Lessor upon demand and/or as such
obligations accrue.
c. If Lessee shall default in the observance or performance of any term or
covenant on Lessee's part to be observed or performed under or by virtue of any
of the terms or provisions in any article of this lease, then, unless otherwise
provided elsewhere in this lease, Lessor may immediately or at any time
thereafter and with notice perform the obligation of Lessee thereunder, and if
Lessor, in connection therewith or in connection with any default by Lessee in
the covenant to pay rent hereunder, makes any expenditures or incurs any
obligations for the payment of money, including but not limited to attorney's
fees, in instituting, prosecuting or defending any actions or proceeding, such
sums so paid or obligations incurred with interest and costs shall be deemed to
be additional rent hereunder and shall be paid by Lessee to Lessor rendition of
any bill or statement to Lessee therefor, and if Lessee's lease term shall have
expired at the time of making of such expenditures or incurring of such
obligations, such sums shall be recoverable by Lessor as damages.
21. Mail & Telephone Forwarding.
---------------------------
a. After termination or expiration of the term of this Agreement, Lessee
hereby agrees that it will take all reasonable steps to notify all parties of
Lessee's new address and phone numbers. Lessor
-10-
<PAGE>
shall have no obligation to notify any person or entity of Lessee's new address
and/or phone numbers, except as expressly provided herein.
b. Lessor will, unless otherwise instructed by Lessee in writing, forward
mail to Lessee at its new address and give out new telephone number via a voice
mail message for a period of three (3) months at the rate of $TBD per month,
which sums shall be deducted from any amounts deposited with the Lessor as
security hereunder and paid to the Lessor in advance. In the event that there is
not sufficient security remaining on deposit to pay for the charges set forth
herein, unless the Lessee shall pay the charges set forth herein to the Lessor
in advance, Lessor shall have no obligation to provide the services set forth
herein.
22. Notices.
-------
Any notice under this Agreement shall be in writing and shall be either
delivered by hand or by first class mail to the party at the address set forth
below. Lessor hereby designates its address as:
ALLIANCE BUSINESS CENTERS
Madison Building (center address)
15851 N. Dallas Parkway Suite 500
Dallas, TX 75248
Attn: Management
with a copy by regular first class mail to:
ALLIANCE Business Centers
122 East 42nd St., Ste. 2707
New York, NY 10168
Attn: Legal Department
Lessee hereby designates its address (which address must be an address within
the United States), as
Embedded Support Tools Corp.
Attn: _______________
120 Royall Street
Canton, MA 02021
Phone: 781-828-5588
Fax: 781-821-2268
If such mail is properly addressed and mailed as above, it shall be deemed
notice for all purposes, given when sent or delivered, even if returned as
undelivered.
23. Landlord's Election Under This Agreement.
----------------------------------------
Upon early termination of the main Building lease, this Agreement shall
terminate unless the Building Landlord under the main lease elects to have this
Agreement assigned to the Building Landlord or another entity as provided in the
main lease. Upon notice to Lessor of the termination of the main lease and such
election, (i) the Agreement shall be deemed to have been assigned by Lessor to
the Building Landlord or to such other entity as is designated in such notice by
the Building Landlord, (ii) the Building Landlord shall be deemed to be the
Lessor under this Agreement and shall assume all rights and responsibilities of
Lessor ` under this Agreement, and (iii) Lessee shall be deemed to have attorned
to the Building Landlord as Lessor under this Agreement.
-11-
<PAGE>
24. Time of Essence.
---------------
Time is of the essence as to the performance by Lessee of all covenants,
terms and provisions of this Agreement.
25. Severability.
------------
The invalidity of any one or more of the sections, subsections, sentences,
clauses or words contained in this Agreement or the application thereof to any
particular set of circumstances, shall not affect the validity of the remaining
portions of this Agreement or of their valid application to any other set of
circumstances. All of said sections, subsections, sentences, clauses and words
are inserted conditionally on being valid in law; and in the event that one or
more of the sections, subsections, sentences, clauses or words contained herein
shall be deemed invalid, this Agreement shall be construed as if such invalid
sections, subsections, sentences, clauses or words had not been inserted. In the
event that any part of this Agreement shall be held to be unenforceable or
invalid, the remaining parts of this Agreement shall nevertheless continue to be
valid and enforceable as though the invalid portions had not been a part hereof.
In addition, the parties acknowledge (i) that this Agreement has been fully
negotiated by and between the parties in good faith and is the result of the
joint efforts of both parties, (ii) that both parties have been provided with
the opportunity to consult with legal counsel regarding its terms, conditions
and provisions and (iii) that regardless of whether or not either party has
elected to consult with legal counsel, it is the intent of the parties that in
no event shall the terms, conditions or provisions of this Agreement be
construed against either party as the drafter of this Agreement.
26. Execution by Lessee.
-------------------
The party or parties executing this Agreement on behalf of the Lessee
warrant(s) and represent(s): (i) that such executing party (or parties) has (or
have) complete and full authority to execute this Agreement on behalf of Lessee;
(ii) that Lessee shall fully perform its obligations hereunder.
27. Assumption Agreements and Covenants.
-----------------------------------
This Agreement is subject and subordinate to the main Building lease
governing the Facility, under which Lessor is bound as tenant; and the
provisions of the main lease, other than as to the payment of rent or other
monies, are incorporated into this Agreement as if completely herein rewritten.
Lessee shall comply with and be bound by all provisions of the main lease except
that the payment of rent shall be governed by the provisions of this Agreement,
and Lessee shall indemnify and hold Lessor harmless from and against any claim
or liability under the main lease of Lessor arising from Lessee's breach of the
Main Lease or this Agreement. Lessor covenants and warrants that the use of the
Premises as a business office is consistent with and does not violate the terms
of the main lease.
-12-
<PAGE>
28. Covenant and Conditions.
-----------------------
Each term, provision and obligation of this Agreement to be performed by
Lessee shall be construed as both a covenant and condition.
29. Entire Agreement.
----------------
This Agreement embodies the entire understandings between the parties
relative to its subject matter, and shall not be modified, changed or altered in
any respect except in writing signed by all panics.
30. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Agreement as of
the date first above written.
LESSOR: ANI Dallas, Inc., dba Alliance Business Centers
By: /s/ Rosanne Meier
-------------------------
Title: General Manager
-------------------------
LESSEE: Embedded Support Tools Corp.
(If a corporation)
By: /s/John Baggott
-------------------------
Title: Vice President
-------------------------
[Corporate Seal)
LESSEE:
(If an individual or partnership)
By: _________________________
By: _________________________
-13-
<PAGE>
EXHIBIT "A"
. Furnished, Decorated Reception . Receipt of Mail and Packages
Room with Professional Receptionist
. Personalized Telephone Answering . Complete Kitchen Facilities
During Office Hours with Coffee Machine
. 24 hour Voicemail (1 at $25+tax/mo) . Utilities and Maintenance
. Unlimited hours of Conference Room . HVAC During Normal Business
or private furnished offices, subject Hours
to prior scheduling and use by other . Janitorial Services
lessees . 8 hours per month courtesy use
. Corporate Identity on Lobby of other ALLIANCE Business
Directory where Available (for an Centers affiliated facilities.
additional fee) Locations subject to current
. Nameplate (1 at $25+tax) affiliation and availability
. Complete Mail Room Facility
EXHIBIT "B" OPERATING STANDARDS
- --------------------------------------------
1. Lessees and their guests will conduct themselves in a businesslike manner;
proper attire will be worn at all times; and the noise level will be kept
to a level so as not to interfere with or annoy other Lessees.
2. Lessee shall not provide or offer to provide any services to Lessor's
customers if such services are available from Lessor.
3. Lessee will not affix anything to the walls of the Premises without the
prior written consent of the Lessor.
4. Lessee will not prop open any corridor doors, exit doors or doors
connecting corridors during or after business hours.
5. Lessees using public areas may only do so with the consent of the Lessor,
and those areas must be kept neat and attractive at all times.
6. Lessee will not conduct any activity within the Premises, Executive Suite
or Building which in the sole judgment of the Landlord will create
excessive traffic or is inappropriate to the executive office suite
environment.
7. Lessee may not conduct business in the corridors or any other areas except
in its designated offices or conference rooms without the written consent
of Lessor.
-14-
<PAGE>
8. All corridors, halls, elevators and stairways shall not be obstructed by
Lessee or used for any purpose other than normal egress and ingress.
9. No advertisement, identifying signs or other notices shall be inscribed,
painted or affixed on any part of the corridors, doors, or public areas.
10. Without Lessor's specific prior written permission, Lessee is not permitted
to place "mass market", direct mail or advertising (i.e. newspaper,
classified advertisements, yellow pages, billboards) using Lessor's
assigned telephone number or take any such action that would generate a
excessive amount of incoming calls.
11. Lessee shall not solicit clients of Lessor or and their employees in the
Building without first obtaining Lessor's prior written approval.
12. Immediately following Lessee's use of conference room space and/or
audio/visual equipment, Lessee shall clean up and return the space and
equipment to the state and condition it was in prior to Lessee's use. If
not, Lessor may charge Lessee for any other expenses required to restore
the conference space and/or equipment to its original condition.
13. Lessor must be notified in writing if Lessee desires to utilize the
conference room or other common areas of the Executive Suite during evening
or weekend hours. Lessor may deny the Lessee access if the desired usage is
inappropriate and may disrupt normal operations.
14. Lessee shall not, without Lessor's written consent, store or operate any
computer (except a desktop/laptop computer) or any other large business
machines, reproduction equipment, heating equipment, stove, speaker phones,
radios, stereo equipment or other mechanical amplification equipment,
refrigerator or coffee equipment, or conduct a mechanical business, do any
cooking, or use or allow to be used on the Premises oil, burning fluids,
gasoline, kerosene for heating, warming or lighting. If Lessee chooses to
maintain a private fax machine in their office, there will be an additional
satisfy fee of $100 billed to Lessee each month. No article deemed extra
hazardous on account of fire or any explosives shall be brought into said
Premises or Facility. No offensive gases, odors on liquids shall be
permitted.
15. Lessee will bring no animals into the Premises or Facility except for those
assisting disabled individuals.
16. Lessee shall not remove furniture, fixtures or decorative material from
offices or common areas without the written consent of Lessor.
-15-
<PAGE>
17. Lessee shall not make any additional copies of any Lessor issued keys. All
keys and security cards are the property of Lessor and must be returned
upon request or by the close of the business on the expiration or sooner
termination of the Agreement term. Any lost or unreturned keys or cards
shall incur a $25.00 per item charge and the cost to re-key the office.
18. Lessee shall not smoke nor allow smoking in any area of the Facility,
including the Premises, and shall comply with all governmental regulations
and ordinances concerning smoking.
19. Lessee shall not allow more than three visitors in the reception lobby of
the Premises at any one time.
20. Lessee's parking rights (if any) are defined by Lessor's Agreement with the
owner of the Building. Landlord reserves the right to modify parking
arrangements if required to do so by Building management.
21. Lessee shall cooperate and be courteous with all other occupants of the
Facility and Lessor's staff and personnel.
22. Lessor reserves the right to make such other reasonable rules and
regulations as in its judgment may from time to time be needed for the
safety, care, appropriate operation and cleanliness of the Facility.
-16-
<PAGE>
LEASE AND SERVICE AGREEMENT
EXTENSION RIDER
RE: Lease and Service Agreement between ALLIANCE Business Centers, a New
York corporation and EST dated July 8, 1998.
DATE: December 30, 1998
CENTER: 15851 N. Dallas Parkway, Suite 500
Addison, TX 75001
Paragraph "3a" of the Agreement is hereby modified so that the term of the
Agreement shall expire on July 31, 1999.
In consideration of this modification and extension of the term, the Lessee
shall pay the Lessor as rent for the Premises a total rent of $5,154.00, payable
in equal monthly installments of $787.00.
All other terms and conditions of the Agreement shall remain in full force and
effect.
ACCEPTED BY LESSOR: ACCEPTED BY LESSEE:
ALLIANCE BUSINESS CENTERS, a EST
New York corporation
By: /s/ Rosanne Meier By: /s/ John Baggott
---------------------- ----------------------
Print Print
Name: Roseanne Meier Name: John Baggott
---------------------- ----------------------
Title: Area General Manager Title: V.P.
---------------------- ----------------------
Date: 1/21/99 Date: 1/6/99
---------------------- ----------------------
-17-
<PAGE>
Exhibit 10.12
OFFICE LEASE AGREEMENT
By this Office Lease Agreement (the "Lease") Lessor hereby agrees to lease
to Lessee and Lessee agrees to lease from Lessor, upon the terms and conditions
herein contained, the premises described below, and Lessor and Lessee, in
consideration of the mutual covenants and agreements herein and other good and
valuable consideration, agree as follows:
ARTICLE 1. PARTIES
- ------------------
The parties to this agreement are:
1.1. Gwynedd Office Park Associates, L.P., as Lessor herein.
1.2. EST Corporation, a Massachusetts corporation as Lessee herein.
ARTICLE 2. LEASED PREMISES
- --------------------------
Suite number 101, comprising approximately 261 square feet of net rentable
space, on the first floor of the Building located at 768 North Bethlehem Pike,
and more particularly described in Exhibit A attached hereto and hereinafter
called the Leased Premises. A floor plan of the Leased Premises is attached
hereto as Exhibit B.
ARTICLE 3. TERM
- ---------------
3.1. The primary term of this Lease shall be for twelve (12) months
commencing on the sooner of the date that Landlord receives a Use and Occupancy
Permit from Lower Gwynedd Township or February 1, 1999 (the "Commencement Date")
and terminating on January 31, 2000 (the "Termination Date") unless terminated
earlier by a provision of this Lease. Lessee agrees to give written notice to
Lessor of intent to vacate the Premises at least ninety (90) days prior to the
Termination Date. Failure by Lessee to give such notice shall, at Lessor's sole
option, extend the term of the Lease, in accordance with Article 47 herein.
3.2. Notwithstanding the term dates, if Lessor, cannot deliver possession
of the Leased Premises to Lessee on the above date, this Lease shall not be void
or voidable, nor shall Lessor be liable to Lessee for any loss or damage
resulting there from. The primary term of this Lease shall be extended by the
length of such delay, and there shall be an abatement of rent covering the
period between the beginning of the term and the date that Lessor does actually
deliver possession. In any event upon occupancy Lessee shall execute and deliver
to Lessor, the Acknowledgment of Lease Commencement attached as Exhibit D
acknowledging possession of the Leased Premises. If Lessee fails to deliver such
Acknowledgment within fifteen (15) days of occupancy, this Lease shall at
the sole option of Lessor, be effective on the
<PAGE>
commencement date in 3.1 hereof. If Lessee shall occupy the Leased Premises
prior to the commencement of the term specified above, Rent shall be paid at the
rate for the term.
ARTICLE 4. RENT
- ---------------
4.1. Lessee agrees to pay to Lessor without deduction or offset the
following sums monthly, from the Commencement Date and continuing throughout the
original lease term, in advance on the first day of each and every calendar
month. These amounts will be known as the "Base Rent" and are as follows:
Rental Rate Per Annual Monthly
--------------- ------ -------
Year Dates Square Foot Rent Rent
---- ----- ----------- ---- ----
1 2/1/99 - 1/31/00 $16.00 $4,176.00 $348.00
4.2. Lessee shall deposit the sum of $348.00 with Lessor as security (the
"Security Deposit") for the full and faithful performance by Lessee of the terms
and conditions of this Lease, to be delivered to Lessor with the execution of
this Lease. Additional terms of the Security Deposit are contained in Article 7.
ARTICLE 5. RENTAL ESCALATION AFTER OCCUPANCY
- --------------------------------------------
Intentionally deleted.
ARTICLE 6. LATE CHARGES AND RETURNED CHECK
- ------------------------------------------
6.1. In the event any installment of rent or any other sums which become
owing by Lessee to Lessor under the provisions of this lease are not received
within five (5) days after the due date thereof (without in any way implying
Lessor's consent to such late payment), Lessee, to the extent permitted by law,
agrees to pay, in addition to the rent installment or such other sum owed, a
late payment charge equal to ten percent (10%), which late charge shall
constitute liquidated damages and shall be for the purpose of reimbursing Lessor
for the additional costs and expenses which Lessor presently expects to incur in
connection with the handling and processing of late payments hereunder. Lessor
and Lessee expressly covenant and agree that in the event of any such late
payment(s) by Lessee, the damages so resulting to Lessor will be difficult to
ascertain precisely, and that the foregoing charge constitutes a reasonable and
good faith estimate by the parties of the extent of such damages. Such late
payment charges are due immediately when incurred.
6.2. Lessee shall pay all applicable bank charges incurred by Lessor plus
$25.00 for each returned check. Payment of any kind received by Lessor on behalf
of Lessee shall be applied first to non-rent items, then to rent, regardless of
notations on check. Lessee's right to possession and all of Lessor's obligations
-2-
<PAGE>
hereunder are expressly contingent on the prompt payment of rent and other
amounts, and the use of the premises is obtained only on the condition that rent
and other amounts are paid on time. Payment of rent by Lessee shall be an
independent covenant. In the event Lessee has not timely paid rentals and other
sums due on two or more occasions, or in the event of a returned check for any
reason, Lessor may thereafter require that all rent and other sums due be paid
by cashier's check, or money order, without prior notice.
ARTICLE 7. SECURITY DEPOSIT
- ---------------------------
7.1. The Security Deposit, as described in Section 4.2, shall be held by
Lessor without liability for interest and as security for the performance by
Lessee of Lessee's obligations under this Lease. It is expressly understood that
such deposit shall not be considered an advance payment of rent or a measure of
Lessor's damages in case of default by Lessee.
7.2. Upon the occurrence of any event of default by Lessee, Lessor may,
without notice and without terminating this lease and without prejudice to any
other remedy, use such deposit to the extent necessary to make good any
arrearage of rent and any other damage, injury, expense or liability caused to
Lessor by such event of default.
7.3. Following any such application of the Security Deposit, Lessee shall
pay to Lessor, on demand, the amount so applied, in order to restore the
Security Deposit to its original amount, and if Lessee shall fail to do so, such
failure shall constitute a default under this lease, affording Lessor the same
rights and remedies as a default in the payment of rent. If Lessee is not then
in default hereunder, any remaining balance of the Security Deposit shall be
returned to Lessee within a reasonable period of time after the termination of
this lease. If Lessor transfers its interest in the premises during the lease
term, Lessor may assign the Security Deposit to the transferee and thereafter
Lessor shall have no further liability for the return of the Security Deposit.
ARTICLE 8. LESSOR'S IMPROVEMENTS
- --------------------------------
8.1. Lessee agrees, that the Leased Premises is taken in an "As-Is"
condition. Lessor agrees to have the Premises re-keyed prior to Lessee's
occupancy of the Premises at Lessor's sole expense. Lessor also agrees to
shampoo the carpet and paint the Premises at Lessor's sole cost.
ARTICLE 9. ADDITIONAL IMPROVEMENTS
- ----------------------------------
Intentionally deleted.
-3-
<PAGE>
ARTICLE 10. USE
- ---------------
10.1. The leased premises shall be used and occupied for purposes of
general office use, business and commercial use, computer related use including
data processing, storage and record retention, and for no other use without
Lessor's prior written consent.
10.2. Lessee, by entry under this lease, acknowledges that it has examined
the Leased Premises and accepts them as being in good state of repair and in the
condition called for under this Lease.
10.3. Lessee and Lessor shall, at their own expense, comply promptly with
all federal, state, county, municipal, and other laws, statutes, ordinances,
rules, regulations, orders, and requirements regulating the use, condition, or
occupancy by Lessee of the Leased Premises.
10.4. Lessee shall not use or permit the use of the Leased Premises in any
manner which will tend to create waste or any nuisance or will tend to interfere
with, annoy, or disturb Lessor in its management of any lessee, sublessee, or
other occupant of the building. Lessee agrees to comply with all reasonable
rules and regulations that Lessor may adopt from time to time for the operation,
protection, and welfare of the building and garage facilities, and its occupants
and visitors. The present rules and regulations are attached as Exhibit C. Any
future rules and regulations shall become a part of this Lease upon delivery of
a copy to Lessee in accordance with the notice provisions of this Lease.
10.5. Lessee shall not do or permit to be done anything which would cause
Lessor's fire and extended coverage insurance to be canceled or the rate
increased. If Lessor's rates are increased because of Lessee's activities,
Lessee shall pay the amount of such increase.
ARTICLE 11. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS
- ----------------------------------------------------
11.1. Lessee shall not make any alterations, additions, or improvements to
the Leased Premises without the prior written consent of Lessor. Consent for
nonstructural alterations, additions or improvements shall not be unreasonably
withheld by Lessor. The foregoing shall be done only by Lessor's contractors or
employees or by third parties approved by Lessor in writing. Lessee shall pay
Lessor in advance for any requested alterations, improvements, lock changes, or
other modifications which are approved by Lessor. Lessee shall have the right at
all times to erect or install furniture and fixtures provided that Lessee
complies with all applicable governmental laws, ordinances, and regulations.
Lessee shall have the right to remove at the termination of this Lease such
items so installed, provided Lessee is not in default; however, Lessee shall,
prior to the termination of this lease, repair any damage caused by such
removal.
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11.2. Lessee may remove its trade fixtures, office supplies, and movable
furniture and equipment not attached to the Leased Premises provided: (a) Such
removal is made prior to the termination of the Tenn of this Lease; (b) Lessee
is not in default of any obligations or covenant under this Lease at the time of
such removal; and (c) Lessee promptly repairs all damage caused by such removal
prior to the termination of the term of this Lease. All other property at the
Leased Premises and any alterations or additions to the Leased Premises
(including wall-to-wall carpeting, paneling, or other wall covering) and any
other article attached or affixed to the floor, wall, or ceiling of the Leased
Premises shall become the property of Lessor at Lessor's option, and shall
remain upon and be surrendered with the Leased Premises as a part thereof at the
termination of this Lease, Lessee hereby waiving, all rights to any payment or
compensation thereof. If, however, Lessor so requests in writing, Lessee shall,
prior to termination of this Lease, remove any and all alterations, additions,
fixtures, equipment, and property placed or installed by Lessee in the Leased
Premises and repair any damages caused by such removal.
11.3. Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished Lessee at the Lease Premises, which
claims are or may be secured by any mechanic's or material man's lien against
the leased premises or any interest therein.
11.4. Lessee shall give Lessor not less than ten (10) days' written notice
prior to the commencement of any work in or on the Leased Premises, and Lessor
shall have the right to post notices of non-responsibility in or on the Leased
Premises as provided by law.
ARTICLE 12. TAXES ON LESSEE'S PROPERTY
- --------------------------------------
Lessee shall be liable for all taxes levied or assessed against personal
property, furniture, or fixtures placed by Lessee in the Leased Premises. If
any such taxes for which Lessee is liable are levied or assessed against Lessor
or Lessor's property and if Lessor elects to pay the same or if the assessed
value of Lessor's property is increased by inclusion of personal property,
furniture, or fixtures placed by Lessee in the Leased Premises, and Lessor
elects to pay the taxes based on such increase, Lessee shall pay to Lessor upon
demand that part of such taxes for which Lessee is primarily liable hereunder.
ARTICLE 13. LESSOR'S LIEN
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Intentionally deleted.
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ARTICLE 14. MAINTENANCE AND SURRENDER
- -------------------------------------
14.1. Except as otherwise hereinafter provided, Lessor shall during the
term of this lease provide for the cleaning and maintenance of all common areas
of the building. Unless otherwise expressly stipulated herein, Lessor shall not
be required to make any improvements or repairs of any kind to the Leased
Premises during the term of this lease, except necessary repairs to the walls,
roof, structural elements, HVAC and electrical systems of the building in which
the Leased Premises are located; provided, however, that if such repairs are
necessitated by the acts or omissions of Lessee, its agents, employees,
customers, invitees, or visitors, then Lessee shall bear the cost of such
repairs.
14.2. So long as Lessee is not in default hereunder, Lessor shall furnish
the Leased Premises during reasonable and usual business hours (which hours
shall be from 7:00 a.m. to 7:00 p.m. Monday through Friday, excluding holidays),
-------- --------
the following services at Lessor's sole expense except as otherwise provided in
this lease. Lessee shall have access to the building 24 hours a day, 365 days a
year.
(a) Air-conditioning and heating as reasonably required for
comfortable use during usual business hours as described above (subject to
federal, state, and local regulations). If Lessee desires to have heating or air
conditioning on Saturdays, Sundays and/or legal holidays, Lessee may request
such services at least forty-eight hours prior to such date, and Lessor will
charge Lessee a cost of $5.00 per hour of "overtime HVAC costs". Whenever
machines or equipment which generate unusual heat are used in the Leased
Premises and affect temperature otherwise maintained by the building air-
conditioning system, Lessor reserves the right to install supplementary air-
conditioning units in the Leased Premises and the costs thereof as well as the
cost of operation and maintenance thereof shall be paid by Lessee to Lessor
simultaneous with Lessor's incurring any such cost or expense.
(b) Electricity as required for light fixtures installed by Lessor,
and electricity as required for incidental office use such as typewriters,
personal computers, faxes, calculating machines, and machines of similar low
electrical consumption. Lessor has the right to meter and to charge for
excessive consumption.
(c) Hot and cold water for drinking, lavatory, and toilet purposes
drawn through fixtures installed by Lessor in public or common areas.
(d) Janitorial service in and about premises five (5) nights per
week, such window washing and wall cleaning as may be reasonably required.
(e) Automatic passenger elevators for access to and from the Leased
Premises, subject to building rules and regulations.
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(f) Draperies or other type of coverings of exterior windows as
determined by Lessor, Lessor reserves the right to install, maintain, and
operate uniform window coverings in all windows, either exterior or interior.
(g) Maintenance of lighting fixtures furnished by Lessor and
replacement of defective lamps in such fixtures as needed from time to time for
efficient operation.
(h) Daily maintenance service in and about public areas, five (5)
days per week, as determined by Lessor.
(i) Men's and women's rest rooms on each office floor.
14.3. If Lessee shall desire any of the services specified in Article 14.2
at any time other than the time herein designated, such service or services
shall be supplied to Lessee at Lessor's option and only at the written request
of Lessee. Lessee shall pay to Lessor as additional rent, the cost of such
service or services immediately upon receipt of a bill therefore.
ARTICLE 15. DAMAGE, DESTRUCTION, AND CONDEMNATION
- -------------------------------------------------
15.1. If the building or the Leased Premises should be totally destroyed
by fire, tornado, or other casualty, or if they should be so damaged that
rebuilding or repairs cannot reasonably be completed within one hundred twenty
(120) days from the date of the occurrence of the damage, this Lease shall
terminate and rent shall be abated for the unexpired portion of this Lease,
effective as of the date of said occurrence.
15.2. If the building or the Leased Premises should be damaged by fire,
tornado, or other casualty, and rebuilding or repairs can reasonably be
completed within one hundred twenty (120) working days from the date of the
occurrence of the damage, this Lease shall not terminate, but Lessor shall, if
the casualty has occurred prior to the final four (4) months of the lease term,
at its sole cost, option and risk, proceed forthwith to rebuild or repair the
Leased Premises to substantially the condition in which they existed prior to
such damage. If the Leased Premises are to be rebuilt or repaired and are
untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be adjusted
equitably. In the event that Lessor should fail to complete such rebuilding or
repairs within one hundred twenty (120) working days from the date of the
occurrence of the damage, Lessee may, at its option, terminate this lease by
written notification at such time to Lessor, at which time all rights and
obligations hereunder shall cease excepting rental obligations incurred by
Lessee prior to the damage to or destruction of the Leased Premises.
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15.3. If during the term of this Lease (including any extension or
renewal) all or a portion of the Leased Premises should be taken for any public
or quasi-public use under any governmental law, ordinance, or regulation, or by
right of eminent domain, or should be sold to the condemning authority under
threat of condemnation, at the option of the Lessor this Lease shall terminate
and the rent shall be abated during the unexpired portion of this Lease,
effective as of the date of the taking of said Leased Premises by the condemning
authority. Lessor shall receive the entire award from any such taking, and
Lessee shall have no claim thereto, or for the value of any unexpired term of
this Lease.
15.4. Lessor or its officers, agents, and representatives shall have the
right to enter into and upon any and all parts of the Leased Premises with prior
notice at all reasonable hours (a) to inspect same or clean or make repairs or
alterations or additions as Lessor may deem necessary (but without any
obligation to do so, except as expressly provided for herein), or (b) to show
the Premises to prospective tenants, purchasers, or lenders; and Lessee shall
not be entitled to any abatement or reduction of rent by reason thereof, nor
shall such be deemed to be an actual or constructive eviction.
ARTICLE 16. INDEMNITY
- ---------------------
Each party agrees to indemnify and hold the other harmless against any and
all claims, demands, damages, costs, and expenses, including reasonable
attorney's fees, arising from the conduct or management of either parties
business, from its use of the Leased Premises, from any breach on the part of
either party or any conditions of this Lease, or from any act or negligence of
either party, its agents, contractors, employees, subtenants, guests, or
invitees in or about the Leased Premises.
ARTICLE 17. ASSIGNMENT AND SUBLEASE
- -----------------------------------
17.1. Lessee shall have the right, only with the prior written consent of
Lessor not to be unreasonably withheld, to assign this Lease or any interest
therein and to sublet the Leased Premises. Approval by Lessor of any sublease
or assignment shall not release Lessee from any obligation under this Lease and
shall not constitute permission for subsequent subletting or assignment.
Sublessee or assignees shall assume and be liable for all of Lessee's
obligations under this Lease unless otherwise specified in writing. Default by
a sublessee or assignee of the Lessee shall be deemed a default by Lessee.
Unless otherwise agreed in writing, no sublease or assignment shall be valid
unless (a) a copy of the lease is attached thereto, (b) the sublessee or
assignee agrees in writing to be liable for all of Lessee's obligations
hereunder, and (c) written approval of the Lessor under this Lease is attached
to the sublease or assignment. Lessee hereby agrees that it will not sublease
to any other tenant of the Building and that Lessor has no obligation to approve
such.
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17.2. Lessor is expressly given the right to assign any or all of its
interest, rights, or obligations in respect to the Leased Premises and this
Lease. Any assignment wherein the assignee assumes Lessor's obligations shall
release Lessor of any further obligations under this Lease.
ARTICLE 18. INSURANCE
- ---------------------
18.1. Lessor shall, at all times during the term of this Lease, maintain a
policy or policies of insurance with the monthly premiums thereon fully paid in
advance, issued by and binding upon some solvent insurance company, insuring the
building against loss or damage by fire, explosion, or other hazard and
contingencies for the full insurable value thereof; provided that Lessor shall
not be obligated to insure any furniture, equipment, machinery, goods, or
supplies not covered by this Lease which Lessee may bring or obtain upon the
Leased Premises, or any additional improvements which Lessee may construct there
on. If the annual premiums charged Lessor for such casualty insurance exceed
the standard premium rates applicable to the Leased Premises due to the nature
of Lessee's use thereof then Lessee shall upon receipt of appropriate premium
invoices reimburse Lessor for such increases in such premiums.
18.2. Lessee shall likewise, at its expense, maintain a policy or policies
of comprehensive general liability insurance with the monthly premiums thereof
fully paid in advance, issued by and binding upon some solvent insurance
company, such insurance to afford minimum protection of not less than Five
Hundred Thousand Dollars ($500,000.00) in respect to personal injury or death to
any one person, and of not less than Five Hundred Thousand Dollars ($500,000.00)
in respect to any one occurrence, and property insurance coverage of not less
than Five Hundred Thousand Dollars ($500,000.00) for property damage. Lessee,
upon commencement of the Lease term, shall provide Lessor with evidence of such
insurance naming Lessor, Lessor's managing agent and any entity holding a
mortgage on the property as an additional named insured thereunder.
ARTICLE 19. WAIVER OF SUBROGATION RIGHT
- ---------------------------------------
Lessee and Lessor hereby mutually release each other from liability and
waive all right of recovery against each other for any loss from perils insured
against under their respective fire insurance policies, including any extended
coverage and endorsements thereto; provided, however, that this article shall be
inapplicable if it would have the effect, but only to the extent it would have
the effect, of invalidating any insurance coverage of Lessor or Lessee.
ARTICLE 20. DEFAULT
- -------------------
20.1. The following events shall be deemed to be events of default by
Lessee under this lease:
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(a) Lessee shall fail to pay any installment of rent within seven
(7) days or any other sum due by Lessee within seven (7) days of the due date;
(b) Lessee shall fail to comply with any term, provision, or
covenant of this lease, other than the payment of rent, and shall not cure that
failure within thirty (30) days after written notice thereof to Lessee.
(c) Lessee shall make an assignment for the benefit of creditors.
(d) Lessee shall file a petition under any section or chapter of
the National Bankruptcy Act, as amended, or under any similar law or statute of
the United States or any state thereof; or Lessee shall be adjudged bankrupt or
insolvent in proceedings filed against Lessee thereunder and such petition or
adjudication shall not be vacated or set aside or stayed within the time
permitted by law.
(e) A receiver or trustee shall be appointed for all or
substantially all of the assets of Lessee and that receivership shall not be
terminated or stayed within six (6) months.
(f) Lessee shall desert or vacate any substantial portion of the
Leased Premises with the non-payment of rent without the prior written consent
of Lessor.
20.2. No acceptance of any late rental payments or any other act by Lessor
shall be deemed to be a waiver of any default by Lessee. Unless otherwise
agreed to by Lessor and expressed in an instrument in writing, at Lessor's sole
option, at any time Lessee causes a default in the Lease, the Lease shall
thereafter be deemed to remain in default and Lessor may at anytime exercise any
remedies available to Lessor as specified herein.
ARTICLE 21. WAIVER OF DEFAULT
- -----------------------------
No waiver by the parties hereto of any default or breach of any term,
condition, or covenant of this lease shall be deemed to be waiver of any other
or continuing breach of the same or any other term, condition, or covenant
contained herein.
ARTICLE 22. REMEDIES
- --------------------
22.1. Upon the occurrence of any event of default specified in Article 20,
Lessor shall have the option to pursue any one or more of the following remedies
without any further notice or demand whatsoever, not specifically provided for
herein:
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<PAGE>
(a) Terminate this lease, in which event Lessee shall immediately
surrender the Leased Premises to Lessor, and if Lessee fails to do so, Lessor
may, without prejudice to any other remedy which it may have for possession or
arrearages in rent and upon five (5) days prior written notice to Lessee, enter
upon and take possession of the Leased Premises and expel or remove Lessee and
any other person who may be occupying the premises or any part thereof. This may
be done, by self-help if necessary, without being liable for prosecution or any
claim of damages for such entrance and expulsion or removal. Lessee agrees to
pay to Lessor on demand the amount of all reasonable loss and damage which
Lessor may suffer by reason of such termination, whether through inability to
relet the premises on satisfactory terms or otherwise.
(b) Enter upon and take possession of the Leased Premises and expel
or remove Lessee and any other person who may be occupying the Leased Premises
or any part thereof, by self-help if necessary, without being liable for
prosecution or any claim for damages, and if Lessor so elects, relet the Leased
Premises on such terms as Lessor shall deem advisable and receive the rent
therefrom; and Lessee agrees to pay to Lessor within ten (10) days any
deficiency that may arise by reason of such reletting.
(c) Enter upon the Leased Premises, by self-help if necessary,
without being liable for prosecution or any claim for damages therefore, and do
whatever Lessee is obligated to do under the terms of this Lease; and Lessee
agrees to reimburse Lessor on demand for any expenses which Lessor may incur in
thus effecting compliance with Lessee's obligations under this Lease, and Lessee
further agrees that Lessor shall not be liable for any damages resulting to
Lessee from such action.
(d) Lessor may, without being liable for prosecution or any claim
for damages therefore and upon written notice to Lessee, discontinue furnishing
all or any part of the services described in Article 14, and no such
discontinuance shall be deemed an eviction or disturbance of Lessee's use of the
premises.
(e) Lessor may enforce any or all of its rights provided in Article
13 hereof.
(f) The following provisions shall override and control any
conflicting provisions of Pennsylvania Property Code, as well as any successor
statute governing the right of Lessor to change the door locks of commercial
tenants. In the event of the failure or refusal by Lessee to make the timely
punctual payment of any rent or other sums payable under this Lease when and as
the same shall become due and payable, or in the event of any default of this
Lease by Lessee as described in Article 20 above, Lessor is entitled and is
hereby authorized, with notice to Lessee whatsoever, to enter upon the Leased
Premises by use of master key, a duplicate key or other peaceable means, and to
change, alter
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and/or modify the door locks on all entry doors of the Leased Premises, thereby
permanently excluding Lessee, and its officers, principals, agents, employees
and representatives therefrom.
In the event the Lessor has either permanently repossessed the Leased
Premises pursuant to the foregoing provisions of this Lease, or has terminated
the Lease by reason of Lessee's default, Lessor shall not thereafter be
obligated to provide Lessee with a key to the Leased Premises at any time,
regardless of any amounts subsequently paid by Lessee; provided, however, that
in any such instance, during Lessor's normal business hours and at the
convenience of Lessor, and upon receipt of written request from Lessee
accompanied by such written waivers and releases as the Lessor may require,
Lessor will either (at Lessor's option) (1) escort Lessee or its authorized
personnel to the Leased Premises to retrieve any personal belongings or other
property of Lessee not subject to the Lessor's lien or security interest
described in Article 13 hereof. If Lessor elects to exclude Lessee from the
Leased Premises without permanently repossessing or terminating pursuant to the
foregoing provisions of this Lease, then Lessor shall not be obligated to
provide Lessee a key to reenter the Leased Premises until such time as all
delinquent rental and other amounts due under this Lease have been paid in full
and all other defaults, if any, have been completely cured to Lessor's
satisfaction (if such cure occurs prior to any actual permanent repossession or
termination), and Lessor has been given assurance reasonably satisfactory to
Lessor evidencing Lessee's ability to satisfy its remaining obligations under
this Lease. During any such temporary period of exclusion, Lessor will, during
Lessor's regular business hours and at Lessor's convenience, upon receipt of
written request from Lessee (accompanied by such written waivers and releases as
Lessor may reasonably require), escort Lessee or its authorized personnel to the
Leased Premises to retrieve personal belongings of Lessee or its employees, and
such other property of Lessee as is not subject to the Lessor's lien and
security interest described in Article 13. This remedy of Lessor shall be in
addition to, and not in lieu of, any of its other remedies set forth in this
Lease, or otherwise available to Lessor at law or in equity.
22.2. No re-entry or taking possession of the Leased Premises by Lessor
shall be construed as an election on its part to terminate this Lease, unless a
written notice of such intention is given to Lessee. Notwithstanding any such
reletting or re-entry to take possession, Lessor may at any time thereafter
elect to terminate this Lease for a previous default in the event such default
is not cured by Lessee.
22.3. Pursuit of any of the foregoing remedies shall not preclude pursuit
of any of the other remedies herein provided or any other remedies provided by
law, nor shall pursuit of any remedy herein provided constitute a forfeiture or
waiver of any rent due to Lessor hereunder or of any damages accruing to Lessor
by reason of the violation of any of the terms, provisions and covenants herein
contained. Lessor's acceptance of rent following an event of default hereunder
shall not be
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construed as Lessor's waiver of such event of default. No waiver by Lessor of
any violation or breach of any of the terms, provisions, and covenants herein
contained shall be deemed or construed to constitute a waiver of any other
violation or breach of any of the terms, provisions, and covenants herein
contained. Forbearance by Lessor to enforce one or more of the remedies herein
provided upon an event of default shall not be deemed or construed to constitute
a waiver of such default.
22.4. The loss or damage that Lessor may suffer by reason of termination
of this Lease or the deficiency from any reletting as provided for above shall
include the expense of repossession and any repairs or remodeling undertaken by
Lessor following repossession.
22.5. No act or thing done by Lessor or its agents during the term hereby
granted shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid unless the same
be made in writing and subscribed by Lessor.
ARTICLE 23. RIGHTS AND REMEDIES CUMULATIVE
- ------------------------------------------
The rights and remedies provided by this Lease are cumulative and the use
of any one right or remedy by either party shall not preclude or waive its right
to use any or all other remedies. Said rights and remedies are given in
addition to any other rights the parties may have by law, statute, ordinance, or
otherwise.
ARTICLE 24. MORTGAGES
- ---------------------
The rights and interests of Lessee under this Lease and to the leased
Premises shall be subject and subordinate to all deeds of trust, mortgages, rent
assignments, and other security instruments and to all renewals, modifications,
consolidations, replacements and extensions thereof (die "Security Documents")
heretofore or hereafter executed by Lessor or any successor in interest of
Landlord covering the Premises, the Building, the Land or any parts thereof or
interest therein to the same extent as if the Security Documents had been
executed, delivered and recorded prior to the execution of this Lease; provided,
however, that at the option of the holder or holders of any Security Document,
evidenced by written notice to such effect from such holder or holders to
Lessee, this Lease shall be superior to the Security Document held by such
holder or holders. After the delivery to Lessee of a notice from Lessor that it
has entered into one or more Security Documents, then during the term of such
Security Documents Lessee shall deliver to the holder or holders of all Security
Documents a copy of all notices to Lessor and shall grant to such holder or
holders the right to cure all defaults, if any, of Lessor hereunder within the
same time period provided in this Lease for curing such defaults by Lessor and,
except with the prior written consent of the holder of the Security Documents,
shall not (i) amend this Lease, (ii) surrender or terminate this Lease except
pursuant to a right to terminate expressly set forth in this Lease,
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or (iii) pay any Rent or installment thereof more than one month in advance or
pay any Rent or installment thereof or other amounts payable hereunder other
than in strict accordance with the terms hereof or of the Security Documents. In
the event of foreclosure by any lienholder of the building, Lessee shall not
have a right to terminate this lease. The provisions of this section shall be
self-operative and shall not require further agreement by Lessee however, at the
request of Lessor, the holder of any Security Document or the successor in
interest of Lessor pursuant to such Security Document (whether by foreclosure or
conveyance in lieu of foreclosure or otherwise), Lessee shall execute such
further documents (including, without limitation, attornment agreements) as may
be required or desirable to evidence and set forth for the benefit of the holder
of any Security Documents or such successor in interest pursuant thereto the
obligations of Lessee hereunder.
At any time and from time to time upon not less than 10 days prior notice
by Lessor, Lessee shall furnish a statement in writing certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications), and stating whether or not to the best knowledge of Lessee
Lessor is in default in the keeping, observance or performance of any covenant,
agreement, term, provision or condition contained in this Lease and, if so,
specifying each such default of which Lessee may have knowledge, it being
intended that any such statement may be relied upon by any prospective
purchasers, tenant, mortgagee or assignee of any mortgage of the Building or
Land or of Lessor interest therein.
ARTICLE 24.1 QUIET ENJOYMENT
- ----------------------------
If and so long as Lessee pays the prescribed rent and performs or observes
all the terms, conditions, covenants and obligations of this required to be
performed or observed by it hereunder, Lessee shall at all times during the term
have the peaceable and quiet enjoyment, possession, occupancy and use of the
Premises without any interference from Lessor or any person or persons claiming
the leased Premises by, through or under Lessor, subject to any mortgages,
underlying leases or other matters if record to which this Lease is or may
become subject.
ARTICLE 25. BROKERAGE
- ---------------------
25.1. Lessee warrants that it has had no dealings with any broker or agent
(other than Somerset Properties, Inc.) in connection with negotiation or
execution of this Lease except as listed below, and Lessee agrees to indemnify
Lessor against all costs, expenses, attorney's fees, or other liability or
commissions, compensation or charges claimed by any broker or agent claiming
same by, through, or under Lessor.
25.2. Lessee agrees that it will not enter into any agreements, verbal or
written, with any third-party broker or agent (other than Lessor or Lessor's
employees or agents) in connection with any renewal, renegotiation or expansion
of this Lease or a new lease to be entered into for the Leased Premises or any
other
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premises in the Building. Lessee agrees to indemnify Lessor against all costs,
expenses, attorney's fees, or other liability or commissions, compensation or
other charges claimed by any broker or agent claiming same by, through or under
Lessor.
ARTICLE 26. HOLDING OVER
- ------------------------
Should Lessee, or any of its successors in interest, hold over the
Premises, or any part thereof, after the expiration of the Term of this Lease,
unless otherwise agreed in writing, such holding over shall constitute and be
construed as tenancy from month to month only, at a rental equal to 150% of the
rent (base and cumulative escalation) payable for the last full month of the
Term of this lease. The inclusion of the preceding sentence shall not be
construed as Lessor's consent for Lessee to hold over.
ARTICLE 27. AMERICANS WITH DISABILITIES ACT OF 1990 ("ADA")
- ----------------------------------------------------------
27.1. Notwithstanding anything contained in the Lease to the contrary,
Lessor represents that it is currently making good faith efforts to bring the
common areas into compliance with the requirements imposed of Title III of the
ADA.
27.2. Lessee represents and covenants that it shall conduct its occupancy
and use of the Premises in accordance with the ADA to the extent if any Lessee
is required by the ADA to comply (including, but not limited to, modifying its
policies, practices and procedures, and providing auxiliary aids and services to
disabled persons).
27.3. If the Lease provides that the Lessee is to complete certain
alterations and improvements to the Premises in conjunction with the Lessee
taking occupancy of the Premises, Lessee agrees that all such work shall comply
with the ADA and, upon request of Lessor, Lessee shall provide Lessor with
evidence reasonably satisfactory to Lessor that such work was performed in
compliance with the ADA. Furthermore, Lessee covenants and agrees that any and
all future alterations or improvements made by Lessee to the Premises shall
comply with the ADA.
ARTICLE 28. HAZARDOUS MATERIALS PERMITTED
- -----------------------------------------
Lessee hereby represents that Lessee uses only those Hazardous Materials
(as defined below) in the conduct of its business on the Premises. Otherwise,
Lessee does not and shall not use or permit the use of the Premises for any
purpose relating to the storage and use of Hazardous Materials. Lessee shall
not, in any event, generate, manufacture, produce, release, discharge or dispose
of on, in or under the Premises or the property of which the Premises are a part
(the "Property"), or transport to or from the Premises or the Property, any
Hazardous Materials, or allow any other person or entity to do so.
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Lessee shall comply with all local, state or federal laws, ordinances or
regulations relating to Hazardous Materials and above ground and underground
storage tanks on, in, under or about the Premises.
Lessee shall promptly notify Lessor should Lessee receive notice of or
otherwise become aware of any (i) pending or threatened environmental regulatory
action against Lessee, in regards to the leased Premises or the Property; (ii)
claims made or threatened by any third party relating to any loss or injury
resulting from any Hazardous Material; or (iii) release or discharge or
threatened release or discharge of any Hazardous Material in, on, under or about
the Premises or the Property.
Lessee shall promptly deliver copies of any documents relating to any
governmental proceeding relating to Hazardous Materials and all engineering
reports, test reports and laboratory analyses concerning the Hazardous Materials
to Lessor.
Lessee shall promptly and thoroughly investigate suspected Hazardous
Materials contamination of the Premises or the Property or the ground water of
the Property, resulting from Lessee's use of the Premises.
Lessor shall have the right, to require an annual audit of Lessee's
operation on the Premises to ensure compliance with environmental laws and
regulations. Upon receipt of written notice from Lessor, Lessee shall promptly
correct any violations and/or deficiencies cited in the audit.
If an Event of Default occurs, Lessor, at Lessee's expense, shall have the
right to cause to be conducted an investigation of the Premises for Hazardous
Materials and Lessee shall forthwith remove, repair, clean up or detoxify any
Hazardous Materials from the Premises, the Property, or ground water of the
Property resulting from Lessee's use, whether or not such actions are required
by law.
Lessee shall permit Lessor or its agents to inspect the Premises at any
reasonable time agrees to fully cooperate with Lessor in determining compliance.
Lessee shall protect, indemnify an hold harmless Lessor, its directors,
officers, employees, agents, successors and assigns from and against any and all
loss, damage, cost, expense or liability (including attorney's fees and costs)
arising directly or indirectly out of Lessee's use of the Premises, or from the
conduct of Lessee's business or attributable to Lessee's failure to comply with
this, including without limitation (i) all foreseeable consequential damages;
and (ii) the costs of any required or necessary repair, cleanup, or
detoxification of the Premises or the Property and the preparation and
implementation of any closure, remedial or other plans, required by a
governmental agency with jurisdiction for the subject matter.
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<PAGE>
This indemnity shall survive termination or cancellation of this Lease for any
reason.
"Hazardous Materials" shall mean any flammable explosives, radioactive
materials, hazardous wastes, toxic substances or related materials, including,
without limitation, any substance defined as or included in the definition of
"hazardous substances", "hazardous wastes", hazardous materials", "toxic
substances", "contaminants" or "pollutants" under any applicable federal or
state laws or regulations.
ARTICLE 29. NOTICES AND ADDRESSES
- ---------------------------------
29.1. Whenever written notice is required or permitted under this Lease,
such notice shall be in writing and shall be either (a) hand delivered to the
party being notified, (b) hand delivered to and left inside such party's mailing
address set forth below, (c) hand delivered to and left inside the Leased
Premises, or (d) forwarded by certified mail, return receipt requested, postage
prepaid, to such party at such party's mailing address. The addresses for Lessor
and Lessee shall be as follows:
LESSOR: LESSEE:
Gwynedd Office Park Associates, L.P. EST Corporation
c/o Somerset Properties, Inc. 120 Royall Street
768 N. Bethlehem Pike Canton, MA 02021
Suite 203 Attn: John Baggott,
Ambler, PA 19002 V.P. of Finance
Attn: Anthony N. Brady
29.2. Notice shall be deemed to have been given upon actual delivery or
upon the third (3rd) day after mailing from any location within the county where
the building is located, whichever is sooner. Notice by non-certified mail shall
be sufficient if it is actually received by the addressee or an employee or
agent of the addressee. Notice to any one of multiple Lessees shall be
considered notice to all. Notice from one of multiple Lessees shall be
considered notice to all. Notice from one of multiple Lessees to Lessor shall be
considered notice from all Lessees. The term "notice" as used above shall be
inclusive of notices, billings, requests and demands. If Lessee moves out of the
Leased Premises without leaving with Lessor a written notice of a forwarding
address, Lessee's mailing address shall be deemed to be Lessee's last known
address as shown by Lessor's records, and such notice shall be deemed received
by Lessee when deposited in first class mail.
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<PAGE>
ARTICLE 30. PARTIES BOUND
- --------------------------
This agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, legal
representatives, successors, and assigns where permitted by this agreement.
ARTICLE 31. PENNSYLVANIA LAW TO APPPLY
- --------------------------------------
This agreement shall be construed under and in accordance with the laws of
the State of Pennsylvania, and all obligations of the parties created hereunder
are performed in Montgomery County, Pennsylvania.
ARTICLE 32. PRIOR AGREEMENTS SUPERSEDED
- ---------------------------------------
This agreement constitutes the sole and only agreement of the parties
hereto and supersedes any prior understandings or written or oral agreements
between the parties respecting this subject matter.
ARTICLE 33. LEGAL CONSTRUCTION
- ------------------------------
In case any one or more of the provisions contained in this agreement 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 thereof and this agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
ARTICLE 34. SHORT FORM LEASE
- ----------------------------
Lessee shall, within ten (10) days after request by Lessor, execute a short
form lease in recordable form setting forth the essential elements of this Lease
Agreement including, but not limited to, the names of' the parties, the term of
the lease, and the description of the leased premises.
ARTICLE 35. GENDER
- ------------------
Words of any gender used in this lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
ARTICLE 36. FORCE MAJEURE
- -------------------------
Lessor shall not be required to perform any term, condition, or covenant in
this lease so long as such performance is delayed or prevented by force majeure
circumstance, which shall mean acts of God, labor disputes (whether lawful or
not), material or labor shortages, restrictions by any governmental authority,
civil riots,
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floods, and any other cause not reasonably within the control of Lessor and
which by the exercise of due diligence Lessor is unable, wholly or in part, to
prevent or overcome.
ARTICLE 37. JOINT AND SEVERAL LIABILITY
- ---------------------------------------
Intentionally deleted.
If there be more than one Lessee, the obligations hereunder imposed upon
Lessee shall be joint and several. If there be a guarantor of Lessee's
obligations hereunder, the obligations hereunder imposed upon Lessee shall be
the joint and several obligations of Lessee and such guarantor, and Lessor need
not first proceed against the Lessee hereunder before proceeding against such
guarantor, nor shall any such guarantor be released from its guaranty for any
reason whatsoever, including without limitation, in case of any amendments,
waivers, or failure of notice to guarantor.
ARTICLE 38. ATTORNEY'S FEES
- ---------------------------
In the event Lessor or Lessee breaches any of the terms of this agreement
whereby the party not in fault employs attorneys to protect or enforce its
rights hereunder and prevails, then the defaulting party agrees to pay the other
party reasonable attorney's fees incurred by the prevailing party.
ARTICLE 39. TIME OF THE ESSENCE
- -------------------------------
It is expressly agreed that time is of the essence in this Lease Agreement;
and all performance due dates, time schedules, and conditions precedent to
exercising a right shall be strictly adhered to without delay except where
otherwise expressly provided.
ARTICLE 40. AMENDMENT
- ---------------------
No amendment, modification, or alteration of the terms hereof shall be
binding unless it shall be in writing, dated subsequent to the date hereof, and
executed by the parties.
ARTICLE 41. ADDITIONAL PROVISIONS
- ---------------------------------
Intentionally deleted.
ARTICLE 42. RULES AND REGULATION
- --------------------------------
Lessee and Lessee's agents, employees, and invitees will comply fully with
all requirements of the rules and regulations of the building and related
facilities,
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which are attached hereto as Exhibit C, and made a part hereof as though fully
set out herein. Lessor shall at all times have the right to change such rules
and regulations or to promulgate other rules and regulations in such manner as
may be deemed by Lessor advisable for safety, care, or cleanliness of the
building and related facilities or premises, and for preservation of good order
therein, all of which rules and regulations, changes and amendments will be
forwarded to Lessee in writing and shall be carried out by Lessee.
Lessee shall further be responsible for the compliance with such rules and
regulations by the employees, servants, agents, visitors and invitees of Lessee.
The failure of Lessor to enforce any of said rules and regulations against
Lessee or any other tenant of the building shall not be deemed to be a waiver of
such rules and regulations. Lessor shall not be responsible to Lessee for non-
performance by any other tenant or occupant of the building (or their employees,
servants, agents, visitors, or invitees) of any said rules and regulations.
ARTICLE 43. FINANCIAL INFORMATION
- ---------------------------------
Intentionally deleted.
ARTICLE 44. GUARANTY OF LEASE
- -----------------------------
Intentionally deleted.
ARTICLE 45. RELOCATION OF LESSEE
- --------------------------------
Upon at least 60 days notice to Lessee, Lessor shall have the right to
relocate Lessee within the building in lease space which is reasonably suited
for Lessee's use. Such relocation shall be made at Lessor's sole expense limited
to reasonable moving, improvement, and administrative expense. Rent per square
foot shall not be increased if the relocation space is larger. Relocation date
shall be contained in the relocation notice referred to above. Lessor shall not
be liable to Lessee in connection with such relocation other than for those
expenses referred to above.
ARTICLE 46. RELEASE AND INDEMNITY
- ---------------------------------
Both parties shall indemnify and hold harmless Lessor and Lessor's
partners, venturers, agents, directors, officers, employees, invitees, and
contractors, from all claims, losses, costs, damages, or expenses (including but
not limited to attorney's fees) resulting or arising or alleged to result or
arise from any and all injuries to or death of any person or damage to or loss
of any property caused by any act, omission, or neglect of Lessee or Lessor's
partners, venturers, directors, officers, employees, agents, invitees, or
guests, or any parties contracting with Lessee relating to the Premises, the
Land, the Building, or the Complex generally or by any
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breach, violation or non-performance of any covenant of Lessee or Lessor under
this Lease.
ARTICLE 47. TERMINATION BY NOTICE OR CONTINUATION
- -------------------------------------------------
It is hereby mutually agreed that either party hereto may terminate the
Lease at the expiration of the original term by delivering to the other party
written notice of same no later than ninety (90) days prior to the expiration of
the then current term. In the absence of such notice the lease shall
automatically continue for an additional period of one (1) year under the same
terms and conditions, with the exception that the current annual rent shall be
increased by the increase in the Consumer Price Index (CPI). However, in no
event shall the increase in annual rent be less than three (3 %) percent.
ARTICLE 48. EXECUTION
- ---------------------
The parties having agreed as above, this lease is dated for reference on
January 7, 1999.
- ---------
LESSEE: EST Corporation, a Massachusetts corporation
/s/ John Baggott
- ----------------
Name: John Baggott
Title: Vice President of Finance
1/4/99
- ------
Date
LESSOR: Gwynedd Office Park Associates, L.P.
By: Bethlehem Pike-Corporation, its General Partner
/s/ Anthony N. Brady
- --------------------
Name: Anthony N. Brady
Title: President
1/7/99
- ------
Date
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<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
-----
768 North Bethlehem Pike, Ambler, Pennsylvania 19002
ALL THAT CERTAIN lot or piece of ground with the buildings and improvements
thereon erected, Situate in the Township of Lower Gwynedd, County of Montgomery
and State of Pennsylvania, bounded and described according to a Final Plan
Glassman Tract, made by Robert D. Gilmore & Associates, Inc., Consulting
Engineers and Land Surveyors, dated January 24, 1979 and last revised March 28,
1979, as follows, to wit:
BEGINNING at a point on the title line in the bed of Bethlehem Pike (L.R.
153) (ROUTE 309), said point also being a comer of lands now or late of Joseph
Egher; thence from said point extending along said lands of Joseph Egher and
partly along lands now or late of Stephano Bros. Real Estate, North 74 degrees
59 minutes 30 seconds East, crossing the said Northeasterly side of Bethlehem
Pike, 451.94 feet to a point to an iron pipe; thence extending South 15 degrees
00 minutes 30 seconds East 22.30 feet to an iron pipe; thence extending North 63
degrees 46 minutes East 75.45 feet to an iron pipe set in the comer of lands now
or late of The Springhouse Estates; thence extending along the same South 15
degrees 00 minutes 30 seconds East 330.04 feet to an iron pipe; thence extending
South 67 degrees 28 minutes West 62.03 feet to a point a comer of Lot No. 2;
thence extending along same, the three following courses and distances: (1)
North 15 degrees 00 minutes 30 seconds West 149.63 feet; (2) South 73 degrees 24
minutes West 213.60 feet, and (3) North 15 degrees 00 minutes 30 seconds West
152. 10 feet to a point; thence extending partly along Lot No. 2 and partly
along lands now or late of Charles Dager, South 74 degrees 59 minutes 30 seconds
West crossing a Sanitary Sewer Pipe 215.00 feet to a point of curve on the
future right of way line of Bethlehem Pike; thence extending through the bed of
same, the three following courses and distances: (1) on the arc of a circle
curving to the left having a radius of 10.00 feet the arc distance of 15.71 feet
to a point; (2) South 74 degrees 59 minutes 30 seconds West 25.88 feet to a
point in the title line in the bed of same; and (3) North 15 degrees 00 minutes
30 seconds West 60.00 feet to the first mentioned point and place of beginning.
BEING Lot "A" as shown on the above mentioned Plan.
BEING THE SAME premises which F. A. Pierce, Inc., a Pennsylvania
Corporation by Indenture dated June 26, 1979 and recorded at Norristown in the
Office of the Recorder of Deeds in and for the County of Montgomery in Deed Book
Volume 4427 page 326, granted and conveyed unto Montgomery County Industrial
Development Authority in fee.
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<PAGE>
BEING Parcel Number 39-00-03890-03-1 as set forth in the Montgomery County
Board of Assessments Appeals.
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<PAGE>
EXHIBIT "B"
FLOOR PLAN
----------
FLOOR PLAN ATTACHED
-24-
<PAGE>
EXHIBIT "C"
RULES AND REGULATION
--------------------
The following rules and regulations shall apply, where applicable, to the
premises, the building, the parking lot associated therewith, the land situated
beneath the building and the appurtenances thereto:
1. Sidewalks, doorways, vestibules, halls, stairways and other similar
areas shall not be obstructed by Lessees or used by any Lessee for any purpose
other than ingress and egress to and from the leased premises and for going from
one to another part of the building.
2. Plumbing, fixtures and appliances shall be used only for the purposes
for which designed, and no sweepings, rubbish, rags or other unsuitable material
shall be thrown or placed therein. Damage resulting to any such fixtures or
appliances from misuse by a Lessee or such Lessee's agents, employees or
invitees, shall be paid by such Lessee, and Lessor shall not in any case be
responsible thereof.
3. No signs, advertisements or notices shall be painted or affixed on or to
any windows or doors or other part of the building except of such color, size
and style and such places as shall be first approved in writing by Lessor. No
curtains or other window treatments shall be placed between the glass and the
building standard window treatments.
4. Lessor shall provide all locks for doors in each Lessee's Leased
Premises, and no Lessee shall place any additional lock or locks on any door in
its leased area without Lessor's prior written consent. Two keys to the locks on
the doors in Lessee's Leased Premises shall be furnished by Lessor to each
Lessee, at the cost of Lessor.
5. With respect to work being performed by Lessee in any Leased Premises
with the approval of Lessor, Lessee will refer all contractors, contractors'
representatives and installation technicians rendering any service to them to
Lessor for Lessor's supervision, approval and control before the performance of
any contractual services. This provision does not apply to all work performed in
the building including, but not limited to, installation of telephones,
telegraph equipment, electrical devices and attachments, and any and all
installations of every nature affecting floors, walls, woodwork, trim, windows,
ceilings, equipment and any other physical portion of the building.
6. Lessor shall have the power to prescribe the weight and position of
safes and other heavy equipment or items, which shall in all cases, to
distribute weight, stand on supporting devices approved by Lessor. All damages
done to the
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building by a Lessee's property while in the building, shall be repaired at the
expense of such Lessee.
7. LESSEE SHALL NOTIFY THE BUILDING MANAGER WHEN SAFES OR OTHER HEAVY
EQUIPMENT OR FURNITURE ARE TO BE TAKEN IN OR OUT OF THE BUILDING, OR WHEN LESSEE
IS MOVING INTO OR OUT OF THE PREMISES. THE MOVING SHALL BE DONE UNDER THE
SUPERVISION OF THE BUILDING MANAGER, AFTER PERMISSION FROM LESSOR. PERSONS
EMPLOYED TO MOVE SUCH PROPERTY MUST BE ACCEPTABLE TO LESSOR. LESSEE IS
RESPONSIBLE FOR ARRANGING PROTECTION OF LOBBY FLOORS AND ELEVATOR WALLS PRIOR TO
THE MOVING OPERATION. THE TIME OF DAY FOR SUCH MOVE SHALL NOT CONFLICT WITH
TENANT USE.
8. Corridor doors, when not in use, shall be kept closed.
9. Each Lessee shall cooperate with Lessor's employees in keeping its
Leased Premises neat and clean. Lessee shall not employ any person for the
purpose of such cleaning other than the building's cleaning and maintenance
personnel. Lessor shall be in no way responsible to Lessee, its agents,
employees, or invitees for any loss of property from the Leased Premises or
public areas or for any damages to any property thereon from any cause
whatsoever.
10. To insure orderly operation of the building, no ice, mineral or other
water, towels, newspapers, etc. shall be delivered to any leased area except by
persons appointed or approved by Lessor in writing.
11. Should a Lessee require telegraphic, telephonic, annunciator or other
communication service, Lessor will direct the electrician where and how wires
are to be introduced and placed, and none shall be introduced or placed except
as Lessor shall direct. Electric current shall not be used for power or heating
without Lessor's prior written permission.
12. Lessee shall not make or permit any improper, objectionable or
unpleasant noises or odors in the building or otherwise interfere in any way
with other Lessees or person having business with them.
13. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways. No birds or animals shall be brought into or kept in, on or
about any Lessee's leased premises.
14. No machinery of any kind shall be operated by any Lessee in its leased
area without the prior written consent of Lessor, nor shall any Lessee use or
keep in the building any inflammable or explosive fluid or substance.
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15. No portion of any Lessee's leased premises shall at any time be used or
occupied as sleeping or lodging quarters.
16. Lessor reserves the right to rescind any of these rules and regulations
and to make such other and further rules and regulations as in its judgment
shall from time to time be needful for the safety, protection, care and
cleanliness of the building, the operation thereof, the preservation of good
order therein, and the protection, care and cleanliness of the building, the
operation thereof, the preservation of good order therein, and the protection
and comfort of the Lessee and their agents, employees and invitees, which rules
and regulations, when made and written notice thereof is given to and agreed to
a Lessee such agreement shall not be unreasonably withheld, shall be binding
upon it in like manner as if originally herein prescribed.
17. Lessor will not be responsible for lost or stolen personal property,
including trade fixtures, equipment, money or jewelry from Lessee's leased
premises or public or common areas, regardless of whether such loss occurs when
the area is locked against entry or not.
18. No objects visible from the street may be placed on the balconies
without prior written consent of Lessor.
19. Lessee shall not permit any portion of the leased premises to be used
for the sale of food, drink, liquor, or tobacco, for a barber or manicure shop,
for retail sales to the general public, for an employment bureau, or for
auctions or sales of personal property.
20. Lessee shall be responsible for any damage to carpeting and flooring as
a result of rust or corrosion of file cabinets, pot holders, roller chairs, and
metal objects.
21. Lessee employing laborers or others outside of the building shall not
have their employees paid in the building.
22. Lessee shall permit Lessor to grant to anyone the exclusive right to
conduct any business or render any service in the building.
23. Lessee shall not advertise the business, profession, or activities of
Lessee in any manner which violates the letter or spirit of any code of ethics
adopted by any recognized association or organization pertaining thereto or use
the name of the building for any purposes other than that of the business
address of Lessee or use any picture or likeness of the building or the building
name in any letterheads, envelopes, circulars, notices, advertisements,
containers, or wrapping material, without Lessor's express consent in writing.
-27-
<PAGE>
24. Lessee shall, before leaving the leased premises unattended, close and
lock all outside doors and shut off all utilities; damage resulting from failure
to do so shall be paid by Lessee.
25. Lessee shall give Lessor prompt notice of all accidents to or defects
in air-conditioning equipment, plumbing, electric facilities or any part or
appurtenance of the leased premises,
26. Lessee, its employees, agents, guests and invitees, in common with
Lessor and other Lessees of the building (and their employees, agents, guests
and invitees), shall have the right to use the parking area located on the land
on which the building is situated; provided however, that Lessee shall not park,
and shall prohibit its employees from parking, in areas marked "visitors",
"guests" or similar designations. Lessor shall have no obligation to provide any
security or lighting with respect to the parking area and use of the parking
area by Lessee, its employees, agents, guests and invitees, is solely the
responsibility of Lessee. Lessor shall have the right from time to time to
increase or decrease the parking areas and the number of parking spaces thereon,
to increase, decrease or change the access from the parking areas to the public
streets, to reserve spaces or locations within the parking area for specific
Lessees (without the obligation to provide reserved spaces for other Lessees) to
include within these rules and regulations such additional rules and regulations
regarding the use of the parking areas as Lessor deems appropriate, to do such
other acts as in Lessor's sole judgment is necessary or appropriate for the
operation or maintenance of the parking areas of the building.
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EXHIBIT "D"
ACKNOWLEDGMENT OF LEASE COMMENCEMENT
The undersigned parties acknowledge that the following described Lease is
in full force and effect and that Lessee has taken possession of the space.
Date of Lease:___________________________________
Lessor:__________________________________________
Address:_________________________________________
Lessee:__________________________________________
Address:_________________________________________
Suite No:________________________________________
Square Feet in N.R.A.:___________________________
Building Address:________________________________
City/State/Zip:__________________________________
Building Legal Description:______________________
________________________________________________________________________________
________________________________________________________________________________
The undersigned parties further acknowledge that the commencement date,
annual anniversary date, and ending date of the initial lease term are as
follows:
Commencement Date:_______________________________
Termination Date:________________________________
Lessor and Lessee hereby agree that: (1) Except for those items shown on
the attached "punch list", which Lessor will remedy within a reasonable period
of time, Lessor has fully completed any work construction required under the
terms of the Lease, (2) The Premises are tenantable, the Lessor has no further
obligation for construction (except as attached hereto), and Lessee acknowledges
that both the
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Building and the Premises are satisfactory in all respects, and that Lessee
accepts said Premises as is.
The undersigned parties further acknowledge that the above described Lease
has not been amended or modified and that this acknowledgment may be filed of
record by Lessor with the Pennsylvania Secretary of State and/or in the real
estate records of the county where the building is located as a financing
statement for purposes of recording Lessor's contractual landlord lien rights
over Lessee's personal property, leasehold improvements, and fixtures therein
and insurance proceeds thereon. Such rights are binding on subsequent owners of
the building. All provisions of the above Lease are hereby affirmed and
incorporated herein.
LESSEE: LESSOR:
(to be signed upon occupancy) (to be signed upon occupancy)
______________________________ ______________________________________
Printed Name of Lessee Printed Name of Lessor
(if applicable) (if applicable
______________________________ ______________________________________
Signature Signature
______________________________ ______________________________________
Printed Name Printed Name
______________________________ ______________________________________
Title Title
______________________________ ______________________________________
Date Signed Date Signed
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DocInfo: BOS1 #1003361 v1
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<PAGE>
EXHIBIT 10.13
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1. Parties: This Lease ("Lease"), dated for reference
purposes only, August 3, 1999, is made by/between City of Dana Point ("Lessor"),
Embedded Support Tools Corporation ("Lessee"), (collectively, the "Parties", or
individually a "Party").
1.2. (a) Premises: That certain portion of the Building,
including all improvements therein or to be provided by Lessor under the terms
of this Lease, commonly known by the street address of 33282 Golden Lantern,
located in the City of Dana Point, County of Orange, State of California, with
zip code 92629, as outlined on Exhibit ____ attached hereto ("Premises"). The
"Building" is that certain building containing the Premises and generally
described as (describe briefly the nature of the Building): City Plaza - 33282
Golden Lantern Suite 103, Dana Point, CA 92629. In addition to Lessee's rights
to use and occupy the Premises as hereinafter specified, Lessee shall have non-
exclusive rights to the Common Areas (as defined in Paragraph 2.7 now) as
hereinafter specified, but shall not have any rights to the roof, exterior walls
or utility raceways of the Building or to any other buildings in the Industrial
Center. The premises, the Building, the Common Areas, the land upon which they
are located, along with all other buildings and Improvements thereon, are herein
collectively referred to as Industrial Center." (Also see Paragraph 2.)
1.2 (b) Parking: Two (2) unreserved vehicle parking spaces
("Unreserved Parking Spaces"); and _________________________ reserved vehicle
parking spaces ("Reserved Parking Spaces"). (Also see Paragraph 2.6).
1.3. Term: 2 years and 0 months ("Original Term") commencing
September 1, 1999 ("Commencement Date") and ending October 31, 2001 ("Expiration
Date"). (Also see Paragraph 3.)
1.4. Early Possession: Upon Execution ("Early Possession
Date"). (Also see Paragraphs 3.2 and 3.3.)
1.5. Base Rent: $646.00 plus $40.00 per month ("Base Rent"),
payable on the first day of each month commencing September 1, 1999. (Also see
Paragraph 4.)
If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum __________, attached hereto.
<PAGE>
1.6. (a) Base Rent Paid Upon Execution: $646.00 + 40.00 as Base
Rent for the period September 1999
1.6 (b) Lessee's Share of Common Area Operating Expenses:
____________ percent ( %) ("Lessee's Share") as determined by prorata square
footage of the Premises as compared to the total square footage of the Building
or other criteria as described in Addendum __________.
1.7. Security Deposit: $646.00 ("Security Deposit"). (Also see
Paragraph 5.)
1.8. Permitted Use: General Office_____________________________
________________________________________________________________________________
____________________
_____________________________________________ ("Permitted Use"). (Also see
Paragraph 6.)
1.9. Insuring Party. Lessor Is the "Insuring Party." (Also see
Paragraph 8.)
1.10. (a) Real Estate Brokers. The following real estate
broker(s) (collectively, the "Brokers") and brokerage relationships exist In
this transaction and are consented to the Parties (check applicable boxes):
_______________ represents Lessor exclusively ("Lessor's
Broker");
_______________ represents Lessee exclusively ("Lessee's Brokee")
or
Muller Commercial Real Estate represents both Lessor and Lessee
("Dual Agency"). (Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease
by both Parties, Lessor shall pay to said Broker(s) jointly, or in such separate
shares as they may mutually designate in writing a fee as set forth in a
separate written agreement between Lessor and said Broker(s) (or in the event
there is no separate written agreement between Lessor and said Broker(s), the
sum of $___________) for brokerage services rendered by said Broker(s) in
connection with this transaction.
1.11. Guarantor. The obligations of the Lessee under this Lease
are to be guaranteed by Lessee. ("Guarantor"). (Also see Paragraph 37.)
1.12. Addenda and Exhibits. Attached hereto is an Addendum or
Addenda consisting of Paragraphs 49 through 51, and Exhibits N/A through N/A,
all of which constitute a part of this Lease.
-2-
<PAGE>
2. Premises, Parking and Common Areas.
2.1. Letting. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, or the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 3(b)) based thereon is
not subject to revision whether or not the actual square footage is more or
less.
2.2. Condition. Lessor shall deliver the Premises to Lessee
clean and free of debris on the Commencement Date and warrants to Lessee that
the existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating systems and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition on
the Commencement Date. If a non-compliance with said warranty exists as of the
Commencement Date, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expense. If Lessee does not give Lessor written notice of a non-
compliance with this warranty within thirty (30) days after the Commencement
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense.
2.3. Compliance with Covenants, Restrictions and Building Code.
Lessor warrants that any improvements (other than those constructed by Lessee or
at Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent of at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance, Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under applicable
Laws (as defined in Paragraph 2.4).
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2.4. Acceptance of Premises. Lessee hereby acknowledges: (a)
that it has been advised by the Broker(s) to satisfy itself with respect to the
condition of the premises (including but not limited to the electrical and fire
sprinkler systems, security, environmental aspects, seismic and earthquake
requirements, and compliance with the Americans with Disabilities Act and
applicable zoning, municipal, county, state and federal laws, ordinances and
regulations and any covenants or restrictions of record collectively,
"Applicable Laws") and the present and future suitability of the Premises for
Lessee's intended use; (b) that Lessee has made such investigation as it deems
necessary with reference to such matters, is satisfied with reference thereto,
and assumes all responsibility therefore as the same relate to Lessee's
occupancy of the Premises and/or the terms of this Lease; and (c) that neither
Lessor, nor any of Lessor's agents, has made any oral or written representations
or warranties with respect to said matters other than as set forth in this
Lease.
2.5. Lessee as Prior Owner/Occupant. The warranties made by
Lessor in this Paragraph 2 shall be of no force or effect if immediately prior
to the date set forth in paragraph 1.1 Lessee was the owner or occupant of the
Premises. In such event, Lessee shall, at Lessee's sole cost and expense,
correct any non-compliance of the premises with said warranties.
2.6. Vehicle Parking. Lessee shall be entitled to use the
number of Unreserved Parking Spaces and Reserved Parking Spaces specified in
Paragraph 1.2(b) on those portions of the Common Areas designated from time to
time by Lessor for parking. Lessee shall not use more parking spaces than said
number. Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to
or are controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, contractors invitees to be loaded, unloaded, or parked in areas other
than those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide
the parking facilities required by Applicable Law,
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2.7. Common Areas - Definition. The term "Common Areas" is
defined as all areas and facilities outside the Premises and within the exterior
boundary line of the Industrial Center and interior utility raceways within the
Premises that are provided and designated by the Lessor from time to time for
the general non-exclusive use of Lessor. Lessee and other lessees of the
Industrial Center and their respective employees, suppliers, shippers,
customers, contractors and invitees, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways
and landscaped areas.
2.8. Common Areas - Lessee's Rights. Lessor hereby grants to
Lessee, for the benefit of Lessee and its employees, suppliers, shippers,
contractors, customers and invitees, during the term of this Lease, the non-
exclusive right to use, in common with others entitled to such use, the Common
Areas as they exist from time to time, subject to any rights, powers, and
privileges reserved by Lessor under the terms hereof or under the terms of any
rules and regulations or restrictions governing the use of the Industrial
Center. Under no circumstances shall the right herein granted to use the Common
Areas be deemed to include the right to store any property, temporarily or
permanently, in the Common Areas. Any such storage shall be permitted only by
the prior written consent of Lessor or Lessor's designated agent, which consent
may be revoked at any time. In the event that any unauthorized storage shall
occur then Lessor shall have the right, without notice, in addition to such
other rights and remedies that it may have, to remove the property and charge
the cost to Lessee, which cost shall be immediately payable upon demand by
Lessor.
2.9. Common Areas - Rules and Regulations. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable Rules and Regulations with respect thereto
in accordance with paragraph 40. Lessee agrees to abide by and conform to all
such Rules and Regulations, and to cause its employees, suppliers, shippers,
customers, contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center.
2.10. Common Areas - Changes. Lessor shall have the right, in
Lessor's sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
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(c) To designate other land outside the boundaries of the
Industrial Center to be a pan of the Common Areas;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Industrial Center as
Lessor may, in the exercise of sound business judgment, deem to be appropriate.
3. Term.
3.1. Term. The Commencement Date. Expiration Date and Original
Term of this Lease are as specified in Paragraph 1.3.
3.2. Early Possession. If an Early Possession Date is specified
in Paragraph 1.4 and if Lessee totally or partially occupies the Premises after
the Early Possession Date but prior to the Commencement Date, the obligation to
pay Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including but not limited to the obligations to
pay Lessees Share of Common Area Operating Expenses and to carry the Insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.
3.3. Delay In Possession. If for any reason Lessor cannot
deliver possession of the Premises to Lessee by the Early Possession Date, if
one is specified in Paragraph 1.4, or if no Early Possession Date is specified,
by the Commencement Date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
Parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, it
possession is not tendered to Lessee when required by this Lease
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and Lessee does not terminate this Lease, as aforesaid, the period free of the
obligation to pay Base Rent, if any, that Lessee would otherwise have enjoyed
shall run from the date of delivery of possession and continue for a period
equal to the period during which the Lessee would have otherwise enjoyed under
the terms hereof, but minus any days of delay caused by the acts, changes or
omissions of Lessee.
4. Rent.
4.1. Base Rent. Lessee shall pay Base Rent and other rent or
charges, as the same may be adjusted from time to time, to Lessor in lawful
money of the United States, without offset or deduction, on or before the day on
which it is due under the terms of this Lease. Base Rent and all other rent and
charges for any period during the term thereof which is for less than one full
month shall be prorated based upon the actual number of days of the month
involved. Payment of Base Rent and other charges shall be made to Lessor at its
address stated herein or to such other persons or at such other addresses as
Lessor may from time to time designate in writing to Lessee.
4.2. (a) - (d) [Intentionally deleted]
5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's
execution hereof the Security Deposit set forth in Paragraph 1.7 as security for
Lessee's faithful performance of Lessee's obligations under this Lease. It
Lessee fails to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor may
use, apply or retain all or any portion of said Security Deposit for the payment
of any amount due Lessor or to reimburse or compensate Lessor for any liability,
cost, expense, loss or damage (including attorneys' fees) which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. Any time the Base Rent
increases during the term of this Lease, Lessee shall, upon written request from
Lessor, deposit additional monies with Lessor as an addition to the Security
Deposit so that the total amount of the Security Deposit shall at all times bear
the same proportion to (the then current Base Rent as the initial Security
deposit bears to the initial Base Rent set forth in Paragraph 1.5. Lessor shall
not be required to keep all or any part of the Security Deposit separate from
its general accounts. Lessor shall, at the expiration of earlier termination of
the term hereof and after Lessee has vacated the Premises, return to Lessee (or,
at Lessor's option, to the last assignee, if any, of Lessee's interest herein),
that portion of the Security Deposit not used or applied by Lessor. Unless
otherwise expressly agreed in writing by Lessor, no part of the Security Deposit
shall be considered
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held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. Use
6.1. Permitted Use.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable hereto, and for no other purpose. Lessee shall not use or permit the
use of the Premises in a manner that is unlawful, creates waste or a nuisance,
or that disturbs owners and/or occupants of, or causes damage to the Premises or
neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written notification of same,
which notice shall include an explanation of Lassoes reasonable objections to
the change in use.
6.2. Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof. Lessee
shall not engage in any activity in or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Requirements (as defined in
Paragraph 6.3). "Reportable Use" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation, possession, storage,
use, transportation or disposal of a Hazardous
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Substance that requires a permit from, or with respect to which a report,
notice, registration or business plan is required to be filed with, any
governmental authority, and (iii) the presence in, on or about the Premises of a
Hazardous Substance with respect to which any Applicable Laws require that a
notice be given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing, Lessee may, without Lessor's prior
consent, but upon notice to Lessor and in compliance with all Applicable
Requirements, use any ordinary and customary materials reasonably required to be
used by Lessee in the normal course of the Permitted Use, so long as such use is
not a Reportable Use and does not expose the Premises or neighboring properties
to any meaningful risk of contamination or damage or expose Lessor to any
liability therefor. In addition, Lessor may (but without any obligation to do
so) condition its consent to any Reportable Use of Hazardous Substance by Lessee
upon Lessees giving Lessor such additional assurances as Lessor, in its
reasonable discretion, deems necessary to protect itself, the public, the
Premises and the environment against damage, contamination or injury and/or
liability therefor, including but not limited to the installation (and, at
Lessor's option, removal on or before Lease expiration or earlier termination)
or reasonably necessary protective modifications to the Premises (such as
concrete encasements) and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof.
(b) Duty to Inform Lessor. It Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall Immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).
(c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessees
obligations under this sub-paragraph 6.2(c) shall include, but not be limited
to, the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultants and attorneys' fees and testing), removal, remediation,
restoration and/or abatement
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thereof, or of any contamination therein involved, and shall survive the
expiration or earlier termination of this Lease. No termination, cancellation or
release agreement entered into by Lessor and Lessee shall release Lessee from
its obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.
6.3. Lessee's Compliance with Requirements. Lessee shall, at Lessees
sole cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises, (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessee written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
6.4. Inspection; Compliance with Law. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the condition
of the Premises and for verifying compliance by Lessee with this Lease and all
Applicable Requirements (as defined in Paragraph 6.3), and Lessor shall be
entitled to employ experts and/or consultants in connection therewith to advise
Lessor with respect to Lessee's activities, including but not limited to
Lessee's installation, operation, use, monitoring, maintenance, or removal of
any Hazardous Substance on or from the Premises. The costs and expenses of any
such inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall
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upon request reimburse Lessor or Lessor's Lender, as the case may be, for the
costs and expenses of such inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.
7.1. Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Condition). 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations). (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair.
(b) [Intentionally deleted]
(c) [Intentionally deleted]
7.2. Lessor's Obligations. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building
Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessor, subject
to reimbursement pursuant to Paragraph 42, shall keep in good order, conditions
and repair the foundations, exterior walls, structural condition of interior
bearing walls, exterior roof, fire sprinkler and/or standpipe and those (if
located in the Common Areas) or other automatic fire extinguishing system
including fire alarm and/or smoke detection systems and equipment, fire
hydrants, parking lots, walkways, parkways, driveways, landscaping, fences,
signs and utility systems serving the Common Areas and all parts thereof, as
well as providing the services for which there is a Common Area Operating
Expense pursuant to Paragraph 4-2. Lessor shall not be obligated to paint the
exterior or interior surfaces of exterior walls nor shall Lessor be obligated to
maintain, repair or replace windows, doors or plate glass of the Premises.
Lessee expressly waives the benefit of any statute now or hereafter in effect
which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessors failure to keep the
Building, Industrial Center or Common areas in good order, condition and repair.
7.3. Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility Installations"
is used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the
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improvements on the Premises which are provided by Lessor under the terms of
this Lease, other than Utility Installations or Trade Fixtures. "Lessee-Owned
Alterations and/or Utility Installations" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor pursuant
to Paragraph 7.4(a). Lessee shall not make nor cause to be made any Alterations
or Utility Installations in, on, under or about the Premises without Lessor's
prior written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof) without
Lessor's consent but upon notice to Lessor, so long as they are not visible from
the outside of the Premises, do not involve puncturing, relocating or removing
the roof or any existing walls, or changing or interfering with the fire
sprinkler or fire detection systems and the cumulative cost thereof during the
term of this Lease as extended does not exceed $2,500.00.
(b) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2.500.00 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
(c) Lien Protection. Lessee shall pay when due all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises. If
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Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory
to Lessor in an amount equal to one and one-half times the amount of such
contested lien claim or demand, indemnifying Lessor against liability for the
same, as required by law for the holding of the Premises free from the effect of
such lien or claim. In addition, Lessor may require Lessee to pay Lessor's
attorneys' fees and costs in participating in such action if Lessor shall decide
it is to its best interest to do so.
7.4. Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal and
to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee-Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage of deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed of specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the Installation,
maintenance or removal of Lessees Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of my soil, material or groundwater contaminated by Lessee, all as
may than be required by Applicable Requirements and/for good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
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8. Insurance; Indemnity.
*Original 8.1 - {Intentionally deleted]
8.1. Liability Insurance
(a) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease, as an "insured
contract" far the performance of Lessee's indemnity obligations under this
Lease. The limits of said Insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability Insurance
described in Paragraph 8.1(a) above, in addition to and not in lieu of, the
Insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.2. Property Insurance-Building, Improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.3. If the coverage is available and
commercially appropriate. Lessor's policy or policies shall insure against all
risks if direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender or included in the Base Premium),
including coverage for any
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additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of my undamaged sections of the Building required
to be demolished or removed by reason of the enforcement of any building,
zoning, safety or land use laws as the result of a covered loss, but not
including plate glass insurance. Said policy or policies shall also contain an
agreed valuation provision in lieu of any co-insurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that in
the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide for one full year's loss
of rental revenues from the date of any such loss. Said insurance shall contain
an agreed valuation provision in lieu of any co-insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected rental income,
Real Property Taxes, insurance premium costs and other expenses, if any,
otherwise payable, for the next 12-month period. Common Area Operating Expenses
shall include any deductible amount in the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) Lessee's improvements, since Lessor is the insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.3. Lessee's Property Insurance. Subject to the requirements of
Paragraph 8.4, Lessee, at its cost, shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain Insurance
coverage on all of Lessee's personal property. Trade Fixtures and Lessee-Owned
Alterations and Utility Installations in, on, or about the Premises similar in
coverage to that carried by Lessor as the insuring Party under Paragraph 8.2(a).
Such insurance shall be full replacement cost coverage with a deductible not to
exceed $1,000.00
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per occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property and the restoration of Trade Fixtures and
Lessee-Owned Alterations and Utility Installations. Upon request from Lessor,
Lessee shall provide Lessor with written evidence that such insurance is in
force.
8.4. Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender, as set
forth in the most current issue "Bests Insurance Guide." Lessee shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.1(a) and 8.3. No such
policy shall be cancelable or subject to modification except after thirty
(30)days' prior written notice to Lessor. Lessee shall at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.
8.5. Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
the perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.6. Indemnity. Except for Lessor's negligence and/or breach of
express warranties, Lessee shall indemnify, protect, defend and hold harmless
the Premises, Lessor and its agents. Lessor's master of ground lessor, partners
and Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessees business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or
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proceeding involved therein, and whether or not (in the case of claims made
against Lessor) litigated and/or reduced to judgment. In case any action or
proceeding be brought against Lessor by reason of any of the foregoing matters,
Lessee, upon notice from Lessor, shall defend the same at Lessees expense by
counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee
in such defense. Lessor need not have first paid any such claim in order to be
so indemnified.
8.7. Exemption of Lessor from Liability. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or any
other person in or about the Premises, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures, or from any
other cause, whether said injury or damage results from conditions arising upon
the Premises or upon other portions of the Building of which the Premises are a
part from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for my damages arising from any act or neglect of any other
Lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence of
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit herefrom.
9. Damage or Destruction.
9.1. Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in sub-paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility
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Installations and Trade Fixtures of any lessees of the Building) of the Building
shall, at the option of Lessor, be deemed to be Premises Total Destruction.
(c) "Insured Loss" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.2(a) irrespective of any deductible amounts of coverage
limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depredation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2. Promises Partial Damage - Insured Loss. If Premises Partial
Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense,
repair such damage (but not Lessee's Trade Fixtures of Lessee-Owned Alterations
and Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available. Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, Lessor shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If Lessor does not receive such funds or assurance within such
ten (10) day period, and if Lessor does not so elect to restore and repair, then
this Lease shall terminate sixty (60) days following the occurrence of this
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than this Paragraph 9.2.
notwithstanding that
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there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.
9.3. Partial Damage - Uninsured Loss. If Premises Partial Damage that
is not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may, at Lessees
option, either (i) repair such damage is soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(iii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the funds of assurance thereof within the times specified
above, this Lease shall terminate as of the date specified in Lessor's notice of
termination,
9.4. Total Destruction. Notwithstanding any other provision hereof,
if Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
9.5. Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessees written notice
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purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds. Lessor shall, at Lessees expense, repair such damage as
soon as reasonably possible and this Lease shall continue in full force and
effect. If Lessee fails to exercise such option and provide such funds or
assurance during such period, then this Lease shall terminate as of the date set
forth in the first sentence of this Paragraph 9.5.
9.6. Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair, remediation or restoration.
[missing data]
meaningful way the repair or restoration of the Premises within ninety (90) days
after such obligation shall accrue, Lessee may, at any time prior to the
commencement of such repair or restoration, give written notice to Lessor and to
any Lenders of which Lessee has actual notice of Lessee's election to terminate
this Lease on a date not less than sixty (60) days following the giving of such
notice, if Lessee gives such notice to Lessor and such Lenders and such repair
or restoration is not commenced within thirty (30) days after receipt of such
notice, this Lease shall terminate as of the date specified in said notice. If
Lessor or a Lender commences the repair or restoration of the Premises within
thirty (30) days after the receipt of such notice, this Lease shall continue in
full force and effect. "Commence" as used in this Paragraph 9.6 shall mean
either the unconditional authorization of the preparation of the required plans,
or the beginning of the actual work on the Premises, whichever occurs first.
9.7. Hazardous Substance Conditions. If a Hazardous Substance
Condition occurs, unless Lessee is legally responsible therefor (in which case
Lessee shall make the investigation and remediation thereof required by
Applicable Requirements and this Lease shall continue in full force and effect,
but subject to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor
may, at Lessor's option, either (i) investigate and remediate such Hazardous
Substance Condition, if required, as soon as reasonably possible at Lessor's
expense, in which
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event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or whichever is greater, give written notice to
Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such Hazardous Substance Condition of Lessor's desire to terminate
this Lease as of the date sixty (60) days following the date of such notice. In
the event Lessor elects to give such notice of Lessor's intention to terminate
this Lease. Lessee shall have the right within ten (10) days after the receipt
of such notice to give written notice to Lessor of Lessee's commitment to pay
for the excess costs of (a) investigation and remediation of such Hazardous
Substance Condition to the extent required any Applicable Requirements, over (b)
an amount equal to twelve (12) times the then monthly Base Rent or whichever is
greater. Lessee shall provide Lessor with the funds required of Lessee or
satisfactory assurance thereof within thirty (30) days following said commitment
by Lessee. In such event this Lease shall continue in full force and effect, and
Lessor shall proceed to make such investigation and remediation as soon as
reasonably possible after the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof within the
time period specified above, this Lease shall terminate as of the date specified
in Lessor's notice of termination.
9.8. Termination - Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9. Waiver of Statutes. Lessor and Lessee agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Premises and the Building with respect to the termination of this Lease and
hereby waive the provisions of any present or future statute to the extent it is
inconsistent herewith.
10. Utilities. Lessee shall pay directly for all utilities and services
supplied to the Premises. Including but not limited to electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon. If
any such utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor of all such charges jointly metered or
billed with other premises in the Building. In the manner and within the time
periods set forth in Paragraph 4.2(d).
11. Assignment and Subletting.
11.1. Lessor's Consent Required.
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(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36 .
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessees assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the lime of full
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent, "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
(d) An assignment or subletting of Lessees interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 12.1, or a non-curable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach. Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("Lessor's Notice"), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new fair market rental value,
if disputed by Lessee. Lessee shall pay the amount set forth in Lessors Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one
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hundred ten percent (110%) of the price previously in effect, (iii) any index-
oriented rental or price adjustment formulas contained in this Lease shall be
adjusted to require that the base index be determined with reference to the
index applicable to the time of such adjustment, and (iii) any fixed rental
adjustments scheduled during the remainder of the Lease term shall be increased
in the same ratio as the new rental bears to the Base Rent in effect immediately
prior to the adjustment specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 11.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
11.2. Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.
(d) In any event or any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's obligations under
this Lease, including any sublessee, without first exhausting Lessors remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessees determination as to
the
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financial and operational responsibility and appropriateness of the proposed as
signee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000.00 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessees
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other of additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 11.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit increase a condition to Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor.
11.3. Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 12.1)
shall occur in the performance of Lessee's obligations under this Lease. Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease, Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee
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to perform and comply with any of Lessees obligations to such sublessee under
such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents and other charges due and to become due under the sublease,
sublessee shall rely upon any such statement and request from Lessor and shall
pay such rents and other charges to Lessor without any obligation or right to
inquire as to whether such Breach exists and notwithstanding any notice from or
claim from Lessee to the contrary. Lessee shall have no right or claim against
such sublessee, or, until the Breach has been cured, against Lessor, for any
such rents and other charges so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
12. Default; Breach; Remedies.
12.1. Default; Breach. Lessor and Lessee agree that if an attorney
is consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one of more of the
following Defaults, and, where a grace
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period for cure after notice is specified herein, the failure by Lessee to cure
such Default prior to the expiration of the applicable grace period, and shall
entitle Lessor to pursue the remedies set forth in Paragraphs 12.2 and/or 12.3.
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, (i) the
failure by Lessee to make any payment of Base Rent, Lessee's Share of Common
Area Operating Expenses, or any other monetary payment required to be made by
Lessee hereunder as and when due, (ii) the failure by Lessee to provide Lessor
with reasonable evidence of insurance or surety bond required under this Lease,
or (iii) the failure of Lessee to fulfill any obligation under this Lease which
endangers or threatens life or property, where such failure continues for a
period of three (3) days following written notice thereof by or on behalf of
Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original term, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3. (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
Subletting per Paragraph 11.1, (iv) a Tenancy Statement per Paragraphs 15 or 36,
(v) the subordination or non-subordination of this Lease per Paragraph 29, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1, 10 and 36, (vii) the execution of any document
requested under Paragraph 41 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 39 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs 12.1(a), (b) or (c) above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or
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receiver to take possession of substantially all of Lessee's assets located at
the Premises or of Lessee's Interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days: provided, however, in the event that any
provision of this Subparagraph 12.1 (c) is contrary to any applicable law, such
provision shall be of no force or effect, and shall not affect the validity of
the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially
false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantees becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantees refusal to honor the guaranty, or (v) a
Guarantees breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any Such event, to provide Lessor with written
alternative assurances of security which, when coupled with the then existing
resources of Lessee, equals or exceeds the Combined financial resources of
Lessee and the Guarantors that existed at the firm of execution of this Lease.
12.2. Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice). Lessor may, at its
option (but without obligation to do so), perform such duty or obligation on
Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee to Lessor upon invoice therefor. If any Check given to
Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor
at its own option, may require all future payments to be made under this Lease
by Lessee to be made only by cashier's check. In the event of a Breach of this
Lease by Lessee (as defined in Paragraph 13.1), with or without further notice
of demand, and without limiting Lessor in the exercise of any right or remedy
which Lessor may have by reason of such Breach. Lessor may:
(a) Terminate Lessees right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of
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the award of the unpaid rent which had been earned at the lime of termination;
(ii) the worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that the Lessee proves could have been reasonably
avoided: (iii) the worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time award exceeds the amount of such
rental loss that the Lessee proves could be reasonably avoided; and (iv) any
other amount necessary to compensate Lessor for all the detriment proximately
caused by the Lessee's failure to perform its obligations under this Lease or
which in the ordinary course of things would be likely to result therefrom,
including but not limited to the cost of recovering possession of the Premises,
expenses of retailing, including necessary renovation and alteration of the
Premises, reasonable attorneys' fees, and that portion of any leasing commission
paid by Lessor in connection with this Lease applicable to the unexpired term of
this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the immediately preceding sentence shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco or the Federal Reserve Bank District in which the Premises are located
at the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessees Default or Breach of this Lease shall not waive
Lessor's right to recover damages under this Paragraph 12.2. If termination of
this Lease is obtained through the provisional remedy of unlawful detainer.
Lessor shall have the right to recover in such proceeding the unpaid rent and
damages as are recoverable therein, or Lessor may reserve the right to recover
all or any part thereof in a separate suit for such rent and/or damages. If a
notice and grace period required under subparagraph 12 (b), (c) or (d) was not
previously given, a notice to pay rent or quit, or to perform or quit, as the
case may be, given to Lessee under any statute authorizing the forfeiture of
leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required under subparagraph 12.1(b), (c) or (d). In such
case, the applicable grace period under the unlawful detainer statute shall run
concurrently after the one such statutory notice, and the failure of Lessee to
cure the Default within the greater of the two (2) such grace periods shall
constitute both an unlawful detainer and a Breach of this Lease entitling Lessor
to the remedies provided (for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in
effect (in California under California Civil Code Section 1951.4) after Lessee's
Breach and recover the rent as it becomes due, provided Lessee has the right to
sublet or assign, subject only to reasonable limitations. Lessor and Lessee
agree that the limitations on assignment and subletting in this Lease are
reasonable. Acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver to protect the Lessor's Interest under this
Lease, shall not constitute a termination of the Lessees fight to possession.
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(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
12.3. Inducement Recapture In Event of Breach. Any agreement by
Lessor for free or abated rent or other charges applicable to the Premises, or
for the giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in paragraph 12.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which Initiated the operation of this
Paragraph 12.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 12.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
12.4. Late Charges. Lessee hereby acknowledges that late payment
by Lessee to Lessor of rent and other sums due hereunder will cause Lessor 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 upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering the
Premises. Accordingly, if any installment of rent or other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) days after
such amount shall be due, then, without any requirement for notice to Lessee.
Lessee shall pay to Lessor a late charge equal to six percent (6%) of such
overdue amount. The Parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Lessor will incur by reason of late payment
by Lessee. Acceptance of such late charge by Lessor shall in no event constitute
a waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three, (3) consecutive installments of Base Rent, then
notwithstanding Paragraph
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4.1 or any other provision of this Lease to the contrary. Base Rent shall, at
Lessor's option, become due and payable quarterly in advance.
12.5. Breach by Lessor. Lessor shall not be deemed in breach of
this Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 12.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by any Lender(s) whose name and address shall have been furnished to
Lessee in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
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13. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessees parking is taken by condemnation, Lessee
may, at Lessee's option, to be exercised in writing within ten (10) days after
Lessor shall have given Lessee written notice of such taking (of in the absence
of such notice, within ten (10) days after the condemning authority takes such
possession) terminate this Lease as of the date the condemning authority lakes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the Premises. No reduction of Base Rent shall occur if
the condemnation does not apply to any portion of the Premises. Any award for
the taking of all or any part of the Premises under the power of eminent domain
or any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution of value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any
compensation, separately awarded to Lessee for Lessee's relocation expenses
and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not
terminated by reason of such condemnation. Lessor shall to the extent of its net
severance damages received, over and above Lessee's Share of the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
14. Brokers' Fees.
14.1. Procuring Cause. The Broker(s) named in Paragraph 1.10
is/are the procuring cause of this Lease.
14.2. Additional Terms. Unless Lessor and Broker(s) have
otherwise agreed in writing, Lessor agrees that: (a) if Lessee exercises any
Option (as defined in Paragraph 38.1) granted under this Lease or any Option
subsequently granted, or (b) if Lessee acquires any rights to the Premises or
other premises in which Lessor has an interest, or (c) if Lessee remains in
possession of the Premises with the consent of Lessor after the expiration of
the term of this Lease after having failed to exercise an Option, or (d) if said
Brokers are the procuring cause of any other lease or sale entered into between
the Parties pertaining to the Premises and/or any adjacent property in which
Lessor has an interest, or (e) if Base Rent is
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increased, whether by agreement or operation of an escalation clause herein,
then as to any of said transactions. Lessor shall pay said Broker(s) a fee in
accordance with the schedule of said Broker(s) in effect at the time of the
execution of this Lease.
14.3. Assumption of Obligations. Any buyer or transferee of
Lessees interest in this Lease, whether such transfer is by agreement or by
operation of law, shall be deemed to have assumed Lessor's obligation under this
Paragraph 14. Each Broker shall be an intended third party beneficiary of the
provisions of Paragraph 1.10 and of this Paragraph 15 to the extent of its
interest in any commission arising from this Lease and may enforce that right
directly against Lessor and its successors.
14.4. Representations and Warranties. Lessee and Lessor each
represent and warrant to the other that it has had no dealings with any person,
firm, broker or finder other than as named in Paragraph 1.10(a) 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 said named Broker(s) is entitled to any commission or finders fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such 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.
15. Tenancy and Financial Statements.
15.1. Tenancy Statement. Each Party (as "Responding Party")
shall within ten (10) days after written notice from the other Party (the
"Requesting Party") execute, acknowledge and deliver to the Requesting Party a
statement in writing in a form similar to the then most current "Tenancy
Statement" form published by the American Industrial Real Estate Association,
plus such additional Information, confirmation and/or statements as may be
reasonably requested by the Requesting Party.
15.2. Financial Statement. If Lessor desires to finance,
refinance, or sell the Premises or the Building, or any part thereof, Lessee and
all Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessees financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
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16. Lessor's Liability. The term "Lessor" as used herein shall mean the Owner
or owners at the time in question of the fee title to the Premises. In the event
of a transfer of Lessees title or interest in the Premises or in this Lease.
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 14.3. upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/for covenants in this Lease to be performed
by the Lessor shall be binding only upon the Lessor as hereinabove defined.
17. Severability. The Invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
18. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 12.4.
19. Time of Essence. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
20. Rent Defined. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
21. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective,
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 21.
22. Notices
22.1. Notice Requirements. All notices required of permitted by
this Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) of may be sent by regular, certified or registered
mail or U.S.
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Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours and shall be deemed sufficiently given if served in
a manner specified in this Paragraph 22. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may by written notice to the other
specify a different address for notice purposes, except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessees address
for the purpose of mailing or delivering notices to Lessee. A copy of all
notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
22.2. Date of Notice. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, if no delivery date is shown, the postmark thereon.
If sent by regular mail, the notice shall be deemed given forty-eight (48) hours
after the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
23. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, of any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessees consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given Lessor by Lessee may be
accepted by Lessor in account of monies or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
24. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for
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recording purposes. The Party requesting recordation shall be responsible for
payment of any fees or taxes applicable thereto.
25. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
25 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Bass Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
26. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
27. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
28. Binding Effect; Choice of Law. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the state in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
29. Subordination; Attornment; Non-Disturbance.
29.1. Subordination. This Lease and any Option granted hereby
shall be subject and subordinate to any ground lease, mortgage, deed of trust,
or other hypothecation of security device (collectively, "Security Device"), now
or hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation. Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 12.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
29.2. Attornment. Subject to the non-disturbance provisions of
Paragraph 29.3. Lessee agrees to attain to a Lender or party other party who
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acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not: (i)
be liable for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership, (ii) be subject to any offsets or
defenses which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one months rent.
29.3. Non-Disturbance. With respect to Security Devices entered
into by Lessor after the execution of this Lease. Lessee's subordination of this
Lease shall be subject to receiving assurance (a "non-disturbance agreement")
from the Lender that Lessor's possession and this Lease, including any options
to extend the term hereof, will not be disturbed so long as Lessee is not in
Breach hereof and attorns to the record owner of the Premises.
29.4. Self-Executing. The agreements contained in this Paragraph
29 shall be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
30. Attorneys' Fees. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 30.
31. Lessor's Access; Showing Premises; Repairs. Lessor and Lessors agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any
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ordinary "For Sale" signs and Lessor may at any time during the last one hundred
eighty (180) days of the term hereof place on or about the Premises and ordinary
"For Lease" signs. All such activities of Lessor shall be without abatement of
rent or liability to Lessee.
32. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessors prior written consent. Notwithstanding anything to the contrary
in this Lease, Lessor shall not be obligated to exercise any standard of
reasonableness in determining whether to grant such consent.
33. Signs. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building. Including the roof, which do not unreasonably interfere with the
conduct of Lessees business: Lessor shall be entitled to all revenues from such
advertising signs.
34. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease of Lessee estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lessor interest, shall constitute Lessees election to have such
event constitute the termination of such interest.
35. Consents.
(a) Except for Paragraph 32 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessors actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment, a subletting, or the presence or use of a
Hazardous Substance, shall be
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<PAGE>
paid by Lessee to Lessor upon receipt of an invoice and supporting documentation
therefor. In addition to the deposit described in Paragraph 11.2(e), Lessor may,
as a condition to considering any such request by Lessee, require that Lessee
deposit with Lessor an amount of money (in addition to the Security Deposit held
under Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor
will incur in considering and responding to Lessee's request. Any unused portion
of said deposit shall be refunded to Lessee without interest. Lessor's consent
to any act, assignment of this Lease or subletting of the Premises by Lessee
shall not constitute an acknowledgment that no Default or Breach by Lessee of
this Lease exists, nor shall such consent be deemed a waiver of any then
existing Default or Breach, except as may be otherwise specifically stated in
writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease
are acknowledged by Lessee as being reasonable. The failure to specify herein
any particular condition to Lessors consent shall not preclude the impositions
by Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
36. Guarantor.
36.1. Form of Guaranty. If there are to be any Guarantors of
this Lease per Paragraph 1.11, the form of the guaranty to be executed by each
such Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the same
obligations as Lessee under this Lease, including but not limited to the
obligation to provide the Tenancy Statement and information required in
Paragraph 15.
36.2. Additional Obligations of Guarantor. It shall constitute a
Default of the Lessee under this Lease if any such Guarantor fails or refuses,
upon reasonable request by Lessor to give: (a) evidence of the due execution of
the guaranty called for by this Lease, including the authority of the Guarantor
(and of the party signing on Guarantor's behalf) to obligate such Guarantor on
said guaranty, and resolution of its board of directors authorizing the making
of such guaranty, together with a certificate of incumbency showing the
signatures of the persons authorized to sign on its behalf, (b) current
financial statements of Guarantor as may from time to time be requested by
Lessor, (c) a Tenancy Statement, or (d) written confirmation that the guaranty
is still in effect.
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<PAGE>
37. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee'
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
38. Options
38.1. Definition. As used in this Lease, the word "Option" has
the following meaning: (a) the right to extend the term of this Lease, or to
renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) (i) the right of first refusal to lease the Premises; or
(ii) the right of first offer to lease the Premises, or (iii) the right of first
refusal to lease other property of Lessor, or (iv) the right of first offer to
lease other property of Lessor; (c) the right to purchase the Premises, or the
right of first refusal to purchase the Premises, or the right of first offer to
purchase the Premises, or the right to purchase other property of Lessor, or the
right of first refusal to purchase other property of Lessor, or the right of
first offer to purchase other property of Lessor.
38.2. Options Personal to Original Lessee. Each Option granted
to Lessee in this Lease is personal to the original Lessee named in Paragraph
1.1 hereof, and cannot be voluntarily or involuntarily assigned or exercised by
any person or entity other than said original Lessee while the original Lessee
is in full and actual possession of the Premises and without the intention of
thereafter assigning or subletting. The Options, if any, herein granted to
Lessee are not assignable, either as a part of an assignment of this Lease or
separately or apart therefrom, and no Option may be separated from this Lease in
any manner, by reservation or otherwise.
38.3. Multiple Options. In the event that Lessee has any
multiple Options to extend or renew this Lease, a later option cannot be
exercised unless the prior Options to extend or renew this Lease have been
validly exercised.
38.4. Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
12.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of separate Defaults under Paragraph 12.1
during the twelve (12) month period immediately preceding the exercise of the
Option, whether or not the Defaults are cured.
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<PAGE>
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessees Inability to exercise an
Option because of the provisions of Paragraph 38.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease: (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 12.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.
39. Rules and Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
40. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same,
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
41. Reservations. Lessor reserves the right, from time to time, to grant,
without any consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
42. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to Institute suit for recovery of such sum. It shall be adjudged that
there was no legal obligation on the part of said Party to pay such sum or any
part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
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<PAGE>
43. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
44. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
45. Offer. Preparation of this Lease by either Lessor or Lessee or Lessors
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
46. Amendments. This Lease may be modified only in writing. signed by the
Parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder. Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
47. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
48. Second year lease payment to increase to $671.00 per month plus $40.00
for utilities per month, starting September 1, 2000.
49. Landlord to clean carpets and paint unit.
50. In addition to rental payment, tenant agrees to pay $40.00 per month
tenant agrees to pay $40.00 per month utilities.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED. THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND
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PURPOSE OF LESSOR AND LESSEE NTH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S
REVIEW AND APPROVAL, FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS,
UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS. AGENTS OR EMPLOYEES AS
TO THE LEGAL SUFFICIENCY. LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON
THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN
ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The Parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at:______________________________ Executed at: 120 Royall Street,
Canton, MA 02021
on:_______________________________________ on: 8/9/99
By LESSOR: By LESSEE:
__________________________________________ Embedded Support Tools Corporation
----------------------------------
__________________________________________ Scotty Cole
----------------------------------
By:_______________________________________ By: /s/ Scotty Cole
Name Printed:_____________________________ Name Printed: Scotty Cole
Title:____________________________________ Title: Controller - Operations
By:_______________________________________ By: /s/ Daniel McGillivray
Name Printed:_____________________________ Name Printed: Daniel McGillivray
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Title:____________________________________ Title: VP - Sales
Address:__________________________________ Address: 120 Royall St., Canton,
MA 02021
Telephone:________________________________ Telephone: 800-957-5588
Facsimile:________________________________ Facsimile: 781-575-1559
BROKER: BROKER:
Executed at:______________________________ Executed at:_______________________
on:_______________________________________ on:________________________________
By:_______________________________________ By:________________________________
Name Printed:_____________________________ Name Printed:______________________
Title:____________________________________ Title:_____________________________
Address:__________________________________ Address:___________________________
__________________________________________ ___________________________________
Telephone:________________________________ Telephone:_________________________
Facsimile:________________________________ Facsimile:_________________________
NOTICE: These forms are often modified to meet changing requirements of law
and industry needs. Please Write or call us to make sure that you are utilizing
the most current form. We can be reached at the American Industrial Real Estate
Association, 700 South Flower, Suite 600, Los Angeles, CA 90017. (213) 687-8777
Fax (213) 687-8616
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<PAGE>
EXHIBIT 10.14
BUSINESS LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into this 30th day of August, 1999 by
and between POINTE WEST, INC., hereinafter called "LANDLORD," and Embedded
Support Tools Corporation, hereinafter called "TENANT."
WITNESSETH:
The LANDLORD does hereby lease to the TENANT and the TENANT does hereby
take and hire from the LANDLORD, certain commercial real property more
particularly identified as Suite # 254 located at 5525 Erindale Drive, Colorado
Springs, Colorado 80918, (hereinafter referred to as the "LEASED PREMISES") upon
the following expressed terms and conditions, to wit:.
1. Lease Term: The term of this lease shall commence on the 30"' day of
----------
August, 1999, and shall continue for a period of twelve (12) months thereafter,
expiring on the 31st day of August, 2000. Should the term continue for a period
of twelve (12) consecutive months, the base rent shall escalate at a rate of 7%
effective the thirteenth (13th) month and every twelfth (12th) month thereafter.
2. Payments: (a) Lease Payments: The TENANT agrees to pay the LANDLORD
-------- --------------
as rent for the LEASED PREMISES during the primary term of the lease subject to
any increases as hereinafter described the total sum of $5,429.02, which sum of
money shall be payable in equal monthly installments of $450.00 in advance on or
before the first day of each month throughout the term of the lease. If TENANT
takes possession on a day other than the first day of the lease term, TENANT
shall pay, upon commencement date of the term, in addition to the first monthly
installment, the prorated rental on a per them basis with respect to the
fractional month preceding the first full calendar month of this lease.
(b) Late Charges: LANDLORD may, at its election charge and collect a late
------------
charge in the amount of Ten Percent (10%) of any monthly rental installment
which is delinquent ten (10) days or more.
Security Deposit: TENANT agrees to pay to LANDLORD a security deposit in
----------------
the total amount of one and one-half (1-1/2) times monthly rate which is recited
for upon execution of the Agreement. The security deposit shall be held by
LANDLORD during the continuance of this Rental Agreement and any extensions
thereof, and shall be returnable to the TENANT, no later than 60 days after
termination of this Agreement, provided the rent is paid in full, and the LEASED
PREMISES are found by the LANDLORD, after due inspection, to be in as good order
and repair as they were on the date of the signing of this Agreement, ordinary
and reasonable wear and tear excepted. In the event that the TENANT is in
default or in the event that there are any repairs necessitated by TENANT'S use
of the property, then any damages, costs or other fees accruing with respect
thereto
<PAGE>
shall be deducted from the security deposit, and the balance returned to
the TENANT not later than sixty (60) days following the termination of the
lease.
(d) Tenant Services: In addition to the sums above stated, TENANT agrees
---------------
to pay to LANDLORD for certain telephone services herein described a fee of
(N/A) per month which payment shall be due on the same day of each month that
the lease payments are due. For such consideration, LANDLORD agrees to provide
to TENANT certain services as more particularly described by EXHIBIT "A"
-----------
attached hereto and made a part hereof by this reference.
(e) No Excuse for Non Payment: No dispute between LANDLORD and TENANT as
-------------------------
to LANDLORD or TENANT obligations under this lease shall excuse the payment of
any sums herein described owing by TENANT to LANDLORD, or the faithful
performance of the other conditions of said lease by either party. TENANT
waives and disclaims any present or future right to withhold any payment of any
form of rent or other obligations due under this lease, or to set off against
rent or any other obligation of TENANT, any obligation of LANDLORD, however
incurred. TENANT agrees that it will not claim or assert any right to so
withhold off.
3. Use of Premises: The TENANT expressly covenants and agrees to use the
---------------
LEASED PREMISES as a General Business Office to conduct business with the
General Public and no other purpose whatsoever without the prior written consent
of the LANDLORD to such change in use of the LEASED PREMISES.
TENANT shall comply with all governmental laws, ordinances, including
zoning ordinances and regulations applicable to the use of the LEASED PREMISES.
TENANT shall promptly comply with all LANDLORD or governmental orders and
directives for the correction, prevention, and abatement of nuisances in or
upon, or connected with the LEASED PREMISES, all at TENANT'S sole expense.
TENANT shall not permit the LEASED PREMISES to be used in any way which would,
in the opinion of the LANDLORD, be hazardous or which would in any way increase
or render void the fire insurance on the LEASED PREMISES.
4. No Assignment or Subletting: This lease may not be assigned or the
---------------------------
LEASED PREMISES sublet during the term of this lease without the prior written
consent of the LANDLORD to such assignment or subletting. The TENANT shall not
transfer any ownership of TENANT without written consent of LANDLORD and will,
at the request of LANDLORD provide whatever documentation is necessary to
establish that TENANT is in compliance with this provision.
5. Taxes: The LANDLORD shall pay all real property taxes for the LEASED
-----
PREMISES during the term of this lease, and the TENANT shall pay all personal
property taxes accruing during the term of this lease for personal property
owned by the TENANT and kept on the leased premises.
<PAGE>
6. Utilities: All utilities used on the LEASED PREMISES during the term
---------
of this lease shall be paid for by the LANDLORD. Notwithstanding, to the extent
that use of the LEASED PREMISES by TENANT is of such a character as to subject
the LANDLORD to any extraordinary (more than standard) utility charges then
TENANT shall reimburse LANDLORD therefore. Standard utility charges to be
determined solely by the LANDLORD.
7. Insurance: (a) TENANT shall throughout the term of this Agreement and
---------
any extensions thereto, at its sole cost and expense, provide and keep in force
with responsible insurance companies satisfactory to LANDLORD and to any
mortgagee under mortgage constituting a lien upon the leased premises, public
liability and property damage insurance. The liability limits of all said
insurance shall be $500,000 Single Liability and $1,000,000 Umbrella Liability,
protecting LANDLORD and any such mortgagee, as well as TENANT against liability
to any employees or servants of TENANT or to any other person whomsoever arising
out of or in connection with TENANTS use of the leased premises or the condition
of the LEASED PREMISES. TENANT is to furnish LANDLORD with a Certificate of
Insurance or other acceptable binder at time of commencement of the lease, or
LANDLORD may provide same and charge TENANT on its normal monthly billing.
(b) TENANT shall indemnify and hold harmless LANDLORD from all loss,
damage, liability or expense, including attorneys' fees, resulting from any
injury to any person or any loss of or damage to any property caused by or
resulting from any act, omission or negligence of TENANT or any officer,
employee, agent, contractor, invitee or visitor of TENANT in or about the
premises of the building, or resulting directly or indirectly from any act or
neglect of any other TENANT in the leased premises. The foregoing provision
shall not be construed to make TENANT responsible for loss, damage, liability or
expense resulting from injuries to third parties caused by any act, omission or
negligence of LANDLORD or of any officer, employee, agent, contractor, invitee
or visitor of LANDLORD. LANDLORD shall not be liable for any loss or damage to
person or property sustained by TENANT, or other persons, which may be caused by
the building or premises, or any appurtenances thereto, being out of repair; or
by the bursting or leakage of any water, gas, sewer or steam pipe, or by theft,
or by any act of neglect of TENANT, or of any other person, or by any other
cause whatsoever, unless caused by the gross neglect of the LANDLORD. In case
of any action or proceeding brought against LANDLORD by reason of any such
claim, upon notice to LANDLORD, TENANT covenants to defend such action or
proceeding with counsel, reasonably satisfactory LANDLORD.
(c) All personal property of any kind or description whatsoever in the
LEASED PREMISES shall be at the TENANT'S sole risk, and the LANDLORD shall not
be held liable for any damage done to or loss of such personal property or to
the business of the TENANT.
<PAGE>
8. Maintenance and Repairs: The LANDLORD shall be responsible for the
-----------------------
exterior maintenance of the LEASED PREMISES during the term of this lease, and
the maintenance of any parking lot facility contiguous thereto which is used in
conjunction with the LEASED PREMISES. Further, all replacement or major repairs
to the plumbing, heating, or electrical systems on the LEASED PREMISES, which
are not necessitated by the negligence of the TENANT, shall be paid by the
LANDLORD. LANDLORD shall be responsible for janitorial work including the LEASED
PREMISES.
TENANT will at its own cost and expense keep in good repair and condition
the interior of the LEASED PREMISES. LANDLORD and LANDLORD'S agents and
representatives shall have the right to enter and inspect the LEASED PREMISES at
any time during reasonable business hours, for the purpose of assessing the
condition of the LEASED PREMISES or in order to make such repairs, additions or
alterations as may be required to be made by TENANT under the terms of this
lease. At the termination of this lease, TENANT shall deliver up the LEASED
PREMISES with all improvements located thereon, in good repair and condition,
ordinary wear and tear excepted. The taking of possession of the LEASED
PREMISES by the TENANT shall be conclusive evidence as against the TENANT that
said premises were in good and satisfactory condition when possession of same
was taken.
9. Communications: (a) The TENANT shall be responsible for the cost of
--------------
integrating into U.S. West access through the suites telephone system.
(b) The TENANT shall be responsible for long distance charges incurred.
(c) Any additional telephone sets and multiple lines are additional
charges to the TENANT.
(d) Telephone lines, equipment reprogramming and installation must be
obtained through the LANDLORD and paid by TENANT.
(e) LANDLORD'S communication equipment will be maintained by LANDLORD,
except for repairs necessitated by TENANT'S negligence.
10. Inspection: The LANDLORD may enter and inspect the LEASED PREMISES
----------
at all reasonable times during the term hereof.
11. Tenant Improvements: TENANT shall not make any alterations,
-------------------
additions or improvements to the LEASED PREMISES without prior written consent
of LANDLORD. Any such alterations, additions or improvements shall be at the
TENANTS cost and expense. TENANT shall promptly pay the costs of all work
performed and shall indemnify and hold harmless the LANDLORD against liens,
costs, damages and expenses incurred in connection therewith including any
<PAGE>
attorney fees incurred by LANDLORD, and if LANDLORD shall be joined in any
action or proceeding involving such work.
All improvements placed upon the LEASED PREMISES of a permanent nature and
fixtures, by the TENANT shall be and become the property of the LANDLORD at the
expiration of this lease, and the LANDLORD shall be under no obligation to
reimburse the TENANT for any sums of money so expended in making permanent
improvements on the LEASED PREMISES; provided, however, that at the expiration
of the term of this lease the TENANT shall be entitled to remove the following
items installed, or to be installed on the premises by the TENANT, and the
provision of this paragraph shall not be construed to prevent the removal of
said items, to wit there are none.
TENANT shall permit and facilitate LANDLORD'S posting of notices of non-
responsibility in and about the LEASED PREMISES, pertaining to any work by,
through, or under TENANT. TENANT shall exercise it's best efforts to see that
Such notices remain posted in any and all locations, designated by LANDLORD
throughout the time in which the work is being done.
12. Destruction of LEASED PREMISES: In the event improvements on the
------------------------------
LEASED PREMISES are partially damaged by any casualty which is covered under an
insurance policy required to be maintained pursuant to the provisions of this
lease, then LANDLORD shall repair such damage as soon as reasonably possible
from insurance proceeds, in which event this lease shall continue in full force
and effect. TENANT shall have no claim against LANDLORD for any damage suffered
by reason of such damage, destruction, repair or restoration and there shall be
an abatement of rent only for the time period and for the actual space rendered
unusable during such repairs. If the LEASED PREMISES are totally destroyed
during the term of this lease from any cause whether or not covered by
insurance, this lease may automatically terminate as of the date of such total
destruction, at the option of the LANDLORD or the TENANT.
13. Default: The TENANT promises and agrees that if default be made in
the payment of rents or in the performance of any other conditions of this
lease, or if TENANT in its use of the premises violates any city ordinances,
State or Federal Laws or if any TENANT, or any Guarantor hereof, files any
petition under the bankruptcy or insolvency laws of the United States, or of any
other jurisdiction, or makes an assignment for the benefit of creditors, or
makes application for appointment of a trustee or receiver regarding any of
TENANT'S property that this lease may be forthwith terminated at the election of
the LANDLORD, subject to the prior written notice requirements hereof, and that
the TENANT will, subject to the grace periods hereinafter set forth, surrender
and deliver up possession of the LEASED PREMISES to the LANDLORD upon receiving
written notice from the LANDLORD of the breach of conditions of this lease and
the election of the
<PAGE>
LANDLORD to so terminate this lease. In the event of such default by the TENANT,
then the LANDLORD, besides other rights or remedies he may have, shall have the
immediate right of re-entry. Should the LANDLORD elect to re-enter, as herein
provided, or should he take possession pursuant to legal proceedings or pursuant
to any notice provided by law, he may either terminate this lease, or he may,
from time to time, without terminating this lease, re-let or re-lease the LEASED
PREMISES or any part thereof for such amount of rental and upon such terms and
conditions as the LANDLORD, in his sole discretion and judgment, may deem
advisable, and he may make such alterations, improvements and repairs to the
LEASED PREMISES as he may deem advisable. No such re-letting or re-leasing of
the LEASED PREMISES by the LANDLORD, under the circumstances set forth in this
paragraph, shall be construed as an election on the LANDLORD'S part to terminate
or cancel this lease, unless a written notice of such termination or
cancellation is mailed by the LANDLORD to the TENANT at the address set out
herein for notices, nor shall such re-letting or re-leasing relieve the TENANT
from liability to the LANDLORD for any and all damages, of whatsoever type or
nature, which the LANDLORD may have or will suffer or incur as a result of the
TENANTS breach of any of the terms, covenants, provisions and conditions herein
contained. Notwithstanding any such re-letting or re-leasing without termination
of this lease by the LANDLORD, the LANDLORD may at any time thereafter elect to
terminate the lease for such previous breach of the TENANT. In the event
LANDLORD is required to retain an attorney to enforce any provision of this
lease, then LANDLORD shall be entitled to recover from TENANT its actual
attorney's fees reasonably incurred and its court costs.
In the event default by TENANT in the payment of rent occurs under the
terms of this lease, LANDLORD shall provide TENANT with three (3) days written
notice of such default. In the event TENANT fails to cure such default within
three (3) days following receipt of such notice, then LANDLORD may proceed with
the remedies as above specified. If default by the TENANT be for reasons other
than non-payment of rent, then LANDLORD shall provide TENANT with ten (10) days
prior written notice to cure such default, and failing such cure by TENANT,
LANDLORD shall be entitled to those remedies set forth under Paragraph 13
hereof.
Acceleration of rent. Following default by TENANT, LANDLORD may demand,
--------------------
and in such case, TENANT shall immediately pay in a single accelerated payment,
the entire amount of lease payments that would become due and owing to LANDLORD
over the remaining portion of the lease term. No discount for early payment
shall occur by reason of the acceleration. If TENANT shall make payment of such
accelerated rent at any time prior to LANDLORD'S termination of TENANT'S right
to possession of the premises, then TENANT shall be entitled to remain in
possession of the premises for the remainder of the term of this lease, so long
as no further default shall occur, but upon the occurrence of a further default,
<PAGE>
LANDLORD shall be entitled to recover possession of the premises without any
rebate of accelerated rent.
TENANT'S Property. Any property of TENANT remaining in the LEASED PREMISES
-----------------
at any time after LANDLORD recovers possession of the LEASED PREMISES, shall be
deemed abandoned, and LANDLORD shall have no responsibility or liability
whatsoever for any of the same. Notwithstanding the foregoing, LANDLORD may
store any of the property in any public or private warehouse, and TENANT shall
pay to LANDLORD, promptly upon demand, all costs incurred in connection with
such property, including the costs of moving and storage, court costs and
attorney's fees. LANDLORD may, at its option, without notice, sell any such
personal property at any public or private sale, with or without legal process,
for such prices as LANDLORD may obtain, and LANDLORD shall apply the proceeds of
such sale, first, to the costs incurred in connection with such property, and
then to any amounts due under the lease from TENANT to LANDLORD, and the
surplus, if any to TENANT.
Remedies Not Exclusive. Except to the extent prohibited by law, no
----------------------
exercise of any remedy provided in this lease, or in any statute or law, shall
preclude the simultaneous or subsequent exercise of any other remedy provided in
this lease, or in any statute or law. Notwithstanding the possible availability
of legal remedies, LANDLORD may obtain specific performance, mandatory or
prohibitory injunctive relief, or other equitable relief requiring TENANT to
cure or refrain from continuing or repeating any event of default or other
breach of this lease.
14. Forfeiture of Advance Rental Deposit: In the event this lease is
------------------------------------
terminated by reason of the default of TENANT, it is understood and agreed that
the LANDLORD shall be entitled to retain advance rental deposit herein made, if
any, to partially compensate LANDLORD for damage suffered by reason of such
default. Nothing herein contained shall be construed, however, as precluding
the LANDLORD from recovering from TENANT any further or additional damages which
he may have suffered by reason of such default of the TENANT as provided in
paragraph 13 hereof.
15. Surrender of Premises: Upon expiration of the term of this lease the
---------------------
TENANT agrees to surrender and deliver up possession of the LEASED PREMISES with
all improvements located thereon to the LANDLORD in as good condition and repair
as at the time of possession, ordinary wear and tear excepted.
16. Holding Over: Should the TENANT continue in possession of the LEASED
------------
PREMISES after the expiration of this lease, without a written extension or
renewal hereof, such possession shall be on a month-to-month basis only and then
at a monthly rate two times the rate herein specified.
<PAGE>
17. No Waiver: The failure of LANDLORD to insist, in any one or more
---------
instances, upon a strict performance of any of the obligations, covenants or
agreements herein contained, or the failure of LANDLORD in any one or more
instances to exercise any option, privilege or right herein contained, shall in
no way be construed to constitute a waiver, relinquishment or release of such
obligations, covenants or agreements, and no forbearance by the LANDLORD of any
default hereunder shall in any manner be construed as constituting a waiver of
such default.
18. Insolvency Proceeding: If the TENANT shall be declared insolvent or
---------------------
bankrupt, or if any assignment of his property shall be made for the benefit of
his creditors or others, or the TENANT'S leasehold interest herein shall be
levied upon under execution, or taken by virtue of any writ of any Court of Law,
or if a Trustee in Bankruptcy or a receiver is appointed for the property of the
TENANT, then and upon the happening of any one of these events, the LANDLORD
may, at his option, take possession of the LEASED PREMISES without thereby
occasioning any forfeiture of the obligations of the TENANT previously accrued
under this lease.
19. Eminent Domain: In the event all or any part of the LEASED PREMISES
--------------
shall be taken by right of eminent domain, or in the event the LANDLORD makes a
conveyance of all or any part of the LEASED PREMISES in lieu of taking by right
of eminent domain, then this lease shall, at the option of the LANDLORD, cease
and terminate. In such event, the TENANT shall not be required to make any
further rental payments to the LANDLORD and the TENANT shall have the right to
remove from the LEASED PREMISES any and all furniture, machinery and fixtures
set forth in Paragraph 11 hereof. In such event of a taking of all or part of
the LEASED PREMISES by right of eminent domain or a conveyance in lieu of such
taking, the LANDLORD shall receive the entire award or price which the
condemning or taking governmental authority will pay for the LEASED PREMISES.
20. Subordination: This lease and all of the rights of TENANT hereunder
-------------
are and shall be subject and subordinate to any lien of any mortgage or Deed of
Trust and accompanying collateral assignments of lease or rents now or hereafter
placed on the LEASED PREMISES or any part thereof and to any and all renewals,
modifications, consolidations, replacements, extensions or substitutions of said
sale and/or mortgage.
TENANT agrees to execute any documents required to effectuate such
subordination or to make this lease subordinate to any lien or any mortgage,
Deed of Trust or ground lease and accompanying assignment of lease or rents, as
the case may be, within ten (10) days after such request has been made by
LANDLORD.
21. Attornment: If a purchaser under a sale or the holder of the mortgage
----------
shall succeed to the rights of the LANDLORD under this lease, whether through
<PAGE>
possession or foreclosure action, or delivery of a new lease or deed, TENANT
upon the request of such successor landlord as TENANTS LANDLORD under this lease
shall promptly execute and deliver any instrument that any such successor
landlord may request to further evidence such attornment. Upon such attornment,
this lease shall continue in full force and effect as, or as if it were, a
direct lease between the successor landlord and TENANT upon all of the terms,
conditions and covenants as are set forth in the lease.
22. ESTOPPEL Certificates: Upon the request of either party, at any time
----------------------
and from time to time, LANDLORD and TENANT agree to execute and to deliver to
the other within ten (10) days after such request a written instrument duly
executed certifying that this lease has not been modified and is in full force
and effect.
23. LANDLORD'S Lien: TENANT hereby grants to LANDLORD, a lien upon and a
---------------
security interest in all property now owned or hereafter acquired by TENANT,
which shall come in or be placed upon the LEASED PREMISES, to secure the payment
of rent and the performance of each and every obligation hereunder to be
performed by TENANT. Following any event of default, LANDLORD, without demand,
may take possession of and sell such property without legal process of any kind
at public and private sale, upon giving such notices, if any, as may be required
by law. The proceeds of any such sale shall be applied, first, to the payment
of expenses thereof, second to the discharge of the unpaid rent or other
liability hereunder, and the balance, if any, shall be paid to TENANT. TENANT
agrees to execute and record any financing statements and other documents
necessary to perfect or record the lien herein granted.
24. Financial Statement: TENANT shall furnish LANDLORD a current
-------------------
financial statement of TENANT and guarantors.
25. Non-Compete: It is understood the Lessee shall in no way compete
-----------
with the services provided by Pointe West, Inc. as set forth in Exhibit "A" and
"B" attached. In the event subtenant breaches any provision of this paragraph,
Subtenant shall be in default hereunder and Subtenant shall be entitled to
exercise any rights or remedies as prescribed below, and in addition to such
rights and remedies, Subtenant shall pay Sub-lessor the sum of $300.00 per week
as liquidated damages for each such breach long as such breach shall continue.
26. Employment of Sub-lessor's Employees: Subtenant recognizes that
------------------------------------
Sub-lessor has expended considerable time, effort and expense in training Sub-
lessor's employees so as to provide high quality service to Subtenant, and that
the hiring by Subtenant of Sub-lessor's present employees or any employee
employed by Sub-lessor within a six (6) six month period prior to the offer by
Subtenant to such employee would save Subtenant, and cause Sub-lessor to expend
considerable time, effort and expense in training new employees, the amount of
which cannot be
<PAGE>
determined with certainty. Should Subtenant, during the original or extended
term of the Agreement or for twelve (12) months thereafter, offer employment to
and subsequently employ an employee of Sub-lessor who is or was an employee of
Sub-lessor at any time during the six (6) month period. Immediately preceding
such offer of employment by Subtenant, Subtenant shall pay to Sub-lessor, as a
procurement fee, and not as a penalty, a sum equal to forty percent (40%) of the
annual salary last payable by Sub-lessor to such employee or $5,000.00
(whichever is greater).
27. Interest, Costs and Attorney Fees: Any amounts due but unpaid under
---------------------------------
this lease shall draw interest at the rate of eighteen percent (18%) per annum
from the date due until paid. If by reason of any default on the part of TENANT
it becomes necessary for LANDLORD to employ an attorney, then and in any such
event if LANDLORD prevails TENANT shall pay LANDLORD reasonable attorney fees
and all costs and expenses incurred by the LANDLORD in enforcing the terms of
this lease.
28. Brokerage Commissions: Each party warrants that it has had no
---------------------
dealings with broker or agent in connection with the negotiation or execution of
this lease and each party agrees to indemnify and hold the other party harmless
from any and all costs, expenses or liability for commissions or other
compensation or charges claimed by or awarded to any broker or agent with
respect to this lease occasioned by the indemnifying party's contact with such
broker or agent.
29. Relocation of TENANT: At LANDLORD'S written request; TENANT shall
--------------------
move from the LEASED PREMISES to other similar premises in the Office Complex.
In the event of such move, the new location and LEASED PREMISES shall be
substituted for the Premises described above, but all other terms of the Lease
shall remain the same, with the exception that the Minimum Rent provided for
herein shall be abated during the period that TENANT is closed for business as a
result of the move to the new location; provided, however, that TENANT shall not
be moved to Premises of substantially less square footage than those herein
located, and that LANDLORD shall bear all actual cash expenses reasonably
incurred by TENANT in so moving. It is understood and agreed that LANDLORD will
relocate TENANT only for sound business practices and considerations.
30. Additional Provisions: (a) TENANT shall be provided with one set of
---------------------
two access keys for the building and TENANT'S LEASED PREMISES. Only LANDLORD
may make additional copies of keys for TENANT. If TENANT requires additional
keys such will be provided at a cost of $4.00 each.
(b) Suite replacement keys will be provided at a cost of $10.00 each.
TENANT will be responsible for expenses incurred due to keys lost for Main
Entrance Doors which facilitates complete re-keying of office complex and
replacement keys to all Tenants.
<PAGE>
31. Rules: It is agreed that the LANDLORD may adopt rules and
-----
regulations, a copy of which shall be attached hereto as EXHIBIT "B" and made a
part of this lease by this reference. TENANT agrees that its employees and
agents, or any others permitted by the TENANT to occupy or enter such LEASED
PREMISES will at all time abide by said rules and regulations and that a default
in the performance and observance thereof shall operate the same as any other
default herein.
32. General Matters: (a) Singular/Plural: Wherever used herein, the
--------------- ---------------
singular shall include the plural, and the use of any gender shall be applicable
to all genders.
(b) Binding Effect: This lease shall bind and benefit alike the heirs,
--------------
successors and assigns of the parties hereto.
(c) Colorado Law: This lease shall be governed by the laws of the State
------------
of Colorado.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and affixed
their seals on the day and year first above written.
"LANDLORD" "TENANT"
Pointe West, Inc. Embedded Support Tools Corporation
By:____________________________ By: /s/ Scotty Cole
--------------------------------
David B. Inglis Scotty Cole
President
TITLE:_____________________________
Controller, EST Corp.
Controller, EST Corp.
CONTINUING GUARANTEE:
- --------------------
We, the undersigned, hereby personally guarantee(s) payment and performance
of all terms and provisions herein and further waive notice of any modification,
extension or renewal hereof and consent to such changes. This guarantee shall
continue after such modification, extensions and/or renewals.
Dated this 27th day of August 1999
---- ------
Print Name Scotty Cole
--------------------------
Signature /s/ Scotty Cole
--------------------------
Emergency Contacts/Phone Numbers
Name Jason Boccia
---------------------
781.828.5588 x280
---------------------
Name Daniel McGillivray
----------------------
781.828.5588 x247
----------------------
Name: Mark Lapham
----------------------
781.828.5588 x270
----------------------
<PAGE>
EXHIBIT "A"
-----------
DESCRIPTION OF TENANT SERVICES
------------------------------
TELEPHONE SERVICES
Complete Answering Service - First line/ One Voice Mailbox $ 75.00/month
Each Additional Line $ 20.00/month
Each Additional Phone $ 10.00/month
First Additional Voice Mailbox $ 10.00/month
Each additional Voice Mailbox $ 5.00/month
This service is included in paragraph 2. "d" above and includes answering
the incoming lines with the TENANT'S company name during regular business hours.
Calls will be transferred to the suite or put into voice mail for messaging if
the TENANT is out of the office. If requested messages can be recorded on a
message pad and forwarded to the TENANT. When requested TENANT calls will be
transferred to an alternate number when the TENANT is out of the office or after
hours. This service is exclusive of the feature charges from U.S. West.
THE FOLLOWING SERVICES AND FACILITIES ARE PROVIDED TO THE TENANT:
- -----------------------------------------------------------------
. Non-exclusive use of two (2) fully furnished conference rooms located
within the premises, on a reservation basis, provided that Landlord shall
have the right to impose a charge for the use of said facilities under the
circumstances described in Exhibit A hereto.
---------
. Listing of your firm on the main building directory.
. Custodial services including carpet vacuuming and trash removal as
necessary.
. All utilities, heating, air conditioning and parking during normal business
hours.
. Use of tenant service areas.
. One telephone handset per suite.
. Incoming/Outgoing Mail Service.
. Two access keys per suite.
. Receptionist service to greet your clients during regular business hours.
The following services are available to the tenants at the specified rates.
LANDLORD reserves the right to adjust the specified rates as necessary.
<PAGE>
. Telephone Installation:
Installation and programming $125.00
This charge is exclusive of U.S. West Installation and line charges, which are
paid by the Tenant directly to U.S. West.
. Secretarial Services: $18.00/hour
These services include word-processing typing, filing, collating, resume
set-up, and miscellaneous clerical services. Secretarial services are billed in
15 minute increments and can also be billed on a "per project basis".
A discount of 10% will be given to Tenants using more than 10 hours per
month of word processing services a 20% discount for using more than 20 hours
per month.
. Rush Projects
All Rush Projects (secretarial services to be performed in less than a 5-
hour turnaround) in excess of five (5) Rush Projects per billing period will be
subject to a 30% surcharge.
. Photocopying
8 1/2x11 or 8 1/2 x 14 $ .10/page
11 x 17 $ .15/page
Transparencies $ .45/page
Discounts are available to tenants using 1000 copies.
Private photocopiers allowed $165.00/mo.
. Facsimile Service
A. Incoming Service $ .25/page
B. Outgoing Local Service N/C
C. Outgoing Service (Long Distance) 1st page $ 2.50
D. Outgoing Service each additional page (Long Distance) $ 1.50
Private fax machines allowed $45.00/mo.
. Consultation $18.00/hour
If a Tenant requires consultation with word processing or managerial staff
for assistance with projects such as presentations, marketing plans, drafting
<PAGE>
correspondence, individualized charts/forms, statistical reports, etc., on an
extensive basis, there will be a charge as stated above.
. Office Supplies
This service includes such items as pens, pencils, legal pads, paper clips,
staples, etc., which can be purchased by the Tenant.
. Conference Rooms/meeting Room Within The Premises
Assuming conference room availability from 8:00 a.m. until 5:00 p.m.,
Monday through Friday, each TENANT is entitled to unlimited conference room
usage on a reservation basis (reservations must be made through the
receptionist).
. Overnight Mailing Services
The cost to the TENANT will include a 15 % surcharge.
. Notary Services
A. Cost to Tenants $ 1.00/signature
B. Cost to Non-Tenants $ 2.00/signature
. UPS Shipping
The cost to the tenant will include a 15 % surcharge.
. Signage Fee
Fees for placing the tenants name on Pointe West signs is $75.00 and will
be waived if signing a lease of one year or more.
<PAGE>
EXHIBIT "B"
RULES/REGULATIONS
-----------------
It is further agreed that the following rules and regulations shall be and
are hereby made a part of this lease, and TENANT agrees that its employees and
agents, or any others permitted by TENANT to occupy or enter the Premises, will
at all times abide by said rules and regulations, to wit:
A. The sidewalks, entries, passages, corridors and stairways of the
Building shall not be obstructed by TENANT, or its agents or employees, or used
for any purpose other than ingress and egress to and from the premises.
B. (1) Furniture, equipment or supplies will be moved in or out of the
Building only during such hours and in such manner as may be prescribed by
LANDLORD. The LANDLORD shall have the right to approve or disapprove the movers
or moving company employed by TENANT, and TENANT shall cause said movers to use
only the loading facilities designated by LANDLORD. In the event TENANT'S
movers damage any part of the Building TENANT shall forthwith pay to LANDLORD
the amount required to repair said damage.
(2) No safe or article, the weight of which may, in the opinion of
LANDLORD, constitute a hazard or damage to the Building or its equipment, shall
be moved into the Premises.
(3) Safes and other equipment, the weight of which is not excessive, shall
be moved into, from or about the Building only during such hours and in such
manner as shall be prescribed by LANDLORD, and LANDLORD shall have the right to
designate the location of such articles in the Premises.
C. During the entire term of this lease, TENANT shall at its expense,
install and maintain a chair pad to protect the carpeting under all caster
chairs.
D. No sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the inside or outside of the Building unless of such
color, size and style and in such place upon or in the Building, as shall be
first designated by LANDLORD, but there shall be no obligation or duty on
LANDLORD to allow any sign, advertisement or notice to be inscribed, painted or
affixed on any part of the inside or outside of the Building. A Directory in a
conspicuous place, with names of TENANTS, not to exceed one name per five
hundred (500) square feet of space contained in the Premises, will be provided
by LANDLORD; any necessary revision in this will be made by LANDLORD at TENANTS
expense, within a reasonable time after notice from TENANT of the change making
the revision necessary. No furniture shall be placed in front of the Building or
in any lobby or corridor, without the prior written consent of LANDLORD.
LANDLORD shall have the right to
<PAGE>
remove all non-permitted signs and furniture, without notice to TENANT, and at
the expense of TENANT.
E. TENANT shall not do or permit anything to be done in said Premises, or
bring or keep anything therein which would in any way increase the rate of fire
insurance on the Building or on property kept therein, or constitute a nuisance
or waste, or obstruct or interfere with the rights of other tenants, or any way
injure or annoy them, or conflict with the laws relating to fire, or with any
regulations of the fire department, or with any insurance policy upon the
Building or any part thereof, or conflict with any of the rules or ordinances of
the Department of Health of the City and County where the Building is located.
F. TENANT shall not employ any person or persons other than the janitor
of LANDLORD for the purpose of cleaning or taking care of the Premises, without
the prior written consent of LANDLORD. LANDLORD shall be in no way responsible
to TENANT for any loss of property from the Premises, however occurring, or for
any damage done to TENANTS furniture or equipment by the janitor or any of his
staff, or by any other person or persons whomsoever. The janitor of the Building
may at all times keep a pass key, and he and other agents of LANDLORD shall at
all times be allowed admittance to said Premises.
G. Water closets and other water fixtures shall not be used for any
purpose other than that for which the same are intended, and any damage
resulting to the same from misuse on the part of TENANT, its agents or
employees, shall be paid by TENANT. No person shall waste water by tying back
or wedging the faucets or in any other manner.
H. No animals shall be allowed in the offices, halls and corridors of the
Building, except seeing eye dogs. No person shall disturb the occupants of this
or adjoining buildings or premises by the use of any radio, sound equipment or
musical instrument or by the making of loud or improper noises.
I. Bicycles or other vehicles shall not be permitted in the offices,
halls and corridors in the Building, nor shall any obstruction of sidewalks or
entrances of the Building by such be permitted.
J. TENANT shall not allow anything to be placed on the outside of the
Building, nor shall anything be thrown by TENANT, its agents or employees, out
of the windows or doors, or down the corridors, or ventilating ducts of the
Building.
K. No additional lock or locks shall be placed by TENANT on any door in
the Building unless written consent of LANDLORD shall first have been obtained.
A reasonable number of keys to the Premises and to the toilet rooms if locked by
LANDLORD will be furnished by LANDLORD, and neither TENANT, its agents or
employees shall have any duplicate keys made. At the termination of this
tenancy,
<PAGE>
Tenant shall promptly return to LANDLORD all keys to offices, toilet rooms or
vaults.
L. No window shades, blinds, screens, draperies or other window coverings
will be attached or detached by TENANT without LANDLORD'S prior written consent.
TENANT agrees to abide by LANDLORD'S rules with respect to maintaining uniform
curtains, draperies and/or linings at all windows and hallways.
M. No awnings shall be placed over the windows except with the prior
written consent of LANDLORD.
N. If any TENANT desires telegraphic, telephonic or other electric
connections, LANDLORD or its agents will direct the electricians as to where and
how the wires may be introduced, and without such directions, no boring or
cutting for wires will be permitted. Any such installation and connection shall
be made at TENANTS expense.
O TENANT shall not install or operate any steam or gas engine or boiler,
or carry on any mechanical business in the Premises; the use of oil, gas or
flammable liquids for heating, lighting or any other purpose is expressly
prohibited. Explosives or other articles deemed extra hazardous shall not be
brought into the Building Complex.
P. Any painting or decorating as may be agreed to be done by and at the
expense of LANDLORD shall be done during regular weekday working hours; should
TENANT desire such work on Saturdays, Sundays, holidays or outside or regular
working hours, TENANT shall pay for the extra costs thereof.
Q. Except as permitted by LANDLORD, TENANT shall not mark upon, paint
signs upon, cut, drill into, drive nails or screws into, or in any way deface
the walls, ceilings, partitions or floors of the Premises or of the building,
and any defacement, damage or injury caused by TENANT, its agents or employees,
shall be paid for by TENANT.
R. TENANT shall not place this lease or any memoranda thereof of record
with the Clerk and Recorder of the City and County where the Building is located
or in any other public record.
S. LANDLORD has a non-smoking building policy. TENANT shall not smoke in
the office building, as it is a smoke-free environment.
T. TENANT shall not use heating or cooling equipment other than that
provided by the LANDLORD.
<PAGE>
U. During the lease Term, and any extensions, TENANT shall not directly
or indirectly engage in any similar or competing business within the office
complex (see EXHIBIT "B").
V. TENANT shall not leave their vehicle in the office parking lot
overnight. Failure to comply will result in a towing of the vehicle at TENANT'S
expense.
TENANT agrees that LANDLORD may amend, modify, delete or add new and
additional rules and regulations to the use and case of the Premises and the
Building of which the Premises are a part. TENANT agrees to comply with all
such rules and regulations upon notice to TENANT from LANDLORD thereof, in the
event of any breach of any rules and regulations herein set forth or any
amendments, modifications or additions thereto, LANDLORD shall have all remedies
in this lease provided for in the event of default by TENANT.
EXHIBIT "C"
RULES/REGULATIONS
Any TENANT opting for a private photocopier installed in their office will
be responsible for all electrical wiring expenses for such copier. This expense
for the TENANT is approximately $250.00.
<PAGE>
Exhibit 10.15
RICHMOND HOUSE (NEWBURY) LIMITED
and
EST CORP (UK) LIMITED
AGREEMENT
Date: 18th August 1997
Relating to Office Space at
Richmond House, Bath Road, Newbury, Berkshire
<PAGE>
THIS AGREEMENT is made on the 25th July 1997 between Richmond House (Newbury)
Limited, Bath Road, Speen, Newbury, Berkshire, RG14 1QY (hereinafter called
"RH") and EST Corp (UK) Limited, 120 Royall Street, Canton, MA 02021, USA
(hereinafter called "the User).
HEREBY it is Agreed as follows:-
1. During the subsistence of this Agreement:-
(a) RH will allow the User to have Access to and (in common with all
others authorised by RH so far as is not inconsistent with the rights
hereby granted and in any event not to the exclusion of RH) and use
the office(s) numbered 8 on the 1st floor of RH's Business Centre
(hereinafter called "the Centre") Richmond House, Bath Road, Speen,
Newbury, Berkshire (hereinafter called "the building" which expression
shall where the context so admits or requires include the Centre)
which is shown edged red on the plan annexed hereto (hereinafter
called "the Office") together with the fixtures and fittings therein
details of which are set out in the Second Schedule hereto.
(b) RH will provide the following services and facilities to the User:
(i) Lighting in the Office
(ii) Heating and/or air conditioning in the Office
(iii) Electric power in the Office
(iv) Cleaning of the Office and the windows thereof
(v) Reception facilities between 08.30 and 18.00 hrs on normal
business days including the taking of telephone calls and
messages
(c) RH will also procure the provision to the User of:
(i) lavatory and washing facilities for males and females within the
said Richmond House including the heating cleaning and lighting
thereof
(ii) access to the Centre over the entrance halls passages corridors
landing and stairs forming part of the Building (hereinafter
called "the Common Parts") and required for such access
(iii) heating cleaning and lighting of the Common Parts
(iv) cleaning of the windows
<PAGE>
2. The User shall pay for the use of the Office for the said services and
facilities at the rate of (Pounds)1,450.00 (plus vat) per calendar month
payable in advance on the 1st day of each month the first payment to be
made on the date hereof being a proportion from the date hereof up to the
next date for payment hereunder.
3. This Agreement shall commence on the 18/th/ August 1997 and shall continue
until the 17/th/ November 1997 (subject to earlier determination as
hereinafter provided) and unless RH or the User shall have given not less
than one month's written notice to the other determining this Agreement
this Agreement shall continue thereafter until determined by not less than
one month's written notice given at any time by RH or the User to the other
of them.
4. RH may at any time after 17/th/ November 1997 by one month's notice in
writing to the User, vary the rate for payment for the use of the Offices
and for the said services and facilities by the User to such amount as RH
shall in such notice stipulate and as and from the expiration of such
notice the rate of payment shall be increased to the amount stipulated and
payment shall thenceforth be made accordingly provided that if RH shall
serve notice varying the rate for payment in manner aforesaid the User
shall have the right within 7 days of receipt of such notice to give notice
to RH to determine this Agreement on the date of expiration of RH's notice
and if the User shall give such notice of determination this Agreement
shall absolutely determine and the User shall cease to use the said offices
on the date of expiration of RH's notice but without prejudice to the
rights of either party hereto against the other in respect of any
outstanding breach of this Agreement.
5. The User shall prior to taking possession of the Office also pay the sum of
(Pounds)1,450.00 to RH by way of deposit and such deposit shall be repaid
to the User within 28 days of the determination of this Agreement less such
amount as may be owing to RH by the User at the date of determination under
any of the Clauses hereof or may be required to remedy any breaches by the
User of any of his/its obligations herein contained including the cost of
redecorating the Office to the extent considered necessary by RH without
prejudice to the right of RH to recover any greater amount which may be
required for such purposes.
6. RH may make available for the benefit of occupants of the Building such
secretarial photocopying and other services or facilities as it shall in
its absolute discretion decide (RH being entitled to terminate the
provision of such services at any time and for any reason) and the User
shall pay a charge to RH for the use thereof calculated by reference to the
use thereof made by the User in accordance with rates published from time
to time.
-2-
<PAGE>
7. RH shall not be liable to the User nor shall the User have any claim
against RH in respect of any failure to provide or procure any of the
services or facilities referred to herein whether under paragraph 1 (b) or
(c) or paragraph 6 due to or by reason of necessary repair or maintenance
of any installation or apparatus or damage thereto or destruction thereof
by fire, water, act of God or other cause beyond RH's control or mechanical
or other defect or breakdown or unavoidable shortage of fuel materials or
labour provided that RH shall use its reasonable endeavours to prevent or
remedy as soon as reasonably possible such failure.
8. The User shall be entitled to the exclusive use of:
(a) telephone number 01635-553016 for all purposes (except for advertising
for which the prior consent of RH must be obtained) and the User shall
be responsible for all standard British Telecom charges for calls made
on that telephone number and
(b) telephone number 01635-45041 for purposes of facsimile transmission of
all documents (save advertising as aforesaid) and the User shall pay a
charge to RH for the use thereof calculated in accordance with a rate
published by RH from time to time.
9. The User shall be invoiced each month (or at such other intervals as RH may
decide) in respect of the telephone charges referred to in paragraph 8
above and its use of all other services and facilities for which payment is
not included in the payment to be paid within 7 days of their issue.
10. Without prejudice to any other right or remedy or power herein contained or
otherwise available to RH if any payment whatsoever due under the
provisions hereof shall become due but shall remain unpaid for a period
exceeding 7 days to pay on demand to RH interest thereon at a rate of 4%
above the base rate for lending for the time being of Lloyds Bank plc (or
such other Bank as RH may reasonably designate) from the date when the same
became due and until payment thereof (as well after as before any
judgement).
11. The User agrees with RH to observe and perform the obligations and
conditions contained in the First Schedule hereto.
12. RH shall be entitled to determine this Agreement in the event of any
payment due from the User being in arrears for 7 days whether formally
demanded or not or of any breach of the agreements and conditions on the
part of the User herein contained remaining unremedied for 14 days after
written notice requiring such breach to be remedied has been given by RH to
the User or of the User becoming bankrupt or being a company entering into
liquidation whether voluntary or compulsory or of the User entering into
any
-3-
<PAGE>
composition or arrangement for the benefit of his or its creditors or
suffering any distress or execution to be levied on the Users goods.
13. RH and the User mutually acknowledge that nothing contained in this
Agreement creates or is intended to create the relationship of Landlord and
Tenant between them.
14. The occupation and use of the Office by the User by virtue of this
Agreement is non-exclusive and in particular RH reserves the right at its
discretion in connection with the management of the Centre to require the
User from time to time during the subsistence of this Agreement to move to
a different office in the Centre offering comparable space and facilities.
AS WITNESS the hand of SIGNATURE ILLEGIBLE on behalf of Richmond House
-----------------------
(Newbury) Limited and /s/ John Baggott Director & Secy EST CORP (UK) Ltd. on
---------------------------------------------------
behalf of the User
-4-
<PAGE>
The First Schedule above referred to
Agreements on the part of the User
1. To use the Office as an office in connection with the User's business and
not for any other purpose whatsoever.
2. Not to use the Office for any noxious noisy or offensive trade or business
not for any illegal or immoral act or purpose nor for betting or gaming nor
to cause or create any nuisance annoyance or disturbance to RH or other
occupiers of the Building or parts thereof nor hold any sale or auction nor
hold any public meeting therein not keep any livestock thereon.
3. To observe and perform and conform to all regulations and rules
(i) made by RH for the proper management of the Centre and
(ii) made by the Landlord of the Building for the proper management of the
Building and in each case notified by RH to the User from time to time
and to ensure that his/its servants agents and visitors observe and
conform to the same.
4. Not to introduce any additional fire or heating apparatus into the Office
and not to interfere with the heating system therein except by way of
controls provided for use by the User.
5. Not to store in the Office any article or substances of a specially
combustible inflammable explosive or dangerous nature.
6. Not to do or permit to be done anything whereby any policy of insurance on
the Building or any part thereof or the contents thereof may become void or
voidable.
7. Not to use any electrical apparatus in the Office except calculators and
dictation machines or install his/its furniture and fittings without the
prior written consent of RH.
8. Not to make any alterations or additions to the Office nor to any furniture
or fittings provided by RH nor to pierce in any way the walls ceilings or
floors of the Office.
9. To use the Office in such a manner as not to cause any damage to the walls
ceilings or floors thereof or to any of the furniture or fittings provided
by RH and to pay to RH on demand the cost of repairing any damage caused.
<PAGE>
10. Not to assign the benefit of this Agreement (the same being personal to the
User) nor to sub-licence the Office not to allow any other person to have
occupation or share enjoyment or use of the Office
11. Not to allow the Office to be occupied or used by more than 3 persons.
12. Not to display any placard or sign in or on any part of the Office or the
entrance door thereof save in the place indicated by Harvard to display in
such place only such placards or signs as shall be approved and prepared by
RH (but at the cost of the User).
13. Not to obstruct or permit to be obstructed the Common Parts or the
stairways landings or entrance lobbies of the Centre.
14. Not to darken or obstruct any windows on the Office.
15. Not to bring any safe or heavy article into the Office except with the
consent of and in a position designed by RH.
16. To permit RH or its Landlords or the authorised representatives or either
of them at all times to inspect clean or decorate and/or carry out works in
or on the Office and to enter the Office for all necessary purposes.
17. To pay any Value Added Tax imposed by law upon any sum payable under this
agreement or in respect of any services provided by RH to the User.
18. To vacate the Office on the date of determination of this Agreement
(howsoever determined).
19. RH shall have a general lien over all property of the User remaining in the
Office at the time of termination of this Agreement for payment of all
monies whatsoever due by the User to RH under this Agreement and such lien
may be enforced by sale by auction or private treaty.
20. If the User shall leave any property in the Office after the determination
of this Agreement and shall not have removed the same within 3 working days
of notice in writing from RH requiring such removal then RH may on behalf
of the User (and RH is hereby appointed by the User to act on their behalf)
sell such property and hold the proceeds of sale after deducting the costs
of removal storage and sale incurred by it to the order of the User
provided that the User will indemnify RH against all costs and claims
proceedings and expenses arising out of or in connection with such sale.
<PAGE>
The Second Schedule above referred to
Fixtures Fittings and Furniture in the Offices
Qty 3 Executive Desks
Qty 2 Executive Chairs
Qty 2 Double filing cabinets
Qty 1 Glass fronted unit with double cupboard above
Qty 2 Visitors Chairs
<PAGE>
Exhibit 10.17
LEASE AGREEMENT
THIS AGREEMENT was made and entered into by and between Kabushikikaisha Katori
Shoten (hereinafter referred to as "the Lessor") and Nihon ELANIX
Kabushikikaisha (hereinafter referred to as "the Lessee") in connection with the
lease of the part of the building owned by the Lessor described below hereof
upon the following terms and conditions:
Name of the Building: Katori Building
Location: 16-6, Kodenma-cho, nihonbashi, Chuo-ku, Tokyo
Structure: Ferro-concrete built 8 storied building
Leased Area: 8F 30.94Tsubo (102.28 sq. meter)
Term of Lease: From Dec 27,1997 to Dec 26, 1999 (2 years)
Deposit: 2,200,000 Yen
Rents fee: 309,400 Yen per month excluding consumption tax
Maintenance charge: 89,726 Yen per month excluding consumption tax
Security Charge: 2,500 Yen per month excluding consumption tax
Clean up charge: 20,000 Yen per month (option) excluding consumption tax
Company plate: 2,500 Yen per month (option) excluding consumption tax
Bank Account: DAIWA Bank Asakusa branch
Acc. No: 0801208
Acc. Name: Kabushikikaisha Katori Shoten
Article 1. (Rent)
1. The Rent was specified above and the Lessee shall pay the Lessor the Rent
in advance not later than the last day of the preceding months by transfer
to the Lessor's bank account designated by the Lessor above.
2. The Lessee shall also pay the electricity charge, water charge and other
expense for leased area by the last day of current month by transfer to the
Lessor's bank account designated by the Lessor above.
3. Transfer charge shall be paid by the Lessee.
4. In the event the Lessee fails to pay the rent or other indebtedness when
due, the Lessee shall pay to the Lessor interest at the rate of 14% per
annual basis with respect to the overdue rent or other indebtedness as
compensation for the delay in payment.
Article 2. (Renewal)
1. The term of the lease may be renewed for further TWO (2) years period
unless the Lessee notice the Lessor at least by (THREE) 3 months or Lessor
notice the Lessee at least by (SIX) 6 months prior to the expiration of the
current term with both of parties mutual agreement upon for new rent
conditions.
<PAGE>
Article 3. (none)
Article 4. (Revisions of Rent, Maintenance Charge)
1. In case of where taxes or public dues on land and/or buildings have been
increased, or there has been any major fluctuation in the economic
situation, the Lessor may revise, even during the term of this Agreement,
The Rent and/or maintenance charge prescribed above, provided such Rent
and/or Maintenance Charge would become unreasonably lower in comparison
with those figures for the neighboring buildings.
Article 5. (Deposit)
1. In the event the Lessee defaults in the payment in the payment of the sum
payable in accordance with this Agreement such as rent etc, The Lessor may
appropriate the deposit for such sum without giving any notice thereof.
2. In above case the Lessee shall replenish the deposit to its original amount
within 5 days from the date of notice by the Lessor of such appropriation
of the deposit.
3. During the continuance of this Agreement, the Lessee shall not make a
demand for an offset or delay of the rent or any other indebtedness of the
Lessee to the Lessor against the deposit.
4. Deposit shall not have interest, and The Lessee shall not, in any event,
assign or pledge its right to request refundment of the deposit to any
third parties.
5. Concurrently with a revision of the Rent, the amount of the deposit shall
be increased so that Lessor shall request the Lessee to increase the amount
of deposit.
6. When Agreement is terminated, The Lessor shall refund the deposit after
adjustment, of any indebtedness owed by the Lessee to the Lessor such as
unpaid rent etc., after 3 months from the Lessee has vacated the premises
completely.
Article 6. (none)
Article 7. (Purpose of Use)
1. The Lessee shall use the Leased Area for the purpose of a business office
and shall not use of any other purpose.
Definition of purpose:
Article 8. (Acts prohibited)
The Lessee shall not do any one of the following act:
1. Bringing dangers, heavy goods may cause damage to Building and/or other
things which may annoy the Lessor and/or other tenants of the Building.
2. Writing characters in or out side of Leased Area, advertising in similar
way and/or installing such property without approval by the Lessor.
-2-
<PAGE>
Article 9. (none)
Article 10. (Duty to report on changes)
1. The Lessee shall immediately notify the Lessor thereof in writing in any of
following case:
1.1 On changes of address, name, representative or any other matters
registered in the Lessee's Corporate Registry
1.2 On changes of actual responsible person for Agreement.
1.3 On change of any other matter may cause severe influence to Agreement.
Article 11. (Notice of Termination of the Agreement)
1. During current lease term the Lessor shall terminate the Agreement by (SIX)
6 months prior to the termination date with writing, or the Lessee shall
terminate the Agreement by (SIX) 3 months prior to the termination date
with writing.
2. In case of full payment of 3 months rents and maintenance charge in 3
months advance the Lessee shall terminate the Agreement immediately.
3. In case of shortage of term which from the date to notify to the date of
termination of Agreement the Lessee shall pay to the Lessor a sum the per
diem rent as shortage of such term.
4. In case of without notice the Lessee shall pay 3 months rents and
maintenance charge to the Lessor.
5. Cause for the Lessee is responsible the Lessee shall pay 3 months rents and
maintenance charge.
6. In case of expiration of current lease term if the Lessee do not notify as
specified above, the Lessee shall pay 3 months rents and maintenance
charge.
Article 12. (Change of Original Condition of Premises)
1. In case of the Lessee wishes to remodel the Premises or install equipment,
the Lessee shall provide plan or method then obtain the Lessor's written
approval in advance.
1.1 Any additional installation, alternation of partition, furniture etc.
1.2 Any additional installation, alternation of illumination, telephones,
electricity.
1.3 Any additional installation of safe, heavy computer system etc.
1.4 Any additional installation which is similar as above.
2. The Lessee shall pay all of cost relates above, such as maintenance, tax by
vacation.
Article 13. (Repairs)
1. The Lessee shall be obligated to execute necessary repairs, in order to
maintain and manage the Building, the structural parts and/or any other
fixture or equipment of the Building.
-3-
<PAGE>
2. Costs of repairs of wall, ceiling and window glasses and lighting fixtures
and electric bulbs in the Leased Area shall be borne by the Lessee.
3. If the Lessee finds the necessity of repairing as described in the
preceding paragraph, the Lessee shall obligate to notify it immediately to
the Lessor. The Lessee shall execute any repairs, even in the case that
cost of such repairs is borne by the Lessee, after obtaining the approval
of the Lessor except the case of replacing electric bulbs.
Article 14. (Fire prevention)
1. The Lessee shall appoint its employees or persons if deemed necessary for
fire prevention.
2. In the event of requirement of a fire department for appointment of
management person of fire prevention, the Lessee shall follow the
instruction of fire department.
Article 15. (Compensation for Damage)
In the event any damage is cause intentionally or by negligence of The Lessee or
its employees, or any other person related thereto, the Lessee shall compensate
for such damages.
Article 16. (Inspection upon Entry)
The Lessor, if deemed necessary for inspection or the like, may enter the Leased
Area. In case of this paragraph, the Lessor shall notify its intention to the
Lessee in advance, except the cases that need urgency.
Article 17. (Duty of Care)
The Lessee shall use the Premises, common areas and common facilities of the
Building with the care of a good custodian and in such manner as shall not cause
any inconvenience or annoyance to other tenants or neighbors.
Article 18. (Automatic Termination of Agreement)
In case of whole or a part of the building is lost or damaged by natural
disasters or other acts of God and the use of the Premises is thereby rendered
impossible, this Agreement shall automatically terminate notwithstanding the
provisions relating to its term, without liability or penalty of either party to
the other by reason of such termination.
Article 19. (Immunity from Responsibility of the Lessor)
The Lessor shall not be obligated to take any responsibility against any of
losses incurred to the Lessee due to the following reasons and/or causes:
1. In case of fire, earthquake or theft, cause any damage to the Lessee.
2. If the Lessor has exercised ordinary care with respect to the maintenance
and management of Building, the Lessor shall not be responsible for any
damage caused to the Lessee due to any manufacturing of electricity, water,
air-conditioning equipment, or other facilities.
-4-
<PAGE>
3. Any damages caused to the Lessee intentionally or by the negligence or by
breach of laws of other tenants of the Building.
Article 20. (Termination of the Agreement)
1. If any one case of the following cases shall occur or have occurred the
Lessor may terminate this Agreement without any prior notice to the Lessee.
1.1 When the Lessee defaulted in the payment of the rent or other charges
for more than 2 months.
1.2 When the Lease used the Leased Area for any other purposes prescribed
in Article 7.
1.3 When the Lessee is subject to provisional attachment, provisional
disposition, compulsory execution, or when the Lessee has been
declared a bankruptcy, given a decision on commencement of
composition, company readjustment or company reorganization, company
dissolution, death, incompetent or the like.
1.4 When the Lessee's reputation and credibility was materially damaged.
1.5 When the Lessee caused material inconveniences to other tenants of the
Building.
1.6 When the Lessee defaults Article 8.
1.7 When the Lessee not use Leased Area more than 30 days without notice.
1.8 When the Lessee violated this Agreement or any other agreement or the
Use Regulations entered into in connection with this Agreement.
2. After termination of this Agreement by the Lessor the Lessee shall
compensate losses of the Lessor.
3. In case of termination cause of The Lessee is responsible The Lessee shall
vacate within 7 days after days of termination.
Article 21. (Restoration of Original State and Vacation)
Upon termination of this Agreement, the Lessee shall vacate the Leased Area
within 7 days of termination.
1. The Lessee shall remove any additional renovation made by the Lessor, and
all of furniture and fixture and equipment in the Leased Area to its
original state at the Lessee's expense.
2. The restoration work shall be carried out by an entity designated by the
Lessor.
Article 22. (Priority order of payment allocation)
Payment of debt by the Lessee to the Lessor, including setoff from deposit when
termination is lower than total debt the Lessor has a right to determine to
allocate a part of deposit for such debt. And the Lessee and the Guarantor shall
not have any objection against the Lessor.
-5-
<PAGE>
Article 23. (Repayment of Deposit)
In case of expiration of this Agreement The Lessee shall pay 2 months rent based
on expiration date as repayment of deposit to the Lessor. In case of the Lessee
is responsible is in same manner.
Article 24. (Compensation for the delay of Vacation)
In the event the Lessee fails to vacate the Leased Area at the end of this
Agreement, The Lessee shall pay to the Lessor a sum equal to twice the per diem
rent as compensation for the Lessee's holding over, for each day after the date
of termination up to and including the date of actual vacation.
Article 25. (Transfer this Agreement to ESTKK)
The Lessor and the Lessor and Guarantor shall agree to transfer this Agreement
to the subsidiary of EST corporation as known ESTKK immediately after foundation
of ESTKK in Japan without any charge or changing of whole or a part of this
Agreement.
Article 26. (Joint and Several Guarantor)
1. Hideto Sakamoto, the joint and several guarantor(herein after referred to
as the Guarantor), shall be responsible to discharge the Lessee's
liabilities hereunder, jointly and severally with the Lessee.
2. When the Guarantor is unable or when the Lessor deems the Guarantor unfit
as the guarantor, the Lessee shall at the Lessor's request immediately
change such joint and several guarantor to a person approved by the Lessor.
Article 27. (Other Matters and Competent Court)
1. With respect to matters not provided for in this Agreement or in the event
questions arise the interpretation of this Agreement, the Lessor and the
Lessee shall consult with each other to solve such matters in compliance
with the Civil Code or other relevant regulation and in accordance with
customary practice in office lease agreement.
2. The parties here to agree that the District Court of the Lessor's address
shall have jurisdiction with regard to any disputes between the parties
arising under this Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
and have hereto set their names and seals, each retaining one copy thereof.
The Lessor:
The Lessee:
The Guarantor:
-7-
<PAGE>
EXHIBIT 10.18
LEASE
-----
THIS INDENTURE MADE THE 17th DAY OF SEPTEMBER, 1999 IN PURSUANCE OF THE LAND
TRANSFER FORM ACT, PART "2" OF THE PROVINCE OF BRITISH COLUMBIA.
BETWEEN: SAMUEL A. LU and WINSTON A. LU,
------------------------------
businessmen, both having a place of
residence at 1105 West 59th Avenue, in the
City of Vancouver, in the Province of British
Columbia, V6P 1Y1
(hereinafter called the `LANDLORD') OF THE FIRST PART
AND; EMBEDDED SUPPORT TOOLS CORPORATION
----------------------------------
a body corporate, having a place of business at 120
Royall Street, in the City of Canton, in the
State of Massachusetts, USA, 02021
(hereinafter called the `TENANT') OF THE SECOND PART
Article I - DEMISE
- -------------------
1.01. WITNESSETH that in consideration of the rents, covenants and agreements
herein reserved and contained on the part of the Tenant to be paid, observed and
performed, the Landlord does hereby demise and lease unto the Tenant on the
terms and conditions herein contained, the Premises more particularly set out
and shown outlined in red on the plan attached as Schedule `A' hereto, which
Premises are hereinafter referred to as the "Premises".
The Premises are situate in and form part of the Building and Grounds more
particularly described in paragraph 2.15 hereof.
Article II - DEFINITIONS
- -------------------------
2.01. The parties hereto agree that for the purposes of this Indenture, the
words set out in this Article shall have the meanings herein ascribed to them.
2.02. `Area of Premises' shall be the area of the premises in square feet,
which is hereby agreed and deemed to be 562.44 square feet. Premises is as
defined in 1.01.
2.03. `Building' means that Building and other buildings and attached
improvements built upon the Grounds from time to time in which the Premises are
located.
<PAGE>
2.04. `Common Areas' means and includes the Common Areas and Facilities as
hereinafter defined.
2.05. `Common Areas & Facilities' both shall mean and include those areas,
facilities, utilities, improvements, equipment and installations in the Building
or on the Grounds which:
(a) from time to time, are not designated or intended by the Landlord
to be leased to tenants of the Building, and
(b) serve or are for the benefit of the Building, and which are
designated or intended by the Landlord from time to time to be part of the
Common Areas and Facilities of the Building and Grounds; and
(c) from time to time are designated by the Landlord for the use and
benefit of the Landlord, its other tenants and the Tenant, and their respective
invitees, licensees, customers, servants and employees.
Common Areas and Facilities includes, without limitation, all areas, facilities,
utilities, improvements, equipment, and installations which are provided or
designated (and which may be changed from time to time) by the Landlord for the
use or benefit of tenants of the Building, their employees, customers and other
invitees in common with others entitled to the use or benefit thereof in the
manner and for the purposes permitted by this Lease. Without limiting the
generality of the foregoing, Common Areas and Facilities includes the roof,
exterior wall assemblies including weather walls, exterior and interior
structural elements and bearing walls in the Building; truck courts; driveways;
truck ways; delivery passages; loading docks; and related areas; pedestrian
sidewalks; flower beds; lawns and other landscaped and planted areas; public
seating and service areas; common entrances; corridors; passageways, walkways
and pedestrian malls; equipment, furniture, furnishings, and fixtures;
conference rooms, and amenity areas; stairways, ramps, and elevators and other
transportation equipment and systems included in the Building; tenant common
washrooms and public washrooms; electrical, telephone, meter, valve, mechanical,
mail, storage, service and janitor rooms, music, fire prevention, security and
communication systems; general signs; columns; pipes, electrical, plumbing,
drainage, security and life support systems, building automation systems as well
as the structures housing the same (including, without limitation, the heating,
ventilating and air conditioning systems of the Building), mechanical systems
and all other installations or services located therein or related thereto.
2.06. `Cost of Common Areas' (Commonly called `Common Costs') means the total,
without duplication, of the costs incurred by the Landlord during each Rental
Year,
-2-
<PAGE>
calculated in accordance with generally accepted accounting principles
consistently applied, for the continued management and operation of the Building
and the Grounds, and the maintenance, repair, replacement and preservation of
the Common Areas and Facilities, including, without limitation, the costs of the
following:
(a) repairs, replacements, and maintenance except where the cost of any such
repairs, replacements or maintenance are directly attributable to inherent
structural defects or weaknesses and except times for which the Landlord
has elected to take depreciation taken and with the further exception of
repairs for damage caused by the Tenant, its servants, agents, patrons,
invitees, or suppliers which shall be the responsibility of the Tenant
alone to bear the Landlord's cost of repairing;
(b) landscaping and gardening, relining of parking spaces, replacement of
awnings, rental or purchase of signs and equipment, the uniforms of the
personnel referred to in paragraph 2.06(c) hereof and the cleaning and
pressing thereof, supplies, lighting (including replacement of fluorescent
light bulbs and ballasts), security protection, policing, sanitary control,
traffic control, refuse removal, removal of snow and ice, painting and
window cleaning, and otherwise maintaining any leaving and receiving areas
and truck docks;
(c) wages and compensation paid for the following classes of employees or
agents of the Landlord (but not including leasing commissions paid to
brokers) including, without limitation, payments for workers' compensation,
unemployment insurance, vacation pay, Canada Pension Plan and fringe
benefits whether statutory or otherwise but to the extent only that such
wages and compensation are directly attributable to the maintenance,
operation, repair, replacement and management of the Building:
(A) the salaries of the superintending staff of the Building,
building department heads and assistants and the clerical
and accounting staff attached to the superintendent's
office, provided that such wages and compensation will be
for services rendered only in connection with the Building
and will not exceed those which would be paid by a
reasonably prudent operator of a similar Building;
(B) window cleaners, porters, janitors, cleaners and
miscellaneous handymen;
(C) watchmen, commissionaires, caretakers and security personnel; and
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(D) carpenters, engineers, firemen, mechanics, electricians,
plumbers and persons engaged in the repair, maintenance,
operation and replacement of the heating, air-conditioning,
ventilating, plumbing, electrical and elevator and escalator
systems of the Building;
(d) service contracts with independent contractors in respect of the
maintenance, operation, repair, replacement and management of the Building;
(e) operating, maintaining, repairing and replacing security and life support
systems, plumbing, electrical, heating, water, sewer, air-conditioning,
ventilating, sprinkler, and other utility systems and services in respect
of the Building including the building automation system;
(f) insurance coverage obtained by the Landlord from time to time pursuant to
paragraph 4.10 of this Lease;
(g) Real Property Taxes of the Building and Grounds;
(h) supplying steam, electricity, water, sewer services, natural gas and other
fuel and utility services to the Building;
(i) accounting costs incurred in connection with the maintenance and operation
including computations required for the imposition of charges to tenants of
the Building and audit charges required to be incurred for the conclusive
determination of any costs incurred hereunder, and reasonable reserves in
connection with any operating expense;
(j) sales and excise taxes on goods and services provided by the Landlord to
manage, operate, and maintain the Common Areas and Facilities and equipment
thereon;
(k) cleaning the Building and supplies and equipment used in connection
therewith;
(l) stationery supplies, postage and other material required for routine
operation of the superintendent's office;
(m) costs otherwise attributable to capital account on improvements, machinery
and equipment which substantially reduce Common Costs as herein defined;
(n) a management fee equal to not more than 5.0% of Basic Rent (excluding this
management fee), and;
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(o) all taxes which the Landlord is obliged to pay any government authority on
goods and services which are supplied or provided to or for the benefit of
the Building or Grounds;
PROVIDED that Common Costs will not include any debt servicing or payments made
under any co-tenancy agreement affecting title to the Lands, any income tax of
the Landlord, (Corporation capital tax will not form a part of the Common Costs
or Real Property Tax), any costs incurred by or on behalf of or at the request
of an individual tenant or tenants and resulting in a benefit to such individual
tenant or tenants which is not of general application to all tenants of the
Building or costs incurred by the Landlord solely to lease premises in the
Building including costs of leasing commissions, lease incentives, costs of
installation of demising walls and refurbishing vacant premises, and wages and
compensation reasonably allocated by the Landlord to persons retained by the
Landlord for the purposes of leasing the Building. There shall be deducted from
Common Costs:
(aa) all net recoveries, which reduce the expense incurred by the
Landlord in operating and maintaining the Building, received
by the Landlord from tenants including recoveries as a
result of any act, omission, default or negligence of such
tenants or by reason of a breach by such tenants of
provisions in their respective leases and recoveries for
supplying steam, electricity, sewer services, natural gas
and other fuel and utility services to such tenants but
excluding recoveries of Common Costs from other tenants; and
(bb) net proceeds received by the Landlord from insurance
policies taken out by the Landlord to the extent that such
proceeds relate to the costs and expenses incurred in the
maintenance and operation of the Building;
FURTHER PROVIDED that if any of the Common Costs or costs of a like nature at
any time or from time to time apply disproportionately to the office or to the
retail tenants or to the warehouse tenants of the Building then the Landlord, in
its sole discretion acting reasonably, may allocate all or a portion of those
costs to the type of tenants to whom the costs disproportionately apply.
2.07. `Event of Default' shall have the meaning ascribed to it in paragraph
9.01.
2.08. `Gross Area of Premises' is calculated as follows:
Gross Area of = Area of X Total Area of / Net Rentable
the Premises Premises the Building Area of Building
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2.09. `Lease Year' shall be a twelve (12) month period commencing on the first
day of the month coinciding with or next following the date of commencement set
out in paragraph 3.01 and thereafter from year to year PROVIDED THAT where the
Lease Year does not coincide with the date of commencement or termination of
this Lease or any renewal hereof, any payments required hereunder shall be
apportioned for the shorter period.
2.10. `Premises' shall have that meaning ascribed to it in paragraph 1.01.
2.11. `Net Rentable Area' of the Building is calculated as follows.
Net Rentable Area = Total Area of the Building
of the Building less the area of the
Common Areas
and it is agreed that the present Total Area of the Building is 11,857.01 square
feet and the present Common Areas are 1,893.21 square feet, and the present Net
Rentable Area of the Building is 9,963.80 square feet. Additions, renovations
and reconfigurations of the Building may change these areas.
2.12. `Pro Rata Share' or `Tenant's Pro Rata Share' as applied to any amount
shall be that portion of the amount as bears the same ratio to the whole of the
amount as the floor area of Premises bears to the Net Rentable Area of the
Building.
2.13. `Real Property Taxes' shall mean all taxes, rates, and assessments,
whether general or specially levied or assessed for Municipal, School, general
or any other purposes by any lawful government authority payable by the Landlord
in respect of the Building and Grounds and improvements thereon and therein
including without limitation, (corporation capital tax will not form a part of
Common Costs or Real Property Tax), all local improvement rates and charges,
frontage taxes, water, school, hospital, and other taxes and assessments both
general and specific, ordinary and extraordinary, and foreseen or unforeseen,
now levied, imposed, rated, charged, assessed or calculated which may hereafter
be levied, imposed, rated, charged, assessed or calculated by any federal,
provincial, municipal, regional, school or other statutory authority during the
Term and shall. include any other taxes payable by the Landlord which are
imposed in substitution of the foregoing taxes, the whole as Initials finally
determined for each calendar year as a result of assessment, appeal or judicial
review, and shall include any legal fees or appraisers fees as may be reasonably
incurred by the Landlord in respect of contesting or appealing the amount or
legality of any such taxes.
2.14. `Right of Way Areas' shall have the meaning ascribed thereto in paragraph
8.01.
2.15. `Building and Grounds' shall mean those certain lands and Premises and
improvements thereon comprising that certain parcel or tract of land, situated
in
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the City of Richmond and more particularly known and described as, unit #290-
3651 Moncton Street, Richmond, B.C., or Unit # as assigned by the City of
Richmond, and legally described as, Lot 2, Section 10, Block 3 North, Range 7
West, NWD Plan 72396 PID 004-769-619.
2.16. `Substantial Destruction' shall mean such damage as in the opinion of a
competent engineer to be appointed by the Landlord, who may be the Landlord's
employee, requires substantial alterations to the Premises or reconstruction of
any building in which the premises are located or such damage as in the opinion
of such engineer cannot be repaired within a period of six (6) months from the
time such damage occurred.
2.17. `Tenant's Taxes' shall mean all taxes, licenses, rates, duties and
assessments imposed or levied by lawful government authority for any period
during the term or any renewal thereof and relating to or in respect of the
business of the Tenant, or relating to or in respect of personal property and
all business or trade fixtures, machinery and equipment, cabinet work, furniture
and moveable partitions owned or installed by the Tenant at the expense of the
Tenant or at the Tenant's request, whether such taxes are included by the Taxing
authority in the taxes, rates and assessments imposed or levied on or with
respect to the Building and included in Real Property Taxes.
Article III - TERM
- -------------------
3.01. The term of this Lease shall be for 2 (two) Years (the "Term") computed
from 12:01 am on the first (1st) day of October, 1999 (the "Commencement Date of
the Term") and ending at 11:59 pm on the thirty first (31st) day of September,
2001.
Article IV - RENT AND OTHER PAYMENTS BY THE TENANT
- ---------------------------------------------------
4.01. Basic Rent
----------
Yielding and paying to the Landlord in lawful money of Canada Rent for
and during the Term which the Tenant covenants to pay to the Landlord, on the
first day of each month during the Term except as set out herein (the "Basic
Rent") as follows:
Year: Term Basic Rent: Monthly Basic Rent:
- ---- --------------- ------------------
1-Oct 1/99 to Sept.30/01 $10,123.92 $421.83
Plus applicable Goods and Services Taxes.
(i) The Landlord acknowledges receipt of a deposit in the
amount of One Thousand Fifty Eight Dollars & Sixty Nine
Cents ($1,058.69) to be applied towards
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payment of the October 1999 Basic Rent and Additional
Rent and September 2001 Basic Rent, including (7) seven
percent GST. Such Deposit shall be paid by the Tenant
upon the signing of the Lease by Tenant.
4.02. Notice of Payments
------------------
All payments of every nature and kind to be made pursuant to this Lease
shall be in lawful money of Canada at such places as the Landlord or such other
person as the Landlord may from time to time direct. The Tenant shall provide,
post dated cheques for the first day of November 1999, December 1999, and then
on the first day of January and the first day of July in each year, six (6) post
dated cheques payable to the Landlord or such other person as the Landlord may
from time to time direct for the Rent due on the first day of such month and
first day of each and every month for the next ensuing five (5) months.
Until further notice, the Landlord directs all payments by cheque shall
be made payable Winsam Joint Venture and delivered to - c/o Super Grocer 12051
Number 1 Road, Richmond, B.C. Telephone #604-271-2722 at the address set forth
in paragraph 17.03. This direction may be changed by the Landlord at any time.
4.03. Apportionment for Partial Period
--------------------------------
If any Rent payment, adjustment or any other payment hereunder is
required to be made by the Tenant in respect of any period and if this Lease
commences or terminates on other than the beginning or end of such period, the
Tenant shall pay a proportionate amount for that portion of the period in which
the Term of this Lease was in effect.
4.04. Additional Rent
---------------
The Tenant shall pay, in addition to the Basic Rent, the Additional Rent,
as defined in paragraph 2.06 herein and paid in accordance to paragraph 4.05,
4.06, 4.07, 4.09 and 4.10 herein. Such Additional Rent to be estimated at
$145.77 per month.
4.05. Cost of Common Areas and Real Property Taxes
--------------------------------------------
The Tenant shall also pay upon demand, to the Landlord, in addition to
the Basic Rent, in each year of the Lease or its renewal:
(a) the Tenant's Pro Rata Share (as defined herein) of the Cost of
Common Areas incurred by the Landlord with respect to the
operation and maintenance of the Building and Grounds; and
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(b) any other costs, whether for utilities or otherwise, with respect
to the Premises. The Tenant's Pro Rata Share Of the Cost of
Common Areas is presently 5.645% (being the fraction of the Area
of the Building) This percentage will vary in accordance with
paragraph 2.11.
PROVIDED that notwithstanding any other provision in this Lease
to the contrary, where the usage of any utility by a Tenant is
disproportionate with the usage of other tenants or the Landlord
occupying other parts of the Building, the Landlord may allocate
such cost in a reasonable manner based on usage and not on the
Pro Rata Share.
4.06. Payment of Estimated Costs of Common Areas
------------------------------------------
The Tenant further acknowledges that the Landlord is entitled from time
to time to estimate the Costs of Common Areas and that the Tenant shall pay to
the Landlord, monthly, in advance, as Additional Rent, 1/12 of the estimated
annual Costs of Common Areas. The estimated Cost of Common Areas and Real
Property Taxes, as Additional Rent, shall be $145.77 per month.
4.07. Cost of Common Areas - Statements
---------------------------------
The Landlord (or its accountant) shall prepare and provide the Tenant
with a statement of actual Costs of Common Areas not less than annually. The
statement shall be provided to the Tenant within (3) three months of the end of
the period f or which it is prepared. If any amount is estimated only, it may be
amended when the actual amounts are known. Any difference between the estimated
and actual Costs of Common Areas shall be paid by or refunded to the Tenant, as
the case may be within (10) ten days of the delivery of the statement to the
Tenant. If the Tenant is in arrears in the payment of Basic Rent or Additional
Rent the Landlord may, but need not, set off any amount due by the Landlord to
the Tenant against such arrears.
4.08. Taxes on Improvements
---------------------
The Tenant shall pay as they become due, any and all Tenant's Taxes which
are levied during the Term or any renewal thereof, provided that if the Landlord
shall receive any notice of such a levy of taxes it shall furnish the same to
the Tenant, and provided further that the Tenant upon indemnifying the
Landlord's reasonable satisfaction, shall have the right at its own expense to
appeal any such tax levy.
Taxes that are billed to the Landlord shall be, at the option of the
Landlord:
(a) paid by the Tenant; or
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(b) paid by the Landlord in which case the amount shall form
Additional Rent payable forthwith by the Tenant to the Landlord.
4.09. Utility Rates
-------------
The Tenant shall pay as they become due any and all water, gas,
electricity, cablevision, fuel, heat and air conditioning charges and, if
supplied by the Landlord, shall pay the same to the Landlord monthly within ten
(10) days of receiving a statement therefore, and the Landlord shall have the
right to cut off or discontinue without notice any such service whenever and
during any time for which accounts for the same or rent are not paid by the
Tenant to the Landlord when due PROVIDED THAT nothing herein shall limit any
other remedy of the Landlord.
Utility Rates are included in the Additional Rent to be paid by the Tenant.
4.10. Insurance
---------
The Landlord shall insure the Building and Grounds against loss by fire,
broad extended coverage perils, malicious damage, public liability, loss of
rental income insurance insuring the Landlord against loss of rent during any
period of repair or restoration of the premises with a limit equal to the amount
of Basic Rent payable during a twelve (12) month period including the annual
Real Property Taxes, improvements, rates and similar charges and such other
coverages as the Landlord may desire and the cost of such insurance shall be
included in the Cost of Common Areas.
Article V - COVENANTS OF TENANT
- --------------------------------
5.01. The Tenant Covenants and agrees with the Landlord as follows:
(a) To pay the Basic Rent;
(b) To pay as they become due all other payments and Additional Rent provided
herein;
(c) To repair and maintain, except reasonable wear and tear, damage by fire,
lightning, tempest, impact of aircraft, acts of God or the Queen's
enemies, riots, insurrections, structural defects in the Building and
explosions, unless such damage is caused by the negligence of the Tenant,
his or its agents, employees, invitees or licencees.
(d) That the Landlord may enter and view state of repair and that the Tenant
will repair according to notice subject to the exceptions aforesaid, and
the Tenant will post all notices required to save the Landlord harmless
pursuant to the Builder's Lien Act,
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(e) To leave the Premises in good repair, subject to the exceptions aforesaid,
(f) (i) Not to assign, mortgage or encumber this Lease nor sublet or grant a
license in respect of or suffer or permit the Premises or any part thereof
to be used by others without the prior written consent of the Landlord in
each instance, which consent of the Landlord in each instance shall not be
unreasonably withheld, except in the case where the Tenant assigns the
Lease to a wholly-owned subsidiary or affiliated company of the Tenant.
In the event the Tenant proposes to sell the Tenant's rights to the
business to a third party, and further proposes to assign this Lease to
same, the Landlord, may reasonably approve such assignment provided the
Tenant remains as Covenantor, as described in paragraph 23.01 herein, on
the assigned Lease until the expiry of the Tenant's current Term.
Provided that the Tenant shall at the time the Tenant shall request the
consent of the Landlord, deliver to the Landlord such information in
writing (herein called the "Required Information") as the Landlord may
reasonably require respecting the proposed assignee or subtenant including
the name, address, nature of business, financial responsibility, and
standing of such proposed assignee or subtenant.
(ii) In no event shall any assignment or subletting to which the Landlord
may have consented release or relieve the Tenant from his obligations fully
to perform all the terms, covenants and conditions of this Lease on his
part to be performed and in any event the Tenant and in any event the
Tenant shall be liable for the Landlord's reasonable costs incurred in
connection with the Tenant's request for consent.
(g) Not to use or occupy the Premises or any part thereof for any purpose other
than the operation of an office for a computer software development
business and related business, operating as Embedded Support Tools
Corporation, and will not carry on or permit to be carried on in the
premises or any part thereof any other trade or business; nor will the
Tenant store or permit to be stored upon or in the Premises, or Grounds
anything of a dangerous, flammable or explosive nature, except as in the
opinion of the Landlord is or may be reasonably and necessarily utilized in
the usual course of the operation of said office;
(h) Not to do or permit to be done in or about the Building or Grounds anything
which may injure the Common Areas or like areas in the Building or Grounds
or be a nuisance to any other tenant of the Landlord or other owner of part
of the Building and Grounds or their tenants.
(i) Not to do nor omit nor permit to be done or omitted upon the Premises
anything which shall cause the rate of insurance upon the Building of which
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the Premises are part or any part thereof or any other building on the
Grounds, to be increased; PROVIDED that if the rate of insurance be so
increased, the total increase (and not just the Pro Rata Share thereof)
shall, at the option of the Landlord, by paid by the Tenant in accordance
to paragraph 5.01(r);
(j) To keep the Premises in a clean, tidy and wholesome condition and upon the
expiration or the term of any renewal thereof to leave the Premises in such
condition.
(k) To keep well painted and decorated at all times the interior of the
Premises in a manner consistent with a first class business operation.
(l) Not to use the name of the Building in regard to any business other than
the business of the Tenant upon the Premises.
(m) Not to grant any concessions, licences or permission to any third party to
sell or take orders for merchandise or services in the Premises without the
written approval of the Landlord.
(n) To obey and to cause its agents servants and employees to obey all
reasonable rules made by the Landlord for the regulation of all activities
and matters in and about the Building and Grounds and the use of the Common
Areas and like areas in the balance of the Building and Grounds;
(o) If the Landlord supplies any equipment installation of machinery in
connection with heating or air-conditioning of the Premises either
exclusively or in conjunction with other parts of the Building, the Tenant
will carry out such reasonable maintenance program of the same as required
by the Landlord at the Tenant's expense and, if so required by the Landlord
in writing, shall concur in such maintenance being carried out pursuant to
a service contract in the terms and with such persons as directed by the
Landlord, provided that the cost of the same shall not exceed those costs
which a reasonable and prudent owner would be willing to incur to carry out
the same maintenance and such costs shall be included in the Cost of Common
Areas, unless the Landlord shall find that include the same in the Cost of
Common Areas would cause a disproportionate cost on one or more other
tenants in the Building;.
(p) To carry out all other covenants and agreements by it herein contained.
(q) Not to permit nor to cause the exhaust, emission or spreading in any
manner, from the Premises, of any odour or smell which the Landlord or
other tenants of the Landlord find to be offensive or noxious so as to be
detrimental to any Tenant of the building in any way and should the Tenant
not correct the situation described, above, within Twenty-one (21) days (or
such lesser time
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as the Landlord may advise if the Landlord is of the opinion that in the
circumstances the nature of the situation requires more immediate
attention) of receiving written notice from the Landlord requiring such
correction, the Tenant agrees that the Landlord shall be at liberty to
terminate this Lease. The Tenant will install sufficient kitchen exhaust
and make-up air system through the roof membrane that will properly
ventilate, filter and contain the Tenant's menu food items at all times
during this Lease.
(r) Should the business which the Tenant conducts or proposes to conduct in and
about the premises cause or require an increase in the premiums payable
under any policies of insurance held in the Landlord over the premiums
generally paid by the Landlord under such policies of insurance, the Tenant
shall forthwith upon written demand from the Landlord, pay to the Landlord
the full amount of any such increase in premiums.
Article VI - GRANT OF RIGHTS BY TENANT
- ---------------------------------------
6.01. During the Term or any renewal thereof, the Landlord shall have and the
Tenant hereby grants to the Landlord the following rights with respect to the
Premises in addition to all other rights arising out of this Lease or otherwise
incidental to the Landlord's title and any interference by or on behalf of the
Tenant with any such rights shall be deemed a breach of a covenant on the part
of the Tenant herein, namely:
(a) The right to inspect or to authorize in writing an agent to inspect the
Premises at all reasonable times.
(b) The right at any time within One Hundred Eighty (180) days prior to the
expiration of the Term hereby granted to enter upon the Premises at all
reasonable times for the purpose of offering the same for rent and
exhibiting the same to prospective tenants.
(c) The right to install, maintain, replace, repair and service or cause to be
installed, maintained, replaced, and serviced, wires, ducts, pipes,
conduits or other installations in, under or through the premises for or in
connection with the supply of any service or utility to the Premises or to
other parts of the Building; Provided however that the Landlord's exercise
of such right shall be in manner as to cause minimal interference with the
business of the Tenant from the Premises.
(d) The right to make reasonable rules for the regulation of all activities and
matters in and about the Building and Grounds and the use of Common Areas
and like areas in the balance of the Building and Grounds and to alter such
rules from time to time.
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(e) The right to make any repairs at the expense of the Tenant for which the
Tenant is responsible if the Tenant fails to do so within a reasonable
time, and the right at the Landlord's option to remedy any breach of
covenant on the part of the Tenant at the expense of the Tenant, without in
any manner affecting the Tenant's obligations and covenants under this
Lease. Nothing in this Article contained shall be deemed or construed to
impose upon the Landlord any obligation, responsibility or liability
whatsoever for the care, maintenance and repair of the Building or any part
thereof, except as otherwise in this Lease specifically provided.
(f) The right to enter the Premises at any time, with or without force, in the
event of an emergency which threatens the Premises or any other part of the
Building or threatens the security of the Premises or any other part of the
Building.
Article VII - COVENANTS OF THE LANDLORD
- ----------------------------------------
7.01. The Landlord covenants with the Tenant as follows:
(a) For quiet enjoyment.
(b) To provide and maintain in good condition the Common Areas at the expense
of all of the tenants in the Building and Grounds;
(c) Pay for all necessary structural repairs to the Building, including roof,
sewers, drains, main electrical services and other utility services;
(A) at the expense of all of the tenants in the Building and Grounds if
the same are defined as being part of the Cost of Common Areas; and
(B) at the expense of all of the Landlord if the same are not defined as
being part of the Cost of Common Areas.
Notwithstanding anything else contained in this Lease, the Tenant shall not be
responsible for any repairs, replacements or maintenance of a capital nature or
of a structural nature, unless such repairs, replacements or maintenance are
required due to change or alterations by the Tenant, his or its agents,
employees, invitees or licencees.
7.02. Unless negligent, the Landlord shall not be liable for any direct,
indirect or consequential loss, damage, injury or expense caused or incurred by
the Tenant, its agents, employees, invitees and licencees or its or their
property by or arising from:
(a) Fire, explosion, falling plaster, gas, electricity or seeping or leaking
water.
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(b) The, interruption for any reason whatsoever, of any service facility or
utility by the Landlord.
(c) The Landlord observing, performing, exercising or enforcing any covenant,
agreement, right or remedy of the Landlord or
(d) Any other cause beyond the reasonable control of the Landlord.
Article VIII - GRANT OF RIGHTS BY LANDLORD
- -------------------------------------------
8.01. The Landlord hereby grants to the Tenant an Easement and Right of Way in
common with the Landlord and all others having a like right at all times with or
without vehicles to enter, go, return, pass and repass over that part of the
Building and Grounds designated as Common Areas or "Right of Way Areas" areas by
the Landlord from time to time and to park upon and depart from those parts of
the Right of Way Areas designated therefore by the Landlord from time to time
with the intention that the rights aforesaid shall be appurtenant to the
Premises demised herein and shall be binding upon the Common Areas and Right of
Way Areas, provided that nothing herein shall restrict the rights of the
Landlord to redesignate the use of the Common Areas and Right of Way Areas, or
limit the Landlord's rights pursuant to paragraph 8.02. There is no Parking
provided to Tenant.
8.02. Notwithstanding the grant of rights in paragraph 8.01 the Landlord and
Tenant agree:
(a) That the Landlord may add to the Building or add other buildings and
other improvements upon or adjacent to the Common Areas and Right of Way
Areas from time to time, or vary the same without the consent of the
Tenant, provided always that at all times during the Term of any renewal
hereof, the Tenant has reasonable ingress to and egress from the Premises
over parts of the Common Areas and Right of Way Areas.
(b) If, as a result of exercising its rights set out in subparagraph (a)
aforesaid, the actual areas of Common Areas and Right of Way are varied,
the Tenant will, at the cost of the Landlord, execute such documents as are
reasonably required by the Landlord to release the Tenant's interest in
those parts of the Common Areas and Right of Way Areas designated by the
Landlord.
Article IX - RIGHTS AND REMEDIES OF THE LANDLORD
- -------------------------------------------------
9.01. The Tenant shall be in default hereof upon the occurrence of any of the
following:
(a) Forthwith if the Basic Rent, Additional Rent or any other payments hereby
reserved or required of the Tenant to be made or any part thereof are in
arrears or unpaid for seven (7) days after any of the days on which the
same
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ought to have been paid, although no formal or other demand shall have
been made therefor by the Landlord;
(b) Where a provision of this Lease provides that the Landlord has the right to
terminate this Lease after a specified notice due to a breach, then upon
the expiration of that time period unless the breach has been cured during
that time period;
(c) If the Tenant is still in default thirty (30) days after notice in writing
to the Tenant that is in default of any (other than aforesaid in sub-
paragraph (a) and (b) of this paragraph 9.01) covenant or agreement herein
contained, unless having regard to the subject matter of the default, the
Tenant is unable to cure the default in the period aforesaid, but continues
diligently to attempt to do so;
(d) Late payments or dishonored cheques will be treated as being in default;
(e) A default being declared under Article XIX;
(f) In any other event where this Lease prescribes that a default will have
occurred when such event has occurred; Any of which events are herein
called an "Event of Default".
9.02. Re-Entry
--------
Upon the occurrence of an Event of Default, it shall be lawful for the
Landlord at any time thereafter without notice to re-enter the Premises and the
same to have again, repossess and enjoy as of its former estate, anything herein
contained to the contrary notwithstanding; and no acceptance of rent subsequent
to any default or breach and no condoning, excusing or overlooking by the
Landlord on previous occasions of any default, breach or Event of Default
similar to that for which re-entry is made shall be taken to operate as a waiver
of this condition or in any way to defeat or affect the rights of the Landlord
hereunder unless so expressly stated by the Landlord in writing.
9.03. Bankruptcy, Execution, Attachment, Etc.
---------------------------------------
If the Term hereof or any renewal thereof shall at any time be seized or
taken in execution or attachment by any creditor of the Tenant or if the Tenant
shall make any assignment for the benefit of creditors or shall become bankrupt
or insolvent or shall take the benefit of any bankruptcy or insolvency
legislation or in case the Premises shall become vacant or unoccupied for a
period of Ten (10) days, the then current month's Basic Rent and Additional
Rent, together with the Basic Rent and Additional Rent, accruing for the next
three (3) months shall immediately become due and payable and the Term hereof or
any renewal thereof shall at the option of the Landlord become forfeited and
void. Neither this Lease nor any
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<PAGE>
interest therein nor any estate hereby created shall pass to or enure to the
benefit of any Trustee in bankruptcy or any receiver or any assignee for the
benefit of creditors or otherwise by operation of law.
9.04. Distress
--------
Whensoever the Landlord shall be entitled to levy distress against the
goods and chattels of the Tenant it may use such force as it may deem necessary
for that purpose and for gaining admittance to the premises without being liable
in any action in respect thereof, or for any loss or damage occasioned thereby
and the Tenant hereby expressly releases the Landlord from all actions,
proceedings, claims or demands whatsoever for or on account of, or in respect of
any such forceable entry or any loss or damage sustained by the Tenant in
connection therewith.
9.05. Non-Waiver
----------
The waiver by the Landlord of any default or breach of any covenant or
agreement herein or any Event of Default by the Tenant must be in writing and
shall not be construed as, or constitute a waiver of any further or other breach
of the same or any other covenant or condition, and the consent or approval of
the Landlord to or of any act by the Tenant requiring the Landlord's consent or
approval must be in writing and shall not be deemed to waive or render
unnecessary the Landlord's consent or approval to any subsequent act similar or
otherwise by the Tenant.
9.06. Landlord's Right to Perform
---------------------------
If the Tenant shall fail to perform any of its covenants or agreements
herein contained, the Landlord may from time to time at its discretion and
without prior notice to the Tenant perform or cause to be performed any of such
covenants or any agreements or any part thereof and f or such purpose may do
such things as may be requisite and may enter upon the Premises, and all
expenses incurred and expenditures made by or on behalf of the Landlord shall be
forthwith paid by the Tenant to the Landlord, and if the Tenant f ails to pay
the same the Landlord may add the same to the Additional Rent and recover the
same by all remedies available to the Landlord for the recovery of rent in
arrears; PROVIDED THAT if the Landlord commences or completes either the
performance or the causing to be performed of any of such covenants or
agreements or any part thereof, the Landlord shall not be obliged to complete
such performance or causing to be performed or be later obliged to act in like
fashion.
Article X - ADDITIONS AND IMPROVEMENTS TO PREMISES
- ---------------------------------------------------
10.01. The Tenant covenants and agrees with the Landlord that it will not,
without the previous written consent of the Landlord, not to be unreasonably
withheld:
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<PAGE>
(a) Erect, install or place any signs or advertising on the Premises or any
other part of the Building or Grounds;
(b) Install plumbing, fixtures, shades or awnings or exterior lighting,
decorations or painting or any exterior erection, installation or
construction of any kind;
(c) Mark, paint, drill or in any way deface any walls, ceilings, partitions,
floors, wood, stone, iron or other work on the Premises;
(d) Install or permit to be installed in the Premises any special locks or
safes or similar security devices;
(e) Install or permit to be installed in the Premises any apparatus for
illumination, air-conditioning, cooling, heating, refrigeration or
ventilation;
except as may be reasonably required in the conduct of the Tenant's Business
from the Premises and then only after obtaining the written consent of the
Landlord, which consent shall not be unreasonably withheld.
10.02. The Tenant shall make no alterations, installations, removals, additions
or improvements in or about the Premises without the Landlord's prior written
consent not to be unreasonably withheld, and in the event of such consent, all
work shall be done at the Tenant's sole expense (save and except those funds
which the Landlord has agreed to commit pursuant to the offer to Lease) and at
such times, and in such manner as the Landlord may approve, and only by
contractors or tradesmen approved in writing by the Landlord.
10.03. It shall not be unreasonable for the Landlord to require the Tenant to
undertake to put the Premises back into the Original Condition at the end of the
Term or to require that a bond or deposit to cover the cost of the same be
posted prior to consenting to any work being done under any provision of this
Lease that requires the Landlord to consent to such work. In this paragraph
"Original Condition" means, at the option of the Landlord, the condition
existing immediately prior to the request for a consent or the condition
existing prior to the commencement of the first Term of this Lease.
10.04. The Tenant shall not suffer or permit any Builder's Lien to be filed
against the interest of the Landlord in the lands and premises or the Premises
by reason of work, labour, services or material supplied or claimed to have been
supplied to the Tenant, and if any such Builder's Lien shall at any time be
filed against the lands and premises or Premises whatsoever, the Tenant shall
cause the same to be discharged of record within thirty (30) days of the date
the Tenant has knowledge of such filing, and upon failure to do so by the
Tenant, then the Landlord, in addition to any right or remedy, may, but shall
not be obliged to, discharge the same by paying the amount claimed to be due or
by procuring a discharge of such liens by deposit in Court and in any such event
the Landlord shall be entitled, if it so elects,
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<PAGE>
to expedite the prosecution of any action for the enforcement of such lien by
the lien claimant and to pay the amount of the judgment, if any, in favour of
the lien claimant with interest costs and allowance, provided however, that the
Tenant shall not be required to pay or discharge any such Builder's Lien so long
as the Tenant shall in good faith proceed to contest the same by appropriate
proceedings, after first having given notice in writing to the Landlord of its
intention to so contest the validity of the lien claim, and after, at the option
of the Landlord, paying into Court sufficient security to enable the lien to be
discharged in respect of the Lands and Premises constituting the Buildings and
Grounds or Premises or after furnishing a surety bond of a company satisfactory
to the Landlord in an amount sufficient to pay such contested lien claim with
all interest thereon and Court costs and expenses including reasonable
solicitors' fees, which may at such time be allowable by law, which might be
incurred in connection therewith.
10.05. All improvements constructed and all business and trade fixture
permanently attached to the Premises shall be the property of the Landlord.
Forthwith after written demand by the Landlord to remove the same, and failing
the Tenant forthwith doing so, the Landlord may remove such trade fixtures at
the expense of the Tenant and the cost of such removal will be paid by the
Tenant forthwith to the Landlord on written demand, and the Landlord will not be
responsible for any loss or damage to such property caused by such removal.
Article XI - LANDLORD'S PROTECTION AGAINST CLAIMS
- --------------------------------------------------
11.01. The Landlord shall not be liable for and the Tenant hereby covenants and
agrees to indemnify and save harmless the Landlord of and from all claims and
demands of any and every nature whatsoever by the Tenant or any other person
located on the Premises arising out of the following:
(a) Loss of or damage to any property of the Tenant or any other person located
on the Premises from time to time in any way occurring.
(b) Damage or injury, including injury resulting in death, to persons or
property in any way occurring.
(c) Latent defect in the Premises or in the Building.
(d) Any business carried on in the Premises either by the Tenant, any sub-
tenant or otherwise.
11.02. Landlord Unable To Perform
--------------------------
Whenever and to the extent that the Landlord shall be unable to fulfill
or shall be delayed or restricted in the fulfillment of any obligation hereunder
in respect of the supply or provision of any service or utility or the doing of
any work or the making of any repairs by reason of being unable to obtain the
material, goods,
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<PAGE>
equipment, service, utility or labour required to enable it to fulfill such
obligation or by reason of any strike or lockout or any statute, law, or order-
in-council or any regulation or order passed or made pursuant thereto or by
reason of the order or direction of any administration, comptroller or board of
any governmental department or officer or other authority or by reason of any
other cause beyond its control, whether of the foregoing character or not, the
Landlord shall be relieved from the fulfillment of such obligation and the
Tenant shall not be entitled to compensation for any loss, inconvenience,
nuisance or discomfort thereby occasioned.
Article XII - INSURANCE
- ------------------------
12.01. The Tenant covenants and agrees that it shall at its sole expense pay
for and maintain in full force and effect for the benefit of the Landlord and
the Tenant during the Term and any renewals thereof, insurance with a reputable
insurance company or companies as follows:
(a) Public Liability and Property Damage and Contractual Liability insurance
covering the Premises and any plate glass thereon, the business of the
Tenant and any subtenants, concessionaire or licensees of the Tenant
conducted on, or in connection with, the Premises of an amount on less than
the inclusive limit of TWO MILLION DOLLARS ($2,000,000.00) in respect of
any loss or damage to property or such amounts as the Landlord may require.
(b) All Risks Insurance for the benefit of the Landlord and the Tenant fully
covering the fixtures, stock and contents of the Premises.
(c) Plate Glass Insurance for the benefit of the Landlord and the Tenant
covering all plate and other glass in the Premises.
12.02. All policies of insurance required hereunder shall have the following
provisions or characteristics:
(a) The Landlord shall be named as an additional insured in all policies of
insurance required hereunder and any loss shall be payable to the Landlord
and Tenant as their interests may appear notwithstanding any at or neglect
of the Tenant which might otherwise result in the forfeiture of such
policies or any of them.
(b) They shall not be affected or invalidated by any omission or negligence of
any Third Party which is not within the knowledge or control of the
insured.
(c) All policies of insurance shall be written to cover the Landlord and the
Tenant and shall provide that each person, firm or corporation insured
under such policy or policies shall be insured in the same manner and to
the same extent as if individual policies had been issued to each.
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<PAGE>
(d) All insurance shall be instituted with Companies of which the Landlord
approves and shall be in such form as the Landlord reasonably requires.
12.03. The Tenant shall provide proof of new or continued insurance to the
Landlord at least thirty (30) days prior to the expiration date recited in the
respective insurance policies, such proof to be in form and content satisfactory
to the Landlord, and as soon as practicable thereafter the Tenant shall deliver
to the Landlord the actual original or renewal policies.
12.04. The Tenant shall at the commencement of the term furnish and deliver to
the Landlord a certificate from the relative insurance company or companies
furnishing the insurance required under this Article containing the following
information and undertaking:
(a) The name of the insurance company or companies.
(b) The Policy number or numbers.
(c) The expiry date of such insurance.
(d) The nature and limits of such insurance.
(e) Such insurance shall expressly provide as follows:
i) That the insurance covers the liabilities incurred by the Tenant
under this Lease.
ii) That such insurance cannot be altered or cancelled prior to the
expiry date without thirty (30) days notice in writing first being
given by the insured to the Landlord.
iii) That the insurer waives any right of subrogation against the
Landlord.
iv) That the insurer acknowledges that the Landlord's right to collect
under this insurance shall not be affected or such insurance.
12.05. Concurrent with the delivery of the foregoing certificate from the
relative insurance company or companies the Tenant shall deliver to the Landlord
a certified copy of such insurance policy.
Article XIII - COMMON AREAS
- ---------------------------
13.01. Use of Common Areas
-------------------
The manner in which the common areas provided pursuant to paragraph
8.02(a) shall be maintained, used, altered and improved shall be in the sole
discretion of the Landlord.
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<PAGE>
13.02. Dispute of Cost
---------------
If there is any dispute between the Landlord and the Tenant with regard
to the Tenant's Pro Rata Share of the Cost of the Common Areas, the decision of
the Landlord's accountant shall be final and binding for all purposes.
Article XIV - SALES AND ASSIGNMENTS
- ------------------------------------
14.01. Relief of Landlord on Sale
--------------------------
If the Landlord sells the Building and Grounds, the Landlord shall be
released from all obligations, responsibilities and liabilities under this Lease
provided the purchaser in writing, assumes them from the Landlord.
Article XV - DESTRUCTION OR DAMAGE TO PREMISES
- -----------------------------------------------
15.01. If, during the Term or any renewal thereof, the premises or the
building in which the Premises are located shall be destroyed or damaged, the
following shall apply:
(a) If the Premises are unfit in part for occupancy by the Tenant, the rent
shall abate in part only in the proportion that the Premises are unfit, and
if the Premises are wholly unfit for occupancy by the Tenant, the rent
shall be suspended until the Premises have been rebuilt, repaired or
restored; and,
(b) If there is Substantial Destruction to the Premises or the Building in
which the Premises are located so as to be incapable of repair within (1)
one month after such Substantial Destruction and on giving notice to the
Tenant, the Landlord may declare this Lease terminated forthwith and in
such event Basic Rent and Additional Rent and all other monies payable
hereunder shall be apportioned and shall be payable up to the time of such
Substantial Destruction, and the Tenant shall be entitled to be repaid by
the Landlord any rent paid in advance and unearned.
Article XVI - SUBORDINATION
- ----------------------------
16.01. Upon the request of the Landlord in writing, the Tenant shall make this
Lease subject and subordinate to all mortgages, which now or hereafter during
the Term hereof or any renewal thereof shall be recorded or which the Landlord
shall seek to record in the Land Title Office as a mortgage against the
Landlord's portion of the Building or Grounds, and to all advances made or to be
made thereunder, and shall execute promptly from time to time any assurances
that the Landlord may request to confirm this subordination and shall, if
required by the Landlord, attorn to any Mortgagee that the Landlord may request;
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<PAGE>
Article XVII - MISCELLANEOUS PROVISIONS
- ----------------------------------------
17.01. No Agency or Partnership
------------------------
Nothing herein contained shall be construed as creating the relationship
of principal and agent or of partners or of joint venturers between the parties
hereto, their only relationship being that of Landlord and Tenant.
17.02. Over-holding
------------
If at the expiration of the term of this Lease the Tenant shall hold with
the consent of the Landlord, the tenancy of the Tenant thereafter shall, in the
absence of written agreement to the contrary, be from month to month only at a
rental per month equal to one-tenth (1/10) of the Basic Rent payable for the
year immediately preceding such expiration, payable monthly in advance on the
first day of each lease month and shall be subject to all other terms and
conditions of this Lease.
17.03. Notices
-------
Any notice required or contemplated by any provisions of this Lease shall
be given in writing enclosed in a sealed envelope addressed, in the case of the
notice to the Landlord, to it at:
Winsam Joint Venture
c/o-Super Grocer
12051 Number 1 Road, Richmond, B.C.
or at such other address as the Landlord may from time to time notify the Tenant
as hereinbefore provided, and in the case of Notice to the Tenant, at:
Embedded Support Tools Corporation
Attn: Mr. Mark Lapham
c/o- #290 - 3651 Moncton Street,
Richmond, B.C.
and;
120 Royall Street, Canton, Massachusetts,
USA, 02021
mailed, registered, and postage prepaid. The time of giving of such notice shall
be conclusively deemed to be the second (2nd) business day after the date of
such mailing. Such notice shall also be sufficiently given if and when the same
shall be delivered, in the case of notice to the Landlord to an executive
officer of the Landlord, and in the case of notice to the Tenant, to it
personally or to an executive officer of the Tenant if the Tenant is a
corporation. Such notice, if delivered, shall be conclusively deemed to have
been given and received at the time of such delivery. If in this Lease two (2)
or more persons are named as Tenant, such notice shall be
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<PAGE>
sufficiently given if and when same shall be delivered personally to any one (1)
of such person. Provided that either party may, by notice to the other, from
time to time, designate another address in Canada to which notice is mailed more
than five (5) days thereafter shall be addressed.
17.04. Registration
------------
The Tenant may at its own expense register this Lease provided that if
this Lease is not in registrable form the Landlord shall upon request by the
Tenant and at the Tenant's sole expense, take all reasonable steps to put this
Lease in registrable form.
17.05. Whole of Agreement
------------------
The Tenant agrees that the demised Premises are leased by the Tenant
without any representations or warranties other than as contained in this Lease,
and that no representative or Agent of the Landlord is or shall be authorized or
permitted to make any representations with reference hereto or to vary or modify
this Lease in any way, except in writing under seal, and that this Lease
contains all of the agreements and conditions made between the parties hereto.
17.06. Time of Essence
---------------
Time shall be of the essence of this Lease.
17.07. Waiver of Set-Off
-----------------
Without limiting the generality of anything hereinbefore contained, the
Tenant hereby waives and renounces any and all existing and future claims,
offsets and compensation against any Basic Rent due hereunder and agrees to pay
such Basic Rent and other amounts regardless of any claim, offset or
compensation which may be asserted by the Tenant or on its behalf.
17.08. Net Lease
---------
The Tenant acknowledges and agrees that it is intended that this Lease
shall be a completely carefree Net Lease for the Landlord, except as expressly
herein set out, that the Landlord shall not be responsible during the Term for
any costs, taxes, charges, expenses or outlays of any nature whatsoever arising
from or relating to the Leased Premises or the contents thereof or the Common
Areas, and the Tenant shall pay all charges, impositions, costs and expenses of
every nature and kind relating to the Leased Premises and a Proportionate Share
of all costs, taxes, charges, expenses and outlays of every nature and kind
relating to the Building and the Grounds, including said Lands (or either of
them) and not directly levied on any Tenant of the Building and the Tenant
covenants with the Landlord accordingly.
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<PAGE>
17.09. Proper Law and Jurisdiction
---------------------------
This Lease shall be construed in accordance with the laws of the Province
of British Columbia. The parties hereto submit to the jurisdiction of the courts
of the Province of British Columbia.
17.10. Effect of Headings
------------------
The article headings or sub-headings used throughout this Lease are
inserted for convenience or reference only and are not otherwise to be relied
upon or considered in the interpretation hereof.
17.11. Interpretation of Words
-----------------------
Wherever the singular or the masculine or the neuter gender is used in
this Lease, the same shall be deemed to include the plural or the feminine or
the body politic or corporate, where the context or the parties so require.
17.12. Binding Agreement
-----------------
This Lease shall be binding upon and enure to the benefit of the parties
hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns as the case may be.
17.13. Subdivision
-----------
The Landlord reserves the right to subdivide the lands on which the
Building is situated and the Tenant covenants and agrees with the Landlord that
forthwith upon request by the Landlord it will execute such documents,
assurances and writing as may be required in connection with any such
subdivision.
17.14. Interest on Unpaid Monies
-------------------------
If and whenever the Basic Rent hereby reserved or any part thereof or any
other monies payable herein (whether payable pursuant to Article IV or pursuant
to any other provision of this Lease) shall not be paid on the date appointed
for payment thereof, whether lawfully demanded or not, and so often as the same
shall occur then such Basic Rent or other Monies payable herein shall bear
interest calculated from the date when such payment first became due and payable
by the Tenant at a rate equal to six percent (6%) per annum above the prime
lending rate of interest from time to time charged by the Canadian Imperial Bank
of Commerce to its prime risk commercial customers in Canada. The Certificate
of the manager for the time being of the main branch of the Canadian Imperial
Bank of Commerce in Richmond, British Columbia shall be conclusive evidence of
the said prime lending rate of interest in the event of a dispute between the
parties as to such rate
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<PAGE>
of interest. Interest as aforesaid shall be recoverable by the Landlord in the
same manner as rent in arrears.
Article XVIII - ENVIRONMENTAL CONTAMINANTS
- -------------------------------------------
18.01. The Landlord and the Tenant agree that:
(a) The Tenant, at its sole cost and expense, shall comply or cause its
employees, Agents and Invitees, at their sole cost and expense, to comply
with all federal, provincial and municipal laws, rules and regulations and
orders with respect to the discharge of contaminants into the natural
environments, pay immediately when due the costs of removal of any such
wastes and the costs of improvements necessary to deal with such
contaminants and keep the demised Premises free and clear of any lien
imposed pursuant to such laws, and rules and regulations. In the event the
Tenant fails to do so, after notice to the Tenant and the expiration of the
earlier of:
(i) any applicable cure period under the Lease, or,
(ii) the cure period under the applicable laws, rule, regulation or order,
the Landlord at its sole option, may declare the Lease to be in
default.
(b) Subject to sub-paragraph (c) the Tenant shall indemnify and hold the
Landlord harmless from and against all loss, damage or expense (including
without limitation, legal fees and costs, incurred in the investigation,
defence and settlement of any claim) relating to the presence of any
hazardous waste or contaminant referred to herein.
(c) PROVIDED THAT notwithstanding sub-paragraph (a) and (b), the Landlord and
not the Tenant, shall be solely responsible for all matters referred to in
sub-paragraph (a) where the cause of the same,
(i) pre-existed the Commencement of this tenancy, or,
(ii) was the fault of the Landlord or another tenant.
(d) The Landlord shall indemnify and save the Tenant harmless from and against
all loss, damage or expense (including, without limitation, defence and
settlement of any claim) relating to the presence of any hazardous waste or
contaminant referred to herein where the cause of the same,
(i) pre-existed the Commencement of this tenancy, or,
(ii) was the fault of the Landlord or another tenant.
(e) The provisions of this Article XVIII shall continue in force
notwithstanding the expiration or earlier termination of this Lease.
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<PAGE>
Article XIX - RENEWAL
- ----------------------
19.01. If the Tenant duly and regularly pays the Basic Rent and Additional Rent
hereby reserved and observes and performs all the covenants and agreements
herein contained on the part of the Tenant to be paid, observed and performed,
the Landlord, upon written request by the Tenant delivered not less than four
(4) months before the expiration of the Term, shall grant to the Tenant a
renewal of this Lease for a further period of Two (2) Years upon the same terms,
covenants and conditions as are herein contained except as to rent and except
that there shall be no further right of renewal. The Basic Rent for such renewal
term shall be determined by agreement, and failing agreement, by arbitration
before a single arbitrator in accordance with the provisions of the Commercial
Arbitration Act of British Columbia then in force such single arbitrator to be
appointed by agreement, and failing agreement, in accordance with the provisions
of the Commercial Arbitration Act of British Columbia. In any event, the Basic
Rent for the renewal term will not be less than the Basic Rent in the last year
of the Term.
Article XX - SIGNS
- -------------------
20.01. The Landlord will install Tenant's operating name on the front entry
`Tenant Directory Board' and standard `Building Unit Door Name and Number Board'
on entry door at no cost to the Tenant.
20.02. - PARKING
Deleted
Article XXI - IMPROVEMENTS TO PREMISES
- ---------------------------------------
21.01. The Tenant hereby undertakes and agrees to do such work and such
materials as are required to upgrade the Premises in order to make the Premises
fit for the intended use of the Tenant. Such work and materials shall include
all tenant improvements and fixturing of the Premises and shall be at the cost
of the Tenant.
21.02. It is understood that all work performed under paragraph 22.01 is
subject to the approval of the Landlord as hereinbefore provided.
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<PAGE>
IN WITNESS WHEREOF this Agreement of Lease has been executed this 30th day
of September, 1999.
This Lease was hereto Signed, C/S
Sealed and Executed by the
Landlord in the presence of:
(Witness)
Signature Illegible
- ----------------------------
#200-8211 Ackkoyd Road
- ----------------------------
Richmond, B.C. VEX 3J9 X/S/ Samuel A. Lu X/S/ Winston A. Lu
- ---------------------------- ---------------------------------------
REALTOR SAMUEL A. LU / WINSTON A. LU
`LANDLORD'
This Lease was hereto Signed, C/S
Sealed and Executed by the
Tenant in the presence of:
(Witness)
/S/ John Baggott
- ----------------------------
____________________________
X/S/ Scotty Cole
____________________________ ---------------------------------------
John Baggott EMBEDDED SUPPORT TOOLS
CORPORATION
`TENANT'
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<PAGE>
EXHIBIT 10.22
BANKBOSTON BUSINESS LOAN AGREEMENT
==============================================================================
Borrower: Embedded Support Tools Lender: BankBoston, NA.
Corporation 100 Federal Street
120 Royall Street Boston, MA 02110
Canton, MA 02021
==============================================================================
THIS BUSINESS LOAN AGREEMENT between Embedded Support Tools Corporation
("Borrower") and BankBoston, N.A. ("Lender") is made and executed on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. all such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of September 23, 1998 and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Loan Agreement together
with all exhibits and schedules attached to this Business Loan Agreement
from time to time, if any, as amended from time to time.
Borrower. The word "Borrower" means Embedded Support Tools Corporation. The
word "Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
<PAGE>
Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factors lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
Event Of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such Indebtedness
may be or hereafter may become barred by any statute of limitations; and
whether such Indebtedness may be or hereafter may become otherwise
unenforceable.
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Lender. The word "Lender" means BankBoston, NA., its successors and
assigns.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics warehousemen,
or carriers, or other like liens arising in the ordinary course of business
and securing obligations which are not yet delinquent; (d) purchase money
liens or purchase money security interests upon or in any property acquired
or held by Borrower in the ordinary course of business to secure
indebtedness outstanding on the date of this Agreement or permitted to be
incurred under the paragraph of this Agreement titled "Indebtedness and
Liens"; (e) liens and security interests which, as of the date of this
Agreement, have been disclosed to and approved by the Lender in writing;
and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to
the net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
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otherwise, evidencing, governing, representing, or creating a Security
Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement
to indebtedness owed by Borrower to Lender in form and substance acceptable
to Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items,
but including leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d) evidence
of insurance as required below; and (e) any other documents required under
this Agreement or by Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents, and such other authorizations and other documents and
instruments as Lender or its counsel, in their sole discretion, may
require.
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Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
Representations And Warranties. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the Commonwealth of
Massachusetts and is validly existing and in good standing in all states in
which Borrower is doing business. Borrower has the full power and authority
to own its properties and to transact the businesses in which it is
presently engaged or presently proposes to engage. Borrower also is duly
qualified as a foreign corporation and is in good standing in all states in
which the failure to so qualify would have a material adverse effect on its
businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will
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constitute, legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has not
executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any
other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. Except as disclosed to and
acknowledged by Lender in writing, Borrower represents and warrants that:
(a) During the period of Borrower's ownership of the properties, there has
been no use, generation, manufacture, storage, treatment, disposal, release
or threatened release of any hazardous waste or substance by any person on,
under, about or from any of the properties. (b) Borrower has no knowledge
of, or reason to believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened release
of any hazardous waste or substance on, under, about or from the properties
by any prior owners or occupants of any of the properties, or (ii) any
actual or threatened litigation or claims of any kind by any person
relating to such matters. (c) Neither Borrower nor any tenant, contractor,
agent or other authorized user of any of the properties shall use,
generate, manufacture, store, treat, dispose of, or release any hazardous
waste or substance on, under, about or from any of the properties; and any
such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation those laws, regulations and ordinances described above. Borrower
authorizes Lender and its agents to enter upon the properties to make such
inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are based
on Borrower's due diligence in investigating the properties for hazardous
waste and hazardous substances. Borrower hereby (a) releases
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and waives any future claims against Lender for indemnity or contribution
in the event Borrower becomes liable for cleanup or other costs under any
such laws, and (b) agrees to indemnify and hold harmless Lender against any
and all claims, losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting from a breach
of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release
of a hazardous waste or substance on the properties. The provisions of this
section of the Agreement, including the obligation to indemnify, shall
survive the payment of the indebtedness and the termination or expiration
of this Agreement and shall not be affected by Lender's acquisition of any
interest in any of the properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
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applicable requirements of law and regulations, and (i) no Reportable Event
nor Prohibited Transaction (as defined in ERISA) has occurred with respect
to any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, (iii) no steps have been taken to terminate any
such plan, and (iv) there are no unfunded liabilities other than those
previously disclosed to Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at 120 Royall Street, Canton, MA 02021. Unless
Borrower has designated otherwise in writing this location is also the
office or offices where Borrower keeps its records concerning the
Collateral.
Year 2000. Borrower warrants and represents that all software utilized in
the conduct of Borrower's business will have appropriate capabilities and
compatibility for operation to handle calendar dates falling on or after
January 1, 2000, and all information pertaining to such calendar dates, in
the same manner and with the same functionality as the software does
respecting calendar dates falling on or before December 31, 1999. Further,
Borrower warrants and represents that the data-related user interface
functions, data-fields, and data-related program instructions and functions
of the software include the indication of the century.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to make
such information not misleading.
Survival of Representations and Warranties. Borrower understands and
agrees that Lender, without independent investigation, is relying upon the
above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force and
effect until such time as Borrowers Indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
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Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in no
event later than one hundred twenty (120) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender, and, as
soon as available, but in no event later than forty five (45) days after
the end of each fiscal quarter, Borrower's balance sheet and profit and
loss statement for the period ended, prepared and certified as correct to
the best knowledge and belief by Borrower's chief financial officer or
other officer or person acceptable to Lender. All financial reports
required to be provided under this Agreement shall be prepared in
accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and other
reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and
ratios:
Cash Flow Requirements. Maintain Cash Flow at not less than the
following level: Notwithstanding any other definition of Cash Flow
contained in this agreement, for the latest fiscal year maintain a
ratio of EBIT (earnings before interest and taxes) from continuing
operations plus depreciation and amortization less cash payment of
taxes less Subchapter S or Limited Liability Company distributions (if
any) less dividends, and less non financed capital expenditures to
scheduled payments of all principal and interest on all Debt including
Subordinated Debt in such fiscal year of at least 3.00 to 1.00.
Except as provided above, all computations made to determine
compliance with
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the requirements contained in this paragraph shall be made in
accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages
and with insurance companies reasonably acceptable to Lender Borrower,
upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled or
diminished without at least ten (10) days' prior written notice to
Lender Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender Will not be impaired in any
way by any act, omission or default of Borrower or any other person.
In connection with all policies covering assets in which Lender holds
or is offered a security interest for the Loans, Borrower will provide
Lender with such loss payable or other endorsements as Lender may
require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer, (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might
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become a lien or charge upon any of Borrower's properties income, or
profits. Provided however, Borrower will not be required to pay and
discharge any such assessment, tax, charge, levy, lien or claim so long as
(a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on it,
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
Operations. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affair in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulation,
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated record, and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at Borrower's
expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or
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other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and
correct as of the date of the certificate and further certifying that, as
of the date of the certificate, no Event of Default exists under this
Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local law,
statutes, regulations and ordinances; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on its part or
on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is damage
to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loan and to
perfect all Security Interests.
Recovery of Additional Costs. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower which explanation and calculations shall be
conclusive in the absence of manifest error.
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NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by the
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (b) except as allowed as a Permitted Lien, so
transfer, mortgage, assign, pledge, lease, grant a security interest in, or
encumber any of Borrower's assets, or (c) sell with recourse any of
Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
cease operations, liquidate, merge, transfer, acquire or consolidate with
any other entity, change ownership, change its name, dissolve or transfer
or sell Collateral out of the ordinary course of business, (c) pay any
dividends on Borrower's stock (other than dividends payable in its stock
provided, however that notwithstanding the foregoing, but only so long as
no Event of Default has occurred and is continuing or would result from the
payment of dividends, if Borrower is a "Subchapter S Corporation" (as
defined in the Internal Revenue Code of 1986, as amended), Borrower may pay
cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income tax and make
estimated income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as Shareholder of a
Subchapter S Corporation because of their ownership of shares of stock of
Borrower, or (d) purchase or retire any of Borrower's outstanding shares or
alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money
or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
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attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender or (e) Lender in good faith deems itself insecure, even
though no Event of Default shall have occurred.
ADDITIONAL TERMS. Borrower authorizes Lender to release and disclose to its
affiliates, subsidiaries, servicing agents and contractors, copies of originals
of any and all financial records, including, without limitation, statements,
notices, financial and operating reports, balance sheets, financial statements,
consultants' reports and any and all other documents and information relating to
Borrower, now or hereafter provided to or generated by or for the benefit of
Lender in connection with any loan transaction now or hereafter existing.
Maximum availability under the revolving line of credit shall be reduced by
BankBoston guaranties of the indebtedness of the Borrower and its subsidiaries.
DEBT TO TANGIBLE NET WORTH. Borrower will maintain a ratio of Debt to Tangible
Net Worth of less than 1.25 to 1.00.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the Indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due
on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
Default in Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrowers or
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any Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security Interest) at
any time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any trust mortgage or any other type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency laws by
or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on
or of any of Borrower's deposit accounts with Lender. However, this Event
of Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and furnishes reserves or a surety bond for the
creditor or forfeiture proceeding satisfactory to Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of,, or
liability under, any Guaranty of the Indebtedness. Lender, at its option,
may, but shall not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure the Event of Default.
Change in Ownership. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
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<PAGE>
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve (12) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15)
days; or (b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the Commonwealth of Massachusetts. If there
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<PAGE>
is a lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of SUFFOLK County, the Commonwealth of
Massachusetts. Lender and Borrower hereby waive the right to any jury trial
in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under
this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each of the persons
signing below is responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other matter relating
to the Loan, and Borrower hereby waives any rights to privacy it may have
with respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as the
absolute owners of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the sale
of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and unconditionally
agrees that either Lender or such purchaser may enforce Borrower's
obligation under the Loans irrespective of the failure or insolvency of any
holder of any interest in the Loans. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant
to this Agreement. Lender may pay someone else to help collect the Loans
and to enforce this Agreement, and Borrower will pay that amount. This
includes,
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<PAGE>
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also will pay any court costs,
in addition to all other sums provided by law.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise required
by law), and shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier or deposited in the United
States mail, first class, postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above. Any party may change
its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is
to change the party's address. To the extent permitted by applicable law,
if there is more than one Borrower, notice to any Borrower will constitute
notice to all Borrowers. For notice purposes, Borrower will keep Lender
informed at all times of Borrower's current addresses).
Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
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<PAGE>
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is required,
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
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<PAGE>
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
SEPTEMBER 23, 1999. THIS AGREEMENT IS EXECUTED UNDER SEAL.
BORROWER:
Embedded Support Tools Corporation
By: /s/ Peter S. Dawson
------------------------------
Peter S. Dawson, President
LENDER:
BankBoston, N.A.
By: /signature illegible/
------------------------------
Authorized Officer
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<PAGE>
Amendment #1 to Business Loan Agreement
This Amendment is entered into by Embedded Support Tools (the "Borrower") and
BankBoston, N.A. (the "Lender") and is contemporaneous with the Business Loan
Agreement dated September 23, 1999.
In consideration of the mutual covenants and promises as hereinafter set forth,
the Borrower and Lender hereby agree as follows:
1. The paragraph entitled "Change in Ownership" in the "EVENTS OF DEFAULT"
section of the Business Loan Agreement is hereby deleted and replaced with
the following:
"Change in Ownership. Any change in ownership causing the sum of the
combined common stock shares owned by Peter S. Dawson, James E. Watkins,
and John T.W. Baggott to be less than 51% of the issued and outstanding
common stock shares of the Borrower."
2. The section entitled "DEBT TO TANGIBLE NET WORTH" is hereby amended by
inserting the following immediately after the last sentence of the section:
"For the purposes of calculating this ratio, "Debt" shall be defined as the
Borrower's liabilities excluding Subordinated Debt and Redeemable Common
Stock, and "Tangible Net Worth" shall be defined as the Borrower's total
assets excluding all intangible assets (i.e. goodwill, trademarks, patents,
copyrights, organizational expenses, and similar intangible items, but
including leaseholds and leasehold improvements) less total Debt as defined
herein."
Except as amended above, all other terms and conditions of the Business Loan
Agreement remain unchanged and shall be applicable to the Business Loan
Agreement as amended and modified hereby.
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<PAGE>
Accepted and Agreed as of September 23, 1999:
Borrower:
Embedded Support Tools Corporation
By: /s/ Peter S. Dawson
-----------------------------
Name: Peter S. Dawson
President
Lender:
BankBoston, N.A.
By: /s/ Michael A. Ferrara, Jr.
-----------------------------
Michael A. Ferrara, Jr.
Vice President
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<PAGE>
BORROWING BASE RIDER
TO
BUSINESS LOAN AGREEMENT (COMMITTED FACILITY)
- --------------------------------------------------------------------------------
Borrower: Embedded Support Tools Corporation Lender: BankBoston, NA.
120 Royall Street 100 Federal Street
Canton, MA 02021 Boston, MA 02110
- --------------------------------------------------------------------------------
This Rider is entered into between BankBoston, N.A. ("Lender") and Embedded
Support Tools Corporation ("Borrower"), is contemporaneous with and amends the
Business Loan Agreement dated September 23, 1999 between Lender and Borrower.
It is the intention of Lender And Borrower that, upon execution, this Rider
shall constitute a part of the Business Loan Agreement ("Agreement").
IN CONSIDERATION OF the mutual covenants and promises as hereinafter set forth,
Lender and Borrower hereby agree as follows:
DEFINITIONS. Notwithstanding any other definitions contained in the Agreement,
the following words shall have the following meanings when used in this Rider.
Terms not otherwise defined in this Agreement or the Rider shall have the
meanings attributed to such terms in the Uniform Commercial Code. All other
capitalized terms shall have the meanings as set forth in the Agreement. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Account. The word "Account" means a trade account, account receivable, or other
right to payment for goods sold or services rendered owing to Borrower (or to a
third party grantor acceptable to Lender).
Account Debtor. The words "Account Debtor" mean the person or entity obligated
upon an Account.
Advance. The word "Advance" means a disbursement of Loan funds under this
Agreement.
Borrowing Base. The words "Borrowing Base" mean, as determined by Lender from
time to time, the lesser of (a) $2,000,000.00; or (b) 70.000% of the aggregate
amount of Eligible Accounts.
Business Day. The words "Business Day" mean a day on which commercial banks are
open for business in the Commonwealth of Massachusetts.
Eligible Accounts. The words "Eligible Accounts" mean, at any time, all of
Borrower's Accounts which contain selling terms and conditions acceptable to
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<PAGE>
Lender. The net amount of any Eligible Account against which Borrower may borrow
shall exclude all returns, discounts, credits, and offsets of any nature. Unless
otherwise agreed to by Lender in writing, Eligible Accounts do not include:
(a) Accounts with respect to which the Account Debtor is an officer, an
employee or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary of,
or affiliated with or related to Borrower or its shareholders, officers, or
directors.
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by Account
Debtor may be conditional.
(d) Accounts with respect to which the Account Debtor is not a resident of
the United States, except to the extent such Accounts are supported by
insurance, bonds or other assurances satisfactory to Lender.
(e) Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account Debtor to
Borrower.
(f) Accounts which are subject to dispute, counterclaim, or setoff.
(g) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account Debtor.
(h) Accounts with respect to which Lender, in its sole discretion, deems
the creditworthiness or financial condition of the Account Debtor to be
unsatisfactory.
(i) Accounts of any Account Debtor who has filed or has had filed against
it a petition in bankruptcy or an application for relief under any
provision of any state or federal bankruptcy, insolvency, or debtor-in-
relief acts; or who has had appointed a trustee, custodian, or receiver for
the assets of such Account Debtor; or who has made an assignment for the
benefit of creditors or has become insolvent or fails generally to pay its
debts (including its payrolls) as such debts become due.
(j) Accounts with respect to which the Account Debtor is the United States
government or any department or agency of the United States.
(k) Accounts which have been outstanding more than sixty (60) days past
the due date.
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<PAGE>
Eligible Inventory. The words "Eligible Inventory" mean, at any time, all of
Borrower's Inventory as defined below, except:
(a) Inventory which is not owned by Borrower free and clear of all
security interests, liens, encumbrances, and claims of third parties.
(b) Inventory which Lender, in its sole discretion, deems to be obsolete,
unsalable, damaged, defective, or unfit for further processing.
(c) Inventory which is work in process.
Expiration Date. The words "Expiration Date" mean the date of termination of
Lender's commitment to lend under this Agreement.
Inventory. The word "Inventory" means all of Borrower's finished goods,
merchandise of every kind and description, and goods held for sale or lease or
furnished under contracts of service in which Borrower now has or hereafter
acquires any right, whether held by Borrower or others, and all documents of
title, warehouse receipts, bills of lading, and all other documents of every
type covering all or any part of the foregoing. Inventory includes inventory
temporarily out of Borrower's custody or possession and all returns on Accounts.
CREDIT FACILITY. Lender agrees to make Advances to Borrower from the date of
the Agreement to the Expiration Date, provided that the aggregate amount of such
Advances does not exceed the Borrowing Base and subject to the conditions
precedent set forth below.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any Advance
to or for the account of Borrower under this Agreement is subject to the
following conditions precedent, with all documents, instruments, opinions,
reports, and other items required under this Agreement to be in form and
substance satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and delivered by
Borrower to Lender.
(b) Lender shall have received such opinions of counsel, supplemental
opinions, and documents as Lender may request.
(c) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and shall be in
full force and effect.
(d) All guaranties required by Lender for the Loans shall have been
executed by each Guarantor, delivered to Lender, and be in full force and
effect.
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<PAGE>
(e) Lender, at its option and for its sole benefit, shall have conducted
an audit of Borrowers Accounts, Inventory, books, records, and operations,
and Lender shall be satisfied as to their condition.
(f) Borrower shall have submitted all financial reports, including,
without limitation, all reports on Inventory, Accounts or fixed assets of
Borrower as may be required by Lender.
(g) Borrower shall have paid to Lender all fees, costs, and expenses
specified in this Agreement and the Related Documents as are then due and
payable.
(h) There shall not exist at the time of any Advance a condition which
would constitute an Event of Default under this Agreement.
(i) Borrower shall have notified Lender of any event which shall have a
material adverse affect on the value of Eligible Accounts or Eligible
Inventory including, without limitation, damage, loss or depreciation of
Inventory or any adjustments in Accounts.
MAKING LOAN ADVANCES. Advances under this credit facility, as well as
directions for payment from Borrowers accounts, may be requested orally or in
writing by authorized persons as set forth in the Note. Lender may, but need
not, require that all oral requests be confirmed in writing. Each Advance shall
be conclusively deemed to have been made at the request of, and for the benefit
of, Borrower (a) when credited to any deposit account of Borrower maintained
with Lender or (b) when advanced in accordance with the instructions of an
authorized person. Lender, at its option, may set a cutoff time, after which all
requests for Advances will be treated as having been requested on the next
succeeding Business Day. Any advances under this credit facility shall cease,
notwithstanding any commitment by Lender under this Agreement or under any
related agreement, (i) if an Event of Default shall have occurred and is
continuing or (ii) subject to the provisions of the paragraph in the Agreement
entitled, CESSATION OF ADVANCES.
MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal amount of the
outstanding Advances shall exceed the applicable Borrowing Base, Borrower
immediately, upon written or oral notice from Lender, shall pay to Lender an
amount equal to the difference between the outstanding principal balance of the
Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to
Lender in full the aggregate unpaid principal amount of all Advances then
outstanding and all accrued interest, together with all applicable fees, costs
and charges, if any, not yet paid.
LOAN ACCOUNT. Lender shall maintain on its books a record of account in which
Lender shall make entries for each Advance and such other debits and credits as
shall be appropriate in connection with the credit facility. Lender shall
provide
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<PAGE>
Borrower with periodic statements of Borrower's account, which statements shall
be considered to be correct and conclusively binding on Borrower unless Borrower
notifies Lender to the contrary within thirty (30) days after Borrower's receipt
of any such statement which Borrower deems to be incorrect.
COLLATERAL. To secure payment and performance of all Loans, obligations and
duties owed by Borrower to Lender, Borrower hereby grants to Lender a continuing
lien, encumbrance and security interest ("Security Interests") in all present
and future Accounts, Inventory, contract rights, general intangibles, all other
rights of Borrower to the payment of money including, without limitation,
insurance proceeds, all instruments, documents of title, policies and
certificates of insurance and chattel paper arising out of or in connection with
Accounts and Inventory, all files and records relating to any of the foregoing
(all of the foregoing, hereafter "Collateral"). Lender's Security Interests in
the Collateral shall be continuing liens and shall include the proceeds and
products of the Collateral, including without limitation the proceeds of any
insurance. With respect to the Collateral, Borrower agrees and represents and
warrants to Lender:
Collateral Records. Borrower does now, and at all times hereafter shall,
keep correct and accurate records of the Collateral, all of which records
shall be available to Lender or Lender's representative upon demand for
inspection and copying at any reasonable time. With respect to the
Accounts, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible
Accounts and Account balances and agings. With respect to the Inventory,
Borrower agrees to keep and maintain such records as Lender may require,
including without limitation information concerning Eligible Inventory and
records itemizing and describing the kind, type, quality, and quantity of
Inventory, Borrowers Inventory costs and selling prices, and the daily
withdrawals and additions to Inventory at least monthly in the format as
provided by the Lender:
Collateral Schedules. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender schedules of
Accounts and Inventory and Eligible Accounts and Eligible Inventory, in
form and substance satisfactory to the Lender. Thereafter and at such
frequency as Lender shall require, Borrower shall execute and deliver to
Lender such supplemental schedules of Eligible Accounts and Eligible
Inventory and such other matters and information relating to the Accounts
and Inventory at least monthly in the format provided by the Lender.
Representations and Warranties Concerning Accounts. With respect to the
Accounts, Borrower represents and warrants to Lender: (a) Each Account
represented by Borrower to be an Eligible Account for purpose of this
Agreement conforms to the requirements of the definition of an Eligible
Account; (b) All Account information listed on schedules delivered to
Lender
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<PAGE>
will be true and correct, subject to immaterial variance; and (c) Lender,
its assigns, or agents shall have the right at any time and at Borrower's
expense to inspect, examine, and audit Borrowers records and to confirm
with Account Debtors the accuracy of such Accounts.
Representations and Warranties Concerning Inventory. With respect to the
Inventory, Borrower represents and warrants to Lender: (a) All Inventory
represented by Borrower to be Eligible Inventory for purposes of this
Agreement conforms to the requirements of the definition of Eligible
Inventory; (b) All Inventory values listed on schedules delivered to Lender
will be true and correct, subject to immaterial variance; (c) The value of
the Inventory will be determined on a consistent accounting basis; (d)
Except as agreed to the contrary by Lender in writing, all Eligible
Inventory is now and at all times hereafter will be in Borrower's physical
possession and shall not be held by others on consignment, sale on
approval, or sale of return; (e) Except as reflected in the Inventory
schedules delivered to Lender, all Eligible Inventory is now and at all
times hereafter will be of good and merchantable quality, free from
defects; (f) Eligible Inventory is not now and will not at any time
hereafter be stored with a bailee, warehouseman, or similar party without
Lender's prior written consent, and, in such event, Borrower will
concurrently at the time of bailment cause any such bailee, warehouseman,
or similar party to issue and deliver to Lender, in form acceptable to
Lender, warehouse receipts in Lender's name evidencing the storage of
Inventory; and (g) Lender, its assigns or agents shall have the right at
any time and at Borrower's expense to inspect and examine the Inventory and
to check and test the same as to quality, quantity, value, and condition.
COLLECTION OF ACCOUNTS. Borrower shall, if requested to do so by Lender, (i)
hold the proceeds of Accounts as trustee for Lender without commingling such
proceeds with other funds of Borrower and shall turn the same over to Lender,
and (ii) notify Account Debtors of the Security Interest of Lender in the
Accounts and that payment of any Account shall be made directly to Lender
provided, however, that Lender may itself, at any time and without notice to or
demand upon Borrower, so notify Account Debtors. Lender shall credit the
proceeds of the collection of Accounts received by Lender to the Loan Account,
such credits to be entered no later than the third business day after receipt by
Lender as determined by Lender. Such credits shall be conditional upon final
payment in cash or solvent credits.
CUMULATIVE RIGHTS OF LENDER. Except as maybe prohibited by applicable law, all
of Lender's rights and remedies under this Agreement shall be cumulative and may
be exercised singularly or concurrently. An election by Lender to pursue any
remedy shall not exclude pursuit of any other remedy. An election to make
expenditures or to take any action to perform any obligation of Borrower shall
not affect Lender's right to declare a default and to exercise its rights and
remedies.
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<PAGE>
The terms and conditions of this Rider shall prevail where there may be
conflicts or inconsistencies with the terms and conditions of the Agreement.
Except as amended and modified above, all other terms and conditions of the
Agreement remain unchanged and shall be applicable to the Agreement as amended
and modified hereby.
IN WITNESS WHEREOF, Borrower and Lender have executed and delivered this Rider
which is intended to take effect as a sealed instrument as of the date of the
Agreement.
BORROWER:
Embedded Support Tools Corporation
By: /s/ Peter S. Dawson
----------------------------
Peter S. Dawson, President
LENDER:
BankBoston, N.A.
By: /s/ Michael A. Ferrara, Jr.
----------------------------
Title: Vice President
--------------------------
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<PAGE>
Amendment #1
to
Borrowing Base Rider to Business Loan Agreement (Committed Facility)
This Amendment is entered into by Embedded Support Tools (the "Borrower") and
BankBoston, N.A. (the "Lender") and is contemporaneous with the Borrowing Base
Rider to Business Loan Agreement dated September.
In consideration of the mutual covenants and promises as hereinafter set forth,
the Borrower and Lender hereby agree as follows:
1. The paragraph entitled "Borrowing Base" is hereby deleted and replaced with
the following:
"Borrowing Base. The words "Borrowing Base" mean, as determined by Lender
from time to time, the lesser of (a) $2,000,000.00; or (b) 70% of the
aggregate amount of Eligible Accounts less the aggregate amount of the
Indebtedness of any of the Borrower's subsidiaries and affiliates to the
Lender and its subsidiaries and affiliates."
Except as amended above, all other terms and conditions of the Borrowing Base
Rider to Business Loan Agreement (Committed Facility) remain unchanged and shall
be applicable to the Borrowing Base Rider to Business Loan Agreement (Committed
Facility) as amended and modified hereby.
Accepted and Agreed as September 23, 1999:
Borrower:
Embedded Support Tools Corporation
By: /s/ Peter S. Dawson
-----------------------------
Name: Peter S. Dawson
President
Lender:
BankBoston, N.A.
By: /s/ Michael A. Ferrara, Jr.
-----------------------------
Michael A. Ferrara, Jr.
Vice President
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<PAGE>
Exhibit 10.23
BANKBOSTON COMMERCIAL
SECURITY AGREEMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Borrower: Embedded Support Tools Corporation Lender: BNA.
120 Royall Street 100 Federal Street
Canton, MA 02021 Boston, MA 02110
- --------------------------------------------------------------------------------------------------
</TABLE>
THIS COMMERCIAL SECURITY AGREEMENT is entered into between Embedded Support
Tools Corporation (referred to below as "Grantor"); and BankBoston, N.A.
(referred to below as "Lender"). For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the Indebtedness and
agrees that Lender shall have the rights stated in this Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Commercial Security Agreement
together with all exhibits and schedules attached to this Commercial
Security Agreement from time to time, if any, as amended from time to time.
Collateral. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
All inventory, chattel paper, accounts, equipment, general intangibles
and fixtures, together with the following specifically described
property: marketable securities and other such Investment Property
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions for
any property described above.
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(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described in
this Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of Grantor's
right, title, and interest in and to all computer software required to
utilize, create, maintain, and process any such records or data on
electronic media.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
Grantor. The word "Grantor" means Embedded Support Tools Corporation, its
successors and assigns.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
Indebtedness. The word "Indebtedness" means the Indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents. In addition, the
word "Indebtedness" includes all other obligations, debts and liabilities,
plus interest thereon, of Grantor, or any one or more of them, to Lender,
as well as all claims by Lender against Grantor, or any one or more of
them, whether existing now or later, whether they are voluntary or
involuntary, due or not due, direct or indirect, absolute or contingent,
liquidated or unliquidated; whether Grantor may be liable individually or
jointly with others; whether Grantor may be obligated as guarantor, surety,
accommodation party or otherwise; whether recovery upon such indebtedness
may be or hereafter may become barred by any statute of limitations; and
whether such indebtedness may be or hereafter may become otherwise
unenforceable.
Lender. The word "Lender" means BankBoston, N.A., its successors and
assigns.
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Note. The word "Note" means the note or credit agreement dated September
23, 1999, in the principal amount of $2,000,000.00 from Embedded Support
Tools Corporation to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and substitutions for
the note or credit agreement.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual security interest
in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantor's accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding, however, all IRA and Keogh accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Perfection of Security Interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as its
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue the security interest granted in this
Agreement. Lender may at any time, and without further authorization from
Grantor, file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Grantor
will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of
Grantor. This is a continuing Security Agreement and will continue in
effect even though all or any part of
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the Indebtedness is paid in full and even though for a period of time
Grantor may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its certificate or articles of incorporation and bylaws do not
prohibit any term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear
to be on the Collateral. At the time any account becomes subject to a
security interest in favor of Lender, the account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
theretofore shipped or delivered pursuant to a contract of sale, or for
services theretofore performed by Grantor with or for the account debtor;
there shall be no setoffs or counterclaims against any such account; and no
agreement under which any deductions or discounts may be claimed shall have
been made with the account debtor except those disclosed to Lender in
writing.
Location of the Collateral. Grantor, upon request of Lender, will deliver
to Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased
by Grantor; (b) all real property being rented or leased by Grantor; (c)
all storage facilities owned, rented, leased, or being used by Grantor; and
(d) all other properties where Collateral is or may be located. Except in
the ordinary course of its business, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the extent
the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at
such other locations as are acceptable to Lender. Except in the ordinary
course of its business, including the sales of inventory, Grantor shall not
remove the Collateral from its existing locations without the prior written
consent of Lender. To the extent that the Collateral consists of vehicles,
or other titled property, Grantor shall not take or permit any action which
would require application for certificates of title for the vehicles
outside the Commonwealth of Massachusetts, without the prior written
consent of Lender.
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Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A sale
in the ordinary course of Grantor's business does not include a transfer in
partial or total satisfaction of a debt or any bulk sale. Grantor shall
not pledge, mortgage, encumber or otherwise permit the Collateral to be
subject to any lien, security interest, encumbrance, or charge, other than
the security interest provided for in this Agreement, without the prior
written consent of Lender. This includes security interests even if junior
in right to the security interests granted under this Agreement. Unless
waived by Lender, all proceeds from any disposition of the Collateral (for
whatever reason) shall be held in trust for Lender and shall not be
commingled with any other funds; provided however, this requirement shall
not constitute consent by Lender to any sale or other disposition. Upon
receipt, Grantor shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's
rights in the Collateral against the claims and demands of all other
persons.
Collateral Schedules and Locations. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles,
Grantor shall deliver to Lender schedules of such Collateral, including
such information as Lender may require, including without limitation names
and addresses of account debtors and agings of accounts and general
intangibles. Insofar as the Collateral consists of inventory and
equipment, Grantor shall deliver to Lender, as often as Lender shall
require, such lists, descriptions, and designations of such Collateral as
Lender may require to identify the nature, extent, and location of such
Collateral. Such information shall be submitted for Grantor and each of
its subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not commit
or permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall
have the right at all reasonable times to examine, inspect, and audit the
Collateral wherever located. Grantor shall immediately notify Lender of
all cases involving the return, rejection, repossession, loss or damage of
or to any
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Collateral; of any request for credit or adjustment or of any other dispute
arising with respect to the Collateral; and generally of all happenings and
events affecting the Collateral or the value or the amount of the
Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness,
or upon any of the other Related Documents. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and
so long as Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien which is
not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. The terms "hazardous waste" and
"hazardous substance" shall also include, without limitation, petroleum and
petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and
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substances. Grantor hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This
obligation to indemnify shall survive the payment of the Indebtedness and
the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to
Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days' prior written
notice to Lender and not including any disclaimer of the insurer's
liability for failure to give such a notice. Each insurance policy also
shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor
or any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require.
If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be obligated to)
obtain such insurance as Lender deems appropriate, including if it so
chooses "single interest insurance," which will cover only Lender's
interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which
have not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
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Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the
payment of premiums shall remain Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following: (a)
the name of the insurer; (b) the risks insured; (c) the amount of the
policy; (d) the property insured; (e) the then current value on the basis
of which insurance has been obtained and the manner of determining that
value; and (f) the expiration date of the policy. In addition, Grantor
shall upon request by Lender (however not more often than annually) have an
independent appraiser satisfactory to Lender determine, as applicable, the
cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in
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the Collateral against prior parties, nor to protect, preserve or maintain any
security interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when due
on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.
Default in Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
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collateral documents to create a valid and perfected security interest or
lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the Indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor dies
or becomes incompetent. Lender, at its option, may, but shall not be
required to, permit the Guarantor's estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to Lender,
and, in doing so, cure the Event of Default.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Grantor has not been given a prior notice of a breach of the
same provision of this Agreement, it may be cured (and no Event of Default
will have occurred) if Grantor, after Lender sends written notice demanding
cure of such default, (a) cures the default within fifteen (15) days; or
(b), if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
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RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Massachusetts Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods,
provided that Lender makes reasonable efforts to return them to Grantor
after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in its
own name or that of Grantor. Lender may sell the Collateral at public
auction or private sale. Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will give Grantor reasonable notice of the time after which any
private sale or any other intended disposition of the Collateral is to be
made. The requirements of reasonable notice shall be met if such notice is
given at least ten (10) days before the time of the sale or disposition.
All expenses relating to the disposition of the Collateral, including
without limitation the expenses of retaking, holding, insuring, preparing
for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right;
(b) the receiver may be an employee of Lender and may serve without bond;
and (c) all fees of the receiver and his or her attorney shall become part
of the Indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure until
repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
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Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the Indebtedness in
such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action, or similar property, Lender
may demand, collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether or
not Indebtedness or Collateral is then due. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor, change any address to which mail and payments
are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or storage
of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Grantor shall
be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement, after
Grantor's failure to perform, shall not affect Lender's right to declare a
default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
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Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the Commonwealth of Massachusetts. If there is a lawsuit,
Grantor agrees upon Lender's request to submit to the jurisdiction of the
courts of the Commonwealth of Massachusetts. Lender and Grantor hereby
waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Grantor against the other. This
Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor
shall pay the costs and expenses of such enforcement. Costs and expenses
include Lender's attorneys' fees and legal expenses whether or not there is
a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Grantor also shall pay all court costs and such additional fees
as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each of the persons
signing below is responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise required
by law), and shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier or deposited in the United
States mail, first class, postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above. Any party may change
its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is
to change the party's address. To the extent permitted by applicable law,
if there is more than one Grantor, notice to any Grantor will constitute
notice to all Grantors. For notice purposes, Grantor will keep Lender
informed at all times of Grantor's current address(es).
-13-
<PAGE>
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover
all sums of money or other property which may now or hereafter become due,
owing or payable from the Collateral; (b) to execute, sign and endorse any
and all claims, instruments, receipts, checks, drafts or warrants issued in
payment for the Collateral; (c) to settle or compromise any and all claims
arising under the Collateral, and, in the place and stead of Grantor, to
execute and deliver its release and settlement for the claim; and (d) to
file any claim or claims or to take any action or institute or take part in
any proceedings, either in its own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable. This power is given as security for the Indebtedness, and the
authority hereby conferred is and shall be irrevocable and shall remain in
full force and effect until renounced by Lender.
Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by Lender, nor
any course of dealing between Lender and Grantor, shall constitute a waiver
of any of Lender's rights or of any of Grantor's obligations as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
-14-
<PAGE>
ADDITIONAL TERMS. Borrower further represents that the address of the Borrower
as set forth at the beginning of this Agreement is the chief executive office or
the sole place of business of the Borrower.
IRREVOCABLE LIMITED POWER OF ATTORNEY.
WITHOUT LIMITING THE GENERALITY OF ANY OTHER POWER OF ATTORNEY SET FORTH
HEREIN OR IN THE RELATED DOCUMENTS, GRANTOR HEREBY IRREVOCABLY APPOINTS LENDER,
AND ANY OTHER OFFICER OR AGENT OF LENDER, WITH FULL POWER OF SUBSTITUTION, AS
ITS TRUE AND LAWFUL AGENTS AND ATTORNEYS IN FACT ("ATTORNEYS IN FACT") TO
PREPARE, SIGN, DELIVER AND FILE, IN GRANTOR'S NAME, PLACE AND STEAD, ANY AND ALL
FINANCING STATEMENTS IN CONNECTION HEREWITH AS SAID ATTORNEYS IN FACT MAY DEEM
APPROPRIATE. TO THE EXTENT PERMITTED BY LAW, GRANTOR HEREBY RATIFIES EACH AND
EVERY ACT THAT SAID ATTORNEYS IN FACT MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE HEREOF. THIS POWER OF ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND
IS IRREVOCABLE. THIS POWER OF ATTORNEY IS NOT INTENDED TO CREATE AN
ATTORNEY/CLIENT RELATIONSHIP BETWEEN THE PARTIES.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER
23, 1999. THIS COMMERCIAL SECURITY AGREEMENT IS EXECUTED UNDER SEAL.
GRANTOR:
Embedded Support Tools Corporation
By: /s/ Peter Dawson
---------------------------
Peter S. Dawson, President
-15-
<PAGE>
Exhibit 10.24
FORM OF
TAX INDEMNIFICATION AGREEMENT
TAX INDEMNIFICATION AGREEMENT, dated as of ________________, 1999 (the
"Agreement"), among Embedded Support Tools Corporation, a Massachusetts
corporation ("EST"), (the "Company"), and the persons listed on the signature
page hereto (individually, a "Stockholder" and, collectively, the
"Stockholders").
WHEREAS, the execution and delivery by the Company and the Stockholders of
this Agreement is a condition to the closing of the Public Offering (as
hereinafter defined);
WHEREAS, EST has been an "S corporation" (as defined in section 1361(a)(1)
of the Code (as hereinafter defined)) for federal tax purposes since January 6,
1989.
WHEREAS, EST and the Stockholders plan to terminate the S corporation
status of EST prior to the closing of the Public Offering and, as a result, EST
will be a "C corporation" (as defined in section 1361(a)(2) of the Code)
beginning on the Termination Date (as hereinafter defined); and
WHEREAS, the Company and the Stockholders wish to provide for the
termination of this Agreement such that it has no effect should the Public
Offering not close.
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. The following terms as used herein have the following
-----------
meanings:
"Adjustment Amount" means the net increase in taxable income of one or more
of the Stockholders or the Company based on a Final Determination and which
gives rise to a payment pursuant to Section 3.3 or 3.4 hereof.
"Affected Stockholder" means a Stockholder whose tax returns are adjusted
in a manner which gives rise to an obligation of the Company pursuant to Section
3.3 hereof.
<PAGE>
"Blended Rate" means a percentage which equals the sum of the maximum
marginal federal and state individual income tax rates for an individual
residing in Massachusetts (after giving effect to the full deductibility of
state income taxes for federal income tax purposes) in effect for the year of
the adjustment to a tax return of the Company or such Stockholder that gives
rise to a correlative adjustment to a tax return of such Stockholder or the
Company, respectively. For example, if an adjustment results in an amount due
from the Stockholders hereunder, the year of the Company's return that was
adjusted shall determine the Blended Rate to be used in computing the amount
due.
"Closing Date" means the date on which the Public Offering closes.
"Code" means the Internal Revenue Code of 1986, as amended.
"C Short Year" means that portion of the S Company beginning on the
Termination Date and ending Termination Year.
"C Taxable Year" means any taxable year (or portion thereof) of the Company
during which the Company is a C corporation, including the C Short Year.
"Final Termination" means the final resolution of any income tax liability
(including all related interest and penalties) for a taxable period. A Final
Determination shall result from the first to occur of:
(i) the expiration of 30 days after acceptance by the Internal
Revenue Service (the "IRS") of a Waiver of Restrictions on Assessment and
Collection of Deficiency in Tax and Acceptance of Overassessment (the "Waiver")
on Federal Revenue Form 870 or 870-AD (or any successor comparable form or the
expiration of a comparable period with respect to any comparable agreement or
form under the laws of any other jurisdiction), unless, within such period, the
applicable taxpayer gives notice of that taxpayer's intention to attempt to
recover all or part of any amount paid pursuant to the Waiver by filing a timely
claim for refund;
(ii) a decision, judgment, decree or other order by a court of
competent jurisdiction that is not subject to further judicial review (by appeal
or otherwise) and has become final;
(iii) the execution of a closing agreement under section 7121 of
the Code or the acceptance by the IRS or its counsel of an offer in compromise
under section 7122 of the Code or the execution of a comparable agreement under
the laws of any other jurisdiction;
-2-
<PAGE>
(iv) the expiration of the time for filing a claim for refund or
for instituting suit in respect of a claim for refund disallowed in whole or
part by the IRS or any other relevant taxing authority;
(v) any other final disposition of the tax liability for such
period by reason of the expiration of the applicable statute of limitations; or
(vi) any other event that the parties hereto agree is a final and
irrevocable determination of the liability at issue.
"Public Offering" means the initial offering of shares of the Company's
Common Stock, $.10 par value, pursuant to the Registration Statement on Form S-1
originally filed by the Company with the Securities and Exchange Commission on
December 21, 1999.
"S Short Year" means that portion of the S Termination Year beginning on
the first day of such taxable year and ending on the day immediately preceding
the Termination Date.
"S Taxable Year" means any taxable year (or portion thereof) of the Company
during which the Company was an S corporation, including the S Short Year.
"S Termination Year" means the fiscal year of the Company that includes the
Termination Date.
"Taxing Authority" means the IRS or any comparable state or foreign taxing
authority.
"Termination Date" means the date on which the S corporation status of EST
will terminate pursuant to section 1362(d) of the Code.
-3-
<PAGE>
ARTICLE II.
TERMINATION OF S CORPORATION STATUS AND ALLOCATION OF INCOME
2.1 Termination of S Corporation Status. The Company and the Stockholders
-----------------------------------
shall cause the Company to terminate their S corporation status at least two
days prior to the Closing Date.
2.2 Allocation Election. The Company shall elect to allocate the items
-------------------
described in section 1362(e)(2)(A) of the Code pursuant to section 1362(e)(3) of
the Code under "normal tax accounting rules," and the Stockholders shall consent
to such election and shall provide the Company with the statement of consent
described in section 1.1362-6(b) of the Treasury Regulations.
ARTICLE III.
OBLIGATIONS
3.1 Liability for Taxes Incurred by Stockholders During the S Short Year.
--------------------------------------------------------------------
Each Stockholder shall (i) duly include, in his or its own federal and state
income tax returns, all items of income, gain, loss, deduction or credit
attributable to the S Short Year in a manner consistent with the Form 1120S and
the schedules thereto (and the corresponding state income tax forms and
schedules) to be filed by the Company with respect to such period, (ii) file
such returns no later than the due date (including extensions, if any) for
filing such returns, and (iii) pay any and all taxes required to be paid for his
taxable year that includes the S Short Year.
3.2 Liability for Taxes Incurred by the Company During the S Short Year
-------------------------------------------------------------------
and the C Short Year. The Company shall (i) be responsible for and effect the
- --------------------
filing of all federal and state income tax returns for the Company with respect
to the S Short Year and the C Short Year, (ii) accurately prepare and timely
file such Company returns, and (iii) pay any and all taxes required to be paid
by the Company for the C Short Year.
3.3 Company's Indemnification of Stockholders for Tax Liabilities. In the
-------------------------------------------------------------
event of an adjustment to one or more tax returns of the Company for an S
Taxable Year based on a Final Determination which results in a net increase in
taxable income of a Stockholder and a corresponding adjustment to one or more
tax returns of the Company for a C Taxable Year based on a Final Determination
that results in a net decrease in taxable income of the Company, the Company
shall pay to any Affected Stockholder an amount equal to the Adjustment Amount
multiplied by the Blended Rate; provided, however, the total amount due under
this Section 3.3 shall not exceed the amount of refund (or an offset against tax
that would otherwise be due and payable) received by the Company that is
attributable to the relevant adjustment. The Company shall pay the amount due to
the Affected Stockholder within thirty (30) business days after the receipt of
notice from the Affected
-4-
<PAGE>
Stockholder that a payment is due by such party to the appropriate Taxing
Authority.
3.4 Stockholders' Indemnification of the Company for Tax Liabilities.
----------------------------------------------------------------
(a) Adjustments to Company's Taxable Income. In the event of an
---------------------------------------
adjustment of one or more tax returns of the Company for a C Taxable Year based
on a Final Determination which results in a net increase in taxable income of
the Company for a C Taxable Year and a corresponding adjustment to one or more
tax returns of the Company for an S Taxable Year based on a Final Determination
which results in a net decrease in taxable income of the Company for the S
Taxable Year, each Stockholder, severally but not jointly, agrees to contribute
to the capital of the Company his or its pro rata share (based upon the relative
amount of Company stock held by such Stockholder during the relevant time
period) of an amount equal to the Adjustment Amount multiplied by the Blended
Rate; provided, however, the total amount due under this Section 3.4(a) shall
not exceed the amount of refund (or an offset against tax that would otherwise
be due and payable) received by each stockholder that is attributable to the
relevant adjustment.
(b) Adjustments Attributable to the Company's S Status. If, based on
--------------------------------------------------
a Final Determination, the Company is deemed to have been a C corporation for
federal, state or local income tax purposes during any period in which it
reported (or intends to report) its taxable income as an S corporation, each
Stockholder, severally but not jointly and subject to the limitations contained
in Section 3.4(c), shall contribute to the capital of the Company his or its pro
rata share (based upon the relative amount of Company stock held by such
Stockholder during the relevant time period) of an amount equal to the taxes,
penalties and interest incurred by the Company as a result of the Company being
deemed to have been a C corporation.
(c) Limit on Indemnification Amount. Notwithstanding the provisions
-------------------------------
of this Section 3.4, all payments required to be made by any Stockholder to the
Company pursuant to Section 3.4(b) shall not exceed the total distributions to
pay taxes made to such Stockholder by the Company during the period beginning on
the first day of the first open tax year of the Company in which the Company is
deemed to have been a C corporation and ending on the Termination Date.
(d) Time of Indemnification Payment. The Stockholders shall
-------------------------------
contribute to the capital of the Company any amounts calculated in accordance
with this Section 3.4 within 30 business days after the first to occur of (a)
the receipt of the refund from the appropriate Taxing Authority attributable to
such adjustment, or (b) delivery of a notice from the Company that a payment is
due by the Company to the appropriate Taxing Authority.
-5-
<PAGE>
ARTICLE IV.
CONTESTS/COOPERATION
4.1 Contests. Whenever the Stockholders or the Company become aware of an
--------
issue that they or it believe could result in a Final Determination which could
give rise to a payment or indemnification obligation under Article III, the
Stockholders or the Company (as the case may be) shall promptly give notice of
the issue to the other parties hereto. The Stockholders and their
representatives, at their expense, shall be entitled to participate in all
conferences and meetings with or proceedings before the IRS or any other Taxing
Authority with respect to the issue. The parties shall consult and cooperate
with each other in the negotiation and settlement or litigation of any
adjustment that may give rise to any payment or indemnification obligation under
Article III. All decisions with respect to such negotiation and settlement or
litigation shall be made by the parties after full, good faith consultation or
pursuant to the dispute resolution provisions of Section 4.2.
4.2 Dispute Resolution.
------------------
(a) If the parties hereto are, after negotiation in good faith,
unable to agree upon the appropriate application of the provisions of this
Agreement, the controversy shall be settled by a "Big 5" (or equivalent)
accounting firm, other than the Company's independent public accountants, chosen
by the Company and the Stockholders (the "Accounting Firm"). The decision of the
Accounting Firm with respect thereto shall be final, and the Company or the
Stockholders shall immediately pay any amounts due under this Agreement pursuant
to such decision. The applicable expenses of the Accounting Firm shall be borne
one-half by the Company and one-half by the Stockholders unless the Accounting
Firm specifies otherwise.
(b) In the event that any of the Stockholders or the Company receives
notice, whether orally or in writing, of any federal, state, local or foreign
tax examination, claim, settlement, proposed adjustment or related matter that
may affect in any way the liability of a Stockholder under this Agreement, he or
it shall within ten days notify the other parties hereto in writing thereof;
provided, that any failure to give such notice shall not reduce a party's right
to indemnification under this Agreement except to the extent of actual damage
incurred by the other parties as a result of such failure. The party or parties
( the "Indemnifying Party") who would be required to indemnify the other party
or parties (the "Indemnified Party") shall be entitled in their reasonable
discretion and at their sole expense to handle, control and compromise or settle
the defense of any matter that may give rise to a liability under this
Agreement; provided, that such Indemnifying Party from time to time provides
assurances reasonably satisfactory to the Indemnified Party that (i) the
Indemnifying Party is financially capable of pursuing such defense to its
conclusion, and (ii) such defense is actually being pursued in a reasonable
manner.
-6-
<PAGE>
4.3 Cooperation. The parties shall make available to each other, as
-----------
reasonably requested, and to any Taxing Authority all information, records or
documents relating to any liability for taxes covered by this Agreement and
shall preserve such information, records and documents until the expiration of
any applicable statute of limitations or extensions thereof. The party
requesting such information shall reimburse the other party for all reasonable
out-of-pocket costs incurred in producing such information.
4.4 Costs. Except to the extent otherwise provided herein, each party
-----
shall bear his own costs in connection with this Agreement.
ARTICLE V.
MISCELLANEOUS
5.1 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed to be an original, but all of which counterparts
collectively shall constitute a single instrument representing the agreement
among the parties hereto.
5.2 Construction of Terms. Nothing herein expressed or implied is
---------------------
intended, or shall be construed, to confer upon or give any person, firm or
corporation, other than the parties hereto and their respective successors and
permitted assigns, any rights or remedies under or by reason of this Agreement.
5.3 Governing Law. This Agreement and the legal relations between the
-------------
parties hereto shall be governed by and construed in accordance with the
substantive laws of the Commonwealth of Massachusetts without regard to any
choice of law rules.
5.4 Amendment and Modification. This Agreement may be amended, modified or
--------------------------
supplemented only by a writing executed by all the parties hereto.
5.5 Assignment. Except by operation of law or in connection with the sale
----------
of all or substantially all the assets of a party, this Agreement shall not be
assignable, in whole or in part, directly or indirectly, by the Stockholders
without the written consent of the Company or by the Company without the written
consent of the Stockholders. Any attempt to assign any rights or obligations
arising under this Agreement without such consent shall be void. The provisions
of this Agreement shall be binding upon and inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.
5.6 Interpretation. The title, article and section headings contained in
--------------
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties, and shall not in any way affect the meaning or
interpretation of this Agreement.
-7-
<PAGE>
5.7 Severability. In the event that any one or more of the provisions of
------------
this Agreement shall be held to be illegal, invalid or unenforceable in any
respect, the same shall not in any respect affect the validity, legality or
enforceability of the remainder of this Agreement, and the parties shall use
their best efforts to replace such illegal, invalid or unenforceable provision
with an enforceable provision approximating, to the extent possible, the
original intent of the parties.
5.8 Entire Agreement. This Agreement embodies the entire agreement and
----------------
understanding of the parties hereto in respect to the subject matter contained
herein. There are no representations, promises, warranties, covenants or
undertakings other than those expressly set forth herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
5.9 Further Assurances. Subject to the provisions of this Agreement, the
------------------
parties shall acknowledge such other instruments and documents and take all
other actions that may be reasonably required in order to effectuate the
purposes of this Agreement.
5.10 Waivers, Etc. No failure or delay on the part of any party in
------------
exercising any power or right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power or
any abandonment or discontinuance of steps to enforce such right or power
preclude any other or further exercise thereof or the exercise of any other
right or power. No waiver of any provision of this Agreement nor consent to any
departure by the parties therefrom shall in any event be effective unless it
shall be in writing, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which it was given.
5.11 Set-off. All payments to be made by any Stockholder under this
-------
Agreement shall be made without set-off, counterclaim or withholding, all of
which are expressly waived.
5.12 Change of Law. If, due to any change in applicable law or regulations
-------------
or the interpretation thereof by any court or other governing body having
jurisdiction subsequent to the date of this Agreement, performance of any
provision of this Agreement shall be impracticable or impossible, the parties
shall use their best efforts to find an alternative means to achieve the same or
substantially the same results as are contemplated by such provision.
5.13 Notices. All notices under this Agreement shall be validly given if
-------
in writing and delivered personally or sent by registered mail, postage prepaid
-8-
<PAGE>
to the Company at:
Embedded Support Tools Corporation
120 Royall Street
Canton, MA 02021
Attn: Peter S. Dawson
to the Stockholders at:
c/o Peter S. Dawson
120 Royall Street
Canton, MA 02021
or at such other address as any party may, from time to time, designate in a
written notice given in a like manner. Notice given by mail shall be deemed
delivered five calendar days after the date mailed.
5.14 Termination of Agreement. This Agreement shall terminate and be void,
------------------------
as if it never had been executed, if the Closing Date does not occur on or
before June 1, 2000.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
EMBEDDED SUPPORT TOOLS CORPORATION
By: ________________________
Name:
Title:
STOCKHOLDERS
___________________________________________
Peter S. Dawson
___________________________________________
John T.W. Baggott
___________________________________________
James E. Watkins
___________________________________________
Richard E. Cote
___________________________________________
H. Allan George
___________________________________________
Nicholas Lossky
___________________________________________
Daniel J. McGillivray
___________________________________________
Randall N. Rohrbach
___________________________________________
Stuart Schlitt
___________________________________________
John P. Shaughnessy
-10-
<PAGE>
Exhibit 10.25
STOCK PLEDGE AGREEMENT
----------------------
STOCK PLEDGE AGREEMENT dated as of July 30, 1999 between John T. W.
Baggott, an individual residing at the address set forth on the signature page
hereto (the "Pledgor") and Embedded Support Tools Corporation, a Massachusetts
-------
corporation with a principal place of business at 120 Royall Street, Canton,
Massachusetts (the "Secured Party").
-------------
WHEREAS, Secured Party and Pledgor have entered into a certain Secured
Promissory Note dated as of the date hereof in the original principal amount of
$550,000 (the "Note").
----
WHEREAS, the Pledgor has agreed to pledge certain shares of common stock,
no par value per share, of the Secured Party ("Common Stock") to the Secured
------------
Party to secure the Pledgor's obligations under the Note.
NOW, THEREFORE, in consideration of the foregoing premises, the covenants
and agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and in order to induce
Secured Party to make the loan evidenced by the Note to the Pledgor, the parties
hereby agree as follows:
1. Definitions.
-----------
Terms defined in the Note and not otherwise defined herein shall have the
meanings set forth therein.
2. Security Interest in Pledged Stock.
----------------------------------
To secure the due payment and performance of all of the liabilities and
obligations of Pledgor to the Secured Party under the Note (said liabilities and
obligations being hereinafter collectively referred to as the "Obligations"),
-----------
Pledgor hereby pledges and assigns to the Secured Party and grants to the
Secured Party a security interest in (and agrees to pledge and assign to the
Secured Party and to grant to the Secured Party a security interest in) all of
Pledgor's right, title and interest in and to the shares of Common Stock listed
on Exhibit A annexed hereto and made a part hereof (the "Pledged Stock").
------- - --------------
Pledgor is contemporaneously herewith delivering to the Secured Party the
certificate(s) representing the Pledged Stock listed on Exhibit A attached
------- -
hereto together with an undated stock power executed in blank.
As further security, Pledgor hereby also grants to the Secured Party a
security interest in (and agrees to pledge with and assign to the Secured Party
and to grant to the Secured Party a security interest in) any payments, stock
fights, rights to subscribe, liquidating dividends, stock dividends, dividends
paid in stock,
<PAGE>
new securities or other property which Pledgor is or may hereafter become
entitled to receive on account of the Pledged Stock. In the event that Pledgor
receives any such money, property or shares after demand has been made or
Pledgor has breached any of the terms or conditions under the Note (an "Event of
--------
Default"), Pledgor will immediately deliver such money, property or shares to
- -------
the Secured Party to be held hereunder in the same manner as the property
originally delivered hereunder. The Pledged Stock and all such money, property
or shares hereafter delivered to the Secured Party under this Section 2 are
hereinafter called the "Collateral." The Collateral shall constitute security
for the Obligations.
3. Representations and Covenants with Respect to Pledged Securities.
-----------------------------------------------------------------
Pledgor represents, warrants and covenants that:
3.1. Pledged Stock. The Pledged Stock is duly authorized, validly issued,
-------------
fully paid and non-assessable. All shares of Pledged Stock issued to the Pledgor
after the date hereof in respect of the Pledged Stock shall be duly authorized,
validly issued, fully paid and non-assessable. Each certificate representing the
Pledged Stock delivered to the Secured Party shall be accompanied by an undated
stock power executed in blank by Pledgor.
3.2. Restrictions on Security Interests, etc. All the Pledged Stock shall
---------------------------------------
at all times be free and clear of any security interests, mortgages, pledges,
liens, options, encumbrances and restrictions on the transfer thereof, other
than (a) the security interest provided for herein, (b) the restrictions
contained in a certain Shareholders Agreement by and between the parties hereto
dated as of July 1, 1999 (the "Shareholders Agreement"), and (c) such
----------------------
restrictions on transfer as may be imposed by state and federal securities laws.
3.3. Administration of Collateral. The following provisions shall govern
----------------------------
the administration of the Collateral, and in case of the occurrence of any Event
of Default, the provisions of Section 4 hereof shall govern with respect to
rights to realize upon the Collateral.
At all times, prior to the Event of Default, Pledgor shall have the right
to exercise all voting rights with respect to the Collateral subject to the
terms and conditions of the Voting Agreement. Following an Event of Default, all
voting rights with respect to the Collateral shall be exercised by Secured
Party, and the Pledgor will, if so requested, execute appropriate irrevocable
proxies therefor. Prior to an Event of Default, the Pledgor shall be entitled to
receive all dividends or other distributions (collectively, "Distributions')
---------------
made or paid by the Secured Party consisting of cash dividends in respect of,
all of the Collateral for all purposes and with the same force and effect as
though the Collateral were not subject hereto. All other Distributions
consisting of stock or other securities of the Secured Party made or paid on the
Collateral will be retained by the Secured Party (or if received by
-2-
<PAGE>
Pledgor shall be forthwith paid by him to the Secured Party in the original form
received) and held by the Secured Party as a part of the Collateral. If an Event
of Default shall have occurred, all Distributions and other payments with
respect to the Collateral shall be retained by the Secured Party (or if received
by Pledgor shall be forthwith paid by Pledgor to the Secured Party in the
original form received) and held by the Secured Party as part of the security
for the Obligations or applied to the payment of the Obligations in such order
and in such manner as determined in the sole discretion of the Secured Party
consistent with applicable law.
3.4. Indemnity. Pledgor will indemnify and save and hold the Secured Party
---------
harmless from and against any and all fees and expenses (including reasonable
attorney's fees) which may be incurred or sustained after the date hereof by the
Secured Party or any such holder, directly or indirectly, in connection with the
lawful exercise of any of the Secured Party's fights with respect to the
Collateral. The covenants contained in this Section 3.4 shall survive the
termination of the other provisions of this Pledge Agreement.
3.5. Further Assurance. Pledgor covenants that forthwith upon the request
-----------------
of the Secured Party and in confirmation of the security interest created
hereunder Pledgor shall execute and deliver to the Secured Party such further
instruments and agreements, in form and substance reasonably satisfactory to the
Secured Party and its counsel, as the Secured Party may reasonably request in
order to perfect the security interests created hereunder, including financing
statements, other instruments required to be filed or recorded under state or
federal law as presently or at the time in effect, and such other instruments as
the Secured Party may reasonably specify.
3.6. Preservation of Collateral. The Secured Party shall have no duty as
--------------------------
to the collection or protection of the Collateral or any part thereof or any
income thereon, or as to the preservation of any rights pertaining thereto,
beyond the safe physical custody of any Collateral actually in the Secured
Party's possession. Unless an Event of Default has occurred hereunder, the
Secured Party shall not sell, pledge or otherwise transfer or encumber the
Collateral except in connection with an assignment of this Agreement by the
Secured Party.
4. Rights to Realize Upon Collateral.
----------------------------------
Except to the extent prohibited by applicable law which cannot lawfully be
waived, the following provisions shall govern the right of the Secured Party to
realize upon the Collateral if an Event of Default shall have occurred in
addition to any rights and remedies available at law (including without
limitation, all rights of a secured creditor under Article 9 of the Uniform
Commercial Code as in effect in Massachusetts ) or in equity and in addition to
the provisions contained in any of the other documents (in case of a conflict
between the provisions of this Section 4 and the Note, the provisions of this
Section 4 shall govern).
-3-
<PAGE>
4.1. Marshalling, etc. The Secured Party shall not be required to make any
----------------
demand upon or pursue or exhaust any rights or remedies against the Pledgor or
others with respect to the payment of the Obligations, or pursue or exhaust any
of its rights or remedies with respect to any of the security for the
Obligations, or any direct or indirect guaranty thereof. The Secured Party shall
not be required to marshall the Collateral or any other security for the
Obligations or any guaranty thereof, or to resort to the Collateral or any other
security for the Obligations, or any guaranty thereof in any particular order
and all of the rights of the Secured Party under the Note shall be cumulative.
To the extent that Pledgor lawfully may, he hereby agrees to waive, and does
hereby absolutely and irrevocably waive and relinquish the benefit and advantage
of, and does hereby covenant not to assert against the Secured Party or any
other holder of any Obligations, any valuation, stay, appraisement, extension or
redemption laws now existing or which may hereafter exist which, but for this
provision, might be applicable to any sale made under the judgment, order or
decree of any court, or privately under the power of sale conferred by this
Pledge Agreement or in respect of the Collateral, and the Secured Party hereby
agrees to conduct any such sale in a commercially reasonable manner.
4.2. Sales of the Collateral. Any item of the Collateral may be sold for
-----------------------
cash or other value in any number of lots at public auction or private sale
without demand, advertisement or notice (excepting only that the Secured Party
shall give Pledgor seven (7) days' prior written notice of the time and place of
any public sale or private sale, which notice each of Pledgor and the Secured
Party hereby agrees to be reasonable). At any sale or sales of the Collateral
(except at private sale), the Pledgor, the Secured Party, or the Secured Party's
representatives or assigns, may bid for and purchase the whole or any part of
the property and rights so sold, and upon compliance with the terms of such sale
may hold, exploit and dispose of such property and rights without further
accountability to Pledgor, except for the proceeds of such sale or sales.
Pledgor will execute and deliver, or cause to be executed and delivered, such
instruments, documents, assignments, waivers, certificates and affidavits and
supply or cause to be supplied such further information and take such further
action as the Secured Party shall reasonably require in connection with such
sale.
4.3. Application of Proceeds. The proceeds of all sales and collections,
-----------------------
and any other moneys (including any cash contained in the Collateral) the
application of which is not otherwise herein provided for, shall be applied as
follows:
First, to the payment of the reasonable costs and expenses of such
-----
sale or sales and collections, and the reasonable compensation of the
Secured Party's counsel;
-4-
<PAGE>
Second, any surplus then remaining to the payment of the Obligations
------
in such order and manner as determined in the sole discretion of the
Secured Party; and
Third, any surplus then remaining to be paid to or deposited in the
-----
account of Pledgor, subject, however, to the rights of the holder of any
then existing lien of which the Secured Party has actual notice.
4.4. Private Sale of Securities. Pledgor recognizes that registration
--------------------------
under the Securities Act of 1933, as amended, of the securities included in the
Collateral or compliance with the requirements of Rule 144 thereunder might be
required to effect any public sale thereof and that the Secured Party may desire
to effect one or more private sales pursuant to an exemption from such
registration. Pledgor agrees, therefore, that, if at any time when the Secured
Party shall determine to exercise any rights hereunder to sell all or part of
such securities pursuant to this Section 4, the securities in question shall not
be effectively registered under the Securities Act of 1933, as then in effect,
the Secured Party may sell such securities by private sale not involving a
public offering registered under said Act, such sale to be conducted in such
manner and in such circumstances as the Secured Party may deem necessary or
advisable in order that such sale may be effected without such registration.
Pledgor hereby agrees that such manner of disposition is commercially
reasonable, that Pledgor will, upon the Secured Party's request, give any such
purchaser access to such information as may be reasonably requested to effect
such disposition and that neither the Secured Party nor any other holder of any
Obligations shall incur any responsibility for selling all or part of such
securities at a private sale, notwithstanding the possibility that a higher
price might be realized if the sale were deferred until after registration or
made in compliance with said Rule 144.
5. Course of Dealing.
-----------------
No course of dealing between the Pledgor and the Secured Party shall
operate as a waiver of any rights of any of them under this Pledge Agreement or
the Note or in respect of the Collateral, the Pledged Stock, the Obligations or
any security therefor. No delay or omission on the part of any of them in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this Pledge Agreement. No waiver of any right shall be
effective unless in writing and signed by the Secured Party and no waiver on one
occasion shall be construed as a bar to or waiver of any such right on any other
occasion.
6. Discharge.
---------
This Pledge Agreement and the rights hereby granted shall cease, determine
and be void upon the indefeasible payment in full in cash of the Obligations, or
upon the Pledgor's irrevocable surrender of the related collateral shares, and
at the
-5-
<PAGE>
request of Pledgor, and at Pledgor's expense, the Secured Party shall release
and discharge the Secured Party's rights hereunder and release and discharge all
of the Collateral without recourse against the Secured Party and to that end
shall execute and deliver to Pledgor at Pledgor's own expense, such releases,
reassignments and other documents (or cause the same to be done) as Pledgor
shall reasonably request, and the Secured Party shall pay over to Pledgor any
money and deliver to Pledgor any other property then held by the Secured Party
as Collateral (or cause the same to be done). Pledgor's receipt of the
Collateral so delivered shall be a complete and full acquittance therefor, and
the Secured Party shall thereafter be discharged from any liability or
responsibility therefor provided that the Secured Party has complied with
Section 3.6 hereof.
Notwithstanding the foregoing, this Pledge Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time payment of all or
any part of the Obligations is rescinded or otherwise must be restored by
Secured Party to the Secured Party or creditors of the Secured Party or any
representative of the Secured Party or representative of the Secured Party's
creditors upon the insolvency, bankruptcy or reorganization of the Secured
Party, or the Pledgor or to the creditors of the Pledgor or any representative
of the Pledgor or representative of the creditors of the Pledgor upon the
insolvency, bankruptcy or reorganization of any Pledgor, or otherwise, all as
though such payments had not been made.
7. Miscellaneous.
-------------
The invalidity or unenforceability of any term or provision hereof shall
not affect the validity or enforceability of any other term or provision hereof
The headings in this Pledge Agreement are for convenience of reference only and
shall not alter or otherwise affect the meaning hereof This Pledge Agreement
shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts and shall bind and inure to the benefit of the
parties hereto and their respective heirs, representatives, successors and
assigns, including as such successors and assigns all holders of any of the
Obligations.
Pledgor hereby waives presentment, notice, protest, notice of acceptance of
this Pledge Agreement, notice of extensions granted, other security received or
delivered, or any other action taken in reliance thereon, all demands and
notices in connection with the delivery, acceptance, performance, default, or
enforcement of any of the Obligations and all other demands and notices of any
description, and assents to any extension or postponement of the time of payment
or any other indulgence, to any substitution, exchange, or release of
collateral, and to the addition or release of any party or person primarily or
secondarily liable on the Obligations.
All notices and communications hereunder shall be given in the manner
contemplated by the Purchase Agreement.
-6-
<PAGE>
Executed under seal as of the day and year first above written.
PLEDGOR:
/s/ John T.W. Baggott
------------------------------------
Print Name: John T. W. Baggott
Address: 88 Wayside Inn Road
Marlborough MA 01752
The foregoing Pledge Agreement is hereby accepted and receipt herewith of the
Pledged Stock listed on Exhibit A attached hereto is acknowledged.
------- -
SECURED PARTY:
EMBEDDED SUPPORT TOOLS CORPORATION, a
Massachusetts corporation
By: /s/ Mark F. Lapham
--------------------------------
Name: Mark F. Lapham
Title: Chief Financial Officer
-7-
<PAGE>
EXHIBIT A
to Stock Pledge Agreement
Common Stock of
Embedded Support Tools Corporation
Owned by
John T. W. Baggott
and
Pledged to
Embedded Support Tools Corporation
as of July 30, 1999
Number Certificate
of Shares Number
--------- ------
110,000 8 [Partial; total shares 1,108,778]
<PAGE>
Exhibit 10.26
SECURED DEMAND PROMISSORY NOTE
------------------------------
$550,000 Canton, Massachusetts
July 30, 1999
FOR VALUE RECEIVED, the undersigned promises to pay on or before 7/30/2004
to the order of Embedded Support Tools Corporation, a Massachusetts corporation
(the "Company"), at the offices of EST or at such other place as the holder of
this Note may designate, the principal sum of Five hundred fifty thousand
Dollars ($550,000), together with interest on the unpaid principal balance of
this Note from time to time outstanding at the rate of 6.19% per year until paid
in full.
The undersigned shall have the right to prepay at any time, without premium
or penalty, all or any portion of the principal indebtedness evidenced by this
Note, together with accrued interest on the principal so prepaid to the date of
such prepayment.
All payments hereunder shall be credited first against any costs and
expenses then owed by the undersigned, next against late charges, if any, next
against interest and then against the principal amount of this Note.
No failure by the holder of this Note to exercise, and no delay in
exercising, any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by such holder of any right or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the holder hereof as herein
specified are cumulative and not exclusive of any other rights or remedies which
such holder may otherwise possess.
No modification, rescission, waiver, forbearance, release or amendment of
any provision of this Note shall be made, except by a written agreement duly
executed by the undersigned and the holder hereof
This Note may not be assigned by the undersigned.
The undersigned agrees to pay all reasonable costs and expenses incurred by
the holder hereof in enforcing this Note, including, without limitation,
reasonable attorneys' fees and disbursements.
The undersigned: (i) waives presentment, demand, notice and protest, and
also waives any delay on the part of the holder hereof, and (ii) assents to any
extension or other indulgence (including, without limitation, the release or
substitution of collateral) permitted the undersigned by the holder hereof with
respect to this Note and/or any collateral given to secure this Note and/or to
secure any other liability of the undersigned to the holder hereof. No extension
of time for
<PAGE>
the payment of this Note or any installment hereof made by agreement with any
person now or hereafter liable for the payment of this Note shall operate to
release, discharge, modify, change or affect the original liability under this
Note, either in whole or in part, of the undersigned if not a party to such
agreement.
This Note shall be binding upon the undersigned and each endorser and
guarantor hereof and upon their respective heirs, successors, assigns and
representatives, and shall inure to the benefit of the holder and his successors
and assigns. The term the "undersigned" shall be defined as any and all persons
(jointly and/or severally, singly and/or collectively) liable hereunder whether
as a maker, endorser, guarantor, surety, or otherwise and whether such liability
is direct or indirect, or primary or secondary.
The undersigned's obligations under this Note are secured by a pledge of
certain shares of stock of EST owned by the undersigned pursuant to a certain
Pledge Agreement by and between the undersigned and EST of even date herewith.
This Note shall be governed by the laws of The Commonwealth of
Massachusetts without regard to the principles of conflicts of laws.
Executed under seal as of the day and year first above written.
/s/ John T. W. Baggott
-------------------------------
Print Name: John T. W. Baggott
Address: 88 Wayside Inn Road
Marlborough, MA 01752
-2-
<PAGE>
Exhibit 10.28
Confidential Disclosure Agreement
Customer: Embedded Support Tools Agreement No.: V5807
120 Royal Street
Canton, MA 02021
This Agreement will provide protection for Information to be exchanged between
us which we do not wish to become public ("Information") while maintaining our
ability to conduct our respective business activities. Each of us agrees that
the following terms shall apply when one of us ("Discloser") discloses
Information to the other ("Recipient") under this Agreement.
1. Disclosure. Each time one of us wishes to disclose specific Information to
the other, or wishes to engage in multiple disclosures relating to a specific
subject matter, Discloser will issue a supplement to this Agreement
("Supplement") before disclosure. The Supplement will contain initial and final
disclosure dates, a non-confidential description of the Information to be
disclosed and any additional or different terms and conditions. The Supplement
must be signed by the Discloser and the Recipient.
Information may be disclosed by: (i) presentation; (ii) delivery; (iii)
authorized access such as to a data base; or (iv) any other express means.
Information must be identified as confidential at the time of disclosure, and
all materials containing Information must have a restrictive marking. The
Discloser shall not disclose any Information not described in a signed
Supplement or which Discloser does not have the right to disclose to the
Recipient.
Disclosure may take place through the Discloser or its Related Companies. A
Related Company is any corporation, company, or other entity which: (i) is
Controlled by a party hereto, (ii) Controls a party hereto; or (iii) is under
common Control with a party hereto. For this purpose, "Control" means that more
than fifty percent (50%) of the controlled entity's shares or ownership interest
representing the right to make decisions for such entity are owned or
controlled, directly or indirectly, by the controlling entity. An entity is
considered to be a Related Company only so long as such ownership or control
exists.
2. Protection. For two (2) years after the date of disclosure, the Recipient
will use the same care and discretion to avoid disclosure of the Discloser's
Information as the Recipient uses with its own similar Information which it does
not wish to disclose. Subject to this obligation, the Recipient may use
Discloser's Information for any purpose.
3. Exceptions. The Recipient may disclose Discloser's Information to: (i) its
employees and contractors, and employees and contractors of its Related
Companies, who have a need to know, and (ii) any other party with the
Discloser's prior written consent. Upon request of the Recipient, the Discloser
may make disclosures directly to such parties on behalf of the Recipient. Prior
to any such disclosure or such request by Recipient, the Recipient must have an
appropriate agreement with any such party sufficient to require the party to
treat Information in accordance with this Agreement. The Recipient may disclose
Information to the extent required by law, but
<PAGE>
must give the Discloser reasonable prior notice to allow the Discloser an
opportunity to obtain a protective order.
Notwithstanding the foregoing, no obligation shall apply to Information that is:
(i) already rightfully the Recipient's possession or rightfully received by the
Recipient without a nondisclosure obligation; (ii) developed independently by
the Recipient; (iii) publicly available when received, or thereafter becomes
publicly available through no fault of the Recipient; (iv) disclosed by the
Discloser without a signed Supplement as required by Section 1; (v) disclosed by
the Discloser to a third party without a nondisclosure obligation; or (vi)
inherently disclosed by the Recipient in the use, distribution or marketing of
any product or service.
4. Disclaimers. THE DISCLOSER PROVIDES INFORMATION SOLELY ON AN "AS IS"
BASIS.
Neither this Agreement, nor any disclosure of Information hereunder, in any way:
(i) grants to either of us any right or license under an copyright, patent, mask
work or trademark now or hereafter owned or controlled by the other; (ii)
obligates either of us to disclose or receive any Information, perform any work,
enter into any license, business engagement or other agreement; (iii) limits
either of us from developing, manufacturing. or marketing products or services
which may be competitive with those of the other; (iv) limits either of us from
assigning or reassigning its employees in any way; (v) creates any joint
relationship or authorizes either of us to act or speak on behalf of the other;
or (vi) limits either of us from entering into any business relationship with
any other parties.
5. General. Neither of us may assign or otherwise transfer our rights or
delegate our duties or obligations under this Agreement without the prior
written consent of the other. Any attempt to do so will be void.
The Recipient must comply with all applicable United States and foreign export
laws and regulations.
Only a written agreement signed by both or us can modify this Agreement.
Either of us may terminate this Agreement by providing one month's written
notice to the other. Any provisions of this Agreement which by their nature
extend beyond its termination remain in effect until fulfilled and apply to our
respective successors and authorized assigns.
If there is a conflict between the terms of this Agreement and a Supplement,
those of the Supplement will prevail.
This Agreement will be governed by the substantive law of the State of New York.
Discloser and Recipient may communicate with each other by facsimile and such
communication is acceptable as a writing. The autographs of representatives of
Discloser and Recipient, as
-2-
<PAGE>
received by facsimile machine, shall constitute "original" signatures. Any
reproduction of this Agreement by reliable means will be considered an original
of this Agreement.
This Agreement, including any Supplements, is the complete and exclusive
agreement regarding our disclosures hereunder.
Agreed To: Agreed To:
International Business Machines Corporation Embedded Support Tools
1000 River Street 120 Royal Street
Bldg 965-3J, Dept HRQD, M&S Contracts Canton, MA 02021
Administration
Essex Junction Vermont 05452-4299 Peter Dawson, President
FAX: (902) 769-3988
Kathleen S. Ginn
Director of PowerPC
/s/ Kathleen S. Ginn /s/ Peter Dawson
- -------------------------- -------------------------
May 9, 1999 April 22, 1999
- -------------------------- -------------------------
-3-
<PAGE>
Confidential Disclosure Agreement
Supplement for Disclosure
Customer: Embedded Support Tools Referenced Agreement No.: V5807
120 Royal Street
Canton, MA 02021
With respect to the Information identified below, the terms and conditions in
the referenced Agreement, as modified by any terms and conditions identified
below, shall apply to disclosures hereunder:
Discloser: XIBM - Embedded Support Tools
Initial Disclosure Date: April 19, 1999 Final Disclosure Date: April 18, 2001
Non-confidential description of information to be disclosed:
From IBM: IBM RISCWatch Drivers' Source Code.
From Embedded Support Tools: None. at this time.
Additional or different terms and conditions (if any):
This Supplement and the referenced Agreement are the complete and exclusive
agreement regarding disclosures hereunder.
Agreed To: Agreed To:
International Business Machines Corporation Embedded Support Tools
1000 River Street 120 Royal Street
Bldg 965-3J, Dept HRQD, M&S Contracts Canton, MA 02021
Administration
Essex Junction Vermont 05452-4299 Peter Dawson, President
FAX: (902) 769-3988
Kathleen S. Ginn
Director of PowerPC
/s/ Kathleen S. Ginn /s/ Peter Dawson
- -------------------------- -------------------------
Signature Signature
May 9, 1999 April 22, 1999
- -------------------------- -------------------------
Date (month spelled out) Date (month spelled out)
-4-
<PAGE>
Exhibit 10.29
Power PC Confidential IBM
Disclosure Agreement
_____________________________________________________________________________
[IBM LETTERHEAD APPEARS HERE]
Embedded Support Tools ("Embedded Support"), ("Recipient") and International
Business Machines Corporation ("IBM") agree that the following terms and
conditions apply when IBM discloses, to Recipient under this Agreement,
confidential Information ("Information") that may include Information considered
to be confidential to Motorola, Incorporated. Recipient and IBM agree that our
mutual objective under this Agreement is to provide appropriate protection for
Information while maintaining our ability to conduct our respective business
activities.
1. ASSOCIATED CONTRACT DOCUMENTS
- -----------------------------------
Each time IBM wishes to disclose specific Information to Recipient, IBM will
issue a Supplement to this Agreement ("Supplement") before disclosure. The
Supplement will identify Recipient's person designated to be its Point of
Contact for the disclosure and will contain the initial and Final Disclosure
Dates. If either of these dates is omitted from the Supplement, such data will
be deemed to be the actual date of disclosure. Confidential Information becomes
subject to this Agreement on the Initial Disclosure Date. The Supplement will
also contain a non-confidential description of the specific Information to be
disclosed and any additional terms and conditions for that Information.
The only time Recipient and IBM are required to sign the Supplement is when it
contains additional terms and conditions. When signatures are not required, and
except as hereinafter provided, Recipient indicates acceptance of Information
under the terms and conditions of this Agreement by participating in the
disclosure, after receipt of the Supplement. If Recipient provides IBM prior
notice that it objects to the receipt of any Information corresponding to the
respective non-confidential description thereof in the Supplement, IBM shall not
make the particular disclosure. Otherwise, the disclosure shall proceed as
provided herein.
2. DISCLOSURE
----------
IBM's and Recipient's Points of Contact will coordinate and control the
disclosure.
Confidential Information will be disclosed either:
(a) in writing;
(b) by delivery of items;
(c) by initiation of access to Information, such as may be contained in a
database; or
(d) by oral and/or visual presentation.
Confidential Information shall be marked with a restrictive legend, such as "IBM
Confidential", "Motorola Confidential Proprietary" or IBM Confidential/Motorola
Confidential Proprietary. If INFORMATION is not marked with such legend or is
disclosed orally and/or visually, (1) the Information will be identified as
confidential at the time of disclosure, and (2) IBM will promptly provide
Recipient with written confirmation.
3. OBLIGATION OF CONFIDENTIALITY
-----------------------------
Recipient will use the same care and discretion to avoid disclosure, publication
or dissemination of Information as it uses with its own similar information that
it does not wish to disclose, publish or disseminate. The obligation of
confidentiality applies to the
<PAGE>
tangible and intangible forms of the Information including any ideas, concepts,
know-how or techniques contained in Information. Subject to Section 5, Recipient
may use the tangible forms of Information only: (1) to determine the feasibility
of entering into a mutually beneficial business arrangement with IBM and for
purposes of negotiating such an arrangement, and (2) to design, develop, market,
sell, lease, or otherwise dispose of software and hardware tools, for use in the
design or development of microprocessor or other integrated circuits; provided,
however, that Recipient may not incorporate tangible Information into any
software or hardware tool that would be made available to other than IBM or
Motorola. Recipient is not authorized to use the tangible forms of Information
in any way other than as described in the preceding sentence. Recipient's
obligation of confidentiality extends to all Residuals contained in the
Information. The term "Residuals" shall mean Information in intangible form,
including ideas, concepts, techniques and know-how contained therein, which may
be retained in the minds of those who have had rightful access the Information.
Subject to Recipient's obligation of confidentiality, as described above, and
subject to Section 5, Recipient is free to use such Residuals for any purpose.
Recipient may disclose Information to:
a) its employees who have a need to know to permit Recipient to use the
Information as authorized by this Agreement; and b) any other party with IBM's
prior written consent.
Before disclosure to any of the above parties, Recipient will secure appropriate
written agreements with each such party sufficient to enable Recipient to comply
with its obligations undertaken in this Agreement.
Recipient may disclose Information to the extent required by law. However,
Recipient must give IBM prompt notice and make a reasonable effort to obtain a
protective court order.
Recipient agrees that all Information received is and will remain the property
of IBM and/or of Motorola and that such shall not be copied or reproduced
without the express written permission of IBM. After the authorized activities
described in this Agreement are completed or upon termination or expiration of
this Agreement, and upon written request, Recipient will return all the
Information to IBM along with all copies or certify by written memorandum that
all such Information has been destroyed, except that Recipient may retain
archival copies of the Information, which are to be used only in case of
resolving a dispute concerning this Agreement.
Nothing in this Agreement creates any obligation in any way limiting or
restricting assignment and/or reassignment of employees.
4. CONFIDENTIALITY PERIOD
----------------------
Disclosed Information continues to be subject to this Agreement for five years
following the Final Disclosure Date.
5. EXCEPTIONS
----------
No obligation of confidentiality applies to any Information that Recipient:
a) already rightfully possesses without obligation of confidentiality; b)
develops independently; or c) rightfully receives without obligation of
confidentiality from a third party.
No obligation of confidentiality applies to any Information that is, or becomes,
publicly available without breach of this Agreement.
Neither this Agreement nor any disclosure of Information grants Recipient any
license or immunity from IBM, Motorola or any other third party, either directly
or by implication, estoppel or otherwise, under any patents, trademarks, trade
names, service marks, trade secrets (except as might be permitted elsewhere in
this Agreement), mask works, copyrights, or any other intellectual property
rights.
-2-
<PAGE>
6. DISCLAIMERS
-----------
IBM PROVIDES ALL INFORMATION ON AN "AS IS" BASIS.
Neither IBM nor Motorola will be liable for any damages arising out of the use
of Information. Disclosure of Information containing business plans is for
planning purposes only. IBM and Motorola may change or cancel their plans at any
time. Therefore, use of such Information is at Recipient's own risk. None of the
Information which may be disclosed by IBM to Recipient hereunder will constitute
any representation, warranty, assurance or guarantee by IBM or Motorola with
respect to infringement, misappropriation or violation of any of the
intellectual property rights of third parties.
7. EXPORT LAW COMPLIANCE
---------------------
Technology, software and/or commodities furnished under this Agreement are
subject to United States export/reexport control laws and regulations. Recipient
agrees to comply with such laws and regulations. Including complying with the
terms of the U.S. license authorizing IBM to furnish the technology, software
and/or commodities to Recipient. Unless authorized by appropriate government
license or regulations, Recipient agrees not to export, directly or indirectly,
any technology, software and/or commodities provided by IBM or their direct
product to the following countries or to nationals of any of the following
countries. Albania, Bulgaria, Cambodia, Cuba, Estonia, Iran, Iraq, Laos, Latvia,
Libya, Lithuania, Mongolia, North Korea, People's Republic of China, Romania,
Syria, Bosnian-Serb occupied area of Bosnia/Herzegovina, the geographic area
formerly known as the Union of Soviet Socialist Republics, Vietnam and Federal
Republic of Yugoslavia (Serbia and Montenegro). The foregoing obligations
survive the termination of any agreement or other arrangement under which the
technology, software, or commodities were provided to Recipient.
8. MOTOROLA CONFIDENTIAL INFORMATION
---------------------------------
Recipient acknowledges that Motorola is a third party beneficially to this
Agreement, having all the rights to enforce the terms and conditions of this
Agreement as regards Information considered to be confidential to Motorola.
To the extent that any Information disclosed to Recipient under this Agreement
comprises software which is subject to the terms of an IBM or Motorola software
licensing agreement, Recipient will be required to execute such a software
licensing agreement prior to receipt of such Information. In the event of a
conflict between the terms of such a software licensing agreement and the terms
of this Agreement, the terms of the software licensing agreement shall prevail.
9. TERM
----
This Agreement shall commence on the date it is fully executed by the parties
and will continue for one (1) year thereafter, unless terminated by either
party; however, the duty to protect Information and to comply with all
applicable export laws as stated in this Agreement shall survive the termination
or expiration of this Agreement, and shall apply to Recipient's successors and
assigns.
10. GENERAL
-------
This Agreement does not require either party to disclose or to receive
information.
No other rights, express or implied, are granted to Recipient by this Agreement.
Neither party may assign its rights or delegate its duties or obligations under
this Agreement without the other party's prior written consent. Any attempt to
do so is void.
IBM may modify the terms and conditions of this Agreement by giving Recipient
three months' written notice. Any such modification will apply only to
Information for which the initial disclosure Date is on or after the
-3-
<PAGE>
effective date specified in the notice. Otherwise, only a written agreement
signed by Recipient and IMB can modify this Agreement.
Either party may terminate this Agreement by providing on month's written notice
to the other. Any provisions of this Agreement which by their nature extend
beyond its termination will remain in effect beyond such termination until
fulfilled and will apply to either party's successors and assigns.
If there is a conflict between the terms and conditions of this Agreement and
Supplement, those of the Supplement prevail. Except as modified by a Supplement,
the terms and conditions of this Agreement remain in full force and effect.
The laws of the State of New York govern this Agreement.
The parties acknowledge that they have read this Agreement, understand it, and
agree to be bound by its terms and conditions. Further, they agree that the
complete and exclusive statement of the agreement between the parties relating
to this subject shall consist of this Agreement and its Supplements. This
statement of the agreement supersedes all proposals or other prior agreements,
oral or written, and all other communications between the parties relating to
this subject. Any reproduction of this Agreement by reliable means will be
considered an original of this document.
Embedded Support Tools International Business Machines Corporation
By: /s/ Peter Dawson By: /s/ Ronald J. Tessitore
-------------------- -----------------------------
Name: Peter Dawson Name: Ronald J. Tessitore
Title: President Title: Director of Embedded
PowerPC Product Solutions
Date: 6/5/98 Date: 6/25/98
Phone: 781-828-5588 Fax 781-575-149
-4-
<PAGE>
SUPPLEMENT TO POWERPC
CONFIDENTIAL DISCLOSURE AGREEMENT
Referenced Agreement: V3757 Supplement Number: 1
Initial Disclosure Date: June 1, 1998 Final Disclosure Date: June 1, 1999
Recipient's Point of Contact: IBM's Point of Contact:
Embedded Support Tools Ricardo Gariazzo
Jim O'Brien 11400 Burnet Road
120 Royal Street Internal Zip 4329
Canton, MA 02021 Austin, Texas 78758
Confidential Information:
IBM RISCWatch drivers' source code
Additional Terms and Conditions
Notwithstanding the use restriction contained in first paragraph of Section 3 of
the Referenced Agreement, Recipient is authorized to use the Information
identified in the Supplement only to facilitate the design of systems that will
use microprocessors designed by Motorola and/or IBM using the information;
provided, however, that Recipient shall not be authorized, without the prior
written consent of Motorola and/or IBM, to use the Information to design,
develop, market, sell, lease, or otherwise dispose of any data processing
system, or any portion thereof, that implements, either in hardware or in
software, any portion of any data processor architecture, any portion of any
data processing system design or any other Information disclosed to Recipient
under this Agreement, unless the only portions of the data processing system
which embody, incorporate or are based upon any portion of the information are
one or more integrated circuits designed by IBM and/or Motorola using the
information and manufactured by IBM, Motorola, or an IBM-authorized license.
The parties acknowledge that they have read this Supplement, understand it and
agree to be bound by its terms and conditions. Further they agree that this
Supplement and the referenced Agreement are the complete and exclusive statement
of the agreement between the parties relating to this subject, superseding all
proposals or other prior agreements, oral or written, and all other
communications between the parties relating to this subject. Any reproduction of
this Supplement by reliable means will be considered an original of this
document.
<PAGE>
Embedded Support Tools International Business Machines Corporation
By: /s/ Peter Dawson By: /s/ Ronald J. Tessitore
------------------ --------------------------
Name: Peter Dawson Name: Ronald J. Tessitore
Title: President Title: Director of Embedded
PowerPC Product Solutions
Date: 6/5/98 Date: 6/25/98
Phone: 781-828-5588 Fax 781-575-1499
<PAGE>
EXHIBIT 10.30
CONFIDENTIAL DISCLOSURE AGREEMENT
Effective Date: 11-1-99 , 19_____
------- ------
In order to protect certain confidential information, Hewlett-Packard Company
and its corporate affiliates ("HP"), and the "Participant" identified below,
agree that:
1. Disclosing Party: The party disclosing confidential information
----------------
("Discloser") is Both Parties (Note: Fill in "HP", "Participant", or
------------
"both parties".)
2. Primary Representative: Each party's representative for coordinating
----------------------
disclosure or receipt of confidential information is:
HP: Michael Sloane
--------------
Participant: Peter Dawson
------------
3. Description of Confidential Information: The confidential information
---------------------------------------
disclosed under this Agreement is described as:
- ---------
HP: Product Information (technical) Product Development Schedules Firmware
------------------------------------------------------------------------
Development Equipment & Code
- ----------------------------
Participant: Products Under Development
--------------------------
_____________________________________________________________________________
_____________________________________________________________________________
(Note: Be specific; for example, individually list materials provided. Attach
additional sheets if needed.)
4. Use of Confidential Information: The party receiving confidential,
-------------------------------
information ("Recipient") snail make use of the confidential information only
for the following purpose (e.g., "evaluation and testing for a make/buy decision
on project xyz."):
HP: Decisions regarding development tools
-------------------------------------
_____________________________________________________________________________
Participant: Debugging & Delivery of Development Tools
-----------------------------------------
5. Confidentiality Period: This Agreement and Recipient's duty to hold
----------------------
confidential information in confidence expire on:
5-31-2001
---------
(Note: This is the period of protection of confidential information).
6. Disclosure Period: This Agreement pertains to confidential information that
-------------------
is disclosed between the Effective Date and
5-31-2001
---------
(Note: This is the period during which confidential information is going to be
disclosed.)
7. Standard of Care: Recipient shall protect the disclosed confidential
----------------
information by using the same degree of care, but no less than a reasonable
degree of care, to prevent the unauthorized
HEWLETT-PACKARD COMPANY
Personal LaserJet Products
----------------------------------
(Entity Name)
P.O. Box 15
-----------
Boise, ID 83707-0015
----------------------------------
(Address)
BY /s/ Norra Spohn
----------------------------------
(Functional Manager's
Norra Spohn
----------------------------------
(Name)
R&D Manager
----------------------------------
(Title)
White - Legal Dept (Local or 20BO) Green - Participant use, dissemination, or
publication of the confidential information as Recipient uses to protect its own
confidential information of a like nature.
8. Marking: Recipient's obligations shall only extend to confidential
---------
information that is described in paragraph 3, and that: (a) comprises specific
materials individually listed in paragraph 3; or, (b) is marked as confidential
at the time of disclosure; or, (c) is unmarked (e.g. orally disclosed) but
treated as confidential at the time of disclosure, and is designated as
confidential in a written memorandum sent to Recipient's primary representative
within thirty days of disclosure, summarizing the confidential information
sufficiently for identification.
9. Exclusions: This Agreement imposes no obligation upon Recipient with respect
----------
to information that: (a) was in Recipient's possession before receipt from
Discloser; (b) is or becomes a matter of public knowledge through no fault of
Recipient; (c) is rightfully received by Recipient from a third party without a
duty of confidentiality; (d) is disclosed by Discloser to a third party without
a duty of confidentiality on the third party; (e) is independently developed by
Recipient; (f) is disclosed under operation of law; or (g) is disclosed by
Recipient with Discloser's prior written: approval."
10. Warranty: Each Discloser warrants that it has the right to make the
--------
disclosures under this Agreement. NO OTHER WARRANTIES ARE MADE BY EITHER PARTY
UNDER THIS AGREEMENT. ANY INFORMATION EXCHANGED UNDER THIS AGREEMENT IS PROVIDED
"AS IS".
11. Rights: Neither party acquires any intellectual property rights under this
------
Agreement except the limited rights necessary to carry out the purposes set
forth in paragraph 4. This Agreement shall not restrict reassignment of
Recipient's employees.
Miscellaneous
- -------------
12. This Agreement imposes no obligation on either party to purchase, sell,
license, transfer or otherwise dispose of any technology, services or products.
13. Both parties shall adhere to all applicable laws, regulations and rules
relating to the export of technical data, and shall not export or reexport any
technical data, any products received from Discloser, or the direct product of
such technical data to any proscribed country listed in such applicable laws,
regulations and rules unless properly authorized.
14. This Agreement does not create any agency or partnership relationship.
15. All additions or modifications to this Agreement must be made in writing and
must be signed by both parties.
16. This Agreement is made under, and shall be construed according to, the laws
of the State of California, U.S.A.
PARTICIPANT
Embedded Support Tools Corp.
- --------------------------------------
(Company Name)
120 Royall Street
- --------------------------------------
Canton, MA 02021
- --------------------------------------
(Address)
BY /s/ Peter Dawson
----------------------------------
(Authorized Signature)
Peter Dawson
- --------------------------------------
(Name)
President EST Corp.
- --------------------------------------
(Title)
Pink - HP Functional Manager Yellow - HP Representative
<PAGE>
EXHIBIT 10.31
AN AGREEMENT BETWEEN EST CORPORATION AND CASE ASSEMBLY SOLUTIONS:
EST agrees to purchase board assembly work from Case of two distinct types:
PROTOTYPE:
Prototype means a board outside of any forecast or established manufacturing
schedule or "screen" type which needs to be turned around in 5 business days or
less. Prototype pricing shall be applied therefore to "rush" orders for small
quantities of standard boards out of sequence but shall NOT be applied to
requests to accelerate small quantities of boards already in the "pipe".
Prototype boards shall be priced on an order-by-order basis, with Case giving
EST most favorable pricing terms (among Case customers).
VOLUME:
Volume shall apply to board orders which are part of an established library of
board types &/or an established production schedule and are ordered more than 5
business days in advance.
Case agrees to price volume board assembly work to EST at Case's formula (see
attached) price less twelve percent (of Case's formula price).
EST agrees to pay a one-time set-up charge of $300 per volume board set up on
Case systems. An initial check for $6,000 shall pay for the first 20 setups in
advance. This charge shall NOT apply to prototype orders (but shall be applied
when a prototype shifts over into an established volume board). No charge shall
be made for subsequent orderly revisions and updates of boards already system
loaded.
EST guarantees Case a minimum of fifteen thousand dollars ($15,000) cumulative
per month volume board assembly work beginning in July, 1999. Prototypes shall
not count toward this quota.
Invoices presented by Case to EST shall be paid within 15 days of arrival at
EST. In the event of any dispute, EST shall part pay the non-disputed part and
withhold only the difference related to disputed items.
Case agrees to inform EST and permit EST to bid on an equal footing should Case
become for sale. EST agrees to negotiate with Case should EST decide to develop
or purchase in-house manufacturing.
EST agrees to purchase and finance at zero interest additional equipment
required by Case to complete EST orders on a case-by-case negotiated basis.
This agreement lasts until June 30, 2000 with a ninety-day forward roll-over
period.
<PAGE>
For Case Assembly Solutions For EST Corporation
/s/ Gregory Cronin /s/ Peter Dawson
- ------------------------------- -------------------------------
Gregory Cronin Peter Dawson
/s/ Jay J. Sullivan /s/ Tom Fiske
- ------------------------------- -------------------------------
Jay J. Sullivan Tom Fiske
5/11/99 /s/ Mark F. Lapham
- ------------------------------- -------------------------------
Dated Mark F. Lapham
-2-
<PAGE>
5/11/1999
CASE Assembly Solutions Inc.
Pricing Formula for EST Corp Assemblies
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Component Type Standard Price per placement
- -------------------------------------------------------------------------------
<S> <C>
SMT IC $ 0.22
- -------------------------------------------------------------------------------
SMT Chip $ 0.14
- -------------------------------------------------------------------------------
SMT Fine Pitch IC $ 1.00
- -------------------------------------------------------------------------------
SMT BGA $ 3.00
- -------------------------------------------------------------------------------
Through Hole Component $ 0.24
- -------------------------------------------------------------------------------
</TABLE>
Component Type Summary:
SMT IC: Includes all SOIC, QFP, J-Leaded packages excluding any fine pitch.
SMT Chip: Includes all standard machine mountable chip components such as 0603,
0805, 1206, capacitors and resistors, also machine mountable diodes, transistors
and inductors.
SMT Fine Pitch: Includes Fine Pitch PLCC packages also grouped are multileaded
SMT connectors.
SMT BGA: Includes placement of standard pitch BGA IC's and BGA sockets.
Through Hole Components: Includes assembly of standard "post reflow" through
hole components.
The following components may be charged at a premium from above pricing: 0402
package components are priced at a slight premium due to the higher level of
touch-up required. Large Through-Hole connectors, components requiring special
fixturing or pre-forming. Assembly of Hardware. Surface Mount components
assembled by hand.
Realizing that not all factors of the assembly process are covered in this
model, additional costs may be associated with the following factors:
- excessive packaging or handling requirements
- other unforeseen factors that may increase overall assembly
time
-3-
<PAGE>
Exhibit 10.40
Assignment And Assumption Agreement
-----------------------------------
This agreement ("Agreement") is made between Achieve Software
Corporation ("Achieve") and Embedded Support Tools Corp. ("EST") with respect to
the Sublease Agreement ("Sublease") between J.J. Wild, Inc. ("Wild") and Achieve
concerning the portion of the Boston Mutual Building (the "Building", located at
120 Royall Street, Canton, Massachusetts), comprising 5,575 square feet,
occupied by Achieve pursuant to the Sublease (the "Sublease Premises").
Whereas, EST has succeeded to the rights of Wild under the lease dated
January 23, 1998 (the "Lease") between Wild and Boston Mutual Life Insurance
Company (the "Lessor") by which Wild leased from the Lessor a 25,635 square-foot
portion of the building including Sublease Premises; and
Whereas, EST which is already occupying other parts of the Building,
wishes to take occupancy of the Sublease Premises as soon as possible, and
Achieve has agreed to vacate the Sublease Premises prior to the currently
scheduled expiration of the Sublease on December 31, 2000;
Now, therefore, it is agreed:
1. Achieve will vacate the Sublease Premises on or before January 15,
2000 and will confirm in writing to EST that it has done so.
2. Achieve will have no responsibility for rent or other charges
relating to the Sublease Premises arising on or after December 31, 1999 (the
Effective Date). EST assumes all obligations of Achieve under the Sublease and
the Lease as of the Effective Date, and will hold Achieve harmless from any
claims by Wild, Lessor, or any other party for any charges arising thereafter
relating to the Sublease Premises or the Building. EST and Achieve will hold
each other harmless for all acts connected with this tenancy, negotiations to
reach this agreement, and with Achieve's move from the space.
3. EST assumes responsibility for securing Lessor's consent, if
required, to this Agreement.
4. Any notice to EST under this Agreement may be addressed to EST at
120 Royall Street, Canton, MA, 02021; any notice to Achieve under the Agreement
shall be addressed to Achieve Software Corp. c/o Anthony Wright, 1150 Lakeway
Drive, Suite 207, Austin, TX, 78734.
EMBEDDED SUPPORT ACHIEVE SOFTWARE CORPORATION
TOOLS CORP.
By: /s/ Mark Lapham By: /s/ Anthony Wright
------------------------ ----------------------------
Mark Lapham Anthony Wright
Chief Financial Officer Executive Vice President
Date 14 December, 1999 Date December 13, 1999
----------------------- ---------------------------
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our reports dated August 5, 1999, except as to the information presented in
Note 13, for which the date is December 22, 1999, relating to the consolidated
financial statements and financial statement schedule of Embedded Support Tools
Corporation, which appear in such Registration Statement. We also consent to
the reference to us under the heading "Experts" in such prospectus.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 22, 1999
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<PAGE>
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<CURRENT-ASSETS> 7,059
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<TABLE> <S> <C>
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<PP&E> 650
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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