<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
OPEN SOLUTIONS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7372 22-317350
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
300 WINDING BROOK DRIVE
GLASTONBURY, CONNECTICUT 06033
(860) 652-3155
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DOUGLAS K. ANDERSON
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
OPEN SOLUTIONS INC.
300 WINDING BROOK DRIVE
GLASTONBURY, CONNECTICUT 06033
(860) 652-3155
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MARK G. BORDEN, ESQ. JOHN J. EGAN III, ESQ.
PHILIP P. ROSSETTI, ESQ. JEFFREY C. HADDEN, ESQ.
HALE AND DORR LLP GOODWIN, PROCTER & HOAR LLP
60 STATE STREET EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02109
TELEPHONE: (617) 526-6000 TELEPHONE: (617) 570-1000
TELECOPY: (617) 526-5000 TELECOPY: (617) 523-1231
</TABLE>
------------------------
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,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.01 par value per share........ $40,000,000 $11,800
=====================================================================================================
</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.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
JUNE 10, 1998
[ ] SHARES
[OPEN SOLUTIONS LOGO]
COMMON STOCK
------------------------
Of the [ ] shares of Common Stock ("Common Stock") offered
hereby, [ ] are being sold by Open Solutions Inc. ("OSI" or the
"Company") and [ ] are being sold by certain stockholders of the
Company (the "Selling Stockholders"). See "Principal and Selling Stockholders."
The Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholders. Prior to this offering, there has been no public market
for the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $[ ] and $[ ] per share. See
"Underwriting" for the factors to be considered in determining the initial
public offering price. Application has been made for the listing of the Common
Stock on the Nasdaq National Market under the symbol "OSIF."
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===================================================================================================================
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share ................. $ $ $ $
- -------------------------------------------------------------------------------------------------------------------
Total(3) .................. $ $ $ $
===================================================================================================================
</TABLE>
(1) See "Underwriting" for information relating to indemnification of the
Underwriters.
(2) Before deducting estimated expenses of $ , all of which will
be payable by the Company.
(3) The Company and certain stockholders of the Company have granted to the
Underwriters a 30-day option to purchase up to [ ] additional
shares of Common Stock solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and
$ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of BT Alex. Brown Incorporated, Baltimore, Maryland, on or about ,
1998.
BT ALEX. BROWN
CREDIT SUISSE FIRST BOSTON
UBS SECURITIES
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3
[OPEN SOLUTIONS LOGO]
The Company intends to distribute to its stockholders annual reports
containing audited consolidated financial statements. The Company also intends
to make available to its stockholders, within 45 days after the end of each
fiscal quarter, reports for the first three quarters of each fiscal year
containing interim unaudited financial information.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK IN
CONNECTION WITH THE OFFERING, INCLUDING OVER-ALLOTMENT, STABILIZING AND
SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
Open Solutions Inc. is a registered trademark, and The Complete Banking
Solution and The Complete Credit Union Solution are trademarks, of Open
Solutions Inc. All other trademarks or trade names referred to in this
Prospectus are the property of their respective owners.
2
<PAGE> 4
[DESCRIPTION OF LEFT HALF OF INSIDE FRONT COVER FOLDOUT GRAPHICS]
Four images of screens from the OSI system "The Complete Banking Solution" are
displayed along the left side of the page with text describing each screen
immediately to the right.
(Screen 1) The screen is the home screen of the Customer Service
Representative module. The screen contains a command line at the top of a large
yellow tickler field in the middle of the screen.
ENHANCED CUSTOMER SERVICE: Information concerning customers and prospects is
easily captured, updated and accessed. The entire customer relationship can be
viewed from any desktop, and the system prompts the user with timely
suggestions, reminders and cross-selling opportunities. The result is customer
service that is comprehensive, effective and personal.
(Screen 2) The screen is the "Edit Person" screen from the Customer
Service Representative Module. The screen contains a number of data elements on
the left side of the screen and images of the customer's face and signature on
the right.
COMPLETE CUSTOMER PROFILE: One screen displays the customer's photograph,
signature, and other identifiers, eliminating the need for a driver's license
or other identification.
(Screen 3) The screen is the "Edit Additional Property" screen from
the Lending module. The screen contains a number of data elements on the left
side of the screen and an image of a residential property on the right.
UP-TO-DATE COLLATERAL INFORMATION: A complete description of the latest
appraisal and all specifics regarding loan collateral, whether a home, car or
other property, can be obtained real-time. Appraisal information is easily
updated.
(Screen 4) The screen is the "Payoff Inquiry" screen from the lending
module. The screen contains a number of data elements at the top and detailed
payoff information at the bottom that is adjustable with a scroll bar.
CONSOLIDATED PAYOFF INQUIRY/TRANSACTION: A loan payoff need not involve
numerous computer transactions. Loan balance, interim interest charges, escrow
balance, mortgage insurance premiums due, late charges and other relevant data
can be viewed on one screen. The "Payoff" button activates the transaction and
completes the payoff, indicating the loan balance due to the bank or to the
borrower.
[DESCRIPTION OF RIGHT HALF OF INSIDE FRONT COVER FOLDOUT GRAPHICS]
OSI PRODUCTS
THE COMPLETE BANKING SOLUTION(TM)
THE COMPLETE CREDIT UNION SOLUTION(TM)
A three-dimensional circle at the center with the label "The OSI Data Model."
Surrounding the inner circle is a three-dimensional ring with connecting pipes
to the inner circle with the following text within the ring: "OSI
Applications -- Home/Internet Banking -- Teller/Platform -- Lending --
Depository -- Operations -- ATM." A second ring surrounds the first ring with
the following text within the ring: "Third Party Products -- Item Processing --
Imaging -- Electronic Forms -- Interactive Voice Response -- Cash Management --
General Ledger." A third ring surrounds the entire graphic with the following
text within the ring: "Commercial Banks -- Thrifts -- Credit Unions."
The following text appears below the graphic described above.
"The Complete Banking Solution" and "The Complete Credit Union Solution"
(collectively, the "OSI System") from Open Solutions Inc. (OSI) are fully
integrated suites of financial applications that operate in a Microsoft Windows
NT environment with an Oracle relational database. The OSI System interfaces to
third-party applications that are commonly used in banks and credit unions and
is designed to enable OSI's customers to reduce their core data processing and
operational costs and to leverage their customer information.
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information
contained in this Prospectus (i) reflects the conversion of all outstanding
shares of the Company's Series A-1, Series A-2, Series B, Series C and Series D
Preferred Stock (the "Convertible Preferred Stock") into an aggregate of
5,308,472 shares of Common Stock at the closing of this offering and (ii)
assumes no exercise of the Underwriters' over-allotment option. This Prospectus
contains forward-looking statements which involve risks and uncertainties. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth under "Risk Factors" and elsewhere in this Prospectus.
THE COMPANY
Open Solutions Inc. (the "Company") is a leading provider of client/server
core processing software and related services to small to mid-size banks and
credit unions. The Company has developed The Complete Banking Solution and The
Complete Credit Union Solution (the "OSI System"), which are fully-integrated
suites of banking and credit union applications that operate in a Microsoft
Windows NT environment with an Oracle relational database. The Company's
software supports all of an institution's core processing requirements,
including deposits and loans, teller functions, home/Internet banking and
platform automation. The OSI System enables its customers to enhance customer
satisfaction and compete more effectively in the financial services industry.
Currently, there are over 20,000 banking and depository institutions in the
United States with assets of up to $3 billion, including small to mid-size
commercial banks, thrifts and credit unions. The Company believes that these
institutions, which have traditionally competed on personalized service, are
facing increasing competitive pressures and are seeking to implement information
technology systems that provide a competitive advantage. Banks and credit unions
also require core processing systems that are able to accommodate new and
emerging technologies, such as automated teller machines ("ATMs"), telephone
banking and home banking via personal computers and the Internet. These
institutions have traditionally fulfilled their information technology needs
through legacy computer systems, operated either by the institution or a service
bureau on an outsourced basis. These legacy systems are not easily integrated
with other applications used in the enterprise, typically do not provide
real-time transaction processing and are not easily adapted to evolving business
needs and regulatory requirements.
The need to improve customer service levels, enhance operating efficiencies
and lower costs has contributed to the growing acceptance of the client/server
model of computing based on open, industry-standard operating environments and
relational databases. Client/server systems can improve information sharing by
providing access at each desktop to critical customer and transaction data.
Until recently, the adoption of client/server systems in many banks and credit
unions has lagged other industries due to the limited number of suppliers of
open client/server systems designed specifically to address the core processing
requirements of such institutions. The Company believes that fewer than 200
small to mid-size banks and credit unions in the United States have implemented
open client/server core processing systems.
The OSI System is a client/server software solution that is designed to
enable the Company's customers to reduce their core processing and operational
costs and to leverage their customer information to improve retention and
identify potential cross-selling opportunities. In addition to providing
comprehensive core processing functionality, the OSI System interfaces to
third-party applications that are commonly used in banks and credit unions,
including check processing, ATMs and general ledger applications. The OSI System
can reduce the overall cost of ownership of a financial institution's core
system. By integrating core banking functions, which have historically run on
separate systems, the OSI System enables its customers to achieve operational
efficiencies. The
3
<PAGE> 6
OSI System can also reduce the costs that would otherwise be associated with the
ongoing maintenance of legacy systems.
The Company's objective is to be the leading supplier of enterprise-wide
client/server software for small to mid-size banks and credit unions. The
Company's strategy for achieving this objective includes the following: (i)
continue to focus on small to mid-size banks and credit unions, (ii) expand
distribution through outsourcing solutions, (iii) leverage customer base and
(iv) maintain product leadership.
The Company markets its software and services primarily through its direct
sales force. To expand its distribution capabilities, the Company has also
established strategic relationships with The BISYS Group, Inc., a major national
outsourcing provider, and Connecticut On-Line Computer Center, Inc., a major
regional outsourcing provider, under which these third parties provide
outsourced processing services to the financial services industry using the OSI
System.
The Company was organized as a Delaware corporation in 1992. The Company's
principal office is located at 300 Winding Brook Drive, Glastonbury, Connecticut
06033 and its telephone number is (860) 652-3155.
4
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................... [ ] shares
Common Stock offered by the Selling Stockholders...... [ ] shares
Common Stock to be outstanding after the offering..... [ ] shares(1)
Use of proceeds....................................... Working capital and other general
corporate purposes
Nasdaq National Market symbol......................... OSIF
</TABLE>
- ---------------
(1) Based on the number of shares of Common Stock outstanding on March 31, 1998.
Excludes an aggregate of 1,643,125 shares subject to options outstanding as
of March 31, 1998 at a weighted average exercise price of $0.58 per share,
of which options to purchase 1,018,836 shares of Common Stock are
exercisable. Also excludes an aggregate of 636,111 shares of Common Stock
issuable upon the exercise of outstanding warrants as of March 31, 1998 at a
weighted average exercise price of $5.66 per share, all of which are
exercisable. See "Risk Factors -- Shares Eligible for Future Sale;
Registration Rights," "Management -- Stock Plans," "Description of Capital
Stock -- Warrants" and Notes 7 and 9 of Notes to the Company's Financial
Statements.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license................... $ -- $ -- $ 213 $ 801 $ 4,099 $ 693 $ 1,158
Service and maintenance............ 95 -- 55 218 2,550 289 1,176
------ ------- ------- ------- ------- ------- -------
Total revenues....................... 95 -- 268 1,019 6,649 982 2,334
Loss from operations................. (476) (1,205) (1,890) (3,774) (3,264) (1,223) (2,122)
Net loss............................. (513) (1,191) (1,895) (3,638) (3,055) (1,179) (2,027)
Net loss per common share (basic and
diluted)........................... (0.25) (0.61) (0.98) (1.73) (1.42) (0.55) (0.94)
Weighted average common shares used
to compute net loss per share...... 2,079 1,955 1,936 2,103 2,155 2,136 2,166
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------------------------
PRO PRO FORMA
ACTUAL FORMA(1) AS ADJUSTED(1)(2)
-------- ----------- -----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 7,346 $ 7,346 $
Working capital............................................. 6,232 6,232
Total assets................................................ 11,686 11,686
Long-term debt, less current portion........................ 58 58
Mandatorily redeemable convertible preferred stock.......... 16,140 --
Stockholders' equity (deficit).............................. (8,244) 7,896
</TABLE>
- ---------------
(1) Reflects conversion of all outstanding shares of Convertible Preferred Stock
into an aggregate of 5,308,472 shares of Common Stock upon the closing of
this offering. See Note 2 of Notes to the Company's Financial Statements.
(2) Adjusted to give effect to the sale by the Company of [ ] shares of
Common Stock offered hereby at an assumed initial public offering price of
$[ ] per share and after deducting the estimated underwriting
discounts and commissions and offering expenses payable by the Company. See
"Use of Proceeds."
5
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus.
Limited Operating History; History of Losses. The Company was incorporated
in May 1992 and did not sell its first product until the second quarter of 1995.
Accordingly, the Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies with limited
operating histories. Although the Company has experienced revenue growth in
recent periods, historical growth rates may not be sustained and are not
necessarily indicative of future operating results. The Company incurred
operating losses of $2.1 million, $3.3 million, $3.8 million and $1.9 million
for the three months ended March 31, 1998 and the years ended December 31, 1997,
1996 and 1995, respectively. There can be no assurance that operating losses
will not increase in the future or that the Company will ever achieve or sustain
profitability on a quarterly or annual basis. To the extent that revenues do not
grow at anticipated rates, increases in operating expenses precede or are not
subsequently followed by commensurate increases in revenues or the Company is
unable to adjust operating expense levels accordingly, the Company's business,
financial condition and results of operations will be materially adversely
affected. As of March 31, 1998, the Company had an accumulated deficit of $12.6
million.
Potential Fluctuations in Quarterly Performance. The Company's revenues
and operating results have varied substantially from quarter to quarter. The
Company's quarterly operating results may continue to fluctuate due to a number
of factors, including the timing, size and nature of the Company's licensing
transactions, lengthy and unpredictable sales cycles, the timing of introduction
and market acceptance of new products or product enhancements by the Company or
its competitors, product and price competition, the relative proportions of
revenues derived from license fees and services, changes in the Company's
operating expenses, software bugs or other product quality problems, personnel
changes and fluctuations in economic and financial market conditions.
The Company recognizes software license revenues upon delivery and, if
required by the contract, upon customer acceptance, if such criteria is other
than perfunctory, which typically does not occur in the same quarter in which
the software license agreement for the system is signed. As a result, the
Company is constrained in its ability to increase its software license revenue
in any quarter if there are unexpected delays in delivery or required acceptance
of systems for which software licenses were signed in previous quarters.
Implementation of the OSI System typically occurs over 14 to 24 weeks, and the
Company currently has limited implementation resources. As a result of the
Company's limited operating history and experience in the implementation of the
OSI System, the Company may from time to time experience delays and difficulties
in implementation of the OSI System. Delays in the delivery, implementation or
any required acceptance of the Company's products, including delays resulting
from constraints upon the Company's limited installation resources, could
materially adversely affect the Company's quarterly results of operations. In
addition, increased sales and marketing expenses for any given quarter will
negatively impact operating results of such quarter due to a lack of recognition
of associated revenues until the subsequent delivery of the product.
The Company's expense levels are based, in significant part, on its
expectations as to future revenues and are largely fixed in the short term. As a
result, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected shortfall in revenues. Accordingly, any
significant shortfall of revenues in relation to the Company's expectations
would have an immediate and materially adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company plans to
increase operating expenses to expand its installation, product development,
sales and marketing and administrative organizations. The timing of such
expansion and the rate at which new personnel become productive could cause
material fluctuations in quarterly results of operations.
6
<PAGE> 9
The Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful. There can be no assurance that future
revenues and results of operations will not vary substantially. It is also
possible that in some future quarter the Company's results of operations will be
below the expectations of public market analysts and investors. In either case,
the price of the Company's Common Stock could be materially adversely affected.
Acceptance of OSI System. The Company's revenues are derived primarily
from two sources: (i) license fees for software products and (ii) fees for a
full range of services complementing its products, including implementation,
training, and support and maintenance services. Substantially all of these fees
are attributable to licenses of the OSI System. Although the use of
client/server technology has grown in the banking and credit union industry in
recent years, the client/server market is still an emerging market. Moreover,
banks and credit unions historically have been slow to adapt to and accept new
technologies, including client/server systems. The Company's future financial
performance will depend in large part on continued growth in the number of banks
and credit unions utilizing client/server technology. Accordingly, if the
client/server market fails to grow or grows more slowly than the Company
currently anticipates, the Company's business, financial condition and results
of operations could be materially adversely affected. In addition, a significant
portion of all banks and credit unions have traditionally satisfied their
information technology needs through a service bureau or outsourcing solution.
Upon purchasing the OSI System, these customers will be required to employ
information technology personnel in order to successfully operate and maintain
the OSI System. There can be no assurance that the Company's customers will be
able to hire and retain such personnel or that any inability to do so will not
affect their ability to successfully operate and maintain the OSI System which
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, the Company's future financial
performance will depend in part on the successful development, introduction and
customer acceptance of new and enhanced versions of the OSI System and other
products. A decline in demand for, or failure to achieve broad market acceptance
of, the OSI System or any enhanced version as a result of competition,
technological change or otherwise, will have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence on New Products and Rapid Technological Change; Product
Development Risk. The client/server application software market is characterized
by rapid technological change, frequent new product introductions and evolving
industry standards. The introduction of products embodying new technologies and
the emergence of new industry standards can render existing products obsolete
and unmarketable in short periods of time. The Company expects new products and
services, and enhancements to existing products and services, to be developed
and introduced by others, which will compete with the products and services
offered by the Company. The life cycles of the Company's products are difficult
to estimate. The Company's future success will depend upon the widespread
adoption of client/server application software in the banking and credit union
industry, as well as the Company's ability to enhance its current products and
to develop and introduce new products that keep pace with technological
developments and emerging industry standards and to address the increasingly
sophisticated needs of its customers. There can be no assurance that the Company
will be successful in developing and marketing new products or product
enhancements that meet these changing demands, that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of these products or that its new products and
product enhancements will adequately meet the demands of the marketplace and
achieve market acceptance.
Delays in the release of new and upgraded versions of the Company's
software products, particularly the Oracle relational database management
system, could have a material adverse effect on the Company's revenues and
results of operations. Because of the complexities inherent in developing
software products as sophisticated as those sold by the Company and the lengthy
testing periods associated with such products, no assurance can be given that
future product introductions by the Company will not be delayed. In addition,
complex software programs may contain
7
<PAGE> 10
undetected errors or bugs when they are first introduced or as new versions are
released. There can be no assurance that errors will not be found in the
Company's existing or future products or third-party products upon which the
Company's products are dependent, such as the Oracle relational database and
Microsoft Windows NT, with the possible result of delays in or loss of market
acceptance of the Company's products, diversion of the Company's resources,
injury to the Company's reputation and increased service, warranty expenses
and/or payment of damages.
Intense Competition. The market for the Company's products and services is
intensely competitive and subject to rapid technological change. Competitors
vary in size and in the scope and breadth of the products and services they
offer. The Company encounters competition from a number of sources, all of which
offer core software systems to the banking and credit union industry. The
Company expects additional competition from other established and emerging
companies as the client/server application software market continues to develop
and expand. The Company also expects that competition will increase as a result
of software industry consolidation, including particularly the acquisition of
any of its competitors or any of the client/server based retail banking system
providers by one of the larger service providers to the banking industry. The
Company encounters competition in the U.S. from a number of sources, including
Fiserv, Inc., NCR Corporation, Electronic Data Systems Corporation, Marshall &
Ilsley Corporation, M&I EastPoint, Phoenix International Ltd., Inc., Jack Henry
& Associates, Inc., ALLTEL Corporation, Prologic Corporation and Kirchman
Corporation, all of which offer core processing systems or outsourcing
alternatives to banks and credit unions. The Company also competes against a
number of smaller, regional competitors. In addition to these competitors, the
Company competes internationally with, Misys plc Banking Division (including
Midas-Kapiti International, Inc., Kindle Banking Systems and ACT Financial
Systems), Sanchez Computer Associates, Inc. and Financial Network Services,
among others. Some of the Company's current, and many of the Company's
potential, competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
engineering, technical, marketing and other resources than the Company. As a
result, they may be able to respond more quickly to new or emerging technologies
and changes in customer demands or to devote greater resources to the
development, promotion and sale of their products than the Company. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products to address the needs of the Company's prospective customers.
Accordingly, it is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share. The Company expects
that the banking and credit union software market will continue to attract new
competitors and new technologies, possibly involving alternative technologies
that are more sophisticated and cost effective than the Company's technology.
There can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competitive pressures faced by the
Company will not materially adversely affect its business, financial condition
and results of operations.
Management of Growth. The Company is currently experiencing a period of
rapid growth which has placed, and could continue to place, a strain on its
management and other resources. The Company's business has grown in size and
complexity over the past three years. Total revenues increased from $268,141 for
the year ended December 31, 1995 to $6.6 million for the year ended December 31,
1997 and to $2.3 million for the three months ended March 31, 1998. In addition,
the number of employees increased from 26 as of December 31, 1995 to 109 as of
March 31, 1998, and the Company expects to hire additional personnel during 1998
and 1999. The Company's need to manage its growth effectively will require it to
continue to implement and improve its operational, financial and other internal
systems on a timely basis, and to attract, train, motivate, manage and retain
its employees. If the Company's management is unable to manage growth
effectively or new employees are unable to achieve anticipated performance
levels, the Company's business, financial condition and results of operations
could be materially adversely affected. In addition, the Company from time to
time may seek acquisitions of businesses, products and technologies that are
complementary to those of the Company or that allow the Company to enter new
markets. Any such
8
<PAGE> 11
acquisition would place additional strains upon the Company's management and
other resources. Potential investors should consider the risks, expenses and
difficulties frequently encountered in connection with the operation and
development of an expanding business.
Reliance on New Customers. The Company historically has relied upon and
expects to continue to rely upon software license fees from new customers for a
substantial portion of its revenues. Most such licenses involve large dollar
amounts (typically ranging from $250,000 to $750,000), and the sales cycles for
these transactions are often lengthy and unpredictable. Any inability of the
Company to license and deliver the OSI System to a significant number of new
customers would have a material adverse effect on the Company's business,
financial condition and results of operations.
Expansion of Credit Union Customer Base. The Company's software for credit
unions, The Complete Credit Union Solution, has been installed to date at only
one credit union. There can be no assurance that The Complete Credit Union
Solution will be installed at additional credit unions or that it will achieve
wide customer acceptance. Any failure of the Company to successfully penetrate
the credit union industry could have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on the Banking and Credit Union Industry; Risk of
Consolidation. Substantially all of the Company's revenues are derived from
customers in the banking and credit union industry, primarily small to mid-size
banks, and the Company expects it will continue to derive substantially all of
its revenues from such customers for the foreseeable future. Unfavorable
economic conditions adversely impacting the banking and credit union industry
could have a material adverse effect on the Company's business, financial
condition and results of operations. For example, the banking and credit union
industry has experienced and may continue to experience cyclical fluctuations in
profitability, which may affect the willingness or ability of participants in
this industry to fund projects such as those for which the Company may be
engaged.
Merger and acquisition activity among financial institutions has been
widespread in recent years and is expected to continue in future years. As a
result, industry consolidation could have the effect of reducing the number of
current and potential customers of the Company. Any significant increase in the
level of such consolidation among small to mid-size banks and credit unions
could adversely affect the Company's business, financial condition and results
of operations.
Lengthy Sales Cycle. The Company's software is used for business-critical
purposes, and its implementation involves significant capital commitments by
customers. Potential customers generally commit significant resources to an
evaluation of available software and require the Company to expend substantial
time, effort and money educating them as to the value of the Company's software.
Sales of the Company's software products require an extensive education and
marketing effort throughout a customer's organization because decisions to
license such software generally involve the evaluation of the software by a
significant number of customer personnel in various functional areas, each
having specific and often conflicting requirements. A variety of factors,
including factors over which the Company has little or no control, may cause
potential customers to favor a competing vendor or to delay or forego a
purchase. In addition, the sales cycles associated with these transactions are
subject to a number of uncertainties, including customers' budgetary
constraints, the timing of the expiration of customers' current system license
agreements or outsourced core processing agreements, the timing of customers'
budget cycles and approval processes and customers' willingness to implement a
client/server operating environment. As a result of these or other factors, the
sales cycle for the Company's products is long, typically ranging between six to
nine months. Due to the length of the sales cycle for its software products, the
Company's ability to forecast the timing and amount of specific sales is
limited, and the delay or failure to complete one or more large license
transactions could have a material adverse effect on the Company's business,
financial condition and results of operations.
9
<PAGE> 12
Reliance on and Expansion of Sales Force and Third-Party Outsourcing
Agreements. The Company relies primarily on its direct sales force for sales of
the OSI System. The Company will be required to hire additional sales, customer
service and implementation personnel in 1998 and beyond if the Company is to
achieve revenue growth in the future. Competition for such personnel is intense,
and there can be no assurance that the Company will be able to retain its
existing sales, customer service and implementation personnel or will be able to
attract, assimilate or retain such additional highly qualified personnel in the
future. If the Company is unable to hire such personnel on a timely basis, its
business, financial condition and results of operations could be materially
adversely affected.
The Company has entered into exclusive license and marketing arrangements
with two providers of outsourcing services to financial institutions, The BISYS
Group, Inc. ("BISYS") and Connecticut On-Line Computer Center, Inc. ("COCC").
Accordingly, the Company's success depends in part on the ultimate success of
these license and marketing arrangements, including the effort and resources
expended by such providers to market outsourcing services using the OSI System.
Dependence on Key Personnel. The Company's future success depends to a
significant extent on the Company's executive officers and key employees,
including the Company's sales force and software professionals, particularly
project managers, software engineers and other senior technical personnel. The
loss of the services of any of these individuals or group of individuals could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company does not maintain any key person life
insurance for any of its executive officers or key employees. Competition for
qualified personnel in the software industry is intense and the Company competes
for such personnel with other software companies that have greater financial and
other resources. The future success of the Company will depend in large part on
its ability to attract, retain and motivate highly qualified personnel, and
there can be no assurance that the Company will be able to do so. The Company
has from time to time experienced difficulty in locating and retaining
candidates with appropriate qualifications.
Dependence on Third-Party Technology. The Company's proprietary software
is currently designed, and may in the future be designed, to work on or in
conjunction with certain third-party hardware and/or software products,
including the Microsoft Windows NT operating system with an Oracle relational
database. Although the Company believes that there are alternatives for these
products, any significant interruption in the supply of such third-party
hardware and/or software could have a material adverse effect on the Company's
sales unless and until the Company can replace the functionality provided by
these products. In addition, the Company is to a certain extent dependent upon
such third-parties' abilities to enhance their current products, to develop new
products on a timely and cost-effective basis and to respond to emerging
industry standards and other technological changes. There can be no assurance
that the Company would be able to replace the functionality provided by the
third-party hardware and/or software currently offered in conjunction with the
Company's products in the event that such hardware and/or software becomes
obsolete or incompatible with future versions of the Company's products or is
otherwise not adequately maintained or updated. The absence of or any
significant delay in the replacement of that functionality could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Concentration of Customers. Historically, a limited number of customers
have accounted for a significant percentage of the Company's revenues in each
year. For the year ended December 31, 1997, two bank customers accounted for 17%
and 15% of the Company's total revenues. For the year ended December 31, 1996,
four bank customers accounted for 38%, 22%, 20% and 14% of the Company's total
revenues. Although the Company expects that its reliance on any particular
customer will decline as its customer base expands, the failure of the Company
to enter into a sufficient number of licensing agreements during a particular
period could have a material adverse effect on the Company's business, financial
condition and results of operations.
10
<PAGE> 13
Year 2000 Issues. A portion of the growth in the Company's revenues in
1997 and the first quarter of 1998 resulted from the Company's ability to
provide banking applications that resolve the Year 2000 problem. As the overall
demand for Year 2000 solutions declines, there can be no assurance that the
demand for the Company's products and services will not be materially adversely
affected. Although the Company believes the OSI System complies with Year 2000
requirements, there can be no assurance that customers will not encounter
difficulties with the OSI System arising from Year 2000 issues. In addition,
there can be no assurance that Year 2000 issues will not adversely affect
third-party network or application software that is integrated with the OSI
System.
Potential for Contract Liability. Failures in a customer's system could
result in an increase in service and warranty costs or a claim for substantial
damages against the Company. There can be no assurance that the limitations of
liability set forth in the Company's contracts would be enforceable or would
otherwise protect the Company from liability for damages. The Company maintains
general liability insurance coverage, including coverage for errors and
omissions in excess of the applicable deductible amount. There can be no
assurance that such coverage will continue to be available on acceptable terms
or will be available in sufficient amounts to cover one or more large claims, or
that the insurer will not deny coverage as to any future claim. The successful
assertion of one or more large claims against the Company that exceeds available
insurance coverage, or the occurrence of changes in the Company's insurance
policies, including premium increases or the imposition of large deductible or
co-insurance requirements, could have a material adverse effect on the Company's
business, financial condition and results of operations. Furthermore,
litigation, regardless of its outcome, could result in substantial cost to the
Company and divert management's attention from the Company's operations. Any
contract liability claim or litigation against the Company could, therefore,
have a material adverse effect on its business, financial condition and results
of operations. Because many of the Company's projects are business-critical
projects for financial institutions, a failure or inability to meet a customer's
expectations could seriously damage the Company's reputation and affect its
ability to attract new business.
Government Regulation. While the Company's operations are not directly
regulated by banking authorities, the Company's existing and potential customers
are subject to extensive federal, state and foreign governmental regulations.
Such regulations may adversely affect the banking and credit union industry,
limit the number of potential customers for the Company's products and services
or otherwise have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, governmental regulation in the
financial services industry is evolving, particularly with respect to banking
technology. There can be no assurance that future changes in such regulations or
in their interpretation will not adversely affect the business of the Company.
Dependence on Intellectual Property Rights; Risk of Infringement. The
Company relies on a combination of copyright, trademark and trade secret laws,
nondisclosure agreements and other contractual provisions and technical measures
to protect its intellectual property rights. There can be no assurance that
these protections will be adequate to prevent the Company's competitors from
copying or reverse-engineering the Company's products, or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technology. The Company does not include
in its products any mechanism to prevent unauthorized copying and any such
unauthorized copying could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company has no
patents, and existing copyright laws afford only limited protection for the
Company's intellectual property rights and will not protect such rights in the
event competitors independently develop products similar to those of the
Company. In addition, the laws of certain countries in which the Company's
products are or may be licensed do not protect the Company's products and
intellectual property rights to the same extent as the laws of the United
States.
Although the Company has never been the subject of a material intellectual
property dispute, there can be no assurance that a third party will not assert
that the Company's technology violates its
11
<PAGE> 14
intellectual property rights in the future. As the number of software products
in the Company's target market increases and the functionality of these products
further overlap, the Company believes that software developers may become
increasingly subject to infringement claims. Any such claims, whether with or
without merit, can be time consuming and expensive to defend. There can be no
assurance that third parties will not assert infringement claims against the
Company in the future with respect to its current or future products or that any
such assertion will not require the Company to enter into royalty arrangements
(if available) or litigation that could be costly to the Company.
Significant Influence by Directors, Officers and Principal
Stockholders. Upon completion of this offering, the Company's directors,
officers and certain principal stockholders of the Company will beneficially own
approximately [ ]% of the Company's outstanding Common Stock. These
stockholders, if acting together, would have the ability to elect the Company's
directors and may have the ability to determine the outcome of corporate actions
requiring stockholder approval, irrespective of how other stockholders of the
Company may vote. This concentration of ownership may have the effect of
delaying or preventing a change in control of the Company.
Broad Discretion as to Use of Proceeds. The net proceeds from this
offering will be used, as determined by management in its sole discretion, for
working capital and general corporate purposes, as well as for the possible
acquisition of additional businesses and technologies that are complementary to
the current or future business of the Company. However, the Company has not
determined the specific allocation of the net proceeds among the various uses
described above. The Company's management will have broad discretion over the
use and investment of such net proceeds, and, accordingly, investors in this
offering will rely upon the judgment of the Company's management with respect to
the use of proceeds, with only limited information concerning management's
specific intentions.
No Prior Public Market for Common Stock; Possibility of Volatility of Stock
Price. Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained after this offering or that the market price of the Common Stock
will not decline below the initial public offering price. The initial public
offering price will be determined by negotiations between the Company and the
Representatives of the Underwriters and is not necessarily indicative of the
market price at which the Common Stock of the Company will trade after this
offering. The market prices for securities of technology companies have been
highly volatile and the market has experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. Announcements of technological innovations or new products or service
offerings by the Company or its competitors, developments concerning proprietary
rights, including patents and litigation matters, domestic or international
regulatory developments affecting the banking and credit union industry, general
market conditions, any shortfall in revenues or earnings from expected levels or
other failures by the Company to meet expectations of securities analysts and
other factors, may have a significant impact on the market price of the Common
Stock.
Dividends. No cash dividends have been declared or paid on its capital
stock to date and the Company does not anticipate paying cash dividends in the
foreseeable future. In addition, under the terms of the Company's credit
agreement there are certain restrictions on the Company's ability to declare and
pay dividends.
Dilution. Purchasers of shares of Common Stock in this offering will
suffer an immediate and substantial dilution in the net tangible book value of
the Common Stock from the initial public offering price.
Shares Eligible for Future Sale; Registration Rights. Sales of substantial
amounts of shares of Common Stock in the public market following this offering
could adversely affect the market price of the Common Stock. Upon completion of
this offering, the Company will have outstanding [ ] shares of Common
Stock. On the date of this Prospectus, in addition to the [ ] shares
offered hereby, approximately [ ] shares of Common Stock, which are not
subject to
12
<PAGE> 15
180-day lock-up agreements (the "Lock-up Agreements") with the Representatives
of the Underwriters, will be eligible for immediate sale in the public market
pursuant to Rule 144(k) under the Securities Act of 1933, as amended (the
"Securities Act"). Approximately [ ] additional shares of Common Stock,
which are not subject to the Lock-up Agreements, will be eligible for sale in
the public market in accordance with Rule 144 or Rule 701 under the Securities
Act beginning 90 days after the date of this Prospectus. Upon expiration of the
Lock-up Agreements 180 days after the date of this Prospectus, approximately
[ ] additional shares of Common Stock will be available for sale in the
public market, subject to the provisions of Rule 144 under the Securities Act.
Promptly following the consummation of this offering, the Company intends to
register an aggregate of [ ] shares of Common Stock issuable under its
1994 Stock Option Plan, 1998 Employee Stock Purchase Plan and 1998 Stock
Incentive Plan. Holders of approximately [ ] shares of Common Stock
(including [ ] shares of Common Stock that may be acquired pursuant to
the exercise of options and warrants held by them) have agreed, pursuant to the
Lock-up Agreements, not to directly or indirectly offer, sell, pledge, contract
to sell, grant any option to purchase or otherwise dispose of such shares for
180 days after the date of the final Prospectus. The Company is unable to
predict the effect that sales made under Rule 144, or otherwise, may have on the
then prevailing market price of the Common Stock. The holders of approximately
[ ] shares of Common Stock are entitled to certain incidental and
demand registration rights with respect to such shares. By exercising their
registration rights, such holders could cause a large number of shares to be
registered and sold in the public market. Sales pursuant to Rule 144 or other
exemptions from registration, or pursuant to registration rights, may have an
adverse effect on the market price for the Common Stock and could impair the
Company's ability to raise capital through offerings of its equity securities.
Antitakeover Provisions. The Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") requires that any
action required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by any consent in writing, and requires advance notice by, and
certain information from, a stockholder of a proposal or director nomination
which such stockholder desires to present at any annual or special meeting of
stockholders. Special meetings of stockholders may be called only by the
Chairman of the Board or the President of the Company or by the Board of
Directors. The Restated Certificate of Incorporation provides for a classified
Board of Directors, and members of the Board of Directors may be removed only
for cause upon the affirmative vote of holders of at least 75% of the votes
which all the stockholders would be entitled to cast in any annual election of
directors or class of directors. In addition, shares of the Company's Preferred
Stock may be issued in the future without further stockholder approval and upon
such terms and conditions, and having such rights, privileges and preferences,
as the Board of Directors may determine. The rights of the holders of Common
Stock will be subject to, and may be adversely affected by, the rights of any
holders of Preferred Stock that may be issued in the future. The Company has no
present plans to issue any shares of Preferred Stock. These provisions, and
other provisions of the Restated Certificate of Incorporation, the Company's
By-laws and certain provisions of the Delaware corporation law, may have the
effect of deterring hostile takeovers or delaying or preventing acquisition
proposals or changes in control or management of the Company, including
transactions in which stockholders might otherwise receive a premium for their
shares over then current market prices. In addition, these provisions may limit
the ability of stockholders to approve transactions that they may deem to be in
their best interests.
13
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the [ ] shares of
Common Stock offered by the Company hereby are estimated to be $[ ]
after deducting the estimated underwriting discounts and commissions and
offering expenses payable by the Company and assuming an initial public offering
price of $[ ] per share. The Company will not receive any of the net
proceeds from the sale of shares by the Selling Stockholders. See "Principal and
Selling Stockholders."
The principal purposes of this offering are to increase the Company's
equity capital, to create a public market for the Company's Common Stock, to
facilitate future access by the Company to public equity markets, to provide
liquidity to existing stockholders, to provide increased visibility and
credibility in a marketplace where several of its current and potential
competitors are or will be publicly held companies, and to enhance the ability
of the Company to use its Common Stock as consideration for acquisitions and as
a means of attracting and retaining key employees.
The Company expects to use the net proceeds from this offering for working
capital and other general corporate purposes, including expansion of its
facilities. The Company has not as yet identified specific uses for such
proceeds and will have discretion over their use and investment. Pending use of
the net proceeds, the Company intends to invest the net proceeds from this
offering in short-term, investment grade, interest-bearing instruments. See
"Risk Factors -- Broad Discretion as to Use of Proceeds."
The Company may seek acquisitions of businesses, products and technologies
that are complementary to those of the Company, and a portion of the net
proceeds may also be used for such acquisitions. While the Company engages from
time to time in discussions with respect to potential acquisitions, the Company
has no plans, commitments or agreements with respect to any such acquisitions as
of the date of this Prospectus, and there can be no assurances that any
acquisitions will be made.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support its
growth strategy and does not anticipate paying cash dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of the
Company's Board of Directors after taking into account various factors,
including the Company's financial condition, operating results, current and
anticipated cash needs and plans for expansion. Under the terms of the Company's
credit agreement there are certain restrictions on the Company's ability to
declare and pay dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and Note 6 of Notes to the Company's Financial Statements.
14
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998 (i) on an actual basis, (ii) on a pro forma basis giving effect,
upon the closing of this offering, to the conversion of all outstanding shares
of the Company's Convertible Preferred Stock into an aggregate of 5,308,472
shares of Common Stock and the filing of the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock,
eliminate the terms of the Company's existing series of Convertible Preferred
Stock and create a class of authorized but undesignated Preferred Stock and
(iii) on a pro forma basis, as adjusted to reflect the issuance and sale of the
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $[ ] per share, after deducting the
estimated underwriting discounts and commissions and offering expenses. The
capitalization information set forth in the table below is qualified by the
Company's Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Long-term debt, less current portion(1)..................... $ 57,778 $ 57,778
------------ ------------
Mandatorily redeemable convertible preferred stock:
Series A-2 Preferred Stock, $0.01 par value; 166,667
shares authorized, 166,667 issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted)................... 500,000 --
Series B Preferred Stock, $0.01 par value; 1,736,250
shares authorized, 1,627,916 issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted)................... 4,930,333 --
Series C Preferred Stock, $0.01 par value; 1,375,000
shares authorized, 1,263,889 issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted)................... 5,731,482 --
Series D Preferred Stock, $0.01 par value; 1,250,000
shares authorized, 833,333 issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted)................... 4,977,734 --
------------ ------------
16,139,549 --
------------ ------------
Stockholders' equity:
Series A-1 Preferred Stock, $0.01 per value; 1,000,000
shares authorized, 1,000,000 issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted)................... 10,000 --
Series A-2 Preferred Stock, $0.01 par value; 416,667
shares authorized, 416,667 issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted)................... 4,167 --
Preferred Stock, $0.01 par value; no shares authorized,
issued or outstanding (actual); 5,000,000 shares
authorized, no shares issued and outstanding (pro forma
and pro forma as adjusted).............................. -- --
Common Stock, $0.01 par value; 19,055,417 shares
authorized, 2,165,804 issued and outstanding (actual);
50,000,000 shares authorized, 7,474,276 (pro forma) and
[ ] (pro forma as adjusted) shares issued and
outstanding(2).......................................... 21,658 74,743
Additional paid-in capital................................ 4,291,481 20,392,112
Accumulated deficit....................................... (12,571,239) (12,571,239)
------------ ------------
Total stockholders' equity (deficit).................... (8,243,933) 7,895,616
------------ ------------
Total capitalization................................ $ 7,953,394 $ 7,953,394
============ ============
</TABLE>
- ---------------
(1) See Note 6 of Notes to the Company's Financial Statements.
(2) Excludes an aggregate of 1,643,125 shares of Common Stock subject to options
outstanding as of March 31, 1998 at a weighted average exercise price of
$0.58 per share, of which options to purchase 1,018,836 shares of Common
Stock are exercisable. Also excludes an aggregate of 636,111 shares of
Common Stock issuable upon the exercise of outstanding warrants as of March
31, 1998 at a weighted average exercise price of $5.66 per share, all of
which are exercisable. See "Risk Factors -- Shares Eligible for Future Sale;
Registration Rights," "Management -- Stock Plans," "Description of Capital
Stock -- Warrants" and Notes 7 and 9 of Notes to the Company's Financial
Statements.
15
<PAGE> 18
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1998
was $7,329,102 or $0.98 per share of Common Stock. Pro forma net tangible book
value per share is determined by dividing the Company's tangible net worth
(tangible assets less liabilities) by the number of shares of Common Stock
outstanding, after giving effect to the mandatory conversion of the Company's
Convertible Preferred Stock upon the completion of this offering. After giving
effect to the sale of the shares of Common Stock offered by the Company hereby
at an assumed initial public offering price of $[ ] per share and after
deducting the estimated underwriting discounts and commissions and offering
expenses, the pro forma net tangible book value of the Company as of March 31,
1998 would have been $[ ] per share. This represents an immediate increase
in such pro forma net tangible book value of $[ ] per share to existing
stockholders and an immediate dilution of $[ ] per share to new investors
purchasing shares in this offering. If the initial public offering price is
higher or lower, the dilution to the new investors will be greater or less,
respectively. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of March
31, 1998............................................... $
Increase per share attributable to this offering..........
------
Pro forma net tangible book value per share after this
offering..................................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1998,
the total number of shares of Common Stock purchased from the Company, the total
consideration paid and the average consideration paid per share by the existing
stockholders and by the new investors based (for new investors) upon an assumed
initial public offering price of $[ ] per share (before deducting the
estimated underwriting discounts and commissions and offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)..... 7,474,276 % $19,031,128 % $ 2.55
New investors................ $
---------- ----- ----------- ----- ------
Total................... % $ %
========== ===== =========== =====
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to [ ], or approximately
[ ]% of the total number of shares of Common Stock outstanding
after this offering (or [ ] shares and approximately
[ ]% if the Underwriters' over-allotment option is exercised
in full), and will increase the number of shares held by new investors to
[ ], or approximately [ ]% of the total number
of shares of Common Stock outstanding after this offering (or
[ ] shares and approximately [ ]% if the
Underwriters' over-allotment option is exercised in full).
16
<PAGE> 19
SELECTED FINANCIAL DATA
The selected financial data set forth below as of December 31, 1997 and
1996, and for the three years ended December 31, 1997 are derived from the
Company's financial statements, which appear elsewhere in this Prospectus and
which have been audited by Price Waterhouse LLP, independent accountants. The
selected financial data set forth below as of December 31, 1995 and 1994, and
for the year ended December 31, 1994 are derived from the Company's audited
financial statements which are not included in this Prospectus. The selected
financial data set forth below as of and for the year ended December 31, 1993
are derived from the Company's unaudited financial statements which are not
included in this Prospectus. The selected financial data set forth below as of
March 31, 1998, and for the three months ended March 31, 1998 and 1997 are
derived from the Company's unaudited financial statements, which appear
elsewhere in this Prospectus. In the opinion of management, the unaudited
financial statements have been prepared on a basis consistent with the financial
statements which appear elsewhere in this Prospectus and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the financial position and results of operations for these
unaudited periods. The operating results for the three months ended March 31,
1998 are not necessarily indicative of the results to be expected for the full
year ending December 31, 1998. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's financial statements, including the
notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license.................. $ -- $ -- $ 213 $ 801 $ 4,099 $ 693 $ 1,158
Service and maintenance........... 95 -- 55 218 2,550 289 1,176
--------- --------- --------- --------- --------- --------- ---------
Total revenues.................. 95 -- 268 1,019 6,649 982 2,334
Cost of revenues:
Software license.................. -- -- 223 507 1,160 219 333
Service and maintenance........... 25 -- 477 1,530 3,150 732 987
--------- --------- --------- --------- --------- --------- ---------
Total cost of revenues.......... 25 -- 700 2,037 4,310 951 1,320
Operating expenses:
Sales and marketing............... 60 136 398 1,051 2,132 458 784
Product development............... 436 985 661 1,060 1,902 472 444
General and administrative........ 50 84 399 645 1,569 324 643
Contract termination.............. -- -- -- -- -- -- 1,265
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses........ 546 1,205 1,458 2,756 5,603 1,254 3,136
--------- --------- --------- --------- --------- --------- ---------
Loss from operations................ (476) (1,205) (1,890) (3,774) (3,264) (1,223) (2,122)
Interest income (expense), net...... (37) 14 (5) 136 209 44 95
--------- --------- --------- --------- --------- --------- ---------
Net loss............................ $ (513) $ (1,191) $ (1,895) $ (3,638) $ (3,055) $ (1,179) $ (2,027)
========= ========= ========= ========= ========= ========= =========
Net loss per common share (basic and
diluted).......................... $ (0.25) $ (0.61) $ (0.98) $ (1.73) $ (1.42) $ (0.55) $ (0.94)
Weighted average common shares used
to compute net loss per share..... 2,079 1,955 1,936 2,103 2,155 2,136 2,166
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------- MARCH 31,
1993 1994 1995 1996 1997 1998
----- ----- ------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 2 $ 652 $ 3,914 $ 4,438 $ 7,596 $ 7,346
Working capital (deficit)................................. (100) 660 3,570 4,901 6,198 6,232
Total assets.............................................. 67 771 4,354 7,546 11,302 11,686
Long-term debt, less current portion...................... 730 250 -- -- 58 58
Mandatorily redeemable convertible preferred stock........ -- -- 5,092 10,573 15,551 16,140
Stockholders' equity (deficit)............................ (764) 521 (1,253) (4,779) (7,826) (8,244)
</TABLE>
17
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading provider of client/server core processing software
and related services to small to mid-size banks and credit unions. The Company
established operations in May 1992, and released its first major product, The
Complete Banking Solution, in the second quarter of 1995. The Company released a
second major product, The Complete Credit Union Solution, in the first quarter
of 1998. These two products (the "OSI System") are fully-integrated suites of
banking and credit union applications that operate in a Windows NT environment
using an Oracle relational database. The OSI System supports an institution's
entire core processing requirements, including deposits and loans, teller
functions, home/Internet banking and platform automation.
As of June 30, 1998, the OSI System had been implemented in [ ] banks
and [ ] credit union and an additional [ ] institutions were under
contract. In addition, through June 30, 1998, BISYS and COCC had placed orders
with the Company for [ ] OSI Systems. New license agreements for OSI Systems
totaled four in 1995, 15 in 1996, 17 in 1997 and [ ] for the current year
through June 30, 1998. To date, all of the Company's sales have been in the
United States.
The Company currently markets its products in the United States directly
and, through an alliance with Unisys PAAG ("Unisys"), in Asia (except Japan),
South Africa and certain other countries. The Company has established software
license and marketing agreements with BISYS and COCC under which these third
parties use the OSI System to provide core processing services to banks and
credit unions on an outsourced basis. Under the agreement with BISYS, software
license fees are paid to the Company over a three-year period following BISYS'
implementation of each OSI System. No revenue had been recognized under the
BISYS agreement through March 31, 1998. Under the agreement with COCC, software
license fees are paid, and revenues are recognized, upon implementation of each
OSI System. Under this agreement, once cumulative software license fees total a
stipulated amount, COCC is released from any further obligation to pay license
fees. This release is subject to a one-time payment in December 2002 if the
asset base of COCC's customers has exceeded a specified amount. Under both the
BISYS and COCC agreements, the Company is also entitled to annual support and
maintenance payments on each installed OSI System. The Company recognized
revenue of $250,000 in the three months ended March 31, 1998 for the delivery of
the OSI System source code to COCC. The Company will earn an additional $250,000
for implementation assistance on the first three COCC customers. Apart from
these fees, the Company does not expect to recognize significant revenues from
its agreements with Unisys and COCC until at least 1999.
The Company's revenues are primarily derived from two sources: (i) software
license revenues and (ii) service and maintenance fees. Software license
revenues primarily include revenues from software licenses for the OSI System.
The Company also derives software license revenues from the sale of third-party
software sublicensed by the Company. Software license fees are generally based
on the bank's asset size and the number of accounts and typically are payable
upon delivery of the software. The Company derives service and maintenance
revenues from (i) implementation and training fees, which are based on customer
size and the magnitude and complexity of the project and (ii) customer support
and maintenance fees for providing on-going support and product updates.
Customer support and maintenance fees are established as a percentage of the
list price for the software license and are paid annually.
Effective January 1, 1997 the Company adopted AICPA Statement of Position
97-2, "Software Revenue Recognition" ("SOP 97-2"). Under SOP 97-2, the Company
recognizes software license revenue when a noncancelable license agreement has
been executed, fees are fixed and determinable, the software has been delivered,
and accepted by the customer if acceptance is required by the contract and other
than perfunctory, and collection is considered probable. Prior to 1997, the
18
<PAGE> 21
Company recognized software license revenue in accordance with AICPA Statement
of Position 91-1, "Software Revenue Recognition" ("SOP 91-1"). Under SOP 91-1,
the Company recognized software license revenue when the software was delivered,
collectibility was probable and no other significant post-delivery obligations
remained.
In December 1997, the Company revised its standard end user license
agreement to eliminate certain customer acceptance provisions that required the
deferral of software license revenue recognition until after implementation was
completed. The Company expects that its future licensing arrangements will
generally be governed by the revised license agreement, although licenses sold
under the previous agreement will continue to affect revenue recognition through
1998 and certain new agreements may contain acceptance or other provisions that
have the effect of deferring revenue recognition. Such differences in the timing
of revenue recognition will impact the comparability of the Company's historical
revenues and operating results to future results of operations.
The Company continues to evaluate and address business and operational
issues related to Year 2000 compliance, and believes that its internal
management systems and software products are in such compliance. The Company
expects that the total cost to the Company to address any potential Year 2000
issues will not be material to operations.
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of
revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- ---------------
1995 1996 1997 1997 1998
------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Revenues:
Software license........................... 79.3% 78.6% 61.7% 70.6% 49.6%
Service and maintenance.................... 20.7 21.4 38.3 29.4 50.4
------ ------ ----- ------ -----
Total revenues.......................... 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Software license........................... 83.2 49.8 17.4 22.3 14.3
Service and maintenance.................... 177.9 150.1 47.4 74.5 42.3
------ ------ ----- ------ -----
Total cost of revenues.................. 261.1 199.9 64.8 96.8 56.6
Operating expenses:
Sales and marketing........................ 148.6 103.0 32.1 46.7 33.6
Product development........................ 246.3 104.0 28.6 48.0 19.0
General and administrative................. 149.0 63.3 23.6 32.9 27.6
Contract termination....................... -- -- -- -- 54.2
------ ------ ----- ------ -----
Total operating expenses................ 543.9 270.3 84.3 127.6 134.4
Loss from operations......................... (705.0) (370.2) (49.1) (124.4) (91.0)
Interest income (expense), net............... (1.7) 13.3 3.2 4.4 4.1
------ ------ ----- ------ -----
Net loss..................................... (706.7)% (356.9)% (45.9)% (120.0)% (86.9)%
====== ====== ===== ====== =====
</TABLE>
Three Months Ended March 31, 1998 and March 31, 1997
Revenues. Revenues increased 137.6% to $2.3 million for the three months
ended March 31, 1998 from $982,273 for the three months ended March 31, 1997.
Software license revenues increased 67.1% to $1.2 million for the three months
ended March 31, 1998 from $693,145 for the three months ended March 31, 1997.
This increase of software license revenues was primarily due to
19
<PAGE> 22
increased sales of the OSI System. In addition, during the three months ended
March 31, 1998, the Company recognized revenues of $250,000 upon delivery of
source code to COCC for the OSI System pursuant to the agreement with COCC. For
the three months ended March 31, 1998 and 1997, software license revenues
included $212,235 and $194,145, respectively, related to third-party software
products, primarily Oracle's relational database management software, which were
sold by the Company with the OSI System under various sublicense agreements.
Service and maintenance revenues increased 306.6% to $1.2 million for the three
months ended March 31, 1998 from $289,128 for the three months ended March 31,
1997. This increase in service and maintenance revenues was primarily due to
implementation fees on a larger number of completed or in-process installations
and, to a lesser extent, an increase in the installed base of customers under
support and maintenance agreements. The Company's installed customer base was 27
at March 31, 1998 compared with 11 at March 31, 1997.
The Company's backlog at March 31, 1998 was approximately $7.2 million,
which represented the unrecognized portion of contractually committed software
license and implementation fees.
Cost of revenues. Cost of software license revenues consists primarily of
sublicense fees paid on third-party software products that are sold with the OSI
System, including Oracle's relational database product, amortization of
capitalized software development costs and personnel and other costs to develop
and produce media and documentation. The Company amortizes capitalized software
development costs over a three-year period. Through March 1998, cost of revenues
also included royalties paid to Banking Spectrum Services, Inc., a shareholder
of the Company ("Banking Spectrum") for certain consulting and support services.
In March 1998, the Company entered into an agreement with Banking Spectrum that
released it from paying future royalties to Banking Spectrum. (See Note 13 of
Notes to the Company's Financial Statements). Cost of service and maintenance
fees primarily consists of personnel and related facility expenses associated
with implementation, training and consulting activities, and ongoing customer
support and product maintenance activities.
Total cost of revenues increased 38.8% to $1.3 million for the three months
ended March 31, 1998 from $951,131 for the three months ended March 31, 1997. As
a percent of total revenues, total cost of revenues decreased to 56.6% for the
three months ended March 31, 1998 from 96.8% for the three months ended March
31, 1997, reflecting higher total revenues and productivity gains in the
implementation, training and customer support functions.
Cost of software license revenues increased 51.9% to $332,675 for the three
months ended March 31, 1998 from $218,976 for the three months ended March 31,
1997. This increase was primarily due to an increase in the number of Oracle
relational database licenses required to support a greater number of new
installations, and increased royalties paid to Banking Spectrum. Cost of
software license revenues as a percent of software license revenues decreased to
28.7% for the three months ended March 31, 1998 from 31.6% for the three months
ended March 31, 1997. This decline was primarily due to a larger software
license fee revenue base over which to spread costs.
Cost of service and maintenance revenues increased 34.9% to $987,697 for
the three months ended March 31, 1998 from $732,155 for the three months ended
March 31, 1997. This increase is primarily due to the hiring of additional
personnel in the implementation, training and customer support departments. Cost
of service and maintenance revenues as a percentage of service and maintenance
revenues decreased to 84.0% for the three months ended March 31, 1998 from
253.2% for the three months ended March 31, 1997. This decrease was primarily
due to a larger service and maintenance revenue base and productivity gains
achieved in the implementation, training and support functions with a larger
number of installations and a larger installed base.
Sales and marketing. Sales and marketing expenses primarily include
personnel costs associated with the Company's sales and marketing activities,
including sales commissions, travel and related overhead, and expenses incurred
in connection with trade shows, advertising, product literature and other
promotional activities. Sales and marketing expenses increased 71.0% to
20
<PAGE> 23
$784,274 for the three months ended March 31, 1998 from $458,562 for the three
months ended March 31, 1997. This increase was primarily due to an increase in
sales department personnel and increased sales commissions paid on higher
revenues. Sales and marketing expenses as a percentage of total revenues
decreased to 33.6% for the three months ended March 31, 1998 from 46.7% for the
three months ended March 31, 1997. This decrease was primarily due to a larger
revenue base over which to spread costs.
Product development. Product development expenses consist of personnel and
related overhead expenses for programmers and outside consultants involved in
developing and maintaining new and existing software products. The Company
accounts for software development costs under Statement of Financial Accounting
Standards No. 86 "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed" ("SFAS 86"). Product development expenses are
charged to expenses as incurred until technological feasibility is established.
Thereafter, costs are capitalized until the product is released to the market.
The Company defines technological feasibility as the point in time at which the
Company has a working model of the related product. Capitalized software costs
are amortized over three years. Product development expenses decreased 6.0% to
$443,192 for the three months ended March 31, 1998 from $471,681 for the three
months ended March 31, 1997. This decrease was primarily due to increases in
capitalized software that offset increases in expenses associated with
additional staffing. The Company capitalized software development costs of
$107,986 and $34,977 for the three months ended March 31, 1998 and 1997,
respectively, in accordance with SFAS 86. Product development expenses as a
percentage of total revenues decreased to 19.0% for the three months ended March
31, 1998 from 48.0% for the three months ended March 31, 1997. This decrease was
primarily due to a larger revenue base over which to spread costs. The Company
anticipates that product development costs will increase in absolute terms in
future periods as the Company continues its development work on future releases
of the OSI System.
General and administrative. General and administrative expenses primarily
include personnel costs associated with the executive, administrative and
finance staff, as well as outside professional fees and other administrative
costs. General and administrative costs increased 98.6% to $642,922 for the
three months ended March 31, 1998 from $323,698 for the three months ended March
31, 1997. This increase was primarily due to the addition of personnel to
support the Company's growth. The Company believes that its costs of
professional services will continue to increase in future periods to accommodate
anticipated growth and expenses associated with its responsibilities as a public
company. General and administrative expenses as a percentage of total revenues
decreased to 27.6% for the three months ended March 31, 1998 from 32.9% for the
three months ended March 31, 1997. This decrease was primarily due to a larger
revenue base over which to spread costs.
Contract termination. In January 1994, the Company entered into an
agreement with Banking Spectrum to provide and receive certain consulting and
support services. Under the agreement, Banking Spectrum was entitled to three
percent of the Company's future license and maintenance revenues in exchange for
use of the Banking Spectrum products and Banking Spectrum's contributions to the
design of the Company's software, and an additional five percent of the
Company's future license and maintenance revenues for those future customers to
which Banking Spectrum provides compliance and regulatory support.
In March 1998, the Company and Banking Spectrum terminated their previous
agreement and entered into a distribution and termination agreement. The new
agreement released the Company from any future royalty payments to Banking
Spectrum in exchange for a cash payment of $100,000 to Banking Spectrum and
fully vested options to shareholders of Banking Spectrum to purchase 275,000
shares of Common Stock at an exercise price of $0.45 per share. The stock
options were estimated by management to have a fair value of approximately $1.6
million. Net of amounts previously accrued, the Company recorded a contract
termination expense of approximately $1.3 million for the three months ended
March 31, 1998.
21
<PAGE> 24
Interest income (expense), net. For the three months ended March 31, 1998,
the Company's cash balance was higher than in 1997 resulting in higher interest
income, which was partially offset by interest expense relating to an equipment
loan.
Years Ended December 31, 1997 and 1996
Revenues. Total revenues increased 552.3% to $6.6 million in 1997 from
$1.0 million in 1996. Software license revenues increased 411.5% to $4.1 million
in 1997 from $801,532 in 1996. This increase was primarily due to increased
sales of the OSI System. Service and maintenance revenues increased 1070.4% to
$2.5 million in 1997 from $217,861 in 1996. This increase in service and
maintenance revenues was primarily due to a larger number of completed or
in-process installations and, to a lesser extent, an increase in the installed
base of customers under support and maintenance agreements.
Cost of revenues. Total cost of revenues increased 111.5% to $4.3 million
in 1997 from $2.0 million in 1996. This increase was primarily due to additional
staffing in the implementation, conversion, training and customer support
departments, increased license fees for third-party software and royalties paid
to Banking Spectrum. Total cost of revenues as a percent of total revenues
decreased to 64.8% in 1997 from 199.9% in 1996. This decrease was primarily due
to higher total revenues and productivity gains in the implementation, training
and customer support functions.
Cost of software license revenues increased 128.8% to $1.2 million in 1997
from $507,094 in 1996. This increase was primarily due to an increase in the
number of Oracle relational database software licenses required for the
increased number of new installations, and increased royalties paid to Banking
Spectrum. Cost of software license revenues as a percent of software license
revenues decreased to 28.3% in 1997 from 63.3% in 1996. This decrease was
primarily due to a larger software license fee revenue base over which to spread
costs.
Cost of service and maintenance revenues increased 105.8% to $3.2 million
in 1997 from $1.5 million in 1996. This increase was primarily attributable to
increased staffing in the implementation, training and customer support
departments to support the Company's growth. Cost of service and maintenance
revenues as a percentage of service and maintenance revenues decreased to 123.6%
in 1997 from 702.5% in 1996. This decrease was primarily due to a larger service
and maintenance revenue base and productivity gains achieved in the
implementation, training and support functions as a result of a larger number of
installations and a larger installed base.
Sales and marketing. Sales and marketing expenses increased 102.9% to $2.1
million in 1997 from $1.1 million in 1996. This increase was primarily due to an
increase in sales and marketing personnel, increased sales commissions paid on
higher revenues and increased advertising and promotion expenses. Sales and
marketing expenses as a percentage of total revenues decreased to 32.1% in 1997
from 103.0% in 1996. This decrease was primarily due to a larger revenue base
over which to spread costs.
Product development. Product development expenses increased 79.4% to $1.9
million in 1997 from $1.1 million in 1996. This increase was primarily due to
increased staffing and consulting fees incurred in connection with continued
development of the Company's software products. During 1997 and 1996, the
Company capitalized software development costs of $455,078 and $153,209,
respectively, in accordance with SFAS 86. Amounts capitalized in 1997 included
$240,000 related to the acquisition of automated teller machine ("ATM")
management software from a third party. Product development expenses as a
percentage of total revenues decreased to 28.6% in 1997 from 104.0% in 1996.
This decrease was primarily due to a larger revenue base over which to spread
costs.
General and administrative. General and administrative expenses increased
143.2% to $1.6 million in 1997 from $645,334 in 1996. This increase was
primarily due to the hiring of additional
22
<PAGE> 25
accounting and executive personnel required to support the Company's growth.
General and administrative expenses as a percentage of total revenues decreased
to 23.6% in 1997 from 63.3% in 1996. This decrease was primarily due to a larger
revenue base over which to spread costs.
Interest income (expense), net. During 1997, the Company's average cash
balance was higher than in 1996, resulting in higher interest income, which was
partially offset by interest expense relating to an equipment loan.
Years Ended December 31, 1996 and 1995
Revenues. Total revenues increased 280.2% to $1.0 million in 1996 from
$268,141 in 1995. Software license revenues increased 276.9% to $801,532 in 1996
from $212,653 in 1995. This increase was primarily due to increased sales of the
OSI System. Service and maintenance revenues increased 292.6% to $217,861 in
1996 from $55,488 in 1995. This increase in service fees was primarily due to
the increase in the number of installations in 1996 and, to a lesser extent, an
increase in the installed base of customers under support and maintenance
agreements.
Cost of revenues. Total cost of revenues increased 191.1% to $2.0 million
in 1996 from $700,006 in 1995. As a percent of total revenues, total cost of
revenues decreased to 199.9% in 1996 from 261.1% in 1995, reflecting higher
total revenues over which to spread costs. Cost of software license revenues
increased 127.4% to $507,094 in 1996 from $223,015 in 1995. This increase was
due to increased license fees paid to third-party software providers, primarily
Oracle, and increased royalties paid to Banking Spectrum. Cost of service and
maintenance revenues increased 220.9% to $1.5 million in 1996 from $476,991 in
1995. This increase was primarily attributable to increased staffing in the
implementation, training and customer support functions required to support the
growth in customer installations as noted above.
Sales and marketing. Sales and marketing expenses increased 163.7% to $1.1
million in 1996 from $398,496 in 1995. This increase was primarily due to an
increase in the number of sales personnel and increased sales commissions paid
on higher revenues. Sales and marketing expenses as a percentage of total
revenues decreased to 103.0% in 1996 from 148.6% in 1995. This decrease was
primarily due to a larger revenue base over which to spread costs.
Product development. Product development expenses increased 60.5% to $1.1
million in 1996 from $660,510 in 1995. Product development expense increased
primarily due to increased staffing and consulting fees required to support
continued development of the Company's software products. During 1996 and 1995,
the Company capitalized software development costs of $153,209 and $119,514,
respectively, in accordance with SFAS 86. Product development expenses as a
percentage of total revenues decreased to 104.0% in 1996 from 246.3% in 1995.
This decrease was primarily due to a larger revenue base over which to spread
costs.
General and administrative. General and administrative expenses increased
61.5% to $645,334 in 1996 from $399,576 in 1995. The increase in expenses was
primarily due to increased costs due to the relocation and expansion of the
Company's facilities. General and administrative expenses as a percentage of
total revenues decreased to 63.3% in 1996 from 149.0% in 1995. This decrease was
primarily due to a larger revenue case over which to spread costs.
Interest income (expense), net. During 1995, the Company was funding
operations with bridge loans from existing investors until a December 1995
preferred stock sale. The interest on the bridge loans exceeded the interest
income earned on the operating account balance during 1995.
23
<PAGE> 26
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited quarterly results of operations of
the Company for each of the quarters in the year ended December 31, 1997 and the
three months ended March 31, 1998. In management's opinion, this unaudited
information has been prepared on the same basis as the audited Financial
Statements and includes all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the information for the
quarters presented, when read in conjunction with the Company's Financial
Statements and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1997 1997 1997 1997 1998
-------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Software license..................... $ 693 $ 519 $ 643 $2,245 $ 1,158
Service and maintenance.............. 289 467 698 1,095 1,176
------- ------- ------ ------ -------
Total revenues.................... 982 986 1,341 3,340 2,334
Costs of revenues:
Software license..................... 219 150 251 541 333
Service and maintenance.............. 732 658 748 1,012 987
------- ------- ------ ------ -------
Total cost of revenues............ 951 808 999 1,553 1,320
Operating expenses:
Sales and marketing.................. 458 496 500 678 784
Product development.................. 472 560 480 390 444
General and administrative........... 324 416 381 447 643
Contract termination................. -- -- -- -- 1,265
------- ------- ------ ------ -------
Total operating expenses.......... 1,254 1,472 1,361 1,515 3,136
Income (loss) from operations.......... (1,223) (1,294) (1,019) 272 (2,122)
Interest income (expense), net......... 44 31 46 88 95
------- ------- ------ ------ -------
Net income (loss)...................... $(1,179) $(1,263) $ (973) $ 360 $(2,027)
======= ======= ====== ====== =======
</TABLE>
The following table sets forth unaudited quarterly results of operations as
a percentage of revenues for each of the quarters in the year ended December 31,
1997 and the three months ended March 31, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1997 1997 1997 1997 1998
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Software license...................... 70.6% 52.6% 47.9% 67.2% 49.6%
Service and maintenance............... 29.4 47.4 52.1 32.8 50.4
------- ------- ------ ------ ------
Total revenues..................... 100.0 100.0 100.0 100.0 100.0
Costs of revenues:
Software license...................... 22.3 15.1 18.7 16.2 14.3
Service and maintenance............... 74.5 66.8 55.8 30.3 42.3
------- ------- ------ ------ ------
Total cost of revenues............. 96.8 81.9 74.5 46.5 56.6
Operating expenses:
Sales and marketing................... 46.7 50.3 37.3 20.3 33.6
Product development................... 48.0 56.8 35.8 11.7 19.0
General and administrative............ 32.9 42.2 28.4 13.3 27.6
Contract termination.................. -- -- -- -- 54.2
------- ------- ------ ------ ------
Total operating expenses........... 127.6 149.3 101.5 45.3 134.4
Income (loss) from operations........... (124.4) (131.2) (76.0) 8.2 (91.0)
Interest income (expense), net.......... 4.4 3.2 3.4 2.6 4.1
------- ------- ------ ------ ------
Net income (loss)....................... (120.0)% (128.0)% (72.6)% 10.8% (86.9)%
======= ======= ====== ====== ======
</TABLE>
24
<PAGE> 27
The Company's revenues and operating results have varied substantially from
quarter to quarter. The Company's quarterly operating results may continue to
fluctuate due to a number of factors, including the timing, size and nature of
the Company's licensing transactions, lengthy and unpredictable sales cycles,
the timing of introduction and market acceptance of new products or product
enhancements by the Company or its competitors, product and price competition,
the relative proportions of revenues derived from license fees and services,
changes in the Company's operating expenses, software bugs or other product
quality problems, personnel changes and fluctuations in economic and financial
market conditions. Accordingly, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and the
results of operations for any quarter are not necessarily indicative of future
results of operations.
Revenues of $3.3 million for the three months ended December 31, 1997
included software license and implementation revenues of $1.6 million associated
with two large banks (assets greater than $1 billion) that were implemented in
that quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily from the sale of
preferred stock and from a credit line for equipment purchases. The Company had
net working capital of $6.2 million at March 31, 1998, including cash and cash
equivalents totaling $7.3 million.
Cash used in operating activities was $514,966, $1.0 million, $3.9 million
and $1.7 million for the three months ended March 31, 1998 and for the years
ended December 31, 1997, 1996 and 1995, respectively. Cash used in operations
during each of these periods was primarily due to net losses and an increase in
accounts receivable partially offset in each period by increases in accounts
payable, royalties payable and deferred revenues. In 1996, the cash used in
operating activities was also attributable to expenditures for deferred project
costs. In 1997, cash flow from operations was favorably impacted by a reduction
in deferred project costs.
Cash used in investing activities was $289,578, $812,334, $850,083 and
$212,037 for the three months ended March 31, 1998, and for the years ended
December 31, 1997, 1996 and 1995, respectively. Cash used during such periods
was to acquire property and equipment and for capitalized software development
costs. The Company currently has no significant capital spending or purchase
commitments, but expects to continue to engage in capital spending in the
ordinary course of business.
Cash provided by financing activities was $554,835, $5.0 million, $5.3
million and $5.2 million for the three months ended March 31, 1998, and for the
years ended December 31, 1997, 1996 and 1995, respectively. During 1997, 1996
and 1995, the Company received $5.0 million, $5.5 million, and $5.1 million,
respectively, of net proceeds from the sale of preferred stock. In addition, the
Company received $60,000 and $120,000 in proceeds during 1996 and 1995,
respectively, from a subscription note receivable.
In 1995, the Company received and repaid $1.0 million in bridge loans from
existing investors. In September 1996, the Company entered into a $250,000
equipment line of credit with a bank. The equipment line allowed for draw downs
through September 1997 with the outstanding borrowings on the equipment line
converting to a $104,002, nine percent term loan payable in 36 months beginning
in October 1997. As of March 31, 1998, the Company had an outstanding balance of
$83,779 under this term loan. In June 1997, the Company entered into a $1.0
million working capital line of credit with the same bank that provides the
equipment line of credit. The line is secured by all assets, exclusive of those
financed under the equipment line. The maximum amount available under this line
of credit is 75% of domestic accounts receivable, less amounts that have been
outstanding for more than 90 days. This line of credit expires July 20, 1998. At
March 31, 1998, there was no balance outstanding on this line of credit.
The Company believes that the proceeds generated by the sale of Common
Stock by the Company in this offering, cash and cash equivalents on hand and
cash generated by operations will be sufficient to meet the Company's working
capital requirements for the next twelve months.
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BUSINESS
The Company is a leading provider of client/server core processing software
and related services to small to mid-size banks and credit unions. The Company
has developed The Complete Banking Solution and The Complete Credit Union
Solution (the "OSI System"), which are fully-integrated suites of banking and
credit union applications that operate in a Microsoft Windows NT environment
with an Oracle relational database. The Company's software supports all of an
institution's core processing requirements, including deposits and loans, teller
functions, home/ Internet banking and platform automation. The Company's open
and flexible client/server architecture is designed to enable its customers to
reduce their core processing and operational costs and leverage customer
information to improve retention and identify potential cross-selling
opportunities. The OSI System interfaces to third-party applications that are
commonly used in banks and credit unions, including check processing, ATMs and
general ledger applications. The OSI System enables its customers to enhance
customer satisfaction and compete more effectively in the financial services
industry.
INDUSTRY BACKGROUND
Currently, there are over 20,000 banking and depositary institutions in the
United States with assets of up to $3 billion, including small to mid-size
commercial banks, thrifts and credit unions. The Company believes that these
institutions, which have traditionally competed on personalized service, are
facing increasing competitive pressures to improve their efficiencies in the
areas of customer service, operations and marketing. In addition, the evolving
requirements of the electronic marketplace demand that banks expand their
traditional services to include ATMs, telephone banking and home banking through
personal computers and the Internet. Banks and depositary institutions of all
sizes are also experiencing increased competitive pressures from non-bank
competitors which, as a result of the deregulation of the financial services
industry, can offer products and services traditionally marketed by banks.
In responding to these trends, small to mid-size banks and credit unions
are increasingly seeking to implement information technology systems that will
enable them to increase the efficiency of their operations, offer a broader
array of services and provide enhanced levels of customer service. These
institutions have traditionally fulfilled their information technology needs
through legacy computer systems, operated either by the institution or a service
bureau on an outsourced basis. These systems, which operate in large mainframe
or minicomputer environments, are designed primarily to batch process a large
number of transactions and create centralized financial records. Nightly batch
sessions are typically required to update each customer's account with the
business day's transactions. As a result, banks utilizing legacy systems
typically do not offer their customers real-time processing of transactions, a
feature that is becoming an increasingly important operating requirement.
Moreover, legacy systems typically store data in non-relational, sequentially
indexed files. In this environment, retrieval of customer or other information
can be burdensome and time consuming and limits an institution's flexibility in
meeting changing customer service requirements. The centralized processing and
proprietary architecture of these systems is not designed to easily support
analysis for decision-making or integrate with other business applications used
throughout the enterprise. Financial institutions relying on legacy systems
often find it difficult to conform their business processes and reporting to the
architecture of the system and are not able to easily adapt the system to their
evolving needs.
The need to improve customer service levels, enhance operating efficiencies
and lower costs has contributed to the growing acceptance of the client/server
model of computing based on open, industry-standard operating environments and
relational databases. In a client/server environment, servers provide shared
access to data and applications, while client devices such as personal computers
and workstations provide the user interface and local processing functions.
Client/server
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systems can improve information sharing by providing access at each desktop to
critical customer and transaction data and business applications, which had
historically been restricted or difficult to access in legacy environments.
Client/server applications enable organizations to streamline core business
practices and reporting and to make faster, more informed decisions. The
client/server model is also scalable as capacity can be increased by upgrading
the server or linking multiple servers. In addition, the client/server model
offers flexibility in that additional functionality can easily be provided
through third-party applications.
The Company believes that, until recently, the adoption of client/server
systems in many banks and credit unions has lagged other industries due to the
limited number of suppliers of open client/server systems designed specifically
to address the core processing requirements of such institutions. In part, this
has been attributable to the industry's long-standing reliance on legacy systems
and the high-volume processing requirements of larger banks. Among smaller
banking institutions, which the Company believes are best positioned to benefit
from the implementation of client/server systems, the adoption of such systems
has been hampered by the absence of cost effective client/server systems
designed specifically for use by such institutions. The Company believes that
fewer than 200 small to mid-size banks and credit unions in the United States
have implemented open client/server core processing systems.
The Company believes that banks and credit unions today are seeking
information technology solutions that combine the performance, reliability and
security associated with legacy-based systems with the flexibility, ease-of-use,
scalability and reduced cost of ownership associated with client/server systems.
Banks and credit unions require systems that can be easily integrated with other
applications used in the enterprise, provide real-time transaction processing
and comply with applicable regulatory requirements. Banks and credit unions also
require core processing systems that are able to accommodate new and emerging
technologies, such as ATMs, telephone banking and home banking via personal
computers and the Internet. In addition, these institutions require systems that
are Year 2000 compliant. Banks and credit unions are also seeking information
technology solutions that offer quick and effective access to customer and
account data in order to offer better, more customized services, monitor trends
and performance and cross-sell services and products. A client/server core
processing solution must be able to meet all of these requirements to enable
banks and credit unions to achieve a competitive advantage in their markets
through improved customer service, lower costs and enhanced access to customer
information.
THE OSI SOLUTION
The OSI System enables financial institutions to process transactions and
access critical customer and account data through a suite of open, distributed
application modules that operate in a Microsoft Windows NT environment with an
Oracle relational database. The Company's solutions are designed to provide its
customers with the following benefits:
X Fully-Integrated Solution. The OSI System supports all of an
institution's core processing requirements, including those of its branch
offices. The OSI System accommodates telephone banking and home banking
via personal computers and the Internet, and provides ATM management
capabilities. All components of the OSI System utilize a common
relational database and operating system. This architecture allows a bank
to provide its customers with real-time information concerning their
accounts and to create real-time management reports. The OSI System also
eliminates potential errors arising from the maintenance of multiple
databases and enables institutions to change their business processes
without requiring the modification of the underlying data model.
X Enhanced Customer Service Through Real-Time Processing. The OSI System
allows a bank's customers and employees to access and process information
on a real-time basis, which enables a bank's customers to receive up to
the minute account and transaction information from any branch,
telephone, home or Internet location. The OSI System also enables bank
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employees to quickly identify customers and gather accurate and current
information about the entire customer relationship. Availability of this
information enables institutions to improve their level of customer
service and provide them with incremental opportunities for marketing
additional products and services.
X Open Architecture. The OSI System operates in an open environment using
the Microsoft Windows NT operating system and the Oracle relational
database management system, which are installed on non-proprietary
hardware. The flexible, open architecture of the OSI System facilitates
the use of popular, off-the-shelf third-party software and the addition
of more processing capability as the institution's requirements increase.
X Reduced Cost of Ownership. The OSI System can reduce the overall cost of
ownership of a financial institution's core system. By integrating core
banking functions, which have historically run on separate systems, into
one seamless environment, the OSI System enables its customers to achieve
operational efficiencies. The OSI System can also reduce the costs that
would otherwise be associated with the ongoing maintenance of legacy
systems. In addition, the time and expense required to adapt the OSI
System to accommodate changing business processes and regulatory
requirements is less than that required with a typical legacy system. The
ability of the OSI System to operate across a broad range of popular
hardware provides customers with increased flexibility and the ability to
select the most cost-effective system.
STRATEGY
The Company's objective is to be the leading supplier of enterprise-wide
client/server software for small to mid-size banks and credit unions. The
Company's strategy for achieving this objective includes the following:
X Focus on Small to Mid-Size Banks and Credit Unions. The Company will
continue to focus on providing core processing solutions to small to
mid-size banks and credit unions, which the Company defines as
institutions with assets up to $3 billion. The Company believes that the
client/server model of computing is particularly well-suited for
institutions in this market. These institutions, unlike larger banks,
typically do not require extensive customization in connection with the
implementation of a banking system which makes it easier for them to
realize the benefits of client/server core processing systems in a
cost-effective manner. The Company believes that the demand for
client/server systems in this market is increasing as a result of these
factors.
X Expand Distribution Through Outsourcing Solutions. A number of small to
mid-size banks and credit unions outsource their core processing systems
to third-party service providers. These third-party service providers
typically choose one or more significant banking solutions on which they
base their outsourcing services. The Company has established strategic
relationships with BISYS, a major national outsourcing provider, and
COCC, a major regional outsourcing provider, under which these third
parties provide outsourced processing services to the financial services
industry using the OSI System. The Company plans to continue to jointly
market the OSI System with its outsourcing partners to expand its
installed customer base.
X Leverage Customer Base. The Company intends to continue to leverage its
installed customer base by expanding the range of complementary products
and services available to its customers. The Company generates recurring
revenues by entering into maintenance arrangements with its customers
that provide for annual service fees. As the asset size or number of
accounts of a financial institution increases, or as additional
application modules or services are provided, customers typically pay
incremental license and maintenance fees. The Company plans to continue
to expand its professional services offerings to its installed base of
customers as they implement additional application modules.
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X Maintain Product Leadership. The Company believes that the open
client/server architecture of the OSI System provides it with competitive
advantages over other core processing systems. For example, the OSI
System offers on-line, real-time transaction processing capabilities that
are not available in many competitive systems, and the Company recently
announced the introduction of a home/Internet banking module supporting
the Open Financial Exchange ("OFX") standard, which enables customers to
access bank services using personal computers and the Internet. The
Company's open architecture enables it to utilize leading,
non-proprietary software and hardware to provide comprehensive
functionality. The Company intends to extend its technological leadership
by continuing to add new applications, integrate new technologies and
expand the functionality of its system.
TECHNOLOGY
The Company developed the OSI System to enable customers to realize the
advantages of client/server architectures. The OSI System is designed to offer
the following benefits: (i) flexible functionality, scalability, and high
performance, (ii) lower total cost of ownership, (iii) the ability to operate
either in real-time or batch processing mode and (iv) integration with
third-party applications and emerging technologies. The Company believes that
the OSI System achieves these objectives through an open architecture that is
based on leading technologies in the areas of operating systems, relational
databases, graphical user interfaces and report generation tools.
The foundation of the OSI System is an enterprise-wide relational database.
The OSI System uses relational database software from the industry's leading
supplier, Oracle Corporation. The OSI System's functionality is implemented
through application modules, each of which performs a specific core processing
function, that share the data in the relational database. This approach allows
for database normalization and business modeling. Through database
normalization, data is organized in tables that are easily accessible through a
variety of query tools as well as the application modules. The OSI System's data
model consists of over 600 tables, which the Company believes is substantially
greater than the number of tables in the data models of competing solutions. As
a result, a higher degree of independence between a customer's business
processes and underlying data is achieved and the OSI System is more scalable
and adaptable to changing business needs. New application modules may be
developed or existing modules may be altered as required without having to
change the underlying data model.
The OSI System is based on a single, enterprise-wide database as opposed to
a distributed database in which the database is spread among two or more
components, typically resident on different computers. The principal benefit of
an architecture using a single enterprise-wide database is that it permits
real-time processing so that, for example, transactions are immediately
reflected in a bank or credit union customer's account. This contrasts with a
batch processing approach in which all accounts are updated only at scheduled
intervals, typically at the end of the business day. The OSI System may be
configured to operate in either batch mode or a hybrid batch/real-time mode for
those banks or credit unions that do not require or desire real-time processing.
The OSI System is a 32-bit Microsoft Windows NT application that operates
in an open systems environment. The system does not require any proprietary
hardware components and is currently deployed on a wide range of client and
server platforms. The system features multi-level security that takes advantage
of the features of the underlying operating system and relational database as
well as offers some that are indigenous to the system. The OSI System also
interfaces to a broad range of third-party applications and peripherals that are
commonly used in banks and credit unions.
PRODUCTS
The OSI System is an enterprise-wide solution that addresses the core
processing requirements of small to mid-size banks and credit unions and other
financial institutions. The OSI System consists of software application modules
that operate on a fully-integrated basis and is designed to be Year
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2000-compliant. The Company recently released its OSI/ATM Server, the OSI
home/Internet banking module and a 32-bit version of the OSI System. In
addition, the Company markets third-party applications that are commonly used in
banks and credit unions. Current prices for the base OSI System software license
range from approximately $140,000 to $1.5 million, depending on asset size and
number of customer accounts.
Application Modules
The following table describes certain application modules of the OSI
System:
<TABLE>
<CAPTION>
APPLICATION DESCRIPTION
- ----------- -----------
<S> <C>
Customer Service.......................... Provides a quick and comprehensive view of each cus-
tomer relationship; maintains customer's picture and
signature for recognition; supports opening and
maintenance of all types of accounts and provides a
measure of an individual customer's profitability;
enables tellers to complete an entire transaction
on-line in the presence of the customer.
Comprehensive Lending..................... Provides comprehensive management of all loans,
whether mortgage, consumer or commercial, including
establishment of escrow, insurance and tax accounts;
can provide loan-loss reserve calculations based on
risk ratings and loan classifications; includes "what
if" loan calculator and amortization schedule.
Depository System......................... Supports all forms of deposit instruments, including
passbook and statement savings, club accounts and
checking accounts, share drafts (credit unions),
certificates of deposit and time deposits and
repurchase agreements.
Teller Application........................ Provides a teller with real-time access to the bank's
database and a complete profile of the bank's clients
(including a customer's picture and signature); easily
navigated by the teller and does not require
transaction codes.
General Ledger Interface.................. Easy-to-use module designed to manage interfaces to
popular general ledger systems.
Bank and Branch Operations................ A comprehensive and secure administrative management
tool for determining user accessibility, security,
hours of operation, cash boxes and authorization
structures.
End of Day Production..................... Identifies and schedules all end of day processing,
including updating of interest, fees and other
charges, and produces daily production reports and
customer statements.
Executive Information..................... Enables management to monitor bank's performance
through on-line queries of any product or branch;
tools can generate new reports in graphical or tabular
form based upon ad hoc information requests.
External File Manager..................... Manages all data that must be entered into the
database from external sources, including check
clearings, ACH (automatic clearing house), loan
origination and ATM transaction files.
</TABLE>
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<TABLE>
<CAPTION>
APPLICATION DESCRIPTION
- ----------- -----------
<S> <C>
Payroll................................... Enables updating of all payroll accounts provided
through an ACH format or from outside payroll systems.
Product Manager........................... Enables bank to design and promote new loan, checking
and deposit products and to monitor current product
offerings; uses fill-in-the-blank, easy-to-follow
screens with user defined fees and rate schedules that
allow for unlimited tiering.
IRS/Year-End Reporting.................... Supports year-end IRS reporting information for both
standard and specialized forms.
Forms Integration......................... Integrates generation of forms, includes new account
documents, disclosures, signature cards and passbooks;
eliminates need to inventory pre-printed forms.
</TABLE>
OSI/ATM Server
The OSI/ATM Server is an ATM management system that provides banks with the
capability to directly manage their own ATM network or interface with regional
ATM networks. The OSI/ATM Server enables customers to reduce costs associated
with ATM systems and provides features such as real-time, single balance update
capabilities, support for multiple ATM transactions and processing and
authorization options. In addition, the OSI/ATM Server enables banks to define
their own operating parameters without the need for program modifications. The
system, which operates on Stratus computers, is designed to provide
fault-tolerant reliability. The OSI/ATM Server is fully integrated with the OSI
System. Current list prices for the OSI/ATM Server module range from
approximately $45,000 to $90,000.
Home/Internet Banking Module
The Company's home/Internet banking module enables customers to remotely
access an online banking system through which a customer can transfer funds from
transaction accounts, make balance inquiries, generate instant statements and
monitor account activity. The Company's system supports the OFX standard, which
enables the system to interface to bank services that use a variety of devices
to originate customer transactions. Through the OFX standard, the OSI System can
also be integrated with commonly-used personal financial management products,
such as Microsoft's Money 98 and Intuit's Quicken. Current list prices for the
home/Internet banking module range from approximately $50,000 to $100,000.
Third-Party Applications
The open architecture of the OSI System facilitates the integration of
third-party applications, and the Company offers various third-party
applications for use with the OSI System. Such applications include:
asset/liability management, check and statement imaging, collection management,
disaster recovery planning, general ledger, voice response, loan origination and
on-line ATM interface.
SALES AND MARKETING
The Company markets its software and services primarily through its direct
sales force. As of May 31, 1998, the Company employed 22 sales and marketing
personnel.
The Company's marketing program includes direct mail, networking,
telemarketing, advertising in industry specific trade journals and periodicals,
seminars and trade shows. The Company maintains an Internet web site from which
prospective customers can retrieve and view product information. The Company has
established an alliance with Unisys PAAG under which Unisys has
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exclusive rights to market the OSI System in Asia (except Japan), South Africa
and certain other countries. The Company has established strategic relationships
with Oracle Corporation, Compaq Computer Corporation and Stratus Computer, Inc.
providing for joint marketing efforts.
Historically, a significant portion of all banks and credit unions have
chosen to satisfy their information technology needs through service bureaus. To
address this market, the Company has entered into software license and marketing
agreements with BISYS and COCC under which these third parties provide
outsourced core processing services to the financial services industry using the
OSI System.
Pursuant to a Software License and Marketing and Distribution Agreement
with BISYS, the Company has granted BISYS the exclusive rights in the United
States, subject to certain exceptions, to use the OSI System to provide
outsourcing of core processing services to banks and credit unions. This grant
becomes non-exclusive if BISYS fails to enter into a specified number of
customer contracts in specified years. BISYS has agreed that the Company shall
be the exclusive provider of client/server core processing systems for BISYS
during the term of the Agreement. Pursuant to the Agreement, the parties engage
in joint marketing of each other's products and services and refer potential
customers to each other. As of June 30, 1998, BISYS had entered into outsourcing
agreements with [ ] institutions.
The Company has also entered into a License and Marketing Agreement with
COCC under which the Company has granted COCC certain exclusive rights to use
the OSI System to provide outsourced core processing services to banks and
credit unions in the New England states and New York. COCC must meet certain
customer milestones to maintain its exclusivity. The Company receives license
fees with respect to outsourced data processing agreements entered into by COCC,
subject to a cumulative maximum payment, as stipulated in the agreement. As of
June 30, 1998, COCC had entered into outsourcing agreements with [ ]
institutions.
CUSTOMERS
The Company's customers are primarily small to mid-size banks and credit
unions, typically with fewer than ten branches, that serve the banking needs of
their local communities. These banks are often the primary local providers of
savings accounts and consumer, mortgage and commercial loans in the markets they
serve. The majority of the Company's customers are located in the Northeast
region, although the Company is expanding its presence in other regions.
The Company had three, two, four and two significant customers, which
accounted for approximately 48%, 32%, 94% and 98%, respectively, of total
revenues for the three months ended March 31, 1998 and the years ended 1997,
1996 and 1995, respectively. The Company anticipates that no customer will
account for more than 10% of revenues in the year ending December 31, 1998.
Sales to two banks and payments from one outsourcing provider accounted for
approximately 22%, 15% and 11% of total revenues, respectively, in the three
months ending March 31, 1998. Sales to two banks accounted for approximately 17%
and 15% of total revenues, respectively, in the year ended December 31, 1997.
Sales to four banks accounted for approximately 38%, 22%, 20% and 14% of total
revenues, respectively, in the year ended December 31, 1996. Sales to two banks
accounted for approximately 55% and 43% of total revenues, respectively, in the
year ended December 31, 1995.
SERVICES
The Company provides comprehensive implementation and training services to
customers who purchase the OSI System. An implementation team works with the
customer through all phases of the project, including software installation,
data conversion, education and training. Full implementation of the OSI System
typically occurs over 14 to 24 weeks, depending on the complexity of the
conversion. The Company also provides post-implementation customer support and
maintenance.
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As of May 31, 1998, the Company had 59 employees dedicated to implementation,
training, support and maintenance.
X Implementation. The Company assigns to each customer a project manager
who coordinates all activities related to the implementation of the OSI
System. The Company also assigns conversion programmers who convert a
bank's current account data to the relational database in the OSI System.
Data conversion activities include data mapping, program development,
testing, data auditing and a complete trial conversion prior to the final
implementation date.
X Training. The Company offers a comprehensive education and training
program to its customers. The Company offers training classes at its
headquarters in Connecticut and hands-on application training at the
customer site prior to installation of the OSI System. In addition,
on-site training for ancillary products is available upon request. The
Company also assists customers desiring to adapt the OSI System to
particular needs, including customer-specific software features, reports
or regulatory requirements.
X Support and Maintenance. Support and maintenance personnel provide
immediate telephone response service during normal working hours,
supplemented by on-call support 24 hours a day, seven days a week. The
Company also provides product support services through the Internet,
electronic mail and facsimile. In addition, the Company offers remote
product support services whereby the Company's support team directly
connects to a customer's server to troubleshoot or perform routine
maintenance. The Company enters into maintenance agreements with its
customers pursuant to which they pay an annual maintenance fee, based on
a percentage of the license fee, over the term of the software license.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview."
PRODUCT DEVELOPMENT
The Company plans to continue to invest significant resources to maintain
and enhance its current product and service offerings. The Company's principal
product development focus is on: (i) enhanced functionality of the OSI System
through the development of new features and improvements to existing
applications modules, (ii) software updates as new versions of the Windows NT
operating system and Oracle relational database are released and (iii) tools to
automate the process of converting a customer's legacy data to the OSI System.
As of May 31, 1998, the Company employed a staff of 24 employees engaged in
product development. The Company's product development expenditures were
approximately $443,192, $1.9 million, $1.1 million and $660,510 for the three
months ended March 31, 1998 and the years ended December 31, 1997, 1996 and
1995, respectively.
COMPETITION
The financial services software market is intensely competitive and subject
to rapid technological change. Competitors vary in size and in the scope and
breadth of products and services offered. The Company encounters competition in
the U.S. from a number of sources, including Fiserv, Inc., NCR Corporation,
Electronic Data Systems Corporation, Marshall & Ilsley Corporation, M&I
EastPoint, Phoenix International Ltd., Inc., Jack Henry & Associates, Inc.,
ALLTEL Corporation, Prologic Corporation and Kirchman Corporation, all of which
offer core processing systems or outsourcing alternatives to banks and credit
unions. The Company also competes against a number of smaller, regional
competitors. In addition to these competitors, the Company competes
internationally with Misys plc Banking Division (including Midas-Kapiti
International, Inc., Kindle Banking Systems and ACT Financial Systems), Sanchez
Computer Associates, Inc. and Financial Network Services, among others. The
Company also competes with other core processing alternatives, including
in-house applications, which were either developed internally or purchased from
third-party vendors, and outsourcing, either as a part of a total outsourcing
solution or through a service bureau arrangement. Furthermore, the Company
expects additional competition from other established and emerging companies as
the client/server application software market continues to
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expand. There can be no assurance that the Company will be able to compete
successfully against either its existing or future competitors.
In general, the Company competes on the basis of product architecture and
functionality, service and support, including the range and quality of technical
support, training and implementation services, and product pricing in relation
to performance and support.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company seeks to protect its software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection. The Company's license agreements contain
provisions which limit the number of users, state that title remains with the
Company and protect confidentiality. The Company presently has no patents or
patent applications pending.
Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. Policing
unauthorized use of the Company's products is difficult, particularly overseas,
and while the Company is unable to determine the extent to which piracy of its
software products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the extent of the laws of the United States.
Nevertheless, the Company believes that due to the rapid pace of technological
change in the information technology and software industries, factors such as
the technological and creative skills of its employees, new product
developments, frequent product enhancements and the timeliness and quality of
support services are more important to establishing and maintaining a
competitive advantage in the industry.
The Company does not believe that any of its products infringe upon the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim infringement by the Company with respect to current
or future products. Any such claim could result in costly litigation, cause
product shipment delays or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable to the Company or at all, which could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
EMPLOYEES
As of May 31, 1998, the Company had a total of 121 employees, of which 27
were engaged in product development and system documentation, 59 were engaged in
implementation, training, support and maintenance, 22 were engaged in sales and
marketing and 13 were engaged in finance and administration. None of the
Company's employees is represented by a labor union. The Company has not
experienced any work stoppages and considers relations with its employees to be
good.
FACILITIES
The Company currently leases approximately 15,000 square feet of space in
its headquarters facility in Glastonbury, Connecticut. The lease for this
property expires in 2003. The Company plans to lease approximately 15,000
additional square feet at this facility before the end of 1998.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings that would
have a material adverse effect on the Company's business, financial condition or
results of operations.
34
<PAGE> 37
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and certain other key employees of the
Company, their respective ages as of March 31, 1998 and their positions with the
Company are as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS AGE POSITION
- -------------------------------- --- --------
<S> <C> <C>
Douglas K. Anderson....................... 48 Chairman of the Board and Chief Executive
Officer
John L. Person............................ 63 President and Chief Operating Officer
Graham H. Gurney.......................... 57 Senior Vice President of Sales and
Director
Clifford I. Waggoner...................... 56 Senior Vice President, Chief Technology
Officer and Director
Richard J. Willemin....................... 47 Senior Vice President and Chief Financial
Officer
Carlos P. Naudon (1)...................... 47 Vice Chairman of the Board
Douglas C. Carlisle (2)................... 41 Director
David M. Clarke (1)....................... 47 Director
Samuel F. McKay (1)(2).................... 58 Director
William W. Neville........................ 44 Director
Richard P. Yanak (2)...................... 63 Director
KEY EMPLOYEES
- ---------------
Charles J. Beer........................... 40 Vice President of Application Development
John J. DeMita............................ 53 Vice President of Professional Services
John L. Messier........................... 34 Vice President of Conversion Services
Michael D. Nicastro....................... 39 Vice President of Marketing
Debra M. Dabrowski........................ 30 Controller
</TABLE>
- ---------------
(1) Member of the Audit Committee effective as of the closing of this offering.
(2) Member of the Compensation Committee effective as of the closing of this
offering.
Mr. Anderson has served as Chairman of the Board and Chief Executive
Officer of the Company since December 1997 and as a director since July 1994.
Mr. Anderson served as President of the Company from October 1995 to December
1997. From December 1986 to October 1995, Mr. Anderson was employed by the
Savings Bank of Manchester and was responsible for all bank operations and
information technology, most recently as Executive Vice President. Prior to
joining the Savings Bank of Manchester, Mr. Anderson was employed for 14 years
by Unisys Corporation.
Mr. Person has served as President and Chief Operating Officer of the
Company since December 1997, and served as Executive Vice President and Chief
Operating Officer of the Company from May 1997 to December 1997. From August
1996 to May 1997, Mr. Person was Managing Director of Compression Engines, LLC,
a software company. From October 1994 to May 1997, Mr. Person served as
President of Enanti Corporation, a contact management software company. From
July 1992 to October 1994, Mr. Person served as President of HP Films, a film
production company. Mr. Person also served as President of Newtrend MISER Group,
a company specializing in banking software.
Mr. Gurney co-founded the Company in 1992, and has served as Senior Vice
President of Sales of the Company since June 1996 and as a director since 1992.
From September 1984 to October 1987, Mr. Gurney served as regional district
manager for the New York district of Sperry Corporation, a computer hardware and
software company. From October 1987 to June 1992, Mr. Gurney served as the
Eastern regional sales director for Sharebase Corporation, a relational database
company.
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<PAGE> 38
Mr. Gurney was employed in various positions for 15 years in the financial
services computing industry.
Mr. Waggoner co-founded the Company in 1992, has served as Senior Vice
President and Chief Technology Officer of the Company since October 1995 and as
a director since 1992. Mr. Waggoner served as President of the Company from May
1992 to October 1995. From June 1987 to May 1992, Mr. Waggoner was Vice
President and Principal of Linc Systems Corporation, a software services
company. Prior to joining Linc Systems Corporation, Mr. Waggoner was employed
for 17 years by Electronic Data Systems Corporation.
Mr. Willemin has served as Senior Vice President and Chief Financial
Officer of the Company since April 1998. From March 1997 to April 1998, Mr.
Willemin served as Chief Financial Officer of Summit Medical, Inc., a supplier
of clinical database software. From September 1996 to February 1997, Mr.
Willemin served as Chief Financial Officer of Datalogix International, Inc., a
supplier of manufacturing and logistics software. From June 1994 to August 1996,
Mr. Willemin served as Vice President and Chief Financial Officer of NEIC, a
transaction processing company in the health care industry. From March 1992 to
June 1994, Mr. Willemin served as interim Chief Financial Officer during periods
of transition for several companies, including, Saratoga Springs Water Company,
a beverage manufacturer and distributor, and Canyon Ranch Spa Cuisine, a mail
order health food company.
Mr. Naudon has served as Vice Chairman of the Board of the Company since
October 1995 and as a director since September 1994, and served as Managing
Director from March 1995 to October 1995. Since May 1992, Mr. Naudon, has served
as Chairman of the Board of BSI Administrative Services Inc., a benefits plan
administration company. In addition, since January 1984, Mr. Naudon has served
as President, Chief Executive Officer and director of Banking Spectrum, Inc. and
Banking Spectrum Services, Inc., each a banking consulting company.
Mr. Carlisle has served as a director of the Company since March 1994.
Since 1984, Mr. Carlisle has served as a general partner of Menlo Ventures VI,
L.P. ("Menlo Ventures"), a venture capital fund that invests in emerging growth
technology companies. Mr. Carlisle is a director of Carrier Access Corporation.
Mr. Clarke has served as a director of the Company since April 1998. Since
September 1993, Mr. Clarke has served as Vice President, Private Equity, of the
Aetna Investment Management Group of Aetna Life Insurance Company ("Aetna").
From September 1977 to September 1993, Mr. Clarke held various other positions
in the Private Bond Investment Group of Aetna.
Mr. McKay has served as a director of the Company since December 1995.
Since April 1994, Mr. McKay has served as a general partner of Axiom Venture
Partners, L.P. ("Axiom"), a venture capital firm. Previously, Mr. McKay was
general partner of Connecticut Seed Ventures, L.P. Mr. McKay is a director of
Anika Therapeutics, Inc., Sabre Communications Corporation, Costar Corporation
and Nightingale Corp.
Mr. Neville has served as a director of the Company since June 1998. Since
June 1997, Mr. Neville has served as President of TOTALPLUS, a division of
BISYS. From June 1995 to June 1997, Mr. Neville served as Senior Vice President
and Eastern regional General Manager of TOTALPLUS. From June 1992 to June 1995,
Mr. Neville served as Vice President and General Manager of the New England
region of TOTALPLUS.
Mr. Yanak has served as a director of the Company since May 1996. Since
October 1996, Mr. Yanak has served as Senior Advisor of NYCE Corporation, an
electronic banking services company. From December 1987 to October 1996, Mr.
Yanak served as President and Chief Executive Officer of NYCE Corporation.
Mr. Beer has served as Vice President of Application Development of the
Company since October 1996, and served as Director of Application Development of
the Company from June 1992
36
<PAGE> 39
to October 1996. Previously, Mr. Beer served as Assistant Vice President of
Development of American Savings Bank.
Mr. DeMita has served as Vice President of Professional Services of the
Company since September 1996. From December 1995 to September 1996, Mr. DeMita
served as Vice President of Production of NYCE Corporation, an electronic
banking services company. From July 1992 to October 1995, Mr. DeMita served as
President of Hardcopy Media Inc., a printing company and owned and operated
Alpha Graphics, a printing franchise company. Previously, Mr. DeMita served as
President of American Business Information Services, a subsidiary of American
Savings Bank.
Mr. Messier has served as Vice President of Conversion Services of the
Company since December 1997, and served as Manager of Customer Support of the
Company from July 1995 to December 1997. From February 1990 to July 1995, Mr.
Messier served as a Product Support Specialist and Senior Project Manager at
Fiserv, Inc., a financial services technology company.
Mr. Nicastro has served as Vice President of Marketing of the Company since
October 1996, and served as Director of Marketing and Customer Services of the
Company from September 1994 to October 1996. From February 1985 to September
1994, Mr. Nicastro held various product management positions with the Data
Services Division of NCR Corporation. In addition, Mr. Nicastro served in
various positions at Bristol Savings Bank and Citicorp.
Ms. Dabrowski has served as Controller of the Company since May 1997. From
August 1989 to April 1997, Ms. Dabrowski was employed by Price Waterhouse LLP,
an independent public accounting firm, most recently as Audit Manager in its
Technology Industry Group. Ms. Dabrowski is a certified public accountant.
Pursuant to an Amended and Restated Investors' Rights Agreement dated as of
August 22, 1997 among the Company and certain stockholders of the Company, such
stockholders were granted the right (which terminates upon the closing of this
offering) to designate representatives on the Company's Board of Directors.
Under this agreement, Messrs. Carlisle, McKay, Clarke and Neville were elected
the representatives of Menlo Ventures, Axiom, Aetna and BISYS, respectively.
Following this offering, the Board of Directors of the Company will be
divided into three classes, each of whose members will serve for a staggered
three-year term. The Board will consist of three Class I Directors (Messrs.
Carlisle, Naudon and Waggoner), three Class II Directors (Messrs. Gurney, McKay
and Yanak) and three Class III Directors (Messrs. Anderson, Clarke and Neville).
At each annual meeting of stockholders, a class of directors will be elected for
a three-year term to succeed the directors of the same class whose terms are
then expiring. The terms of the Class I Directors, Class II Directors and Class
III Directors expire upon the election and qualification of successor directors
at the annual meeting of stockholders to be held during the calendar years 1999,
2000 and 2001, respectively.
Each officer serves at the discretion of the Board of Directors and holds
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. There are no family relationships among any of
the directors or executive officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee composed of Messrs.
Carlisle, McKay and Yanak, which makes recommendations concerning salaries and
incentive compensation for employees of and consultants to the Company and
administers and grants stock options pursuant to the Company's stock option
plans, and an Audit Committee composed of Messrs. Clark, McKay and Naudon, which
reviews the results and scope of the audit and other services provided by the
Company's independent public accountants.
37
<PAGE> 40
DIRECTOR COMPENSATION
Directors do not currently receive any compensation for their services on
the Board of Directors, other than reimbursement for out-of-pocket expenses.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1997 for the Company's Chief Executive Officer and
its three other most highly compensated executive officers in 1997 who were
serving as executive officers on December 31, 1997 (the Chief Executive Officer
and such other executive officers are hereinafter referred to as the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS(1) COMPENSATION
- --------------------------- -------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Douglas K. Anderson....... $175,000 $30,000 $-- 195,000(2) $40,000(2)
Chairman of the Board and
Chief Executive Officer
Graham H. Gurney.......... 100,000 15,400(3) -- -- --
Senior Vice President of
Sales
Clifford I. Waggoner...... 106,000 3,000 -- -- --
Senior Vice President and
Chief Technology Officer
John L. Person(4)......... 88,218 15,000 2,800(5) 100,000 4,936(6)
President and Chief
Operating Officer
</TABLE>
- ---------------
(1) Represents the number of shares covered by options to purchase shares of the
Company's Common Stock granted during the year ended December 31, 1997.
(2) In exchange for the surrender of the right to receive 175,000 shares of
Common Stock originally granted on October 2, 1995, Mr. Anderson received an
option to purchase 175,000 shares of Common Stock at an exercise price of
$0.45 per share and supplemental compensation of $40,000 in 1997 and $60,000
in 1998.
(3) Represents sales commissions.
(4) Mr. Person joined the Company in May 1997.
(5) Represents automobile allowance.
(6) Represents reimbursement for relocation expenses.
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<PAGE> 41
The following table sets forth grants of stock options to each of the Named
Executive Officers during the year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------------------------------------------ AT ASSUMED ANNUAL RATES
PERCENT OF OF STOCK PRICE
NUMBER OF TOTAL APPRECIATION FOR OPTION
SECURITIES OPTIONS TERM(2)
UNDERLYING GRANTED TO EXERCISE FAIR MARKET ------------------------------
OPTIONS EMPLOYEES IN PRICE VALUE PER EXPIRATION
NAME GRANTED(1) FISCAL YEAR PER SHARE SHARE DATE 0% 5% 10%
- ---- ---------- ------------ ----------- ----------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas K. Anderson....... 175,000 36.3% $0.45 $1.50 7/21/07 $183,750 $299,309 $476,600
20,000 4.2% 0.45 1.50 7/21/07 21,000 34,207 54,469
Graham H. Gurney.......... -- -- -- -- -- -- -- --
Clifford I. Waggoner...... -- -- -- -- -- -- -- --
John L. Person............ 100,000 20.7% 0.45 1.50 5/07/07 105,000 171,034 272,343
</TABLE>
- ---------------
(1) Mr. Anderson's option to purchase 175,000 shares vested with respect to
84,722 shares immediately upon grant and the remaining shares underlying the
option vest in twenty-six equal monthly installments. Twenty-five percent of
Mr. Person's option and Mr. Anderson's option to purchase 20,000 shares vest
on the first anniversary of the date of grant and the remaining shares
underlying the options vest in thirty-six equal monthly installments.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (0%, 5% and 10%)
on the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the timing of such
exercise and the future performance of the Common Stock. There can be no
assurance that the rates of appreciation assumed in this table can be
achieved or that the amounts reflected will be received by the individuals.
The following table sets forth certain information concerning the number
and value of unexercised options held by each of the Named Executive Officers on
December 31, 1997. None of the Named Executive Officers exercised any stock
options during the year ended December 31, 1997.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Douglas K. Anderson................. 130,555 94,445 $536,248 $384,002
Graham H. Gurney.................... 81,272 30,208 342,314 126,874
Clifford I. Waggoner................ 19,792 30,208 83,126 126,874
John L. Person...................... -- 100,000 -- 405,000
</TABLE>
- ---------------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock at fiscal year end.
39
<PAGE> 42
STOCK PLANS
1994 Stock Option Plan and 1998 Stock Incentive Plan
The Company's 1994 Stock Option Plan (the "1994 Plan") was adopted by the
Board of Directors and approved by the stockholders of the Company in March
1994. Amendments to the 1994 Plan increased the number of authorized shares
under the Plan to 3,000,000 shares of Common Stock. As of March 31, 1998,
options to purchase an aggregate of 1,643,125 shares of Common Stock at a
weighted average exercise price of $0.58 per share were outstanding under the
1994 Plan. No additional option grants will be made under the 1994 Plan.
The Company's 1998 Stock Incentive Plan (the "Incentive Plan") was adopted
by the Board of Directors, subject to stockholder approval, in June 1998. Awards
may be made under the Incentive Plan for up to the sum of (i) 1,200,000 shares
of Common Stock (subject to adjustment in the event of stock splits and other
similar events), plus (ii) the number of shares of Common Stock (up to
1,700,000) (subject to adjustment in the event of stock splits and other similar
events) subject to awards granted under the 1994 Plan which are not actually
issued because options granted under such plan expire or otherwise result in
shares not being issued or, in the case of restricted stock, are repurchased by
the Company pursuant to the terms of the applicable stock restriction agreement.
The Incentive Plan provides for the grant of incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), nonstatutory stock options, restricted stock awards and
other stock-based awards (collectively, "Awards").
Officers, employees, directors, consultants and advisors of the Company and
its subsidiaries are eligible to receive Awards under the Incentive Plan. Under
present law, however, incentive stock options may only be granted to employees.
The maximum number of shares with respect to which an Award may be granted to
any participant under the Incentive Plan may not exceed 400,000 shares per
calendar year.
Optionees receive the right to purchase a specified number of shares of
Common Stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. Options may be
granted at an exercise price which may be less than, equal to or greater than
the fair market value of the Common Stock on the date of grant. Under present
law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Code may not be
granted at an exercise price less than the fair market value of the Common Stock
on the date of grant (or less than 110% of the fair market value in the case of
incentive stock options granted to optionees holding more than 10% of the voting
power of the Company). The Incentive Plan permits the Board of Directors to
determine the manner of payment of the exercise price of options, including
through payment by cash, check or in connection with a "cashless exercise"
through a broker, by surrender to the Company of shares of Common Stock, by
delivery to the Company of a promissory note, or by any combination of the
permitted forms of payment.
As of March 31, 1998, approximately 115 persons would have been eligible to
receive Awards under the Incentive Plan, including the Company's four executive
officers and six non-employee directors. The granting of Awards under the
Incentive Plan is discretionary.
The Incentive Plan is administered by the Board of Directors. The Board of
Directors has the authority to adopt, amend and repeal the administrative rules,
guidelines and practices relating to the Incentive Plan and to interpret the
provisions thereof. Pursuant to the terms of the Incentive Plan, the Board of
Directors may delegate authority under the Incentive Plan to one or more
committees of the Board of Directors and, subject to certain limitations, to one
or more executive officers of the Company. The Board of Directors has authorized
the Compensation Committee to administer the Incentive Plan, including the
granting of options to executive officers. Subject to any applicable limitations
contained in the Incentive Plan, the Board of Directors, the Compensation
40
<PAGE> 43
Committee or any other committee or executive officer to whom the Board of
Directors delegates authority, as the case may be, selects the recipients of
Awards and determines (i) the number of shares of Common Stock covered by
options and the dates upon which such options become exercisable, (ii) the
exercise price of options, (iii) the duration of options, and (iv) the number of
shares of Common Stock subject to any restricted stock or other stock-based
Awards and the terms and conditions of such Awards, including the conditions for
repurchase, issue price and repurchase price.
In the event of a merger, liquidation or other Acquisition Event (as
defined in the Incentive Plan), the Board of Directors is authorized to provide
for outstanding options or other stock-based Awards to be assumed or substituted
for by the acquiror. If the acquiror refuses to assume or substitute for
outstanding Awards, they will accelerate, becoming fully exercisable and free of
restriction, prior to consummation of the Acquisition Event. In addition,
following an Acquisition Event, an assumed or substituted Award will accelerate
if the employment of its holder with the acquiror is terminated prior to the
first anniversary of the Aquisition Event other than "for cause," as defined in
the Incentive Plan.
No Award may be granted under the Incentive Plan after June 2008, but the
vesting and effectiveness of Awards previously granted may extend beyond that
date. The Board of Directors may at any time amend, suspend or terminate the
Incentive Plan, except that no Award granted after an amendment of the Incentive
Plan and designated as subject to Section 162(m) of the Code by the Board of
Directors shall become exercisable, realizable or vested (to the extent such
amendment was required to grant such Award) unless and until such amendment is
approved by the Company's stockholders.
The Company intends to grant options to purchase an aggregate of 200,000
shares of Common Stock to certain employees (none of whom is an executive
officer) on the effective date of this offering at a price per share equal to
the initial public offering price.
1998 Employee Stock Purchase Plan
The Company's 1998 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors, subject to stockholder approval, in June
1998. The Purchase Plan authorizes the issuance of up to a total of 250,000
shares of Common Stock to participating employees.
All employees of the Company, including directors of the Company who are
employees, and all employees of any participating subsidiaries, whose customary
employment is more than 20 hours per week and for more than five months in any
calendar year are eligible to participate in the Purchase Plan. Employees who
would immediately after the grant own 5% or more of the total combined voting
power or value of the stock of the Company or any subsidiary are not eligible to
participate. As of March 31, 1998, approximately 109 of the Company's employees
would have been eligible to participate in the Purchase Plan.
On the first day of a designated payroll deduction period (the "Offering
Period"), the Company will grant to each eligible employee who has elected to
participate in the Purchase Plan an option to purchase the number of shares of
Common Stock equal to an amount (a whole percentage from 1% to 10% of such
employee's base pay) authorized by the employee to be deducted by the Company
from such employee's base pay during the Offering Period. On the last day of the
Offering Period, the employee is deemed to have exercised the option, at the
option exercise price, to the extent of accumulated payroll deductions. Under
the terms of the Purchase Plan, the option price is an amount equal to 85% of
the closing price (as defined) per share of the Common Stock on either the first
business day or the last business day of the Offering Period, whichever is
lower. In no event may an employee purchase in any one Offering Period a number
of shares which exceeds the number of shares determined by dividing (a) the
product of $2,083 and the number of whole months in such Offering Period by (b)
the closing price per share of the Common Stock on the commencement date of the
Offering Period. The Compensation Committee may, in its discretion, choose an
Offering
41
<PAGE> 44
Period of 12 months or less for each Offering and choose a different Offering
Period for each Offering.
If an employee is not a participant on the last day of the Offering Period,
such employee is not entitled to exercise any option, and the amount of such
employee's accumulated payroll deductions will be refunded. An employee's rights
under the Purchase Plan terminate upon voluntary withdrawal from the Purchase
Plan at any time, or when such employee ceases employment for any reason, except
that upon termination of employment because of death, the employee's beneficiary
has certain rights to elect to exercise the option to purchase the shares which
the accumulated payroll deductions in the participant's account would purchase
at the date of death.
Because participation in the Purchase Plan is voluntary, the Company cannot
now determine the number of shares of Common Stock to be purchased by any
particular current executive officer, by all current executive officers as a
group or by non-executive employees as a group.
401(k) PLAN
The Company currently maintains a 401(k) salary reduction plan (the "401(k)
Plan") which is intended to qualify under Sections 401(a) and 401(k) of the
Internal Revenue Code of 1986. Employees working more than 20 hours per week are
eligible to begin participating in the 401(k) Plan on the first day of each
calendar quarter. All eligible executive officers, other than Mr. Person, have
elected to participate in the 401(k) Plan.
Eligible employees electing to participate in the 401(k) Plan may defer a
portion of their compensation on a pre-tax basis, by contributing a percentage
thereof to the 401(k) Plan. The maximum contribution is prescribed in Section
401(k) of the Internal Revenue Code of 1986. The contribution limit for 1997 was
$9,500. The Company made matching contributions of $30.00 plus up to one percent
of the employee's gross earnings in 1997, subject to the foregoing limit.
Eligible employees who elect to participate in the 401(k) Plan are generally
vested in the Company's matching contribution after two years of service.
EMPLOYMENT AGREEMENTS
Pursuant to a Key Employee Agreement dated October 2, 1995, as amended on
July 21, 1997, the Company agreed to employ Douglas K. Anderson as President and
Chief Executive Officer. The Company also agreed to maintain a policy on the
life of Mr. Anderson with a death benefit of $300,000 payable to a beneficiary
named by Mr. Anderson. Under the agreement, Mr. Anderson retained 175,000 shares
of Common Stock initially issued to him and surrendered the right to receive
175,000 shares in exchange for the grant of an incentive stock option to
purchase 175,000 shares of Common Stock at an exercise price of $0.45 per share
and supplemental compensation of $40,000 in 1997 and $60,000 in 1998. The
Company also granted to Mr. Anderson an additional option to purchase 20,000
shares of Common Stock at an exercise price of $0.45 per share. On March 2,
1998, the Company agreed to pay Mr. Anderson an annual base salary of not less
than $225,000 and a bonus of $50,000 in 1998 based on the achievement of certain
performance targets. The Company also agreed to provide, under certain
circumstances, for 24 months of salary continuation and acceleration of options
upon termination of Mr. Anderson's employment.
Pursuant to a letter agreement dated April 10, 1997, the Company agreed to
employ John L. Person as Executive Vice President and Chief Operating Officer
and to grant Mr. Person an incentive stock option to purchase 100,000 shares of
Common Stock at an exercise price of $0.45 per share. On March 2, 1998, the
Company agreed to pay Mr. Person an annual base salary of $190,000 and a bonus
of up to $35,000 based on the achievement of certain performance targets. The
Company also agreed to provide, under certain circumstances, 12 months salary
continuation and acceleration of options upon termination of Mr. Person's
employment.
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<PAGE> 45
Pursuant to a letter agreement dated February 27, 1998, the Company agreed
to employ Richard J. Willemin as Senior Vice President and Chief Financial
Officer. The Company agreed to pay Mr. Willemin an annual base salary of
$150,000 and to grant Mr. Willemin an incentive stock option to purchase 100,000
shares of Common Stock at an exercise price of $2.75 per share. The Company also
agreed that in the event of a change in control of the Company the vesting of
all such options will be accelerated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Board of Directors
are Messrs. Carlisle, McKay and Yanak. No executive officer of the Company has
served as a director or member of the compensation committee (or other committee
serving an equivalent function) of any other entity, whose executive officers
served as a director of or member of the Compensation Committee of the Board of
Directors.
From January 1997 to June 1998, Mr. Naudon served as a member of the
Compensation Committee of the Board of Directors. Mr. Naudon is President, Chief
Executive Officer, a director and majority shareholder of Banking Spectrum, a
shareholder of the Company. See "Certain Transactions."
Each of Messrs. Carlisle and McKay was appointed to the Board of Directors
as the designee of Menlo Ventures and Axiom, respectively. See "Certain
Transactions."
CERTAIN TRANSACTIONS
In January 1994, the Company entered into an agreement with Banking
Spectrum Services, Inc., a shareholder of the Company, and Banking Spectrum,
Inc. (collectively, "Spectrum"), to provide and receive certain consulting and
support services. Pursuant to the agreement, the Company agreed to pay Spectrum
a three percent royalty based on license and maintenance revenues, as defined in
the agreement, in exchange for the use of Spectrum's products and contributions
to the design of the Company's software. In addition, the Company agreed to pay
Spectrum a five percent royalty based on license and maintenance revenues for
compliance and regulatory support provided to customers. In March 1998, the
Company and Spectrum entered into a distribution and termination agreement. The
March 1998 agreement releases the Company from any future royalty payments to
Spectrum in exchange for a cash payment of $100,000 and grants to affiliates of
Spectrum of fully-vested options to purchase 275,000 shares of Common Stock at
an exercise price of $0.45 per share. Mr. Naudon, a director of the Company, is
President and Chief Executive Officer, director and the majority shareholder of
Spectrum. The stock options were estimated by management to have a fair value of
approximately $1.6 million, and the Company recorded a contract termination
expense of approximately $1.3 million (net of amounts previously accrued) for
the three months ended March 31, 1998.
In July 1992 and January 1994, the Company entered into Professional
Services Agreements (the "Prism Agreements") with Prince-Roth Information
Systems Management, Inc. T/A ("PRISM"). Under the PRISM Agreements, PRISM
provided data processing technical services to the Company, and the Company
deferred payment for such services under the agreements until June 1995 and June
1996, respectively. Pursuant to the terms of the PRISM Agreements, Messrs.
Gurney and Waggoner each received an aggregate of approximately $132,000.
Spouses of the shareholders of PRISM are shareholders of the Company.
On February 3, 1994, the Company issued an aggregate of 1,000,000 shares of
Series A-1 Preferred Stock at $1.50 per share for an aggregate purchase price of
$1.5 million to Menlo Ventures and Menlo Entrepreneurs Fund VI, L.P. ("Menlo
Entrepreneurs"). In addition, the Company issued warrants to purchase 333,333
shares of Series A-2 Preferred Stock with an exercise price of $3.00 per share.
These warrants were exercised on September 13, 1994 for $999,999. Mr. Carlisle,
a director
43
<PAGE> 46
of the Company, is a general partner of MV Management VI, L.P. ("MVM"). MVM is a
general partner of Menlo Ventures and Menlo Entrepreneurs.
On September 14, 1994, the Company issued 83,333 shares of Series A-2
Preferred Stock at $3.00 per share for $50,000 cash and a $200,000 promissory
note from Banking Spectrum. Mr. Naudon, a director of the Company, is President
and Chief Executive Officer, and a director and the majority shareholder of
Banking Spectrum.
On May 12, 1995, the Company issued 166,667 shares of Series A-2 Preferred
Stock at $3.00 per share for an aggregate purchase price of $500,000 to
Connecticut Innovations, Incorporated ("CII").
On September 1, 1995, the Company issued demand notes with an interest rate
of 10% per annum to Menlo Ventures and Menlo Entrepreneurs in an aggregate
original principal amount of $500,000. On November 15, 1995, the Company issued
demand notes with an interest rate of 10% per annum to Menlo Ventures and Menlo
Entrepreneurs in an aggregate original principal amount of $500,000. Each of the
notes was repaid on December 27, 1995.
On December 27, 1995, the Company issued an aggregate of 1,543,334 shares
of Series B Preferred Stock at $3.00 per share for an aggregate purchase price
of $4,630,000 to certain investors, including Menlo Ventures, Menlo
Entrepreneurs, Axiom and CII. In addition, the Company issued warrants to
purchase 192,916 shares of Series B Preferred Stock at $4.00 per share. Warrants
to purchase 84,583 shares of Series B Preferred Stock were exercised by Menlo
Ventures and Menlo Entrepreneurs on March 6, 1998 for $338,332. The Company
granted each of Axiom and Menlo the right (which terminates upon the closing of
this offering) to designate one nominee for election to the Board of Directors.
Mr. McKay, a director of the Company, is Chief Executive Officer of Axiom
Venture Associates, Inc. ("Axiom Associates"), the general partner of Axiom.
On October 23, 1996, the Company issued 1,222,222 shares of Series C
Preferred Stock at $4.50 per share for an aggregate purchase price of $5,500,000
to Aetna, Menlo Ventures, Menlo Entrepreneurs, Axiom and CII. In addition, the
Company issued warrants to purchase 152,778 shares of Series C Preferred Stock
at $6.00 per share. Warrants to purchase 41,667 shares of Series C Preferred
Stock were exercised by Menlo Ventures and Menlo Entrepreneurs on March 6, 1998
for $250,002. The Company granted Aetna the right (which terminates upon the
closing of this offering) to designate one nominee for election to the Board of
Directors. Mr. Clarke, a director of the Company, is Vice President, Private
Equity, of Aetna.
On August 22, 1997, the Company issued 833,333 shares of Series D Preferred
Stock at $6.00 per share for an aggregate purchase price of $5,000,000 to BISYS.
In addition, the Company issued a warrant to purchase 416,667 shares of Series D
Preferred Stock at $6.00 per share. The Company granted BISYS the right (which
terminates upon the closing of this offering) to designate one nominee for
election to the Board of Directors. Concurrent with such preferred stock
offering, the Company entered into a software license and marketing and
distribution agreement with BISYS. See "Business -- Sales and Marketing." Mr.
Neville, a director of the Company, is President of TOTALPLUS, a division of
BISYS.
The Company has adopted a policy providing that all material transactions
between the Company and its officers, directors and other affiliates must (i) be
approved by a majority of the members of the Company's Board of Directors and by
a majority of the disinterested members of the Company's Board of Directors and
(ii) be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
44
<PAGE> 47
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of April 30, 1998, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, by
(i) each person or entity known to the Company to own beneficially more than 5%
of the Company's Common Stock, (ii) each of the directors of the Company, (iii)
each of the Named Executive Officers, (iv) all directors and executive officers
as a group and (v) each of the other Selling Stockholders. Except as indicated
below, none of these entities has a relationship with the Company or, to the
knowledge of the Company, any of the Underwriters or their respective
affiliates. Unless otherwise indicated, each person or entity named in the table
has sole voting power and investment power (or shares such power with his or her
spouse) with respect to all shares of capital stock listed as owned by such
person or entity. The address of each of the officers and directors of the
Company is c/o Open Solutions Inc., 300 Winding Brook Drive, Glastonbury, CT
06033.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE
OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING (1) SHARES AFTER OFFERING(1)(2)
---------------------- BEING ----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE OFFERED(3) NUMBER PERCENTAGE
- ------------------------ --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
5% STOCKHOLDERS
MV Management VI, L.P.(4)................... 2,469,583 32.7% -- 2,469,583
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
The BISYS Group, Inc.(5).................... 1,250,000 15.7% -- 1,250,000
11 Greenway Plaza
Houston, TX 77046
Axiom Venture Partners, L.P.(6)............. 875,000 11.5% -- 875,000
City Place II, 17th Floor
Hartford, CT 06103
Aetna Life Insurance Company(7)............. 750,000 9.8% -- 750,000
151 Farmington Avenue
Hartford, CT 06106
Carlos P. Naudon(8)......................... 549,417 7.1% 55,000 494,417
Connecticut Innovations, Incorporated(9).... 479,167 6.3% -- 479,167
999 West Street
Rocky Hill, CT 06067
Lorraine H. Rothstein....................... 440,000 5.8% 88,000 352,000
157 Arbour Circle
Basking Ridge, NJ 07920
Graham H. Gurney(10)........................ 437,522 5.5% -- 437,522
Ellen A. Dugan.............................. 430,000 5.7% 40,000 390,000
33 Country Oaks
Lebanon, NJ 08833
Clifford I. Waggoner(11).................... 376,042 5.0% -- 376,042
OTHER DIRECTORS AND EXECUTIVE OFFICERS
Douglas K. Anderson(12)..................... 329,513 4.3% -- 329,513
Douglas C. Carlisle(4)...................... 2,469,583 32.7% -- 2,469,583
David M. Clarke(7).......................... 750,000 9.8% -- 750,000
Samuel F. McKay(6).......................... 875,000 11.5% -- 875,000
William W. Neville(5)....................... 1,250,000 15.7% -- 1,250,000
John L. Person(13).......................... 27,083 * -- 27,083
Richard J. Willemin......................... -- -- -- --
Richard P. Yanak(14)........................ 10,417 * -- 10,417
All executive officers and directors as a
group (11 persons)(15).................... 7,074,577 81.2% 55,000 7,019,577
</TABLE>
- ---------------
* Less than 1%
45
<PAGE> 48
(1) The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual or entity has sole or shared voting power or
investment power and any shares as to which the individual or entity has
the right to acquire beneficial ownership within 60 days after April 30,
1998 through the exercise of any stock option, warrant or other right. The
inclusion herein of such shares, however, does not constitute an admission
that the named stockholder is a direct or indirect beneficial owner of such
shares.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) In the event that the over-allotment option is exercised in full, Messrs.
Gurney and Waggoner will each sell 35,000 shares to the Underwriters. As a
result of such sale, Messrs. Gurney and Waggoner will thereafter
beneficially own 402,522 ([ ]%) and 341,042 ([ ]%), respectively,
of the shares outstanding after this offering.
(4) Consists of 2,433,003 shares held by Menlo Ventures and 36,580 shares held
by Menlo Entrepreneurs. MVM is a general partner of Menlo Ventures and
Menlo Entrepreneurs. Mr. Carlisle, a director of the Company, is a general
partner of MVM. Mr. Carlisle disclaims beneficial ownership of the shares
held by Menlo Ventures and Menlo Entrepreneurs, except to the extent of his
pecuniary interests therein.
(5) Includes 416,667 shares issuable upon the exercise of warrants held by
BISYS which are exercisable within 60 days after April 30, 1998. Mr.
Neville, a director of the Company, is President of TOTALPLUS, a division
of BISYS.
(6) Includes 97,222 shares issuable upon the exercise of warrants held by Axiom
which are exercisable within 60 days after April 30, 1998. Mr. McKay, a
director of the Company, is Chief Executive Officer of Axiom Venture
Associates, Inc., the general partner of Axiom. Mr. McKay shares voting and
investment power with respect to such shares with two other executive
officers of Axiom Associates. Mr. McKay disclaims beneficial ownership of
the shares held by Axiom, except to the extent of his pecuniary interest
therein.
(7) Includes 83,333 shares issuable upon the exercise of warrants held by the
Aetna which are exercisable within 60 days after April 30, 1998. Mr.
Clarke, a director of the Company, is Vice President, Private Equity of
Aetna.
(8) Consists of 251,762 shares held by Banking Spectrum, 22,895 shares subject
to options held by Banking Spectrum which are exercisable within 60 days
after April 30, 1998, 33,440 shares held by Mr. Naudon, 205,695 shares held
by Mr. Naudon which are exercisable within 60 days after April 30, 1998,
10,000 shares held by The Enrique S. Naudon Trust, 10,000 shares held by
The Ignacio S. Naudon Trust and 15,625 shares held by Allister & Naudon
Profit Sharing Pension Plan. Mr. Naudon, a director of the Company, is
President and Chief Executive Officer, and a director and the majority
shareholder of Banking Spectrum, a trustee of the Allister & Naudon Profit
Sharing Plan, and Susan Steingass, his spouse, is a trustee of The Enrique
S. Naudon Trust and The Ignacio S. Naudon Trust.
(9) Includes 34,722 shares issuable upon the exercise of warrants held by CII
which are exercisable within 60 days after April 30, 1998.
(10) Includes 87,522 shares subject to options held by Mr. Gurney which are
exercisable within 60 days after April 30, 1998.
(11) Includes 26,042 shares subject to options held by Mr. Waggoner which are
exercisable within 60 days after April 30, 1998.
(12) Includes 154,513 shares subject to options held by Mr. Anderson which are
exercisable within 60 days after April 30, 1998.
46
<PAGE> 49
(13) Consists of shares subject to options held by Mr. Person which are
exercisable within 60 days after April 30, 1998.
(14) Consists of shares subject to options held by Mr. Yanak which are
exercisable within 60 days after April 30, 1998.
(15) Includes an aggregate of 1,166,091 shares of Common Stock subject to
options or warrants which are exercisable within 60 days after April 30,
1998.
47
<PAGE> 50
DESCRIPTION OF CAPITAL STOCK
After the filing of the Company's Restated Certificate of Incorporation
upon the closing of this offering, the authorized capital stock of the Company
will consist of 50,000,000 shares of Common Stock, $0.01 par value per share,
and 5,000,000 shares of Preferred Stock, $0.01 par value per share ("Preferred
Stock"). As of March 31, 1998 (after giving effect to the conversion of all
outstanding shares of Convertible Preferred Stock into Common Stock to be
effected upon the closing of this offering), there were outstanding (i)
7,474,276 shares of Common Stock held by 35 stockholders of record, (ii) options
to purchase an aggregate of 1,643,125 shares of Common Stock and (iii) warrants
to purchase an aggregate of 636,111 shares of Common Stock ("Warrants").
The following summary of certain provisions of the Company's Common Stock,
Preferred Stock, Warrants, Restated Certificate of Incorporation and Amended and
Restated By-laws (the "By-laws") is not intended to be complete and is qualified
by reference to the provisions of applicable law and to the Company's Restated
Certificate of Incorporation, By-laws and Warrants included as exhibits to the
Registration Statement of which this Prospectus is a part. See "Additional
Information."
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do 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
outstanding Preferred Stock. Upon the liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to receive ratably the net
assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares
offered by the Company 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 which the Company may
designate and issue in the future. Certain holders of Common Stock have the
right to require the Company to effect the registration of their shares of
Common Stock in certain circumstances. See "Shares Eligible for Future Sale."
PREFERRED STOCK
Under the terms of the Restated Certificate of Incorporation, the Board of
Directors is authorized, subject to any limitations prescribed by law, without
stockholder approval, to issue shares of Preferred Stock in one or more series.
Each such series of Preferred Stock shall have such rights, preferences,
privileges and restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be determined by the Board of Directors.
The purpose of authorizing the Board of Directors to issue Preferred Stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue any shares of Preferred Stock.
48
<PAGE> 51
WARRANTS
As of March 31, 1998, the Company has outstanding warrants to purchase
108,333 shares of Series B Preferred Stock at an exercise price of $4.00 per
share, warrants to purchase 111,111 shares of Series C Preferred Stock at an
exercise price of $6.00 per share and a warrant to purchase 416,667 shares of
Series D Preferred Stock at an exercise price of $6.00 per share. The warrants
to purchase Series B Preferred Stock expire on December 27, 2000. The warrants
to purchase Series C Preferred Stock expire on October 23, 2001. The warrant to
purchase Series D Preferred Stock expires on August 22, 2001. All of these
warrants will become warrants to purchase Common Stock upon the closing of this
offering.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
The Restated Certificate of Incorporation provides for the division of the
Board of Directors into three classes as nearly equal in size as possible with
staggered three-year terms. See "Management." In addition, the Restated
Certificate of Incorporation provides that directors may be removed only for
cause by the affirmative vote of holders of at least 75% of the votes which all
the stockholders would be entitled to cast in any annual election of directors
or class of directors. Under the Restated Certificate of Incorporation, any
vacancy on the Board of Directors, however occurring, including a vacancy
resulting from an enlargement of the Board of Directors, may only be filled by
vote of a majority of the directors then in office. The classification of the
Board of Directors and the limitations on the removal of directors and filling
of vacancies could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from acquiring, control of the
Company.
The Restated Certificate of Incorporation also provides that, after the
closing of this offering, any action required or permitted to be taken by the
stockholders of the Company at an annual meeting or special meeting of
stockholders may only be taken if it is properly brought before such meeting and
may not be taken by written action in lieu of a meeting. The Restated
Certificate of Incorporation further provides that special meetings of the
stockholders may only be called by the Chairman of the Board, the President or
the Board of Directors. Under the Company's By-laws, in order for any matter to
be considered "properly brought" before a meeting, a stockholder must comply
with certain requirements regarding advance notice and provide certain
information to the Company. The foregoing provisions could have the effect of
delaying until the next stockholders meeting stockholder actions which are
favored by the holders of a majority of the outstanding voting securities of the
Company. These provisions may also discourage another person or entity from
making a tender offer for the Common Stock, because such person or entity, even
if it acquired a majority of the outstanding voting securities of the Company,
would be able to take action as a stockholder (such as electing new directors or
approving a merger) only at a duly called stockholders' meeting, and not by
written consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. The Restated Certificate of Incorporation and
the By-laws require the affirmative vote of holders of at least 75% of the votes
which all the stockholders would
49
<PAGE> 52
be entitled to cast in any annual election of directors or class of directors to
amend or repeal any of the provisions described in the prior two paragraphs.
The Restated Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions which involve intentional misconduct or a knowing violation of
law. Further, the Restated Certificate of Incorporation contains provisions to
indemnify the Company's directors and officers to the fullest extent permitted
by the General Corporation Law of Delaware. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is BankBoston, N.A.
50
<PAGE> 53
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the securities
of the Company. Upon completion of this offering, based upon the number of
shares outstanding at March 31, 1998, there will be [ ] shares of
Common Stock of the Company outstanding (assuming no exercise of the
Underwriters' over-allotment option or outstanding warrants or options of the
Company). Of these shares, the [ ] shares sold in this offering
will be freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), except that any
shares purchased by "affiliates" of the Company, as that term is defined in Rule
144 ("Rule 144") under the Securities Act ("Affiliates"), may generally only be
sold in compliance with the limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining [ ] shares of Common Stock are deemed
"restricted securities" under Rule 144. Of the restricted securities,
approximately [ ] shares of Common Stock, which are not subject to
the 180-day lock-up agreements (the "Lock-up Agreements") with the
Representatives of the Underwriters, will be eligible for immediate sale in the
public market pursuant to Rule 144(k) under the Securities Act. Approximately
[ ] additional shares of Common Stock, which are not subject to
Lock-up Agreements, will be eligible for sale in the public market in accordance
with Rule 144 or Rule 701 under the Securities Act beginning 90 days after the
date of this Prospectus. Upon expiration of the Lock-up Agreements 180 days
after the date of this Prospectus, approximately [ ] additional
shares of Common Stock will be available for sale in the public market, subject
to the provisions of Rule 144 under the Securities Act.
The officers and directors of the Company, and certain securityholders,
which executive officers, directors and securityholders in the aggregate hold
approximately [ ] shares of Common Stock (including
[ ] shares of Common Stock that may be acquired pursuant to the
exercise of options and warrants held by them) on the date of this Prospectus,
have agreed that, for a period of 180 days after the date of this Prospectus,
they will not sell, consent to sell or otherwise dispose of any shares of Common
Stock, or any shares convertible into or exchangeable for shares of Common
Stock, owned directly by such persons or with respect to which they have the
power of disposition, without the prior written consent of the Representatives
of the Underwriters.
In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the Registration Statement of which this Prospectus is a
part, a stockholder, including an Affiliate, who has beneficially owned his or
her restricted securities (as that term is defined in Rule 144) for at least one
year from the later of the date such securities were acquired from the Company
or (if applicable) the date they were acquired from an Affiliate is entitled to
sell, within any three-month period, a number of such shares that does not
exceed the greater of 1% of the then outstanding shares of Common Stock
(approximately [ ] shares immediately after this offering) or the
average weekly trading volume in the Common Stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, under Rule 144(k),
if a period of at least two years has elapsed between the later of the date
restricted securities were acquired from the Company or (if applicable) the date
they were acquired from an Affiliate of the Company, a stockholder who is not an
Affiliate of the Company at the time of sale and has not been an Affiliate of
the Company for at least three months prior to the sale is entitled to sell the
shares immediately without compliance with the foregoing requirements under Rule
144.
Securities issued in reliance on Rule 701 (such as shares of Common Stock
acquired pursuant to the exercise of certain options granted under the Company's
stock plans) are also restricted securities and, beginning 90 days after the
effective date of the Registration Statement of which this Prospectus is a part,
may be sold by stockholders other than Affiliates of the Company subject only to
51
<PAGE> 54
the manner of sale provisions of Rule 144 and by Affiliates under Rule 144
without compliance with its one-year holding period requirement.
OPTIONS
The Company intends to file registration statements on Form S-8 with
respect to the shares of Common Stock issuable under the 1994 Plan, the
Incentive Plan and the Purchase Plan promptly following the consummation of this
offering. Shares issued upon the exercise of stock options after the effective
date of the Form S-8 registration statements will be eligible for resale in the
public market without restriction, subject to Rule 144 limitations applicable to
Affiliates and the Lock-Up Agreements noted above, if applicable.
REGISTRATION RIGHTS
Pursuant to an Amended and Restated Investors' Rights Agreement dated as of
August 22, 1997 among the Company and certain persons and entities (the
"Rightsholders"), including Aetna, Axiom, Banking Spectrum, BISYS, CII and Menlo
Ventures and Menlo Entrepreneurs, such Rightsholders will be entitled following
the offering to certain rights with respect to the registration under the
Securities Act of a total of approximately 5,944,583 shares of Common Stock,
including the shares issuable upon exercise of outstanding warrants (the
"Registrable Stock"). The Amended and Restated Investors' Rights Agreement
generally provides that, in the event the Company proposes to register any of
its securities under the Securities Act, the Rightsholders shall be entitled to
include Registrable Stock in such Registration, subject to the right of the
managing underwriter of any underwritten offering to limit for marketing reasons
the number of shares of Registrable Stock included in such "piggyback"
registration period.
The Rightsholders may, upon the request of holders of Registrable Stock
having an aggregate offering price of at least $2,000,000, require the Company
to prepare and file a registration statement under the Securities Act with
respect to their shares of Registrable Stock at any time after this offering.
The Company need effect only two such demand registrations and is not required
to file a demand registration statement within one hundred eighty days after the
effective date of any other registration statement filed by the Company.
EFFECT OF SALES OF SHARES
Prior to this offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that market sales
of shares of Common Stock or the availability of shares for sale will have on
the market price of the Common Stock prevailing from time to time. Nevertheless,
sales of significant numbers of shares of the Common Stock in the public market
could adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through an offering of its equity
securities.
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<PAGE> 55
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives, BT
Alex. Brown Incorporated, Credit Suisse First Boston Corporation and UBS
Securities LLC, have severally agreed to purchase from the Company and the
Selling Stockholders the following respective numbers of shares of Common Stock
at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
BT Alex. Brown Incorporated.................................
Credit Suisse First Boston Corporation......................
UBS Securities LLC..........................................
--------
Total.............................................
========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of the Common Stock offered hereby if any
such shares are purchased.
The Company and the Selling Stockholders have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the initial public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such price
less a concession not in excess of $[ ] per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $[ ] per share to certain other dealers. After the initial
public offering, the public offering price and other selling terms may be
changed by the Representatives of the Underwriters.
The Company and certain stockholders of the Company (other than the Selling
Stockholders) have granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to
[ ] additional shares of Common Stock at the public offering price
less the underwriting discounts and commissions set forth on the cover page of
this Prospectus. To the extent that the Underwriters exercise such option, each
of the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it shown in the above table bears to [ ], and such
stockholders will be obligated, pursuant to the option, to sell such shares to
the Underwriters. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the Common Stock offered
hereby. If purchased, the Underwriters will offer such additional shares on the
same terms as those on which the [ ] shares are being offered.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company, the Selling Stockholders and certain other
stockholders against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended.
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<PAGE> 56
The Company, each of its officers and directors, and certain of its
stockholders, including all of the Selling Stockholders, have agreed, subject to
certain exceptions, not to offer, sell, pledge, contract to sell (including any
short sale), grant any option to purchase or otherwise dispose of any shares of
Common Stock or any shares which may be issued upon exercise of a stock option
or warrant or conversion of any convertible securities into Common Stock or
enter into any hedging transaction relating to the Common Stock for a period of
180 days after the date of this Prospectus without the prior written consent of
the Representatives of the Underwriters. The Representatives of the Underwriters
may, in their sole discretion and at any time without notice, release all or any
portion of the securities subject to Lock-up Agreements. See "Shares Eligible
for Future Sale."
The Representatives have advised the Company, the Selling Stockholders and
certain other stockholders that the Underwriters do not intend to confirm sales
to any accounts over which they exercise discretionary authority.
In connection with this offering, the Underwriters and other persons
participating in this offering may engage in transactions that stabilize,
maintain or otherwise affect the price of the Common Stock. Specifically, the
Underwriters may over-allot in connection with this offering, creating a short
position in Common Stock for their own account. To cover over-allotments or to
stabilize the price of the Common Stock, the Underwriters may bid for, and
purchase, shares of Common Stock in the open market. The Underwriters may also
impose a penalty bid whereby they may reclaim selling concessions allowed to an
Underwriter or a dealer for distributing Common Stock in this offering, if the
Underwriters repurchase previously distributed Common Stock in transactions to
cover their short position, in stabilization transactions or otherwise. Finally,
the Underwriters may bid for, and purchase, shares of Common Stock in market
making transactions. These activities may stabilize or maintain the market price
of the Common Stock above market levels that may otherwise prevail. The
Underwriters are not required to engage in these activities and may end any of
these activities at any time.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock will be determined by negotiations among the Company,
representatives of the Selling Stockholders and certain other stockholders and
the Representatives of the Underwriters. Among the factors to be considered in
such negotiations are the prevailing market conditions, the results of
operations of the Company in recent periods, the market capitalizations and
stages of development of other companies which the Company, representatives of
the Selling Stockholders and certain other stockholders and the Representatives
of the Underwriters believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant. Application has been made for
quotation of the Common Stock on the Nasdaq National Market under the symbol
"OSIF."
LEGAL MATTERS
The validity of the shares of Common Stock offered by the Company, the
Selling Stockholders and certain other stockholders hereby will be passed upon
for the Company by Hale and Dorr LLP, Boston, Massachusetts, and for the
Underwriters by Goodwin, Procter & Hoar LLP, Boston, Massachusetts.
EXPERTS
The Company's financial statements as of December 31, 1997 and 1996 and for
each of the three years in the period ended December 31, 1997 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
54
<PAGE> 57
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include all amendments,
exhibits, schedules and supplements thereto) on Form S-1 under the Securities
Act with respect to the shares of Common Stock offered hereby. This Prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission, to
which Registration Statement reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
The Registration Statement and the exhibits thereto may be inspected and
copied at prescribed rates at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., 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 Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. In addition, the Company is
required to file electronic versions to these documents with the Commission
through the Commission's Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
55
<PAGE> 58
OPEN SOLUTIONS INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheet at December 31, 1996, 1997 and March 31, 1998
(unaudited)............................................... F-3
Statement of Operations for the years ended December 31,
1995, 1996 and 1997 and for the three months ended March
31, 1997 (unaudited) and March 31, 1998 (unaudited)....... F-4
Statement of Cash Flows for the years ended December 31,
1995, 1996 and 1997 and for the three months ended March
31, 1997 (unaudited) and March 31, 1998 (unaudited)....... F-5
Statement of Changes in Stockholders' Equity (Deficit) for
the years ended December 31, 1995, 1996 and 1997 and for
the three months ended March 31, 1998 (unaudited)......... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 59
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Open Solutions Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of cash flows and of changes in stockholders' equity (deficit)
present fairly, in all material respects, the financial position of Open
Solutions Inc. at December 31, 1997 and 1996, and the results of its operations,
its cash flows and changes in stockholders' equity (deficit) for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with 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.
Price Waterhouse LLP
Hartford, Connecticut
April 6, 1998
F-2
<PAGE> 60
OPEN SOLUTIONS INC.
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------
PRO FORMA
DECEMBER 31, STOCKHOLDERS'
------------------------ EQUITY
1996 1997 ACTUAL (NOTE 2)
---------- ----------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $4,437,657 $ 7,596,183 $ 7,346,474
Restricted cash (Note 2)...................... 94,241 281,090 --
Accounts receivable (Note 2).................. 1,448,573 1,505,940 2,205,362
Prepaid expenses and other.................... 135,210 232,807 306,716
Deferred project costs (Note 2)............... 458,675 -- --
---------- ----------- ----------- -----------
Total current assets...................... 6,574,356 9,616,020 9,858,552
Fixed assets, net (Notes 2 and 3)............... 767,390 1,153,090 1,260,590
Software development costs, net (Note 2)........ 204,035 533,343 566,514
---------- ----------- ----------- -----------
Total assets.............................. $7,545,781 $11,302,453 $11,685,656
========== =========== =========== ===========
LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.............................. $ 227,887 $ 104,249 $ 422,364
Royalties payable (Note 13)................... 68,315 378,981 --
Accrued expenses (Note 4)..................... 372,108 1,081,917 716,704
Note payable (Note 5)......................... -- 175,000 150,000
Current portion of long-term debt (Note 6).... -- 34,668 26,001
Deferred revenue (Note 2)..................... 1,005,129 1,643,457 2,311,132
---------- ----------- ----------- -----------
Total current liabilities................. 1,673,439 3,418,272 3,626,201
---------- ----------- ----------- -----------
Accrued rent expense (Note 2)................... 77,731 100,823 106,061
Long-term debt, less current portion (Note 6)... -- 57,778 57,778
---------- ----------- ----------- -----------
77,731 158,601 163,839
---------- ----------- ----------- -----------
Total liabilities............................... 1,751,170 3,576,873 3,790,040
Commitments and contingencies (Note 10).........
Mandatorily redeemable convertible preferred
stock (Note 7)................................ 10,573,480 15,551,214 16,139,549 $ --
Stockholders' equity (deficit) (Note 8, 9 and
14):
Preferred stock, $0.01 par value; 1,416,667,
1,416,667, 1,416,667, and 0 shares
authorized; 1,416,667, 1,416,667, 1,416,667,
and 0 shares issued and outstanding......... 14,167 14,167 14,167 --
Common stock, $0.01 par value; 8,580,417,
9,830,417, 19,055,417, and 50,000,000 shares
authorized; 2,115,000, 2,165,325, 2,165,804
and 7,474,276 shares issued and
outstanding................................. 21,150 21,653 21,658 74,743
Additional paid-in capital.................... 2,674,465 2,682,569 4,291,481 20,392,112
Accumulated deficit........................... (7,488,651) (10,544,023) (12,571,239) (12,571,239)
---------- ----------- ----------- -----------
Total stockholders' equity (deficit)...... (4,778,869) (7,825,634) (8,243,933) $ 7,895,616
---------- ----------- ----------- ===========
Total liabilities, mandatorily redeemable
convertible preferred stock and stockholders'
equity (deficit).............................. $7,545,781 $11,302,453 $11,685,656
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 61
OPEN SOLUTIONS INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues (Note 2):
Software license............................ $ 212,653 $ 801,532 $ 4,099,722 $ 693,145 $ 1,158,310
Service and maintenance..................... 55,488 217,861 2,549,890 289,128 1,175,594
----------- ----------- ----------- ----------- -----------
Total revenues....................... 268,141 1,019,393 6,649,612 982,273 2,333,904
----------- ----------- ----------- ----------- -----------
Cost of revenues:
Software license............................ 223,015 507,094 1,160,005 218,976 332,675
Service and maintenance..................... 476,991 1,530,528 3,150,536 732,155 987,697
----------- ----------- ----------- ----------- -----------
Total cost of revenues............... 700,006 2,037,622 4,310,541 951,131 1,320,372
----------- ----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing......................... 398,496 1,050,831 2,132,410 458,562 784,274
Product development......................... 660,510 1,059,879 1,901,892 471,681 443,192
General and administrative.................. 399,576 645,334 1,569,568 323,698 642,922
Contract termination (Note 13).............. -- -- -- -- 1,265,292
----------- ----------- ----------- ----------- -----------
Total operating expenses............. 1,458,582 2,756,044 5,603,870 1,253,941 3,135,680
----------- ----------- ----------- ----------- -----------
Loss from operations.......................... (1,890,447) (3,774,273) (3,264,799) (1,222,799) (2,122,148)
Interest income (expense), net................ (4,506) 135,801 209,427 43,644 94,932
----------- ----------- ----------- ----------- -----------
Net loss...................................... $(1,894,953) $(3,638,472) $(3,055,372) $(1,179,155) $(2,027,216)
=========== =========== =========== =========== ===========
Net loss per common share (basic and diluted)
(Note 2).................................... $ (0.98) $ (1.73) $ (1.42) $ (0.55) $ (0.94)
=========== =========== =========== =========== ===========
Weighted average common shares outstanding
(Note 2).................................... 1,935,644 2,102,568 2,155,333 2,136,056 2,165,546
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 62
OPEN SOLUTIONS INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................... $(1,894,953) $(3,638,472) $(3,055,372) $(1,179,155) $(2,027,216)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization............. 53,865 147,790 352,326 55,452 148,907
Compensation expense related to stock and
options granted......................... -- 52,500 85,526 41,149 23,130
Options granted to Banking Spectrum (Note
13)..................................... -- -- -- -- 1,608,750
Changes in operating assets and
liabilities:
Restricted cash......................... -- (94,241) (186,849) (214,283) 281,090
Accounts receivable..................... (146,240) (1,302,333) (57,367) (181,428) (699,422)
Prepaid expenses and other.............. (17,054) (110,005) (97,597) (20,919) (73,909)
Deferred project costs.................. -- (458,675) 458,675 126,758 --
Accounts payable and accrued expenses... 264,158 371,774 500,645 (16,449) (70,228)
Royalties payable....................... -- 68,315 310,666 (68,315) (378,981)
Deferred revenue........................ -- 968,254 638,328 175,135 667,675
Accrued rent expense.................... -- 77,731 23,092 6,843 5,238
----------- ----------- ----------- ----------- -----------
Net cash used by operating activities... (1,740,224) (3,917,362) (1,027,927) (1,275,212) (514,966)
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of fixed assets................... (92,523) (696,874) (597,256) (81,852) (181,592)
Software development costs.................. (119,514) (153,209) (215,078) (34,977) (107,986)
----------- ----------- ----------- ----------- -----------
Net cash used by investing activities... (212,037) (850,083) (812,334) (116,829) (289,578)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Net proceeds from the sale of preferred
stock..................................... 5,092,000 5,481,480 4,977,734 -- --
Proceeds from exercise of stock options..... 1,500 -- 8,607 6,938 167
Proceeds from exercise of warrants.......... -- -- -- 588,335
Proceeds from short-term debt............... 1,000,000 -- -- -- --
Payments of short-term debt................. (1,000,000) (250,000) -- -- (33,667)
Proceeds from long-term debt................ -- -- 104,002 -- --
Payments of long-term debt.................. -- -- (91,556) -- --
Proceeds from subscription note
receivable................................ 120,000 60,000 -- -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities........................... 5,213,500 5,291,480 4,998,787 6,938 554,835
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................... 3,261,239 524,035 3,158,526 (1,385,103) (249,709)
Cash and cash equivalents at beginning of
period.................................... 652,383 3,913,622 4,437,657 4,437,657 7,596,183
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period.................................... $ 3,913,622 $ 4,437,657 $ 7,596,183 $ 3,052,554 $ 7,346,474
=========== =========== =========== =========== ===========
Supplemental disclosure
Cash paid for:
Interest.................................. $ 21,781 $ 3,438 $ 9,148 $ 1,732 $ 2,143
Income taxes.............................. 4,156 25,923 19,172 -- --
</TABLE>
See discussion of non-cash transaction in Note 5.
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 63
OPEN SOLUTIONS INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
------------------- ------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
--------- ------- --------- ------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- December 31,
1994....................... 1,416,667 $14,167 1,930,000 $19,300 $ 2,442,315 $(1,955,226) $ 520,556
Exercise of stock
options.................. -- -- 10,000 100 1,400 -- 1,500
Proceeds from subscription
note receivable.......... -- -- -- -- 120,000 -- 120,000
Net loss................... -- -- -- -- -- (1,894,953) (1,894,953)
--------- ------- --------- ------- ----------- ------------ -----------
Balance -- December 31,
1995....................... 1,416,667 14,167 1,940,000 19,400 2,563,715 (3,850,179) (1,252,897)
Issuance of common stock
(Note 8)................. -- -- 175,000 1,750 50,750 -- 52,500
Proceeds from subscription
note receivable.......... -- -- -- -- 60,000 -- 60,000
Net loss................... -- -- -- -- -- (3,638,472) (3,638,472)
--------- ------- --------- ------- ----------- ------------ -----------
Balance -- December 31,
1996....................... 1,416,667 14,167 2,115,000 21,150 2,674,465 (7,488,651) (4,778,869)
Exercise of stock
options.................. -- -- 50,325 503 8,104 -- 8,607
Net loss................... -- -- -- -- -- (3,055,372) (3,055,372)
--------- ------- --------- ------- ----------- ------------ -----------
Balance -- December 31,
1997....................... 1,416,667 14,167 2,165,325 21,653 2,682,569 (10,544,023) (7,825,634)
Exercise of stock
options.................. -- -- 479 5 162 -- 167
Issuance of stock options
(Note 13)................ -- -- -- -- 1,608,750 -- 1,608,750
Net loss................... -- -- -- -- -- (2,027,216) (2,027,216)
--------- ------- --------- ------- ----------- ------------ -----------
Balance -- March 31, 1998
(unaudited)................ 1,416,667 $14,167 2,165,804 $21,658 $4,291,481 $(12,571,239) $(8,243,933)
========= ======= ========= ======= =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 64
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY
Open Solutions Inc. (the "Company") is a provider of client/server core
processing software and related professional services to small to mid-size banks
and credit unions. The Company's current products operate in a Microsoft Windows
NT environment using an Oracle relational database.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit with banks, as well as
short-term investments with original maturities of 90 days or less.
Restricted Cash
As of December 31, 1996 and 1997, certain cash amounts were restricted by a
customer in an escrow account. In February 1998, the restriction was removed.
Accounts Receivable
Receivables are net of the allowance for doubtful accounts. As of December
31, 1996 and 1997 and March 31, 1998, the allowance for doubtful accounts was
approximately $86,000, $214,000 and $334,000 (unaudited), respectively.
Fixed Assets
Fixed assets are stated at cost and are depreciated using the straight-line
method over the estimated useful lives of the assets, ranging from 5 and 7
years. Leasehold improvements are amortized over the shorter of the term of the
lease or the useful life of the asset.
Software Development Costs
Software development costs for new software products and additional modules
for existing software are expensed as incurred until technological feasibility
is established. Technological feasibility is defined as the point in time at
which the Company has a working model of the product. Software development costs
incurred subsequent to the establishment of technological feasibility and prior
to general release of the product are capitalized and amortized based on the
greater of the amount computed using (a) the ratio that current gross revenues
for a product bear to the total of current and anticipated future gross revenues
for that product or (b) the straight-line method over the remaining estimated
economic life of the product, generally three years. Capitalized software
development costs were $153,209, $455,078 and $107,986 (unaudited) for years
ended December 31, 1996, 1997 and for the three months ended March 31, 1998,
respectively. Amortization expense was $19,919, $48,769, $125,770, $9,694
(unaudited) and $74,815 (unaudited) for the years ended December 31, 1995, 1996,
1997 and the three months ended March 31, 1997 and 1998, respectively.
Accumulated amortization was $68,688, $194,458, and $269,273 (unaudited) as of
December 31, 1996, 1997 and March 31, 1998, respectively.
Accrued Rent Expense
Accrued rent expense results from the recognition of rent expense on a
straight-line basis relating to a seven year lease agreement with escalating
payments expiring April 2003.
F-7
<PAGE> 65
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Pro Forma Stockholders' Equity (Unaudited)
If the offering contemplated in this Prospectus is consummated, all of the
Company's preferred stock outstanding at the closing date will be converted into
an equal number of shares of common stock. The unaudited pro forma stockholders'
equity as of March 31, 1998 reflects the conversion of all outstanding preferred
stock into 5,308,472 shares of common stock.
Revenue Recognition
The Company generates revenues from licensing the rights to use its
software products and certain third-party software products to end users. The
Company also generates revenues from customer support and maintenance, and from
implementation and training services provided to customers.
Effective January 1, 1997 the Company early adopted AICPA Statement of
Position 97-2, "Software Revenue Recognition" (SOP 97-2). Under SOP 97-2, the
Company recognizes software license revenue when a noncancelable license
agreement has been executed, fees are fixed and determinable, the software has
been delivered, and accepted by the customer if acceptance is required by the
contract and other than perfunctory, and collection is considered probable.
Prior to 1997, the Company recognized software license revenue in accordance
with AICPA Statement of Position 91-1, "Software Revenue Recognition" (SOP
91-1). Under SOP 91-1, the Company recognized software license revenue when the
software was delivered, collectibility was probable and no other significant
post delivery obligations remained.
Maintenance revenues are recognized ratably over the maintenance period,
generally one year. Revenues from implementation and training services are
recognized as services are performed. The Company enters into contracts which
provide both license and service elements. As such service elements are not
essential to functionality of the software, in accordance with SOP 97-2, the
license fees are generally recognized upon delivery and the service revenues are
recognized when performed.
Deferred revenue is comprised of payments received in advance of product
delivery, maintenance and other services which have been paid by customers prior
to the services being performed. Deferred project costs are comprised of costs
associated with projects in process for which revenue has not yet been
recognized.
The Company receives royalties from several software vendors for marketing
referrals. Royalty income is recognized at the time the software vendor receives
payment from its customer, and such income is included in service and
maintenance revenue.
Income Taxes
The Company uses the liability method of accounting for income taxes, as
set forth in Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Under this method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences
between the financial statement carrying amounts and the tax basis of the assets
and liabilities and the net operating loss carryforwards using presently enacted
tax rates.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" (EPS) (SFAS 128) which specifies the computation,
presentation and disclosure requirements for earnings per share of entities with
publicly held common stock or potential common stock. SFAS 128 is effective for
financial statements for both interim and annual
F-8
<PAGE> 66
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
periods ended after December 15, 1997. The statement defines two earnings per
share calculations, basic and diluted. Basic EPS is computed by dividing income
available to common stock by the weighted average number of common shares
outstanding; diluted EPS is computed by giving effect to all dilutive potential
common shares that were outstanding during the period. The calculation of
diluted EPS is similar to basic EPS except both the numerator and denominator
are increased for the conversion of potential common shares. Dilutive common
share equivalents include stock options, warrants, and convertible preferred
stock.
The 1995, 1996, 1997 and March 1998 calculations of diluted EPS do not
include the exercise of stock options, conversion of preferred stock or the
exercise of warrants as the effect on diluted earnings per share would have been
antidilutive.
Concentration of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk are limited to accounts receivable. Two customers,
four customers, two customers, and three customers, respectively, each
represented 10% or more of the Company's total revenues, or an aggregate of 98%,
94%, 32%, and 48% (unaudited) of total revenues for the years ended December 31,
1995, 1996, and 1997 and for the three months ended March 31, 1998,
respectively. Five customers represented approximately 59%(unaudited) of the
Company's total accounts receivable at March 31, 1998. The Company maintains
reserves for potential credit risks and otherwise controls this risk through
credit approvals and monitoring procedures.
Stock Based Compensation
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock option plan. Under APB 25, compensation expense is
recognized to the extent that the fair market value of the underlying stock on
the date of grant exceeds the exercise price of the employee stock option.
Additional disclosures required under Financial Accounting Standards Board
Statement No. 123 "Accounting for Stock-Based Compensation" (SFAS 123), are
included in Note 9, Stock Option Plan.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 applies to all
companies and is effective for fiscal years beginning after December 15, 1997.
SFAS 130 establishes standards for the reporting and display of comprehensive
income in a set of financial statements. Comprehensive income is defined as the
change in net assets of a business enterprise during a period from transactions
generated from non-owner sources. It includes all changes in equity during a
period except those resulting from investment by owners and distributions to
owners. The Company has adopted SFAS 130 beginning January 1, 1998. For the
three months ended March 31, 1998, comprehensive loss was the same as net loss.
F-9
<PAGE> 67
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In June 1997, the Financial Accounting Standards Board issued Statement No.
131 "Disclosures about Segments of an Enterprise and Related Information" (SFAS
131). SFAS 131 applies to all public companies and is effective for fiscal years
beginning after December 15, 1997. SFAS 131 requires that business segment
financial information be reported in the financial statements utilizing the
management approach. The management approach is defined as the manner in which
management organizes the segments within the enterprise for making operating
decisions and assessing performance. The Company has adopted SFAS 131 beginning
January 1, 1998. The Company's operations are currently managed all within one
segment.
Unaudited Interim Financial Statements. The financial statements as of
March 31, 1998 and for the three months ended March 31, 1997 and 1998 are
unaudited and include all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results for such interim periods. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results to be expected for any future period.
NOTE 3 -- FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
1996 1997 1998
-------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment................... $633,664 $1,106,892 $1,233,036
Office furniture and equipment....... 112,262 198,200 235,581
Leasehold improvements............... 186,855 239,945 258,013
-------- ---------- ----------
932,781 1,545,037 1,726,630
Less: accumulated depreciation....... (165,391) (391,947) (466,040)
-------- ---------- ----------
$767,390 $1,153,090 $1,260,590
======== ========== ==========
</TABLE>
Depreciation expense was $33,946, $99,021 and $226,556, for the years ended
December 31, 1995, 1996 and 1997, respectively, and $45,758 (unaudited) and
$74,092 (unaudited) for the three months ended March 31, 1997 and 1998,
respectively.
NOTE 4 -- ACCRUED EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
1996 1997 1998
-------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued compensation................. $146,555 $ 423,833 $ 180,463
Accrued third party license fees..... -- 327,425 192,236
Accrued sales tax.................... 113,102 316,463 304,845
Other................................ 112,451 14,196 39,160
-------- ---------- -----------
$372,108 $1,081,917 $ 716,704
======== ========== ===========
</TABLE>
NOTE 5 -- NOTE PAYABLE
In August 1997, the Company entered into an agreement with another software
company for the purchase of certain assets, properties and rights relating to an
ATM software product in exchange for a $255,000 note. The amount due to the
vendor is being paid down based on per copy fees of the purchased software
products, however, any remaining balance will be due in full on June 30, 1998.
At December 31, 1997 and March 31, 1998, the balance due to the software company
was $175,000 and $150,000 (unaudited), respectively.
F-10
<PAGE> 68
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- LINES OF CREDIT
In September 1996, the Company entered into a $250,000 equipment line of
credit with a bank. The equipment line allowed for draw downs through September
1997 with the outstanding borrowings on the equipment line converting to a
$104,002, nine percent term loan payable in 36 months beginning October 1997.
Borrowings are secured by a first security interest in the related equipment. At
December 31, 1997 and March 31, 1998 the term loan balance was $92,446 and
$83,779 (unaudited), respectively.
In June 1997, the Company entered into a $1,000,000 working capital line of
credit with the same bank. At December 31, 1997 and March 31, 1998, there was no
balance outstanding under this line of credit. The line of credit is secured
with a first security interest in all assets, exclusive of those financed under
the equipment line. The line of credit is available up to 75% of domestic
accounts receivable less than 90 days outstanding. Interest will be paid monthly
at the bank's prime plus 50 basis points.
In conjunction with these credit agreements, the Company must maintain
certain liquidity, tangible capital base and quick ratio financial covenants.
The Company was in compliance with its financial covenants at March 31, 1998
(unaudited). Payment of dividends is prohibited under the lines of credit.
NOTE 7 -- MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
In May 1995, the Company issued to Connecticut Innovations, Incorporated
("CII") 166,667 shares of Series A-2 Preferred Stock at $3.00 per share for
$500,000. As a requirement of the funding, the Company must maintain its
principal place of business and conduct the majority of its operations in
Connecticut. If the Company fails to maintain its Connecticut presence, CII may
require the Company to purchase CII's shares at the greater of the original
purchase price plus a 40% annual compounded rate of return or the fair market
value of the shares. In addition, CII may require the Company to purchase its
shares if the Company is a private company and is acquired by a third party or
if the Company disposes of substantially all of its assets to a third party. The
price of redemption will be the greater of the original purchase price of the
shares plus a 25% annually compounded rate of return or the fair market value of
the shares. Management does not consider any of the events that would trigger
mandatory redemption to be probable events and therefore does not accrue for
accretion.
In December 1995, the Company issued to a group of investors 1,543,334
shares of Series B Preferred Stock at $3.00 per share for $4,630,000. In
conjunction with the sale, the Company issued 192,916 warrants to purchase
additional shares of Series B Preferred Stock at $4.00 per share of which 84,583
warrants were exercised in March 1998. The Series B Preferred Stock has similar
mandatory redemption features as the May 1995 Series A-2.
In October 1996, the Company issued to a group of investors 1,222,222
shares of Series C Preferred Stock at $4.50 per share for $5,500,000. In
conjunction with the sale, the Company issued 152,778 warrants to purchase
additional shares of Series C Preferred Stock at $6.00 per share of which 41,667
warrants were exercised in March 1998. The Series C Preferred Stock has similar
mandatory redemption features as the May 1995 Series A-2 and Series B.
In August 1997, the Company issued to an investor 833,333 shares of Series
D Preferred Stock at $6.00 per share for $5,000,000. In conjunction with the
sale, the Company issued 416,667 warrants to purchase additional shares of
Series D Preferred Stock at $6.00 per share. The Series D Preferred Stock has
similar mandatory redemption features as the May 1995 Series A-2, Series B and
Series C. Concurrent with the preferred stock offering, the investor in the
Series D Preferred Stock offering
F-11
<PAGE> 69
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
also entered into a marketing and distribution agreement with the Company. As of
March 31, 1998, there have been no revenues recognized under this agreement.
The holders of preferred stock are entitled to receive noncumulative cash
dividends when and as declared by the Board of Directors and have similar voting
rights as common stockholders in addition to certain other defined voting
rights. In the event of any voluntary or involuntary liquidation of the Company,
the holders of Series A-1, Series A-2, Series B, Series C and Series D Preferred
Stock shall be entitled to all unpaid dividends at the time of liquidation and
$1.50, $3.00, $3.00 or $4.50 and $6.00, respectively, per share as a liquidating
distribution prior to any liquidating distribution to the common stockholders.
At the option of the preferred stockholders, their shares may be converted to
common stock at the rate of one common stock share for one share of preferred
stock. The preferred stock shall automatically convert into shares of common
stock upon the closing of a public offering meeting certain criteria. The
mandatory redemption features terminate upon the closing of a public offering
and the expiration of any related lock-up agreements, with the exception of the
Series A-2 Preferred Stock held by CII. The rights of CII to require the Company
to purchase its Series A-2 Preferred Stock in the event the Company fails to
maintain its Connecticut presence do not terminate.
NOTE 8 -- STOCKHOLDERS' EQUITY
Capital Stock Transactions
In December 1995, in conjunction with the issuance of the Series B
Preferred Stock, the Company revised its certificate of incorporation to
authorize 11,000,000 shares, of which 7,680,417 were common stock and 3,319,583
were preferred stock. In October 1996, in conjunction with the issuance of the
Series C Preferred Stock, the Company revised its certificate of incorporation
to authorize 13,275,000 shares of which 8,580,417 were common stock and
4,694,583 were preferred stock. In August 1997, in conjunction with the issuance
of the Series D Preferred Stock, the Company revised its certificate of
incorporation to authorize 15,775,000 shares, of which 9,830,417 were common
stock and 5,944,583 were preferred stock. In February 1998, the Company revised
its certificate of incorporation to approve an increase in authorized shares
from 15,775,000 to 25,000,000.
In January 1996, the Company issued 175,000 shares of common stock to the
Chief Executive Officer, resulting in compensation expense of $52,500.
The Company has reserved shares of common stock as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Conversion of preferred stock.......................... 5,182,222 5,308,472
Conversion of preferred stock upon exercise of
warrants............................................. 762,361 636,111
Exercise of options.................................... 1,610,000 3,000,000
------------ ------------
7,554,583 8,944,583
============ ============
</TABLE>
Preferred Stock
In February 1994, the Company issued 1,000,000 shares of preferred stock
designated as Series A-1 Preferred Stock at $1.50 per share. In conjunction with
the issuance of the Series A-1 Preferred Stock, the Company issued a warrant to
purchase 333,333 shares of Series A-2 Preferred Stock with an exercise price of
$3.00 per share. The warrant was subsequently converted to 333,333 shares of
Series A-2 Preferred Stock in September 1994 for $999,999.
F-12
<PAGE> 70
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In September 1994, the Company issued an additional 83,333 shares of
preferred stock designated as Series A-2 Preferred Stock at $3.00 per share. The
Company received $50,000 in cash and a note for $200,000 payable in monthly
installments of $10,000 plus interest, of which $60,000 and $0 was outstanding
at December 31, 1995 and 1996, respectively. The shares were pledged as
collateral against the note.
At the option of the preferred stockholders, their shares may be converted
to common stock at the rate of one common stock share for one share of preferred
stock. The preferred stock shall automatically convert into shares of common
stock upon the closing of a public offering meeting certain criteria.
NOTE 9 -- STOCK OPTION PLAN
The Company has established the 1994 Stock Option Plan (the "1994 Plan")
for employees, officers, directors, and consultants or advisors to the Company
under which the Board of Directors may grant incentive stock options and
non-qualified stock options. Incentive stock options will be granted at the fair
value of the Common Stock at the time of grant, as determined by the Board of
Directors. Generally, incentive stock options vest 25% on the first anniversary
of the date of grant and then ratably on a monthly basis over the subsequent
three years. In certain circumstances, at the discretion of the Board of
Directors, options are granted with a vesting schedule of other than four years.
Non-qualified stock options have a vesting period as determined by the Board of
Directors generally vesting 25% on the first anniversary of the date of grant
and then ratably on a monthly basis over the subsequent three years. The stock
options are exercisable over a period of ten years from the date of grant.
In May 1997, the shareholders approved an increase in the maximum number of
shares that may be issued under the 1994 Plan from 1,110,000 to 1,610,000. In
February 1998, the shareholders approved an increase in the maximum number of
shares that may be issued under the 1994 Plan from 1,610,000 to 3,000,000.
A summary of stock option activity under the 1994 Plan is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- --------
<S> <C> <C>
Outstanding at December 31, 1995............................ 595,500 $0.20
Granted................................................... 386,500 0.30
---------
Outstanding at December 31, 1996............................ 982,000 0.24
Granted................................................... 482,250 1.23
Canceled.................................................. (47,675) 0.24
Exercised................................................. (50,325) 0.17
---------
Outstanding at December 31, 1997............................ 1,366,250 0.59
Granted................................................... 283,500 0.52
Canceled.................................................. (6,146) 1.82
Exercised................................................. (479) 0.30
---------
Outstanding at March 31, 1998 (unaudited)................... 1,643,125 0.58
=========
</TABLE>
Stock options outstanding at March 31, 1998 includes 275,000 stock options
granted to affiliates of Banking Spectrum Services, Inc., a shareholder of the
Company, in March 1998. The Company recorded contract termination expense in
connection with these stock options, as described in Note 13, Related Parties.
F-13
<PAGE> 71
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information regarding stock options granted
during 1995, 1996 and 1997, and the three months ended March 31, 1998
(unaudited):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SFAS123
WEIGHTED MINIMUM
NUMBER OF AVERAGE VALUE AT
OPTIONS EXERCISE GRANT
GRANTED PRICE DATE
--------- --------- ----------
<S> <C> <C> <C>
1995:
Options granted with an exercise price equal to market
value..................................................... 245,500 $0.28 $ 0.09
1996:
Options granted with an exercise price equal to market
value..................................................... 386,500 0.30 0.10
1997:
Options granted with an exercise price equal to market
value..................................................... 8,500 0.36 0.12
Options granted with an exercise price less than market
value..................................................... 473,750 1.25 1.10
1998:
Options granted with an exercise price less than market
value..................................................... 283,500 0.52 6.22
</TABLE>
The weighted average SFAS 123 minimum value at grant date is the amount
attributable to the option that is calculated without considering the expected
volatility of the underlying stock.
The following table summarizes additional information about stock options
outstanding at March 31, 1998 (unaudited):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- --------------------------------
NUMBER WEIGHTED- NUMBER
OUTSTANDING AT AVERAGE WEIGHTED EXERCISABLE AT WEIGHTED
EXERCISE MARCH 31, REMAINING AVERAGE MARCH 31, AVERAGE
PRICE 1998 CONTRACTUAL LIFE EXERCISE PRICE 1998 EXERCISE PRICE
- -------- -------------- ---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
$0.15 296,000 6.2 $0.15 283,813 $0.15
0.15 20,000 6.9 0.15 15,833 0.15
0.30 203,000 7.3 0.30 160,115 0.30
0.30 368,500 8.2 0.30 159,011 0.30
0.45 311,125 9.2 0.45 123,085 0.45
0.45 275,000 9.9 0.45 275,000 0.45
2.75 161,000 9.6 2.75 1,979 2.75
2.75 8,500 9.9 2.75 -- --
--------- --------- -----
1,643,125 1,018,836 0.32
========= ========= =====
</TABLE>
Had compensation expense been recognized based on the minimum value of the
employee options at their grant dates, as prescribed in SFAS 123, the Company's
pro forma net loss would have been as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------ MARCH 31,
1995 1996 1997 1998
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net loss:
As reported................. $1,894,953 $3,638,472 $3,055,372 $2,027,216
Pro forma................... 1,896,688 3,646,337 3,131,847 2,066,900
Pro forma net loss per share
(basic and diluted):
As reported................. $ (0.98) $ (1.73) $ (1.42) $ (0.94)
Pro forma................... (0.98) (1.73) (1.45) (0.95)
</TABLE>
F-14
<PAGE> 72
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The minimum value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions used
for options granted during the applicable period: .
<TABLE>
<CAPTION>
MARCH 31,
1995 1996 1997 1998
------- ------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Risk free interest rate....................... 7.24% 6.72% 5.65%-6.66% 5.42%
Expected dividend yield....................... None None None None
Expected life of option....................... 6 years 6 years 6 years 6 years
Expected volatility........................... 0% 0% 0% 0%
</TABLE>
The minimum value method requires the input of subjective assumptions.
Changes in the subjective input assumptions can materially affect the minimum
value estimate.
Compensation of $358,513 and $24,225 (unaudited) has been attributed to
those common stock options granted to employees during 1997 and the three months
ended March 31, 1998, respectively, with an exercise price below estimated fair
value. Compensation expense is recognized over the four year vesting period and
totaled $85,526, $41,149 (unaudited) and $23,130 (unaudited) for the year ended
December 31, 1997 and the three months ended March 31, 1997 and 1998,
respectively.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
At March 31, 1998, the Company was committed under facility and various
other operating leases with an initial term of more than one year which expire
at various dates through 2003. Terms of the facility lease provide for
escalating rent payments in future years. Minimum lease payments under these
noncancelable leases are approximately as follows:
<TABLE>
<S> <C>
April 1 -- December 31, 1998....................... $ 128,000
1999............................................... 182,000
2000............................................... 191,000
2001............................................... 211,000
2002............................................... 219,000
Thereafter......................................... 72,000
----------
Total minimum obligations................ $1,003,000
==========
</TABLE>
Rent expense under operating leases was approximately $36,000, $149,000 and
$194,000 for the years ended December 31, 1995, 1996 and 1997 and $51,000
(unaudited) and $46,000 (unaudited) for the three months ended March 31, 1997
and 1998, respectively.
From time to time in the ordinary course of business, the Company is
subject to legal proceedings. While it is impossible to determine the ultimate
outcome of such matters, it is management's opinion that the resolution of any
pending issues will not have a material adverse effect on the financial
position, results of operations or cash flows of the Company.
NOTE 11 -- DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, trade accounts receivable, other current
assets, trade accounts payable, royalties payable, accrued expenses, notes
payable and outstanding lines of credit approximate fair value because of the
short maturity of those instruments.
F-15
<PAGE> 73
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- INCOME TAXES
Significant components of the Company's deferred tax asset at December 31,
1996 and 1997, and March 31, 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Gross deferred tax assets:
Net operating loss
carryforwards.............. $ 2,853,000 $ 3,967,000 $ 4,017,000
Research & development credit
carryforwards.............. 130,000 332,000 363,000
Stock option expense.......... -- -- 643,000
Other......................... 32,000 126,000 136,000
----------- ----------- -----------
3,015,000 4,425,000 5,159,000
----------- ----------- -----------
Gross deferred tax liability:
Capitalized software
development costs.......... 84,000 221,000 145,000
Accelerated depreciation...... 14,000 71,000 79,000
----------- ----------- -----------
98,000 292,000 224,000
----------- ----------- -----------
Valuation allowance............. (2,917,000) (4,133,000) (4,935,000)
----------- ----------- -----------
Net deferred tax asset.......... $ -- $ -- $ --
=========== =========== ===========
</TABLE>
The Company has provided a valuation allowance for the full amount of the
net deferred tax asset as of December 31, 1996 and 1997 and March 31, 1998 since
management has not determined realization of these future benefits to be more
likely than not. If the Company achieves profitability, the deferred tax asset
would be available, subject to certain annual limitations, to offset future
income taxes.
At March 31, 1998, the Company had approximately $9.9 million of federal
net operating loss carryforwards that begin expiring in 2007 and had
approximately $10.7 million of state net operating loss carryforwards that begin
expiring in 1998. At March 31, 1998, the Company had approximately $363,000 of
research and development credit carryforwards that begin expiring in 2007.
As defined in the Internal Revenue Code, certain ownership changes limit
the annual utilization of federal net operating loss and tax credit
carryforwards. The Company experienced such an ownership change in December 1995
which limits approximately $3.2 million of federal net operating loss
carryforwards and $143,000 of research tax credits to a $307,000 annual Section
382 limitation.
NOTE 13 -- RELATED PARTIES
Banking Spectrum
In January 1994, the Company entered into an agreement with Banking
Spectrum Services, Inc., a shareholder of the Company, and Banking Spectrum,
Inc. (collectively, "Banking Spectrum"), to provide and receive certain
consulting and support services. The majority shareholder of Banking Spectrum
Services, Inc. is a director and shareholder of the Company. Pursuant to the
agreement, the Company agreed to pay Banking Spectrum a three percent royalty
based on license and maintenance revenues, as defined in the agreement, in
exchange for the use of Banking Spectrum's products and contributions to the
design of the Company's software. In addition, the Company agreed to pay Banking
Spectrum a five percent royalty based on license and maintenance revenues
F-16
<PAGE> 74
OPEN SOLUTIONS INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
for compliance and regulatory support provided to customers. The Company
recognized royalty expense of $9,021, $72,064, $337,945, $30,791 (unaudited) and
$90,403 (unaudited) for the years ended December 31, 1995, 1996, 1997 and for
the three months ended March 31, 1997 and 1998, respectively.
In March 1998, the Company and Banking Spectrum terminated their previous
agreement and entered into a distribution and termination agreement. The new
agreement released the Company from any future royalty payments to Banking
Spectrum in exchange for cash payment of $100,000 to Banking Spectrum and fully
vested options to affiliates of Banking Spectrum Services, Inc. to purchase
275,000 shares of Common Stock at an exercise price of $0.45 per share. The
stock options were estimated by management to have a fair value of approximately
$1.6 million (unaudited). Net of amounts previously accrued, the Company
recorded a contract termination expense of approximately $1.3 million
(unaudited) for the three months ended March 31, 1998.
PRISM
During 1994, the Company borrowed $250,000 from Prince-Roth Information
Systems Management Inc. ("PRISM"), a related party. Spouses of the shareholders
of PRISM are shareholders of the Company. The note was paid in full during 1996
including interest due. Interest expense was $0 and $3,000 for the years ended
December 31, 1995 and 1996, respectively.
NOTE 14 -- SUBSEQUENT EVENTS
Amended and Restated Certificate of Incorporation
After the filing of the Company's Amended and Restated Certificate of
Incorporation upon the closing of this offering, the authorized capital stock of
the Company will consist of 50,000,000 shares of common stock, $0.01 par value
per share, and 5,000,000 shares of preferred stock, $0.01 par value per share.
1998 Stock Incentive Plan
The Company's 1998 Stock Incentive Plan (the "Incentive Plan") was adopted
by the Board of Directors, subject to stockholder approval, in June 1998,
effective upon the closing of the offering contemplated in this Prospectus. The
Incentive Plan is intended to replace the Company's 1994 Plan. Awards may be
made under the Incentive Plan for up to the sum of (i) 1,200,000 shares of
common stock (subject to adjustment in the event of stock splits and other
similar events), plus (ii) the number of shares of common stock (up to
1,700,000) (subject to adjustment in the event of stock splits and other similar
events) subject to awards granted under the 1994 Plan which are not actually
issued because options granted under such plan expire or otherwise result in
shares not being issued or, in the case of restricted stock, are repurchased by
the Company pursuant to the terms of the applicable stock restriction agreement.
1998 Employee Stock Purchase Plan
The Company's 1998 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors, subject to stockholder approval, in June
1998, effective upon the closing of the offering. The Purchase Plan authorizes
the issuance of up to a total of 250,000 shares of common stock to participating
employees.
F-17
<PAGE> 75
=====================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 14
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 26
Management............................ 35
Certain Transactions.................. 43
Principal and Selling Stockholders.... 45
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 51
Underwriting.......................... 53
Legal Matters......................... 54
Experts............................... 54
Additional Information................ 55
Index to Financial Statements......... F-1
</TABLE>
------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, 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.
=====================================================
=====================================================
[ ] SHARES
[OPEN SOLUTIONS LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
BT ALEX. BROWN
CREDIT SUISSE FIRST BOSTON
UBS SECURITIES
, 1998
=====================================================
<PAGE> 76
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 and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 11,800
NASD filing fee............................................. 4,500
Nasdaq National Market listing fee.......................... 95,000
Blue Sky fees and expenses.................................. 10,000
Transfer Agent and Registrar fees........................... 15,000
Accounting fees and expenses................................ 250,000
Legal fees and expenses..................................... 250,000
Printing and mailing expenses............................... 150,000
Miscellaneous............................................... 113,700
--------
Total.................................................. $900,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article EIGHTH of the Registrant's Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") provides that no
director of the Registrant shall be personally liable for any monetary damages
for any breach of fiduciary duty as a director, except to the extent that the
Delaware General Corporation Law prohibits the elimination or limitation of
liability of directors for breach of fiduciary duty.
Article NINTH of the Registrant's Restated Certificate of Incorporation
provides that a director or officer of the Registrant (a) shall be indemnified
by the Registrant against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any litigation
or other legal proceeding (other than an action by or in the right of the
Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made with respect to any
matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount advanced
if it is ultimately determined that he is not entitled to indemnification for
such expenses.
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct
II-1
<PAGE> 77
required for indemnification, or if the Registrant fails to make an
indemnification payment within 60 days after such payment is claimed by such
person, such person is permitted to petition the court to make an independent
determination as to whether such person is entitled to indemnification. As a
condition precedent to the right of indemnification, the director or officer
must give the Registrant notice of the action for which indemnity is sought and
the Registrant has the right to participate in such action or assume the defense
thereof.
Article NINTH of the Registrant's Restated Certificate of Incorporation
further provides that the indemnification provided therein is not exclusive, and
provides that in the event that the Delaware General Corporation Law is amended
to expand the indemnification permitted to directors or officers the Registrant
must indemnify those persons to the fullest extent permitted by such law as so
amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Under Section 8 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. Reference is made to the form of Underwriting Agreement filed as
Exhibit 1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding shares of Common
Stock and Preferred Stock issued, warrants issued and options granted by the
Registrant since June 1995. Further included is the consideration, if any,
received by the Registrant for such shares, warrants and options and information
relating to the section of the Securities Act of 1933, as amended (the
"Securities Act"), or rule of the Securities and Exchange Commission under which
exemption from registration was claimed.
1. On December 27, 1995, the Registrant sold a total of 1,543,334
shares of Series B Preferred Stock to Axiom Venture Partners L.P., Barry
Bloom, Mark Heller, Menlo Ventures VI, L.P., Menlo Entrepreneurs Fund VI,
L.P., Connecticut Innovations, Incorporated and Zachs CMP for an aggregate
purchase price of $4.6 million. The Registrant also issued such investors
warrants to purchase an aggregate of 192,916 shares of Series B Preferred
Stock at an exercise price of $3.00 per share.
2. On October 23, 1996, the Registrant sold a total of 1,222,222
shares of Series C Preferred Stock to Aetna Life Insurance Company, Axiom
Venture Partners L.P., Menlo Ventures VI, L.P., Menlo Entrepreneurs Fund
VI, L.P. and Connecticut Innovations, Incorporated for an aggregate
purchase price of $5.5 million. The Registrant also issued such investors
warrants to purchase an aggregate of 152,778 shares of Series C Preferred
Stock at an exercise price of $6.00 per share.
3. On August 22, 1997, the Registrant sold a total of 833,333 shares
of Series D Preferred Stock to The BISYS Group, Inc. for $5.0 million. The
Company also issued such investor a warrant to purchase 416,667 shares of
Series D Preferred Stock at an exercise price of $6.00 per share.
II-2
<PAGE> 78
4. On March 6, 1998, the Registrant issued a total of 84,583 shares
of Series B Preferred Stock and 41,667 shares of Series C Preferred Stock
to Menlo Ventures VI, L.P. and Menlo Entrepreneurs Fund VI, L.P. upon the
exercise of warrants.
Certain of the transactions described above involved directors, officers
and five percent stockholders of the Registrant. See "Certain Transactions."
The Registrant's 1994 Stock Option Plan was adopted by the Board of
Directors and approved by the stockholders of the Registrant in March 1994. As
of March 31, 1998, options to purchase 60,804 shares of Common Stock had been
exercised for an aggregate consideration of $10,274, options to purchase
1,643,125 shares of Common Stock were outstanding and 175,000 shares of Common
Stock had been issued under an award of restricted stock under such plan.
The securities issued in the foregoing transactions were either (i) offered
and sold in reliance upon exemptions from Securities Act registration set forth
in Sections 3(b) and 4(2) of the Securities Act, or any regulations promulgated
thereunder, relating to sales by an issuer not involving any public offering, or
(ii) in the case of certain options to purchase shares of Common Stock and
shares of Common Stock issued upon the exercise of such options, such offers and
sales were made in reliance upon an exemption from registration under Rule 701
of the Securities Act. No underwriters were involved in the foregoing sales of
securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 Amended and Restated Certificate of Incorporation of the
Registrant, to be effective upon the closing of this
offering.
3.3 By-Laws of the Registrant, as amended.
3.4 Amended and Restated By-Laws of the Registrant, to be
effective upon the closing of this offering.
*4.1 Specimen certificate for shares of Common Stock.
*5 Opinion of Hale and Dorr LLP.
10.1 1994 Stock Option Plan, as amended.
*10.2 1998 Stock Incentive Plan, including forms of stock option
agreement for incentive and nonstatutory stock options.
10.3 1998 Employee Stock Purchase Plan.
10.4 Amended and Restated Investors' Rights Agreement, dated as
of August 22, 1997, between the Company and the Investors
(as defined therein).
10.5 Form of Series B Preferred Stock Warrant.
10.6 Form of Series C Preferred Stock Warrant.
10.7 Form of Series D Preferred Stock Warrant.
*10.8 Employment Agreement between the Company and Douglas K.
Anderson dated October 2, 1995, as amended.
+10.9 Software License and Marketing and Distribution Agreement,
between the Company and BISYS, Inc., dated as of August 20,
1997.
+10.10 License and Marketing Agreement, between the Company and
Connecticut On-Line Computer Center, Inc., dated as of
December 9, 1997.
+10.11 Software License Agreement, between the Company and Unisys
Corporation, dated as of June 18, 1997.
*10.12 Employment Agreement between the Company and Graham H.
Gurney dated January 2, 1993.
*10.13 Employment Agreement between the Company and Clifford I.
Waggoner dated January 2, 1993.
</TABLE>
II-3
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.14 Letter Agreement between the Company and John L. Person
dated April 10, 1997.
10.15 Letter Agreement between the Company and Richard J. Willemin
dated February 27, 1998.
10.16 Form of Information Processing System Agreement.
10.17 Form of prior Information Processing System Agreement.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5).
24 Power of Attorney (included on page II-5).
27 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Securities and Exchange Commission.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts is included in this
Registration Statement. All other schedules have been omitted because they are
not required or because the required information is given in the Registrant's
Financial Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Amended and Restated
Certificate of Incorporation of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted form the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 80
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 Glastonbury, Connecticut, on this
10th day of June, 1998.
OPEN SOLUTIONS INC.
By: /s/ DOUGLAS K. ANDERSON
--------------------------------------
Douglas K. Anderson
Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Open Solutions Inc., hereby
severally constitute and appoint Douglas K. Anderson, Richard J. Willemin, Mark
G. Borden and Philip P. Rossetti, 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 Open Solutions Inc. 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, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DOUGLAS K. ANDERSON Chairman of the Board and Chief June 10, 1998
- --------------------------------------------------- Executive Officer (Principal
Douglas K. Anderson Executive Officer)
/s/ RICHARD J. WILLEMIN Senior Vice President and Chief June 10, 1998
- --------------------------------------------------- Financial Officer (Principal
Richard J. Willemin Financial and Accounting
Officer)
/s/ DOUGLAS C. CARLISLE Director June 10, 1998
- ---------------------------------------------------
Douglas C. Carlisle
/s/ DAVID M. CLARKE Director June 10, 1998
- ---------------------------------------------------
David M. Clarke
/s/ GRAHAM H. GURNEY Director June 10, 1998
- ---------------------------------------------------
Graham H. Gurney
</TABLE>
II-5
<PAGE> 81
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. MCKAY Director June 10, 1998
- ---------------------------------------------------
Samuel F. McKay
/s/ CARLOS P. NAUDON Director June 10, 1998
- ---------------------------------------------------
Carlos P. Naudon
/s/ WILLIAM W. NEVILLE Director June 10, 1998
- ---------------------------------------------------
William W. Neville
/s/ CLIFFORD I. WAGGONER Director June 10, 1998
- ---------------------------------------------------
Clifford I. Waggoner
/s/ RICHARD P. YANAK Director June 10, 1998
- ---------------------------------------------------
Richard P. Yanak
</TABLE>
II-6
<PAGE> 82
SCHEDULE II
OPEN SOLUTIONS INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT ---------------------------------- DEDUCTIONS BALANCE AT
BEGINNING OF CHARGE TO COSTS CHARGE TO OTHER NET OF END OF
DESCRIPTION PERIOD AND EXPENSES ACCOUNTS WRITE-OFFS PERIOD
----------- ------------ ---------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:
Years ended
December 31, 1995......... -- -- -- -- 0
December 31, 1996......... -- 86 -- -- 86
December 31, 1997......... 86 239 -- 111 214
Three months ended March 31,
1998 (unaudited).......... 214 130 -- -- 344
</TABLE>
S-1
<PAGE> 83
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 Amended and Restated Certificate of Incorporation of the
Registrant, to be effective upon the closing of this
offering.
3.3 By-Laws of the Registrant, as amended.
3.4 Amended and Restated By-Laws of the Registrant, to be
effective upon the closing of this offering.
*4.1 Specimen certificate for shares of Common Stock.
*5 Opinion of Hale and Dorr LLP.
10.1 1994 Stock Option Plan, as amended.
*10.2 1998 Stock Incentive Plan, including forms of stock option
agreement for incentive and nonstatutory stock options.
10.3 1998 Employee Stock Purchase Plan.
10.4 Amended and Restated Investors' Rights Agreement, dated as
of August 22, 1997, between the Company and the Investors
(as defined therein).
10.5 Form of Series B Preferred Stock Warrant.
10.6 Form of Series C Preferred Stock Warrant.
10.7 Form of Series D Preferred Stock Warrant.
*10.8 Employment Agreement between the Company and Douglas K.
Anderson dated October 2, 1995, as amended.
+10.9 Software License and Marketing and Distribution Agreement,
between the Company and BISYS, Inc., dated as of August 20,
1997.
+10.10 License and Marketing Agreement, between the Company and
Connecticut On-Line Computer Center, Inc., dated as of
December 9, 1997.
+10.11 Software License Agreement, between the Company and Unisys
Corporation, dated as of June 18, 1997.
*10.12 Employment Agreement between the Company and Graham H.
Gurney dated January 2, 1993.
*10.13 Employment Agreement between the Company and Clifford I.
Waggoner dated January 2, 1993.
10.14 Letter Agreement between the Company and John L. Person
dated April 10, 1997.
10.15 Letter Agreement between the Company and Richard J. Willemin
dated February 27, 1998.
10.16 Form of Information Processing System Agreement.
10.17 Form of prior Information Processing System Agreement.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5).
24 Power of Attorney (included on page II-5).
27 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Securities and Exchange Commission.
<PAGE> 1
Exhibit 1
___________ Shares
OPEN SOLUTIONS INC.
-------------------
Common Stock
($.01 Par Value)
UNDERWRITING AGREEMENT
----------------------
_______________, 1998
BT Alex. Brown Incorporated
Credit Suisse First Boston Corporation
UBS Securities LLC
As Representatives of the
Several Underwriters
c/o BT Alex. Brown Incorporated
1 South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
Open Solutions Inc., a Delaware corporation (the "Company"), and
certain shareholders of the Company (the "Selling Shareholders") propose to sell
to the several underwriters (the "Underwriters") named in Schedule I hereto for
whom you are acting as representatives (the "Representatives") an aggregate of
__________ shares (the "Firm Shares") of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), of which __________ shares will be sold by
the Company and __________ shares will be sold by the Selling Shareholders. The
respective amounts of the Firm Shares to be so purchased by the several
Underwriters are set forth opposite their names in Schedule I hereto, and the
respective amounts to be sold by the Selling Shareholders are set forth opposite
their names in Schedule II hereto. The Company and the Selling Shareholders are
sometimes referred to herein collectively as the "Sellers." The Company [and]
[the] [certain] [Selling Shareholders] also propose[s] to sell at the
Underwriters' option an aggregate of up to __________ additional shares of the
Company's Common Stock (the "Option Shares") as set forth on Schedule III below.
<PAGE> 2
As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to exercise the over-allotment option in whole
or in part for the accounts of the several Underwriters. The Firm Shares and the
Option Shares (to the extent the aforementioned option is exercised) are herein
collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDERS.
(a) The Company represents and warrants to each of the
Underwriters as follows:
(i) A registration statement on Form S-1 (File No.
333-______) with respect to the Shares has been carefully prepared by the
Company in conformity in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the Rules and Regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission. Copies of such
registration statement, including any amendments thereto, the preliminary
prospectuses (meeting the requirements of the Rules and Regulations) contained
therein and the exhibits, financial statements and schedules, as finally amended
and revised, have heretofore been delivered by the Company to you. Such
registration statement, together with any registration statement filed by the
Company pursuant to Rule 462 (b) of the Act, herein referred to as the
"Registration Statement," which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A and contained in the Prospectus
referred to below, has become effective under the Act and no post-effective
amendment to the Registration Statement has been filed as of the date of this
Agreement. "Prospectus" means (a) the form of prospectus first filed with the
Commission pursuant to Rule 424(b) or (b) the last preliminary prospectus
included in the Registration Statement filed prior to the time it becomes
effective or filed pursuant to Rule 424(a) under the Act that is delivered by
the Company to the Underwriters for delivery to purchasers of the Shares,
together with the term sheet or abbreviated term sheet filed with the Commission
pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus included
in the Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus."
(ii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. Each of the
subsidiaries of the Company as listed in Exhibit 21 to Item 16(a) of the
Registration Statement (collectively, the "Subsidiaries") has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, with corporate power and
2
<PAGE> 3
authority to own or lease its properties and conduct its business as described
in the Registration Statement. The Subsidiaries are the only subsidiaries,
direct or indirect, of the Company. The Company and each of the Subsidiaries are
duly qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification, except where the failure to be so
qualified would not have a material adverse affect on the Company. The
outstanding shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable and are owned
by the Company or another Subsidiary free and clear of all liens, encumbrances
and equities and claims; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.
(iii) The outstanding shares of Common Stock of the
Company, including all shares to be sold by the Selling Shareholders, have been
duly authorized and validly issued and are fully paid and non-assessable; the
portion of the Shares to be issued and sold by the Company have been duly
authorized and when issued and paid for as contemplated herein will be validly
issued, fully paid and non-assessable; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue and sale thereof. Neither
the filing of the Registration Statement nor the offering or sale of the Shares
as contemplated by this Agreement gives rise to any rights, other than those
which have been waived or satisfied, for or relating to the registration of any
shares of Common Stock.
(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of the Shares
conform to the description thereof contained in the Registration Statement. The
form of certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.
(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Shares nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and will
conform in all material respects to, the requirements of the Act and the Rules
and Regulations. The Registration Statement and any amendment thereto do not
contain, and will not contain, any untrue statement of a material fact and do
not omit, and will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus and any amendments and supplements thereto do not contain, and will
not contain, any untrue statement of material fact; and do not omit, and will
not omit, to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment or supplement,
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any Underwriter through the Representatives,
specifically for use in the preparation thereof.
3
<PAGE> 4
(vi) The consolidated financial statements of the Company
and the Subsidiaries, together with related notes and schedules as set forth in
the Registration Statement, present fairly in all material respects the
financial position and the results of operations and cash flows of the Company
and the consolidated Subsidiaries, at the indicated dates and for the indicated
periods. Such financial statements and related schedules have been prepared in
accordance with generally accepted principles of accounting, consistently
applied throughout the periods involved, except as disclosed herein, and all
adjustments necessary for a fair presentation of results for such periods have
been made. The summary financial and statistical data included in the
Registration Statement presents fairly in all material respects the information
shown therein and such data has been compiled on a basis consistent with the
financial statements presented therein and the books and records of the Company.
(vii) Price Waterhouse LLP, who have certified certain of
the financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any of
the Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries could reasonably
be expected to result in any material adverse change in the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and of the Subsidiaries taken as a whole
or to prevent the consummation of the transactions contemplated hereby, except
as set forth in the Registration Statement.
(ix) The Company and the Subsidiaries have good and
marketable title to all of the properties and assets reflected in the financial
statements (or as described in the Registration Statement) hereinabove
described, subject to no lien, mortgage, pledge, charge, encumbrance or adverse
claim of any kind except those reflected in such financial statements (or as
described in the Registration Statement) or which are not material in amount.
The Company and the Subsidiaries occupy their leased properties under valid and
binding leases conforming in all material respects to the description thereof
set forth in the Registration Statement.
(x) The Company and the Subsidiaries have filed all
Federal, state, local and foreign tax returns which have been required to be
filed and have paid all taxes owed by or due from them and all assessments
received by them or any of them to the extent that such taxes have become due
and are not being contested in good faith and for which an adequate reserve for
accrual has been established in accordance with generally accepted accounting
principles. All tax liabilities have been adequately provided for in the
financial statements of the Company, and the Company does not know of any actual
or proposed additional material tax assessments.
(xi) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or
4
<PAGE> 5
any development involving a prospective material adverse change in or affecting
the earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise), or prospects of the Company and its
Subsidiaries taken as a whole, whether or not occurring in the ordinary course
of business, and there has not been any material transaction entered into or any
material transaction that is probable of being entered into by the Company or
the Subsidiaries, other than transactions in the ordinary course of business and
changes and transactions described in the Registration Statement, as it may be
amended or supplemented. The Company and the Subsidiaries have no material
contingent obligations which are not disclosed in the Company's financial
statements which are included in the Registration Statement.
(xii) Neither the Company nor any of the Subsidiaries is or
with the giving of notice or lapse of time or both, will be, in violation of or
in default under its charter or by-laws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound and which default is of material
significance in respect of the condition, financial or otherwise of the Company
and its Subsidiaries taken as a whole or the business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries taken as a whole. The execution and delivery of
this Agreement and the consummation of the transactions herein contemplated and
the fulfillment of the terms hereof will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or any Subsidiary is a party, or of the certificate of incorporation or
by-laws of the Company or any order, rule or regulation applicable to the
Company or any Subsidiary of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction. All
contracts and agreements required to be disclosed in the Registration Statement
or filed as exhibits thereto have been disclosed and/or filed in accordance with
the Act and the Rules and the Regulations and, except as disclosed in the
Registration Statement, the Company is not party to any contract or agreement
which imposes any material adverse conditions on the conduct of the Company's
business as presently conducted or contemplated to be conducted, materially
limits the Company's ability to engage in any line of business or requires the
Company to deal exclusively with any parties.
(xiii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or blue sky laws) has been obtained
or made and is in full force and effect.
(xiv) The Company and each of the Subsidiaries owns and
possesses (i) all material licenses, certificates and permits from governmental
authorities which are currently employed by any of them to conduct their
respective businesses and (ii) adequate rights to all patents, patent rights,
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<PAGE> 6
trade names, trademarks, trade secrets, copyrights and other intellectual
property necessary to conduct the Company's business. Neither the Company nor
any of the Subsidiaries has infringed, has received any notice of any
infringement or conflict with or knows of any infringement or conflict with
asserted rights of others with respect to any patents, patent rights, trade
names, trademarks, trade secrets, copyrights or other intellectual property,
which infringement is or could reasonably be expected to be material to the
business of the Company and the Subsidiaries taken as a whole. The Company knows
of no material infringement by others of patents, patent rights, trade names,
trademarks, trade secrets, copyrights or intellectual property, owned by or
licensed to the Company.
(xv) Neither the Company, nor to the Company's best
knowledge, any of its affiliates, has taken or may take, directly or indirectly,
any action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation of
the price of the shares of Common Stock to facilitate the sale or resale of the
Shares.
(xvi) Neither the Company nor any Subsidiary is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940 and the rules and regulations of the Commission thereunder.
(xvii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xviii) The Company and each of its Subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks as is adequate
for the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.
(xix) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section
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<PAGE> 7
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
(xx) To the Company's knowledge, there are no affiliations or
associations between any member of the NASD and any of the Company's officers,
directors or securityholders, except as set forth in the Registration Statement.
(b) Each of the Selling Shareholders severally represents
and warrants as follows:
(i) Such Selling Shareholder now has and at the Closing
Date and the Option Closing Date, as the case may be (as such dates are
hereinafter defined) will have good and marketable title to the Firm Shares
[and/or the Option Shares] to be sold by such Selling Shareholder, free and
clear of any liens, encumbrances, equities and claims, and full right, power and
authority to effect the sale and delivery of such Firm Shares [and/or Option
Shares]; and upon the delivery of, against payment for, such Firm Shares [and/or
Option Shares] pursuant to this Agreement, the Underwriters will acquire good
and marketable title thereto, free and clear of any liens, encumbrances,
equities and claims, assuming that they are bona fide purchasers within the
meaning of the Uniform Commercial Code.
(ii) Such Selling Shareholder has full right, power and
authority to execute and deliver this Agreement, the Power of Attorney and the
Custodian Agreement referred to below and to perform its obligations under such
Agreements. The execution and delivery of this Agreement and the consummation by
such Selling Shareholder of the transactions herein contemplated and the
fulfillment by such Selling Shareholder of the terms hereof will not require any
consent, approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body (except as may be required
under the Act, state securities laws or Blue Sky laws) and will not result in a
breach of any of the terms and provisions of, or constitute a default under,
organizational documents of such Selling Shareholder, if not an individual, or
any indenture, mortgage, deed of trust or other agreement or instrument to which
such Selling Shareholder is a party, or of any order, rule or regulation
applicable to such Selling Shareholder of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to, or which has constituted,
or which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Common Stock of the Company and, other than as
permitted by the Act, the Selling Shareholder will not distribute any prospectus
or other offering material in connection with the offering of the Shares.
(iv) Without having undertaken to determine independently
the accuracy or completeness of the information contained in the Registration
Statement, such Selling Shareholder
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<PAGE> 8
is familiar with the Registration Statement and has no actual knowledge of any
material fact, condition or information not disclosed in the Registration
Statement which has adversely affected in any material respect or may adversely
affect in any material respect the business of the Company or any of the
Subsidiaries. Without having undertaken to determine independently the accuracy
or completeness of the representations and warranties of the Company contained
herein, such Selling Shareholder that is currently a director or officer of the
Company hereby has no actual knowledge that such representations and warranties
are not true and correct. The information pertaining to such Selling Shareholder
under the caption "Principal and Selling Shareholders" in the Prospectus is
complete and accurate in all material respects.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
(a) On the basis of the representations, warranties and
covenants herein contained, and subject to the conditions herein set forth, the
Sellers agree to sell to the Underwriters and each Underwriter agrees, severally
and not jointly, to purchase, at a price of $_____ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof. The number of Firm
Shares to be purchased by each Underwriter from each Seller shall be as nearly
as practicable in the same proportion to the total number of Firm Shares being
sold by each Seller as the number of Firm Shares being purchased by each
Underwriter bears to the total number of Firm Shares to be sold hereunder. The
obligations of the Company and of each of the Selling Shareholders shall be
several and not joint.
(b) Certificates in negotiable form for the total number
of the Shares to be sold hereunder by the Selling Shareholders have been placed
in custody with the Company as custodian (the "Custodian") pursuant to the
Custodian Agreement executed by each Selling Shareholder for delivery of all
Firm Shares [and/or any Option Shares] to be sold hereunder by the Selling
Shareholders. Each of the Selling Shareholders specifically agrees that the Firm
Shares [and/or any Option Shares] represented by the certificates held in
custody for the Selling Shareholders under the Custodian Agreement are subject
to the interests of the Underwriters hereunder, that the arrangements made by
the Selling Shareholders for such custody are to that extent irrevocable, and
that the obligations of the Selling Shareholders hereunder shall not be
terminable by any act or deed of the Selling Shareholders (or by any other
person, firm or corporation including the Company, the Custodian or the
Underwriters) or by operation of law (including the death of an individual
Selling Shareholder or the dissolution of a corporate Selling Shareholder) or by
the occurrence of any other event or events, except as set forth in the
Custodian Agreement. If any such event should occur prior to the delivery to the
Underwriters of the Firm Shares or the Option Shares hereunder, certificates for
the Firm Shares or the Options Shares, as the case may be, shall be delivered by
the Custodian in accordance with the terms and conditions of this Agreement as
if such event has not occurred. The Custodian is authorized to receive and
acknowledge receipt of the proceeds of sale of the Shares held by it against
delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is
to be made in New York Clearing House funds by certified or bank cashier's
checks drawn to the order of the Company for the
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<PAGE> 9
shares to be sold by it and an account of the Company, "as Custodian" for the
shares to be sold by the Selling Shareholders, in each case against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters. Such payment and delivery are to be made at the offices of BT
Alex. Brown Incorporated, 1 South Street, Baltimore, Maryland, at 10:00 a.m.,
Baltimore time, on the third business day after the date of this Agreement or at
such other time and date not later than five business days thereafter as you and
the Company shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the New
York Stock Exchange is open for trading and on which banks in New York are open
for business and not permitted by law or executive order to be closed.) The
certificates for the Firm Shares will be delivered in such denominations and in
such registrations as the Representatives request in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representatives at least one business day prior to the
Closing Date.
(d) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company [and [the] [certain] Selling Shareholders [listed on Schedule
III hereto]] hereby grant[s] an option to the several Underwriters to purchase
the Option Shares at the price per share as set forth in the first paragraph of
this Section 2. [The maximum number of Option Shares to be sold by the Company
and the Selling Shareholders is set forth opposite their respective names on
Schedule III hereto.] The option granted hereby may be exercised in whole or in
part by giving written notice (i) at any time before the Closing Date and (ii)
only once thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company, [the
Attorney-in-Fact and the Custodian] setting forth the number of Option Shares as
to which the several Underwriters are exercising the option, the names and
denominations in which the Option Shares are to be registered and the time and
date at which such certificates are to be delivered. [If the option granted
hereby is exercised in part, the respective number of Option Shares to be sold
by the Company and each of the Selling Shareholders listed in Schedule III
hereto shall be determined on a pro rata basis, adjusted by you in such manner
as to avoid fractional shares.] The time and date at which certificates for
Option Shares are to be delivered shall be determined by the Representatives but
shall not be earlier than three nor later than 10 full business days after the
exercise of such option, nor in any event prior to the Closing Date (such time
and date being herein referred to as the "Option Closing Date"). If the date of
exercise of the option is three or more days before the Closing Date, the notice
of exercise shall set the Closing Date as the Option Closing Date. The number of
Option Shares to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Shares being purchased as the number of
Firm Shares being purchased by such Underwriter bears to the total number of
Firm Shares, adjusted by you in such manner as to avoid fractional shares. The
option with respect to the Option Shares granted hereunder may be exercised only
to cover over-allotments in the sale of the Firm Shares by the Underwriters.
You, as Representatives of the several Underwriters, may cancel such option at
any time prior to its expiration by giving written notice of such cancellation
to the Company [and the Attorney-in-Fact]. To the extent, if any, that the
option is exercised, payment for the Option Shares shall be made on the Option
Closing Date in New York Clearing House funds by certified or bank
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<PAGE> 10
cashier's check drawn to the order of the Company [for the Option Shares to be
sold by it and to the order of "THE COMPANY, AS CUSTODIAN" for the Option Shares
to be sold by the Selling Shareholders] against delivery of certificates
therefor at the offices of BT Alex. Brown Incorporated, 1 South Street,
Baltimore, Maryland.]]
(e) If on the Closing Date [or Option Closing Date, as
the case may be,] any Selling Shareholder fails to sell the Firm Shares [or
Option Shares] which such Selling Shareholder has agreed to sell on such date as
set forth in SCHEDULE II hereto, the Company agrees that it will sell or arrange
for the sale of that number of shares of Common Stock to the Underwriters which
represents Firm Shares [or the Option Shares] which such Selling Shareholder has
failed to so sell, as set forth in SCHEDULE II hereto, or such lesser number as
may be requested by the Representatives.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a
public offering of the Firm Shares as soon as the Representatives deem it
advisable to do so. The Firm Shares are to be initially offered to the public at
the initial public offering price set forth in the Prospectus. The
Representatives may from time to time thereafter change the public offering
price and other selling terms. To the extent, if at all, that any Option Shares
are purchased pursuant to Section 2 hereof, the Underwriters will offer them to
the public on the foregoing terms.
It is further understood that you will act as the
Representatives for the Underwriters in the offering and sale of the Shares in
accordance with a Master Agreement Among Underwriters entered into by you and
the several other Underwriters.
4. COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
(a) The Company covenants and agrees with the several
Underwriters that:
(i) The Company will (A) use its best efforts to cause
the Registration Statement to become effective or, if the procedure in Rule 430A
of the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations and (C) file on a timely basis all
reports and any definitive proxy or information statements required to be filed
by the Company with the Commission subsequent to the date of the Prospectus and
prior to the termination of the offering of the Shares by the Underwriters.
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<PAGE> 11
(ii) The Company will advise the Representatives promptly
(A) when the Registration Statement or any post-effective amendment thereto
shall have become effective, (B) of receipt of any comments from the Commission,
(C) of any request of the Commission for amendment of the Registration Statement
or for supplement to the Prospectus or for any additional information, and (D)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the use of the Prospectus or of the institution
of any proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representatives
in endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of,
the Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representatives such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), and of all amendments thereto, as
the Representatives may reasonably request.
(v) The Company will comply with the Act and the Rules
and Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act"),
and the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Shares as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading, or, if
it is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or
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<PAGE> 12
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
(vi) The Company will make generally available to its
security holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration Statement, an
earning statement (which need not be audited) in reasonable detail, covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, which earning statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise you in writing when such statement has been so made
available.
(vii) The Company will, for a period of five years from the
Closing Date, deliver to the Representatives copies of annual reports and copies
of all other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Securities
Exchange Act of 1934, as amended. The Company will deliver to the
Representatives similar reports with respect to significant subsidiaries, as
that term is defined in the Rules and Regulations, which are not consolidated in
the Company's financial statements.
(viii) No offering, sale, short sale or other disposition of
any shares of Common Stock of the Company or other securities convertible into
or exchangeable or exercisable for shares of Common Stock or derivative of
Common Stock (or agreement for such) will be made for a period of 180 days after
the date of this Agreement, directly or indirectly, by the Company otherwise
than hereunder or with the prior written consent of BT Alex. Brown Incorporated,
except that the Company may, without such consent, (a) issue shares upon the
exercise of options issued pursuant to its stock option plans and employee stock
purchase plan on or prior to the date hereof, and (b) grant options and sell
shares of Common Stock to its employees, consultants and directors pursuant to
its stock option and employee stock purchase plans so long as such options are
not exercisable and such shares are not subject to sale by such recipient prior
to the end of the above-referenced 180-day period.
(ix) The Company will use its best efforts to list,
subject to notice of issuance, the Shares on the Nasdaq National Market.
(x) The Company has caused each officer and director and
specific shareholders of the Company to furnish to you, on or prior to the date
of this Agreement, a letter or letters, in form and substance satisfactory to
the Underwriters, pursuant to which each such person shall agree not to offer,
sell, sell short or otherwise dispose of any shares of Common Stock of the
Company or other capital stock of the Company, or any other securities
convertible, exchangeable or exercisable for Common Shares or derivative of
Common Shares owned by such person or request the registration for the offer or
sale of any of the foregoing (or as to which such person has the right to direct
the disposition of) for a period of 180 days after the date of this Agreement,
directly or indirectly, except
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with the prior written consent of BT Alex. Brown Incorporated ("Lockup
Agreements"). In addition, the Company agrees to enforce any similar lockup or
market stand-off agreements it has with its shareholders and not to waive or
amend any such agreements without the prior written consent of BT Alex. Brown
Incorporated.
(xi) The Company shall apply the net proceeds of its sale
of the Shares as set forth in the Prospectus and shall file such reports with
the Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(xii) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act").
(xiii) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
for the Common Stock.
(xiv) The Company will not take, directly or indirectly,
any action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
(b) Each of the Selling Shareholders covenants and agrees
with the several Underwriters that:
(i) No offering, sale, pledge, contract to sell
(including any short sale), grant of any option to purchase or sell or other
disposition of any shares of Common Stock of the Company or other capital stock
of the Company or other securities convertible, exchangeable or exercisable for
Common Stock or derivative of Common Stock owned by the Selling Shareholder,
enter into any hedging transaction relating to the Common Stock or request the
registration for the offer or sale of any of the foregoing (or as to which the
Selling Shareholder has the right to direct the disposition of) will be made,
entered into or requested for a period of 180 days after the date of this
Agreement, directly or indirectly, by such Selling Shareholder otherwise than
hereunder or with the prior written consent of BT Alex. Brown Incorporated.
(ii) In order to document the Underwriters'
compliance with the reporting and withholding provisions of the Tax Equity and
Fiscal Responsibility Act of 1982 and the Interest and Dividend Tax Compliance
Act of 1983 with respect to the transactions herein contemplated, each of the
Selling Shareholders shall deliver to you prior to or at the Closing Date a
properly completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
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<PAGE> 14
(iii) Such Selling Shareholder will not take,
directly or indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company.
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to
the performance of the obligations of the Sellers under this Agreement,
including, without limiting the generality of the foregoing, the following:
accounting fees of the Company; the fees and disbursements of counsel for the
Company and the Selling Shareholders; the cost of printing and delivering to, or
as requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectus, the Prospectus, this Agreement, the Underwriters'
Selling Memorandum, the Underwriters' Invitation Letter, the Listing
Application, the Blue Sky Survey and any supplements or amendments thereto; the
filing fees of the Commission; the filing fees and expenses (including legal
fees and disbursements) incident to securing any required review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of
the Shares; the listing fee of the Nasdaq National Market; and the expenses,
including the fees and disbursements of counsel for the Underwriters, incurred
in connection with the qualification of the Shares under State securities or
Blue Sky laws. To the extent, if at all, that any of the Selling Shareholders
engage special legal counsel to represent them in connection with this offering,
the fees and expenses of such counsel shall be borne by such Selling
Shareholder. Any transfer taxes imposed on the sale of the Shares to the several
Underwriters will be paid by the Sellers pro rata. The Company agrees to pay all
costs and expenses of the Underwriters, including the fees and disbursements of
counsel for the Underwriters, incident to the offer and sale of directed shares
of the Common Stock by the Underwriters to employees and persons having business
relationships with the Company and its Subsidiaries. The Sellers shall not,
however, be required to pay for any of the Underwriters expenses (other than
those related to qualification under NASD regulation and State securities or
Blue Sky laws) except that, if this Agreement shall not be consummated because
the conditions in Section 6 hereof are not satisfied, or because this Agreement
is terminated by the Representatives pursuant to Section 11 hereof, or by reason
of any failure, refusal or inability on the part of the Company or the Selling
Shareholders to perform any undertaking or satisfy any condition of this
Agreement or to comply with any of the terms hereof on their part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the Company
shall reimburse the several Underwriters for reasonable out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company and the
Selling Shareholders shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
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<PAGE> 15
The several obligations of the Underwriters to purchase the
Firm Shares on the Closing Date and the Option Shares, if any, on the Option
Closing Date are subject to the accuracy, as of the Closing Date or the Option
Closing Date, as the case may be, of the representations and warranties of the
Company and the Selling Shareholders contained herein, and to the performance by
the Company and the Selling Shareholders of their covenants and obligations
hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and any and all filings required
by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and
any request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceedings for that purpose
shall have been taken or, to the knowledge of the Company or the Selling
Shareholders, shall be contemplated by the Commission and no injunction,
restraining order, or order of any nature by a Federal or state court of
competent jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance of the Shares.
(b) The Representatives shall have received on the
Closing Date or the Option Closing Date, as the case may be, the opinion of
[Hale and Dorr LLP], counsel for the Company and the Selling Shareholders, dated
the Closing Date or the Option Closing Date, as the case may be, addressed to
the Underwriters (and stating that it may be relied upon by counsel to the
Underwriters) to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement; the Company
is duly qualified to transact business in all jurisdictions in which the conduct
of its business requires such qualification, or in which the failure to qualify
would have a materially adverse effect upon the business of the Company.
(ii) The Company has authorized and outstanding
capital stock as set forth under the caption "Capitalization" in the Prospectus
(except for issuances subsequent to June 30, 1998 pursuant to the exercise of
warrants and stock options described in the Prospectus); the authorized shares
of the Company's Common Stock have been duly authorized; the outstanding shares
of the Company's Common Stock, including the Shares to be sold by the Selling
Shareholders, have been duly authorized and validly issued and are fully paid
and non-assessable; all of the Shares conform to the description thereof
contained in the Prospectus; the certificates for the Shares, assuming they are
in the form filed with the Commission, are in due and proper form; the shares of
Common Stock, including the Option Shares, if any, to be sold by the Company
pursuant to this Agreement have been duly authorized and will be validly issued,
fully paid and non-assessable when issued and paid for as contemplated by this
Agreement; and no preemptive rights of stockholders exist
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with respect to any of the Shares or the issue or sale thereof in the Company's
charter or bylaws, as such documents will be in effect immediately after the
offering contemplated hereby, or, to the knowledge of such counsel, in any other
document or instrument.
(iii) Except as described in or contemplated by
the Prospectus, to the knowledge of such counsel, there are no outstanding
securities of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the Company
and there are no outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Shares or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(iv) The Registration Statement has become
effective under the Act and, to the best of the knowledge of such counsel, no
stop order proceedings with respect thereto have been instituted or are pending
or threatened under the Act.
(v) The Registration Statement, the Prospectus
and each amendment or supplement thereto comply as to form in all material
respects with the requirements of the Act and the applicable rules and
regulations thereunder (except that such counsel need express no opinion as to
the financial statements and related schedules therein or any other financial,
statistical or accounting information, or information relating to the
Underwriters, or the method of distribution of Shares by the Underwriters,
included therein).
(vi) The statements under the captions
"Management," "Certain Transactions," "Description of Capital Stock" and "Shares
Eligible for Future Sale" in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or matters of law or legal
conclusions, fairly summarize in all material respects the information called
for with respect to such documents and matters.
(vii) Such counsel does not know of any contracts
or documents required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are not so filed
or described as required, and such material contracts and documents as are
summarized in the Registration Statement or the Prospectus are fairly summarized
in all material respects.
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(viii) Such counsel knows of no material legal or
governmental proceedings pending or threatened against the Company except as set
forth in the Prospectus.
(ix) The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Charter or by-laws of the Company, as currently
in effect, or any agreement or instrument known to such counsel to which the
Company is a party and which is listed as an exhibit to the Registration
Statement.
(x) This Agreement has been duly authorized,
executed and delivered by the Company.
(xi) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or as required by state
securities and Blue Sky laws as to which such counsel need express no opinion)
except such as have been obtained or made.
(xii) The Company is not, and will not become, as
a result of the consummation of the transactions contemplated by this Agreement,
and application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
(xiii) This Agreement has been duly authorized,
executed and delivered on behalf of the Selling Shareholders.
(xiv) To the knowledge of such counsel, each
Selling Shareholder has the legal right, power and authority, and any approval
required by law (other than as required by state securities and Blue Sky laws as
to which such counsel need express no opinion), to sell, assign, transfer and
deliver the portion of the Shares to be sold by such Selling Shareholder.
(xv) The Custodian Agreement and the Power of
Attorney executed and delivered by each Selling Shareholder who is a natural
person and, to the knowledge of such counsel, each Selling Stockholder who is
not a natural person, is valid and binding.
(xvi) Upon the Underwriters' receipt of the shares
to be sold by the Selling Stockholders and assuming the Underwriters purchase
such Shares for value and without notice of an adverse claim to such Shares
within the meaning of Section 8-102 of the Uniform Commercial Code as in effect
in the Commonwealth of Massachusetts, the Underwriters will have acquired all
rights of the Selling Stockholders in such Shares free of any adverse claim, any
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<PAGE> 18
lien in favor of the Company and any restrictions on transfer imposed by the
company or any other third parties.
In rendering such opinion Hale and Dorr LLP may rely (i) as to
matters governed by the laws of states other than Delaware or Federal laws on
local counsel in such jurisdictions, (ii) as to the matters set forth in
subparagraphs (xiii), (xiv) and (xv) on opinions of other counsel representing
the respective Selling Shareholders and (iii) as to certain matters set forth in
subparagraphs (ii) and (iii) on an opinion of Shipman & Goodwin LLP, provided
that in each case Hale and Dorr LLP shall state that they believe that they and
the Underwriters are justified in relying on such other counsel. In addition to
the matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which leads them
to believe that (i) the Registration Statement, at the time it became effective
under the Act (but after giving effect to any modifications incorporated therein
pursuant to Rule 430A under the Act) and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements, in the light of
the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and financial
accounting or statistical information or information relating to the
Underwriters or the method of distribution of the Shares by the Underwriters,
included therein). With respect to such statement, Hale and Dorr LLP may state
that their belief is based upon the procedures set forth therein, but is without
independent check and verification.
(c) The Representatives shall have received from Goodwin,
Procter & Hoar, LLP, counsel for the Underwriters, an opinion dated the Closing
Date or the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (ii), (iii), (iv), (ix) and (xi) of Paragraph (b) of
this Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In rendering such opinion,
Goodwin, Procter & Hoar LLP may rely as to all matters governed other than by
the laws of the State of Delaware or Federal laws on the opinion of counsel
referred to in Paragraph (b) of this Section 6. In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to believe
that (i) the Registration Statement, or any amendment thereto, as of the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) as of the Closing Date
or the Option Closing Date, as the case may be, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact, necessary in order to make the statements, in the light
of the circumstances under which they are
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<PAGE> 19
made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein). With
respect to such statement, Goodwin, Procter & Hoar LLP may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.
(d) The Representatives shall have received at or prior
to the Closing Date from Goodwin, Procter & Hoar LLP a memorandum or summary, in
form and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under the
State securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.
(e) The Representatives shall have received, on each of
the dates hereof, the Closing Date and the Option Closing Date, as the case may
be, a letter dated the date hereof, the Closing Date or the Option Closing Date,
as the case may be, in form and substance satisfactory to the Representatives,
of Price Waterhouse LLP confirming that they are independent public accountants
within the meaning of the Act and the applicable published Rules and Regulations
thereunder and stating that in their opinion the financial statements and
schedules examined by them and included in the Registration Statement comply in
form in all material respects with the applicable accounting requirements of the
Act and the related published Rules and Regulations; and containing such other
statements and information as is ordinarily included in accountants' "comfort
letters" to Underwriters with respect to the financial statements and certain
financial and statistical information contained in the Registration Statement
and Prospectus.
(f) The Representatives shall have received on the
Closing Date or the Option Closing Date, as the case may be, a certificate or
certificates of the Chief Executive Officer and the Chief Financial Officer of
the Company to the effect that, as of the Closing Date or the Option Closing
Date, as the case may be, each of them severally represents as follows:
(i) The Registration Statement has become
effective under the Act and no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for such purpose have
been taken or are, to his or her knowledge, contemplated by the Commission;
(ii) The representations and warranties of the
Company contained in Section 1 hereof are true and correct as of the Closing
Date or the Option Closing Date, as the case may be;
(iii) All filings required to have been made
pursuant to Rules 424 or 430A under the Act have been made;
(iv) He or she has carefully examined the
Registration Statement and the Prospectus and, in his or her opinion, as of the
effective date of the Registration Statement, the statements contained in the
Registration Statement were true and correct in all material respects, and such
Registration Statement and Prospectus did not omit to state a material fact
required to be stated
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<PAGE> 20
therein or necessary in order to make the statements therein not misleading, and
since the effective date of the Registration Statement, no event has occurred
which should have been set forth in a supplement to or an amendment of the
Prospectus which has not been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or otherwise,
of the Company and its Subsidiaries taken as a whole or the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business.
(g) The Company and the Selling Shareholders shall have
furnished to the Representatives such further certificates and documents
confirming the representations and warranties, covenants and conditions
contained herein and related matters as the Representatives may reasonably have
requested.
(h) The Firm Shares and Option Shares, if any, have been
approved for designation upon notice of issuance on the Nasdaq National Market.
(i) The Lockup Agreements described in Section 4 (a) (x)
are in full force and effect.
The opinions and certificates mentioned in this Agreement
shall be deemed to be in compliance with the provisions hereof only if they are
in all material respects satisfactory to the Representatives and to Goodwin,
Procter & Hoar LLP, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this
Section 6 shall not have been fulfilled when and as required by this Agreement
to be fulfilled, the obligations of the Underwriters hereunder may be terminated
by the Representatives by notifying the Company of such termination in writing
or by telegram at or prior to the Closing Date or the Option Closing Date, as
the case may be.
In such event, the Selling Shareholders, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to sell and deliver the portion
of the Shares required to be delivered as and when specified in this Agreement
are subject to the conditions that at the Closing Date or the Option Closing
Date, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
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<PAGE> 21
8. INDEMNIFICATION.
(a) The Company and each of the Selling Shareholders that
is currently a director or officer of the Company (the "Management Selling
Shareholders"), jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities to which
such Underwriter or any such controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any alleged act or failure to act by
any Underwriter in connection with, or relating in any manner to, the Shares or
the offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based upon
matters covered by clause (i) or (ii) above (provided, that the Company shall
not be liable under this clause (iii) to the extent that it is determined in a
final judgment by a court of competent jurisdiction that such loss, claim,
damage, liability or action resulted directly from any such acts or failures to
act undertaken or omitted to be taken by such Underwriter through its gross
negligence or willful misconduct); and will reimburse each Underwriter and each
such controlling person upon demand for any legal or other expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry related to the
offering of the Shares, whether or not such Underwriter or controlling person is
a party to any action or proceeding; provided, however, that the Company and the
Management Selling Shareholders will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or such amendment or supplement, in reliance upon and in conformity
with written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof and provided
further that the Company shall not be liable to any Underwriter under this
Section 8(a) with respect to any Preliminary Prospectus to the extent that any
such loss, claim, damage or liability of such Underwriter results solely from an
untrue statement of a material fact contained in, or the omission of a material
fact from, such Preliminary Prospectus which such untrue statement or omission
was corrected in the Prospectus, if such Underwriter sold Shares to the person
alleging such loss, claim, damage or liability without sending or giving, at or
prior to the written confirmation of such sale, a copy of the Prospectus if the
Company has previously furnished copies thereof to such Underwriter. In no
event, however, shall the liability of any Management Selling Shareholder for
indemnification under this Section 8(a) exceed the proceeds received by such
Management Selling Shareholder from the Underwriters in the offering
contemplated by this Agreement. This indemnity agreement will be in addition to
any liability which the Company or the Management Selling Shareholders may
otherwise have.
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<PAGE> 22
(b) Each Selling Shareholder that is not currently an
officer of director of the Company (a "Non-Management Selling Shareholder")
severally and not jointly will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement,
each Underwriter, and each person, if any, who controls the Company or any
Underwriter within the meaning of the Act, against any losses, claims, damages
or liabilities to which the Company or any such director, officer, Underwriter
or controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made; and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, Underwriter or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that each
Non-Management Selling Shareholder will be liable in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission has been made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by such Non-Management Selling Shareholder specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which the Non-Management Selling Shareholders may otherwise have.
(c) Each Underwriter severally and not jointly will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement, the Selling Shareholders,
and each person, if any, who controls the Company or the Selling Shareholders
within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer, Selling
Shareholder or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances under
which they were made; and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, Selling Shareholder or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or through
the Representatives specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
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(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) (b) or (c) shall be available to
any party who shall fail to give notice as provided in this Section 8(d) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a), (b) or (c). In case any such proceeding shall be
brought against any indemnified party and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a), the Company and you in the case of parties indemnified by Section
8(b) and by the Company and the Selling Shareholders in the case of parties
indemnified pursuant to Section 8(c). The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(e) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
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therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Selling Shareholders on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling Shareholders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Shareholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
Section 8(e) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 8(e). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to above in this Section 8(e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (e), (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter, (ii) no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation, and (iii) no
Selling Shareholder shall be required to contribute any amount in excess of the
proceeds received by such Selling Shareholder from the Underwriters in the
offering contemplated by this Agreement. The Underwriters' obligations in this
Section 8(e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) In any proceeding relating to the Registration
Statement, any Preliminary Prospectus, the Prospectus or any supplement or
amendment thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court
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<PAGE> 25
having jurisdiction over any other contributing party, agrees that process
issuing from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may join him or it as an additional defendant in any such
proceeding in which such other contributing party is a party.
(g) Any losses, claims, damages, liabilities or expenses
for which an indemnified party is entitled to indemnification or contribution
under this Section 8 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case
may be, any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company or a Selling
Shareholder), you, as Representatives of the Underwriters, shall use your
reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company and the Selling
Shareholders such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company and the
Selling Shareholders or you as the Representatives of the Underwriters will have
the right, by written notice given within the next 36-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part of
the non-defaulting Underwriters or of the Company or of the Selling Shareholders
except to the extent provided in Section 8 hereof. In the event of a default by
any Underwriter or Underwriters, as set forth in this Section 9, the Closing
Date or Option Closing
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Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representatives, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes any
person substituted for a defaulting Underwriter. Any action taken under this
Section 9 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: if to the Underwriters, to BT Alex. Brown
Incorporated, 1 South Street, Baltimore, Maryland 21202, Attention: Equity
Syndicate; with a copy to BT Alex. Brown Incorporated, 1 South Street,
Baltimore, Maryland 21202. Attention: General Counsel; if to the Company or the
Selling Shareholders, to
____________________________________________________
____________________________________________________
____________________________________________________
11. TERMINATION.
This Agreement may be terminated by you by notice to the
Sellers as follows:
(a) at any time prior to the earlier of (i) the time the Shares
are released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following
has occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change or
any development involving a prospective material adverse change in or affecting
the condition, financial or otherwise, of the Company and its Subsidiaries taken
as a whole or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company and
its Subsidiaries taken as a whole, whether or not arising in the ordinary course
of business, (ii) any outbreak or escalation of hostilities or declaration of
war or national emergency or other national or international calamity or crisis
or change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of the
Shares, or (iii) suspension of trading in securities generally on the New York
Stock Exchange or the American Stock Exchange or limitation on prices (other
than limitations on hours or numbers of days of trading) for securities on
either such Exchange, (iv) the enactment, publication, decree or other
26
<PAGE> 27
promulgation of any statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects or
may materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading in the rating of the Company's debt securities
by any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Exchange Act); (vii) the suspension of trading
of the Company's common stock by the Commission on the Nasdaq National Market or
(viii) the taking of any action by any governmental body or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of
the Underwriters, the Company and the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company, the Selling Shareholders and the Underwriters
acknowledge and agree that the only information furnished or to be furnished by
any Underwriter to the Company for inclusion in any Prospectus or the
Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters), legends required by Item 502(d) of Regulation S-K under the Act
and the information under the caption "Underwriting" in the Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Shares under
this Agreement.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Maryland.
27
<PAGE> 28
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Shareholders, the
Company and the several Underwriters in accordance with its terms.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Shareholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
OPEN SOLUTIONS INC.
By
---------------------------------------
Name:
Title:
Selling Shareholders listed on Schedule II
By
---------------------------------------
Name:
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. BROWN INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
UBS SECURITIES LLC
As Representatives of the several
Underwriters listed on Schedule I
By: BT Alex. Brown Incorporated
By:
--------------------------------------
Name:
Title:
28
<PAGE> 29
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------
BT Alex. Brown Incorporated
Credit Suisse First Boston Corporation
UBS Securities LLC
__________
Total __________
29
<PAGE> 30
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
Number of Firm Shares
Selling Shareholder to be Sold
------------------- ----------
__________
Total __________
30
<PAGE> 31
SCHEDULE III
SCHEDULE OF OPTION SHARES
Maximum Number Percentage of
of Option Shares Total Number of
Name of Seller to be Sold Option Shares
-------------- ---------------- ---------------
------ ---
Total 100%
------ ---
DOCSC\634675.2
31
<PAGE> 1
Exhibit No. 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF OPEN SOLUTIONS INC.
OPEN SOLUTIONS INC., a corporation incorporated under the General
Corporation Law of Delaware, hereby amends and restates its Certificate of
Incorporation, which was originally filed with the Secretary of State on May 18,
1992, so that the same shall read, in its entirety, as follows:
ARTICLE I.
The name of this corporation is Open Solutions Inc.
ARTICLE II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
ARTICLE III.
A. CLASSES OF STOCK. This corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the corporation is authorized to issue
is Fifteen Million Seven Hundred Seventy-Five Thousand (15,775,000) shares. Nine
Million Eight Hundred Thirty Thousand Four Hundred Seventeen (9,830,417) shares
shall be Common Stock par value $.01 per share and Five Million Nine Hundred
Forty-Four Thousand Five Hundred Eighty. Three (5,944,583) shares shall be
Preferred Stock par value $.01 per share.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
rights, preferences, privileges, and restrictions granted to and imposed on the
Series A-1 Preferred Stock, which series shall consist of One Million
(1,000,000) shares, the Series A-2 Preferred Stock, which series shall consist
of Five Hundred Eighty-Three Thousand Three Hundred Thirty-Three (583,333)
shares, the Series B Preferred Stock, which series shall consist of One Million
Seven Hundred Thirty-Six Thousand Two Hundred Fifty (1,736,250) shares, the
Series C Preferred Stock, which series shall consist of One Million Three
Hundred Seventy-Five Thousand (1,375,000) shares and the Series D Preferred
Stock, which series shall consist of One Million Two Hundred Fifty Thousand
(1,250,000) shares are as set forth below in this Article III(B).
1. DIVIDEND PROVISIONS. The holders of shares of Series A-1
Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock shall be entitled to receive
dividends, out of any assets legally available therefor, prior and in preference
to any declaration
<PAGE> 2
or payment of any dividend (payable other than in Common Stock or other
securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of this
corporation) on the Common Stock of this corporation, at the rate of (i) $.11
per share per annum for the Series A-1 Preferred Stock and (ii) $.21 per share
per annum for the Series A-2 Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock, or, if greater (as
determined on a per-annum basis and an as-converted basis for the Series A-1
Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock), an amount equal to that paid on
any other outstanding shares of this corporation, payable quarterly when, as and
if declared by the Board of Directors in their sole discretion. Such dividends
shall not be cumulative.
2. LIQUIDATION PREFERENCE.
a. In the event of any liquidation, dissolution or winding up of
this corporation, either voluntarily or involuntarily, the holders of Series A-1
Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, (i) for the
Series A-1 Preferred Stock, an amount per share equal to the sum of (A) $1.50
for each outstanding share of Series A-1 Preferred Stock (the "Original Issue
Price" for the Series A-1 Preferred Stock) and (B) an amount equal to declared
but unpaid dividends on such share; (ii) for the Series A-2 Preferred Stock, an
amount per share equal to the sum of (A) $3.00 for each outstanding share of
Series A-2 Preferred Stock (the "Original Issue Price" for the Series A-2
Preferred Stock) and (B) an amount equal to declared but unpaid dividends on
such share; (iii) for the Series B Preferred Stock, an amount per share equal to
the sum of (A) $3.00 for each outstanding share of Series B Preferred Stock (the
"Original Issue Price" for the Series B Preferred Stock) and (B) an amount equal
to accrued, but unpaid, dividends on such share; (iv) for the Series C Preferred
Stock, an amount per share equal to the sum of (A) $4.50 for each outstanding
share of Series C Preferred Stock (the "Original Issue Price" for the Series C
Preferred Stock) and (B) an amount equal to accrued, but unpaid, dividends on
such share; and (v) for the Series D Preferred Stock, an amount per share equal
to the sum of (A) $6.00 for each outstanding share of Series D Preferred Stock
(the "Original Issue Price" for the Series D Preferred Stock) and (B) an amount
equal to accrued, but unpaid, dividends on such share. If upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series B
Preferred Stock, Series C Preferred Stock and the Series D Preferred Stock shall
be insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of the corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the
Series B
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<PAGE> 3
Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock
in proportion to the preferential amount each such holder is otherwise entitled
to receive.
b. Upon the completion of the distribution required by
subparagraph (a) of this Section 2, the remaining assets of the corporation
available for distribution to stockholders shall be distributed among the
holders of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Common
Stock pro rata based on the number of shares of Common Stock held by each
(assuming conversion of all such Preferred Stock).
c. (i) For purposes of this Section 2, a liquidation,
dissolution or winding up of this corporation shall be deemed to be occasioned
by, or to include: (A) the acquisition of the corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but excluding any merger
effected exclusively for the purpose of changing the domicile of the
corporation); or (B) a sale of all or substantially all of the assets of the
corporation; UNLESS in the case of (A) or (B), the corporation's shareholders of
record as constituted immediately prior to such acquisition or sale will,
immediately after such acquisition or sale (by virtue of securities issued as
consideration for the corporation's acquisition or sale or otherwise) hold at
least 50% of the voting power of the surviving or acquiring entity.
(ii) In any of such events, if the consideration received
by the corporation is other than cash, its value will be deemed its fair market
value. Any securities shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange or through the
Nasdaq National Market System, the value shall be deemed to be the average of
the closing prices of the securities on such exchange over the thirty-day period
ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the Board of
the corporation and the holders of at least a majority of the voting power of
all then outstanding shares of Preferred Stock.
-3-
<PAGE> 4
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof; as mutually determined by the Board of the corporation and
the holders of at least a majority of the voting power of all then outstanding
shares of such Preferred Stock.
(iii) In the event the requirements of this subsection 2(c)
are not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until such time as
the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock and the Series D Preferred Stock shall revert to and be the same as such
rights, preferences and privileges existing immediately prior to the date of the
first notice referred to in subsection 2(c)(iv) hereof.
(iv) The corporation shall give each holder of record of
Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and the Series D Preferred Stock written notice
of such impending transaction not later than twenty (20) days prior to the
shareholders' meeting called to approve such transaction, or twenty (20) days
prior to the closing of such transaction, whichever is earlier, and shall also
notify such holders in writing of the final approval of such transaction. The
first of such notices shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 2, and the corporation
shall thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after the
corporation has given the first notice provided for herein or sooner than ten
(10) days after the corporation has given notice of any material changes
provided for herein; PROVIDED, HOWEVER that such periods may be shortened upon
the written consent of the holders of Preferred Stock that are entitled to such
notice rights or similar notice rights and that represent at least a majority of
the voting power of all then outstanding shares of such Preferred Stock.
3. [Intentionally left blank.]
4. CONVERSION. The holders of the Series A-1 Preferred Stock,
the Series A-2 Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
-4-
<PAGE> 5
a. RIGHT TO CONVERT. Each share of Series A-1 Preferred
Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and the Series D Preferred Stock shall be convertible, at the option of
the holder thereof, at any time after the date of issuance of such share, at the
office of this corporation or any transfer agent for such stock, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing the Original Issue Price by the Conversion Price applicable to such
share, determined as hereafter provided, in effect on the date the certificate
is surrendered for conversion. The initial Conversion Price per share for shares
of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock shall be the
Original Issue Price for such share; provided, however, that the Conversion
Price for the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock shall be subject to adjustment as set forth in subsection 4(d).
Accrued dividends, if any (i) on the Series A-1 Preferred Stock and the Series
A-2 Preferred Stock will be eliminated upon conversion and shall not be applied
upon conversion to the Common Stock; and (ii) on the Series B Preferred Stock,
the Series C Preferred Stock and the Series D Preferred Stock shall be payable
upon conversion.
b. AUTOMATIC CONVERSION. Except as provided below in
subsection 4(c), each share of Preferred Stock shall automatically be converted
into shares of Common Stock at the Conversion Price at the time in effect for
such share immediately upon the corporation's sale of its Common Stock in a firm
commitment underwritten public offering pursuant to a registration statement
under the Securities Act of 1933, as amended, the aggregate public offering
price of which was at least $10,000,000, based on a public offering price of at
least $6.00 per share of Common Stock with respect to conversion of Series A-1
Preferred Stock, Series A-2 Preferred Stock and Series B Preferred Stock and
$7.50 per share of Common Stock with respect to conversion of Series C Preferred
Stock and Series D Preferred Stock and the Common Stock is listed for trading on
the Nasdaq National Market System.
c. MECHANICS OF CONVERSION. Before any holder of Series A-1
Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for such series of Preferred Stock, and shall give written
notice to this corporation at its principal corporate office of his election to
convert the same and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued. This
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A-1 Preferred Stock, Series A-2 Preferred Stock,
Series B Preferred Stock Series C Preferred Stock or Series D Preferred Stock,
or to the nominee or nominees of such holder, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such
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<PAGE> 6
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A-1 Preferred
Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act of
1933, the conversion may, at the option of any holder tendering Series A-1
Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock for conversion, be conditioned upon
the closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock upon
conversion of the Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock shall
not be deemed to have converted such Series A-1 Preferred Stock, Series A-2
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock until immediately prior to the closing of such sale of
securities.
d. CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR
CERTAIN DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Conversion Price of the
Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock
shall be subject to adjustment from time to time as follows:
(i) (A) Upon each issuance by this corporation of any
Additional Stock (as defined below) after the effective date of filing of this
Restated Certificate of Incorporation (the "Effective Date"), without
consideration or for a consideration per share less than the Conversion Price
for such series in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price for such series in effect immediately prior to each
such issuance shall forthwith (except as otherwise provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing the total
computed under clause (x) below by the total computed under clause (y) below as
follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the shares of such
series sold pursuant to the agreement pursuant to which
shares of such series are first issued (the "Stock Purchase
Agreement"), plus
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<PAGE> 7
(2) the aggregate consideration, if any, received by
the corporation for all Additional Stock issued on or after
the Effective Date for such series,
(y) an amount equal to the sum of
(1) the aggregate purchase price of the shares of such
series sold pursuant to the Stock Purchase Agreement divided
by the Conversion Price for such shares in effect at the
Effective Date for such series, plus
(2) the number of shares of Additional Stock issued
since the Effective Date for such series.
(B) No adjustment of the Conversion Price for the
Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock or Series D Preferred Stock shall
be made in an amount less than one cent per share, provided that any adjustments
that are not required to be made by reason of this sentence shall be carried
forward and shall be either taken into account in any subsequent adjustment made
prior to 3 years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of 3 years from the date of the
event giving rise to the adjustment being carried forward, and upon such
adjustment the Conversion Price for such Preferred Stock shall be rounded up or
down to the nearest cent. Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant
to this subsection 4(d)(i) shall have the effect of increasing the Conversion
Price above the Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof
(D) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined in good
faith by the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance of options to purchase
or rights to subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock or options to purchase or rights to
subscribe for such convertible or exchangeable securities, the following
provisions shall apply for all purposes of this subsection 4(d)(i) and
subsection 4(d)(ii):
-7-
<PAGE> 8
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (whether or not then
exercisable) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for
a consideration equal to the consideration (determined in the
manner provided in subsections 4(d)(i)(C) and (d)(i)(D)), if
any, received by the corporation upon the issuance of such
options or rights plus the minimum exercise price provided in
such options or rights for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange (whether
or not then convertible or exchangeable) for any such
convertible or exchangeable securities or upon the exercise
of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such
options or rights were issued and for a consideration equal
to the consideration, if any, received by the corporation for
any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if
any, to be received by the corporation upon the conversion or
exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be
determined in the manner provided in subsections 4(d)(i)(C)
and (d)(i)(D)).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable
to this corporation upon exercise of such options or rights
or upon conversion of or in exchange for such convertible or
exchangeable securities, including, but not limited to, a
change resulting from the anti-dilution provisions thereof,
the Conversion Price of the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock and the Series B Preferred Stock,
to the extent in any way affected by or computed using such
options, rights or securities, shall be recomputed to reflect
such change, but no further adjustment shall be made for the
actual issuance
-8-
<PAGE> 9
of Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or
exchange of such securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price
of the Series A-1 Preferred Stock, the Series A-2 Preferred
Stock, the Series B Preferred Stock, the Series C Preferred
Stock and Series D Preferred Stock, to the extent in any way
affected by or computed using such options, rights or
securities or options or rights related to such securities,
shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or
exchangeable securities that remain in effect) actually
issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the
exercise of the options or rights related to such securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to
subsections 4(d)(i)(E)(i) and (2) shall be appropriately
adjusted to reflect any change, termination or expiration of
the type described in either subsection 4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E))
by this corporation after the Effective Date other than:
(A) Common Stock issued pursuant to a transaction
described in subsection 4(d)(iii) hereof;
(B) 1,610,000 shares of Common Stock issuable or
issued (and not repurchased at cost by the corporation in
connection with the termination of employment) to employees
of this corporation directly or pursuant to the stock option
plan approved by the Board of Directors of this corporation
and existing on the Effective Date or such other stock option
plan or restricted plan or amendment thereto approved by a
majority of the holders of Preferred Stock;
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<PAGE> 10
(C) Common Stock issued upon conversion of shares of
Preferred Stock;
(D) shares of Common Stock issued or issuable in a
public offering in connection with which all outstanding
shares of Series A-1 Preferred Stock, Series A-2 Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock will be converted to Common Stock;
(E) the warrants to purchase up to 192,916 shares of
Series B Preferred Stock issued by the corporation in
connection with the initial sale of the Series B Preferred
Stock (the "Series B Warrants"), the Series B Preferred Stock
issued upon exercise of the Series B Warrants and the Common
Stock issued upon conversion of such Series B Preferred
Stock;
(F) the warrants to purchase up to 152,778 shares of
Series C Preferred Stock issued by the corporation in
connection with the initial sale of the Series C Preferred
Stock (the "Series C Warrants"), the Series C Preferred Stock
issued upon exercise of the Series C Warrants and the Common
Stock issued upon conversion of such Series C Preferred
Stock; or
(G) the warrants to purchase up to 416,667 shares of
Series D Preferred Stock issued by the corporation in
connection with the initial sale of the Series D Preferred
Stock (the "Series D Warrants"), the Series D Preferred Stock
issued upon exercise of the Series D Warrants and the Common
Stock issued upon conversion of such Series D Preferred
Stock.
(iii) In the event the corporation should at any time or
from time to time after the Effective Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of
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<PAGE> 11
such record date (or the date of such dividend distribution, split or
subdivision if no record date is fixed), the Conversion Price of the Series A-1
Preferred Stock, the Series A-2 Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock and Series D Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock
outstanding at any time after the Effective Date is decreased by a combination
of the outstanding shares of Common Stock, then, following the record date of
such combination, the Conversion Price for the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock and the Series D Preferred Stock shall be appropriately increased so that
the number of shares of Common Stock issuable on conversion of each share of
such series shall be decreased in proportion to such decrease in outstanding
shares.
e. OTHER DISTRIBUTIONS. In the event this corporation shall
declare a distribution to holders of the corporation's Common Stock payable in
securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights not referred to in subsection 4(d)(iii), then, in each such case for the
purpose of this subsection 4(e), the holders of the Series A-1 Preferred Stock,
the Series A-2 Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and Series D Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the corporation into which their shares
of Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of the corporation entitled to receive such distribution.
f. RECAPITALIZATIONS. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2), provision shall be made so that the holders of the
Series A-1 Preferred Stock, the Series A2 Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock
shall thereafter be entitled to receive upon conversion of such Preferred Stock
the number of shares of stock or other securities or property of the Company or
otherwise, to which a holder of Common Stock deliverable upon conversion would
have been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock and the Series D Preferred Stock after
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<PAGE> 12
the recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series A-1 Preferred Stock, the Series A-2
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the Series D Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
g. NO IMPAIRMENT. This corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock against impairment.
h. NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A-1 Preferred Stock, the Series
A-2 Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
or the Series D Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of shares of Series A-1 Preferred Stock, Series A-2 Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series
D Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of the Series A-1 Preferred Stock, the Series A-2
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock or
the Series D Preferred Stock pursuant to this Section 4, this corporation, at
its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. This corporation shall,
upon the written request at any time of any holder of Series A-1 Preferred
Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and readjustment,
(B)
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<PAGE> 13
the Conversion Price for such series of Preferred Stock at the time in effect,
and (C) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of a share of
such Preferred Stock
i. NOTICES OF RECORD DATE. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A-1 Preferred Stock, Series A-2
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock, at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend distribution or right.
j. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A-1 Preferred Stock, the Series A-2
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the Series D Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock; and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of
Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, in addition to
such other remedies as shall be available to the holder of such Preferred Stock,
this corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to these articles.
k. NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A-1 Preferred Stock,
Series A-2 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
or Series D Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at his
address appearing on the books of this corporation.
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<PAGE> 14
5. VOTING RIGHTS.
a. Except as set forth in subsection 5(b) of this Section 5, the
holder of each share of Series A-1 Preferred Stock, Series A-2 Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
shall have the right to one vote for each share of Common Stock, if and when
issued, into which such Series A-1 Preferred Stock, Series A-2 Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
could then be converted, and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, outstanding any provision
hereof, to notice of any shareholders' meeting in accordance with the Bylaws of
this corporation, and shall be entitled to vote, together with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote. Fractional votes shall not, however, be permitted and any
fractional voting rights available on an as-converted basis (after aggregating
all shares into which shares of preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
b. ELECTION OF DIRECTORS. Except as set forth below, at each
election of directors in which there are shares of Preferred Stock outstanding,
the holders of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock and Series D Preferred Stock,
voting together as a separate class, shall be entitled to elect four (4) members
to the Board of Directors. Except as set forth below, at each election of
directors in which there are shares of Preferred Stock outstanding, the holders
of Common Stock, voting separately as a class, shall be entitled to elect four
(4) members to the Board of Directors. Except as set forth below, at each
election of directors, the holders of Series A-1 Preferred Stock, Series A-2
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Common Stock, voting together as a separate class, shall be
entitled to elect one member, or such additional number of members as the
majority of the holders of Preferred Stock and Common Stock each voting as a
separate class shall approve, to the Board of Directors.
c. Vacancies in the Board of Directors may be filled only by the
vote of a majority of the outstanding shares entitled to vote thereon
represented at a duly held meeting at which a quorum is present, or by written
consent of a majority of the shares entitled to vote thereon. Each director so
elected shall hold office until the next annual meeting of shareholders and
until a successor has been elected and qualified.
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<PAGE> 15
6. PROTECTIVE PROVISIONS.
a. So long as any shares of Series A-1 Preferred Stock,
Series A-2 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
or Series D Preferred Stock are outstanding, this corporation shall not, without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of a majority of the outstanding Preferred Stock, which majority
must include the holders of a majority of the outstanding Series B Preferred
Stock that is entitled to vote with respect to the matter and the holders of a
majority of the outstanding Series C Preferred Stock that is entitled to vote
with respect to the matter:
(i) sell, convey, or otherwise dispose of or encumber all
or substantially all of its property or business or merge into or consolidate
with any other corporation (other than a wholly-owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the corporation is disposed of;
(ii) alter or change the rights, preferences or privileges
of the shares of Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the
Series B Preferred Stock or the Series C Preferred Stock so as to affect
adversely the shares;
(iii) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A-1 Preferred Stock,
Series A-2 Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock;
(iv) create (by new authorization, reclassification,
recapitalization or otherwise) any class or series of stock or any other
securities convertible into equity securities of this corporation having a
preference over, or being on a parity with, the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock or the Series D Preferred Stock with respect to voting, dividends or upon
liquidation;
(v) effect a reclassification or recapitalization of the
outstanding capital stock of the corporation;
(vi) amend Article VII hereof to provide limits on director
liability or indemnification other than to the maximum extent permitted by law;
or
(vii) change the size of the corporation's Board of
Directors from its existing size of nine (9).
b. So long as any shares of Series B Preferred Stock or Series C
Preferred Stock are outstanding, this corporation shall not, without first
obtaining
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<PAGE> 16
the approval (by vote or written consent, as provided by law) of the holders of
two-thirds (2/3) of the outstanding shares of each such series of Preferred
Stock, cause a conversion under Section 4(b) hereof.
c. So long as any shares of Series D Preferred Stock are
outstanding, this corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of a majority of
the outstanding shares of Series D Preferred Stock:
(i) alter or change the rights, preferences or privileges
of the shares of Series D Preferred Stock so as to affect adversely such shares;
(ii) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series D Preferred Stock;
(iii) effect a reclassification or recapitalization of the
outstanding capital stock of the corporation so as to (x) alter or change the
rights, preferences or privileges of the shares of Series D Preferred Stock so
as to affect adversely such shares or (y) increase or decrease (other than by
redemption or conversion) the total number of authorized shares of Series D
Preferred Stock; or
(iv) amend Article VII hereof to provide limits on director
liability or indemnification other than to the maximum extent permitted by law.
7. STATUS OF CONVERTED STOCK. In the event any shares of
Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock shall be converted
pursuant to Section 4 hereof, the shares so converted shall be cancelled and
shall not be issuable by the corporation. The Articles of Incorporation of this
corporation shall be appropriately amended to effect the corresponding reduction
in the corporation's authorized capital stock.
C. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors in their sole discretion.
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<PAGE> 17
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the corporation, the assets of the corporation shall be
distributed as provided in Section 2 of Division (B) of this Article III hereof.
3. [Intentionally left blank.]
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE IV.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors shall have the power, subject to the provisions
of Section B.6 of Article III, both before and after receipt of any payment for
any of the corporation's capital stock, to adopt, amend, repeal or otherwise
alter the Bylaws of the corporation without any action on the part of the
stockholders; provided, however, that the grant of such power to the Board of
Directors shall not divest the stockholders of, nor limit their power, subject
to the provisions of Section B.6 of Article THREE, to adopt, amend, repeal or
otherwise alter the Bylaws or otherwise limit any other stockholder rights.
ARTICLE V.
Elections of directors need not be by written ballot unless the Bylaws
of the corporation shall so provide.
ARTICLE VI.
The corporation reserves the right to adopt, repeal, rescind or amend
in any respect any provisions contained in this Restated Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on stockholders herein are granted subject to this
reservation.
ARTICLE VII.
A director of the corporation shall, to the fill extent permitted by
the Delaware General Corporation Law as it now exists or as it may hereafter be
amended, not be liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Neither any amendment nor
repeal of this Article VII, nor the adoption of any provision of this Restated
Certificate of Incorporation inconsistent with this Article VII, shall eliminate
or reduce the effect of this Article VII in respect of any matter occurring, or
any cause of action, suit or claim that, but
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<PAGE> 18
for this Article VII, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
ARTICLE VIII.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the corporation.
ARTICLE IX.
To the fullest extent permitted by applicable law, the corporation is
authorized to provide indemnification of (and advancement of expenses to)
officers and agents of the corporation (and any other persons to which Delaware
law permits the corporation to provide indemnification) through bylaw
provisions, agreements with such officers, agents or other persons, vote of
stockholders or disinterested directors or otherwise, in excess of the
indemnification and advancement otherwise permitted by Section 145 of the
Delaware General Corporation Law, subject only to limits created by applicable
Delaware law (statutory or non-statutory), with respect to actions for breach of
duty to the corporation, its stockholders, and others.
ARTICLE X.
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
Delaware 19805. The Corporation's registered agent at such address is
Corporation Service Company.
This Restated Certificate of Incorporation has been duly adopted by the
written consent of the stockholders in accordance with the provisions of
Sections 242, 245 and 228 of the General corporation Law of Delaware, as
amended, and written notice has been given as provided in Section 228 of the
General Corporation Law of Delaware.
[INTENTIONALLY LEFT BLANK]
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<PAGE> 19
IN WITNESS WHEREOF, OPEN SOLUTIONS INC., has caused this certificate to
be signed by its President as of this 22 day of August, 1997.
OPEN SOLUTIONS INC.
By /s/ Douglas K. Anderson
-------------------------
Douglas K. Anderson
Its President
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<PAGE> 20
FIRST CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OPEN SOLUTIONS INC.
OPEN SOLUTIONS INC. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"General Corporation Law"), does hereby certify:
FIRST: That the Restated Certificate of Incorporation of the
Corporation was filed with the Secretary of State of August 22, 1997; and
SECOND: That, pursuant to the provisions of Section 242 of the General
Corporation Law, the Board of Directors of the Corporation, at the Board of
Directors meeting held February 25, 1998, duly adopted resolutions setting forth
a proposed first amendment to the Restated Certificate of Incorporation of the
Corporation, declared said proposed first amendment to be advisable and directed
that it be submitted to the stockholders of the Corporation for approval; and
THIRD: That thereafter, pursuant to the provisions of Sections 228 and
242 of the General Corporation Law, the stockholders of the Corporation, by
written consent filed with the minutes of the stockholders' meetings, duly
adopted the following resolution setting forth the proposed amendment:
RESOLVED, that the Restated Certificate of Incorporation of the
Corporation be, and it hereby is, amended by deleting, in its entirety, the
first full paragraph of Article III thereof and substituting for the first full
paragraph of Article III the following:
"A. CLASSES OF STOCK. This corporation is authorized to issue
two classes of stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares which the corporation is
authorized to issue is Twenty-five Million (25,000,000) shares.
Nineteen Million, Fifty-five Thousand, Four Hundred Seventeen
(19,055,417) shares shall be Common Stock par value $.01 per share and
Five Million Nine Hundred Forty-Four Thousand Five Hundred Eighty Three
(5,944,583) shares shall be Preferred Stock par value $.01 per share."
FOURTH: That said amendment was only adopted in accordance with the
provisions of Section 242 of the General Corporation Law.
<PAGE> 21
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its President this ninth day of March, 1998.
OPEN SOLUTIONS INC.
By: /s/ Clifford I. Waggoner
-------------------------------
Clifford I. Waggoner, Secretary
<PAGE> 1
Exhibit No. 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
OPEN SOLUTIONS INC.
Open Solutions Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
1. The Corporation filed its original Certificate of Incorporation with
the Secretary of the State of Delaware on May 18, 1992.
2. At a duly called meeting of the Board of Directors of the Corporation
at which a quorum was present at all times, a resolution was duly adopted,
pursuant to Sections 242 and 245 of the General Corporation Law of the State of
Delaware, setting forth an Amended and Restated Certificate of Incorporation of
the Corporation and declaring said Amended and Restated Certificate of
Incorporation advisable. The stockholders of the Corporation duly approved said
proposed Amended and Restated Certificate of Incorporation by written consent in
accordance with Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware. The resolution setting forth the Amended and Restated
Certificate of Incorporation is as follows:
RESOLVED: That the Certificate of Incorporation of the Corporation, be and
hereby is amended and restated in its entirety so that the same
shall read as follows:
FIRST. The name of the Corporation is:
Open Solutions Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
<PAGE> 2
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 55,000,000 shares, consisting of
(i) 50,000,000 shares of Common Stock, $.01 par value per share ("Common
Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock").
The following is a statement of the designations 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
each share held at all meetings of stockholders. There shall be no cumulative
voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
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
2
<PAGE> 3
to constitute different classes of shares for the purposes of voting by classes
unless expressly provided.
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 the General Corporation Law of Delaware. 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. Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
FIFTH. The Corporation shall have a perpetual existence.
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot, except as
and to the extent provided in the By-Laws of the Corporation.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation, except as and to the extent provided in
the By-Laws of the Corporation.
SEVENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as
3
<PAGE> 4
the case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH. Except to the extent that the General Corporation Law of Delaware
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.
NINTH. 1. Actions, Suits and Proceedings Other than by or in the Right of
the Corporation. 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 (other than an action by or in the right of the Corporation), 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, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (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, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 7
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the
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Indemnitee unless the initiation thereof was approved by the Board of Directors
of the 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 such 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. Actions or Suits by or in the Right of the Corporation. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor 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, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was
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unlawful, the Indemnitee shall be considered for the purposes hereof to have
been wholly successful with respect thereto.
4. 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 4. 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
between the Corporation and the Indemnitee in the conduct of the defense of such
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.
5. Advance of Expenses. Subject to the provisions of Section 6 below,
in the event that the Corporation does not assume the defense pursuant to
Section 4 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.
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6. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 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 with respect to requests under Section 1, 2 or 5 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 the directors of the Corporation consisting of persons who are not at that
time parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
whether or not a quorum, (c) a majority vote of a 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, (d) independent
legal counsel (who may, to the extent permitted by law, be regular legal counsel
to the Corporation), or (e) a court of competent jurisdiction.
7. 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
no disposition thereof is made within the 60-day period referred to above in
Section 6. 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 6 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.
8. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of Delaware
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
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or facts occurring prior to the final adoption of such amendment, termination or
repeal.
9. 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 disinterested directors or otherwise, both 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, agreements 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.
10. 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 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 expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. 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 corporation, partnership, joint venture, trust or
other enterprise (including any 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 the General
Corporation Law of Delaware.
12. 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.
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13. 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 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.
14. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware
is 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 General Corporation Law of Delaware, as so
amended.
TENTH. Notwithstanding any other provision of law, this Certificate of
Incorporation or the By-laws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the votes which all the
stockholders would be entitled to cast in any annual election of directors or
class of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with, Articles EIGHTH, NINTH and TENTH. Except as
otherwise provided herein, the Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
ELEVENTH. This Article is inserted for the management of the business and
for the conduct of the affairs of the Corporation.
1. Number of Directors. The number of directors of the Corporation
shall not be less than three. The exact number of directors within the
limitations specified in the preceding sentence shall be fixed from time to time
by, or in the manner provided in, the Corporation's By-Laws.
2. Classes of Directors. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the designated number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class I, and if such fraction is two-thirds, one of the extra directors shall be
a member of Class I and one of the
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extra directors shall be a member of Class II, unless otherwise provided from
time to time by resolution adopted by the Board of Directors.
3. Terms of Office. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting in 1999; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting in 2000; and each initial director in Class III shall serve for a term
ending on the date of the annual meeting in 2001; and provided further, that the
term of each director shall be subject to the election and qualification of his
successor and to his earlier death, resignation or removal.
4. Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
5. Quorum; Action at Meeting. A majority of the directors at any time
in office shall constitute a quorum for the transaction of business. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each director so
disqualified, provided that in no case shall less than one-third of the number
of directors fixed pursuant to Section 1 above constitute a quorum. If at any
meeting of the Board of Directors there shall be less than such a quorum, a
majority of those present may adjourn the meeting from time to time. Every act
or decision done or made by a majority of the directors present at a meeting
duly held at which a quorum is present shall be regarded as the act of the Board
of Directors unless a greater number is required by law, by the By-Laws of the
Corporation or by this Certificate of Incorporation.
6. Removal. Directors of the Corporation may be removed only for cause
by the affirmative vote of the holders of at least seventy-five percent (75%) of
the votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors.
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7. Vacancies. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the board, shall be filled
only by a vote of a majority of the directors then in office, although less than
a quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the class for which
such director shall have been chosen, subject to the election and qualification
of his successor and to his earlier death, resignation or removal.
8. Stockholder Nominations and Introduction of Business, Etc. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided by the By-Laws of the Corporation.
9. Amendments to Article. Notwithstanding any other provisions of law,
this Certificate of Incorporation or the By-Laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article ELEVENTH.
TWELFTH. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting. Notwithstanding any other provisions of
law, the Certificate of Incorporation or the By-Laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article TWELFTH.
THIRTEENTH. Special meetings of stockholders may be called at any time by
only the Chairman of the Board of Directors, the President or the Board of
Directors. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting. Notwithstanding any other provision of law, this Certificate of
Incorporation or the By-Laws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the votes which all the
stockholders would be entitled to cast in any annual election of directors or
class of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with, this Article THIRTEENTH.
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IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Incorporation to be signed by its
Chairman of the Board and Chief Executive Officer this _____ day of ___________,
1998.
OPEN SOLUTIONS INC.
By:_________________________________
Douglas K. Anderson
Chairman of the Board and
Chief Executive Officer
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Exhibit No. 3.3
AMENDED BYLAWS
OF
OPEN SOLUTIONS INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place either within or without the State of
Delaware as may be fixed from time to time by the Board of Directors. Meetings
of stockholders for any other purpose may be held at such time and place, within
or without the State of Delaware, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1994, shall be held at such date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
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Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the
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corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
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Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
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ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be fixed at seven or such greater number as may be approved by the
stockholders in accordance with the Restated Certificate and the Investors
Rights Agreement being executed as part of the Financing, as amended from time
to time. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a vote of
the stockholders as provided in the Restated Certificate of Incorporation. The
directors so chosen shall hold office until the next annual election and until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute. If, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute less
than a majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of shares at the
time outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the
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corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
president on two (2) days' notice to each director by mail or twenty-four (24)
hours' notice to each director either personally or by telegram; special
meetings shall be called by the
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president or secretary in like manner and on like notice on the written request
of two directors unless the board consists of only one director, in which case
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of the sole director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment
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by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the
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bylaws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
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ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a president, treasurer and a secretary. The
Board of Directors may elect from among its members a Chairman of the Board and
a Vice Chairman of the Board. The Board of Directors may also choose one or more
vice-presidents, assistant secretaries and assistant treasurers. Any number of
offices may be held by
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the same person, unless the certificate of incorporation or these bylaws
otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, a treasurer, and a
secretary and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
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Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board
he shall preside at all meetings of the stockholders and the Board of Directors;
he shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice president, if any, (or in the event there
be more than one vice-president, the vice-presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform
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such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 12. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
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THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and
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exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the Board of Directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly paid shares and in such case upon
the face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
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series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
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TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and
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to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation, provided, however, that the
corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the corporation. The indemnification provided for in this Section 6
shall:
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(i) not be deemed exclusive of any other rights to which those indemnified may
be entitled under any bylaw, agreement or vote of stockholders or disinterested
directors or otherwise, both as to action in their official capacities and as to
action in another capacity while holding such office, (ii) continue as to a
person who has ceased to be a director, and (iii) inure to the benefit of the
heirs, executors and administrators of such a person. The corporation's
obligation to provide indemnification under this Section 6 shall be offset to
the extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the corporation or any other
person.
Expenses incurred by a director of the corporation in defending a civil
or criminal action, suit or proceeding by reason of the fact that he is or was a
director of the corporation (or was serving at the corporation's request as a
director or officer of another corporation) shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized by relevant sections of the General Corporation Law of
Delaware. Notwithstanding the foregoing, the corporation shall not be required
to advance such expenses to an agent who is a party to an action, suit or
proceeding brought by the corporation and approved by a majority of the Board of
Directors of the corporation which alleges willful misappropriation of corporate
assets by such agent, disclosure of confidential information in violation of
such agent's fiduciary or contractual obligations to the
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corporation or any other willful and deliberate breach in bad faith of such
agent's duty to the corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action, suit or proceeding by reason of the fact that he, his testator or
intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also
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imposes duties on, or otherwise involves services by, such person to the plan or
participants or beneficiaries of the plan; excise taxes assessed on a person
with respect to an employee benefit plan pursuant to such Act of Congress shall
be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
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Exhibit No. 3.4
AMENDED AND RESTATED BY-LAWS
OF
OPEN SOLUTIONS INC.
ARTICLE I. - Stockholders
1. Place of Meetings. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors, the Chairman of the Board or the
President or, if not so designated, at the registered office of the corporation.
2. Annual Meeting. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors, the Chairman of the Board 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, the Chairman of the Board or the
President and stated in the notice of the meeting. If no annual meeting is held
in accordance with the foregoing provisions, the Board of Directors shall cause
the meeting to be held as soon thereafter as is convenient. 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 the
stockholders shall be deemed to refer to such special meeting.
3. Special Meetings. Special meetings of stockholders may be called at
any time only by the Chairman of the Board, the President or the Board of
Directors. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting.
4. Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
<PAGE> 2
5. Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, at a place within the city where the meeting is to
be held. The list shall also be produced and kept at the time and place of the
meeting during the whole time of the meeting, and may be inspected by any
stockholder who is present.
6. Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
7. Adjournments. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
8. Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by law, the Certificate of Incorporation or these By-Laws. Each stockholder of
record entitled to vote at a meeting of stockholders may vote in person or may
authorize another person or persons to vote or act for him by written proxy
executed by the stockholder or his authorized agent and delivered to the
Secretary of the corporation. No such proxy shall be voted or acted upon after
three years from the date of its execution, unless the proxy expressly provides
for a longer period.
9. Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express
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provision of law, the Certificate of Incorporation or these By-Laws. Any
election by stockholders shall be determined by a plurality of the votes cast by
the stockholders entitled to vote at the election.
10. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nomination for election to the Board of Directors of the corporation
at a meeting of stockholders may be made by the Board of Directors or by any
stockholder of the corporation entitled to vote for the election of directors at
such meeting who complies with the notice procedures set forth in this Section
10. Such nominations, other than those made by or on behalf of the Board of
Directors, shall be made by notice in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary, and received not less
than 60 days nor more than 90 days prior to such meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the Secretary not later than the close of business on the 10th day
following the date on which the notice of the meeting was mailed or such public
disclosure was made, whichever occurs first. Such notice shall set forth (a) as
to each proposed nominee (i) the name, age, business address and, if known,
residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee, and (iv) any
other information concerning the nominee that must be disclosed as to nominees
in proxy solicitations pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to be named as
a nominee and to serve 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. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
11. Notice of Business at Annual Meetings. 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 meeting (or any supplement
thereto) given by or at the direction of the Board 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 an annual meeting by a
stockholder. For business to be
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properly brought before an annual meeting by a stockholder, if such business
relates to the election of directors of the corporation, the procedures in
Section 10 of Article I must be complied with. If such business relates to any
other matter, the stockholder must have given timely notice thereof in writing
to the Secretary. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
that in the event that less than 70 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the date on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever occurs
first. A stockholder's notice to the Secretary 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. Notwithstanding anything in these By-Laws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 11 and except that any
stockholder proposal which complies with Rule 14a-8 of the proxy rules (or any
successor provision) promulgated under the Securities Exchange Act of 1934, as
amended, and is to be included in the corporation's proxy statement for an
annual meeting of stockholders shall be deemed to comply with the requirements
of this Section 11.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 11, and if he should so
determine, the chairman shall so declare to the meeting that any such business
not properly brought before the meeting shall not be transacted.
12. Action without Meeting. Stockholders may not take any action by
written consent in lieu of a meeting.
13. Organization. The Chairman of the Board, or in his absence the Vice
Chairman of the Board, or the President, in the order named, shall call meetings
of the stockholders to order, and shall act as chairman of such meeting,
provided, however, that the Board of Directors may appoint any stockholder to
act as chairman of any meeting in the absence of the Chairman of the Board. The
Secretary of the corporation shall act as secretary at all meetings of the
stockholders; but in the absence of the Secretary at any meeting of the
stockholders, the presiding officer may appoint any person to act as secretary
of the meeting.
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ARTICLE II. - Directors
1. General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or 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.
2. Number; Election and Qualification. The number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors, but in no event shall be less than three. The number
of directors may be decreased at any time and from time to time 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. Directors need
not be stockholders of the corporation.
3. Classes of Directors. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the designated number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class I, and if such fraction is two-thirds, one of the extra directors shall be
a member of Class I and one of the extra directors shall be a member of Class
II, unless otherwise provided from time to time by resolution adopted by the
Board of Directors.
4. Terms of Office. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting of stockholders in
1999; each initial director in Class II shall serve for a term ending on the
date of the annual meeting of stockholders in 2000, and each initial director in
Class III shall serve for a term ending on the date of the annual meeting of
stockholders in 2001; and provided further, that the term of each director shall
be subject to the election and qualification of his successor and to his earlier
death, resignation or removal.
5. Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he or she is a
member and (ii) the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors among
the three classes of
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<PAGE> 6
directors so as to ensure that no one class has more than one director more than
any other class. To the extent possible, consistent with the foregoing rule, any
newly created directorships shall be added to those classes whose terms of
office are to expire at the latest dates following such allocation, and any
newly eliminated directorships shall be subtracted from those classes whose
terms of offices are to expire at the earliest dates following such allocation,
unless otherwise provided from time to time by resolution adopted by the Board
of Directors.
6. Quorum; Action at Meeting. A majority of the directors at any time
in office shall constitute a quorum for the transaction of business. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each director so
disqualified, provided that in no case shall less than one-third (1/3) of the
number of directors fixed pursuant to Section 2 above constitute a quorum. If at
any meeting of the Board of Directors there shall be less than such a quorum, a
majority of those present may adjourn the meeting from time to time. Every act
or decision done or made by a majority of the directors present at a meeting
duly held at which a quorum is present shall be regarded as the act of the Board
of Directors unless a greater number is required by law, by the Certificate of
Incorporation or these By-Laws.
7. Removal. Directors of the corporation may be removed only for cause
by the affirmative vote of the holders of at least seventy-five percent (75%) of
the votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors.
8. Vacancies. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, shall be filled
only by vote of a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the class for which
such director shall have been chosen, subject to the election and qualification
of his successor and to his earlier death, resignation or removal.
9. Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the Chairman of the
Board or Secretary. 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.
10. Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may
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<PAGE> 7
be held without notice immediately after and at the same place as the annual
meeting of stockholders.
11. Special Meetings. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
12. Notice of Special Meetings. Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy
or telex, or delivering written notice by hand, to his last known business or
home address at least 24 hours in advance of the meeting, or (iii) by mailing
written notice to his last known business or home address at least 72 hours in
advance of the meeting. A notice or waiver of notice of a meeting of the Board
of Directors need not specify the purposes of the meeting.
13. Meetings by Telephone Conference Calls. Directors or any members of
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
14. Action by Consent. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
15. Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation
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<PAGE> 8
to be affixed to all papers which may require it. Each such committee shall keep
minutes and make such reports as the Board of Directors may from time to time
request. Except as the Board of Directors may otherwise determine, any 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 in these By-Laws for the Board of
Directors.
16. 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 or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE III. - Officers
1. Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
2. Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3. Qualification. No officer need be a stockholder. Any two or more
offices may be held by the same person.
4. Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
5. Resignation and Removal. Any officer may resign by delivering his or
her written resignation to the corporation at its principal office or to the
Chairman of the Board, President or Secretary. 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.
Any officer may be removed at any time, with or without cause, by vote of
a majority of the entire number of directors then in office.
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Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
6. Vacancies. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
7. Chairman of the Board and Vice Chairman of the Board. The Board of
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive Officer. 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. Unless otherwise provided by the
Board of Directors, he shall preside at all meetings of the stockholders, and if
he is a director, at all meetings of 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 or her by
the Board of Directors. The person designated as the Chief Executive Officer of
the Company shall, subject to the direction of the Board of Directors, have
general charge and supervision of the business of the corporation.
8. President. Unless the Board of Directors has designated the Chairman
of the Board or another officer as Chief Executive Officer, the President shall
be the Chief Executive Officer of the corporation. The President shall perform
such other duties and shall have such other powers as the Chief Executive
Officer or the Board of Directors may from time to time prescribe.
9. Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the Chief Executive Officer may
from time to time prescribe. In the event of the absence, inability or refusal
to act of the Chief Executive Officer, then, in the order determined by the
Board of Directors, the President (if he is not the Chief Executive Officer) and
the Vice President (or if there shall be more than one, the Vice Presidents)
shall perform the duties of the Chief Executive Officer and when so performing
shall have all the powers of and be subject to all the restrictions upon the
Chief Executive Officer. The Board of Directors may assign to any Vice President
the title of Executive Vice President, Senior Vice President or any other title
selected by the Board of Directors.
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10. Secretary and Assistant Secretaries. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the Chief
Executive Officer may from time to time prescribe. In addition, the Secretary
shall perform such duties and have such powers as are incident to the office of
the secretary, including without limitation the duty and power to give notices
of all meetings of stockholders and special meetings of the Board of Directors,
to attend all meetings of stockholders and the Board of Directors and keep a
record of the proceedings, to maintain a stock ledger and prepare lists of
stockholders and their addresses as required, to be custodian of corporate
records and the corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer or the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Secretary, the Assistant Secretary (or if there shall be more than one,
the Assistant Secretaries in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
11. Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to him or
her by the Board of Directors or the Chief Executive Officer. In addition, the
Treasurer shall perform such duties and have such powers as are incident to the
office of treasurer, including without limitation the duty and power to keep and
be responsible for all funds and securities of the corporation, to deposit funds
of the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer or the Treasurer may from
time to time prescribe. In the event of the absence, inability or refusal to act
of the Treasurer, the Assistant Treasurer (or if there shall be more than one,
the Assistant Treasurers in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Treasurer.
12. 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.
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Article IV. - Capital Stock
1. Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
2. Certificates of Stock. Every holder of stock of the corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him or her in the corporation. Each such certificate shall be signed
by, or in the name of the corporation by, the Chairman or Vice Chairman, if any,
of the Board of Directors, or the President or a Vice President, and the
Treasurer or any Assistant Treasurer, or the Secretary or an Assistant Secretary
of the corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-Laws,
applicable securities laws or any agreement among any number of stockholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
3. Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-Laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-Laws.
4. Lost, Stolen or Destroyed Certificates. The corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or
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<PAGE> 12
destruction and the giving of such indemnity as the Board of Directors may
require for the protection of the corporation or any transfer agent or
registrar.
5. Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE V. - General Provisions
1. Fiscal Year. Except as from time to time otherwise designated by the
Board of Directors, the fiscal year of the corporation shall begin on the first
day of January of each year and end on the last day of December in each year.
2. Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.
3. Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telecopy or any other available
method, whether before, at or after the time stated in such waiver, or the
appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
4. Voting of Securities. Except as the directors may otherwise
designate, the Chairman of the Board or Treasurer may waive notice of, and act
as, or appoint any person or persons to act as, proxy or attorney-in-fact for
this corporation (with or
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without power of substitution) at any meeting of stockholders or shareholders of
any other corporation or organization, the securities of which may be held by
this corporation.
5. Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a 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.
6. Certificate of Incorporation. All references in these By-Laws to the
Certificate of Incorporation shall be deemed to refer to the Amended and
Restated Certificate of Incorporation of the corporation, as amended and in
effect from time to time.
7. Transactions with Interested Parties. No contract or transaction
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
a. The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
b. The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
c. The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
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8. 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.
9. 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.
ARTICLE VI. - Amendments
1. By the Board of Directors. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
2. By the Stockholders. Subject to the following paragraph, these
By-Laws may be altered, amended or repealed or new by-laws may be adopted by the
affirmative vote of the holders of a majority of the shares of the capital stock
of the corporation issued and outstanding and entitled to vote at any regular or
special meeting of stockholders, provided notice of such alteration, amendment,
repeal or adoption of new by-laws shall have been stated in the notice of such
regular or special meeting.
3. Certain Provisions. Notwithstanding any other provision of law, the
Certificate of Incorporation or these By-Laws (including the preceding
paragraph), and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the votes which all the stockholders would be entitled to cast
in any annual election of directors or class of directors shall be required to
amend or repeal, or to adopt any provisions inconsistent with, Sections 2, 3,
10, 11, 12 or 13 of Article I, Article II or Article VI of these By-Laws.
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<PAGE> 1
Exhibit No. 10.1
OPEN SOLUTIONS INC.
1994 STOCK OPTION PLAN
Adopted by the Board of Directors on March 10, 1994
Approved by the Shareholders on March 10, 1994
1. PURPOSE.
The purpose of this plan (the "Plan") is to secure for OPEN SOLUTIONS
INC. (the "Company") and its shareholders the benefits arising from capital
stock ownership by employees, officers and directors of, and consultants or
advisors to, the Company and its parent and subsidiary corporations who are
expected to contribute to the Company's future growth and success. Except where
the context otherwise requires, the term "Company" shall include the parent and
all present and future subsidiaries of the Company as defined in Sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from
time to time (the "Code"). Those provisions of the Plan which make express
reference to Section 422 shall apply only to Incentive Stock Options (as that
term is defined in the Plan).
2. TYPE OF OPTIONS AND ADMINISTRATION.
(a) TYPE OF OPTIONS AND AWARDS. Options granted pursuant to the Plan
shall be authorized by action of the Board of Directors of the Company (or a
Committee designated by the Board of Directors) and may be either incentive
stock options ("Incentive Stock Options") meeting the requirements of Section
422 of the Code or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code. Restricted stock awards ("awards")
granted pursuant to the Plan shall be authorized by action of the Board of
Directors of the Company (or a Committee designated by the Board of Directors)
and shall meet the requirements of Section 13 of the Plan.
(b) ADMINISTRATION. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion (i) grant options to purchase shares of the Company's
Common Stock ("Common Stock") and issue shares upon exercise of such options as
provided in the Plan and (ii) make awards for the purchase of shares of Common
Stock pursuant to Section 13 of the Plan. The Board shall have authority,
subject to the express provisions of the Plan, to construe the respective option
agreements, awards and the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the terms and provisions of the
respective option agreements and awards, which need not be identical, and to
make all other determinations in the
<PAGE> 2
judgment of the Board of Directors necessary or desirable for the administration
of the Plan. The Board of Directors may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option agreement
or award in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board of
Directors shall be liable for any action or determination under the Plan made in
good faith. The Board of Directors may, to the full extent permitted by or
consistent with applicable laws or regulations (including, without limitation,
applicable state law and Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3")),
delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee.
(c) APPLICABILITY OF RULE 16B-3. Those provisions of the Plan which
make express reference to Rule 16b-3 shall apply only to such persons as are
required to file reports under Section 16(a) of the Exchange Act (a "Reporting
Person").
3. ELIGIBILITY.
(a) GENERAL. Options and awards may be granted to persons who are,
at the time of grant, employees, officers or directors of, or consultants or
advisors to, the Company; PROVIDED, that Incentive Stock Options may only be
granted to employees Company. A person who has been granted an option or award
if he or she is otherwise eligible, be granted additional options or awards if
the Board of Directors shall so determine.
(b) GRANT OF OPTIONS TO DIRECTORS AND OFFICERS. From and after the
registration of the Common Stock of the Company under the Exchange Act, the
selection of a director or an officer (as the terms "director" and "officer" are
defined for purposes of Rule 16b-3) as a recipient of an option or award, the
timing of the option grant or award, the exercise price of the option or the
sale price of the award and the number of shares subject to the option or award
shall be determined either (i) by the Board of Directors, of which all members
shall be "disinterested persons" (as hereinafter defined), or (ii) by two or
more directors having full authority to act in the matter, each of whom shall be
a "disinterested person." For the purposes of the Plan, a director shall be
deemed to be a "disinterested person" only if such person qualifies as a
"disinterested person" within the meaning of Rule 16b-3, as such term is
interpreted from time to time.
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<PAGE> 3
4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 16 below, the maximum
number of shares of Common Stock of the Company which be issued and sold under
the Plan is 650,000 shares. If (i) an option granted under the Plan shall expire
or terminate for reason without having been exercised in full, the unpurchased
shares subject to such option shall again be available for subsequent option
grants or awards under the Plan and (ii) if restricted stock awarded under the
Plan shall be repurchased by the Company, the repurchased shares subject to such
award shall again be available for subsequent option grants or awards under the
Plan. If shares issued upon exercise of an option or award under the Plan are
tendered to the Company in payment of the exercise price of an option granted
under the Plan, such tendered shares shall again be available for subsequent
option grants or awards under the Plan; provided, that in no event shall such
shares be made available for issuance to Reporting Persons or pursuant to
exercise of Incentive Stock Options.
5. FORMS OF OPTION AGREEMENTS.
As a condition to the grant of an option under the Plan, each recipient
of an option shall execute an option agreement in such form not inconsistent
with the Plan as may be approved by the Board of Directors. Such option
agreements may differ among recipients.
6. PURCHASE PRICE.
(a) GENERAL. The purchase price per share of stock deliverable upon
the exercise of an option shall be determined by the Board of Directors,
PROVIDED, HOWEVER, that in the case of an Incentive Stock Option, the exercise
price shall not be less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
Section 11(b).
(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
options, or, to the extent provided in the applicable option agreement, (i) by
delivery to the Company of shares of Common Stock of the Company already owned
by the optionee having a fair market value equal in amount to the exercise price
of the options being exercised, (ii) by any other means (including, without
limitation, by delivery of a promissory note of the optionee payable on such
terms as are specified by the Board of Directors) which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Rule 16b-3 and
Regulation T promulgated by the Federal Reserve Board) or (iii) by any
combination of such methods of payment. The
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fair market value of any shares of the Company's Common Stock or other non-cash
consideration which may be delivered upon exercise of an option shall be
determined by the Board of Directors.
7. OPTION PERIOD.
Each option and all rights thereunder shall expire on such date as
shall be set forth in the applicable option agreement, except that, in the case
of an Incentive Stock Option, such date shall not be later than ten years after
the date on which the option is granted and, in all cases, options shall be
subject to earlier termination as provided in the Plan.
8. EXERCISE OF OPTIONS.
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. NONTRANSFERABILITY OF OPTIONS.
Incentive Stock Options, and all options granted to Reporting Persons,
shall not be assignable or transferable by the person to whom they are granted,
either voluntarily or by operation of law, except by will or the laws of descent
and distribution, and, during the life of the optionee, shall be exercisable
only by the optionee; provided, however, that non-statutory options may be
transferred pursuant to a qualified domestic relations order (as defined in
Rule 16b-3).
10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, the Board of Directors shall
determine the period of time during which an optionee may exercise an option
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the agreement evidencing such option.
11. INCENTIVE STOCK OPTIONS.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options granted under
the Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
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(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the grant of such
option, the owner of stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (after taking into account the
attribution of stock ownership rules of Section 424(d) of the Code), then the
following special provisions shall be applicable to the Incentive Stock Option
granted to such individual:
(i) The purchase price per share of the Common Stock subject to
such Incentive Stock Option shall not be less than 110% of the fair
market value of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years
from the date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) which are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market value
(determined as of the respective date or dates of grant) of more than $100,000.
(d) TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY. No Incentive
Stock Option may be exercised unless, at the time of such exercise, the optionee
is, and has been continuously since the date of grant of his or her option,
employed by the Company, except that:
(i) an Incentive Stock Option may be exercised within the
period of three months after the date the optionee ceases to be an
employee of the Company (or within such lesser period as may be
specified in the applicable option agreement), PROVIDED, that the
agreement with respect to such option may designate a longer exercise
period and that the exercise after such three-month period shall be
treated as the exercise of a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the Company,
or within three months after the optionee ceases to be such an
employee, the Incentive Stock Option may be exercised by the person to
whom it is transferred by will or the laws of descent and distribution
within the period of one year after the date of death (or within such
lesser period as may be specified in the applicable option agreement);
and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e) (3) of the Code or any successor provision thereto) while
in the employ
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of the Company, the Incentive Stock Option may be exercised within the
period of one year after the date the optionee ceases to be such an
employee because of such disability (or within such lesser period as
may be specified in the applicable option agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. ADDITIONAL PROVISIONS.
(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in its
sole discretion, include additional provisions in option agreements covering
options granted under the Plan, including without limitation restrictions on
transfer, repurchase rights, commitments to pay cash bonuses, to make, arrange
for or guaranty loans or to transfer other property to optionees upon exercise
of options, or such other provisions as shall be determined by the Board of
Directors; PROVIDED THAT such additional provisions shall not be inconsistent
with any other term or condition of the Plan and such additional provisions
shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
(b) ACCELERATION, EXTENSION, ETC. The Board of Directors may, in its
sole discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be exercised; PROVIDED, HOWEVER, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Section 422 of the
Code or with Rule 16b-3.
13. AWARDS.
An award shall consist of the sale and issuance by the Company of
shares of Common Stock, and purchase by the recipient of such shares, subject to
the terms, conditions and restrictions described in the document evidencing the
award and in this Section 13 and elsewhere in the Plan.
(a) EXECUTION OF RESTRICTED STOCK AWARD AGREEMENT. As a condition to
an award under the Plan, each recipient of an award shall execute an agreement
in such form, which may differ among recipients, as shall be specified by the
Board of Directors at the time of such award.
(b) PRICE. The Board of Directors shall determine the price at which
shares of Common Stock shall be sold to recipients of awards under the Plan. The
Board of
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Directors may, in its discretion, issue shares pursuant to awards without the
payment of any cash purchase price by the recipients or issue shares pursuant to
awards at a purchase price below the then fair market value of the Common Stock.
If a purchase price is required to be paid it shall be paid in cash or by check
payable to the order of the Company at the time that the award is accepted by
the recipient or by such other means as may be approved by the Board of
Directors.
(c) NUMBER OF SHARES. The award shall specify the number of shares of
Common Stock granted thereunder.
(d) RESTRICTIONS ON TRANSFER. In addition to such other terms,
conditions and restrictions upon awards as shall be imposed by the Board of
Directors, all shares issued pursuant to an award shall be subject to the
following restrictions:
(1) All shares of Common Stock subject to an award (including
any shares issued pursuant to paragraph (e) of this Section) shall be
subject to certain restrictions on disposition and obligations of
resale to the Company as provided in subparagraph (2) below for the
period specified in the document evidencing the award, and shall not be
sold, assigned, transferred, pledged, hypothecated or otherwise
disposed of until such restrictions lapse. The period during which such
restrictions are applicable is referred to as the "Restricted Period."
(2) In the event that a recipient's employment with the Company
(or consultancy or advisory relationship, as the case may be) is
terminated within the Restricted Period, whether such termination is
voluntary or involuntary, with or without cause, or because of the
death or disability of the recipient, the Company shall have the right
and option for a period of three months following such termination to
buy for cash that number of the shares of Common Stock purchased under
the award as to which the restrictions on transfer and the forfeiture
provisions contained in the award have not then lapsed, at a price
equal to the price per share originally paid by the recipient. If such
termination occurs within the last three months of the applicable
restrictions, the restrictions and repurchase rights of the Company
shall continue to apply until the expiration of the Company's three
month option period.
(3) Notwithstanding subparagraphs (1) and (2) above, the Board
of Directors may, in its discretion, either at the time that an award
is made or at any time thereafter, waive its right to repurchase shares
of Common Stock upon the occurrence of any of the events described in
this paragraph (d) or remove or modify any part or all of the
restrictions. In addition, the Board of Directors may, in its
discretion, impose upon the recipient of an award at the
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time of such award such other restrictions on any shares of Common
Stock issued pursuant to such award as the Board of Directors may deem
advisable.
(e) ADDITIONAL SHARES. Any shares received by a recipient of an award
as a stock dividend on, or as a result of stock splits, combinations, exchanges
of shares, reorganizations, mergers, consolidations or otherwise with respect
to, shares of Common Stock received pursuant to such award shall have the same
status and shall bear the same restrictions, all on a proportionate basis, as
the shares initially purchased pursuant to such award.
(f) TRANSFERS IN BREACH OF AWARD. If any transfer of shares purchased
pursuant to an award is made or attempted contrary to the terms of the Plan and
of such award, the Board of Directors shall have the right to purchase for the
account of the Company those shares from the owner thereof or his or her
transferee at any time before or after the transfer at the price paid for such
shares by the person to whom they were awarded under the Plan. In addition to
any other legal or equitable remedies which it may have, the Company may enforce
its rights by specific performance to the extent permitted by law. The Company
may refuse for any purpose to recognize as a shareholder of the Company any
transferee who receives any shares contrary to the provisions of the Plan and
the applicable award or any recipient of an award who breaches his or her
obligation to resell shares as required by the provisions of the Plan and the
applicable award, and the Company may retain and/or recover all dividends on
such shares which were paid or payable subsequent to the date on which the
prohibited transfer or breach was made or attempted.
(g) ADDITIONAL AWARD PROVISIONS. The Board of Directors may, in its
sole discretion, include additional provisions in any award granted under the
Plan, including without limitation commitments to pay cash bonuses, make,
arrange for or guarantee loans or transfer other property to recipients upon the
grant of awards, or such other provisions as shall be determined by the Board of
Directors.
14. GENERAL RESTRICTIONS.
(a) INVESTMENT REPRESENTATIONS. The Company may require any person to
whom an option or award is granted, as a condition of exercising such option or
purchasing the shares subject to the award, to give written assurances in
substance and form satisfactory to the Company to the effect that such person is
acquiring the Common Stock subject to the option or award for his or her own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock.
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(b) COMPLIANCE WITH SECURITIES LAWS. Each option and award shall be
subject to the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration or qualification of the shares subject
to such option or award upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
or that the disclosure of non-public information or the satisfaction of any
other condition is necessary as a condition of, or in connection with, the
issuance or purchase of shares thereunder, such option or award may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval, or satisfaction of such condition shall have
been effected or obtained on conditions acceptable to the Board of Directors.
Nothing herein shall be deemed to require the Company to apply for or to obtain
such listing, registration or qualification, or to satisfy such condition.
(c) FIRST REFUSAL RIGHTS. Until such time as the Company's
outstanding shares of Common Stock are first registered under Section 12(g) of
the Securities Exchange Act of 1934, the Company shall have the right of first
refusal with respect to any proposed sale or other disposition by any person
granted an option or award (or any successor in interest by reason of purchase,
gift or other transfer) of any shares of Common stock issued under the Plan.
Such right of first refusal shall be exercisable in accordance with the terms
and conditions established by the Board of Directors and set forth in the
agreement evidencing such right.
15. RIGHTS AS A SHAREHOLDER.
The holder of an option or recipient of an award shall have no rights
as a shareholder with respect to any shares covered by the option or award
(including, without limitation, any rights to receive dividends or non-cash
distributions with respect to such shares) until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
16. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS AND RELATED TRANSACTIONS.
(a) GENERAL. If, through or as a result of any merger, consolidation,
sale of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number or kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding options under the
Plan, and (z) the price for each share subject to any
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then outstanding options under the Plan or repurchase rights of the Company,
without changing the aggregate purchase price as to which such options remain
exercisable. Notwithstanding the foregoing, no adjustment shall be made pursuant
to this Section 16 if such adjustment would cause the Plan to fail to comply
with Section 422 of the Code or with Rule 16b-3.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under this
Section 16 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
17. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
(a) GENERAL. In the event of a consolidation or merger or sale of all
or substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding options and
awards: (i) provide that such options shall be assumed, or equivalent options
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof), PROVIDED that any such options substituted for Incentive
Stock Options shall meet the requirements of Section 424(a) of the Code, (ii)
upon written notice to the optionees, provide that all unexercised options will
terminate immediately prior to the consummation of such transaction unless
exercised by the optionee within a specified period following the date of such
notice, (iii) in the event of a merger under the terms of which holders of the
Common Stock of the Company will receive upon consummation thereof a cash
payment for each share surrendered in the merger (the "Merger Price"), make or
provide for a cash payment to the optionees equal to the difference between (A)
the Merger Price times the number of shares of Common Stock subject to such
outstanding options (to the extent then exercisable at prices not in excess of
the Merger Price) and (B) the aggregate exercise price of all such outstanding
options in exchange for the termination of such options, and (iv) provide that
all or any outstanding options shall become exercisable in full immediately
prior to such event and any restrictions on and rights of the Company to
repurchase shares covered by outstanding awards issued pursuant to the Plan
shall terminate.
(b) SUBSTITUTE OPTIONS. The Company may grant options under the Plan
in substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one
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of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
18. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option or award shall confer
upon any recipient of an award or optionee any right with respect to the
continuation of his or her employment by the Company or interfere in any way
with the right of the Company at any time to terminate such employment or to
increase or decrease the compensation of the optionee.
19. OTHER EMPLOYEE BENEFITS.
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise or the value of an award granted to an employee will not
constitute compensation with respect to which any other employee benefits of
such employee are determined, including, without limitation, benefits under any
bonus, pension, profit-sharing, life insurance or salary continuation plan,
except as otherwise specifically determined by the Board of Directors.
20. AMENDMENT OF THE PLAN.
(a) The Board of Directors may at any time, and from time to time,
modify or amend the Plan in any respect, except that if at any time the approval
of the shareholders of the Company is required under Section 422 of the Code or
any successor provision with respect to Incentive Stock Options, or under
Rule 16b-3, the Board of Directors may not effect such modification or amendment
without such approval.
(b) The termination or any modification or amendment of the Plan
shall not, without the consent of an optionee or recipient of an award, affect
his or her rights under an option or award previously granted to him or her.
With the consent of the optionee or recipient of an award affected, the Board of
Directors may amend outstanding option agreements or awards in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to amend
or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any outstanding option or award to the extent necessary to
ensure the qualification of the Plan under Rule 16b-3.
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21. WITHHOLDING.
(a) The Company shall have the right to deduct from payments of any
kind otherwise due to the optionee or recipient of an award any federal, state
or local taxes of any kind required by law to be withheld with respect to any
shares issued upon exercise of options under the Plan or the purchase of shares
subject to the award. Subject to the prior approval of the Company, which may be
withheld by the Company in its sole discretion, the optionee or recipient of an
award may elect to satisfy such obligations, in whole or in part, (i) by causing
the Company to withhold shares of Common Stock otherwise issuable pursuant to
the exercise of an option or subject to an award or (ii) by delivering to the
Company shares of Common Stock already owned by the optionee or subject to an
award. The shares so delivered or withheld shall have a fair market value equal
to such withholding obligation. The fair market value of the shares used to
satisfy such withholding obligation shall be determined by the Company as of the
date that the amount of tax to be withheld is to be determined. An optionee or
award recipient who has made an election pursuant to this Section 21(a) may only
satisfy his or her withholding obligation with shares of Common Stock which are
not subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting Person,
no election to use shares for the payment of withholding taxes shall be
effective unless made in compliance with any applicable requirements of Rule
16b-3.
(c) If the recipient of an award under the Plan elects, in accordance
with Section 83(b) of the Code, to recognize ordinary income in the year of
acquisition of any shares awarded under the Plan, the Company will require at
the time of such election an additional payment for withholding tax purposes
based on the difference, if any, between the purchase price of such shares and
the fair market value of such shares as of the date immediately preceding the
date of the award.
22. CANCELLATION AND NEW GRANT OF OPTIONS, ETC.
The Board of Directors shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
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23. EFFECTIVE DATE AND DURATION OF THE PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by
the Board of Directors, but no Incentive Stock Option granted under the Plan
shall become exercisable unless and until the Plan shall have been approved by
the Company's shareholders. If such shareholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, no options
previously granted under the Plan shall be deemed to be Incentive Stock Options
and no Incentive Stock Options shall be granted thereafter. Amendments to the
Plan not requiring shareholder approval shall become effective when adopted by
the Board of Directors; amendments requiring shareholder approval (as provided
in Section 20) shall become effective when adopted by the Board of Directors,
but no Incentive Stock Option granted after the date of such amendment shall
become exercisable (to the extent that such amendment to the Plan was required
to enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any Incentive Stock
Options granted on or after the date of such amendment shall terminate to the
extent that such amendment to the Plan was required to enable the Company to
grant such option to a particular optionee. Subject to this limitation, options
and awards may be granted under the Plan at any time after the effective date
and before the date fixed for termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with
Section 17, the Plan shall terminate, with respect to Incentive Stock Options,
upon the earlier of (i) the close of business on the day next preceding the
tenth anniversary of the date of its adoption by the Board of Directors, or (ii)
the date on which all shares available for issuance under the Plan shall have
been issued pursuant to the exercise or cancellation of options or the final
vesting of awards granted under the Plan. Unless sooner terminated in accordance
with Section 17, the Plan shall terminate with respect to options which are not
Incentive Stock Options and awards on the date specified in (ii) above. If the
date of termination is determined under (i) above, then options outstanding on
such date shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such options.
Adopted by the Board of Directors on
March 10, 1994.
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Exhibit No. 10.3
OPEN SOLUTIONS INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of Open
Solutions Inc. (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par value
(the "Common Stock"). Two Hundred Fifty Thousand (250,000) shares of Common
Stock in the aggregate have been approved for this purpose.
1. Administration. The Plan will be administered by the Company's Board
of Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. Participation in the Plan will neither be permitted nor
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company, including Directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), other than employees of the Company or any Designated Subsidiary
who are "highly compensated" within the meaning of Section 414(q) of the Code,
are eligible to participate in any one or more of the offerings of Options (as
defined in Section 9) to purchase Common Stock under the Plan provided that:
(a) they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in
a calendar year; and
(b) they have been employed by the Company or a Designated
Subsidiary for at least three months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the
<PAGE> 2
employee has a contractual right to purchase shall be treated as stock owned by
the employee.
3. Offerings. The Company will make one or more offerings ("Offerings")
to employees to purchase stock under this Plan. Offerings will begin on such
date or dates as may be established by the Board from time to time (the
"Offering Commencement Dates"). Each Offering Commencement Date will begin a
6-month period (a "Plan Period") during which payroll deductions will be made
and held for the purchase of Common Stock at the end of the Plan Period. The
Board or the Committee may, at its discretion, choose a different Plan Period of
twelve (12) months or less for subsequent Offerings.
4. Participation. An employee eligible on the Offering Commencement
Date of any Offering may participate in such Offering by completing and
forwarding a payroll deduction authorization form to the employee's appropriate
payroll office at least 14 days prior to the applicable Offering Commencement
Date. The form will authorize a regular payroll deduction from the Compensation
received by the employee during the Plan Period. Unless an employee files a new
form or withdraws from the Plan, his deductions and purchases will continue at
the same rate for future Offerings under the Plan as long as the Plan remains in
effect. The term "Compensation" means the amount of money reportable on the
employee's Federal Income Tax Withholding Statement, excluding overtime, shift
premium, incentive or bonus awards, allowances and reimbursements for expenses
such as relocation allowances for travel expenses, income or gains on the
exercise of Company stock options or stock appreciation rights, and similar
items, whether or not shown on the employee's Federal Income Tax Withholding
Statement, but including, in the case of salespersons, sales commissions to the
extent determined by the Board or the Committee.
5. Deductions. The Company will maintain payroll deduction accounts for
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction equal to any whole number
percentage (up to a maximum of 10%) of the Compensation he or she receives
during the Plan Period or such shorter period during which deductions from
payroll are made.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other
employee stock purchase plan (as defined in Section 423(b) of the Code) of the
Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such Common Stock (determined at the Offering Commencement
Date of the Plan Period) for each calendar year in which the Option is
outstanding at any time.
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6. Deduction Changes. An employee may decrease or discontinue his
payroll deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee accounts, except
to the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to the close
of business on the fourth business day prior to the end of a Plan Period and for
any reason permanently draw out the balance accumulated in the employee's
account and thereby withdraw from participation in an Offering. Partial
withdrawals are not permitted. The employee may not begin participation again
during the remainder of the Plan Period. The employee may participate in any
subsequent Offering in accordance with terms and conditions established by the
Board or the Committee.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, the largest number of whole shares of Common Stock of the Company
as does not exceed the number of shares determined by dividing (a) the product
of $2,083 and the number of whole months in such Plan Period by (b) the closing
price (as defined below) on the Offering Commencement Date of such Plan Period
or such other number as may be determined by the Board prior to the Offering
Commencement Date.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market, whichever is applicable, as published in
The Wall Street Journal. If no sales of Common Stock were made on such a day,
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.
Each employee who continues to be a participant in the Plan on the
Exercise Date shall be deemed to have exercised his Option at the Option Price
on such date
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<PAGE> 4
and shall be deemed to have purchased from the Company the number of full shares
of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for, but not in excess of the maximum
number determined in the manner set forth above.
Any balance remaining in an employee's payroll deduction account at the
end of a Plan Period will be automatically refunded to the employee, except that
any balance which is less than the purchase price of one share of Common Stock
will be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the name
of a brokerage firm, bank or other nominee holder designated by the employee.
The Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing stock
certificates.
11. Rights on Retirement, Death or Termination of Employment. In the
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. No employee shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Option until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who is deemed to have exercised an Option between
the record
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<PAGE> 5
date and the distribution date for such stock dividend shall be entitled to
receive, on the distribution date, the stock dividend with respect to the shares
of Common Stock acquired upon such Option exercise, notwithstanding the fact
that such shares were not outstanding as of the close of business on the record
date for such stock dividend.
13. Rights Not Transferable. Rights under this Plan are not transferable
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. Application of Funds. All funds received or held by the Company
under this Plan may be combined with other corporate funds and may be used for
any corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event
of a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, the
number of shares subject to any outstanding Option and the purchase price
thereof shall be adjusted proportionately, and such other adjustment shall be
made as may be deemed equitable by the Board or the Committee. In the event of
any other change affecting the Common Stock, such adjustment shall be made as
may be deemed equitable by the Board or the Committee to give proper effect to
such event.
16. Merger. If the Company shall at any time merge or consolidate with
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 60%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger or consolidation, and the Board or the Committee
shall take such steps in connection with such merger or consolidation as the
Board or the Committee shall deem necessary to assure that the provisions of
Section 15 shall thereafter be applicable, as nearly as reasonably may be, in
relation to the said securities or property as to which such holder of such
Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, all outstanding Options shall be
cancelled by the Board or the Committee as of the effective date of any such
transaction, provided that notice of such cancellation shall be given to each
holder of an Option, and each holder of an Option shall have the right to
exercise such Option in full based on payroll
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<PAGE> 6
deductions then credited to his account as of a date determined by the Board or
the Committee, which date shall not be less than ten (10) days preceding the
effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and
deliver Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market and the approval of all
governmental authorities required in connection with the authorization, issuance
or sale of such stock.
21. Governing Law. The Plan shall be governed by Delaware law except to
the extent that such law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Notification upon Sale of Shares. Each employee agrees, by entering
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased or
one year after the date of exercise of the Option.
24. Effective Date and Approval of Stockholders. The Plan shall take
effect upon the closing of the Company's initial public offering of Common
Stock, subject to approval by the stockholders of the Company as required by
Section 423 of the Code,
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<PAGE> 7
which approval must occur within twelve months of the adoption of the Plan by
the Board.
Adopted by the Board of Directors
on _______________, 1998
Approved by the stockholders on
_______________, 1998
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<PAGE> 1
Exhibit No. 10.4
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"Agreement") is made as of the 22nd day of August, 1997, by and among Open
Solutions Inc., a Delaware corporation (the "Company") and the investors listed
on Schedule A, Schedule B, Schedule C, and Schedule D hereto (each an "Investor"
and collectively the "Investors").
RECITALS
WHEREAS, the Investors listed on Schedule A have purchased from the
Company shares of Series A-1 Preferred Stock of the Company, par value $.01 per
share (the "Series A-1 Preferred Stock") and Series A-2 Preferred Stock of the
Company, par value $.01 per share (the "Series A-2 Preferred Stock"); and
WHEREAS, the Investors listed on Schedule B have purchased from the
Company shares of Series B Preferred Stock of the Company, par value $.01 per
share (the "Series B Preferred Stock"); and
WHEREAS, the Investors listed on Schedule C have purchased from the
Company shares of Series C Preferred Stock of the Company, par value $.01 per
share (the "Series C Preferred Stock");
WHEREAS, the Investor listed on Schedule D has agreed to purchase from
the Company shares of Series D Preferred Stock of the Company, par value $.01
per share (the "Series D Preferred Stock"); and
WHEREAS, in order to induce the Company to issue the Series D Preferred
Stock and to induce the Investor listed on Schedule D to invest funds in the
Company, the Investors and the Company hereby agree that this Agreement shall
govern the rights of the Investors to cause the Company to register shares of
Common Stock issuable to the Investors and certain other matters as set forth
herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHT. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
<PAGE> 2
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof.
(d) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(e) The terms "register", "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A-1 Preferred Stock, (ii) the
Common Stock issuable or issued upon conversion of the Series A-2 Preferred
Stock, (iii) the Common Stock issuable or issued upon conversion of the Series B
Preferred Stock, including shares of Series B Preferred Stock issuable upon
exercise of any warrant, (iv) the Common Stock issuable or issued upon
conversion of the Series C Preferred Stock, including shares of Series C
Preferred Stock issuable upon exercise of any warrant, (v) the Common Stock
issuable or issued upon conversion of the Series D Preferred Stock, including
shares of Series D Preferred Stock issuable upon exercise of any warrant, and
(vi) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security that is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced in (i), (ii), (iii) and (iv) above,
excluding in all cases, however, any Registrable Securities sold by a person in
a transaction in which his rights under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
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<PAGE> 3
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after (i) February
1, 1997, and before the effective date of the first registration statement for a
public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction), a written request from the Holders of a majority of the
Registrable Securities then outstanding that the Company file a registration
statement under the Act covering the registration of at least thirty percent
(30%) of the Registrable Securities then outstanding, or (ii) the effective date
of the first registration statement for a public offering of securities of the
Company (other than a registration statement relating to either the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction), a written request from
Holders of Registrable Securities covering the registration of Registrable
Securities with an anticipated gross offering price of at least $2,000,000, then
the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event
within ninety (90) days of the receipt of such request, the registration under
the Act of all Registrable Securities that the Holders request to be registered
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 3.5, subject to the limitations of subsection 1.2(b).
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to subsection 1.2(a) and the
Company shall include such information in the written notice referred to in
subsection 1.2(a). The underwriter will be selected by the Company and shall be
reasonably acceptable to a majority in interest of the Initiating Holders. In
such event, the right of any Holder to include his Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form for a large institutional investor with
the underwriter or underwriters selected for such underwriting. Notwithstanding
any other provision of this Section 1.2, if the underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Initiating Holders shall so advise
all Holders of Registrable
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<PAGE> 4
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating Holders,
in proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder; PROVIDED, HOWEVER, that the number of
shares of Registrable Securities to be included in such underwriting shall not
be reduced unless all other securities are first entirely excluded from the
underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 60 days after receipt
of the request of the Initiating Holders; PROVIDED, HOWEVER, that the Company
may not utilize this right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations
pursuant to this Section 1.2 that have been declared or ordered effective;
(ii) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below.
1.3 COMPANY REGISTRATION. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
capital stock under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt
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<PAGE> 5
securities which are also being registered), the Company shall, at such time,
promptly give each Holder written notice of such registration. Upon the written
request of each Holder given within twenty (20) days after mailing of such
notice by the Company in accordance with Section 3.5, the Company shall, subject
to the provisions of Section 1.8, cause to be registered under the Act all of
the Registrable Securities that each such Holder has requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to one hundred twenty (120)
days or until the distribution contemplated in the Registration Statement has
been completed; PROVIDED, HOWEVER, that (i) such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders, as the case may be, such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
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<PAGE> 6
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders or
the Common Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities in each case not later than the effective date of such
registration.
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding himself or itself, the Registrable
Securities held by him or it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.2(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to
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<PAGE> 7
originally trigger the Company's obligation to initiate such registration as
specified in subsection 1.2(a) or subsection 1.12(b)(2), whichever is
applicable.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; PROVIDED, HOWEVER, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all Participating Holders shall bear such expenses),
unless (i) the registration is withdrawn following any deferral of the
registration by the Company pursuant to Section 1.2(c); (ii) the registration is
withdrawn due to a material adverse change in the Company's business or
financial condition; or (iii) the Holders of a majority of the Registrable
Securities agree to forfeit their right to one (1) demand registration pursuant
to Section 1.2.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as will not, in the opinion of the underwriters, jeopardize the success
of the offering by the Company, provided that such underwriting requirement
shall not provide for indemnification or contribution obligations on the part of
the Holders greater than the obligations set forth in Section 1.10(b). If the
total amount of securities, including Registrable Securities requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters reasonably believe
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities which the underwriters believe will not jeopardize the
success of the offering (the securities so included to be apportioned pro rata
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<PAGE> 8
among the selling stockholders according to the total amount of securities
entitled to be included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by such selling stockholders,
but in no event shall the amount of securities of the selling Holders included
in the offering be reduced below twenty-five (25%) percent of the total amount
of securities included in such offering, unless such offering is the initial
public offering of the Company's securities in which case the selling
stockholders may be excluded entirely if the underwriters make the determination
described above and no other stockholder's securities are included. For purposes
of the preceding parenthetical concerning apportionment, for any selling
stockholder that is a holder of Registrable Securities that is a partnership or
corporation, the partners, retired partners and stockholders of such holder
(and, in the case of a partnership, any affiliated partnerships), or the estates
and family members of any such partners and retired partners and any trusts for
the benefit of any of the foregoing persons shall be deemed to be a single
"selling stockholder," and any prorata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; PROVIDED, HOWEVER, that
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<PAGE> 9
the indemnity agreement contained in this subsection 1.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this subsection 1.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity under this subsection 1.10(b) exceed the gross
proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between
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such indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 1.10, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
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(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive a
written request or requests from Holders of at least one-third (1/3) of the
Registrable Securities then outstanding that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
PROVIDED, HOWEVER, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the
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public (net of any underwriters' discounts or commissions) of less than
$2,000,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than sixty (60)
days after receipt of the request of the Holder or Holders under this Section
1.12, PROVIDED, HOWEVER, that the Company shall not utilize this right more than
once in any twelve-month period; or (4) in any particular jurisdiction in which
the Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be paid by the
Company. Registrations effected pursuant to this Section 1.12 shall not be
counted as demands for registration or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to Section 1 may be assigned
(but only with all related obligations) by a Holder to a transferee or assignee
of such securities who, after such assignment or transfer, holds at least
100,000 shares of Registrable Securities (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalizations),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement, including without
limitation the provisions of Section 1.15 below; and (c) such assignment shall
be effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the Act.
For the purposes of determining the number of shares of Registrable Securities
held by a transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership and its
affiliated partnerships; provided that all assignees and
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transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 1.2 hereof, unless under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of his
securities will not reduce the amount of the Registrable Securities of the
Holders that is included, (b) to include such securities in any registration
filed under Section 1.3 hereof, unless under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of his securities will not
reduce the amount of the Registrable Securities of the Holders that is included,
or (c) to make a demand registration that could result in such registration
statement being declared effective prior to the earlier of either of the dates
set forth in subsection 1.2(a) or within one hundred eighty (180) days of the
effective date of any registration effected pursuant to Section 1.2.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor and each Common
Holder hereby agrees that, during the period of duration specified by the
Company and an underwriter of common stock or other securities of the Company,
following the effective date of a registration statement of the Company filed
under the Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except common stock included in such registration; PROVIDED, HOWEVER, that:
(a) all officers, employees and directors of the Company, all
stockholders holding more than one percent (1%) of the outstanding capital stock
of the Company and all other persons with registration rights (whether or not
pursuant to this Agreement) enter into similar agreements; and
(b) such market stand-off time period shall not exceed one
hundred eighty (180) days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities (and the
shares or
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<PAGE> 14
securities of every other person subject to the foregoing restriction) until the
end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a SEC Rule 145 transaction
on Form S-4 or similar forms that may be promulgated in the future.
1.16 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
request registration or inclusion in any registration pursuant to Sections 1.2,
1.3 or 1.12 shall terminate on the date five (5) years following the closing of
the first firm commitment underwritten public offering pursuant to an effective
registration statement under the Act covering the offer and sale of Common Stock
for the account of the Company to the public at an aggregate offering price
resulting in gross proceeds to the Company as seller of not less than
$10,000,000 before deducting underwriting commissions, provided that the
offering price per share of Common Stock is not less than $7.50 per share and
the Common Stock is listed for trading on the NASDAQ NMS, or its equivalent.
2. COVENANTS OF THE COMPANY. The Company covenants and agrees
as follows:
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to
each Investor:
(a) as soon as practicable, but in any event within seventy-
five (75) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("gaap"),
and audited and certified by independent public accountants of nationally
recognized standing selected by the Company;
(b) so long as such Investor holds at least 100,000 shares of
Registrable Securities (as adjusted for stock splits, recombinations or
reclassifications), as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited income statement, a statement of cash flows
for such fiscal quarter and an unaudited balance sheet as of the end of such
fiscal quarter;
(c) so long as such Investor holds at least 100,000 shares of
Registrable Securities (as adjusted for stock splits, recombinations or
reclassifications), within thirty (30) days of the end of each month, an
unaudited income statement and
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a statement of cash flows and balance sheet for and as of the end of such month
(including year-to-date totals for such statements), in reasonable detail,
comparing results to the annual plan and to the prior year comparable period;
(d) so long as such Investor holds at least 100,000 shares of
Registrable Securities (as adjusted for stock splits, recombinations or
reclassifications), as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, including balance sheets, income
statements and statements of cash flows for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsection (b) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with gaap consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by gaap) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment;
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time reasonably request; PROVIDED,
HOWEVER, that the Company shall not be obligated under this subsection (f) or
any other subsection of Section 2.1 to provide information which it deems in
good faith to be a trade secret or similar confidential information unless the
Investor agrees in writing to hold such information in confidence.
2.2 INSPECTION. The Company shall permit each Investor who then
holds at least 100,000 shares of Registrable Securities, at such Investor's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by the
Investor; PROVIDED, HOWEVER, that the Company shall not be obligated pursuant to
this Section 2.2 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information unless the
Investor agrees in writing to hold such information in confidence.
2.3 TRANSACTIONS WITH AFFILIATES. The Company shall not, without the
approval of a disinterested majority of the Company's Board of Directors, engage
in any loans, leases, contracts or other transactions with any director,
officer, key employee or greater than ten percent (10%) stockholder of the
Company, or any member of any such person's immediate family, including the
parents, spouse, children and other relatives of any such person, on terms less
favorable than the
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Company would obtain in a transaction with an unrelated party, as determined in
good faith by the Board of Directors.
2.4 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS AND MARKET
STAND-OFF. The Company will cause each person now or hereafter employed by it or
any subsidiary with access to confidential information to enter into a
proprietary information and inventions agreement substantially in the form
approved by the Board of Directors. The Company will use its best efforts to
cause all holders of its common stock who are not parties hereto to be bound by
a market stand-off provision in substantially the form set forth in Section 1.15
hereof
2.5 INSURANCE.
(a) Except as otherwise decided in accordance with policies
adopted by the Company's Board of Directors, the Company will use its best
efforts to maintain from financially sound and reputable insurers, (i) insurance
on its assets and those of its subsidiaries that are of an insurable character
against loss or damage by fire, explosion and other risks customarily insured
against by companies in the Company's line of business, and (ii) insurance
against other hazards and risks and liability to persons and property to the
extent and in the manner customary for companies in similar businesses similarly
situated. The Company does not now have products liability insurance but may in
the future in the judgment of the Board of Directors obtain such insurance in
amounts customary for companies similarly situated.
(b) The Company covenants that it will use its best efforts to
obtain promptly directors' and officers' liability insurance in the minimum
amount of $1,000,000, and the Company covenants further that so long as a
representative of Aetna Life Insurance Company, Menlo Ventures VI, L.P. or Axiom
Venture Partners, L.P. serves on the Company's Board of Directors, it will use
its best efforts to maintain such insurance, provided that such insurance is
available at commercially reasonable rates as determined by the Company's Board
of Directors.
2.6 QUALIFIED SMALL BUSINESS STOCK. The Company covenants that so
long as the Series A-1, Series A-2, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, or the Common Stock, into which it is
converted, is held by an Investor (or a transferee in whose hands the Series
A-1, Series A-2, Series B, Series C and Series D Preferred Stock or the Common
Stock into which it is converted, is eligible to qualify as Qualified Small
Business Stock as defined in Section 1202(c) of the Internal Revenue Code of
1986, as amended), it will use its reasonable efforts to cause the Series A-1,
Series A-2, Series B, Series C and Series E Preferred Stock or the Common Stock
into which it is converted, to qualify as Qualified Small Business Stock. The
Company will seek in good faith to qualify as a "Qualified Small
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<PAGE> 17
Business" as defined in Section 1202(d) of the Internal Revenue Code of 1986, as
amended (the "Code") but no assurance is given that the Company will so qualify.
2.7 INDEMNIFICATION. The Company covenants that so long as a
representative of The BISYS Group, Inc., Aetna Life Insurance Company, Menlo
Ventures VI, L.P. or Axiom Venture Partners, L.P. serves on the Company's Board
of Directors, its Restated Certificate will provide for the indemnification of
the Company's officers and directors to the fullest extent permitted by law.
2.8 TERMINATION OF COVENANTS. Except for those contained in Section
2.5(b), Section 2.7 and Section 2.11, the covenants set forth in this Section 2
shall terminate as to Investors and be of no further force or effect (i) when
the sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the firm commitment underwritten offering of
its securities to the general public is consummated or when the Company is
subject to the requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur or (ii) as to any Investor, or transferee or
assignee of such Investor, who holds less than 100,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations).
2.9 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this Section 2.9, the Company hereby grants to each Major Investor
(as hereinafter defined) a right of first offer with respect to future sales by
the Company of its Shares (as hereinafter defined). For purposes of this Section
2.9, a Major Investor shall mean any Investor who holds 100,000 shares of
Registrable Securities. For purposes of this Section 2.9, Investor includes any
general partners and affiliates of an Investor. An Investor shall be entitled to
apportion the right of first offer hereby granted it among itself and its
partners and affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by nationally recognized
overnight courier ("Notice") to the Major Investors stating (i) its bona fide
intention to offer such Shares, (ii) the number of such Shares to be offered,
and (iii) the price and terms, if any, upon which it proposes to offer such
Shares.
(b) Within twenty (20) calendar days after giving of the
Notice, a Major Investor may elect to purchase or obtain, at the price and on
the terms specified in the Notice, up to that portion of such Shares which
equals the proportion that the number of shares of common stock issued and held,
or issuable upon
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conversion and/or exercise of the Series A-1 Preferred Stock, Series A-2
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or any other securities of the Company then held, by such Major
Investor bears to the total number of shares of common stock of the Company
(assuming full conversion and exercise of all outstanding convertible or
exercisable securities, options or warrants) then issued and held, or issuable
upon conversion of the Series A-1 Preferred Stock, Series A-2 Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or
any other securities of the Company then held, by the Major Investors. The
Company shall promptly, in writing, inform each Major Investor that purchases
all the shares available to it (a "Fully-Exercising Investor") of any other
Major Investor's failure to do likewise. During the ten (10) day period
commencing after such information is given, each Fully-Exercising Investor shall
be entitled to obtain that portion of the Shares for which Major Investors were
entitled to subscribe but which were not subscribed for by the Major Investors
which is equal to the proportion that the number of shares of common stock
issued and held, or issuable upon conversion and/or exercise of Preferred Stock
or any other securities of the Company then held, by such Fully-Exercising
Investor bears to the total number of shares of common stock issued and held, or
issuable upon conversion and/or exercise of the Preferred Stock or any other
securities of the Company then held, by all Fully-Exercising Investors who wish
to purchase some of the unsubscribed shares.
(c) If all Shares referred to in the Notice which Investors are
entitled to obtain pursuant to subsection 2.9(b) are not elected to be obtained
as provided in subsection 2.9(b) hereof, the Company may, during the 60-day
period following the expiration of the period provided in subsection 2.9(b)
hereof, offer the remaining unsubscribed portion of such Shares to any person or
persons at a price not less than, and upon terms no more favorable to the
offeree than those specified in the Notice. If the Company does not enter into
an agreement for the sale of the Shares within such period, or if such agreement
is not consummated within 60 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this Section 2.9 shall not be
applicable (i) to the issuance or sale of 1,610,000 shares of common stock (or
options therefor) to employees or consultants for the primary purpose of
soliciting or retaining their employment or to the issuance of any additional
shares of common stock (or options therefor) to such persons for such purposes
which shares (or options) are approved for issuance by the holders of a majority
of the outstanding Series B Preferred Stock, the Series C Preferred Stock and
Series D Preferred Stock, voting together as a single class; (ii) to or after
consummation of a bona fide, firmly underwritten public offering of shares of
common stock, registered under the Act pursuant to a registration statement on
Form S-1; (iii) to the issuance of securities pursuant to the conversion or
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exercise of convertible or exercisable securities; (iv) to the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise; or (v) to the issuance of stock, warrants or other
securities or rights to persons or entities with which the Company has business
relationships provided such issuances are for other than primarily equity
financing purposes.
(e) The right of first offer set forth in this Section 2.9 may
not be assigned or transferred, except that (i) such right is assignable by each
Holder to any wholly owned subsidiary or parent of; or to any corporation or
entity that is, within the meaning of the Act, controlling, controlled by or
under common control with, any such Holder, and (ii) such right is assignable
between and among any of the Holders.
2.10 RIGHT OF REPURCHASE. The Company covenants that to the extent it
has the right to repurchase shares of its Common Stock held by employees,
consultants and directors or former employees, consultants and directors at the
price such persons paid for such Common Stock, and the Company fails to exercise
such right, it will assign such right to the Investors, Graham Gurney, Clifford
I. Waggoner, Glenn A. Field, Arnold Pelligrinelli, and Paul Rothstein, on a pro
rata basis according to the number of shares of Common Stock held by each such
person on an as-converted basis. The Company covenants further that it will
either exercise such right or make such assignment no later than ten (10) days
before its right to repurchase such shares terminates.
2.11 BOARD MEMBERS; ELECTION OF DIRECTORS.
(a) The Company will promptly reimburse members of the
Company's Board of Directors (the "Board of Directors") for the reasonable
expenses, including airfare, incurred by such Board members when acting on
behalf of the Company including attendance at Board of Director meetings.
(b) So long as the Investor named below shall continue to hold
no less than thirty-five percent (35%) of the shares of Series B Preferred Stock
originally acquired by it, such Investor shall be entitled, but shall be under
no obligation, to designate one nominee for election to the Board of Directors
by the Investors:
Axiom Venture Partners, L.P.
Menlo Ventures VI, L.P.
In the event a designation is not made by an Investor named above in accordance
with this Section 2.11(b), unless otherwise agreed by such Investor, the
Investors will use their best efforts to ensure that such position on the Board
of Directors shall be left vacant until a nominee is so designated.
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(c) So long as the Aetna Life Insurance Company shall continue
to hold no less than thirty-five percent (35%) of the shares of Series C
Preferred Stock originally acquired by it, Aetna Life Insurance Company shall be
entitled, but shall be under no obligation, to designate one nominee for
election to the Board of Directors by the Investors. In the event a designation
is not made by Aetna Life Insurance Company in accordance with this Section
2.11(c), unless otherwise agreed by it, the Investors will use their best
efforts to ensure that such position on the Board of Directors shall be left
vacant until a nominee is so designated.
(d) So long as The BISYS Group, Inc. shall continue to hold no
less than thirty-five percent (35%) of the shares of Series D Preferred Stock
originally acquired by it, The BISYS Group, Inc. shall be entitled, but shall be
under no obligation, to designate one nominee for election to the Board of
Directors by the Investors. In the event a designation is not made by The BISYS
Group, Inc. in accordance with this Section 2.11(d), unless otherwise agreed by
it, the Investors will use their best efforts to ensure that such position on
the Board of Directors shall be left vacant until a nominee is so designated.
(e) The nominees selected in accordance with Sections 2.11(b),
(c) and (d) on the one hand, and the nominees selected by the holders of a
majority of the outstanding Common Stock in accordance with the Restated
Certificate of Incorporation of the Company, on the other hand, shall consult in
good faith and use their best efforts to mutually agree as to the designation of
an additional nominee or nominees for election to the Board of Directors by the
holders of the outstanding Common Stock and Preferred Stock voting together as a
class, as provided in the Restated Certificate of Incorporation of the Company.
In the event that an agreement is not reached in accordance with this Section
2.11(e) as to such nominee or nominees, the Investors will use their best
efforts to cause such position or positions to remain vacant.
(f) Each Investor agrees to vote the Series A-1, Series A-2,
Series B, Series C and Series D Preferred Stock, or the Common Stock into which
it is converted, held by it from time to time for the nominees so designated in
accordance with Sections 2.11(b), (c), (d) and (e) at each annual meeting of
shareholders of the Company, and at any special meeting of shareholders of the
Company called for the election of directors, in such manner as may be required
to elect such nominees.
(g) The Company agrees to use its best efforts to cause the
nominees so designated in accordance with Section 2.11(b), (c), (d) and (e) to
be included in part of the slate of directors and to be recommended to, and
elected by shareholders, at each annual meeting of shareholders of the Company,
and at any special meeting of shareholders of the Company called for the
election of directors.
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<PAGE> 21
(h) If (i) the Company receives a written notice from an
Investor named in Section 2.11(b), (c) or (d) that such Investor wishes to
remove a director designated by it and elected pursuant to Section 2.11(b), (c)
or (d), as the case may be, or (ii) such director shall have resigned or shall
be unable to serve, then, in any such case, the Company and the Investors agree
to take such action as may be necessary to call a special meeting of the
stockholders of the Company for the purpose of effecting any such removal or
filling such vacancy, as the case may be, and at such meeting each Investor
shall vote to accomplish said result.
(i) If any Investor shall refuse to vote the Series A-1,
Series A-2, Series B, Series C or Series D Preferred Stock, or the Common Stock
into which it is converted, held by it as provided in any of the foregoing
subsections of this Section 2.11 at any meeting of shareholders of the Company,
or shall refuse to give its written consent in lieu of a meeting, thereupon,
without further action by such Investor, the President or any Vice President of
the Company shall be, and hereby is, irrevocably constituted the
attorney-in-fact and proxy of such Investor for the purpose of voting, and shall
vote such shares at such meeting as provided in the foregoing subsections of
this Section 2.11 or give such consent, as the case may be.
(j) For such period as Connecticut Innovations, Incorporated
("CII") holds Series A-2 Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, the Warrants or Common Stock into which any of the foregoing
has been converted, and provided the Company is not a public company, the
Company hereby agrees that it shall not hold any meetings of its Directors on
less than ten (10) days written notice and will permit CII to send a
representative (without voting rights) to each meeting of the Company's Board of
Directors and all committees of such Board. For such period as CII holds Series
A-2 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, the
Warrants or Common Stock into which any of the foregoing has been converted, and
provided the Company is not a public company, the Company shall give CII notice
of each such meeting in the form and manner such notice is given to the
Company's Directors. The Company hereby agrees that it will not permit its
Directors or Shareholders to conduct any corporate action or business by written
consent without giving at least ten (10) days' prior written notice to CII,
which notice shall contain an exact copy of the consent resolution proposed to
be adopted, except, however, under exceptional circumstances when such written
notice cannot be delivered, at which time telephonic notice shall be permitted.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of, and be
binding upon, the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective
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<PAGE> 22
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Connecticut.
3.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery, delivery by nationally recognized
overnight courier or five days after deposit in the U.S. mail, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days advance written notice to
the other parties. A copy of any such notice to the Company shall be similarly
delivered to counsel for the Company as specified by the Company.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements (by
application to the court in which the action was conducted and as determined by
such court) in addition to any other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
3.8 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
-22-
<PAGE> 23
3.9 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.10 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including
the Exhibits hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof
3.11 WAIVER OF RIGHTS UNDER AND TERMINATION OF PRIOR INVESTORS'
RIGHTS AGREEMENT. Each of the parties to that certain Amended and Restated
Investors' Rights Agreement dated as of November 26, 1996 and among the Company
and the investors identified therein (the "Amended and Restated Investors'
Rights Agreement"), hereby (i) waives all rights to notice of, and to purchase,
the Series D Preferred Stock pursuant to Section 2.9 of such Amended and
Restated Investors' Rights Agreement, and (ii) agrees that upon execution and
delivery of this Agreement by each of the parties hereto, such Amended and
Restated Investors' Rights Agreement shall be superseded, amended and restated
in its entirety by this Agreement.
[Intentionally Left Blank]
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<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Investors' Rights Agreement as of the date first above written.
OPEN SOLUTIONS INC.
By: /s/ Clifford I. Waggoner
-------------------------------
Name: Clifford I. Waggoner
Title: Sr. V. P.
THE BISYS GROUP INC.
By: /s/ Lynn J. Mangum
-------------------------------
Name: Lynn J. Mangum
Title: Chairman & CEO
AETNA LIFE INSURANCE COMPANY
By: /s/ Allan J. Vartelas
-------------------------------
Name: Allan J. Vartelas
Title: Assistant Vice President
AXIOM VENTURE PARTNERS
LIMITED PARTNERSHIP
By: /s/ Samuel F. Mckay
-------------------------------
Name: Samuel F. McKay
Title: General Partner
MENLO VENTURES VI, L.P.
By its General Partner:
MV Management VI, L.P.
By: /s/ Doug Carlisle
-------------------------------
Name: Doug Carlisle
Title: General Partner
-24-
<PAGE> 25
MENLO ENTREPRENEURS FUND VI, L.P.
By its General Partner:
MV Management VI, L.P.
By: /s/ Doug Carlisle
-------------------------------
Name: Douglas C. Carlisle
Title: General Partner
CONNECTICUT INNOVATIONS,
INCORPORATED
By: /s/ Victor R. Budnick
-------------------------------
Name:
Title:
BANKING SPECTRUM SERVICES, INC.
By: /s/ Carlos P. Naudon
-------------------------------
Name: Carlos P. Naudon
Title: President
/s/ MARK HELLER
-----------------------------------
MARK HELLER
/s/ Barry M. Bloom
-----------------------------------
BARRY M. BLOOM
ZACHS CMP
By: /s/ Henry M. Zachs
-------------------------------
Name: Henry M. Zachs
Title: Partner
-25-
<PAGE> 26
-----------------------------------
GLENN A. FIELD
/s/ Allan J. Amer
-----------------------------------
ALLAN J. AMER
/s/ Mark L. Villamar
-----------------------------------
MARK L. VILLAMAR
ALLISTER & NAUDON P/S, RAYMOND
JAMES & ASSOCIATES, INC. CSDN FBO,
JEFFREY W. ALLISTER
By: /s/Jeffrey W. Allister
-------------------------------
Its: Beneficiary
-26-
<PAGE> 27
Schedule A
----------
Schedule of Series A-1 and Series A-2 Investors
-----------------------------------------------
Banking Spectrum Services, Inc.
57 West 38th Street
New York, NY 10018
Axiom Venture Partners L.P.
242 Trumbull Street
Hartford, CT 06103
Menlo Ventures VI, L.P.
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Connecticut Innovations, Inc.
865 Brook Street
Rocky Hill, CT 06067
<PAGE> 28
SCHEDULE B
SCHEDULE OF SERIES B INVESTORS
Axiom Venture Partners L.P.
242 Trumbull Street
Hartford, CT 06103
Menlo Ventures VI, L.P.
Menlo Entrepreneurs Fund VI, L.P.
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Connecticut Innovations, Inc.
865 Brook Street
Rocky Hill, CT 06067
Barry M. Bloom
43 Mackintosh Road
Lyme, CT 06731
Mark Heller
11727 Split Tree Circle
Potomac, MD 20854
Zachs CMP
40 Woodland Street
Hartford, CT 06105
-27-
<PAGE> 29
SCHEDULE C
SCHEDULE OF SERIES C INVESTORS
Aetna Life Insurance Company
151 Farmington Avenue
Hartford, CT 06156
Axiom Venture Partners L.P.
242 Trumbull Street
Hartford, CT 06103
Menlo Ventures VI, L.P.
Menlo Entrepreneurs Fund VI, L.P.
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Connecticut Innovations, Inc.
865 Brook Street
Rocky Hill, CT 06067
-28-
<PAGE> 30
SCHEDULE D
SCHEDULE OF SERIES D INVESTOR
The BISYS Group, Inc.
[add address from distr. list]
-29-
<PAGE> 1
Exhibit 10.5
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO.
STOCK SUBSCRIPTION WARRANT
TO PURCHASE SERIES B PREFERRED STOCK OF
OPEN SOLUTIONS INC., A DELAWARE CORPORATION (THE "COMPANY")
DATE OF INITIAL ISSUANCE: DECEMBER 27, 1995
THIS CERTIFIES THAT, for value received, ____________________________
or registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company, at any time during the Term of this Warrant,
________________________ shares (subject to adjustment as hereinafter provided)
of Series B Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Stock"), at the Warrant Price, payable in lawful money of the United
States of America to be paid upon the exercise hereof. The exercise of this
Warrant shall be subject to the provisions, limitations and restrictions herein
contained and may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
PREFERRED STOCK - shall mean the Company's authorized Series B
Preferred Stock, par value $.01 per share, as constituted at the date hereof.
SECURITIES ACT - the Securities Act of 1933, as amended.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on the date five (5) years from the date of
initial issuance hereof.
WARRANT PRICE - $4.00 per share, subject to adjustment in accordance
with Section 5 hereof.
<PAGE> 2
WARRANTS - this Warrant and any other Warrant or Warrants issued
pursuant to the Series B Preferred Stock and Warrant Purchase Agreement between
the Company and the Investors listed on Schedule A thereto, dated as of
December 27, 1995, to the original holder of this Warrant and the other warrants
issued pursuant thereto, or any transferees from such original holder or
holders.
WARRANT SHARES - shares of Preferred Stock purchased or purchasable by
the Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1 PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Preferred Stock), the
Holder shall deliver to the Company at its office referred to in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company or indebtedness of the
Company to the Holder for cancellation, in each case in the amount of the
Warrant Price for each share being purchased, and (iii) this Warrant. In the
event of any exercise of the rights represented by this Warrant, a certificate
or certificates for the shares of Preferred Stock so purchased, registered in
the name of the Holder or such other name or names as may be designated by the
Holder, shall be delivered to the Holder hereof within a reasonable time, not
exceeding fifteen (15) days, after the rights represented by this Warrant shall
have been so exercised; and, unless this Warrant has expired, a new Warrant
representing the number of shares (except a remaining fractional share), if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the Holder hereof within such time. The person in whose name any
certificate for shares of Preferred Stock is issued upon exercise of this
Warrant shall for all purposes be deemed to have become the holder of record of
such shares on the date on which the Warrant was surrendered and payment of the
Warrant Price and any applicable taxes was made, irrespective of the date of
delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are closed, such
person shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are open.
2.2 TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"These securities have not been registered under the Securities Act of
1933. They may not be sold, offered for sale, pledged or hypothecated
in the absence
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<PAGE> 3
of a registration statement as to the securities under such Act or an
opinion of counsel satisfactory to the Company that such registration
is not required or unless sold pursuant to Rule 144 of such Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO PREFERRED STOCK. The Company covenants and
agrees that all shares of Preferred Stock that may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable, and free from all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
it will pay when due and payable any and all federal and state taxes which may
be payable in respect of the issue of this Warrant, or any Preferred Stock or
certificates therefor issuable upon the exercise of this Warrant. The Company
further covenants and agrees that the Company will at all times have authorized
and reserved, free from preemptive rights, a sufficient number of shares of
Preferred Stock to provide for the exercise of the rights represented by this
Warrant. The Company further covenants and agrees that if any shares of capital
stock to be reserved for the purpose of the issuance of shares upon the exercise
of this Warrant require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly
issued or delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Preferred Stock issuable upon the
exercise of this Warrant is listed on any national securities exchange, the
Company will, if permitted by the rules of such exchange, list and keep listed
on such exchange, upon official notice of issuance, all shares of such Preferred
Stock issuable upon exercise of this Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Warrant Price as provided in Section 5, the Holder shall thereafter be entitled
to purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
-3-
<PAGE> 4
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be
subject to adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Preferred Stock outstanding is increased by a stock dividend payable
in shares of Preferred Stock or by a subdivision or split-up of shares of
Preferred Stock, then, following the record date fixed for the determination of
holders of Preferred Stock entitled to receive such stock dividend, subdivision
or split-up, the Warrant Price shall be appropriately decreased so that the
number of shares of Preferred Stock issuable upon the exercise hereof shall be
increased in proportion to such increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Preferred Stock outstanding is decreased by a combination of the
outstanding shares of Preferred Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Preferred Stock issuable upon the exercise hereof shall be
decreased in proportion to such decrease in outstanding shares.
(iii) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(iv) Whenever the Warrant Price shall be adjusted as provided in
Section 5, the Company shall prepare a statement showing the facts requiring
such adjustment and the Warrant Price that shall be in effect after such
adjustment. The Company shall cause a copy of such statement to be sent by mail,
first class postage prepaid, to each Holder of this Warrant at his address
appearing on the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of the notice required to be mailed under
the provisions of subsection (x) of this Section 5.
(v) In any case in which the provisions of this Section 5 shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the Holder of all or any part of this Warrant which is exercised
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such exercise before giving effect to such adjustment exercise; provided,
however, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
-4-
<PAGE> 5
SECTION 6. OWNERSHIP.
6.1 OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2 TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 12
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with any transfer or
replacement of this Warrant, other than stock transfer taxes (if any) payable in
connection with a transfer of this Warrant, which shall be payable by the
Holder.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein in lieu of the shares of the
Preferred Stock of the Company immediately theretofore purchasable hereunder,
such shares of stock, securities or assets as may (by virtue of such
consolidation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for the number of shares of such
Preferred Stock purchasable hereunder immediately before such consolidation,
merger, sale, reorganization or reclassification. In any such case appropriate
provision shall be made with respect to the rights and interests of the
-5-
<PAGE> 6
Holder of this Warrant to the end that the provisions hereof shall thereafter be
applicable as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of this Warrant. The Company
shall not effect any such consolidation, merger or sale unless prior to or
simultaneously with the consummation thereof the successor corporation or
purchaser, as the case may be, shall assume by written instrument the obligation
to deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder is entitled to receive.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any
distribution of the assets of the Company in dissolution or liquidation (except
under circumstances when the foregoing Section 7 shall be applicable), the
Company shall give notice thereof to the Holder hereof and shall make no
distribution to shareholders until the expiration of thirty (30) days from the
date of mailing of the aforesaid notice and, in any case, the Holder hereof may
exercise this Warrant within thirty (30) days from the date of the giving of
such notice, and all rights herein granted not so exercised within such
thirty-day period shall thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. Subject to further
compliance with Section 11.2 hereof, if the Board of Directors of the Company
shall declare any dividend or other distribution on its Preferred Stock except
out of earned surplus or by way of a stock dividend payable in shares of its
Preferred Stock, the Company shall mail notice thereof to the Holder hereof not
less than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued
upon the exercise of this Warrant but in any case where the Holder would, except
for the provisions of this Section 10, be entitled under the terms hereof to
receive a fractional share upon the complete exercise of this Warrant, the
Company shall, upon the exercise of this Warrant for the largest number of whole
shares then called for, pay a sum in cash equal to the excess of the value of
such fractional share (determined in such reasonable manner as may be prescribed
in good faith by the Board of Directors of the Company).
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants
and agrees that during the Term of this Warrant, unless otherwise approved by
the Holder of this Warrant:
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<PAGE> 7
11.1 WILL RESERVE SHARES. The Company will reserve and set apart and
have at all times, free from preemptive rights, the number of shares of
authorized but unissued Preferred Stock deliverable upon the exercise of this
Warrant.
11.2 WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
SECTION 12. NOTICES. Any notice or other document required or permitted
to be given or delivered to the Holder shall be delivered at, or sent by
certified or registered mail to, the Holder at _________________________________
or to such other address as shall have been furnished to the Company in writing
by the Holder. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the Company at 49 Welles Street, Suite 212, Glastonbury,
Connecticut 06033 or to such other address as shall have been furnished in
writing to the Holder by the Company. Any notice so addressed and mailed by
registered or certified mail shall be deemed to be given when so mailed. Any
notice so addressed and otherwise delivered shall be deemed to be given when
actually received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This
Warrant shall not entitle the Holder to any of the rights of a shareholder of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Preferred Stock, and no mere enumeration herein of
the rights or privileges of the Holder, shall give rise to any liability of the
Holder for the Warrant Price hereunder or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 14. LAW GOVERNING. This Warrant shall be governed by, and
construed and enforced in accordance with, the laws of the State of Connecticut.
SECTION 15. MISCELLANEOUS.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Company
and the holders of two-thirds (2/3) of the Warrant Shares purchasable by the
Holder and holder or holders of all the Warrants then outstanding, provided that
(i) the same change, waiver, discharge or termination is applicable to all
holders of Warrants, (ii) this Section may not be amended without the consent of
the Holder, and (iii) the obligations of the Holder may not be increased without
the consent of the Holder. The headings in this Warrant are for purposes of
reference only and shall not affect the meaning or construction of any of the
provisions hereof.
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<PAGE> 8
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Series B Preferred Stock and
Warrant Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this _____ day of December, 1995
OPEN SOLUTIONS, INC.
By: ______________________________
Title: ___________________________
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<PAGE> 9
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase ___ shares of
Series B Preferred Stock which the undersigned is entitled to purchase by the
terms of the within Warrant according to the conditions thereof, and herewith
makes payment of the Warrant Price of such shares in full. All shares to be
issued pursuant hereto shall be issued in the name of______________ and the
initial address of such person to be entered on the books of the Company shall
be: ____________. The shares are to be issued in certificates of the following
denominations:
[TYPE NAME OF HOLDER]
By: _______________________________
Title: ____________________________
Dated:
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<PAGE> 10
FORM OF ASSIGNMENT
[TO BE SIGNED ONLY UPON TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ________________________ hereby sells, assigns and
transfers unto ___________________ all rights of the undersigned under and
pursuant to the within Warrant, and the undersigned does hereby irrevocably
constitute and appoint ________________________, Attorney to transfer the said
Warrant on the books of the Company, with full power of substitution.
[TYPE NAME OF HOLDER]
By: _______________________________
Title: ____________________________
Dated:____________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE> 1
Exhibit 10.6
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO.
STOCK SUBSCRIPTION WARRANT
TO PURCHASE SERIES C PREFERRED STOCK OF
OPEN SOLUTIONS INC., A DELAWARE CORPORATION (THE "COMPANY")
DATE OF INITIAL ISSUANCE: OCTOBER 23, 1996
THIS CERTIFIES THAT, for value received, __________________________ or
registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company, at any time during the Term of this Warrant
_____________________ shares (subject to adjustment as hereinafter provided) of
Series C Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Stock"), at the Warrant Price, payable in lawful money of the United
States of America to be paid upon the exercise hereof. The exercise of this
Warrant shall be subject to the provisions, limitations and restrictions herein
contained and may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
PREFERRED STOCK - shall mean the Company's authorized Series C
Preferred Stock, par value $.01 per share, as constituted at the date hereof.
SECURITIES ACT - the Securities Act of 1933, as amended.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on the date five (5) years from the date of
initial issuance hereof.
WARRANT PRICE - $6.00 per share, subject to adjustment in accordance
with Section 5 hereof.
<PAGE> 2
WARRANTS - this Warrant and any other Warrant or Warrants issued
pursuant to the Series C Preferred Stock and Warrant Purchase Agreement between
the Company and the Investors listed on Schedule A thereto, dated as of
October 23, 1996, to the original holder of this Warrant and the other warrants
issued pursuant thereto, or any transferees from such original holder or
holders.
WARRANT SHARES - shares of Preferred Stock purchased or purchasable by
the Holder of this Warrant upon the exercise hereof
SECTION 2. EXERCISE OF WARRANT.
2.1 PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Preferred Stock), the
Holder shall deliver to the Company at its office referred to in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company or indebtedness of the
Company to the Holder for cancellation, in each case in the amount of the
Warrant Price for each share being purchased, and (iii) this Warrant. In the
event of any exercise of the rights represented by this Warrant, a certificate
or certificates for the shares of Preferred Stock so purchased, registered in
the name of the Holder or such other name or names as may be designated by the
Holder, shall be delivered to the Holder hereof within a reasonable time, not
exceeding fifteen (15) days, after the rights represented by this Warrant shall
have been so exercised; and, unless this Warrant has expired, a new Warrant
representing the number of shares (except a remaining fractional share), if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the Holder hereof within such time. The person in whose name any
certificate for shares of Preferred Stock is issued upon exercise of this
Warrant shall for all purposes be deemed to have become the holder of record of
such shares on the date on which the Warrant was surrendered and payment of the
Warrant Price and any applicable taxes was made, irrespective of the date of
delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are closed, such
person shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are open.
2.2 TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"These securities have not been registered under the Securities Act of
1933. They may not be sold, offered for sale, pledged or hypothecated
in the absence
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<PAGE> 3
of a registration statement as to the securities under such Act or an
opinion of counsel satisfactory to the Company that such registration
is not required or unless sold pursuant to Rule 144 of such Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO PREFERRED STOCK. The Company covenants and
agrees that all shares of Preferred Stock that may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable, and free from all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
it will pay when due and payable any and all federal and state taxes which may
be payable in respect of the issue of this Warrant, or any Preferred Stock or
certificates therefor issuable upon the exercise of this Warrant. The Company
further covenants and agrees that the Company will at all times have authorized
and reserved, free from preemptive rights, a sufficient number of shares of
Preferred Stock to provide for the exercise of the rights represented by this
Warrant. The Company further covenants and agrees that if any shares of capital
stock to be reserved for the purpose of the issuance of shares upon the exercise
of this Warrant require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly
issued or delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Preferred Stock issuable upon the
exercise of this Warrant is listed on any national securities exchange, the
Company will, if permitted by the rules of such exchange, list and keep listed
on such exchange, upon official notice of issuance, all shares of such Preferred
Stock issuable upon exercise of this Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Warrant Price as provided in Section 5, the Holder shall thereafter be entitled
to purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
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<PAGE> 4
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be
subject to adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Preferred Stock outstanding is increased by a stock dividend payable
in shares of Preferred Stock or by a subdivision or split-up of shares of
Preferred Stock, then, following the record date fixed for the determination of
holders of Preferred Stock entitled to receive such stock dividend, subdivision
or split-up, the Warrant Price shall be appropriately decreased so that the
number of shares of Preferred Stock issuable upon the exercise hereof shall be
increased in proportion to such increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Preferred Stock outstanding is decreased by a combination of the
outstanding shares of Preferred Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Preferred Stock issuable upon the exercise hereof shall be
decreased in proportion to such decrease in outstanding shares.
(iii) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(iv) Whenever the Warrant Price shall be adjusted as provided in
this Section 5, the Company shall prepare a statement showing the facts
requiring such adjustment and the Warrant Price that shall be in effect after
such adjustment. The Company shall cause a copy of such statement to be sent by
mail, first class postage prepaid, to each Holder of this Warrant at his address
appearing on the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of the notice required to be mailed under
the provisions of subsection (vi) of this Section 5.
(v) In any case in which the provisions of this Section 5 shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the Holder of all or any part of this Warrant which is exercised
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such exercise before giving effect to such adjustment exercise; provided,
however, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
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<PAGE> 5
(vi) In the event the Company shall propose to take any action of the
types described in subsections (i) or (ii) of this Section 5, the Company shall
forward, at the same time and in the same manner, to the Holder of this Warrant
such notice, if any, which the Company shall give to the holders of capital
stock of the Company.
SECTION 6. OWNERSHIP.
6.1 OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2 TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 12
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with any transfer or
replacement of this Warrant, other than stock transfer taxes (if any) payable in
connection with a transfer of this Warrant, which shall be payable by the
Holder.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Preferred Stock of the Company immediately theretofore purchasable hereunder,
such shares of stock, securities or
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<PAGE> 6
assets as may (by virtue of such consolidation, merger, sale, reorganization or
reclassification) be issued or payable with respect to or in exchange for the
number of shares of such Preferred Stock purchasable hereunder immediately
before such consolidation, merger, sale, reorganization or reclassification. In
any such case appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
shall thereafter be applicable as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of this
Warrant. The Company shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof the successor
corporation or purchaser, as the case may be, shall assume by written instrument
the obligation to deliver to the Holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, the Holder is entitled
to receive.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any
distribution of the assets of the Company in dissolution or liquidation (except
under circumstances when the foregoing Section 7 shall be applicable), the
Company shall give notice thereof to the Holder hereof and shall make no
distribution to shareholders until the expiration of thirty (30) days from the
date of mailing of the aforesaid notice and, in any case, the Holder hereof may
exercise this Warrant within thirty (30) days from the date of the giving of
such notice, and all rights herein granted not so exercised within such
thirty-day period shall thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. Subject to further
compliance with Section 11.2 hereof, if the Board of Directors of the Company
shall declare any dividend or other distribution on its Preferred Stock except
out of earned surplus or by way of a stock dividend payable in shares of its
Preferred Stock, the Company shall mail notice thereof to the Holder hereof not
less than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued
upon the exercise of this Warrant but in any case where the Holder would, except
for the provisions of this Section 10, be entitled under the terms hereof to
receive a fractional share upon the complete exercise of this Warrant, the
Company shall, upon the exercise of this Warrant for the largest number of whole
shares then called for, pay a sum in cash equal to the excess of the value of
such fractional share (determined in such reasonable manner as may be prescribed
in good faith by the Board of Directors of the Company).
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<PAGE> 7
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants
and agrees that during the Term of this Warrant, unless otherwise approved by
the Holder of this Warrant:
11.1 WILL RESERVE SHARES. The Company will reserve and set apart and
have at all times, free from preemptive rights, the number of shares of
authorized but unissued Preferred Stock deliverable upon the exercise of this
Warrant.
11.2 WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
SECTION 12. NOTICES. Any notice or other document required or permitted
to be given or delivered to the Holder shall be delivered at, or sent by
certified or registered mail to, the Holder at ________________________________,
or to such other address as shall have been furnished to the Company in writing
by the Holder. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the Company at 300 Winding Brook Drive, Glastonbury,
Connecticut 06033 or to such other address as shall have been furnished in
writing to the Holder by the Company. Any notice so addressed and mailed by
registered or certified mail shall be deemed to be given when so mailed. Any
notice so addressed and otherwise delivered shall be deemed to be given when
actually received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This
Warrant shall not entitle the Holder to any of the rights of a shareholder of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Preferred Stock, and no mere enumeration herein of
the rights or privileges of the Holder, shall give rise to any liability of the
Holder for the Warrant Price hereunder or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 14. LAW GOVERNING. This Warrant shall be governed by, and
construed and enforced in accordance with, the laws of the State of Connecticut.
SECTION 15. MISCELLANEOUS.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Company
and the holders of two-thirds (2/3) of the Warrant Shares purchasable by the
Holder and holder or holders of all the Warrants then outstanding, provided that
(i) the same change, waiver, discharge or termination is applicable to all
holders of Warrants, (ii) this Section may not be amended without the consent of
the Holder, and (iii) the obligations of the Holder may not be increased without
the consent of
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<PAGE> 8
the Holder. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Series C Preferred Stock and
Warrant Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 23rd day of October, 1996.
OPEN SOLUTIONS INC.
By: _______________________________
Title: ____________________________
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<PAGE> 9
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase ____ shares of
Series C Preferred Stock which the undersigned is entitled to purchase by the
terms of the within Warrant according to the conditions thereof, and herewith
makes payment of the Warrant Price of such shares in full. All shares to be
issued pursuant hereto shall be issued in the name of ______________ and the
initial address of such person to be entered on the books of the Company shall
be: ___________________. The shares are to be issued in certificates of the
following denominations:
[TYPE NAME OF HOLDER]
By:
Title:
Dated:
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<PAGE> 10
FORM OF ASSIGNMENT
[TO BE SIGNED ONLY UPON TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto ______________________ all rights of the undersigned under
and pursuant to the within Warrant, and the undersigned does hereby irrevocably
constitute and appoint ____________________, Attorney to transfer the said
Warrant on the books of the Company, with full power of substitution.
[TYPE NAME OF HOLDER]
By:
Title:
Dated: ________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE> 1
Exhibit 10.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO.
STOCK SUBSCRIPTION WARRANT
TO PURCHASE SERIES D PREFERRED STOCK OF
OPEN SOLUTIONS INC., A DELAWARE CORPORATION (THE "COMPANY")
DATE OF INITIAL ISSUANCE: AUGUST 22, 1997
THIS CERTIFIES THAT, for value received, ___________________________ or
registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company, at any time during the Term of this Warrant
_________________________ shares (subject to adjustment as hereinafter provided)
of Series D Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Stock"), at the Warrant Price, payable in lawful money of the United
States of America to be paid upon the exercise hereof. The exercise of this
Warrant shall be subject to the provisions, limitations and restrictions herein
contained and may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
PREFERRED STOCK - shall mean the Company's authorized Series D
Preferred Stock, par value $.01 per share, as constituted at the date hereof.
SECURITIES ACT - the Securities Act of 1933, as amended.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on the date five (5) years from the date of
initial issuance hereof.
WARRANT PRICE - $6.00 per share, subject to adjustment in accordance
with Section 5 hereof.
<PAGE> 2
WARRANTS - this Warrant issued pursuant to that certain Series D
Preferred Stock and Warrant Purchase Agreement between the Company and the
Investor listed on Schedule A thereto, dated as of August 22, 1997, to the
original holder of this Warrant, or any transferees from such original holder.
WARRANT SHARES - shares of Preferred Stock purchased or purchasable by
the Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT
2.1 PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Preferred Stock), the
Holder shall deliver to the Company at its office referred to in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company or indebtedness of the
Company to the Holder for cancellation, in each case in the amount of the
Warrant Price for each share being purchased, and (iii) this Warrant. In the
event of any exercise of the rights represented by this Warrant, a certificate
or certificates for the shares of Preferred Stock so purchased, registered in
the name of the Holder or such other name or names as may be designated by the
Holder, shall be delivered to the Holder hereof within a reasonable time, not
exceeding fifteen (15) days, after the rights represented by this Warrant shall
have been so exercised; and, unless this Warrant has expired, a new Warrant
representing the number of shares (except a remaining fractional share), if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the Holder hereof within such time. The person in whose name any
certificate for shares of Preferred Stock is issued upon exercise of this
Warrant shall for all purposes be deemed to have become the holder of record of
such shares on the date on which the Warrant was surrendered and payment of the
Warrant Price and any applicable taxes was made, irrespective of the date of
delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are closed, such
person shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are open.
2.2 TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"These securities have not been registered under the Securities Act of
1933. They may not be sold, offered for sale, pledged or hypothecated
in the absence of a registration statement as to the securities under
such Act or an opinion of
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<PAGE> 3
counsel satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO PREFERRED STOCK. The Company covenants and
agrees that all shares of Preferred Stock that may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable, and free from all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
it will pay when due and payable any and all federal and state taxes which may
be payable in respect of the issue of this Warrant, or any Preferred Stock or
certificates therefor issuable upon the exercise of this Warrant. The Company
further covenants and agrees that the Company will at all times have authorized
and reserved, free from preemptive rights, a sufficient number of shares of
Preferred Stock to provide for the exercise of the rights represented by this
Warrant. The Company further covenants and agrees that if any shares of capital
stock to be reserved for the purpose of the issuance of shares upon the exercise
of this Warrant require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly
issued or delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Preferred Stock issuable upon the
exercise of this Warrant is listed on any national securities exchange, the
Company will, if permitted by the rules of such exchange, list and keep listed
on such exchange, upon official notice of issuance, all shares of such Preferred
Stock issuable upon exercise of this Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Warrant Price as provided in Section 5, the Holder shall thereafter be entitled
to purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
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<PAGE> 4
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be
subject to adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Preferred Stock outstanding is increased by a stock dividend payable
in shares of Preferred Stock or by a subdivision or split-up of shares of
Preferred Stock, then, following the record date fixed for the determination of
holders of Preferred Stock entitled to receive such stock dividend, subdivision
or split-up, the Warrant Price shall be appropriately decreased so that the
number of shares of Preferred Stock issuable upon the exercise hereof shall be
increased in proportion to such increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Preferred Stock outstanding is decreased by a combination of the
outstanding shares of Preferred Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Preferred Stock issuable upon the exercise hereof shall be
decreased in proportion to such decrease in outstanding shares.
(iii) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(iv) Whenever the Warrant Price shall be adjusted as provided in
this Section 5, the Company shall prepare a statement showing the facts
requiring such adjustment and the Warrant Price that shall be in effect after
such adjustment. The Company shall cause a copy of such statement to be sent by
mail, first class postage prepaid, to each Holder of this Warrant at his address
appearing on the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of the notice required to be mailed under
the provisions of subsection (vi) of this Section 5.
(v) In any case in which the provisions of this Section 5 shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the Holder of all or any part of this Warrant which is exercised
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such exercise before giving effect to such adjustment exercise; provided,
however, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
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<PAGE> 5
(vi) In the event the Company shall propose to take any action of
the types described in subsections (i) or (ii) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
SECTION 6. OWNERSHIP.
6.1 OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2 TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 12
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with any transfer or
replacement of this Warrant, other than stock transfer taxes (if any) payable in
connection with a transfer of this Warrant, which shall be payable by the
Holder.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Preferred Stock of the Company immediately theretofore purchasable hereunder,
such shares of stock, securities or
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<PAGE> 6
assets as may (by virtue of such consolidation, merger, sale, reorganization or
reclassification) be issued or payable with respect to or in exchange for the
number of shares of such Preferred Stock purchasable hereunder immediately
before such consolidation, merger, sale, reorganization or reclassification. In
any such case appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
shall thereafter be applicable as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of this
Warrant. The Company shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof the successor
corporation or purchaser, as the case may be, shall assume by written instrument
the obligation to deliver to the Holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, the Holder is entitled
to receive.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any
distribution of the assets of the Company in dissolution or liquidation (except
under circumstances when the foregoing Section 7 shall be applicable), the
Company shall give notice thereof to the Holder hereof and shall make no
distribution to shareholders until the expiration of thirty (30) days from the
date of mailing of the aforesaid notice and, in any case, the Holder hereof may
exercise this Warrant within thirty (30) days from the date of the giving of
such notice, and all rights herein granted not so exercised within such
thirty-day period shall thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. Subject to further
compliance with Section 11.2 hereof, if the Board of Directors of the Company
shall declare any dividend or other distribution on its Preferred Stock except
out of earned surplus or by way of a stock dividend payable in shares of its
Preferred Stock, the Company shall mail notice thereof to the Holder hereof not
less than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued
upon the exercise of this Warrant but in any case where the Holder would, except
for the provisions of this Section 10, be entitled under the terms hereof to
receive a fractional share upon the complete exercise of this Warrant, the
Company shall, upon the exercise of this Warrant for the largest number of whole
shares then called for, pay a sum in cash equal to the excess of the value of
such fractional share (determined in such reasonable manner as may be prescribed
in good faith by the Board of Directors of the Company).
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<PAGE> 7
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants
and agrees that during the Term of this Warrant, unless otherwise approved by
the Holder of this Warrant:
11.1 WILL RESERVE SHARES. The Company will reserve and set apart and
have at all times, free from preemptive rights, the number of shares of
authorized but unissued Preferred Stock deliverable upon the exercise of this
Warrant.
11.2 WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
SECTION 12. NOTICES. Any notice or other document required or permitted
to be given or delivered to the Holder shall be delivered at, or sent by
certified or registered mail to, the Holder at ________________________________,
or to such other address as shall have been furnished to the Company in writing
by the Holder. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the Company at 300 Winding Brook Drive, Glastonbury,
Connecticut 06033 or to such other address as shall have been furnished in
writing to the Holder by the Company. Any notice so addressed and mailed by
registered or certified mail shall be deemed to be given when so mailed. Any
notice so addressed and otherwise delivered shall be deemed to be given when
actually received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This
Warrant shall not entitle the Holder to any of the rights of a shareholder of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Preferred Stock, and no mere enumeration herein of
the rights or privileges of the Holder, shall give rise to any liability of the
Holder for the Warrant Price hereunder or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 14. LAW GOVERNING. This Warrant shall be governed by, and
construed and enforced in accordance with, the laws of the State of Connecticut.
SECTION 15. MISCELLANEOUS.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Company
and the holders of two-thirds (2/3) of the Warrant Shares purchasable by the
Holder and holder or holders of all the Warrants then outstanding, provided that
(i) the same change, waiver, discharge or termination is applicable to all
holders of Warrants, (ii) this Section may not be amended without the consent of
the Holder, and (iii) the obligations of the Holder may not be increased without
the consent of
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<PAGE> 8
the Holder. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Series D Preferred Stock and
Warrant Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this August 22, 1997.
OPEN SOLUTIONS INC.
By: _______________________________
Title: ____________________________
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<PAGE> 9
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase ____ shares of
Series C Preferred Stock which the undersigned is entitled to purchase by the
terms of the within Warrant according to the conditions thereof, and herewith
makes payment of the Warrant Price of such shares in full. All shares to be
issued pursuant hereto shall be issued in the name of ______________ and the
initial address of such person to be entered on the books of the Company shall
be: ___________________. The shares are to be issued in certificates of the
following denominations:
[TYPE NAME OF HOLDER]
By: _______________________________
Title: ____________________________
Dated:
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<PAGE> 10
FORM OF ASSIGNMENT
[TO BE SIGNED ONLY UPON TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto ______________________ all rights of the undersigned under
and pursuant to the within Warrant, and the undersigned does hereby irrevocably
constitute and appoint ____________________, Attorney to transfer the said
Warrant on the books of the Company, with full power of substitution.
[TYPE NAME OF HOLDER]
By: _______________________________
Title: ____________________________
Dated: ________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE> 1
Exhibit 10.9
Confidential Materials omitted and filed separately with
the Securities and Exchange Commission. Asterisks denote omissions.
SOFTWARE LICENSE AND MARKETING AND DISTRIBUTION AGREEMENT
This Software License and Marketing and Distribution Agreement (the "Agreement")
is entered into as of August 20, 1997 (the "Effective Date") by and between
BISYS, Inc. ("BISYS"), a Delaware corporation with its principal place of
business at 11 Greenway Plaza, Houston, TX 77046-1102, and Open Solutions Inc.
("OSI"), a Delaware corporation with its principal place of business at 300
Winding Brook Drive, Glastonbury, CT 06033.
RECITALS
A. BISYS, through its TOTALPLUS(R) Division, is a leading provider of
comprehensive data processing outsourcing solutions to financial institutions.
B. OSI is the developer and owner of The Complete Banking Solution(TM) system
and is a leading supplier of client/server software and information services to
financial institutions.
C. The parties wish to establish an alliance whereby (i) BISYS will be the
exclusive national Outsourcing Services provider and exclusive national
Facilities Manager of The Complete Banking Solution system to Financial
Institutions in the United States; (ii) OSI will license to BISYS the OSI
Proprietary and OSI Interface Software used in connection with such system;
(iii) the parties will engage in certain marketing and selling activities; and
(iv) BISYS will be a recommended preferred provider of certain related services.
Now, therefore, in consideration of the mutual obligations set forth herein, the
parties agree as follows.
1. DEFINITIONS
1.0 Change of Control - shall mean with respect to a particular entity (i) the
consummation of a merger or consolidation of that entity with another in which
the owners of interests (shares or otherwise) of the particular entity
immediately prior to the consummation of such transaction do not own at least
65% of the ownership interests of the surviving successor, acquiring or assuming
entity; (ii) the sale of all or substantially all the assets of such entity; or
(iii) the acquisition of beneficial ownership by any person (including a group
within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended) of 35% or more of the outstanding ownership interests of such
entity. For the purposes of this agreement an initial public offering of OSI
shall not be deemed a change in control.
<PAGE> 2
1.1 Conversion - shall mean the process of converting a new Customer's data to
the System.
1.2 Conversion Date - shall mean the date on which live production begins.
Live production shall mean the time when Customer uses the System or
portions thereof to execute transactions, produce reports or retrieve
information from the OSI Database Model on a regular basis in a production
non-test environment.
1.3 Customer - shall mean that Financial Institution for which BISYS
contractually provides either data processing Outsourcing Services using
the System or acts as Facilities Manager of the System. BISYS shall
provide a form copy of the BISYS Customer contract for Outsourcing or
Facilities Management to OSI prior to entering into the first Customer
contract.
1.4 Documentation - shall mean all user manuals, system guides and related
publications for the OSI Proprietary Software and OSI Interface Software.
1.5 Enhancements - shall mean all upgrades, improvements, modifications and
updates to the OSI Proprietary Software and OSI Interface Software made
available to OSI customers.
1.6 Excluded Licensees - shall mean the Named Competitors and any outsourcing
service providers shown on Schedule 1.6 hereto, which may be amended from
time to time by BISYS with the written consent of OSI, which shall not be
unreasonably withheld.
1.7 Facilities Manager; Facilities Management - shall mean the provider and
operator of the System for the benefit of a Financial Institution on site
at the Financial Institution's facilities; the activity of so providing
and operating the System.
1.8 Financial Institution - shall mean all classes of banks, including those
chartered under state or federal law, commercial banks, savings banks,
mutual savings banks, thrift institutions, savings and loan associations
and credit unions, and branches thereof.
1.9 Interface Software- shall mean that software, other than the OSI Interface
Software, used to interface between and among the various application
software included in the System and between and among peripherals for use
in connection with the System.
1.10 License - shall mean the restricted non-transferable, non-assignable right
to BISYS hereunder to use the OSI Proprietary Software and OSI Interface
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<PAGE> 3
Software within its own data processing facilities as an Outsourcing
Services Provider, and at the Customer's facilities as Facilities Manager,
to provide data processing services to its Customers during the term of
this Agreement. The license will be for use on the Designated Hardware and
Operating Systems as defined in Schedule 17(g), as amended from time to
time.
1.11 Named Competitors - Named competitors of BISYS shall mean Fiserv, EDS, M&I
Data Services, NCR, Jack Henry, and ALLTEL/Systematics and successors
thereto, and other competitors named in Schedule 1.6 Named competitors of
OSI shall mean Phoenix International, Prologic, DCI, M&I Eastpoint, ITI
Premier 11 and NCR Autobank and others as may be amended from time to
time.
1.12 License Fee - shall mean the list price of the OSI Proprietary Software
and OS Interface Software based on the price lists initially shown on the
attached Schedule 1.12 for a similarly situated Financial Institution,
except where OSI routinely discounts such list price in which case License
Fee shall mean such discounted list price. OSI shall have the right to
modify such License Fees annually at the beginning of each calendar year.
1.13 Master Copy - shall mean the object code form copy of the OSI Proprietary
Software and OSI Interface Software and the data base code for the OSI
Database Model to be delivered upon execution of this Agreement and
thereafter from time to time as such code is enhanced and revised by OSI
to reflect the most current versions made available by OSI for use with
the System.
1.14 OSI Database Model - shall mean the database code and resulting database
model developed by OSI and included in the System.
1.15 OSI Proprietary Software - means collectively, the version(s) of software
as set forth in object code format, and database code format with respect
to the OSI Database Model, together with the Documentation to be provided
to BISYS by OSI, for use in connection with the System, including
Enhancements to such software, database code and Documentation that may be
provided by OSI to BISYS from time to time. As listed in Schedule 1.15.
1.16 OSI Interface Software- shall mean that software developed and owned by
OSI, or licensed to OSI, used to interface between and among various
application software and between and among peripherals for use in
connection with the
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<PAGE> 4
System, initially identified on Schedule 1.16 hereto, as may be amended
from time to time by OSI by written notice to BISYS.
1.17 OSI Source Code - shall mean the source code in machine readable form for
the OSI Proprietary Software and the OSI Interface Software owned by OSI.
1.18 Outsourcing Services - shall mean the outsourcing by Financial
Institutions of data processing and other information processing services
from a third party that provides such services remotely from its data
center facilities.
1.19 System - shall mean OSI's The Complete Banking Solution client server,
Oracle relational data base, Microsoft Windows NT environment system
including the applicable OSI Proprietary Software, OSI Interface Software,
OSI Database Model and required Third Party Software (TPS), as it may
exist from time to time during the term of this Agreement for use on the
Designated Hardware and Operating Systems as defined in Schedule 17(g), as
amended from time to time. OSI shall provide a new Schedule 17(g) to BISYS
to reflect the authorized Designated Hardware and Operating Systems as in
effect from time to time.
1.20 Third Party Software (TPS) - shall mean the software developed and owned
by an entity or person other than OSI used, or available for use, in
connection with the System, as initially shown on Schedule 1.19.
2. GRANT AND ACCEPTANCE OF SOFTWARE AND TRADEMARK LICENSE.
(a) Subject to the terms and conditions of this Agreement, OSI hereby grants
to BISYS and BISYS hereby accepts from OSI the License and the concurrent right
to copy and market the System during the term of this Agreement as the exclusive
national Outsourcing provider and exclusive national Facilities Manager of the
System to Financial Institutions in the United States, unmodified from the
version(s) provided by OSI from time to time, in object code form only. BISYS is
prohibited from sub-licensing any of its rights under this Agreement other than
to a direct or indirect wholly owned subsidiary of The BISYS Group, Inc., the
ultimate parent company of BISYS Title to and ownership of the OSI Proprietary
Software, the OSI Interface Software owned by OSI and the OSI Database Model and
all Enhancements other than specifically provided for in Section 13, shall at
all times remain with OSI.
(b) Subject to the terms and conditions of this Agreement, OSI hereby grants
to BISYS and BISYS hereby accepts from OSI a non-exclusive and non-transferable
right
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<PAGE> 5
to use the OSI trade names "OSI" or "Open Solutions Inc." and The Complete
Banking Solution trademark during the term of this Agreement for the sole
purpose of the promotion and marketing of the System. BISYS agrees to reproduce
OSI's trademarks and proprietary rights notices as necessary and appropriate on
the products and services provided by BISYS to the Customer that contain any OSI
trade secrets, trademarks or copyrights. Any and all OSI trademarks and trade
names which BISYS uses in connection with the rights granted hereunder are and
remain the exclusive property of OSI. Nothing herein shall prohibit or otherwise
limit BISYS from promoting and marketing the System as a product offered by its
TOTALPLUS(R) Division.
(c) Within 90 days of the Effective Date, and subject to any confidentiality
limitations, OSI shall deliver to BISYS a schedule (Schedule 2c)and copies of
the documentation set forth on such Schedule 2(c) hereto. OSI represents and
warrants that all agreements granting to OSI a license or other right to use
and/or sub-license the TPS, a schedule of OSI Interface Software, and all other
software or intellectual property included in the System shall be set forth on
Schedule 2(c).
3. DELIVERY OF CODE.
Upon execution of this Agreement, OSI shall deliver to BISYS a Master Copy of
the OSI Proprietary Software and OSI Interface Software in object code form, and
a Master Copy of the database code for the OSI Database Model, on disk. At all
times during the term of this Agreement, OSI shall deliver to BISYS within sixty
(60) days of a general software release to its customers new Master Copies of
the OSI Proprietary Software, OSI Interface Software and OSI Database Model as
designed for use on the Designated Hardware and Operating Systems as defined in
Schedule 17(g), so that BISYS has available to it. the most current version of
the System, including any and all Enhancements, offered by OSI to its customers
generally or made available by OSI to its customers generally. As part of the
License granted hereunder, BISYS shall have the right to copy such Master
Copy(ies) and Documentation for use in connection with its Outsourcing Services
and Facilities Management services to Customers and for other purposes
contemplated hereunder, including archival, testing, support backup, disaster
recovery, and demonstration.
4. EXCLUSIVITY.
(a) Subject to the limitations set forth below, BISYS shall have the exclusive
national (i.e., United States and its territories) License to use the System to
provide Outsourcing Services, and exclusive national License to provide and
operate the System as Facilities Manager, to Financial Institutions. The
foregoing
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<PAGE> 6
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
notwithstanding, during the term of this Agreement, OSI may grant and have
outstanding licenses (A) to use the System as an Outsourcing Services provider
to up to [**] local/regional providers (not to include BISYS) at any one time,
excluding the Excluded Licensees; provided in each case that such license (i) is
limited to a single local/regional provider, i.e., not a consortium or other
arrangement whereby a number of providers have entered into a joint venture or
partnering arrangement, (and for the first 24 months following the Effective
Date for the states of California, Oregon, Washington, Nevada and Arizona a
provider in existence as of the Effective Date) with (X) annual revenues from
its existing data processing services at the time of such license grant equal to
or less than [**] (Y) no more than [**] clients, and (Z) the main office of each
of such clients within the same state or adjacent states as such provider, (ii)
limits such license during the first 36 months to use of the System for such
provider's then existing clients plus up to an additional ten new clients but
not more than [**] clients and after such 36-month period to such additional
licenses as mutually agreed between OSI and such provider, and (iii) contains
restrictions limiting the use of such license upon a Change of Control of such
licensee involving a Named Competitor of BISYS to those Financial Institutions
for which the licensee is providing Outsourcing Services as of the date of the
Change of Control; and (B) to use the System as an Outsourcing provider solely
to credit unions to up to an additional [**] local/regional providers (not to
include BISYS) at any one time, excluding the Excluded Licensees, provided in
each case that such license (i) is limited to a single local/regional provider,
i.e., not a consortium or other arrangement whereby a number of providers have
entered into a joint venture or partnering arrangement, with annual revenues
from its existing data processing services at the time of such license grant
equal to or less than [**], and (ii) contains restrictions limiting the use of
such license upon a Change of Control of such licensee involving a Named
Competitor of BISYS to those credit unions for which the licensee is providing
Outsourcing Services as of the date of the Change of Control (such providers,
individually, a "Permitted Licensee" and, collectively, the "Permitted
Licensees"). The provisions of the immediately preceding sentences shall
terminate in the event that BISYS fails to reaffirm the Agreement within 180
days of a Change of Control of BISYS. A breach of the terms of this subparagraph
(a) by OSI shall be deemed a material breach under the Agreement, subject to
provision for cure as provided in Section 21(b). OSI shall have the option to
convert the rights granted herein to nonexclusive in the event BISYS is unable
to achieve the following milestones for the periods indicated (or cumulatively
with prior periods) by written notice within 45 days of the end of such period:
Year 1 Year 2 Year 3 Year 4 Year 5
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<PAGE> 7
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Financial Institutions entering [**] [**] [**] [**] [**]
into New Outsourcing
Services or Facilities
Management Agreements with
BISYS
Conversions [**] [**] [**] - -
Minimum Required License & [**] [**] [**] - -
Maintenance Fees pursuant to
Sections 8(a) and (b)
</TABLE>
Provided BISYS has satisfied the milestones for years 1 through 3 and that OSI
has satisfied its obligations pursuant to sections 7, 9, 10 and 11 hereof, then
BISYS agrees that the number of conversions for Year 4 and Year 5 shall be 22
and 25, respectively, and further agrees to a Minimum Required License &
Maintenance Fees pursuant to Sections 8(a) and (b) for Years 4 and 5 at amounts
to be mutually agreed that represent the retail sales rates and corresponding
fees of OSI in effect at such time. It is the intent of the parties to evaluate
the terms of this Agreement at the end of such five-year period, including the
extension thereof. The foregoing notwithstanding, OSI shall not have the right
to convert such rights to nonexclusive where BISYS has (i) entered into new
Outsourcing Services and/or Facilities Management agreements with Financial
Institutions representing at least [**] of the number required above for the
periods indicated and (ii) achieved or prepaid the above required minimum
License and Maintenance Fees within 30 days of the end of each annual period.
Provided OSI is not in breach of its obligations under this Agreement, BISYS
shall pay the minimum required fees for the periods indicated above to OSI
(i.e., a total of [**]) in consideration of the exclusivity agreement. Any
amounts paid by BISYS to OSI to satisfy the foregoing minimum obligations and
not otherwise due pursuant to Sections 8(a) and 8(b) hereof shall be treated as
prepaid License and Maintenance Fees under such Sections and shall be applied as
a credit against future amounts due and owing thereunder.
(b) From the date hereof, BISYS shall be the preferred Facilities Manager for
a licensed System installed at a Financial Institution's facilities (i.e., where
the Financial Institution has been granted a license to use the System in-house
at its facilities and elects to seek a Facilities Manager to operate the
System). Notwithstanding the foregoing, no provision in this agreement shall be
construed as prohibiting a Financial Institution licensed to use the System from
independently retaining a Named Competitor or Excluded Licensee to serve as its
Facilities Manager.
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<PAGE> 8
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(c) OSI represents and warrants as of the Effective Date that it has not
granted any license for use of the System to provide Outsourcing Services or to
serve as Facilities Manager to any entity other than BISYS. Unless specifically
prohibited by contract, OSI will provide written notice to BISYS upon the grant
of any license permitted pursuant to the foregoing subparagraph (a). In
addition, OSI agrees to provide an annual certification from its independent
auditors on or before the date it files such financial statements with the
Securities and Exchange Commission and otherwise the 120th day following the end
of each of its fiscal years, in conjunction with issuance of its annual
financial statements, identifying all license grants made pursuant to
subparagraph (a) in effect as of the end of such fiscal year.
(d) [**]. OSI represents and warrants that [**] being provided hereunder are
[**] under similar circumstances. If, during the term of this Agreement, OSI
[**] pursuant to and in accordance with subparagraph (a) hereof [**] Agreement
[**].
(e) EQUITY INVESTMENT. As a condition of the grant of exclusivity and as a
condition to any license grant by OSI to a Permitted Licensee hereunder, BISYS
and OSI shall complete the documentation necessary for BISYS to make, and BISYS
shall promptly thereupon make, the equity investment in OSI described in
Schedule 4(e) to this Agreement.
(f) REASONABLE COMMERCIAL EFFORTS & NON-COMPETE. BISYS shall use reasonable
commercial efforts in seeking agreements to provide Outsourcing Services and
services as Facilities Manager utilizing the System. Based on OSI's efforts
pursuant to Sections 7, 9, 10 and 11 hereunder, BISYS would expect to convert an
existing T0TALPLUS(TM) system host based client to the System within 12 months
of the Effective Date. Successful achievement of this conversion within the
expected time frame is expected to facilitate the development and refinement of
related conversion programs, completion of required development and the
integration into the System of the BISYS provided "wrap-around" products and
services identified in the following Section 5. BISYS agrees to provide an
annual certification from its independent auditors, on or before such time as it
files its annual financial statements with the Securities and Exchange
Commission, certifying as to the BISYS Customers that entered into Outsourcing
Services or Facilities Management agreements with BISYS during the prior fiscal
year. BISYS recognizes that it is in the parties' best interest that the
reputation of the System be upheld and, accordingly, it shall make commercially
reasonable efforts to provide quality sales and service to its Customers.
Notwithstanding the above and without limiting BISYS right to provide its
host-based T0TALPLUS(TM) system outsourcing solution, BISYS shall utilize OSI as
the exclusive provider of client/server core data processing for BISYS during
the term of this agreement. This includes development of a client/server core
processing system by
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<PAGE> 9
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
BISYS or the purchase of another product from an OSI Named Competitor as
identified in Section 1.11. A breach of the foregoing shall be deemed a material
breach under the Agreement. BISYS shall have the opportunity to cure any such
breach upon notice as provided in Section 21 herein.
5. PREFERRED PROVIDER.
OSI shall include BISYS, and its affiliates, as a recommended preferred provider
to deliver the following additional wrap-around services to OSI direct customers
of the System and as applicable to prospective customers:
(a) [**]
(b) [**]
(c) [**]
(d) [**]
Unless inappropriate, OSI marketing and promotional material identifying
wrap-around services shall identify BISYS as a recommended preferred provider of
the foregoing services.
6. SALES AND MARKETING.
(a) TRAINING. OSI shall provide four weeks advance notice of its regularly
scheduled and periodic special internal sales training programs as well as any
other internal training programs for sales and product support, customer service
personnel and systems and software engineers. BISYS shall have the right to
include a [**] of its like employees in such training programs, subject to
class-size limitations, on a [**] basis. BISYS shall be responsible for the
costs of all training materials and other out-of-pocket costs and expenses
directly or indirectly resulting from the participation of its employees in such
training programs as well as all travel and related costs.
(b) TRADE SHOWS. OSI and BISYS shall provide each other with advance notice of
their scheduled participation or intent to participate in a trade show so that
the parties may jointly participate if so desired.
(c) DEMONSTRATION. Upon execution of this Agreement, OSI shall provide to
BISYS a copy of OSI's demonstration program for sales and demonstration purposes
and shall provide BISYS with the most current version of such demonstration
program as it may exist from time to time. Unless inappropriate, OSI
demonstration systems demonstrating "wrap-around" services, as described in
Section 5 hereof, shall demonstrate the "wrap around" services offered by BISYS,
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<PAGE> 10
(d) MARKETING MATERIALS. BISYS and OSI shall, promptly following execution of
this Agreement, develop joint marketing material and standard disclosure
relating to each other, the alliance formed hereby and the products and services
to be offered hereunder, that may be used by both parties on an ongoing
unrestricted basis until otherwise agreed. Such material may also include a new
trademark or logo to reflect the alliance. Prior to the development of such
materials, neither party may publish and distribute any materials using the
trade marks or trade names of the other without the prior written consent of the
other, which shall not be unreasonably withheld. OSI will have final approval of
all marketing materials that represent the material functional aspects of the
System. The parties also expect to engage in certain joint sales and marketing
efforts as mutually agreed. Notwithstanding the foregoing, each party reserves
the right to continue to produce non-referencing marketing materials for their
independent use.
(e) SALES SUPPORT. OSI agrees to participate directly in any sales and
marketing presentations to potential Customers and to otherwise be actively
involved in providing sales support to BISYS through the period until BISYS has
entered into Outsourcing Services agreements or Facilities Management services
agreements for its first five Customers. Thereafter, upon BISYS' reasonable
request, and subject to availability OSI shall provide appropriate sales support
to assist BISYS in its efforts to execute additional Outsourcing Services
agreement employing the System with potential Customers. BISYS shall be
responsible for the reasonable out-of-pocket costs incurred by OSI for such
support.
(f) LEAD REGISTRATION AND REFERRAL. Where either BISYS or OSI determines after
a customer sales presentation or other qualification process that the customer
has a legitimate interest in the System being provided in the mode offered by
the other (i.e., in an Outsourcing Services or Facilities Management mode by an
OSI customer prospect or in an in-house mode by a BISYS customer prospect), such
party ("Referring Party") shall provide a written lead registration and referral
notice to the other identifying the potential customer and contact person. The
party receiving the notice shall have the right to call upon that customer
either separately or together with the Referring Party to close the sale. The
parties recognize that they may continue in competition for such business
opportunity. Where the party receiving the notice (i) has not made a sales
presentation to the identified customer within the six-month period prior to
receipt of such notice and (ii) within six months after the notice enters into
an agreement with such customer to provide the System, the Referring Party shall
be entitled to the Referral Fee described in Section 8 hereof.
Other than the lead registration and referral process described in the foregoing
paragraph, neither party shall have an obligation to disclose to the other nor
shall either party be entitled to information relating to the potential
prospects of the other.
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<PAGE> 11
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(g) NOTICE OF AGREEMENTS WITH CUSTOMERS. BISYS shall provide written notice
of a new Financial Institution client using the System to OSI within 30 days of
the execution of an agreement with such new client.
(h) PRESS RELEASES. The parties expect to issue a mutually agreed upon joint
press release announcing the alliance formed under this Agreement at the
appropriate time. Prior to such public announcement, neither party shall make
any public disclosure of the existence or terms of this Agreement without the
prior written consent of the other.
7. CONVERSION AND PRODUCTION SUPPORT.
OSI shall provide the Conversion, programming, operations and training resources
necessary to convert the first [**] Outsourcing Services Customers in
cooperation with BISYS who shall retain control of the Customer interface. In
consideration of such support, BISYS shall reimburse OSI at cost for reasonable
expenses it incurs in connection therewith. OSI shall prepare the Conversion
plans and provide a copy to BISYS. BISYS shall participate in the Conversions as
a training mechanism and shall be responsible for all subsequent Conversions. At
BISYS' reasonable request, and subject to availability, OSI shall provide
assistance for subsequent Conversions and related production. BISYS shall pay
OSI for such subsequent support services based on OSI's time and materials [**].
In addition, OSI shall provide the technical and operations support required to
establish a production environment at BISYS' initial Outsourcing Services
production facility for the System. At a minimum, OSI shall provide the support
required to deliver production for the initial Conversion from the date of such
Conversion through the 30 days post-Conversion. BISYS shall reimburse OSI its
reasonable out-of-pocket costs for such initial production support. Thereafter,
upon BISYS' request, OSI shall provide additional production/technical support
following such 30-day period and for additional Conversions, and in
consideration thereof BISYS shall pay OSI its time and materials [**].
8. FEES.
(a) LICENSE FEES:
i) OUTSOURCING. Upon successful completion of the Conversion of a Customer to
the System pursuant to an Outsourcing Services agreement, OSI shall be entitled
to a license fee equal to [**] of the OSI License Fee payable by an OSI direct
customer similarly situated as of the effective date of such Outsourcing
Services agreement. Such license fee shall be payable in equal monthly
installments over the initial term of the Outsourcing Services agreement, not to
exceed [**] during the first [**] of this
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<PAGE> 12
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Agreement and, thereafter, not to exceed [**]. Payments shall commence on the
first day of the month following the Conversion Date and each month thereafter
until paid in full unless the Outsourcing Services agreement shall earlier
terminate and BISYS is no longer an Outsourcing Services provider or Facilities
Manager to such Customer. Where such agreement is renewed for an additional
renewal term, OSI shall be entitled to an additional license fee equal to [**]
of the difference, if any, between the License Fee payable by a similarly
situated Financial Institution as of the date of such renewal and the License
Fee payable by a similarly situated Financial Institution as of the date of the
agreement. Such additional license fee, if any, shall be payable by BISYS over
the renewal term of the agreement, not to exceed [**]. Payments shall commence
on the first day of each month following the renewal date and thereafter until
paid in full unless the agreement shall earlier terminate and BISYS is no longer
an Outsourcing Services provider or Facilities Manager to such Customer.
ii) FACILITIES MANAGEMENT. Upon successful completion of the Conversion to the
System pursuant to a Facilities Management agreement, OSI shall be entitled to a
license fee equal to [**] of the OSI License Fee payable by an OSI direct
customer similarly situated to such Customer as of the effective date of such
Facilities Management agreement. Such license fee shall be payable in equal
monthly installments over the initial term of the Facilities Management
agreement, not to exceed [**] during the first [**] of this Agreement and,
thereafter, not to exceed [**]. Payments shall commence on the first day of each
month following the Conversion Date and thereafter until paid in full unless the
Facilities Management agreement shall earlier terminate and BISYS is no longer
an Outsourcing Services provider or Facilities Manager to such Customer. Where
such agreement is renewed for an additional renewal term, OSI shall be entitled
to an additional license fee equal to [**] of the difference, if any, between
the License Fee payable by a similarly situated Financial Institution as of the
date of such renewal and the License Fee payable by a similarly situated
Financial Institution as of the date of the agreement. Such additional license
fee, if any, shall be payable by BISYS over the renewal term of the agreement,
not to exceed [**]. Payments shall commence on the first day of each month
following the renewal date and thereafter until paid in full unless the
agreement shall earlier terminate and BISYS is no longer an Outsourcing Services
provider or Facilities Manager to such Customer.
iii) TERMINATION. In the event of termination of a Outsourcing Services
agreement or Facilities Management agreement prior to the expiration of its
initial or renewal term and the termination of the corresponding license fee,
BISYS shall pay OSI in addition to the normal ongoing fees due until
termination, a termination fee equal to the lesser of the amount representing
(A) the number of monthly installments
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<PAGE> 13
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
remaining and (B) the number of monthly installments set forth below based on
the number of months remaining in the initial or renewal term of such
Outsourcing Services or Facilities Management agreement:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Months Remaining in Term Monthly Installments Payable
- --------------------------------------------------------------------------------
<S> <S>
[**] [**]
- --------------------------------------------------------------------------------
[**] [**]
- --------------------------------------------------------------------------------
[**] [**]
- --------------------------------------------------------------------------------
</TABLE>
No further payment obligations in respect of such license fee shall be due.
(b) MAINTENANCE FEE. Upon Conversion to the System, OSI shall be entitled to
an annual maintenance fee during the initial term of the BISYS agreement with a
Customer equal to a percentage of the OSI License Fee payable by an OSI direct
customer similarly situated as of the date of the agreement as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Percentage
- --------------------------------------------------------------------------------
<S> <C>
[**] [**]
- --------------------------------------------------------------------------------
[**] [**]
- --------------------------------------------------------------------------------
[**] [**]
- --------------------------------------------------------------------------------
</TABLE>
Such annual maintenance fee shall be payable in equal monthly installments
commencing on the first day of each month following the Conversion Date through
the initial term or earlier termination of the agreement between BISYS and such
Customer. During any renewal term of the BISYS agreement with a Customer OSI
shall be entitled to an annual maintenance fee equal to [**] of the License Fee
payable by a similarly situated Financial Institution as of the date of such
renewal Such annual maintenance fee shall be payable in equal monthly
installments commencing on the first day of each month following the renewal
date through the renewal term or earlier termination of such agreement.
(c) REFERRAL FEE. Upon the conversion of a System based on the lead
registration and referral process described in Section 6(f) hereof, the party
receiving the benefit of the referral shall pay the Referring Party a one-time
referral fee equal to [**] of the License Fee payable by a similarly situated
Financial Institution, payable within 30
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<PAGE> 14
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
days of the conversion date of the System. To the extent the referral was
provided by a sales representative customarily entitled to commissions, it is
expected that the Referring Party shall, subject to its internal commission
policies with respect to entitlement to commissions, pay such referral fee to
such sales representative.
(d) PREFERRED VENDOR FEES. Where through OSI's efforts BISYS secures an
agreement to provide the services set forth in Section 5 hereof to OSI direct
customers of the System, OSI shall be entitled to receive the following fees
based on such agreements during the period in which both this Agreement and such
agreement to provide such services are in effect:
[**] [**] of annual revenue
[**] [**] of initial license fee
[**] [**] of annual revenue
[**] [**] of annual revenue
Such fees, other than the fees related to [**], shall be payable monthly by the
end of the month based on the payment of the associated revenues by the customer
to BISYS in the preceding month. A summary report setting forth the calculation
of the fees shall accompany such monthly payment. The fees relating to imaging
services shall be paid within 30 days of receipt of the payment to BISYS of such
initial license fee.
9. SYSTEM SUPPORT.
Irrespective of the termination of this Agreement, so long as any Outsourcing
Services or Facilities Management agreement between BISYS and a Customer
employing the System shall be in effect, OSI shall be obligated to provide
ongoing maintenance support to BISYS for the OSI Proprietary Software and the
OSI Interface Software as provided in Attachment 1 hereto
Notwithstanding OSI's support provided under Attachment 1, BISYS agrees that it
shall provide the first line of product and technical help desk support to its
Customers. This shall include all of the day to day issues of functionality,
error correction and customer service. In no instance shall OSI provide direct
support to BISYS Customers. Said OSI services shall be provided seven (7) days
per week, twenty four (24) hours per day for Priority A errors and during normal
working hours for other errors. OSI shall furnish the names and telephone
numbers of its personnel for both normal working hours and other times (e.g.,
holidays, weekends, etc.). BISYS shall provide the names and telephone numbers
of the designated BISYS personnel assigned to work with OSI.
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<PAGE> 15
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
BISYS agrees to use its best efforts to minimize the number of support contacts
that it makes with OSI after the first [**] outsourcing Services or Facilities
Management Services installations made under this Agreement.
10. PRODUCT DEVELOPMENT.
OSI shall use reasonable commercial efforts to maintain the System competitive
in its marketplace. A breach of the foregoing shall be deemed a material breach
under the Agreement. OSI shall have the opportunity to cure any such breach upon
notice as provided in Section 21 herein. Appropriate representatives of OSI and
BISYS shall meet at least semi-annually to discuss and review OSI product
development plans and for BISYS to provide input based on competitive feature
and function requirements. At any time during the term of this Agreement, BISYS
shall have the right to request certain development efforts related to the
System. To the extent it is mutually agreed that such development efforts
enhance the overall value, marketability or competitive position of the system,
such efforts shall be funded by OSI. BISYS shall be given the opportunity to
contribute to such efforts either through funding and/or contribution of
application specifications and/or certain technology to expedite delivery or to
address certain customer requirements that may not be considered to
significantly enhance the overall value, marketability or competitive value of
the system. In the event that BISYS develops and offers to OSI an application
mutually agreed to have value to the System, BISYS shall contribute such
application to OSI in consideration of a payment equal to [**]. Payment to BISYS
for any such development shall be made quarterly over a [**] period. All
products, derivative works or other intellectual property resulting from such
development efforts and incorporated into the System shall, as incorporated, be
the property of OSI regardless of the manner of funding and regardless of
whether made by OSI or BISYS. As the developer of the System, OSI acknowledges
that it will from time to time engage in certain software and hardware
benchmarking activities. OSI shall provide BISYS with written copies of the
results of all such benchmarking activities within 30 days of any such
benchmarking.
The parties recognize that BISYS has an interest in evaluating the technical
feasibility of integrating certain OSI System modules as replacements and/or
upgrades to its existing mainframe modules or otherwise developing linkages
between the OSI System modules and its mainframe modules. OSI agrees to support
and participate in any such feasibility evaluations which are expected to
include an evaluation of the integration of OSI's client server module to the
BISYS mainframe environment and/or use of the OSI System application code at the
BISYS mainframe level.
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<PAGE> 16
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
OSI, recognizing that modifications to the System designed to enhance its
performance in a multi Financial Institution processing environment will be
beneficial I to BISYS and to the Permitted Licensees and are fundamental to such
persons serving as Outsourcing providers, shall modify the System accordingly to
attain the anticipated benefits within a mutually agreeable time-frame provided
that BISYS pays for [**] of the required investment. BISYS shall recover from
OSI up to [**] of such investment(s) (i.e., [**] of the total investment such
that if fully recovered OSI and BISYS shall have each invested [**] of the
required investment) in the following manner:
(a) upon the grant of a license to a Permitted Licensee, a credit toward
License and Maintenance Fees payable pursuant to Sections 8(a) and (b) hereof
equal to the total investment made by BISYS multiplied by a fraction the
numerator of which is the number of clients for which the Permitted Licensee
provides outsourcing services and the denominator is the number of clients for
which BISYS provides outsourcing services; and
(b) a credit of [**] toward any License and Maintenance Fees payable in excess
of the minimum required License and Maintenance Fees pursuant to Sections 8(a)
and (b) hereof as set forth in the table in Section 4(a) hereof.
OSI reserves all right to determine the scope and nature of any and all
development activities that will be performed to the System regardless of the
source of funding.
11. CUSTOMER REQUIREMENTS.
OSI recognizes that BISYS may from time to time be requested to provide
additional features, functionality or interfaces with respect to the System in
order to secure a new, or retain an existing, Customer. OSI agrees to use
reasonable commercial efforts to deliver a feasibility assessment with respect
to such additional features, functionality or interfaces in writing within 30
days of receipt of a written request, including but not limited to an assessment
of the time period and resources necessary for, and remuneration to OSI to
satisfy such requirements. Based on such assessment, OSI and BISYS by mutual
agreement shall determine the appropriate course of action to address the
Customer requirements and, if appropriate, to set forth the specifications,
deliverables and costs in a writing mutually agreed and signed by OSI and BISYS.
OSI shall use commercially reasonable efforts to satisfy the requirements set
forth in such written agreement within the agreed time periods. BISYS shall not
make any contractual obligations with respect to such Customer requirements
except as specifically approved in writing by OSI.
-16-
<PAGE> 17
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
12. THIRD PARTY PRODUCTS.
Subject to limitations with the agreements between OSI and third parties and
applicable law, OS shall [**] all net profit from the sale of certain third
party products, including but not limited to the TPS, licensed or sold in
conjunction with the System to support outsourcing Services and Facilities
Management services provided by BISYS.
13. SOURCE CODE. As a condition to the effectiveness of the Agreement, OSI
agrees to enter into the standard escrow agreement providing BISYS with certain
rights to the source code for the OSI Proprietary Software and the OSI Interface
Software owned by OSI as set forth as Attachment 2 hereto, and to provide
current versions of such Software to the Escrow Agent as provided in such Escrow
Agreement, with the following additional release conditions:
(a) OSI's failure to take reasonable commercial efforts to cure its material
breach within ninety (90) days of receipt of written notice of such breach;
(b) OSI (i) becomes or is declared insolvent or bankrupt, (ii) becomes the
subject of, and fails to cause its dismissal within 180 days, any proceedings
relating to its liquidation, insolvency or for the appointment of a receiver or
similar officer for it, (iii) makes an assignment for the benefit of all or
substantially all of its creditors, or (iv) enters into an agreement for the
composition, extension, or readjustment of all or substantially all of its
obligations; or
(c) written notice of BISYS at any time during the 180 day period following a
Change of Control of OSI.
Emergency Access to Source Code: BISYS shall have immediate, temporary access to
the OSI Source Code upon written request to OSI in the event that a Customer
Emergency occurs. Such access shall last until the condition(s) requiring such
access have ceased and thereupon BISYS shall promptly return the deposit
materials to the Escrow Agent, together with a notification of the actions taken
and due documentation of all modifications, if any, made to the OSI Source Code.
Definitions: For purposes of this Section, the following definitions shall
apply:
Customer Emergency: BISYS has received notification from a Customer clearly and
convincingly demonstrating that, unless immediate, emergency corrective
modifications are made to the OSI Proprietary Software or to the OSI Interface
Software, and OSI is either incapable or refuses to make such corrective
modification, the Customer will be unable to operate in a commercially
reasonable capacity (which capacity shall include temporary off-line operations)
and material damages will be incurred by the Customer as a result thereof.
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<PAGE> 18
BISYS RIGHTS TO OSI SOURCE CODE UPON CHANGE OF CONTROL OF OSI. OSI shall
promptly deliver to BISYS a machine readable copy of the then current version of
the OSI Source Code upon a Change of Control of OSI. Thereafter OSI shall
deliver a new machine readable copy of the OSI Source Code within ninety (90)
days following a general release to OSI customers of any Enhancements or new
versions of the OSI Proprietary Software or OSI Interface Software developed by
OSI unless and until BISYS elects not to terminate this Agreement pursuant to
Section 21 (b)(iv) hereof, in which case BISYS shall return all copies of the
OSI Source Code to OSI or its successor and continue with the Agreement as
originally determined. In the event that BISYS chooses to terminate this
Agreement as provided in Section 21 (b)(iv) due to a Change of Control of OSI,
BISYS shall have the right to use the OSI Source Code to provide Outsourcing
Services and Facilities Management services to BISYS Customers and to maintain
and support such services, shall be free to develop additional Enhancements to
such OSI Source Code for use by BISYS Customers. It is understood that any
Enhancements, modifications or changes made by BISYS to the OSI Source Code
under this section shall be used solely for the purposes described in the
previous sentence. BISYS shall have ownership rights to only the Enhancements
made by BISYS allowable under this Section 13. OSI shall have no obligation to
support and maintain any Enhancements made by BISYS under the conditions set
forth in Section 21(b)(iv).
14. BOARD SEAT.
During the term of this Agreement, BISYS shall be entitled to nominate a
candidate to the Board of Directors of OSI, or any parent or holding company
that may hereafter exist and OSI agrees to take steps necessary to cause the
nomination of the person so nominated.
15. EMPLOYEES.
During the term of this Agreement, each party will refrain from seeking to hire
the employees of the other and, for the one year following termination of
employment, terminated employees of the other without the prior written consent
of the other.
16. CONFIDENTIALITY.
OSI represents that the System contains trade secrets and BISYS agrees to treat
the OSI Proprietary Software, OSI Database model and OSI Interface Software as
OSI's confidential information and will not disassemble, de-compile or reverse
engineer the System. Any breach or attempted breach of the foregoing sentence
shall be considered a material breach and subject to cure as provided in Section
21 herein.
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<PAGE> 19
The parties further acknowledge that in the course of performing their
respective responsibilities under this Agreement, each may be exposed to or
acquire information which is proprietary to or confidential to the other party
or its clients, including computer programs, software tools, protocols, system
benchmarks, business and marketing plans, product descriptions, development
schedules, product positioning, choices of product names and financial data. All
such confidential and proprietary information, in whatever form, are hereinafter
collectively referred to as "Confidential Information".
Except as otherwise permitted hereunder, the parties agree to hold such
information in strict confidence and not to copy, reproduce, sell, assign,
license, market, transfer, give or otherwise disclose such information to third
parties or to use such information for any purposes whatsoever, without the
express written permission of the other party and to advise each of their
employees, agents and representatives of their obligations to keep such
information confidential.
The parties shall use their reasonable efforts to assist each other in
identifying and preventing any unauthorized use or disclosure of any
Confidential Information. Without limitation of the foregoing, the parties shall
use reasonable efforts to advise each other immediately in the event that either
learns or has reason to believe that any person who has had access to
Confidential Information has violated or intends to violate the terms of this
provision, and will reasonably cooperate in seeking injunctive relief against
any such person.
"Confidential Information" shall not include information that: (i) is, as of the
time of its disclosure, or thereafter becomes part of the public domain through
a source other than the receiving party; (ii) was known to the receiving party
as of the time of its disclosure; (iii) is independently developed by the
receiving party; (iv) is subsequently learned from a third party not under a
confidentiality obligation to the providing party; or (v) is required to be
disclosed pursuant to court order or government authority, whereupon the
receiving party shall provide notice to the other party prior to such
disclosure.
17. WARRANTIES.
(a) OWNERSHIP. OSI represents and warrants that it has the sole ownership of
and/or the right to license and sub-license the OSI Proprietary Software and the
OSI Interface Software as contemplated by this Agreement and has the full power
to grant the rights granted herein without the consent of any other person or
entity.
(b) PERFORMANCE. OSI represents, warrants and covenants that the media on
which the OSI Proprietary Software and OSI Interface Software is recorded and
delivered to BISYS hereunder is free from defects in material and workmanship
under normal use and service for a period of ninety (90) days from delivery. OSI
agrees to replace any
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<PAGE> 20
defective media upon return to OSI. OSI represents and warrants that it has
taken all steps necessary to test the OSI Proprietary Software and the OSI
Interface Software for Disabling Code (as defined herein) and to eliminate
Disabling Code from the OSI Proprietary Software and the OSI Interface Software.
OSI warrants that the OSI Proprietary Software and the OSI Interface Software
will be free of Disabling Code as of the date of delivery by OSI to BISYS.
OSI will continue to take such steps with respect to all Enhancements made by
OSI to keep the same and the OSI Proprietary Software and OSI Interface Software
free of Disabling Code. Disabling Code shall mean computer instructions that:
a. Alter, destroy or inhibit the OSI Proprietary Software, OSI Interface
Software or BISYS' processing environment, including without limitation, other
programs, data storage, computer libraries, and computer and communications
equipment;
b. without functional purpose, self-replicate without manual intervention; or
c. purport to perform a meaningful function but which actually perform either
a destructive or harmful function, or perform no meaningful function.
OSI agrees that it will maintain a master copy of the OSI Proprietary Software
and the OSI Interface Software and all Enhancements made by OSI thereto, and
will take such steps as are necessary to keep the same free of Disabling Code.
(c) DISCLAIMER. THESE EXPRESS WARRANTIES TAKE THE PLACE OF AND SUPERSEDE ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED AND WHETHER OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE OR OTHERWISE, ALL OF WHICH ARE HEREBY EXPRESSLY DISCLAIMED.
EXCEPT AS EXPRESSLY PROVIDED HEREIN, OSI DOES NOT WARRANT, GUARANTEE, OR MAKE
ANY REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE OSI
PROPRIETARY SOFTWARE, OSI INTERFACE SOFTWARE OR DOCUMENTATION. OSI DOES NOT
WARRANT THAT THE OPERATIONS OF THE OSI PROPRIETARY SOFTWARE OR OSI INTERFACE
SOFTWARE WILL BE UNINTERRUPTED OR ERROR FREE.
BISYS understands that OSI is not responsible for and will have no liability for
and does not warrant hardware, software, or other items or any services provided
by any persons other than OSI. BISYS will also indemnify and hold OSI harmless
from any misrepresentations made by BISYS or its representatives as to the
features, functions and capabilities of the System. Failure of BISYS to
indemnify or hold OSI harmless from any such misrepresentation shall be
considered a material breach of this Agreement.
(d) LIMITATION OF LIABILITY. EXCEPT FOR OSI'S INDEMNITY OBLIGATIONS UNDER
SECTION 19 (RELATING TO INTELLECTUAL PROPERTY INFRINGEMENTS), A BREACH OF ITS
CONFIDENTIALITY OBLIGATIONS
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<PAGE> 21
UNDER SECTION 16, ANY LIABILITY OSI MAY HAVE FOR PERSONAL INJURY OR DAMAGE OR
DESTRUCTION OF REAL OR TANGIBLE PERSONAL PROPERTY, OR LIABILITY RESULTING FROM
OSI'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OSI SHALL NOT BE LIABLE TO BISYS
FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OR LOST
PROFITS OR REVENUES OUT OF THIS AGREEMENT OR IN ANY WAY RELATED TO THIS
AGREEMENT, EVEN IF OSI KNOWS, SHOULD HAVE KNOWN, OR HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
EXCEPT FOR A BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER SECTION 16, OR
LIABILITY RESULTING FROM ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, BISYS SHALL
NOT BE LIABLE TO OSI FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OR LOST PROFITS OR REVENUES ARISING OUT OF THIS AGREEMENT OR IN ANY WAY
RELATED TO THIS AGREEMENT, EVEN IF BISYS KNOWS, SHOULD HAVE KNOWN, OR HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(e) COMPLIANCE WITH LAWS AND REGULATIONS. OSI represents that for a period of
ninety (90) days after the date of execution of this Agreement and during any
period during which BISYS is receiving support in accordance with the terms and
conditions hereof, the OSI Proprietary Software and the OSI Interface Software
shall:
a. Function and perform substantially in accordance with the Documentation
and specifications. b. Operate on the Designated Hardware consistent with the
specifications and Documentation.
c. Process BISYS' Customer's data in accordance with the minimum data
processing standards promulgated by federal banking agencies which regulate
BISYS' Customers. If BISYS discovers that either the OSI Proprietary Software or
OSI Interface Software does not meet the criteria set forth above, BISYS shall
notify OSI and OSI shall promptly take commercially reasonable steps in
accordance with support terms and conditions to bring the OSI Proprietary
Software or OSI Interface Software into compliance with the criteria set forth
above.
(f) YEAR 2000 COMPLIANCE. OSI represents that the OSI Proprietary Software and
the OSI Interface Software to be utilized by BISYS and its Customers corresponds
with standards set forth in Attachment 3 to this Agreement, taking into
consideration the appropriate governmental regulatory agencies' requirements
regarding the year 2000. Upon BISYS' written request given after October 1,
1998, BISYS, at its own cost, may retain the services of a third party auditor
to review and evaluate, at a time mutually agreed, the System for the sole
purpose of determining whether the System is able to perform Year 2000
processing.
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<PAGE> 22
(g) COMPATIBILITY WITH DESIGNATED HARDWARE. The System, and each module and
function thereof, will be capable of operating in a commercially reasonable
manner on the Designated Hardware and operating environment specified in
Schedule 17(g).
18. [THERE IS NO SECTION 18.]
19. INDEMNIFICATION.
(a) INDEMNIFICATION BY OSI. OSI shall defend, indemnify and hold BISYS and its
officers, directors, agents and employees harmless from and against any and all
claims, suits, damages, liabilities, costs and expenses (including reasonable
attorney's fees) arising out of or resulting from any claim that BISYS' use of
the OSI Proprietary Software or OSI Interface Software infringes a presently
existing United States patent, copyright, or trademark or misappropriates a
trade secret of any third party, provided OSI is:
i) promptly notified of any and all threats, claims and proceedings related
thereto,
ii) given reasonable assistance (at OSI's sole cost and expense), and
iii) given the opportunity to assume sole control over the defense and all
negotiations for a settlement or compromise.
OSI shall not, however, enter into any settlement without BISYS' prior written
consent, which shall not be unreasonably withheld, if such settlement impairs
any material right of BISYS under the Agreement.
Notwithstanding anything to the contrary contained herein, BISYS shall have the
right to defend and settle, at OSI's expense, against any such infringement or
misappropriation claim in the event that OSI fails to assume or reasonably
pursue such defense.
In the event that the OSI Proprietary Software or OSI Interface Software, or any
portion thereof becomes the subject of a claim of infringement or
misappropriation, OSI may, at its option and its expense, take any of the
following steps so that BISYS' use is not subject to any claim of infringement
or misappropriation and BISYS is provided with functionally equivalent software
to the reasonable satisfaction of BISYS, provided that BISYS' use of the OSI
Proprietary Software or OSI Interface Software conforms with the provisions of
the Agreement:
i) procure for BISYS the right to continue using the OSI Proprietary Software
or OSI Interface Software; or
ii) replace or modify the infringing portion of the OSI Proprietary Software
or OSI Interface Software.
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<PAGE> 23
The foregoing obligations of OSI do not apply with respect to software and any
other products or portions or components thereof.
i) which are not the latest available release supplied by OSI to BISYS,
ii) which are modified by BISYS after shipment by OSI, if the alleged
infringement relates to such modification, unless OSI has consented to the
modification in writing, or such modifications is otherwise authorized,
permitted or provided for under this Agreement, or
iii) which are combined with other products, processes, hardware or materials
where the alleged infringement relates to such combination, unless OSI has
consented in writing to such combination or such combination is otherwise
authorized, permitted or provided for under this Agreement.
THE FOREGOING STATES THE ENTIRE LIABILITY OF OSI WITH RESPECT TO INFRINGEMENT OF
ANY PATENTS, COPYRIGHTS, TRADEMARKS OR MISAPPROPRIATION OF TRADE SECRETS BY THE
OSI PROPRIETARY SOFTWARE OR OSI INTERFACE SOFTWARE OR ANY PARTS THEREOF. NO
COSTS OR EXPENSES SHALL BE INCURRED FOR THE ACCOUNT OF OSI BY BISYS OR ITS
AGENTS WITHOUT THE PRIOR WRITTEN CONSENT OF OSI.
The provisions of this Section 19 do not apply to any TPS or any OSI Interface
Software licensed by OSI from a third party.
INDEMNIFICATION PROCEDURES. The OSI indemnification obligation under the
foregoing subparagraph (a) shall not apply (I) to the extent that BISYS was
responsible for giving rise to the matter upon which the claim for
indemnification is based, and (ii) unless BISYS promptly notifies OSI of any
matters in respect of which the indemnity may apply and of which BISYS has
knowledge and gives OSI the full opportunity to control the response thereto and
the defense thereof, including without limitation any agreement relating to the
settlement thereof. BISYS' failure to promptly give notice shall affect OSI's
indemnification obligation only to the extent OSI's rights are materially
prejudiced by such failure. BISYS may participate, at its own expense, in such
defense and in any settlement discussions directly or through counsel of its
choice.
20. RIGHT TO MAKE AN OFFER UPON THIRD PARTY OFFER.
BISYS shall have the right to offer to acquire all the outstanding shares or
substantially all the assets of OSI in the event of any bona fide written Third
Party Offer to acquire all of the outstanding shares or substantially all the
assets of OSI acceptable to the Board of Directors of OSI. OSI shall notify
BISYS of such offer and
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<PAGE> 24
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisks denote omissions.
all material terms thereof. For purposes of this Section, a "Third Party Offer"
means a written offer from any person or entity with the demonstrated financial
means to purchase all the outstanding shares or substantially all the assets of
OSI. Once BISYS receives notice of such bona fide offer and OSI's notice of
intention to duly consider such offer, BISYS shall have [**] in which to notify
OSI of its intent either to offer to acquire all of the outstanding ownership
interests in or substantially all the assets of OSI or to decline the
opportunity to make an offer. If BISYS intends to make an offer it shall do so
within [**] of its notice to OSI. Thereafter, OSI shall consider the BISYS offer
prior to acceptance of any offer. The OSI Board of Directors at its discretion
and in accordance with its fiduciary duty will consider and accept the offer
that best benefits OSI's shareholders. BISYS' right to notice shall terminate
upon completion of an initial public offering.
21. TERMINATION.
(a) TERM. This Agreement shall commence as of the Effective Date and continue
indefinitely unless terminated in accordance with provisions under this Section.
(b) TERMINATION CONDITIONS. This Agreement shall terminate upon:
(i) written agreement of the parties to terminate this Agreement;
(ii) a party failing to cure its material breach within ninety (90) days of
receipt of notice of such breach, and notice from the non-breaching party to the
breaching party of its intent to terminate this Agreement as of the date set
forth in such notice;
(iii) a party (A) becoming or being declared insolvent or bankrupt, (B) becoming
the subject of, and failing to cause its dismissal within 180 days, any
proceedings relating to its liquidation, insolvency or for the appointment of a
receiver or similar officer for it, (C) making an assignment for the benefit of
all or substantially all of its creditors, or (D) entering into an agreement for
the composition, extension, or readjustment of all or substantially all of its
obligations, and notice from the other party of its intent to terminate this
Agreement as of the date set forth in such notice; or
(iv) written notice of BISYS at any time during the 180 day period following a
Change of Control of OSI on not less than 30 days written notice; provided that
such termination date is a date not later than the last day of such 180 day
period.
(c) DUTIES UPON TERMINATION. Upon termination of this Agreement, the parties
shall continue to perform their respective payment and support obligations under
Sections 8 and 9 hereof which obligations shall survive the termination of this
Agreement. The foregoing notwithstanding, in the event of a termination pursuant
to clause (b)(iv) above, BISYS and OSI shall have the following rights and
obligations so
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<PAGE> 25
Confidential materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
long as any Outsourcing Services or Facilities Management agreement remains in
effect:
i) OSI shall continue to provide all Enhancements to, and any and all new
versions of, the OSI Source Code to BISYS within 90 days following general
release to OSI customers;
ii) BISYS shall have the right to convert an unlimited number of additional
BISYS Customers to the System and in consideration thereof shall pay OSI the
License Fees as provided in Section 8(a) hereof;
iii) For the 12 month period commencing with the first full month following the
termination date, BISYS shall pay the Maintenance Fees provided in Section 8(b)
hereof for both then existing and new BISYS Customers and OSI shall provide the
support services as set forth in Attachment 1 hereto. After such 12 month
period, (Y) OSI shall no longer be obligated to provide such support services,
and (Z) in consideration of OSI's obligation in clause i) above, BISYS shall pay
OSI a maintenance fee of [**] ([**] commencing with the quarter following the
date on which the number of BISYS Customers exceeds [**]) of the License Fee
applicable to each BISYS Customer. The applicable License Fee for existing BISYS
Customers as of the end of such 12 month period shall be the License Fee then
being used for such Customer for the calculation of maintenance fees under
Section 8(b) hereof. The applicable License Fee for new BISYS Customers after
such 12 month period shall be the License Fee used to determine the license fee
payable by BISYS pursuant to the foregoing clause ii).
22. DISPUTE RESOLUTION.
(a) Any controversy or claim arising out of or relating to this Agreement or
the breach thereof shall be settled by arbitration before three (3) arbitrators
in accordance with the Rules of the American Arbitration Association ("AAA")
then in effect, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be
conducted in the city nearest OSI's office having an AAA regional office. The
arbitrators shall be selected from a panel of persons having experience with and
knowledge of electronic computers and the computer business, and at least one of
the arbitrators selected shall be an attorney.
(b) The arbitrators shall have no authority to award punitive damages and may
not, in any event, make any ruling, finding or award that does not conform to
the terms and conditions of this Agreement.
(c) Either party, before or during any arbitration, may apply to a court
having jurisdiction for a temporary restraining order or preliminary or
permanent injunction where such relief is necessary to protect its interests.
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<PAGE> 26
(d) Neither party nor the arbitrators may disclose the existence or results
of any arbitration hereunder without the prior written consent of both Parties.
(e) Prior to initiation of arbitration or any form of legal or equitable
proceeding permitted by this agreement, the aggrieved party shall give the other
party at least thirty (30) days prior written notice describing the claim and
amount as to which it intends to initiate action, provided that nothing
contained herein shall prohibit either party from immediately seeking equitable
relief to enforce any provision of this agreement from a court of competent
jurisdiction under such circumstances as that party's interests hereunder and
its property will be otherwise comprised.
23. ASSIGNMENT. Except as specifically stated in this Agreement with regards
to Change in Control, neither this Agreement nor any of the rights, interests or
obligations of any party hereunder shall be assigned or delegated by either
party hereto without the prior written consent of the other. Such consent shall
not be withheld unreasonably. Any unauthorized assignment or delegation shall be
null and void.
24. GENERAL.
(a) NOTICES. Any notice provided pursuant to this Agreement shall be in
writing and shall be deemed given (i) if by hand delivery, upon receipt thereof;
(ii) if mailed, three (3) days after deposit in the United States mails, postage
prepaid, certified mail return receipt requested, or (iii) if sent via overnight
courier upon receipt.
If to BISYS:
Paul H. Bourke, President
BISYS, Inc.
11 Greenway Plaza, Houston, TX 77046-1102
With copies to:
General Counsel
The BISYS Group, Inc.
150 Clove Road, Little Falls, NJ 07424
If to OSI:
Douglas Anderson, President
Open Solutions, Inc.
300 Winding Brook Drive, Glastonbury, CT 06033.
With copies to:
Christine Horrigan, Esq.
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<PAGE> 27
Shipman & Goodman
One American Row, Hartford, CT 06103
(b) BINDING AGREEMENT. This Agreement shall be binding upon and inure to the
benefit of the parties, their successors and permitted assigns.
(c) GOVERNING LAW AND VENUE. This Agreement and performance hereunder shall be
governed by the laws of the State of New York without regard to conflicts of
law.
(d) FORCE MAJEURE. Neither party shall be liable for delay or failure to
perform any of its obligations hereunder to the extent that such delay or
failure arises times shall be considered extended for a period of time equal to
the time lost because of such delay or failure.
(e) SEVERABILITY. If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable by a court of competent jurisdiction, the
validity, legality and enforceability of the remaining provisions shall in no
way be affected or impaired thereby.
(f) REMEDIES. The rights and remedies of the parties set forth in this
Agreement are not exclusive and are in addition to any other rights and remedies
available to them in law or in equity.
(g) NO WAIVER. The waiver or failure of any party to exercise any right
provided for herein shall not be deemed a waiver of any further right hereunder.
(h) INDEPENDENT CONTRACTORS. The parties shall at all times be independent
contractors with respect to each other in carrying out this Agreement.
(i) HEADINGS. Headings used in this Agreement are for reference only and shall
not be deemed a part of this Agreement.
(j) SURVIVAL. In addition to OSI's obligations under Section 9, and BISYS'
payment obligations under section 8 and rights to obtain the source code from
escrow under Section 13, the provisions of this Agreement relating to
warranties, limitations of liability, indemnification, confidentiality, choice
of law and dispute resolution shall survive the termination of this Agreement.
(k) CONDUCT. Notwithstanding that OSI and BISYS may at times be in competition
for the same Customer, each party agrees to refrain from conduct intended to
disadvantage the other. Repeated violations of this section during any twelve
(12) month period after notice of such violation shall be considered a material
breach not subject to cure.
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<PAGE> 28
(l) TAXES. The System licensed hereunder to BISYS is basically for sublicense
to Customers and therefore should be exempt from sales, use and other similar
taxes. However, if such tax should be imposed on OSI, BISYS shall either bear
such tax by a direct payment to the taxing authority or shall reimburse OSI for
such tax. BISYS shall be responsible for any applicable customs and duties
related to its sublicensing of the System.
(m) ENTIRE AGREEMENT. This Agreement constitutes the complete understanding
and agreement of the parties with respect to the subject matter hereof and
supersedes and merges any prior understandings, statements, negotiations between
the parties, whether oral or otherwise. This Agreement may not be modified
except by a writing subscribed to by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives as of the date first set forth above.
OPEN SOLUTIONS INC. BISYS, INC.
By: /s/ Doug Anderson By: /s/ Paul H. Bourke
---------------------------- ---------------------------------
Name/title: Name/title:
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<PAGE> 29
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Schedule 1.6
[**]
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<PAGE> 30
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Schedule 1.12
OSI1997 List Price Schedule
The Complete Banking Solution 1997 Pricing Schedule
(Prices based on the higher of assets or accounts)
Asset Size or Number of Accounts Cost of System
[**] Accounts [**]
1997 Annual License Maintenance Fee Rate
[**] of the list price.
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<PAGE> 31
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Schedule 1.16
OS l's "The Complete Banking Solution" Interface Listing
Voice Response Units [**]
Edify
Regency
InterVoice
General Ledger Systems N/C Asset/Liability [**]
Financial Technology Inc. Financial Technology Inc.
Interactive Planning Systems Interactive Planning Systems
Item Processing [**] Imaging Systems [**]
NCR Proprietary SoftChec
SoftChec
Unisys Proprietary
Loan Origination Systems [**]
Sound Software
CFI Laser Pro
Contour
Uniform (Specialized Data Systems)
Collections Systems [**]
Intelligent Banking Systems
ATM
Positive Balance File [**]
Mellon
EDS
Norwest
Electronic Forms [**] per branch [**] per pager setup
Banker Systems Inc.
Compliance Systems, Inc.
Universal Pensions, Inc.
Banking Spectrum, Inc.
COLD Systems [**]
Optech
Macrosoft
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<PAGE> 32
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Schedule 1.15
OSI Proprietary Software
A. OS Proprietary SOFTWARE
"The Complete Banking Solution" Modules:
Customer Service Representative System Operations
Teller Bank Operations
Loan Monetary Branch Operations
Loan CSR Product Manager
Loan Utilities External File Manager
Loan Investor Batch Manager
Loan Escrow Batch Server
Card Manager G/L Interface
OSI Data Model IRS Manager
B. DOCUMENTATION
[**]
C. Designated Hardware and Operating Systems
The System operates on Intel based servers and personal computers
utilizing Microsoft Windows NT as the operating system and the Oracle Relational
Database Management System.
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<PAGE> 33
Schedule 1.19
Third Party Software ("TPS")
Oracle Relational Data Base Management System Release 7.3
Oasis Device Driver Software (Passbook & Validation & Receipt Printers)
SQRlBE Software SQR Production Reporting Tool
Eventus Software SQL Studio Data Access Tool
Jetform Software Forms Generation Tool for use with Electronic Forms
Octopus Automatic Switch Over Software Disaster Recovery Tool
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<PAGE> 34
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SERVER CPU. MEMORY AND DISK ESTIMATES
[**]
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<PAGE> 35
Schedule 4(e)
- - Purchase of 833,333 shares of Preferred Stock @ $6.00 per share for a total
equity investment of $5 million.
- - Plus a warrant to acquire an additional 416,667 shares @ $6.00 per share.
- - Subject to customary terms and conditions for such equity investments as the
parties mutually agree.
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<PAGE> 36
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
o Schedule 17G
Estimated Hardware/Software for 200,000 Accounts
- --------------------------------------------------------------------------------
DP Hardware
- --------------------------------------------------------------------------------
Data Base Server Pentium Pro 200, Four Processor, IGB RAM, [**]
(10) 9GB Dr. RAID 5, CD ROM, dual power, supplies & fans,
DAT Backup
Data Base Remote Site Backup Server, (2) Pentium/166, 256M [**]
RAM, (9) 9GB Dr., CD ROM, DAT Backup
WS Pentium Pro 200, 256K Cache, 80M RAM, 2GB SCSI Dr., [**]
EISA NIC, 14" SVGA Monitor, 4GB DAT, CD ROM, System
Admin. & Batch Workstation
WS Pentium Pro 200, 256K Cache, 48M RAM, 1GB SCSI Dr., [**]
EISA NIC, 14" SVGA Monitor, CD ROM, Network
Management Server
UPS
UPS
Ethernet Hub
- --------------------------------------------------------------------------------
DP Software
- --------------------------------------------------------------------------------
NT Server
Data Replication Software
Oracle RDBMS NT/seat (qty = 85% of total w/s qty)
SQR Development System
Forest & Trees
Tape Backup NT
SQL Server
Powerchute
Anti-Virus Software InocuLan
- --------------------------------------------------------------------------------
Branch Operations, Hardware
- --------------------------------------------------------------------------------
BR. File Server Pent./166, 48M RAM, CD ROM, NIC PCI,
EVGA Color, (2) 2.1GB Dr.
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WS Pent./200, 256K Cache, 80M RAM, 2GB SCSI Dr., 4GB
DAT, NIC PCI, EVGA Color, Br. Administrative Workstation
& Network Manager
UPS
DWA Printer Server, Pentium 133, 256K Cache, 32M RAM,
1GB IDE Dr., ISA NIC, 14" SVGA Monitor
Remote Access Model 28.8kbps
Equipment Racks
CSU DSU Includes Cable
Router
Intelligent Ethernet Hub
Expansion Hub
WS Pentium 133, 256K Cache, 32M RAM, 1GB IDE Dr., ISA
NIC, 14" SVGA Monitor
UPS for DWA
Flatbed Color Scanner (1-2/branch)
Passbook Printer
Validation & Receipt Printer
MICR Printer, 12PPM, 5 Input Drawers, Network Card
- --------------------------------------------------------------------------------
Branch Operations Software
- --------------------------------------------------------------------------------
Windows NT
Powerchute S/W (for graceful shutdown of servers)
MS NT Workstations
DWA Printer Manager
System Management SW
SMS Client License (20 User)
Tape Backup NT
Anti-Virus Software InocuLan
SQR Report Generator
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<PAGE> 38
Attachment 1
SUPPORT TERMS AND CONDITIONS
1. Coverage
Subject to the terms hereof, OSI shall provide Support to BISYS for the OSI
Proprietary Software as defined in the Agreement hereunder.
2. Support Services
Support Services consist of:
a) Error Correction and Telephone Support provided to the designated BISYS
Technical Support Contact concerning the Installation and use of the then
current release of the OSI Proprietary Software and the OSI Interface Software
owned and developed by OSI and the Previous Sequential Release.
b) Enhancements, as defined herein, of the OSI Proprietary Software and the
OSI Interface Software owned and developed by OSI that OSI in its discretion
makes generally available.
"Enhancements" mean new releases of the OSI Proprietary Software and the
OSI Interface Software owned and developed by OSI which support new regulations
and provide product enhancements and Fixes. Product Updates consist of one copy
of published revisions to the printed Documentation and one copy of revisions to
the machine readable OSI Proprietary Software and the OSI Interface Software
owned and developed by OSI. Support does not include the physical installation
of Product Updates; all such installations may be performed by OSI upon BISYS'
written request and shall be billable to BISYS at OSI's then current applicable
rate and subject to the discount granted to BISYS.
As part of the Support provided hereunder, OSI agrees to provide Product
Updates on a timely basis in order to enable BISYS' Customers to comply with
federal banking laws and regulations pertaining to the subject matter of the OSI
Proprietary Software.
As provided in the Exclusions section of this document, a condition
precedent to continued Support, Product Updates and any warranty relating to the
Software, BISYS agrees to promptly implement such modifications, updates and
enhancements to the OSI Proprietary Software and the OSI Interface Software
owned and developed by OSI
3. Term and Termination
3.1 Support shall be provided for the duration of the Agreement, unless
terminated by either party as provided herein.
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<PAGE> 39
3.2 OSI may suspend Support if BISYS fails to make payments pursuant to
Section 8, titled "Fees," other than payments being disputed in good faith,
within ten (10) days after BISYS receives notice on non-payment.
3.3 OSI may suspend Support if BISYS fails in a reasonably prompt manner to
implement such modifications, updates and enhancements to the OSI Proprietary
Software and the OSI Interface Software owned and developed by OSI (in the form
of Product Updates) as OSI shall require from time to time in its sole
discretion.
3.4 OSI may terminate in its sole discretion the Support related to a specific
software version, Designated Computer Hardware, hardware configuration or
network structure of the OSI Proprietary Software and the OSI Interface Software
owned and developed by OSI upon a prior three (3) year written notice of Support
discontinuance.
4 Remote Support Services
OSI intends to provide certain Support via a remote on-line connection to BISYS'
designated technical support center. BISYS hereby agrees to assist OSI in the
creation of such a remote on-line connection as part of the implementation of
the System and agrees to maintain and allow OSI access to its designated
technical support center and the OSI Proprietary Software and the OSI Interface
Software owned and developed by OSI through such remote on-line connection.
In the event that the remote on-line connection is not available to OSI
necessitating that OSI's personnel have to be deployed to the BISYS designated
technical support center to perform Support services that would otherwise have
been provided via the remote on-line connection BISYS agrees, in addition to any
fees payable under the Agreement:
a) to pay a per diem charge for all additional Support services at OSI's then
standard rates for such services and
b) to reimburse OSI for all reasonable travel and living expenses incurred by
or on behalf of OSI and its personnel in providing the additional Support
services to BISYS at BISYS' designated technical support center, which shall
have been pre-approved by BISYS in writing.
Any such charges for additional Support services and reimbursement for travel
and living expenses shall be billed by OSI to BISYS on a per occurrence basis
and shall be payable within 45 days of the applicable invoice.
5. Response, Problem Resolution Standards and Error Priority Levels
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<PAGE> 40
5.1 Commercially reasonable efforts shall be made to resolve problems
promptly. Upon BISYS' notification to OSI of a problem, OSI will investigate
such problem to determine the nature and origin of such problem and upon
completion of such investigation outline to BISYS the procedures to be followed
in reaching resolution to such problem.
OSI shall exercise commercially reasonable efforts to correct any Error or
nonconformance reported by BISYS in the OSI Proprietary Software, with the
following priority levels reasonably assigned to such Error by OSI in its sole
discretion:
a) Priority A Errors - OSI shall promptly commence the following procedures:
i) assign OSI personnel to correct the Error;
ii) notify OSI management that such Errors have been reported and of steps
being taken to correct such Error(s);
iii) provide BISYS with periodic reports on the status of the corrections; and
iv) initiate, within a commercially reasonable period of time that the Error
is reported to OSI, work to promptly provide BISYS with a Work-around or Fix and
diligently pursue a resolution of the Error. In the event OSI addresses any
Priority A Error by means of a temporary Work-around, OSI shall exercise
commercially reasonable efforts to effect a final resolution of the Error as
soon as possible thereafter.
b) Priority B Errors - OSI shall exercise commercially reasonable efforts to
include the Fix for the Error in the next regular Product Update.
c) Priority C Errors - OSI may include the Fix for the Error in the next Product
Update.
5.2 If OSI believes reasonably and in good faith that a problem reported by
BISYS may not be due to an Error in the OSI Proprietary Software or the OSI
Interface Software owned and developed by OSI, but may be due to another cause
(as illustrated herein), OSI will so notify BISYS. Such other cause may include
but not be limited to the failure by BISYS to install OSI recommended updates to
T PS , the installation by BISYS of software, or of a release or version of TPS,
which has not been certified and approved by OSI, or BISYS' installation of
hardware or network components which have not been certified and approved by
OSI.
At that time, BISYS may
a) instruct OSI to proceed with problem determination at BISYS' possible
expense as set forth below, or
b) instruct OSI that BISYS does not wish the problem pursued at BISYS'
possible expense.
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<PAGE> 41
If BISYS requests that OSI proceed with problem determination at its possible
expense and OSI determines that the error was not due to an Error in the OSI
Proprietary Software, BISYS shall pay OSI, at OSI's then current and standard
consulting rates, subject to BISYS' standard OS discount, for all work performed
in connection with such determination, plus reasonable related expenses incurred
therewith.
BISYS shall not be liable for:
a) repair to the extent problems are due to Errors in the OSI Proprietary
Software,
b) work performed under this paragraph in excess of its instructions, or
c) work performed after BISYS has notified OSI that it no longer wishes work
on the problem determination to be continued at its possible expense (such
notice shall be deemed given when actually received in writing by OSI).
If BISYS instructs OSI that it does not wish the problem pursued at its possible
expense or if such determination requires effort in excess of BISYS'
instructions, OSI may, at its sole discretion, elect not to investigate the
error.
In the event that OSI fails to resolve a problem or correct an Error within a
commercially reasonable time frame, the problem shall be escalated to OSI Senior
Management and additional technical support resources of a level appropriate for
resolution shall be assigned to the problem on a priority basis. In the case of
a Priority A Error, four (4) hours from the time the Error is reported shall be
deemed a commercially reasonable time frame to escalate OSI's efforts.
In the event that OSI is unable to resolve or correct a Priority A Error within
a commercially reasonable period of time, BISYS shall be entitled to terminate
the Agreement under the procedures provided therein.
6. Confidentiality
All information provided by either party to the other pursuant to these terms
and conditions shall be subject to the confidentiality obligations set forth in
Section 16 of the Agreement.
7. Exclusions
7.1 A condition precedent to OSI's obligation to perform Support shall be that
the OSI Proprietary Software problems shall not be the result of
a) BISYS' negligence, abuse or misapplication of the OSI Proprietary
Software,
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b) Use of the OSI Proprietary Software other than as specified in the
Documentation,
c) Use of the OSI Proprietary Software on hardware other than the Designated
Hardware
d) BISYS' failure to promptly implement such modifications, updates and
enhancements to the OSI Proprietary Software (in the form of Product Updates)
and to Third Party Software licensed from a Third Party as OSI shall require
from time to time in its sole discretion, or
e) Other causes beyond the reasonable control of OSI.
7.2 OSI shall have no obligation to support:
a) Altered, damaged or modified OSI Proprietary Software or OSI Interface
Software owned and developed by OSI (unless such modifications are consented to
in writing by OSI or otherwise authorized, permitted or provided for under this
Agreement) or any portion of the OSI Proprietary Software incorporated with or
into other software;
b) OSI Proprietary Software and the OSI Interface Software owned and
developed by OSI that is not the then current release or immediately Previous
Sequential Release.
7.3 Upon BISYS' request, OSI shall provide Support for the OSI Proprietary
Software which has malfunctioned as a result of any of the causes described in
this Section 7 at its then current and standard rates for material and labor.
Support do not include physical installation of Product Updates.
8. Limitation of Liability
EXCEPT FOR A BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER SECTION 16 OR ANY
LIABILITY OSI MAY HAVE FOR PERSONAL INJURY OR DAMAGE OR DESTRUCTION OF REAL OR
TANGIBLE PERSONAL PROPERTY OR LIABILITY RESULTING FROM OSI'S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, OSI'S LIABILITY FOR DAMAGES FROM ANY CAUSE OF ACTION
WHATSOEVER RELATING TO OSI'S AGREEMENT TO PROVIDE SUPPORT SHALL BE LIMITED TO
THE AMOUNT PAID BY BISYS TO OSI FOR SUPPORT DURING THE PRECEDING TWELVE (12)
MONTH PERIOD PURSUANT TO THE AGREEMENT. OSI SHALL NOT BE LIABLE FOR ANY
INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT
LIMITED TO, LOST PROFITS OR REVENUES, EVEN IF BISYS HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THIS ARTICLE SHALL SURVIVE TERMINATION OF THIS
AGREEMENT.
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OSI AGREES THAT IT WILL NOT WRONGFULLY DISABLE THE OSI PROPRIETARY SOFTWARE OR
ANY OTHER HARDWARE OR OSI PROPRIETARY SOFTWARE ON BISYS' COMPUTER SYSTEM FOR ANY
REASON. ANY LIMITATION OF LIABILITIES SET OUT IN THIS SECTION AND WITH RESPECT
TO OSI WILL BE NULL AND VOID IF OSI BREACHES ITS AGREEMENT SET FORTH IN THE
IMMEDIATELY PRECEDING SENTENCE.
9. Definitions
Unless defined otherwise herein, capitalized terms used in these Support Terms
and Conditions shall have the same meaning as set forth in the Agreement.
"Error" means the non-conformance or error in OSI Proprietary Software, or the
applicable portion thereof, which causes the OSI Proprietary Software to fail to
consistently, accurately and reliably operate and perform the features and
functions described in and in accordance with Specification and the
Documentation.
"Error Correction" means the use of commercially reasonable efforts to correct
Errors in accordance with the terms and conditions contained in this Attachment.
"Fix" means the repair or replacement of object or executable code versions of
OSI Proprietary Software to remedy an Error.
"Previous Sequential Release" means the release of OSI Proprietary Software
which has been replaced by a subsequent release of the same OSI Proprietary
Software. Notwithstanding anything to the contrary contained herein, a Previous
Sequential Release will be supported by OSI for a period of not less than six
(6) months after release of the subsequent release.
"Priority A Error" means an Error which renders OSI Proprietary Software
inoperative, causes inaccuracies in the data processed by the OSI Proprietary
Software, degrades the functions or feature of the OSI Proprietary Software or
materially restricts BISYS' use of the OSI Proprietary Software.
"Priority B Error" means an Error which degrades the functions or features of
the OSI Proprietary Software or restricts BISYS' use of the OSI Proprietary
Software. "Priority C Error" means an Error which is cosmetic or trivial in
nature and which causes only a minor impact on BISYS' use of OSI Proprietary
Software
"Support" means OSI support services as described in Section 2.
"Telephone Support" means technical support telephone assistance provided by OSI
to the Designated Technical Support Contact concerning problem resolution and
the use of the then current release of OSI Proprietary Software and the Previous
Sequential Release. Calls will be accepted during OSI's normal business hours,
except that in the event of an emergency, OS will accept all calls made to the
emergency off-hours telephone numbers which OSI shall supply to BISYS and always
promptly update as they change, 24 hours per day, 7 days per week, 365 days per
year.
"Work-around" means a modification of the OSI Proprietary Software and/or a
change in the procedures followed or data supplied by BISYS to avoid an Error
without substantially impairing BISYS' use of OSI Proprietary Software.
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THESE TERMS AND CONDITIONS CONSTITUTE A SERVICE CONTRACT AND NOT A PRODUCT
WARRANTY. THE OSI PROPRIETARY SOFTWARE AND ALL MATERIALS RELATED TO THE OSI
PROPRIETARY SOFTWARE ARE SUBJECT EXCLUSIVELY TO THE WARRANTIES SET FORTH IN THE
AGREEMENT. THIS ATTACHMENT IS AN ADDITIONAL PART OF THE AGREEMENT AND DOES NOT
CHANGE OR SUPERSEDE ANY TERM OF THE AGREEMENT EXCEPT TO THE EXTENT UNAMBIGUOUSLY
CONTRARY THERETO.
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Attachment 3
OSI Policies and Standards on the year 2000
OSI's The Complete Banking Solution system has been tested for year 2000
compliance and the following information is available to our clients to assist
them with internal audits and external examinations:
Oracle database structures use an internal date format that fully supports four
digit years and therefore the year 2000 is provided for.
Our internal logical date use and date calculations fully support cross century
dates.
Our tests have concluded that we do treat the year 2000 as a leap year (i.e.
there is a February 29th, 2000).
This is in accordance with the practice that years that divide by four are leap
years. The first year of a new century; unless the century itself divides by
four is not a leap year (i.e. the year 1900 and 2100 are not leap years, while
the year 2000 is a leap year).
All OSI reports provide for the year 2000 even if individual dates show with a
two position year (i.e. 11-01-96 and 11-01-00).
Since the OSI system, like all banking systems, needs to process external data
files we are unable to change our code to function with date fields in these
files until the originator directs us to do so.
NOTE: ATM and ACH files are examples of data that may not support the year 2000
at present and therefore make it impossible for OSI to fully certify year 2000
compliance.
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<PAGE> 1
EXHIBIT 10.10
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
LICENSE AND MARKETING AGREEMENT
BETWEEN OPEN SOLUTIONS INC. &
CONNECTICUT ON-LINE COMPUTER CENTER, INC.
This Software License Agreement (the "Agreement") is entered into as of
December 9, 1997 (the "Effective Date") by and between Connecticut On-line
Computer Center, Inc. (COCC), a Connecticut corporation with its principal place
of business at, 135 Darling Drive, Avon Park South, Avon, CT 06001 and Open
Solutions Inc. (OSI), a Delaware corporation with its principal place of
business at 300 Winding Brook Drive, Glastonbury, CT 06033.
RECITALS
A. COCC is a leading provider of comprehensive data processing
outsourcing services to financial institutions in the Northeast region of the
United States.
B. OSI is the developer and owner of The Complete Banking
Solution(TM) ("System") and is a leading supplier of client/server software and
information services to financial institutions.
C. The parties wish to establish an agreement whereby (i) COCC will
be the Regional Outsourcing Data Center providing the System to Financial
Institutions in Connecticut, Vermont, New Hampshire, Maine, Massachusetts, Rhode
Island, New York and any additional states as mutually added to this Agreement;
(ii) OSI will license to COCC the OSI Proprietary Software, OSI Interface
Software and related Documentation used in connection with the System; (iii) the
parties will engage in certain marketing and selling activities; and (iv) COCC
will be a recommended preferred provider of certain related services.
Now, therefore, in consideration of the mutual obligations set forth
herein, the parties agree as follows.
1 DEFINITIONS.
1.1 Assets - shall mean the total dollar value of a Financial
Institution's accounts which are processed by COCC as a Regional Outsourcing
Data Center, as defined below.
1.2 Change of Control - shall mean with respect to a particular
entity (i) the consummation of a merger or consolidation of that entity with
another in which the owners of interests (shares or otherwise) of the particular
entity immediately prior to the consummation of such transaction do not own at
least 65% of the ownership interests of the surviving successor, acquiring or
assuming entity; (ii) the sale of all or substantially all the assets of such
entity; or (iii) the acquisition of
<PAGE> 2
beneficial ownership by any person (including a group within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) of
35% or more of the outstanding ownership interests of such entity. For the
purposes of this agreement an initial public offering of OSI or COCC shall not
be deemed a change in control.
1.3 COCC Territory - shall mean those Financial Institutions
located in Connecticut, Vermont, New Hampshire, Maine, Massachusetts, Rhode
Island, New York and any additional states as added to this Agreement by written
mutual agreement, including all branches, whether located in or outside of the
above states, of those Financial Institutions.
1.4 Conversion - shall mean the process of converting a
Customer's data to the System.
1.5 Conversion Date - shall mean the date on which live
production begins. Live production shall mean the time when Customer uses the
System or portions thereof to execute transactions, produce reports or retrieve
information from the OSI Database Model in a production (non-test) environment.
1.6 Customer - shall mean any Financial Institution for which
COCC provides data processing Outsourcing Services using the System, including
all branches of such Financial Institution.
1.7 Designated Hardware and Operating Systems - the preferred
hardware and operating software upon which the OSI Proprietary Software and OSI
Interface Software is intended to run as defined in Schedules A, B and C; as
attached hereto and as amended from time to time.
1.8 Documentation - shall mean all user manuals, system guides
and related publications and any developers' notes or similar written material
for the OSI Proprietary Software and OSI Interface Software.
1.9 Enhancements - shall mean all upgrades, improvements,
modifications and updates to the OSI Proprietary Software and OSI Interface
Software made available to OSI or COCC customers, but shall not include software
programs created by COCC that are intended to operate as stand-alone software
programs independently, but which may interface with the OSI Database Model, OSI
Proprietary Software and OSI Interface Software.
1.10 Financial Institution - shall mean all classes of banks,
including those chartered under state or federal law, commercial banks, savings
banks, mutual savings banks, thrift institutions, savings and loan associations,
credit unions and branches thereof.
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1.11 Interface Software - shall mean software other than the OSI
Interface Software, including software developed by COCC, used to interface
between and among the various application software included in the System and
between and among peripherals for use in connection with the System.
1.12 License - shall mean the restricted non-transferable, non-
assignable right granted to COCC hereunder for the use by COCC and COCC's
Customers of the OSI Proprietary Software and OSI Interface Software within
their own data processing facilities to provide data processing facilities and
services by COCC as a Regional Outsourcing Data Center to its Customers during
the term of this Agreement.
1.13 License Fee - shall mean the amount paid to OSI by COCC to
obtain the rights to use the System as further described in Section 7 herein.
1.14 Master Copy - shall mean the source code and object code
form copy of the OSI Proprietary Software and OSI Interface Software and the
data base code for the OSI Database Model to be delivered upon execution of this
Agreement and thereafter from time to time as such code is enhanced and revised
by OSI to reflect the most current versions made available by OSI for use with
the System.
1.15 OSI Database Model - shall mean the database code and
resulting database model developed by OSI and included in the System.
1.16 OSI Proprietary Software - means collectively, the
version(s) of software as set forth in object code format, and database code
format with respect to the OSI Database Model, together with the Documentation
to be provided to COCC by OSI, for use in connection with the System, including
updates, Enhancements and modifications of such software, database code and
Documentation that may be provided by OSI to COCC from time to time, which in
its current form is attached hereto as Schedule D.
1.17 OSI Interface Software - shall mean that software developed
and owned by OSI, or licensed to OSI used to interface between and among various
application software and between and among peripherals for use in connection
with the System, initially identified on Schedule E hereto, as may be amended
from time to time by OSI by written notice to COCC.
1.18 Outsourcing Services - shall mean the outsourcing by
Financial Institutions of data processing and other information processing
services from a third party that provides such services remotely from its data
center facilities.\
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1.19 Pilot Institutions - shall mean the first three (3)
Customers where the System is installed, Conversion is complete, and live
production of Outsourcing Services is provided by COCC.
1.20 Regional Outsourcing Data Center - shall mean data center
facilities located within a specified territory that provides remote data
processing and other information processing services to Financial Institutions
located within such specified territory.
1.21 System - shall mean The Complete Banking Solution client
server, relational data base, operating in a Windows(TM) environment as
proprietary software of OSI, including the OSI Proprietary Software and OSI
Interface Software, as it may exist from time to time during the term of this
Agreement, for use on the Designated Hardware and Operating Systems. The System
shall not include raw data exported from the System or Database Model.
1.22 Third Party Software (TPS) - shall mean the software
developed and owned by an entity or person other than OSI used, or available for
use, in connection with the System, as initially shown on Schedule F.
2 GRANT AND ACCEPTANCE OF SOFTWARE AND TRADEMARK LICENSE.
2.1 Subject to the terms and conditions of this Agreement, OSI
hereby grants to COCC and COCC hereby accepts from OSI under all of OSI's
patents, trademarks and copyrights, as well as any know-how or trade secrets
related to the System and Documentation, a non-transferable, nonassignable
license to: duplicate, copy, distribute, display, use, adapt, modify, market,
and advertise the System during the term of this Agreement as a Regional
Outsourcing Data Center to Financial Institutions in the COCC Territory and such
additional states as may be added from time to time by written mutual agreement.
Such agreement shall not be unreasonably withheld. Notwithstanding the foregoing
or anything to the contrary in this Agreement, the license granted hereby to
duplicate, copy, use, adapt and modify the System shall be perpetual upon the
payment of the Down Payments as defined herein. It is understood and agreed that
all right, title and interest to all Enhancements made by COCC in and to the
System and Documentation and all inventions, copyrights, trade secrets and other
intellectual property rights therein shall vest in OSI.
2.2 OSI hereby grants to COCC and COCC hereby accepts from OSI a
non-exclusive, nontransferable and non-assignable right to use the OSI trade
name and The Complete Banking Solution(TM) trademark for the sole purpose of the
promotion and marketing of the System. COCC agrees to reproduce OSI's trademarks
and proprietary rights notices as necessary and appropriate on the products and
services provided by COCC to the Customer. Any and all OSI trademarks and trade
names
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<PAGE> 5
which COCC uses in connection with the rights granted hereunder are and remain
the exclusive property of OSI. Notwithstanding the foregoing, COCC has the right
to re-name the System or any component thereof in accordance with COCC's own
marketing plans to its Customers, so long as COCC gives attribution to OSI for
the use of The Complete Banking Solution(TM) trademark or OSI's proprietary
rights.
3 DELIVERY OF CODE.
3.1 Upon execution of this Agreement, OSI shall deliver to COCC
a Master Copy of the OSI Proprietary Software and OSI Interface Software in
source code and object code form, and a Master Copy of the database code for the
OSI Database Model, on disk. At all times during the term of this Agreement, OSI
shall deliver to COCC within sixty (60) days of a general software release to
its customers new Master Copies of the OSI Proprietary Software, OSI Interface
Software and OSI Database Model so that COCC has available to it the most
current version of the System, including any and all Enhancements, offered by
OSI to its customers or made available by OSI to its customers together with
copies of corresponding amendments to the Escrow Agreement, as defined below,
adding any such general release or Enhancement to the materials on deposit with
the escrow agent. As part of the License granted hereunder, COCC shall have the
right to copy, modify and use `such Master Copies and Documentation for use in
connection with its Outsourcing Services to Customers and for other purposes
contemplated hereunder, including archival, testing, support backup, disaster
recovery, and demonstration.
3.2 At all times during the term of this Agreement, COCC shall
deliver to OSI within sixty (60) days of a general software release to its
customers Master Copies of the OSI Proprietary Software, OSI Interface Software
and OSI Database Model as modified by COCC so that OSI has available to it the
most current version of the System used by COCC, including any and all
Enhancements, offered by COCC to its customers or made available by COCC to its
customers.
4 EXCLUSIVITY.
4.1 EXCLUSIVE REGIONAL OUTSOURCING DATA CENTER. COCC shall have
an exclusive License, subject to paragraph 4.2 below, to use the System to
provide Outsourcing Services as the Regional Outsourcing Data Center to
Financial Institutions located in the COCC Territory or other states added by
mutual written agreement. Such agreement shall not be unreasonably withheld.
OSI's breach of the foregoing shall be deemed a material breach under the
Agreement, provided however, OSI shall have the opportunity to cure any such
breach upon 30 days written notice.
4.2 REASONABLE COMMERCIAL EFFORTS AND COCC EXCLUSIVITY. COCC
shall use reasonable commercial efforts in seeking agreements to provide
Outsourcing
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<PAGE> 6
Services to new and existing Financial Institutions. To retain the marketing
exclusivity agreement set forth in paragraph 4.1 above, within three years
following the Conversion Date of the Pilot Institutions, COCC must have a number
of Customers equal to each of the aggregate number of Financial Institutions for
which COCC provides Outsourcing Services as of the date of this Agreement. In
the event that COCC does not have such a number of Customers after three years
following the date hereof, OSI shall have the right to license the System for
use by other Outsourcing Services providers in the COCC Territory. The aggregate
number of Financial Institutions for which COCC provides Outsourcing Services as
of the date of this Agreement is set forth on Schedule G.
4.3 OSI EXCLUSIVITY. OSI shall be the exclusive provider of
client/server core data processing software for COCC during the shorter of (i)
the term of this Agreement or (ii) for so long as COCC retains the right to
maintain exclusivity as the only Regional Outsourcing Data Center within the
COCC territory. COCC'S breach of the foregoing shall be deemed a material breach
under the Agreement, provided however, COCC shall have the opportunity to cure
any such breach upon notice as provided in Section 16.2.2 herein. The parties
agree that COCC's parallel mainframe software that provides substantially the
same service as the System shall not be considered client/server core data
processing software and any software installed and used on COCC's mainframes
shall not violate the terms of this Agreement.
4.4 CHANGE IN CONTROL. OSI's obligations as to marketing
exclusivity set forth in section 4.1 above, shall terminate in the event that
OSI chooses not to reaffirm the Agreement within 180 days of a Change of Control
of COCC. OSI reserves the right to restrict the license to the then existing
Customers of COCC using the System at the time of a change of control of COCC.
5 SALES AND MARKETING.
5.1 TRAINING. OSI shall provide four weeks advance notice of its
regularly scheduled and periodic special internal sales training programs, as
well as any other internal training programs for sales and product support,
customer service personnel and systems and software engineers. COCC shall have
the right to include a reasonable number of its employees in such training
programs, subject to class-size limitations, on a commercially reasonable fee
basis. COCC shall be responsible for reasonable out-of-pocket costs and expenses
directly resulting from the participation of its employees in such training
programs as well as all reasonable travel costs.
5.2 TRADE SHOWS. OSI and COCC shall use commercially reasonable
efforts to provide each other with advance notice of their intent to participate
in a trade show so that the parties may jointly participate.
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5.3 DEMONSTRATION. Upon execution of this Agreement, OSI shall
provide to COCC a copy of OSI's demonstration program for sales and
demonstration purposes and shall thereafter provide COCC with the most current
version of such demonstration program as it may exist from time to time.
5.4 MARKETING PLANS. COCC and OSI shall use commercially
reasonable efforts following execution of this Agreement to develop a plan that
reflects the parties joint sales and marketing efforts. The parties recognize
that it is in the parties' best interest that the reputation of the System be
upheld and, accordingly, they shall make commercially reasonable efforts to
provide quality sales and service to COCC's Customers.
5.5 SALES SUPPORT. OSI agrees to participate directly in any
sales and marketing presentations to potential Customers and to otherwise be
actively involved in providing sales support to COCC until COCC has entered into
Outsourcing Services agreements for the Pilot Institutions. Thereafter, upon
COCC's reasonable request, OSI shall provide appropriate sales support to assist
COCC in its efforts to obtain additional Customers. COCC shall be responsible
for OSI's reasonable expenses incurred for such support.
5.6 NOTICE OF AGREEMENTS WITH CUSTOMERS. Unless specifically
prohibited by the terms of such agreement, COCC shall provide written notice to
OSI within thirty (30) days after each new Conversion Date. OSI shall have the
right at its own expense to audit COCC for Financial Institutions utilizing the
System. An audit may be done on a annual basis with fifteen (15) days notice to
COCC. If any such audit shows any discrepancy of greater than five percent (5%)
in the license fees owed to OSI, COCC shall pay the cost of the audit in
addition to a one and one-half percent (1.5%) per month late fee for any
outstanding balance discovered.
5.7 PRESS RELEASES. The parties expect to issue a mutually
agreed joint press release announcing the execution of this Agreement. Prior to
such public announcement, neither party shall make any public disclosure of the
existence or terms of this Agreement without the prior written consent of the
other.
6 CONVERSION AND PRODUCTION SUPPORT.
6.1 PILOT INSTITUTIONS. In cooperation with COCC, OSI shall
provide the Conversion, programming, operations, and training resources
necessary to convert the Pilot Institutions, provided, however, COCC shall
retain control of the Customer interface. COCC shall pay OSI all fees for the
Conversion charged to and paid by the Pilot Institutions, or if no Conversion
fee is charged by COCC, COCC
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<PAGE> 8
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
shall pay OSI its current conversion services per diem rate of [**] plus
reasonable expenses. OSI shall prepare the Conversion plans and provide a copy
to COCC.
6.2 SUBSEQUENT CONVERSATIONS. COCC shall participate in the
Pilot Institution Conversions as a training mechanism and shall be responsible
for all subsequent Conversions following the Pilot Institutions. At COCC's
request, OSI shall provide support and related production for any Conversions
subsequent to the Pilot Institutions. COCC shall pay OSI for such assistance at
the then current per diem rate for conversion services plus reasonable expenses.
7 LICENSE FEES.
7.1 LICENSE FEES FOR OUTSOURCING. COCC will pay OSI license fees
based on an aggregate one-time License Fee tied to the total Assets under
management by COCC. Upon the execution of this Agreement, COCC will pay OSI [**]
an initial down payment and COCC will pay OSI an additional [**] down payment
upon successful Conversion of the Pilot Institutions ("Down Payments"). COCC
will pay to OSI a one-time fee of [**] of Assets of any Customer converted.
Payments will be made monthly on an "as converted basis" and will cease for all
Customers when an aggregate of [**] has been paid (inclusive of the Down
Payments). The[**] shall be considered a cap on the total License Fees payable
by COCC to OSI, subject to paragraph 7.3 below, but shall not be considered a
minimum or guarantee of License Fees.
7.2 RE-COMPUTATION. To retain the license fee pricing set forth
in paragraph 7.1 above, COCC must, within [**] following the Conversion Date of
the Pilot Institutions, have a number of Customers equal to [**] of the
aggregate number of Financial Institutions for which COCC provides Outsourcing
Services as of the date of this Agreement hereof and as set forth on Schedule G.
In the event that COCC does not have such a number of Customers after [**]
following the Conversion Date of the Pilot Institutions, OSI shall have the
right to re-negotiate the amount of License Fees payable upon any Conversion
occurring after such [**] period. The re-negotiated fees shall be subject to the
following formula:
7.2.1 If COCC has converted [**] of Financial Institutions
to the System, COCC shall pay to OSI a one-time fee
of [**];
7.2.2 If COCC has converted [**] of Financial Institutions
to the System, COCC shall pay to OSI a [**]; or
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
7.2.3 If COCC has converted [**] of Financial Institutions
to the System, COCC shall pay to OSI a one-time fee
of [**].
7.3 ASSETS OVER [**]. At no time shall the total License Fees
payable by COCC to OSI exceed [**] during the first [**] of this Agreement. [**]
after the execution date of this Agreement, COCC and OSI agree to jointly
conduct an analysis of Financial Institutions using the System to determine any
increase in aggregate Assets under management by COCC. COCC shall subsequently
pay to OSI an additional onetime license fee in [**] annual installments of
an amount equal to [**] in excess of [**] then under management by COCC for
Customers using the System.
7.4 MAINTENANCE FEES. COCC shall pay OSI on each anniversary
date of this agreement, annual maintenance fees at a rate of [**] of the
aggregate License Fees paid by COCC to OSI for the preceding year, excluding the
Down Payments. Annual maintenance fees will be recalculated each year based on
the annual balance of the aggregate License Fees paid. (Example: Year 3
maintenance fees = Year 2 License Fees x [**].) These maintenance fees may be
reduced by mutual agreement if COCC assumes additional support responsibilities
as set forth under Section 8.1 below. Further, subject to section 9.1 below, OSI
agrees to credit COCC with up to [**] of annual maintenance fees in the event
there shall be any mutually agreed upon development projects. Any maintenance
fee credit shall be negotiated at the time any development project is mutually
agreed upon and shall be credited to Maintenance Fees payable on the next
anniversary date of this Agreement. COCC shall only be eligible for such credit
after the Down Payments identified in Section 7.1 have been paid in full.
7.5 [**]. OSI represents and warrants that [**] being provided
hereunder are [**] under similar circumstances. If at any time OSI shall [**]
provided hereunder to COCC, [**].
8 SYSTEM SUPPORT.
8.1 SOFTWARE SUPPORT. Irrespective of the termination of this
Agreement, so long as COCC uses the System for any Customer, OSI shall be
obligated to provide ongoing maintenance support to COCC for the OSI Proprietary
Software and the OSI Interface Software. COCC agrees that it shall provide the
first line of product and technical help desk support to its Customers. The
first line of support shall include all of the day-to-day issues of
functionality, error correction and customer service. In the event that COCC
employees lack the requisite skills or knowledge to resolve an issue, OSI shall
provide telephone consulting services only
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<PAGE> 10
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
to COCC designated personnel to assist such personnel in the resolution of such
problems, relative to the System or Documentation. In no instance shall OSI
provide direct support to COCC's Customers, unless by mutual written agreement
executed by each of the parties hereto. Such OSI telephone consulting services
shall be provided seven (7) days per week, twenty-four (24) hours per day for
Priority A errors, as defined below, and during normal working hours for other
errors. OSI shall furnish the names and telephone numbers of its contact
personnel for both normal working hours and other times (e.g., holidays,
weekends, etc.). COCC shall provide the names and telephone numbers of the
designated COCC personnel assigned to work with OSI. COCC agrees to use
commercially reasonable efforts to minimize the number of support contacts that
it makes with OSI after the successful Conversion of the Pilot Institutions.
COCC also agrees to provide OSI with a quarterly report recording all calls made
to the COCC help desk, whether or not these calls were forwarded to OSI. After
the successful Conversion of the Pilot Institutions, any call made by COCC to
OSI that could have been reasonably resolved by COCC without OSI assistance or
that was made in direct response to a modification to the System by COCC shall
be chargeable to COCC as extraordinary support services at the rates set forth
in Schedule H.
8.2 SYSTEM ERRORS. OSI shall diligently work for the prompt
resolution of defects and errors in the System or correction of errors or
inconsistencies in the Documentation ("Correction"). Notwithstanding the
foregoing section 8.1, in case of a system-down condition (i.e. Priority Code
Emergency (A) as defined below) primarily attributable to OSI, COCC may utilize
and designate any means of communication for both the reporting of errors and
the correction thereof. OSI shall respond to and use commercially reasonable
efforts to complete correction of errors, defects and malfunctions in accordance
with the following schedule:
ERROR PRIORITY(1) RESPONSE(2) CLOSURE(3)
- ----------------- -------------- ---------------
(Calendar Days) (Calendar Days)
Emergency (A) [**] [**]
Critical (B) [**] [**]
Non-Critical (C) [**] [**]
(1) PRIORITY
CODES: A - Catastrophic System or module failures
that do not have a viable detour or
workaround available.
B - Problems that have been substantiated as a
serious inconvenience to users, including
any Priority A Error for which a viable
detour or workaround is available.
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<PAGE> 11
C - All other problems which the user can
avoid or detour for which there is no
urgency for a resolution.
(2) RESPONSE: Response consists of providing, as
appropriate, one or more of the following to
the COCC designated personnel requesting a
response: a workaround/detour, an existing
Correction, a new Correction against
reported product level only, an available
release, a release commitment for Priority B
and C, notification of a non-problem.
(3) CLOSURE: Closure consists of providing a final
Correction of the problem to the COCC
designated personnel requesting Correction,
including Enhancements to the System, and
revised or new Documentation as necessary.
8.3 PRIORITY "A" ERRORS. In the event OSI does not complete
Correction of any Priority A Error within the applicable times set forth above,
upon COCC's reasonable request, OSI shall furnish on-site maintenance support
personnel, at the designated site, who shall remain at the site and provide
support until the problem is corrected. In the event that the error is not due
primarily to an error, defect, malfunction, or breach of warranty regarding the
System or Documentation, COCC shall pay OSI at the rates set forth in Addendum 1
for time spent at the site and reimburse OSI for reasonable expenses incurred by
said personnel. In the event that the Priority A Error is due to an error in or
defect or malfunction of the System, OSI's liability shall be limited to the
cost of repair or replacement, or if repair or replacement is commercially
unavailable or unreasonable, to the Down Payments and aggregate License Fees
paid by COCC.
8.4 OPERATING SYSTEMS. OSI represents and Warrants that the
System can operate under Microsoft Windows NT and the UNIX operating systems.
OSI also represents and warrants, and COCC acknowledges, that the preferred
operating system for the System is Microsoft Windows NT. However, should it be
necessary for COCC to use the System under the UNIX operating system, OSI agrees
to assist COCC in making the System operational. If COCC's need for operating
under the UNIX operating system is due to the System's failure to perform in a
commercially reasonable manner, then OSI's assistance with moving all software
and data to the UNIX operating system will be at OSI's expense. If COCC chooses
to use the UNIX operating system for any other reason, COCC will pay OSI's
commercially reasonable current per diem rates for such assistance. Further, in
the event that OSI provides COCC with a separate agreement for the license of
operating systems in conjunction with the System, OSI agrees to pass all
warranties of the operating system's owner through to COCC.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
9 PRODUCT DEVELOPMENT.
9.1 OSI'S OBLIGATIONS. OSI shall use reasonable commercial
efforts to maintain the System as competitive in its marketplace. Appropriate
representatives of both OSI and COCC shall meet on a quarterly basis to discuss
and review OSI and COCC product development plans and for COCC to provide input
based on competitive feature and function requirements. Both parties agree to
use their commercially reasonable efforts to achieve mutual agreement on the
specific features and phases of development. OSI shall credit COCC for
maintenance fees payable under section 7.3 above based on COCC's commitment to
develop features and functionality for the System that benefits Customers.
9.2 INTELLECTUAL PROPERTY RIGHTS. The parties agree that all
right, title and interest to all Enhancements and other derivative works made by
COCC in and to the System and Documentation and all inventions, copyrights,
trade secrets and other intellectual property rights therein shall vest in OSI;
provided, however, that COCC shall have the right to use such Enhancements
during the term of this Agreement and for so long as any Customer uses the
System. OSI retains all ownership rights in the System as originally delivered
to COCC as well as all rights in subsequent Enhancements made to the System by
OSI, whether or not delivered to COCC. All products, derivative works or other
intellectual property rights resulting from such development efforts shall be
the property of OSI regardless of the manner of finding or control of the
development resources, but shall not include software programs created by COCC
that are intended to operate as stand- alone software programs independently,
but which may interface with the OSI Proprietary Software and OSI Interface
Software.
10 THIRD PARTY PRODUCTS. Subject to limitations with the agreements
between COCC, OSI and third parties, COCC shall [**], including but not limited
to the Oracle seats, which are sold in conjunction with the System to support
COCC's Outsourcing Services. Such third party products are listed on Schedule F,
which may be amended by mutual written agreement from time to time.
11 ESCROW OF SOURCE CODE.
11.1 CONDITION PRECEDENT. As a condition precedent to this
Agreement, OSI agrees to add COCC as a named third party beneficiary on the OSI
escrow agreement ("Escrow Agreement") providing COCC with certain rights to the
source code for the OSI Proprietary Software and the OSI Interface Software
owned by OSI as set forth as Schedule E hereto and any Enhancements (the "Source
Code")
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including without limitation the right to delivery by any escrow agent upon the
occurrence of any triggering event as set forth in section 11.2 hereof
("Triggering Event") of the Source Code. As a further condition precedent to
this Agreement, OSI shall deliver to COCC a copy of an executed Escrow Agreement
instructing any escrow agent party to such Escrow Agreement to deliver copies of
the Source Code to COCC upon the occurrence of any Triggering Event. The parties
acknowledge that COCC will already have Master Copies of the software subject to
the OSI escrow agreement. However, it is the parties' intent that in the event
the terms of the OSI escrow agreement are triggered, COCC shall have full access
and use of the source code maintained under the OSI escrow agreement, as well as
the continued ability to provide the System to its Customers under the License
granted in section 2 above.
11.2 TRIGGERING EVENTS.
Notwithstanding the terms of any escrow agreement between OSI and
an escrow company, the following shall be considered triggering events which
would allow COCC, as a third party beneficiary, access to and which would
require release of the escrowed software programs contained in the System upon
COCC's request:
11.2.1 OSI's voluntary or involuntary becoming or being
declared insolvent or bankrupt;
11.2.2 OSI's becoming the subject of, and failing to cause
its dismissal within sixty (60) days, any
proceedings relating to its liquidation, insolvency
or for the appointment of a receiver or similar
officer for it;
11.2.3 OSI's making an assignment for the benefit of all or
substantially all of its creditors;
11.2.4 OSI's entering into an agreement for the
composition, extension, or readjustment of all or
substantially all of its obligations;
11.2.5 OSI's failure to conduct business in the ordinary
course of business;
11.2.6 OSI's failure to provide COCC with additional Master
Copies of any software used in the System, upon
reasonable written request by COCC and sixty (60)
days written notice by COCC to request the software
from the escrow company, in the event that COCC's
access to additional Master Copies is commercially
necessary.
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<PAGE> 14
11.3 ESCROW OF SOURCE CODE. OSI shall at all times have the
Source Code in an escrow.
11.4 NOTICE OF TERMINATION OF ESCROW AGREEMENT. It shall be a
term of any Escrow Agreement that the escrow agent shall notify COCC and that
OSI shall notify COCC in the event that the Escrow Agreement is terminated for
any reason and in no event shall such Escrow Agreement be terminated without
providing COCC with 30 days prior written notification of such termination. Upon
such termination, OSI shall notify COCC of the new escrow agent and shall
provide COCC with an executed copy of the escrow agreement with such new escrow
agent. Such escrow agreement shall comply with this Section 11.
12 EMPLOYEES. During the term of this Agreement, each party will
refrain from seeking to hire or hiring the employees of the other and, for the
one year following termination of employment, terminated employees of the other
without the prior written consent of the other.
13 CONFIDENTIALITY.
13.1 CONFIDENTIAL INFORMATION. The parties further acknowledge
that in the course of performing their respective responsibilities under this
Agreement, each may be exposed to or acquire information which is proprietary to
or confidential to the other party or its clients, including computer programs,
software tools, protocols, system benchmarks, business and marketing plans,
product descriptions, development schedules, product positioning, choices of
product names and financial data. All such confidential and proprietary
information, in whatever form, are hereinafter collectively referred to as
"Confidential Information." The parties shall use their commercially reasonable
efforts to assist each other in identifying Confidential Information.
13.2 NON-DISCLOSURE. Except as otherwise permitted hereunder, the
parties agree to hold Confidential Information in strict confidence and not to
copy, reproduce, sell, assign, license, market, transfer, give or otherwise
disclose such information to third parties or to use such information for any
purposes whatsoever, without the express written permission of the other party
and to advise each of their employees, agents and representatives of their
obligations to keep such information confidential.
13.3 DUTY TO COOPERATE. The parties shall use their commercially
reasonable efforts to assist each other in identifying and preventing any
unauthorized use or disclosure of any Confidential Information. Without limiting
the foregoing, the parties shall use commercially reasonable efforts to
immediately advise each other in the event that either learns or has reason to
believe that any person who has had access to Confidential Information and has
violated or intends to violate the terms of
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this provision. The parties agree to reasonably cooperate in seeking injunctive
relief against any such person.
13.4 EXCLUSIONS. "Confidential Information" shall not include
information that: (i) is, as of the time of its disclosure, or thereafter
becomes part of the public domain through a source other than the receiving
party; (ii) was known to the receiving party as of the time of its disclosure;
(iii) is subsequently learned from a third party not under a confidentiality
obligation to the providing party; or (iv) is required to be disclosed pursuant
to court order or government authority; provided, however, the receiving party
shall provide notice to the other party sufficiently in advance of such
disclosure to allow such other party to obtain a protective order if it so
desires.
14 WARRANTIES.
14.1 OWNERSHIP. OSI represents and warrants that it has the sole
ownership of and/or the right to license and sub-license the System, including
the OSI Proprietary Software and the OSI Interface Software as contemplated by
this Agreement and has the full power to grant the rights granted herein without
the consent of any other person or entity. OSI represents and warrants that the
System does not infringe any patent, copyright, or trademark or misappropriates
a trade secret or infringes any intellectual property rights of any third party.
14.2 PERFORMANCE. OSI represents, warrants and covenants that the
media on which the System, including the OSI Proprietary Software and OSI
Interface Software is recorded and delivered to COCC hereunder is free from
defects in material and workmanship under normal use and service for a period of
ninety (90) days from delivery. OSI agrees to replace any defective media upon
return to OSI. OSI represents and warrants that it has taken all steps necessary
to test the OSI Proprietary Software and the OSI Interface Software for
Disabling Code (as defined herein) and to eliminate Disabling Code from the OSI
Proprietary Software and the OSI Interface Software. OSI warrants that the OSI
Proprietary Software and the OSI Interface Software will be free of Disabling
Code as of the date of delivery by OSI to COCC. COCC warrants that any
Enhancements made to the System and delivered to OSI shall be free of Disabling
Code as of the date of delivery by COCC to OSI.
14.3 DISABLING CODE. Disabling Code shall mean computer
instructions that:
14.3.1 Alter, destroy or inhibit the OSI Proprietary
Software, OSI Interface Software or COCC's
processing environment, including without
limitation, other programs, data storage, computer
libraries, and computer and communications
equipment;
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<PAGE> 16
14.3.2 Are without functional purpose, self-replicate
without manual intervention; or
14.3.3 Purport to perform a meaningful function but which
actually perform either a destructive or harmful
function, or perform no meaningful function.
14.4 FUTURE MODIFICATIONS AND ENHANCEMENTS. OSI will continue to
take such steps with respect to future modifications and Enhancements to keep
the same and the OSI Proprietary Software and OSI Interface Software free of
Disabling Code. OSI agrees that it will maintain a master copy of the OSI
Proprietary Software and the OSI Interface Software and all modifications and
Enhancements made by OSI thereto, and will take such steps as are necessary to
keep the same free of Disabling Code.
14.5 PERFORMANCE. OSI represents that for a period of ninety (90)
days after the date of execution of this Agreement and during any period during
which COCC is receiving support in accordance with the terms and conditions
hereof, the OSI Proprietary Software and the OSI Interface Software shall:
14.5.1 Function and perform substantially in accordance
with the Documentation and specifications;
14.5.2 Operate on the Designated Hardware consistent with
the specifications and Documentation; and
14.5.3 Process COCC's Customer's data in accordance with
the minimum data processing standards promulgated by
federal banking agencies which regulate COCC or the
Customers.
If COCC discovers that either the OSI Proprietary Software or OSI Interface
Software does not meet the criteria set forth above, COCC shall notify OSI and
OSI shall promptly take all commercially reasonable steps necessary to bring the
OSI Proprietary Software or OSI Interface Software into compliance with the
criteria set forth above.
14.6 YEAR 2000 COMPLIANCE. OSI represents and warrants that the
occurrence in or use by the Systems by COCC and the Customers of dates on or
after January 1, 2000 ("Millennial Dates") or which call on or require a
calendar function including, without limitation, any function indexed to the CPU
block, and any function providing specific dates or days shall not adversely
affect its performance with respect to date-dependent data, computations,
output, or other functions,
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<PAGE> 17
including, but not limited, calculating, comparing, and sequencing and that the
OSI System utilized by COCC and the Customers shall record, create, store,
process, output information related to or including Millennial Dates, provide
and, where appropriate, insert Millennial Dates and calculations for Millennial
Dates without error or omissions and at no additional cost or expense to COCC or
the Customers. The System (i) has no lesser functionality with respect to
records containing dates both, or either, before and/or after January 1, 2000
than heretofore with respect to dates prior to January 1, 2000, (ii) is
interoperable with other software used by COCC which may deliver records to,
receive records from or otherwise interact with the System in the course of
COCC's data processing, and (iii) is in compliance with all appropriate
governmental regulatory agencies' requirements. Upon COCC's written request
given after October 1, 1998, COCC, at its own cost, may retain the services of a
third party auditor to review and evaluate, at a time mutually agreed, the
System for the sole purpose of determining whether the System is able to perform
according to the representations in this Section 14.6.
14.7 COMPATIBILITY WITH DESIGNATED HARDWARE. The System, and each
module and function thereof, will be capable of operating in a commercially
reasonable manner on the Designated Hardware and operating environment specified
in Schedules B and C.
14.8 DISCLAIMER. THESE EXPRESS WARRANTIES TAKE THE PLACE OF AND
SUPERSEDE ALL OTHER WARRANTIES, EXPRESS OR IMPLIED AND WHETHER OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE. EXCEPT AS
EXPRESSLY PROVIDED HEREIN, OSI DOES NOT WARRANT, GUARANTEE, OR MAKE ANY
REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE OSI
PROPRIETARY SOFTWARE, OSI INTERFACE SOFTWARE OR DOCUMENTATION.
14.9 LIMITATION OF LIABILITY. OSI SHALL NOT BE LIABLE TO COCC FOR
ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT
OR IN ANY WAY RELATED TO THIS AGREEMENT, OR PERSONAL INJURY OR DAMAGE OR
DESTRUCTION OF REAL OR TANGIBLE PERSONAL PROPERTY, EVEN IF OSI KNOWS, SHOULD
HAVE KNOWN, OR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, EXCEPT FOR
DAMAGES CAUSED BY OSI'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
COCC SHALL NOT BE LIABLE TO OSI FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES ARISING OUT OF THIS AGREEMENT OR IN ANY WAY RELATED TO THIS AGREEMENT,
OR PERSONAL INJURY OR DAMAGE OR DESTRUCTION OF REAL OR TANGIBLE PERSONAL
PROPERTY, EVEN IF COCC KNOWS, SHOULD HAVE KNOWN, OR HAS BEEN
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ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, EXCEPT FOR DAMAGES CAUSED BY COCC'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
14.10 THIRD PARTY SOFTWARE. COCC understands that OSI is not
responsible for, will have no liability for, and does not warrant hardware,
software, or other items or any services provided by any persons other than OSI,
provided however, OSI agrees to pass through any warranties obtained from third
parties which relate to this Agreement.
15 INDEMNIFICATION.
15.1 INDEMNIFICATION BY OSI. OSI shall defend, indemnify and hold
COCC, the Customers, and each of their officers, directors, agents and employees
harmless from and against any and all claims, suits, damages, liabilities, costs
and expenses (including reasonable attorney's fees) arising out of or resulting
from any claim that COCC's use of the System infringes a United States patent,
copyright, or trademark or misappropriates a trade secret or infringes any other
intellectual property rights of any third party, provided OSI is:
15.1.1 promptly notified of any and all threats, claims and
proceedings related thereto,
15.1.2 given reasonable assistance by COCC in OSI's defense
of the claim (at OSI's sole cost and expense), and
15.1.3 given the opportunity to assume sole control over
the defense and all negotiations for a settlement or
compromise.
15.1.4 OSI shall not, however, enter into any settlement
without COCC's prior written consent, which shall
not be unreasonably withheld, if such settlement
impairs any material right of COCC under the
Agreement. COCC may participate, at its own expense,
in any settlement discussions directly or through
counsel of its choice.
15.2 COCC'S RIGHT TO DEFEND. Notwithstanding anything to the
contrary in Section 15.1 above, COCC shall have the right to defend and settle,
at OSI's expense, against any such infringement or misappropriation claim in the
event that OSI fails to assume or reasonably pursue such defense or reasonably
protect the rights of COCC or its Customers as specified in this Agreement. If
COCC or its Customers are enjoined from using the System or any portion thereof
by any court order, and OSI cannot provide COCC with a non-infringing substitute
or effect the
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provisions of Section 15.3 hereof, COCC may terminate this Agreement in its
entirety and OSI shall return to COCC a portion of the License Fee required to
purchase or obtain a non-infringing substitute for the System or any portion
thereof. OSI shall remain liable for and indemnify COCC for any and all
court-ordered damages awarded to any third party because of such infringement or
misappropriation.
15.3 OSI'S RIGHTS UPON INFRINGEMENT CLAIM BY THIRD PARTIES. In
the event that the System, or any portion thereof becomes the subject of a claim
of infringement or misappropriation, OSI may, at its expense, take any of the
following steps so that: (1) COCC's use is not subject to any claim of
infringement or misappropriation, and (2) COCC is provided with functionally
equivalent software to the reasonable satisfaction of COCC, provided that COCC's
use of the System conforms with the provisions of the Agreement:
15.3.1 At OSI's expense, procure for COCC the right to
continue using the OSI Proprietary Software or
Interface Software; or
15.3.2 Replace or modify the infringing portion of the
System.
15.4 LIMITATIONS. OSI shall not be liable under this Section 15
if OSI (a) has notified COCC of a potential infringement or misappropriation and
(b) has provided COCC with a new version of the System and Documentation, such
that COCC has a reasonable amount of time to install the new version for its
Customers, which avoids the infringement or misappropriation. Further, the
foregoing indemnification obligations of OSI do not apply with respect to OSI's
software and any other products or portions or components thereof:
15.4.1 which are not the latest available release supplied
by OSI to COCC with respect to claims which arise
from alleged infringement occurring after such
release has been supplied to COCC;
15.4.2 which are modified by COCC after shipment by OSI, if
the alleged infringement relates to such
modification, unless OSI has consented to the
modification in writing, or such modification is
otherwise authorized, permitted or provided for
under this Agreement;
15.4.3 which are combined by COCC with other products,
processes, hardware or materials where the alleged
infringement relates to such combination, unless OSI
has consented in writing to such combination or such
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combination is otherwise authorized, permitted or
provided for under this Agreement; or
15.4.4 which is third party software as defined in this
Agreement.
15.5 DISCLAIMER. THE FOREGOING STATES THE ENTIRE LIABILITY OF OSI
WITH RESPECT TO INFRINGEMENT OF ANY PATENTS, COPYRIGHTS, TRADEMARKS OR
MISAPPROPRIATION OF TRADE SECRETS BY THE OSI PROPRIETARY SOFTWARE OR OSI
INTERFACE SOFTWARE OR ANY PARTS THEREOF. EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT, NO COSTS OR EXPENSES SHALL BE INCURRED FOR THE ACCOUNT OF OSI BY COCC
OR ITS AGENTS WITHOUT THE PRIOR WRITTEN CONSENT OF OSI.
15.6 INDEMNIFICATION PROCEDURES. The OSI indemnification
obligation under the foregoing subparagraph 15.1 shall not apply:
15.6.1 to the extent that the System was modified by COCC
after shipment by OSI, if the alleged infringement
relates to such modification, unless OSI has
consented to the modification in writing, or such
modification is otherwise authorized, permitted or
provided for under this Agreement COCC's
modifications to the System, and the modification is
the sole cause of an infringement or
misappropriation claim; or
15.6.2 if COCC fails to promptly notify OSI of any third
party claim of which COCC has knowledge and gives
OSI the initial opportunity to control the response
thereto and the defense thereof, including without
limitation any agreement relating to the settlement
thereof, subject to section 15.2 above. COCC's
failure to promptly give notice shall affect OSI's
indemnification obligation only to the extent OSI's
rights are materially prejudiced by such failure.
16 TERMINATION.
16.1 TERM. This Agreement shall commence as of the Effective Date
and continue indefinitely unless terminated in accordance this Agreement.
16.2 TERMINATION CONDITIONS. This Agreement shall terminate upon:
16.2.1 the mutual written agreement of the parties to
terminate this Agreement;
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
16.2.2 a party failing to cure its material breach within
ninety (90) days of receipt of notice of such
breach, and notice from the nonbreaching party to
the breaching party of its intent to terminate this
Agreement as of the date set forth in such notice;
16.2.3 a party (a) becoming or being declared insolvent or
bankrupt, (b) becoming the subject of; and failing
to cause its dismissal within 180 days, any
proceedings relating to its liquidation, insolvency
or for the appointment of a receiver or similar
officer for it, (c) making an assignment for the
benefit of all or substantially all of its
creditors, or (d) entering into an agreement for the
composition, extension, or readjustment of all or
substantially all of its obligations, and notice
from the other party of its intent to terminate this
Agreement as of the date set forth in such notice;
16.2.4 written notice delivered to COCC by OSI within 180
days of a Change of Control of COCC;
16.2.5 written notice delivered to OSI by COCC within 180
days of a Change of Control of OSI. Any such
termination under this Section 16.2.5 shall not
relieve COCC of any ongoing or outstanding payment
obligations for License Fees or Maintenance Fees due
OSI under the terms of this Agreement.
16.3 This Agreement shall terminate in its entirety if the System
fails to perform to commercially reasonable standards during or within [**] from
the Conversion Date at all [**] Pilot Institutions and:
16.3.1 COCC promptly provides OSI with written notice of
the failure and makes commercially reasonable
efforts to assist OSI in remedying the failure;
16.3.2 The failure cannot be corrected by OSI within six
(6) months after written notification by COCC of the
failure;
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
16.3.3 The failure materially effects the performance,
function, use, or purpose of the System;
16.3.4 Upon any termination, COCC returns all OSI software
and Documentation, including all components of the
System, OSI Proprietary Software and OSI Interface
Software, and all Enhancements to the System,
including all copies thereof; and
16.3.5 Upon termination under this Section 16.3 and subject
to subparagraph 16.3.4 above, COCC shall have no
further obligation to pay any license fees or
maintenance fees. However, OSI shall retain the
original [**] down payment, but shall not be
entitled to the additional [**] payable upon
successful Conversion of the Pilot Institutions.
17 DISPUTE RESOLUTION.
17.1 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration before three (3)
arbitrators in accordance with the Rules of the American Arbitration Association
("AAA") then in effect, and judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
conducted in the city nearest COCC's Regional Outsourcing Data Center having an
AAA regional office. The arbitrators shall be selected from a panel of persons
having experience with and knowledge of electronic computers and the computer
business, and at least one of the arbitrators selected shall be an attorney.
17.2 The arbitrators shall have no authority to award punitive or
exemplary damages. The arbitrators must make their ruling, finding or award in
conformity with the terms and conditions of this Agreement.
17.3 Either party, before or during any arbitration, may apply to
a court having jurisdiction for a temporary restraining order or preliminary or
permanent injunction where such relief is necessary to protect its interests.
17.4 Neither party nor the arbitrators may disclose the existence
or results of any arbitration hereunder without the prior written consent of
both parties. However, an action under section 17.3 above shall not require the
consent of the other party.
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17.5 Prior to initiation of arbitration or any form of legal or
equitable proceeding permitted by this agreement, the aggrieved party shall give
the other party at least thirty (30) days prior written notice describing the
claim and amount as to which it intends to initiate action, provided that
nothing contained herein shall prohibit either party from immediately seeking
equitable relief to enforce any provision of this Agreement from a court of
competent jurisdiction under such circumstances as that party's interests
hereunder and its property will be otherwise irreparably harmed.
18 GENERAL.
18.1 NOTICES. Any notice provided pursuant to this Agreement
shall be in writing and shall be deemed given (i) if by hand delivery, upon
receipt thereof; (ii) if mailed, three (3) days after deposit in the United
States mails, postage prepaid, certified mail return receipt requested, or (iii)
if sent via overnight courier with receipt.
If to COCC: Mark Pumiglia, President
COCC, Inc.
135 Darling Drive
Avon Park South
Avon, CT 06001
With copies to:
General Counsel
[INFORMATION NEEDED]
If to OSI: Douglas Anderson, President
Open Solutions, Inc.
300 Winding Brook Drive
Glastonbury, CT 06033.
With copies to:
Frank Marco, Esq.
Shipman & Goodman
One American Row
Hartford, CT 06001
18.2 BINDING AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the parties, their successors and permitted assigns.
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18.3 GOVERNING LAW AND VENUE. This Agreement and performance
hereunder shall be governed by the laws of the State of Connecticut without
regard to conflicts of law.
18.4 FORCE MAJEURE. Neither COCC nor OSI shall be liable to the
other for delays in the performance of or completion of this Agreement if such
delay is caused by strikes, riots, wars, government regulations imposed after
the fact, acts of God, fire, flood or other similar causes beyond its control.
18.5 SEVERABILITY. If any provision of this Agreement shall be
held to be invalid, illegal or unenforceable by a court of competent
jurisdiction, the validity, legality and enforceability of the remaining
provisions shall in no way be affected or impaired thereby.
18.6 REMEDIES. The rights and remedies of the parties set forth
in this Agreement are not exclusive and are in addition to any other rights and
remedies available to them in law or in equity.
18.7 NO WAIVER. The waiver or failure of any party to exercise
any right provided for herein shall not be deemed a waiver of any further right
hereunder.
18.8 INDEPENDENT CONTRACTORS. The parties shall at all times be
independent contractors with respect to each other in carrying out this
Agreement.
18.9 HEADINGS. Headings used in this Agreement are for reference
only and shall not be deemed a part of this Agreement.
18.10 SURVIVAL. In addition to OSI's obligations under Section 8,
and COCC's payment obligations under section 7 and rights to obtain the source
code from escrow under Section 11, the provisions of this Agreement relating to
warranties, indemnification, confidentiality, choice of law and dispute
resolution shall survive the termination of this Agreement.
18.11 TAXES. The System licensed hereunder to COCC is intended for
sub-license to Customers and therefore should be exempt from sales, use and
other-similar taxes. However, if such tax should be imposed on OSI, COCC shall
either bear such tax by a direct payment to the taxing authority or shall
reimburse OSI for such tax. COCC shall be responsible for any applicable customs
and duties related to its sub-licensing of the System.
18.12 ENTIRE AGREEMENT. This Agreement constitutes the complete
understanding and agreement of the parties with respect to the subject matter
hereof and supersedes and merges any prior understandings, statements,
negotiations
-24-
<PAGE> 25
between the parties, whether oral or otherwise. This Agreement may not be
modified except by a writing subscribed to by both parties.
18.13 AMENDMENT. The parties hereto may cause this Agreement to be
amended at any time by execution of an instrument in writing on behalf of each
of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives as of the date first set forth above.
Open Solutions Inc. Connecticut On-line Computer Center, Inc.
By: /s/ Douglas K. Anderson By: /s/ Mark Pumiglia
------------------------- -------------------------------------
Douglas K. Anderson Mark Pumiglia
President & CEO President & CEO
-25-
<PAGE> 26
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE A
OSI's "The Complete Banking Solution" Interface Listing All prices listed below
will be subject to a [**] discount for COCC. Any Interface listed below or later
developed by OSI may be purchased by COCC in a quantity that significantly
decreases the overall costs of such interface per institution. The determination
of such pricing shall be by mutual agreement between OSI and COCC.
Voice Response Units [**]
Edify
Regency
InterVoice
General Ledger Systems N/C Asset/Liability [**]
Financial Technology Inc. Financial Technology Inc.
Interactive Planning Systems Interactive Planning Systems
Item Processing [**] Imaging Systems [**]
NCR Proprietary SoftChec
SoftChec
Unisys Proprietary
Loan Origination Systems [**]
Sound Software
CFI Laser Pro
Contour
Uniform (Specialized Data Systems)
Collections Systems [**]
Intelligent Banking Systems
ATM
Positive Balance File [**]
Mellon
EDS
Norwest
Electronic Forms [**] per branch [**] per pager setup
Banker Systems Inc.
Compliance Systems, Inc.
Universal Pensions, Inc.
Banking Spectrum, Inc.
COLD Systems [**]
Optech
Macrosoft
Page 1 of 1
<PAGE> 27
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE B
SERVER CPU, MEMORY AND DISK ESTIMATES
[**]
Page 1 of 3
<PAGE> 28
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Estimated Hardware/Software for 200,000 Accounts
================================================================================
DP HARDWARE
================================================================================
DataBase Server Pentium Pro 200, Four Processor, 1GB RAM, (10) [**]
9GB Dr. RAID 5, DC ROM, dual power, supplies &
fans, DAT Backup.
DataBase Remote Site Backup Server, (2) Pentium/166, 256M RAM, [**]
(9) 9GB Dr., CD ROM, DAT Backup
WS Pentium Pro 200, 256K Cache, 80M RAM, 2GB SCSI Dr., EISA [**]
NIC, 14" SVGA Monitor, 4GB DAT, CD ROM, System Admin.,
& Batch Workstation
WS Pentium Pro 200, 256K Cache, 48M RAM, 1GB SCSI Dr., EISA [**]
NIC, 14" SVGA Monitor, CD ROM, Network Management Server
UPS
UPS
Ethernet Hub
================================================================================
DP SOFTWARE
================================================================================
NT Server
Data Replication Software
Oracle RDBMS NT/seat (qty = 85% of total w/s qty)
SQR Development System
Forest & Trees
Tape Backup NT
SQL Server
Powerchute
Anti-Virus Software InocLan
================================================================================
BRANCH OPERATIONS HARDWARE
================================================================================
Br. File Server Pent./166, 48M RAM, CD ROM, NIC PCI, EVGA
Color, (2) 2.1GB Dr.
WS Pent./200, 256 K Cache, 80M RAM, 2GB SCSI Dr., 4GB DAT,
NIC PCI, EVGA Color, Br. Administrative Workstation
& Network Manager.
UPS
DWA Printer Server., Pentium 133, 256K Cache, 32M RAM., 1GB
IDE Dr., ISA NIC, 14" SVGA Monitor
Remote Access Modem 28.8kbps
Equipment Racks
CSU DSU Includes Cable
Router
Intelligent Ethernet Hub
Page 2 of 3
<PAGE> 29
Expansion Hub
WS Pentium 133, 256K Cache, 32M RAM, 1GB IDE Dr., ISA NIC,
14" SVGA Monitor
UPS for DWA
Flatbed Color Scanner (1-2/branch)
Passbook Printer
Validation & Receipt Printer
MICR Printer, 12PPM, 5 Input Drawers, Network Card
================================================================================
BRANCH OPERATIONS SOFTWARE
================================================================================
Windows NT
Powerchute S/W (for graceful shutdown of servers)
MS NT Workstations
DWA Printer Manager
System Management SW
SMS Client License (20 User)
Tape Backup NT
Anti-Virus Software InocuLan
SQR Report Generator
Page 3 of 3
<PAGE> 30
SCHEDULE C
OSI represents and warrants that the System can operate under Microsoft Windows
NT and the UNIX operating systems. OSI also represents and COCC acknowledges
that the preferred operating system for the System is Microsoft windows NT.
However, should it become necessary for COCC to utilize the System under the
UNIX operating system, OSI agrees to assist COCC in doing so. Should the need to
operate under the UNIX operating system be due to the System's failure to
perform in a commercially reasonable manner, then OSI's assistance with the move
to the UNIX operating system will be at OSI's expense. If COCC chooses to
utilize the UNIX operating system for any reason other, the cost of OSI's
assistance will be paid by COCC at the then current per diem rates for such
services.
Page 1 of 1
<PAGE> 31
SCHEDULE D
OSI Current Documentation
[intentionally blank]
Page 1 of 1
<PAGE> 32
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE E
OSI PROPRIETARY SOFTWARE
A. OSI Proprietary SOFTWARE
"The Complete Banking Solution" Modules:
Customer Service Representative System Operations
Teller Bank Operations
Loan Monetary Branch Operations
Loan CSR Product Manager
Loan Utilities External File Manager
Loan Investor Batch Manager
Loan Escrow Batch Server
Card Manager G/L Interface
OSI Data Model IRS Manager
B. DOCUMENTATION
[**]
C. Designated Hardware and Operating Systems
The System operates on Intel based servers and personal computers utilizing
Microsoft Windows NT as the operating system and the Oracle Relational Database
Management System.
Page 1 of 1
<PAGE> 33
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE F
Third Party Software ("TPS")
Oracle Relational DataBase Management System Release 7.3
Nexus All Printer/Device Class Service (Passbook & Validation & Receipt
Printers)
SQRIBE Software SQR Production Reporting Tool
Eventus Software SQL Studio Data Access Tool
Jetform Software Forms Generation Tool for use with Electronic Forms
Octopus Automatic Switch Over Software Disaster Recovery Tool
ORACLE PRICING:
OSI and Oracle will negotiate the best possible pricing of the Oracle RDBMS
for use by COCC. In no event will the cost of Oracle RDBMS to COCC exceed [**]
of the cost of the OSI system as a whole.
Page 1 of 1
<PAGE> 34
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SCHEDULE G
Aggregate Number of COCC Customers on Effective Date of Agreement = [**]
Page 1 of 1
<PAGE> 35
SCHEDULE H
OSI Current Support Service Rates
[intentionally blank]
Page 1 of 1
<PAGE> 1
EXHIBIT 10.11
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SOFTWARE LICENSE AGREEMENT
BETWEEN
UNISYS CORPORATION
AND
OPEN SOLUTIONS, INC.
<PAGE> 2
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS...................................................... 1
ARTICLE 2 - GRANT OF LICENSE................................................. 3
ARTICLE 3 - TERM............................................................. 6
ARTICLE 4 - PAYMENT/INVOICES................................................. 6
ARTICLE 5 - DELIVERABLES/QUALITY ASSURANCE/ACCEPTANCE........................ 8
ARTICLE 6 - UPDATES.......................................................... 9
ARTICLE 7 - TECHNICAL TRAINING/INTEGRATION................................... 10
ARTICLE 8 - MARKETING SUPPORT................................................ 12
ARTICLE 9 - MAINTENANCE/TECHNICAL SUPPORT.................................... 13
ARTICLE 10 - NOTICES/ADMINISTRATION.......................................... 15
ARTICLE 11 - TERMINATION..................................................... 16
ARTICLE 12 - CONFIDENTIAL INFORMATION AND DISCLOSURE......................... 17
ARTICLE 13 - WARRANTY........................................................ 18
ARTICLE 14 - DISCLAIMER...................................................... 19
ARTICLE 15 - LIMITATION OF LIABILITY......................................... 20
ARTICLE 16 - INFRINGEMENT/INDEMNITY.......................................... 20
ARTICLE 17 - TRADEMARKS AND TRADE NAMES...................................... 21
ARTICLE 18 - FORCE MAJEURE................................................... 22
ARTICLE 19 - ASSIGNMENT AND BENEFITS......................................... 22
ARTICLE 20 - [**]............................................................ 22
ARTICLE 21 - GENERAL PROVISIONS.............................................. 22
ARTICLE 22 - ADDENDA/ATTACHMENTS............................................. 25
ARTICLE 23 - SURVIVAL OF PROVISIONS.......................................... 26
ARTICLE 24 - ENTIRE AGREEMENT................................................ 26
ADDENDUM A - PACKAGE AND DOCUMENTATION
ADDENDUM B - COMPENSATION SCHEDULE
ADDENDUM C - TRAVEL POLICY
ADDENDUM D - EXCLUSIONS TO SUBCONTRACTOR DEFINITION
EXHIBIT 1 - USER COMMUNICATION FORM (UCF)
<PAGE> 3
SOFTWARE LICENSE AGREEMENT
AGREEMENT NO. __________
This Agreement is entered into by and between Unisys Corporation (hereinafter
"UNISYS", a Delaware corporation, with offices at Township Line & Union Meeting
Roads, Blue Bell, Pennsylvania 19424, and Open Solutions, Inc. (hereinafter
"OSI"), a Delaware corporation, with offices at 300 Winding Brook Drive,
Glastonbury, Connecticut 06033.
RECITALS
OSI owns certain computer software programs and the documentation related
thereto.
UNISYS desires to obtain certain rights, as hereinafter described, in said
programs and their related documentation.
OSI is willing to grant such rights in said programs and their related
documentation to UNISYS.
In consideration of the mutual covenants herein contained and intending to be
legally bound by the provisions of this Agreement, the parties agree as follows:
ARTICLE 1- DEFINITIONS
Words, as employed in this Agreement, shall have their normally accepted
meanings. The terms "herein" and "hereof" unless specifically limited, shall
have reference to the entire Agreement the word "shall" is mandatory, the word
"may" is permissive, the ward "or is not exclusive, the words "includes" and
"including" are not limiting and the singular includes the plural and vice
versa. The following terms shall have the described meaning:
A. "CORRECTION" shall mean a change made in the PACKAGE to correct errors or
defects in the PACKAGE or to make the PACKAGE conform to OSI's then current
DOCUMENTATION.
B. "DISTRIBUTION CHANNEL" shall mean subsidiaries, affiliates, dealers, value
added resellers, distributors, manufacturer's representatives, and other
such entities engaged in doing business with UNISYS, or its subsidiaries or
1
<PAGE> 4
affiliates, and who acquire products from them for the purpose of ultimate
sublicense to END USERS, other than competitors of OSI as in Addendum D.
The DISTRIBUTION CHANNEL shall be further defined by and limited to a list
of the parties (other than UNISYS and its subsidiaries which are hereby
automatically included as port of the DISTRIBUTION CHANNEL) intended by
UNISYS as distributors of the PACKAGE. Such list shall be furnished to OSI
for review and confirmation, which shall not be unreasonably withheld, that
such entities are not competitors of OSI. This process shall apply to any
additions UNISYS subsequently requires to the initial list.
C. "DOCUMENTATION" shall mean any portion of those visually or machine
readable materials (in English and all foreign languages, and all
localizations and nationalizations for foreign countries, available from
OSI) developed by or for OSI or licensed to OSI for use in connection with
the PACKAGE and all revisions thereto made by or for OSI or licensed to OSI
including, but not limited to, new documents, corrected documents and
revisions to properly reflect changes made to the PACKAGE provided by OSI
to UNISYS hereunder. DOCUMENTATION shall accurately describe the material
features, functions, and use of the PACKAGE. A description of such
materials in existence as of the Effective Date is set forth in Addendum A.
D. "END USER" shall mean the customers of UNISYS or the DISTRIBUTION CHANNEL
who are granted a license or sublicense which includes the right to use the
PACKAGE for productive processing of data as opposed to use for
demonstration, evaluation or other nonproductive purposes.
E. "ENHANCEMENT" shall mean a new function or feature for any portion of the
PACKAGE which provides a new capability which the previous releases or
versions of the PACKAGE did not have and which may be incorporated into the
PACKAGE by modification to the then existing programs or by development of
new programs.
F. "IMPROVEMENT" shall mean an addition or change to any portion of the
PACKAGE which is intended to or which does improve the performance of the
PACKAGE or any portion thereof.
G. "PACKAGE" shall mean the source code and object code form of one or more
software programs which performs substantially in accordance with the
DOCUMENTATION. Said PACKAGE includes the programs listed in Addendum A, and
any supporting programs necessary for the proper
2
<PAGE> 5
functioning thereof. Said PACKAGE shall include all CORRECTIONS. UPDATES,
IMPROVEMENTS and enhancements to any portion thereof made by or for OSI and
provided to UNISYS hereunder, all translations into foreign languages and
all localizations and nationalizations for foreign countries made by or for
OSI to any portion of the PACKAGE from time to time.
H. "SUBCONTRACTOR" shall mean an individual or entity with whom UNISYS or the
DISTRIBUTION CHANNEL has a written contract to perform specified work
utilizing the PACKAGE or DOCUMENTATION; provided, however, that such
contract shall be consistent with the rights and licenses granted hereunder
and shall be subject to the same limitations as are contained in this
Agreement for the protection of OSI's proprietary and confidential
information. This definition specifically excludes as SUBCONTRACTORS the
list of companies set forth in Addendum D which offer solutions competitive
to the PACKAGE, and OSI may amend Addendum D, upon written notice to UNISYS
pursuant to Article 10, to include additional parties offering competitive
solutions.
I. "UPDATE" shall mean a release of the PACKAGE subsequent to the initial
delivery in which OSI has incorporated (1) accumulated CORRECTIONS, (2)
IMPROVEMENTS, (3) ENHANCEMENTS, or (4) changes based on modifications
pursuant to new releases of the operating system, together with new or
revised DOCUMENTATION which properly describes the updated PACKAGE.
ARTICLE 2 - GRANT OF LICENSE
A. Subject to the terms and conditions of this Agreement, OSI hereby grants to
UNISYS and UNISYS hereby accepts from OSI under all of OSI's USA and
foreign patents and copyrights, as well as any know-how or trade secrets
related to the PACKAGE and DOCUMENTATION, a right and license to:
1. use, copy, support, localize, nationalize, and translate the PACKAGE
and DOCUMENTATION;
2. integrate the PACKAGE with other computer programs;
3. integrate the DOCUMENTATION with other written materials;
4. grant sublicenses to END USERS in the territory (as hereinafter
defined) to use, copy and modify the object code version of the
PACKAGE upon such terms and conditions as shall be agreed to between
UNISYS and END USERS; provided, however, any modifications by or for
an END USER which include the use of any
3
<PAGE> 6
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
proprietary information of OSI shall be subject to the same
limitations as are contained in this Agreement for the protection of
OSI's proprietary information;
5. grant sublicenses to END USERS in the territory (as hereinafter
defined) to use, copy and modify the source code version of the
PACKAGE , upon such terms and conditions as shall be agreed to
between UNISYS and END USERS; provided, however, that the use and
sublicense of the source code version of the PACKAGE shall be subject
to the prior written approval of OSI and shall be on terms consistent
with the limitations contained in this Agreement far the protection
of OSI's proprietary information; and
6. grant sublicenses to the DISTRIBUTION CHANNEL containing the same
rights as are granted to UNISYS in Subparagraphs 1 through 5, above,
provided that the DISTRIBUTION CHANNEL shall be bound to protect
OSI's intellectual property rights to the same extent as is required
of UNISYS in this Agreement this Subparagraph shall be construed as
authorizing UNISYS to permit cascaded sublicensing such that, for
example, UNISYS may sublicense a subsidiary which shall have the
right to sublicense a distributor, which shall have the right to
sublicense an END USER.
B. Subject to paragraph 2C, the foregoing rights and licenses shall be
exclusive for the territory, which shall consist of all the countries of
Asia (except Japan), Australia, New Zealand and the continent of Africa.
C. OSI shall have the option to convert the rights granted herein to
nonexclusive under the following conditions:
1. If UNISYS fails to license [**] copies of the PACKAGE to END USERS
within 12 months following the release of the "Asia version" of the
PACKAGE (as set forth in Paragraph 7F); or
2. If UNISYS fails to license [**] copies of the PACKAGE to END USERS
during calendar year 1999; or
3. If UNISYS fails to license [**] copies of the PACKAGE to END USERS
during calendar year 2000; or
4. If UNISYS fails to license [**] copies of the PACKAGE to END USERS
during calendar year 2001.
4
<PAGE> 7
For purposes of the exclusivity criteria set forth in the paragraph, a
"license of a copy" of the PACKAGE is intended to mean the execution of a
license agreement by an END USER that provides for payment to UNISYS of a
license fee.
D. In consideration of the exclusivity, UNISYS agrees not to market in all or
any part of the territory, directly or through the DISTRIBUTION CHANNEL,
any software product that is competitive with the PACKAGE unless UNISYS
first provides OSI with written notice at least 120 days in advance of such
marketing, whereupon OSI may elect, at its sole option to convert this
Agreement to a non-exclusive arrangement
E. Notwithstanding Paragraph 2D above, the parties agree that UNISYS and the
DISTRIBUTION CHANNEL may market Unisys proprietary software products in the
territory which are in existence as of the Effective Date, including
updates, upgrades, enhancements, modifications and new versions thereof
which are released during the term of this Agreement It is expressly agreed
that the software product UNIBANKS shall be considered as a Unisys
proprietary software product, notwithstanding that certain of UNIBANKS
contain software licensed from third parties.
F. Notwithstanding Paragraph 2D above, UNISYS and the DISTRIBUTION CHANNEL may
market other software which may be competitive with the PACKAGE under the
following circumstances:
1. the customer requires a mainframe-based application; or
2. the customer indicates that the PACKAGE is priced outside the upper
limits of the customer's budgetary envelope; or
3. the PACKAGE does not reasonably satisfy the customer's requirements
(including such factors as functionality, platform, database or
capacity); or
4. the customer advises, after receiving a presentation on the merits of
the PACKAGE, that it does not wish to use it.
In no event, however, without OSI's prior written consent, (a) may the
PACKAGE or DOCUMENTATION be provided to an END USER to be used concurrently
with a competitive software product, including Unisys
5
<PAGE> 8
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
proprietary software, unless the PACKAGE is being used concurrently with a
competitive software product on a temporary basis, not to exceed 90 days or
(b) may the PACKAGE or DOCUMENTATION be merged or integrated, in whole or
in part, with any competitive software product.
G. In the event that UNISYS determines that it will offer its proprietary
software or a competitive software product to a potential customer, as
provided in Paragraphs 2E and 2F above, UNISYS shall advise OSI of this
circumstance as soon as practicable, and in such instance OSI may offer the
PACKAGE to the potential customer, either directly or through a third
party.
H. the parties may at any time agree in writing to an arrangement other than
the mutual exclusivity described in this Article 2 to market the PACKAGE in
all or any part of the territory.
I. Unisys may, at any time during the term of this Agreement, elect to
terminate its exclusive rights under this Agreement, in which event the
Agreement shall became nonexclusive and the provisions of Paragraphs 2B
through 2H shall be deemed deleted from the Agreement.
J. It is understood and agreed that all right, title and interest to all
changes, modifications, improvements and derivative works made by UNISYS,
the DISTRIBUTION CHANNEL, or SUBCONTRACTORS in and to the PACKAGE and
DOCUMENTATION and all inventions, copyrights, trade secrets and other
intellectual property rights therein shall vest in OSI; provided, however,
that UNISYS shall have the exclusive right to use such changes and
additions during the term of this Agreement OSI has all ownership rights in
the PACKAGE as originally delivered to Unisys as well as all rights in
subsequent modifications made to the PACKAGE by OSI, whether or not
delivered to UNISYS. During the term of this Agreement, but only outside
the territory, or worldwide upon the termination, expiration or
cancellation of this Agreement, OSI shall have the right to use the changes
and additions made by UNISYS, the DISTRIBUTION CHANNEL, or SUBCONTRACTORS
in and to the PACKAGE and DOCUMENTATION. If such changes and additions
consist of new modules, new functionality, changes to more than [**] or the
code, or other substantial value, OSI shall pay UNISYS a royalty of [**] of
the license fees received by OSI from END USERS for the use of the Unisys
version of the PACKAGE and DOCUMENTATION. Nothing shall be considered as
vesting any intellectual property rights in OSI for software products which
are not
6
<PAGE> 9
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
port of the PACKAGE, nor for interfaces made by UNISYS between the PACKAGE
and other software products.
ARTICLE 3 - TERM
A. The term of this Agreement shall commence on the Effective Date and shall
continue for an initial term of five (5) years, unless earlier terminated
or canceled in accordance with the provisions of this Agreement. At the
conclusion of the initial term, the Agreement will be automatically renewed
for successive one year terms, unless terminated by either party by at
least six months notice to the other party prior to the end of the then
current term.
ARTICLE 4 - PAYMENT/INVOICES
A. For delivery of a copy of the PACKAGE and DOCUMENTATION to UNISYS upon
execution of this Agreement, and in consideration of the license granted to
UNISYS in Paragraph 2A above, UNISYS agrees to pay OSI an initial license
fee for the PACKAGE and DOCUMENTATION, equal to [**].
B. In addition to the initial license fee payable under Paragraph 4A above,
UNISYS shall make [**] license fee payments to OSI for each license fee
bearing copy of the complete or partial PACKAGE sublicensed to an END USER.
Such payments are subject to reconciliation as described in Paragraph C,
below. The specific license fee due OSI for the complete PACKAGE shall be
as set forth in Addendum B. In the event a partial version of the PACKAGE
is sublicensed to an END USER, the parties shall agree on the license fee
due OSI.
C. UNISYS shall provide OSI with quarterly reports showing the quantity of
license fee bearing PACKAGES sublicensed and billed hereunder commencing
after the initial license fee bearing sublicense has been granted. Said
reports and appropriate payment shall be provided to OSI for each calendar
quarter ending March 31, June 30, September 30, December 31 during the term
hereof and shall be forwarded not later than sixty (60) days after the end
of each quarter. Said quantities and related license fee payments shall be
subject to subsequent revision, correction and reconciliation in later
quarters based on: (1) nonacceptance, revocation of acceptance, or
rejection of the PACKAGE or any component thereof by an END USER; in which
event UNISYS shall receive a credit or refund, at the option of UNISYS,
from OSI in the amount of the applicable license fee (or pro-rata share
thereof, if less than all of the
7
<PAGE> 10
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
PACKAGE is affected) paid by UNISYS for said PACKAGE; or (2) adjustments
and/or discounts applied in accordance with Paragraphs E and F below.
D. No license fee shall be due OSI in connection with the use of the PACKAGE
and DOCUMENTATION by UNISYS or by the DISTRIBUTION CHANNEL for any purpose
or any of their SUBCONTRACTORS for performing work for any of them, or by
prospective END USERS for test, evaluation, or nonproduction purposes. Any
test or evaluation by prospective END USERS shall be done under UNISYS
supervision and shall not exceed ninety (90) day in duration.
E. OSI agrees,[**] from UNISYS for the PACKAGE to [**] UNISYS or the
DISTRIBUTION CHANGE [**] for the PACKAGE. If OSI [**], OSI shall so notify
UNISYS and [**].
F. When requested by UNISYS or OSI, both parties agree to review the license
fees payable by UNISYS when mutual benefit may be achieved in response to
special marketing situations.
G. Invoices for reimbursement of permitted travel and living expenses and for
authorized services performed by OSI may be submitted after such services
were rendered or such expenses incurred. Such invoices shall be paid within
forty five (45) days after receipt and approval by UNISYS.
H. In accordance with the reporting and reconciliation provisions set forth in
Paragraph C, above. UNISYS shall make payments to Os for the
maintenance/technical support furnished pursuant to Article 9. The specific
support fees are set forth in Addendum B.
I. It is understood and agreed that OSI is not entitled to any compensation
for UNISYS or other third party products and services sold licensed by
UNISYS in conjunction with the sublicensing of the PACKAGE by UNISYS.
J. OSI shall have the right during the term of this Agreement and for one year
thereafter, at its cost, no more than once each calendar year, through a
mutually acceptable independent auditor to audit the books and records of
UNISYS as necessary to verify any license fee payments made by UNISYS.
UNISYS shall make its books and records available for inspection by such
auditor during its normal business hours and at its usual place of
business. OSI shall give UNISYS no less than thirty days prior written
notice of its desire to have such an audit performed. UNISYS books and
records shall be treated
8
<PAGE> 11
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
by such auditor as confidential information of UNISYS and shall not be
disclosed except that a summary and the conclusions of the audit as they
relate to this Agreement may be disclosed to OSI. If any such audit should
disclose that the statements of UNISYS understate the actual license fee
payable by UNISYS. UNISYS shall pay OSI the amount of the discrepancy plus
interest compounded at 1% per month on any discrepant amount from the
date(s) of such understatement. If such understatement is five percent (5%)
or more. UNISYS shall also reimburse OSI for any expenses incurred in
conducting the audit.
ARTICLE 5 - DELIVERABLES/QUALITY ASSURANCE/ACCEPTANCE
A. INITIAL DELIVERY
Within ten days after the Effective Date, OSI shall deliver, in
reproducible form, the current copy of the items listed in Addendum A.
B. SUBSEQUENT DELIVERIES
Delivery of UPDATES shall be in the same form as the initial delivery of
the item being updated unless otherwise mutually agreed.
C. GENERAL REQUIREMENTS
The object and source code versions of the PACKAGE shall be delivered an
separate media as specified in Addendum A. All items to be delivered
hereunder shall be F.O.B. destination and OSI shall make shipment in
accordance with UNISYS instructions.
D. ACCEPTANCE
All items to be delivered to UNISYS by OSI under this Agreement shall be
subject to UNISYS evaluation, testing, and acceptance for conformance to
applicable specifications. In the event of nonconformance, OSI shall use
commercially reasonable efforts in accordance with the provisions of this
Agreement, to make modifications required to achieve such conformance and
shall deliver in a timely manner to UNISYS the modified items for UNISYS
further evaluation, testing and acceptance. From and after the Effective
Date, UNISYS shall have a period of [**] to evaluate the PACKAGE in order
to determine whether the PACKAGE and DOCUMENTATION meet UNISYS reasonable
requirements with respect to performance, accuracy and reliability. If,
prior to the end of said [**] evaluation period, UNISYS gives OSI notice
that the PACKAGE and DOCUMENTATION do not meet UNISYS requirements
9
<PAGE> 12
based on material, concrete factors specified in such notice, then unless
the parties reach mutually agreeable terms for the resolution of the issue,
UNISYS may elect to cancel this Agreement and receive a return of any
amounts paid pursuant to Paragraph 4A above.
ARTICLE 6 - UPDATES
A. During the term of this Agreement, OSI shall promptly inform UNISYS and
shall keep UNISYS advised after the status of all IMPROVEMENTS,
ENHANCEMENTS, and CORRECTIONS being developed by or for OSI for the PACKAGE
and the DOCUMENTATION, IMPROVEMENTS/ENHANCEMENTS by OSI will only be
delivered to UNISYS when the IMPROVEMENTS/ENHANCEMENT'S become generally
available to all OSI customers; provided, however, OSI will provide UNISYS
with access to beta versions of such IMPROVEMENTS/ENHANCEMENTS prior to
general availability, but such beta versions may not be sublicensed to END
USERS. When any such IMPROVEMENTS, ENHANCEMENTS, or CORRECTIONS hove been
completed by OSI. OSI shall provide to UNISYS one (1) copy of the PACKAGE
incorporating such IMPROVEMENTS, ENHANCEMENTS, or CORRECTIONS, and one (1)
copy of the DOCUMENTATION properly updated to reflect such IMPROVEMENTS,
ENHANCEMENTS, or CORRECTIONS.
B. During the term of this Agreement, UNISYS shall promptly inform OSI and
shall keep OSI advised of the status of all IMPROVEMENTS, ENHANCEMENTS, and
CORRECTIONS being developed by UNISYS, the DISTRIBUTION CHANNEL or
SUBCONTRACTORS for the PACKAGE and the DOCUMENTATION,
IMPROVEMENTS/ENHANCEMENTS by UNISYS, The DISTRIBUTION CHANNEL or
SUBCONTRACTORS will only be delivered to OSI when the
IMPROVEMENTS/ENHANCEMENTS became ready far general release to UNISYS
customers; provided, however, UNISYS, the DISTRIBUTION CHANNEL or
SUBCONTRACTORS will provide OSI with access to beta versions of such
IMPROVEMENTS/ENHANCEMENTS prior to general availability, but such beta
versions may not be sublicensed to END USERS. When any such IMPROVEMENTS,
ENHANCEMENTS, or CORRECTIONS have been completed by UNISYS, the
DISTRIBUTION CHANNEL or SUBCONTRACTORS, UNISYS shall provide to OSI one (1)
copy of the PACKAGE incorporating such IMPROVEMENTS, ENHANCEMENTS, or
CORRECTIONS, and one (1) copy of the
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DOCUMENTATION properly updated to reflect such IMPROVEMENTS, ENHANCEMENTS,
or CORRECTIONS.
C. OSI shall deliver an UPDATE containing an accumulation of CORRECTIONS to
UNISYS at the same time OSI releases such UPDATE for its own use or for use
by its customers; provided, however, that such UPDATE shall be delivered to
UNISYS not less frequently than every six (6) months, commencing the sixth
(6th) month after the Effective Date, and in no event later than the end of
the sixth (6th) month after the Effective Date, unless the parties
otherwise mutually agree in writing. Any CORRECTIONS made by UNISYS, the
distribution CHANNEL or subcontractors independent of IMPROVEMENTS or
ENHANCEMENTS shall be sent to OSI on a monthly basis for accumulation into
the next OSI UPDATE of the UNISYS PAAG specific version.
D. If any portion of the PACKAGE or DOCUMENTATION is translated, localized or
nationalized by or for OSI or any of its agents, OSI shall promptly so
notify UNISYS and, if requested by UNISYS for use by or for END USERS in
the territory, OSI shall, within thirty (30) days of such request, deliver
one (1) copy of such PACKAGE or DOCUMENTATION to UNISYS.
ARTICLE 7 - TECHNICAL TRAINING/INTEGRATION
A. OSI, as requested by UNISYS and at no charge, shall furnish an initial
"train the trainer" training course in each of Asia and South Africa to
UNISYS and UNISYS subsidiary personnel in the installation, maintenance,
and operation of the PACKAGE. Each training course shall be of sufficient
length to accomplish the competency level described above but shall be no
less than five (5) days in length. Course materials shall be provided at no
charge and may be retained by the trainees. If additional training is
required by UNISYS, OSI shall provide training courses as required, based
on a mutually established schedule, location, and discount from OSI's
standard training rates.
B. In the event UNISYS determines that UNISYS requires more in-depth training
than the standard training furnished pursuant to Paragraph A, above, or in
the event OSI is unable to accommodate UNISYS personnel in its standard
training courses. OSI shall provide a "train the trainer" internals
workshop of no less than ten (10) days duration for Unisys personnel for
training in the installation, maintenance, operation, modification, and
enhancement of the PACKAGE, including detailed analysis of the design,
structure, and architecture of the PACKAGE. Such training shall be
conducted in accordance with schedules
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
mutually agreed upon by the parties, training will generally, be conducted
at OSI's facility, unless otherwise agreed by the parties, At the end of
each course OSI shall, if requested by UNISYS, provide UNISYS with any
available instructor materials for the class, for UNISYS subsequent use in
performing training.
C. If a major UPDATE (i.e., those changes for which OSI offers "differential'
training to its own customers) is made by OSI, OSI shall, as requested by
UNISYS, provide training courses in accordance with the requirements set
forth in Paragraph A, above.
D. The training to be performed under Paragraphs A and B above shall be at the
location described therein, and the training to be performed under
Paragraph C above shall be provided at OSI, unless UNISYS & OSI mutually
agree to have the training provided at a site other than OSI's facility in
Glastonbury, Connecticut.
1. If the training is to be performed at OSI's facility, (a) OSI shall
make available, for the use of UNISYS personnel, equipment,
facilities and other items required for such training, and (b) UNISYS
shall bear the cost of travel and living expenses of its personnel.
2. If the training is to be performed at other than OSI's facility,
UNISYS shall (a) reimburse OSI, in accordance with Addendum C, for
travel and living expenses incurred by OSI's personnel to the extent
that such expenses arise solely and directly from the training being
performed at other than an OSI facility, and (b) make available
adequate facilities and equipment reasonably required for such
training.
E. OSI shall assist UNISYS in the [**] END USER installations/
customizations, and will thereafter provide assistance as requested by
UNISYS on a "personnel available" basis, OSI will be compensated for this
assistance at a rate of [**] for the [**] END USER
installations/customizations, and thereafter at the rates set forth in
Addendum B. If OSI personnel are required to provide on-site assistance,
UNISYS shall reimburse OSI, in accordance with Addendum C, for travel and
living expenses incurred by OSI's personnel to the extent that such
expenses arise solely and directly from the assistance being performed at
other than an OSI facility.
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F. OSI, as requested by UNISYS, shall provide consultancy services following
the Effective Date to support UNISYS efforts to create an "Asian/African
version" of the PACKAGE. Such consultancy services shall consist of
technical advice with respect to the functionality, design and architecture
of the PACKAGE, such that UNISYS will have the tools and information
necessary to perform development work, OSI shall assist UNISYS at no charge
in performing a "gap analysis" of the required modifications to the PACKAGE
to meet the needs of the Asian and African markets, and will further
provide a total of six man-months of consultancy services for the creation
of the Asian/African version. OSI will be compensated for any consultancy
services beyond the first six man-months at the rates provided in Addendum
B.
ARTICLE 8 - MARKETING SUPPORT
A OSI will support UNISYS in its initial program launch marketing activities,
for a period of time to be agreed upon by the Marketing Administrators.
Such activities shall be at no charge to UNISYS, except as noted or as
otherwise agreed by the Marketing Administrators, and shall include the
following:
1. OSI shall, as requested by UNISYS, furnish train the trainer type
training in Asia and South Africa to UNISYS and UNISYS subsidiary
marketing organization personnel for the marketing of the PACKAGE.
Such training shall be on specific dates to be mutually agreed upon.
Except as provided in Paragraph 8B below, each party shall bear its
own costs relative to such training.
2. At UNISYS reasonable request, OSI shall participate at no charge to
UNISYS in one trade show, user conference or other similar event per
year at which the PACKAGE is to be exhibited, demonstrated, discussed
or otherwise involved, OSI may participate in additional events by
mutual agreement, at cost.
3. Technical bid support to assist UNISYS to make proposals to at least
four potential END USERS; provided that after the first four
potential END USERS, such support shall be provided at the rates set
forth in Addendum B.
B. If any of the support rendered pursuant to Subparagraphs 1 and 3, above, is
furnished at other than an OSI facility, UNISYS shall reimburse OSI, in
accordance with Addendum D, for travel and living expenses incurred by
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<PAGE> 16
OSI's personnel to the extent such expenses arise solely and directly from
such support being performed at other than an OSI facility.
ARTICLE 9 - MAINTENANCE/TECHNICAL SUPPORT
A OSI shall provide maintenance and technical support as described in this
Article 9 for the PACKAGE and DOCUMENTATION as delivered to UNISYS. UNISYS
shall be responsible to provide maintenance and technical support for any
modifications or enhancements it makes to the PACKAGE and DOCUMENTATION.
UNISYS shall advise OSI of errors and, defects in the PACKAGE and
DOCUMENTATION reported by END USERS or discovered by UNISYS, and OSI shall
resolve the errors and defects, as provided herein, if UNISYS reproduces
such errors or defects in the version of the PACKAGE or DOCUMENTATION as
delivered to UNISYS. At UNISYS request, OSI shall assist UNISYS to resolve
errors and defects which are not reproducible in the version of the PACKAGE
and DOCUMENTATION as delivered to UNISYS and in such event, UNISYS shall
pay OSI at the rates set forth in Addendum B for the time of such personnel
and reimburse OSI, in accordance with Addendum C, for travel and living
expenses of such personnel incurred in rendering such assistance.
B. UNISYS agrees that it shall provide the first of product and technical help
desk support to the DISTRIBUTION CHANNEL, SUBCONTRACTORS and END USERS.
This shall include all of the day to day issues of functionality', error
correction and customer service. In the event that UNISYS lack the
requisite skills or knowledge to resolve an issue, OSI shall provide
telephone consulting services only to UNISYS designated personnel to assist
such personnel in the resolution of such problems, relative to the PACKAGE
or DOCUMENTATION. In no instance shall OSI provide direct support to the
DISTRIBUTION CHANNEL, SUBCONTRACTORS and END USERS as defined herein. Said
OSI services shall be provided seven (7) days per week. Twenty-four (24)
hours per day for Priority A errors and during normal working hours for
other errors, OSI shall furnish the names and telephone numbers of its
personnel for both normal working hours and other times (e.g., holidays,
weekends, etc.), UNISYS shall provide the names and telephone numbers of
the designated UNISYS personnel assigned to work with OSI.
C. UNISYS agrees to minimize the number of support contacts that it makes
with OSI after the first six months of this Agreement UNISYS also agrees to
provide OSI with a quarterly report summarizing the nature of calls made to
the
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<PAGE> 17
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
UNISYS help desk, whether or not these calls were forwarded to OSI. After
the first six months of this Agreement any call made to UNISYS and
forwarded to OSI that could have been resolved by UNISYS without OSI
assistance or that was made in direct response to a UNISYS made
IMPROVEMENT, ENHANCEMENT or CORRECTION shall be chargeable to UNISYS as
extraordinary support services at the rates set forth in Addendum B.
D. Upon UNISYS reasonable request, and subject to availability, OSI shall
furnish qualified personnel for on-site assistance to UNISYS, to resolve
problems and assist in customization. In such event, UNISYS all pay OSI at
the rates set forth in Addendum B for the time of such personnel and
reimburse OSI, in accordance with Addendum C, for travel and living
expenses of such personnel incurred in rendering such assistance; provided,
however, That OSI shall not be entitled to payment for the time of its
personnel if such assistance to resolve problems is required due solely to
a significant error or defect in the PACKAGE DOCUMENTATION as delivered to
UNISYS or OSI's training and such defect cannot otherwise be reasonably
resolved in a timely manner.
E. OSI agrees to diligently work for the prompt resolution of defects and
errors in the PACKAGE or correction of errors or inconsistencies in the
DOCUMENTATION, OSI agrees to respond to UNISYS as required by UNISYS "User
Communication Form" (UCF), Exhibit 1 hereof, as revised or replaced by
UNISYS from time to time. Notwithstanding the foregoing, in case of a
system-down condition (i.e., Priority Code A, Emergency, as defined below)
attributable to OSI. UNISYS may utilize and designate other means of
communication for both the reporting of errors and the correction thereof.
OSI shall respond to and use commercially reasonable efforts to complete
correction of errors, defects and malfunctions in accordance with the
following schedule:
RESPONSE (2) CLOSURE (3)
------------ -----------
ERROR PRIORITY (1) (Calendar Days) (Calendar Days)
Emergency (A) [**] [**]
Critical (B) [**] [**]
Non-Critical (C) [**] [**]
(1) PRIORITY A - Catastrophic system or module failures that do not
CODES: have a viable detour or workaround available.
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B - Problems that have been substantiated as a serious
inconvenience to users, this includes any Priority A for
which a viable detour or workaround is available.
C - All other problems which the user can avoid or detour
for which there is no urgency for a resolution.
(2) RESPONSE: Response consists of providing, as appropriate, one or more of
the following to the UCF originator: a workaround/detour, an
existing CORRECTION, a new CORRECTION against reported product
level only, an available release, a release commitment for
Priority B and C, notification of a non-problem.
(3) CLOSURE: Closure consists of providing a final CORRECTION of the
problem to the UCF originator including UPDATES of the
PACKAGE, and revised or new DOCUMENTATION as necessary.
In the event OSI does not furnish corrections of Priority A errors within
the applicable times set forth above, upon UNISYS reasonable request, OSI
shall furnish on-site maintenance support personnel, at the designated
site, who shall remain at the site and provide support until the problem is
corrected. In the event that the error is not due solely to an error,
defect, malfunction, or breach of warranty regarding the PACKAGE or
DOCUMENTATION, UNISYS shall pay OSI at the rates set forth in Addendum B
for time spent at the site and reimburse OSI, in accordance with
Addendum D, for travel and living expenses incurred by said personnel.
F. OSI shall furnish the maintenance and technical support described in
Paragraphs A, B, C and D, above, for the current release level of the
PACKAGE and the previous release level thereof.
ARTICLE 10 - NOTICES/ADMINISTRATION
All notices shall be in writing and shall be sent by certified mail, return
receipt requested, or by wire communications (e.g., facsimile, To be followed by
US Mail or overnight carrier), To the respective Contract Administrator, at the
address noted below, or as the same may be changed from time to time by notice
similarly given:
A. FOR UNISYS
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1. General administration and liaison shall be performed by Jayant
Sardeshmukh (referred to herein as UNISYS Contract Administrator,
7000 Palmetto Park Road, Suite 201, Boca Raton, Florida 33433, or his
designee or successor.
2. Technical liaison shall be performed by Maurice Locsin (referred to
herein as UNISYS technical Administrator), Manila, Philippines, or
his designee or successor.
3. Marketing liaison shall be performed by Jonji Villa (referred to
herein as "UNISYS Marketing Administrator"), 12/F World Trade Center,
280 Gloucester Road, Causeway Bay, Hong Kong, or his designee or
successor.
B. FOR OS
1. General administration and liaison shall be performed by Douglas
Anderson (referred to herein as "OSI's Contract Administrator"), 300
Winding Brook Drive, Glastonbury, Connecticut 06033, or his designee
or successor.
2. Technical liaison shall be performed by Clifford Waggoner (referred
to herein as "OSI's Technical Administrator"), 300 Winding Brook
Drive, Glastonbury, Connecticut 06033, or his designee or successor.
3. Marketing liaison shall be performed by Michael Nicastro (referred to
herein as "OSI's Marketing Administrator"), 300 Winding Brook Drive,
Glastonbury, Connecticut, or his designee or successor.
C. The Technical and Marketing Administrators may, as applicable to their
respective function, provide further details, handle necessary technical
and marketing matters, develop/implement administrative procedures, but
shall have no authority to affect or change any of the terms and conditions
of this Agreement the exercise of each party's right of termination or
cancellation and the exercise of other general rights of the parties are
reserved to the Contract Administrators.
ARTICLE 11 - TERMINATION
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A. This Agreement may be terminated by either party for cause, in the event
that the other party substantially fails to perform any of its material
obligations hereunder and said cause is not corrected within 30 days after
delivery of written notice from the non-defaulting party specifying such
cause.
B. If a party (i) is involved in any proceedings under any bankruptcy or other
insolvency laws, or laws for the relief of debtors; (ii) has a receiver or
other court appointee named for its business or property; (iii) makes an
assignment for the benefit of creditors; (iv)is liquidated, dissolved, or
its existence is terminated; then the other party may suspend performance
under this Agreement and/or terminate this Agreement immediately upon
written notice.
C. Cancellation or termination of this Agreement shall not cancel, terminate
or affect sublicenses previously granted to END USERS, nor shall any
obligations already committed to END USERS be extinguished, Unisys shall be
permitted to continue to use the PACKAGE and DOCUMENTATION to fulfill
support and maintenance obligations, however, Termination of this Agreement
shall terminate the rights of UNISYS and the DISTRIBUTION CHANNEL to grant
additional sublicenses after such termination, OSI shall have the option to
assume the rights and obligations of UNISYS under its sublicenses with END
USERS if the agreement is rightfully terminated by OSI pursuant to
Paragraphs 11 A or 11 B above, and in such instance UNISYS shall take
appropriate measures to assign its rights under the sublicenses to OSI, the
parties' rights to cancel or terminate in accordance with this Article are
in addition to and shall not limit or prejudice any other right or remedy
available under this Agreement, at law, or in equity, except as provided
herein.
ARTICLE 12 - CONFIDENTIAL INFORMATION AND DISCLOSURE
A. Any information which either party may disclose to the other party shall
not be deemed to be confidential and shall be acquired free from any
restriction, unless the information is proprietary to the disclosing party
or its licensors and, if it is disclosed in tangible form, The disclosing
party marks such information as being confidential to it by marking such
information as "Proprietary", "Restricted", or "Confidential". Any
confidential information disclosed orally shall be identified as
confidential at the time of disclosure and thereafter reduced to tangible
form with a copy prominently marked as aforesaid, delivered to the
receiving party within thirty (30) days of the verbal disclosure. When a
writing contains both confidential and nonconfidential information, The
disclosing party shall specifically note the information which
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is confidential, OSI represents that the PACKAGE contains trade secrets and
UNISYS agrees to treat the PACKAGE as OSI's confidential information
B. Each party shall exercise the same degree of care, in no event less than
reasonable care, to avoid the publication or dissemination of the
confidential information of the other party as it affords to its own
confidential information of a similar nature which it desires not to be
published or disseminated.
C. Confidential information disclosed under this Agreement shall only be used
by the receiving party in the furtherance of this Agreement or the
performance of its obligations hereunder.
D. The obligation of the parties not to disclose confidential information
shall survive the termination or cancellation of this Agreement However,
neither party shall be obligated to protect confidential information of the
other party which:
1. is rightfully received by the receiving party from another party
without restriction, or
2. is known to or developed by the receiving party independently without
use of the confidential information, or
3. is or becomes generally known to the public by other than a breach of
duty hereunder by the receiving party, or
4. has been or is hereafter furnished to others by the disclosing party
without restriction on disclosure.
The obligation not to use or disclose said confidential information shall
end five years after the date of receipt of said confidential information,
except with respect to software, including any related documentation, for
which the obligation shall continue until the occurrence of any of the
events listed in Subparagraphs D1 through D4, above.
E. UNISYS shall be permitted to disclose said confidential information to the
DISTRIBUTION CHANNEL and to SUBCONTRACTORS for their use in the furtherance
of this Agreement in accordance with the rights and licenses granted;
provided, however, That the DISTRIBUTION CHANNEL and SUBCONTRACTORS agree
to protect such information to the extent provided herein.
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F. Except as needed to meet the provisions of Paragraph 11 C above, UNISYS
shall return all of OSI's Confidential Information which is in its
possession upon the termination of this Agreement.
ARTICLE 13 - WARRANTY
A. OSI warrants that it owns the entire right, title and interest in and to
the PACKAGE and DOCUMENTATION or has valid licenses to the PACKAGE and
DOCUMENTATION, and that to the best of its knowledge the Source Code and
DOCUMENTATION have not been disclosed to others except under an obligation
of confidentiality.
B. OSI warrants that it has the right and power to grant the licenses and
rights set forth in this Agreement.
C. OSI warrants that (1) the PACKAGE, as supplied, shall perform in all
material respects in accordance with its specifications and the
DOCUMENTATION listed in Addendum A and the other requirements of this
Agreement, (2) the PACKAGE does not contain any disabling devices, and (3)
the DOCUMENTATION accurately describes the features, functions, and use of
the PACKAGE.
D. OSI warrants that the PACKAGE and DOCUMENTATION are not in the public
domain.
E. OSI warrants that it has no knowledge of any patents or copyrights which
are infringed or may be infringed, or any trade secrets or other
proprietary rights of other parties which ore or may be misappropriated or
violated by using, making, copying, or licensing the PACKAGE or
DOCUMENTATION as contemplated hereunder, OSI further warrants that any
UPDATES it will make to the PACKAGE will not knowingly infringe any patents
or copyrights and misappropriate or violate the trade secrets or other
proprietary rights of other parties by using, making, copying or licensing
the UPDATES as contemplated hereunder.
F. OSI warrants that is has agreements with its employees which ore sufficient
for the fulfillment of OSI's obligations pursuant to this Agreement.
G. OSI warrants and represents that the PACKAGE does not contain a
cryptographic algorithm (code which transforms data to conceal or reveal
20
<PAGE> 23
information content and which uses at least one confidential parameter)
which requires licenses to be obtained from the Deportment of Commerce
(DOC) and/or the Deportment of State (DOS), for export of said PACKAGE.
H. OSI warrants that the Package shall be capable, when used in accordance
with the Documentation, of correctly creating, storing, processing,
providing or receiving dote data from, into and between the twentieth and
twenty-first centuries, including leap year calculations. The remedy
available to Unisys shall include repair, correction or replacement of the
Package whose non-compliance is made known to OSI in writing. The rights
and remedies that Unisys may otherwise have with respect to defects other
than date functionality remain unaffected.
I. UNISYS warrants that any modifications it will make to the PACKAGE will not
knowingly infringe any patents or copyrights and misappropriate or violate
the trade secrets or other proprietary rights of other parties by using,
making copying or licensing the modifications as contemplated hereunder.
ARTICLE 14 - DISCLAIMER
EXCEPT AS EXPRESSLY STATED HEREIN, NEITHER PARTY HAS MADE ANY WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED BY OPERATION OF LAW OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE CONCERNING THE PACKAGE TO BE PROVIDED HEREUNDER, THE SCOPE OR
DURATION OF ANY MARKETING EFFORT WHICH UNISYS MAY UNDERTAKE, OR THE SUCCESS OF
ANY SUCH MARKETING EFFORT. NEITHER PARTY HAS RELIED ON ANY EXPRESS OR IMPLIED
REPRESENTATION OF THE PARTY, WRITTEN OR ORAL NOT CONTAINED HEREIN, AS AN
INDUCEMENT TO ENTERING INTO THIS AGREEMENT.
ARTICLE 15 - LIMITATION OF LIABILITY
OSI'S LIABILITY FOR DAMAGES TO UNISYS OR TO ANY OTHER PERSON CLAIMING DAMAGES
HEREUNDER, OR AS A RESULT OF USE OF THE PACKAGE OR DOCUMENTATION, IF ANY, SHALL
BE LIMITED TO THE AMOUNTS PAID BY UNISYS TO OSI DURING THE TWENTY FOUR MONTH
PERIOD IMMEDIATELY PRECEDING THE OCCURRENCE OF THE EVENT GIVING RISE TO SUCH
LIABILITY. EXCEPT AS PROVIDED IN ARTICLE 16
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RELATING TO INTELLECTUAL PROPERTY INFRINGEMENT OR A BREACH OF ITS OBLIGATIONS
UNDER ARTICLE 12 RELATING TO CONFIDENTIALITY, NEITHER PARTY SHALL BE LIABLE FOR
ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT
LIMITED TO, LOST PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, THIS ARTICLE SHALL SURVIVE TERMINATION OF THIS AGREEMENT.
ARTICLE 16 - INFRINGEMENT/INDEMNITY
OSI agrees to indemnity and hold harmless UNISYS, the DISTRIBUTION CHANNEL,
SUBCONTRACTORS, and END USERS from any claim, liability, damage or expense
including but not limited to reasonable legal expenses of whatever kind for, or
on account of, patent infringement, copyright infringement, misappropriation of
trade secrets or violation after other proprietary rights in connection with or
relating to the authorized use, copying reproduction, distribution, licensing or
other disposition of the PACKAGE and DOCUMENTATION in the territory. OSI agrees
to defend or settle, at OSI's expense, all suits or proceedings arising out of
any of the foregoing; provided UNISYS (a) gives OSI prompt written notice of all
suits or threats of suit and other such claims concerning patent or copyright
infringement or misappropriation of trade secrets and other intellectual
property against UNISYS, the DISTRIBUTION CHANNEL, SUBCONTRACTORS, and END
USERS, (b) permits OSI to defend or settle the claims, and (c) provides
reasonable assistance to OSI, at OSI's expense, in defending or settling the
claims. UNISYS, at its own expense, shall have the right to participate in OSI's
defense of any such action through UNISYS own counsel. In the event that OSI
fails after notice, to defend any action which it is obligated to defend under
this Article 16, UNISYS shall have the right of prosecuting and defending such
action or actions and to collect such costs and expenses (including attorney's
fees) from OSI and shall further have the right to charge OSI with any and all
awards, damages and court costs in such action or actions and to collect such
awards, damages and court costs from OSI. If the PACKAGE or DOCUMENTATION are
held to be an infringement or misappropriation for which UNISYS is indemnified
by OSI, and their use is enjoined, or in OSI's opinion is likely to become the
subject of such a claim of infringement OSI shall, at OSI's option and expense,
either:
1. procure for UNISYS the right to continue to utilize the PACKAGE and
DOCUMENTATION pursuant to the license granted herein, or
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2. replace or modify the PACKAGE and DOCUMENTATION in such a way that they
shall not continue to constitute such infringement or misappropriation, or
3. if neither of the foregoing is a commercially reasonable alternative, then
OSI may temporarily terminate UNISYS right to grant additional licenses and
UNISYS must cease granting additional licenses until the problem is
resolved.
OSI shall not be liable under this Article 16 if the PACKAGE or DOCUMENTATION
have been modified or combined with materials or data not supplied by OSI by any
of the parties indemnified hereunder and such modification, combination or
combinations are the cause of any such infringement or misappropriation, unless
such modifications were made in accordance with OSI's instructions. OSI shall
not be liable under this Article 16 if OSI (a) has notified UNISYS of a
potential infringement or misappropriation and (b) has provided UNISYS with a
new version of the PACKAGE and DOCUMENTATION which avoids the infringement or
misappropriation such that UNISYS has a reasonable amount of time to install the
new version for END USERS.
ARTICLE 17 - TRADEMARKS AND TRADE NAMES
Nothing contained in this Agreement shall be construed as licensing either party
to use any trademark or trade name owned or used by the other party without the
prior written consent of the other party. However, UNISYS and the DISTRIBUTION
CHANNEL shall have the use of the OSI marks currently used to identify the
PACKAGE (and any other or subsequent marks used by OSI to identify the PACKAGE)
in connection with the use, marketing, copying, distribution, licensing and
sublicensing of the PACKAGE and DOCUMENTATION. UNISYS shall provide OSI with a
copy for approval of any and all materials in which UNISYS uses the OSI marks,
which approval shall not be unreasonably or untimely withheld, OSI shall have
the right to terminate the UNISYS right to use OSI marks if, in OSI's reasonable
judgment, such use will be detrimental to OSI's goodwill. When marketing the
PACKAGE and DOCUMENTATION, UNISYS and the DISTRIBUTION CHANNEL shall have the
right to use their own trademarks or trade names when referring to the PACKAGE
or DOCUMENTATION. Each party acknowledges that it acquires no rights or interest
in the other Party's trade names, logo, or trademarks by reason of any use of
the same in connection with this Agreement
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
ARTICLE 18 - FORCE MAJEURE
Neither UNISYS nor OSI shall be liable to the other for delays in the
performance of or completion of this Agreement if notice of such delay is
provided as required in Article 21 L and if such delay is caused by strikes,
riots, wars, government regulations imposed after the fact, acts of God, fire,
flood or other similar causes beyond its control; provided, however, if such
delay exceeds sixty (60) days, the other party shall have the option,
exercisable by written notice, to cancel this Agreement pursuant to Article 11.
ARTICLE 19 - ASSIGNMENT AND BENEFITS
All of the terms and conditions of this Agreement shall be binding upon, inure
to the benefit of, and be enforceable by the respective successors and permitted
assigns of the parties hereto. Except as specifically stated in this Agreement,
neither this Agreement nor any of the rights, interests or obligations of any
party hereunder shall be assigned or delegated by either party hereto without
the prior written consent of the other. Such consent shall not be withheld
unreasonably. Any unauthorized assignment or delegation shall be null and void.
Notwithstanding the foregoing, either party may assign or otherwise transfer its
rights and obligations to successors in interest (whether by purchase of stock
or assets, merger, operation of law, or otherwise) of that portion of its
business related to the subject matter hereof without the consent of the other
party; provided, however, UNISYS may not assign its rights and obligations to
any of the parties then listed on Addendum E.
ARTICLE 20 - [**]
OSI warrants that [**] covered by this Agreement [**]. If, at any time during
the term of this Agreement, OSI [**].
ARTICLE 21 - GENERAL PROVISIONS
A. GOVERNING LAW
This Agreement shall be construed, governed and interpreted in accordance
with the laws of the State of Connecticut, other than the rules relating to
the choice of law.
B. CAPTIONS/HEADINGS
24
<PAGE> 27
The captions and headings of the Articles, clauses and paragraphs contained
herein have been inserted for the convenience of the parties and shall not
be construed as a part of or modifying any provisions of this Agreement.
C. WAIVER
The failure of either party to insist in any one or more instances, upon
the performance of any of the terms, covenants or conditions of this
Agreement or to exercise any right hereunder, shall not be construed as a
waiver of the future performance of any such term, covenant or condition or
the future exercise of such right
D. SEVERABILITY
If any court should find any particular provision of this Agreement void,
illegal, or unenforceable, then that provision shall be regarded as
stricken from this Agreement and the remainder of this Agreement shall
remain in full force and effect.
E. INDEPENDENT CONTRACTORS
It is agreed that the relationship between the parties is that of
independent contractors, and nothing contained in this Agreement shall be
construed or implied to create the relationship of partners, joint
venturers, agent and principal, employer and employee, or any relationship
other than that of independent contractors. At no time shall either party
make any commitments or incur any charges or expenses for or in the name of
the other party.
F. CONFLICT OF INTEREST
OSI represents and warrants that it is under no obligation or restriction,
nor will it assume any such obligation or restriction which would in any
way interfere with or be inconsistent with the rights to the PACKAGE and
DOCUMENTATION granted to UNISYS under this Agreement.
G. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
together shall constitute one and the same instrument.
25
<PAGE> 28
H. PUBLICITY
Neither party shall, except as may be required by law or federal
regulation, or except with the prior written permission of the other party,
publicly advertise this Agreement or disclose its contents.
I. RISK OF LOSS
Until such time as the deliverable items are in UNISYS possession, all risk
of loss shall be OSI's.
J. ENTIRE COMPENSATION
Except as may be specifically provided otherwise in this Agreement, OSI's
performance of the work and fulfillment of its other obligations under this
Agreement and the granting of licenses and rights to UNISYS shall be at no
cost or charge to UNISYS.
K. PERSONAL INJURY/PROPERTY DAMAGE
Each party (the "Indemnifying Party") shall hold harmless the other party
from any claim of personal injury or property damage to the extent that
such claim arises from any act or omission of the Indemnifying Party. Upon
request, either party shall furnish evidence of insurance coverage for such
injury and damage.
L. NOTICE OF DELAY
Whenever any occurrence (e.g., an event of Force Majeure or a filing under
a bankruptcy law) is delaying or threatens to delay either party's timely
performance under this Agreement, that party shall promptly give notice
thereof, including all relevant information with respect thereto, to the
other party.
M. COMPLIANCE WITH LAW
The parties shall in the performance of this Agreement comply with all
applicable laws, executive orders, regulations, ordinances, rules,
proclamations, demands and requisitions of national governments or of any
state, local or other governmental authority which may now or hereafter
govern performance hereunder including, without limitation, all laws,
executive orders, regulations, ordinances, rules and proclamations
regarding Equal Employment Opportunity, the exporting of technology, and
withholding for income taxes.
N. TAXES
26
<PAGE> 29
The PACKAGE licensed hereunder to UNISYS is basically for sublicense to END
USERS and therefore should be exempt from sales, use and other similar
taxes. However, if such tax should be imposed on OSI, UNISYS shall either
bear such tax by a direct payment to the taxing authority or shall
reimburse OSI for such tax. UNISYS shall be responsible for any applicable
customs and duties related to its sublicensing of the PACKAGE.
O. ACCESS TO BOOKS
Through a mutually acceptable independent auditor, OSI shall have
reasonable access to the sufficient books and records of UNISYS once every
twelve (12) months for the sole purpose of determining the amounts due
hereunder, at OSI's own cost; provided, however, that such auditor agrees
to be bound by the provisions of Article 12.
P. ARBITRATION
1. Subject to Subparagraphs 2 through 5, below, any controversy or claim
arising out of or relating to this Agreement or the breach thereof
shall be settled by arbitration before three (3) arbitrators in
accordance with the Rules of the American Arbitration Association
("AAA") then in effect, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be conducted in the city nearest OSI's office
having an AAA regional office. The arbitrators shall be selected from
a panel of persons having experience with and knowledge of electronic
computers and the computer business, and at least one of the
arbitrators selected shall be an attorney.
2. The arbitrators shall have no authority to award punitive damages nor
any other damages not measured by the prevailing party's actual
damages, and may not, in any event, make any ruling, finding or award
that does not conform to the terms and conditions of this Agreement.
3. Either party, before or during any arbitration, may apply to a court
having jurisdiction for a temporary restraining order or preliminary
or permanent injunction where such relief is necessary to protect its
interests pending completion of the arbitration proceedings.
27
<PAGE> 30
4. Neither party nor the arbitrators may disclose the existence or
results of any arbitration hereunder without the prior written
consent of both parties.
5. Prior to initiation of arbitration or any other form of legal or
equitable proceeding, the aggrieved party shall give the other party
at least thirty (30) days prior written notice in accordance with
Article 10 describing the claim and amount as to which it intends to
initiate action, provided that nothing contained herein shall
prohibit either party from immediately seeking equitable relief to
enforce any provision of this Agreement from a court of competent
jurisdiction under such circumstances as that party's interests
hereunder and its property will be otherwise compromised.
ARTICLE 22 - ADDENDA/ATTACHMENTS
All Addenda, attachments and other documents referred to in this Agreement and
all specifications, drawings and documents referenced therein are hereby
incorporated in and made part of this Agreement.
ARTICLE 23 - SURVIVAL OF PROVISIONS
In addition to the rights and obligations which survive as expressly provided
for elsewhere in this Agreement, the Articles and Addenda which by their nature
should survive, shall survive and continue after any termination or cancellation
of this Agreement, and specifically Articles 11, 12, 14, 15, 16, and 19 shall
survive.
ARTICLE 24 - ENTIRE AGREEMENT
This Agreement states the entire agreement between the parties with respect to
the subject matter hereof and shall supersede all previous proposals,
negotiations, representations, commitments, writings, agreements and other
communications, both oral and written, between the parties with respect to the
subject matter hereof. This Agreement may not be released, discharged, changed
or modified except by an instrument in writing signed by a duly authorized
representative of each of the parties.
This Agreement has been duly signed by authorized representatives of the parties
and shall become effective as of the latest date set forth below (the "Effective
Date").
28
<PAGE> 31
OPEN SOLUTIONS, INC. UNISYS CORPORATION
By: /s/ Douglas Anderson By: /s/ Jack A. Blaine
Douglas Anderson Jack A. Blaine
Title: President Title: Corporate Senior Vice President,
President, PAAG
Date: 6/18/97 Date: 11 June 1997
29
<PAGE> 32
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SOFTWARE LICENSE AGREEMENT
ADDENDUM A
PACKAGE AND DOCUMENTATION
A PACKAGE
"The Complete Banking Solution" Modules:
Customer Service Representative System Operations
Teller Bank Operations
Loan Monetary Branch Operations
Loan CSR Product Manager
Loan Utilities External File Manager
Loan Investor Batch Manager
Loan Escrow Batch Server
Card Manager G/L Interface
OSI Data Model
B. DOCUMENTATION
[**]:
[**] [**]
[**] [**]
[**] [**]
[**] [**]
[**] [**]
[**] [**]
[**] [**]
[**] [**]
[**]
Marketing Literature:
Various brochures, advertisements and product descriptions
C. ENVIRONMENT
30
<PAGE> 33
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
The PACKAGE operates on Intel based servers and personal computers
utilizing Microsoft Windows NT as the operating system and the Oracle
Relational Database Management System.
SOFTWARE LICENSE AGREEMENT
ADDENDUM B
COMPENSATION SCHEDULE
A. LICENSE FEES
Far the purpose of marketing activities, the suggested list price for the
PACKAGE will be [**] if OSI 's teller and Platform module is included in
the PACKAGE, or [**] if OSI's teller and Platform modules are not included
in the PACKAGE. The parties shall meet annually and review market pricing
in the territory, making revisions to the suggested list price as
appropriate. The suggested list price will also be reviewed if new
functionality with value in the territory is added to the PACKAGE.
The suggested list price far the SOURCE CODE far marketing activities will
be [**], or such other amount as the parties may mutually agree an a case
by case basis.
The actual price to be charged to END USERS will be determined by UNISYS in
its sole discretion.
License fees due OSI for the PACKAGE shall be calculated as [**] of the
suggested list price for the PACKAGE for each of the [**] sublicenses of
the PACKAGE in each calendar year. Thereafter, license fees due OSI shall
be calculated at [**] of the suggested list price for the PACKAGE for each
sublicense of the PACKAGE in any calendar year. In those instances where
UNISYS translates the PACKAGE, the license fee due OSI shall be reduced by
[**] for the [**] of each translation of the PACKAGE which are sublicensed
to END USERS.
31
<PAGE> 34
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
B. SERVICES
OSI shall provide UNISYS with a [**] OSI standard service rates.
At the Effective Date, OSI's rates for training services are [**]. Rates
for implementation/installation/conversion services are [**]. Rates for
extraordinary support services are [**]. OSI shall provide UNISYS advance
written notice of any changes to such rates, and increases shall not be
effective for at least thirty days from the date of such notice.
C. SUPPORT FEES
Support fees due OSI for the PACKAGE shall be calculated as [**] of the net
annual maintenance fee charged by UNISYS to the END USER. For the purposes
of this Agreement, the net annual maintenance fee shall be deemed to be
[**] of the suggested list price for the PACKAGE licensed to the END USER.
32
<PAGE> 35
SOFTWARE LICENSE AGREEMENT
ADDENDUM C
TRAVEL POLICY
LODGING: Accommodations shall be selected in accordance with the hotels and
the corresponding rates indicated in the Unisys Hotel Directory,
whenever possible.
The itemized hotel bill must be submitted as a receipt.
MEALS: The cost of all meals will be reimbursed an actual/reasonable
basis, except meals provided free of charge an airlines, at
hotels, at Unisys facilities, at Unisys sponsored meetings, etc.
Meals provided free of charge shall be itemized as such. Any meal
cost of ten dollars ($10) or greater must be supported with a
charge card or otherwise valid receipt.
CAR RENTAL: The rental of an automobile at a rate in excess of major rental
agency rates for standard automobiles is prohibited. The itemized
car rental agreement form must be submitted as a receipt
TRAVEL: All personnel must travel by coach or economy class for air and
rail travel. Unisys authorized travel of personnel by private auto
shall be compensated at the rate of thirty-one cents ($0.31) per
mile, plus tolls and parking fees. The ticket form for air or rail
travel must be submitted as a receipt
The above information is provided as a guideline and shall be adhered to
whenever possible. However, all reasonable, actual expenses incurred which are
submitted and supported by appropriate receipts (any expense of ten dollars or
greater must be supported with a charge card or otherwise valid receipt) shall
be reimbursed.
33
<PAGE> 36
SOFTWARE LICENSE AGREEMENT
ADDENDUM D
EXCLUSIONS TO SUBCONTRACTOR DEFINITION
Phoenix International
Fiserv and its subsidiaries including information technology Inc. (ITI)
Bisys
Alltel
Broadway & Seymour
M&I Data Services
EastPoint Technologies
Peerless
NCR Corporation
Jack Henry
Hogan Systems
Perot Systems
Banctec
ACS
EDS and Its subsidiaries
Kirchman
Bankworks AG
LeapFrog Technologies
Bankline MidAmerica
IBM
Precision Systems
Sparak Systems
Data Dimensions Inc.
any regional financial service bureau or outsourcing organization serving the
U.S. banking marketplace
34
<PAGE> 37
SOFTWARE LICENSE AGREEMENT
EXHIBIT 1 PAGE 1 OF 2
U N I S Y S
USER COMMUNICATION FORM (UCF) - (SIMULATION)
To: SUPPORT ACTIVITY LOCATION)
UCF# (DIST/SUB/COUNTRY)*(BRANCH/LOC)*(CUSTOMER REF)
DATE PREPARED: __________________
CLASS: FORM TYPE:
[ ] Software [ ] Hardware [ ] Application [ ] MTR [ ] Problem [ ] Feature
Suggestion
================================================================================
PRODUCT/SYSTEM DESCRIPTION
================================================================================
(HOST PROCESSOR/MACHINE TYPE) (SYSTEM RELEASE) (UNIT STYLE) (SERIAL NO.)
(PRODUCT) (LEVEL) (COMPONENT)
(FIRMWARE) (FIRMWARE LEVEL) (OP SYSTEM) (OS LEVEL)
OCCURRENCES REPRODUCIBLE PRODUCT STATUS PRIORITY
[ ] ONE-TIME [ ] YES [ ] UN-USABLE [ ]PROBLEM AVOIDABLE [ ]A [ ] C
[ ] MULTIPLE [ ] NO [ ] DEGRADED [ ] SYSTEM UNAFFECTED [ ]B
================================================================================
MATERIALS
================================================================================
MATERIALS ATTACHED (Dump, Trace, Data, Obj. Code, Listing, Parts, Tape) No. ___
[ ] YES [ ] NO (MATERIALS DESCRIPTION)
[ ] ADDITIONAL INFORMATION (Previous UCF Reg. No) (Previous UCF Ref #)
[ ] FORWARDED UNDER SEPARATE COVER (Comments)
================================================================================
DESCRIPTION
================================================================================
CONCISE DESCRIPTION (MAXIMUM 76 CHARS)
_______________________________________________________________
_______________________________________________________________
(OPERATIONS IMPACT)
(PERTINENT CONFIGURATION)
(FULL DESCRIPTION)
(ANALYSIS/WORKAROUND)
[ ] DESCRIPTION CONTINUED
SUGGESTED FIXED ATTACHED SITE TESTED
[ ] YES [ ] NO [ ] YES [ ] NO
================================================================================
<PAGE> 38
SOFTWARE LICENSE AGREEMENT
EXHIBIT 1 PAGE 2 OF 2
U N I S Y S
USER COMMUNICATION FORM (UCF) - (SIMULATION)
================================================================================
SITE
IDENTIFICATION
================================================================================
(ORIGINATOR'S NAME) (UNISYS SITE NUMBER)
(COMPANY NAME) (TELEPHONE NUMBER)
(ADDRESS) (TELEX/DEX NUMBER)
(CITY, STATE, COUNTRY, ZIP CODE)
================================================================================
SUPPORT (UNISYS USE ONLY)
================================================================================
(Reviewer)
(Title) (Organization) (Phone Number) (Telex/Dex Number)
- --------------------------------------------------------------------------------
(Address) (Date Acknowledged) (Date Received) (Authorization Number)
- --------------------------------------------------------------------------------
(City, State, Country, Zip Code) (Assigned Priority) (Register Number)
- --------------------------------------------------------------------------------
(Keywords Minimum of One) (Keyword Dictionary)
<PAGE> 1
Exhibit 10.14
April 10, 1997
Mr. John Person
1239 Glencrest Drive
Heathrow, Florida 32746
Dear John,
Please accept this letter as our offer to join Open Solutions Inc. as
Executive Vice President and Chief Operating Officer. The effective date of your
employment will be May 7, 1997.
You will be paid on the 15th and 30th of each month at the annualized
rate of $150,000 per year. In addition, you will be granted 100,000 OSI stock
options, under the 1994 non-statutory OSI Stock Option Plan. These will vest
over a four year period. Health insurance begins 30 days after your start date,
at a pre-tax cost of $75.00 per pay period on a family basis. Eligibility for
enrolling in the OSI 401K plan is three months from date of hire. You will be
eligible to participate in the company bonus plan as established and approved by
the Board of Directors. There is no guarantee of payments under this plan as it
is administered at the discretion of the Board of Directors and is subject to
the company meeting certain established objectives and other factors. (Award
targeted at $50,000 at 100% of all goals)
Other benefits being granted: Household goods moving expense.
Temporary living expenses.
Two trips to find family residence.
$400.00/month car lease allowance.
Laptop Computer, cell phone; other
business expenses.
Congratulations and welcome to Open Solutions.
Sincerely,
/s/ Doug Anderson
Doug Anderson
President & CEO
<PAGE> 1
Exhibit 10.15
February 27, 1998
Mr. Richard Willemin
76 Cross Ridge Road
Chappaqua, NY 10514
Dear Rich:
Please accept this letter as our offer to join Open Solutions Inc. (OSI) as
Chief Financial Officer and Senior Vice President. The effective date of your
employment will be April 8, 1998.
You will be paid on the 15th and 30th of each month at the annualized rate of
$150,000 per year. In addition, you will be granted OSI stock options, under the
1994 Non-statutory OSI Stock Option Plan. These options will vest over a four
year period.
Benefits including health insurance, should you require it, will commence
beginning the 1st of the month 30 days after your start date, at a pre-tax cost
of $75.00 per pay period on a family basis. Eligibility for enrolling in the OSI
401K plan is the next calendar quarter. You will be eligible to participate in
the company bonus plan as established and approved by the Board of Directors.
There is no guarantee of payments under this plan as it is administered at the
discretion of the Board of Directors and is subject to the company meeting
certain established objectives and other factors.
Congratulations and welcome to Open Solutions Inc.
Sincerely,
/s/ Doug Anderson
Doug Anderson
Chairman & CEO
Agreed,
/s/ Richard Willemin
- --------------------
Richard Willemin
<PAGE> 1
Exhibit 10.16
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
INFORMATION PROCESSING SYSTEM AGREEMENT
BY AND BETWEEN
OPEN SOLUTIONS INC.,
a Delaware corporation
(OSI)
AND
[Click here and type name]
--------------------------
(Licensee)
effective as of [Click here and type name], 1998
<PAGE> 2
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
INFORMATION PROCESSING SYSTEM AGREEMENT........................................1
1. Parties...............................................................1
2. Components............................................................1
3. Definitions...........................................................2
4. Entirety of Agreement.................................................5
5. Products and Services.................................................5
6. Payments and Terms of Payment.........................................5
7. License Fees..........................................................6
8. Term..................................................................9
9. Termination...........................................................9
10. State Laws...........................................................10
11. Amendments...........................................................10
12. Acceptance...........................................................10
13. Limitation of Liability..............................................10
14. Warranties, Representations and Limitations..........................12
15. Notification of Changes..............................................12
INITIAL PRODUCT ORDER.........................................................14
IMPLEMENTATION FEE SCHEDULE...................................................15
LICENSE FEE SCHEDULE..........................................................17
END USER SOFTWARE LICENSE.....................................................19
1. Grant of License.....................................................19
2. Ownership of Software................................................21
3. Maintenance and Support Services.....................................21
4. Termination of License...............................................21
5. Notice of Default....................................................23
6. Force Majeure........................................................24
7. Infringement.........................................................24
8. Confidentiality......................................................25
9. Miscellaneous........................................................27
-i-
<PAGE> 3
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
SUPPORT SERVICES TERMS AND CONDITIONS.........................................29
1. Definitions..........................................................29
2. Support Coverage.....................................................30
3. Support Services.....................................................30
4. Term and Termination.................................................31
5. Fees and Payment.....................................................31
6. Response, Problem Resolution Standards and Error Correction..........32
7. Confidentiality......................................................32
8. Exclusions...........................................................32
9. Limitation of Liability..............................................33
MAINTENANCE AND SUPPORT SERVICES FEE SCHEDULE.................................34
IMPLEMENTATION TERMS AND CONDITIONS...........................................35
1. Implementation.......................................................35
2. Implementation Services..............................................37
3. Fees and Payment.....................................................38
4. Term and Termination.................................................38
5. Confidentiality......................................................39
6. Exclusions...........................................................39
7. Limitation of Liability..............................................39
TRAINING SCHEDULE.............................................................41
ESCROW TERMS AND CONDITIONS...................................................44
1. Source Code Agreement................................................44
2. License..............................................................44
3. Definitions..........................................................45
AMENDMENTS TO AGREEMENT.......................................................46
-ii-
<PAGE> 4
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
INFORMATION PROCESSING SYSTEM AGREEMENT
1. PARTIES
This INFORMATION PROCESSING SYSTEM AGREEMENT (the "Agreement") is made and
entered into by and between Open Solutions Inc., a Delaware corporation (OSI),
and:
[CLICK HERE AND TYPE NAME] (the "Licensee")
whose address is: [CLICK HERE AND TYPE NAME]
[CLICK HERE AND TYPE NAME]
as of the "Effective Date" (as defined in section 3.5 below).
2. COMPONENTS
This Agreement incorporates the following attachments which bear the same
Agreement Number as set out in the header to this page above, each such
attachment being referred to individually as an "Attachment" and collectively as
the "Attachments":
a) Initial Product Order (Attachment #1).
b) End User Software License (Attachment #2).
c) Support Services Terms and Conditions (Attachment #3).
d) Maintenance and Support Services Fee Schedule, which shall be
updated from time to time (Attachment #4).
e) Implementation Terms and Conditions (Attachment #5).
f) Training Schedule (Attachment #6).
g) Escrow Terms and Conditions (Attachment #7).
This Agreement may also incorporate Additional Product Orders and Services
Orders bearing the same Agreement Number as set out above, provided that:
a) OSI has provided the Additional Product Order or Service Order
form to Licensee;
b) OSI and the Licensee both execute such Additional Product
Order or Service Order; and
c) Attachments to an Additional Product Order or Service Order
shall only apply to the Additional Product Order or Service
Order to which they are attached. Such attachments shall have
no force or effect as to any other product order, service
order, purchase order, confirmation or
- 1 -
<PAGE> 5
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
similar form, whether pre-existing or subsequently entered
into, even if signed by the parties after the date hereof.
3. DEFINITIONS
For purposes of this Agreement, capitalized terms wherever defined and used
shall have the same meaning throughout this Agreement, unless otherwise
specifically limited in this Agreement or a specific Attachment. The following
definitions shall apply throughout this Agreement and its Attachments, unless
specifically provided otherwise:
3.01 ACCOUNT: The combined total of Licensee's asset and liability
accounts processed on the system.
3.1 CONVERSION: The conversion and formatting of Licensee's
existing data for use with the Licensed Software.
3.2 DESIGNATED COMPUTER HARDWARE: The computer and network
equipment listed on the Initial Product Order which OSI
believes is compatible with the Licensed Software (as
hereinafter defined), and such other computer and network
equipment which OSI believes is compatible with the Licensed
Software.
3.3 DESIGNATED LOCATION: The street address of the primary data
base server which is part of the Designated Computer Hardware.
The Licensee may change the Designated Location by providing
written notice to OSI.
3.4 DOCUMENTATION: All technical materials and documents, whether
in hard copy or magnetic media or machine readable form,
regarding the capabilities, operation, installation and use of
the Licensed Software (as hereinafter defined).
3.5 EFFECTIVE DATE: The date that this Agreement is last signed by
the duly authorized signatory of either OSI or Licensee.
3.6 HIGHER LEVEL LICENSE FEE: A license fee required to be paid by
Licensee as a result of Licensee or any entity in the Licensee
Group merging, adding affiliates or otherwise increasing
beyond the aggregate asset size or number of accounts for
which Licensee has already paid a License Fee or a Higher
Level License Fee under this Agreement.
- 2 -
<PAGE> 6
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
3.7 IMPLEMENTATION: The Installation and Conversion of the
Licensee's data for use with the Licensed Software in
accordance with Implementation Terms and Conditions
(Attachment #5).
3.8 INCURRED EXPENSES: Reasonable travel and living expenses and
other reasonable out-of-pocket expenses incurred in
Implementation, Training, or Support Services, including
(without limitation) file conversion costs; optional products
and services, or hardware requested or authorized by Licensee,
shipping charges; courier or delivery charges; tape, cartridge
or diskette costs; or voice or non-voice telephone or
communication costs.
3.9 LICENSE: The restricted right to use the Licensed Software (as
hereinafter defined) granted to Licensee by OSI in accordance
with the terms of the End User Software License
(Attachment #2).
3.10 LICENSE YEAR: Any 12 month period that commences on the
Effective Date, or an anniversary of the Effective Date, and
ends at midnight on the day before an anniversary of the
Effective Date.
3.11 LICENSED SOFTWARE: All versions of OSI's Proprietary Software
(as hereinafter defined) and Third Party Software (as
hereinafter defined) licensed by OSI to Licensee under this
Agreement.
3.12 LICENSEE GROUP: A subsidiary or affiliate of the Licensee, the
parent corporation of Licensee, and any holding company of
which Licensee is a subsidiary. For the purpose of this
subsection, an affiliate will mean a corporation that is more
than fifty percent (50%) owned directly or indirectly by the
parent corporation of a Licensee, a subsidiary shall be a
corporation of which Licensee directly or indirectly owns more
than fifty percent (50%), and a parent corporation shall be a
corporation that directly or indirectly owns more than fifty
percent (50%) of Licensee, but only so long as such entities
continue to qualify as such an affiliate, subsidiary or parent
corporation.
3.13 LIVE PRODUCTION: Processing Licensee's data in an actual
production mode as opposed to testing mode only.
3.14 OSI'S DATABASE MODEL: The version(s) of the database model,
design and algorithm owned and developed by OSI and
incorporated into OSI's Proprietary Software (as hereinafter
defined).
- 3 -
<PAGE> 7
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
3.15 OSI'S PROPRIETARY SOFTWARE: All version(s) of software owned
by OSI and OSI's Database Model.
3.16 OSI BASE SYSTEM: The OSI Proprietary Software containing the
functional content defined as part of the base system in the
Initial Product Order.
3.17 OSI OPTIONAL MODULES: Software modules developed and
proprietary to OSI which are not included as part of the base
system but which may be licensed by Licensee for an additional
license fee.
3.18 REMOTE LOCATIONS: The street addresses of locations other than
the Designated Location where terminals and computers are
connected to the Licensed Software through the Licensee's
local and wide area networks. The Licensee may change Remote
Locations by providing written notice to OSI.
3.19 SCHEDULED LIVE PRODUCTION DATE: The date specified in the
initial product order on which the Licensee anticipates using
the Software for Live Production.
3.20 SOFTWARE: The version(s) of OSI's Proprietary Software, and
Third Party Software (as hereinafter defined) ordered by
Licensee through OSI, as set forth in the Product Orders, in
object code format or database code format, together with the
Documentation provided to Licensee by OSI, including updates,
modifications or new releases of such software programs and
Documentation that may be provided by OSI to the Licensee from
time to time.
3.21 SPECIFICATIONS: All specifications set forth in:
a) this Agreement,
b) the Report (as defined in the Implementation Terms
and Conditions)
c) the Documentation and
d) all other functional and technical specifications
applicable to the Licensed Software.
3.22 TERM: The initial five (5) year term of this Agreement or any
extension of such initial term or any subsequent term as
provided for herein.
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3.23 THIRD PARTY SOFTWARE: All version(s) of:
a) Software owned by third parties and integrated by OSI
into OSI's Proprietary Software and provided and
sub-licensed to Licensee by OSI ("Third Party
Software Licensed from OSI"), and
b) Software owned by third parties under which, or with
which, OSI's Proprietary Software operates and which
is provided and licensed to Licensee by third party
providers ("Third Party Software Licensed from Third
Party").
4. ENTIRETY OF AGREEMENT
Each party's acceptance of this Agreement (as indicated by execution hereof by
their duly authorized representative) was and is limited to and is expressly
conditioned upon the other party's acceptance of the terms contained in this
Agreement, and its Attachments, to the exclusion of all other terms.
Accordingly, both parties agree that this Agreement and its Attachments are the
complete and exclusive statement of the mutual understanding of the parties and
shall and do supersede and cancel all previous written and oral agreements and
communications relating to the subject matter of this Agreement and its
Attachments.
5. PRODUCTS AND SERVICES
OSI will provide Licensee with the following:
a) OSI's Licensed Software as indicated on the Initial
Product Order.
b) a limited license to use the Licensed Software,
subject to the conditions set forth in the END USER
SOFTWARE LICENSE.
c) the maintenance and support services set forth in the
SUPPORT SERVICES TERMS AND CONDITIONS on the terms
set forth therein and subject to the MAINTENANCE AND
SUPPORT FEE SERVICES SCHEDULE.
d) the initial review, on-site survey and system
implementation, as set forth in the IMPLEMENTATION
TERMS AND CONDITIONS, and training services as set
forth in the TRAINING SCHEDULE.
e) a full and current version and previous version of
the Proprietary Software in escrow, pursuant to the
ESCROW TERMS AND CONDITIONS.
6. PAYMENTS AND TERMS OF PAYMENT
The fees required to be paid by Licensee to OSI under this Agreement include,
but may not be limited to, the initial License Fee, Third Party Software License
Fees, Third Party Interface Fees, Higher Level License Fees, an Annual Support
Fee, a
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Training Fee, an Implementation Fee and Incurred Expenses, all as set out below.
In the event that Licensee requires, or requests, additional services then
additional fees will be required. All invoices are due and payable when
delivered. If OSI fails to invoice for a fee or Incurred Expenses, such failure
shall not waive the requirement for payment of the same. Any invoice or fee not
paid within thirty (30) days of the date due shall incur interest at the rate of
1.5% per month from the due date until paid to cover OSI's costs of collections
as well as interest, or, if lower, the maximum rate allowed by law. All amounts
due under this Agreement shall be paid in U.S. dollars.
Amounts payable to OSI hereunder are payable in full without deduction, or set
off, and shall be in addition to all sales, use or other taxes or duties, which
Licensee shall also be responsible for paying. Licensee shall duly and timely
pay all taxes and duties, however designed, levied or based upon amounts payable
to OSI hereunder (exclusive of United States Federal, state or local taxes based
upon the net income of OSI) or the license, use or possession of the Licensed
Software. Licensee agrees to indemnify and hold OSI harmless from any such taxes
or duties which any federal, state or local taxing authority requires OSI to
pay. Licensee may challenge the applicability of any such tax so long as it
fully complies with applicable law in making such challenge, to include paying
the tax or giving OSI other satisfactory assurance of compliance, if payment is
required in order to make such challenge.
7. LICENSE FEES
7.1 INITIAL LICENSE FEES
The Initial License Fees for the OSI Proprietary Software and OSI
Optional Modules and Third Party Software Licensed From OSI, are set
forth in the Initial Product Order and any subsequent Product Order(s).
The Initial License Fee is calculated according to the License Fee
Schedule Set forth in the Initial Product Order (Attachment #1).
7.2 PAYMENT OF INITIAL LICENSE FEES AND THIRD PARTY SOFTWARE
LICENSE FEES Initial License fees for OSI Proprietary Software and OSI
Optional Modules and License Fees for Third Party Software Licensed
from OSI are due and payable according to the following schedule:
EVENT % PAYMENT
----- ---------
Execution and Delivery of Agreement 30%
Delivery of the OSI Proprietary Software and 70%
of Third Party Software Licensed from OSI
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7.3 HIGHER LEVEL LICENSE FEES
If Licensee or any entity in the Licensee Group, or any of them,
merges, adds affiliates or otherwise increases beyond the aggregate
asset size or number of actual accounts (active and inactive) for which
Licensee has already paid a Licensee Fee or a Higher Level License Fee
under this Agreement, Licensee agrees to pay an additional Higher Level
License Fee as provided for in Initial Product Order (Attachment #1).
7.4 ANNUAL SUPPORT FEES
Annual Support Fees are set forth in the Support Services Terms and
Conditions (Attachment #3) and the Maintenance and Support Services Fee
Schedule (Attachment #4). Annual support fees are based upon License
Fees paid in accordance with The Initial Product Order (Attachment #1),
Higher Level License Fees if applicable, Fees for Third Party Software
Licensed from OSI as indicated on The Initial Product Order as well as
Fees for additional third party software installed during the term of
this agreement including Fees resulting from additional usage of third
party software as indicated in additional seats installed, Fees for
third Party interfaces as indicated on the initial Product Order as
well as Fees for additional interfaces ordered and installed during the
term of this agreement and Fees for OSI Optional Modules as indicated
on the Initial Product Order as well as Fees for additional OSI
Optional Modules ordered and installed during the term of this
agreement and the Annual Support Fee Rate (Attachment #4) in effect at
the commencement of a License Year.
Annual support for OSI Proprietary Software, Third Party Interfaces,
OSI Optional Modules and Third Party Software Licensed from OSI
commences at conversion to Live Production use. Annual Support Fees are
due and payable upon receipt by Licensee of OSI's invoice.
At Licensee's option, Licensee may prepay Annual Support Fees for the
first four years of a five year term, and receive the fifth year of
support for no additional charge except however that additional Annual
Support Fees resulting from Higher Level License Fees as specified in
Section 7.3 of the Information Processing System Agreement would be due
in accordance with the Support Services Terms and Conditions.
7.5 IMPLEMENTATION FEES
Fees shall be due and payable for the following services related to
implementation and conversion (collectively referred to as
"Implementation Fees"). Such Implementation Fees are set out in the Fee
Schedule attached to
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the Initial Product Order (Attachment #1). Implementation fees shall be
due and payable at the time of commencement of performance of the
service for which the fee is charged and shall be deemed earned when
the service is commenced because of the requirement for OSI to allocate
resources for the performance of such services. OSI shall be entitled
to bill for and collect an additional Implementation Fee, to be paid in
advance, if Implementation is required whenever Licensee or any entity
in the Licensee Group merges, adds affiliates, or otherwise changes its
organization or structure such that implementation services are
required from OSI.
7.5.1 CONVERSION SUPPORT SERVICES FEE
Licensee shall pay to OSI a Conversion Support Services Fee
for OSI's agreement to perform the activities and processes
provided for in subsections 1.a and 1.f of the Implementation
Terms and Conditions (Attachment #5).
7.5.2 DATA CONVERSION SERVICES FEE
Licensee shall pay to OSI a Data Conversion Services Fee for
OSI's agreement to perform the activities and processes
provided for in subsections 1.e., 1.j., and 1.k. of the
Implementation Terms and Conditions (Attachment #5).
7.5.3 CLIENT/SERVER IMPLEMENTATION SERVICES FEE
Licensee shall pay to OSI a Client/Server Implementation
Services Fee for OSI's agreement to perform the activities and
processes provided for in subsections 1.b., 1.c., 1.d., 1.g.,
and 1.h of the Implementation Terms and Conditions
(Attachment #5).
7.6 TRAINING FEE
A Training Fee is due and payable upon execution and delivery of this
Agreement by Licensee. The Training Fee is set out in the Fee Schedule
attached to the Initial Product Order.
7.7 THIRD PARTY INTERFACE FEE
Licensee shall pay to OSI a Third Party Interface as set out in the Fee
Schedule attached to the Initial Product Order (Attachment #1) for each
Third Party Interface provided, or developed by OSI. Unless defined in
an amendment to the contrary, all Third Party Interfaces are presumed
to conform to OSI's standard interface form, if the Third Party
Software for which the Third Party Interface has been provided is
rewritten or modified in such a manner that only serves the needs of a
single Licensee or vendor or requires the development of a non-standard
interface, then OSI reserves the right to charge
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an additional Third Party Interface Fee for any such interface which
must be rewritten or developed. In addition to Third Party Interface
fees Licensee shall pay an annual support fee for Third Party
Interfaces as provided for in paragraph 7.4 above.
7.8 INCURRED EXPENSES
Incurred Expenses shall be due and payable immediately upon receipt by
Licensee of OSI's invoice for such incurred expenses.
7.9 FEE CHANGES
OSI reserves the right to adjust its fees and prices at any time
subject to thirty (30) days' advance notice. Such changes shall have no
retroactive effect on Licensee.
7.10 DECONVERSION FEE
Upon termination of this Agreement, if OSI provides services to
Licensee in connection with such termination, for example assisting in
data conversion, then Licensee shall pay to OSI fees for such services
based upon OSI's then standard rates plus all out-of-pocket expenses
incurred by OSI in performing such services.
8. TERM
Subject to termination by OSI or Licensee as herein provided, the initial term
of License with respect to the OSI Licensed Documentation and Licensed Software
hereunder shall be five (5) years. The License shall be automatically renewed
after five (5) years and each subsequent year thereafter, if Licensee is not
then in material default under the terms of this Agreement and without
requirement for payment by the Licensee of a Higher Level License Fee, if, but
only if, the Licensee has not grown in Asset Size or Number of Accounts beyond
the next level as listed in the Fee Schedule set out on the Initial Product
Order (Attachment #1).
9. TERMINATION
Licensee may terminate the License granted under this Agreement by giving OSI a
sixty (60) day prior written notice of termination. OSI, or Licensee, may
terminate the License as provided in the "End User Software License" the
"Implementation Terms & Conditions," and the "Support Services Terms &
Conditions." However, except for the License and except as otherwise expressly
provided herein, the terms, conditions and obligations of this Agreement shall
survive Termination. Termination shall not be an exclusive remedy and all other
remedies shall be available whether or not the License or this Agreement is
terminated.
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If Licensee terminates this Agreement pursuant to this Section prior to the end
of the existing term, then the Licensee shall immediately pay to OSI all moneys
due and payable to OSI at the time of termination in accordance with the terms
of this Agreement, and in addition, as a termination fee and not as a penalty,
Licensee shall pay to OSI one/half of the fees which would be or become due and
payable pursuant to the Support Services Terms & Conditions for the balance of
the unexpired term.
10. STATE LAWS
This Agreement shall be deemed to have been made in, and be construed pursuant
to the laws of the State of Connecticut and the United States without regard to
conflicts of laws provisions thereof.
11. AMENDMENTS
This Agreement may only be changed or modified by a written agreement duly
signed by authorized representatives of both parties. Any waiver of any
provision of this Agreement shall be effective only if made in writing and
signed by a duly authorized representative of the waiving party.
12. ACCEPTANCE
By their execution below, the parties, through their duly authorized
representatives, accept and enter into this Agreement and agree to be bound by
its terms and conditions. The undersigned individuals represent that each is
duly authorized and empowered and directed to execute this Agreement on behalf
of their respective organization.
13. LIMITATION OF LIABILITY
13.1 OSI'S TOTAL LIABILITY TO LICENSEE OR ANY ENTITY IN THE LICENSEE GROUP
UNDER ANY PROVISION OF THIS AGREEMENT OR FOR ANY AND ALL CLAIMS, LOSSES OR
DAMAGES RELATING TO THE LICENSED PRODUCTS (WHETHER BASED ON TORT, CONTRACT, OR
ANY OTHER THEORY) SHALL BE LIMITED TO THE AMOUNT ACTUALLY PAID BY LICENSEE TO
OSI AS LICENSE FEES FOR THE LICENSED SOFTWARE GIVING RISE TO THE LIABILITY. THE
PARTIES ACKNOWLEDGE THAT EACH OF THEM RELIED UPON THE INCLUSION OF THIS
LIMITATION IN CONSIDERATION OF ENTERING INTO THIS AGREEMENT.
13.2 EXCEPT AS SPECIFICALLY OTHERWISE PROVIDED IN THIS AGREEMENT, AND IN
SECTION 7 OF THE END USER SOFTWARE LICENSE
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(ATTACHMENT #2), OSI SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES OF ANY KIND,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF
FITNESS FOR A PARTICULAR PURPOSE.
13.3 IN NO EVENT SHALL OSI OR ITS LICENSORS BE LIABLE FOR ANY SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE USE, OR
INABILITY TO USE, THE LICENSED PRODUCTS OR ARISING OUT OF ANY OTHER
CIRCUMSTANCES ASSOCIATED WITH THE SUBJECT MATTER OF THIS AGREEMENT AND ITS
ATTACHMENTS, AND IN SUCH RESPECT LICENSEE AND LICENSEE GROUP SHALL NOT BE
ENTITLED TO DAMAGES BASED ON LOSS OF PROFIT, LOSS OR INTERRUPTION OF DATA OR
COMPUTER TIME, ALTERATION OR ERRONEOUS TRANSMISSION OF DATA, EVEN IF OSI IS
ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES OR SHOULD HAVE KNOWN OF
SUCH POSSIBILITY.
13.4 THE EXPRESS WARRANTIES MADE IN THIS AGREEMENT TAKE THE PLACE OF AND
SUPERSEDE ALL OTHER WARRANTIES, EXPRESS OR IMPLIED AND WHETHER OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE. EXCEPT AS
EXPRESSLY PROVIDED HEREIN, OSI DOES NOT WARRANT, GUARANTEE, OR MAKE ANY
REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE LICENSED
SOFTWARE OR DOCUMENTATION.
13.5 THE LICENSEE UNDERSTANDS THAT OSI IS NOT RESPONSIBLE FOR AND WILL HAVE
NO LIABILITY FOR AND DOES NOT WARRANT ANY HARDWARE, SOFTWARE PRODUCED BY OTHERS
AND LICENSED TO LICENSEE, WHETHER DIRECTLY FROM THE THIRD PARTY OR THROUGH OSI
AS A SUBLICENSOR, OR OTHER ITEMS OR ANY SERVICES PROVIDED BY ANY PERSONS OTHER
THAN OSI.
13.6 EXCEPT FOR OSI'S INDEMNITY OBLIGATIONS UNDER SECTION 7 (RELATING TO
INTELLECTUAL PROPERTY INFRINGEMENTS) OF THE END USER SOFTWARE LICENSE
(ATTACHMENT #2), OR BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER SECTION 8 OF
THE END USER SOFTWARE LICENSE AND SECTION 5 OF THE IMPLEMENTATION TERMS AND
CONDITIONS (ATTACHMENT #5), AND ANY LIABILITY OSI MAY HAVE FOR PERSONAL INJURY
OR DAMAGE OR DESTRUCTION OF REAL OR TANGIBLE PERSONAL PROPERTY, OSI'S LIABILITY
TO LICENSEE FOR ANY CAUSE WHATSOEVER AND REGARDLESS OF THE FORM OF ACTION AND
WHETHER IN CONTRACT OR TORT, OR AT LAW OR EQUITY, SHALL
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NOT EXCEED THE AMOUNTS ACTUALLY PAID TO OSI BY LICENSEE HEREUNDER.
13.7 THE TERMS AND CONDITIONS OF THIS AGREEMENT CONSTITUTE A SERVICE
CONTRACT AND NOT A PRODUCT WARRANTY. THE LICENSED SOFTWARE AND ALL MATERIALS
RELATED TO THE LICENSED SOFTWARE ARE SUBJECT EXCLUSIVELY TO THE WARRANTIES SET
FORTH IN THIS AGREEMENT.
13.8 THE TERMS AND CONDITIONS OF THIS SECTION 13 SHALL SURVIVE TERMINATION
OF THIS AGREEMENT FOR ANY REASON.
14. WARRANTIES, REPRESENTATIONS AND LIMITATIONS
OSI WARRANTS AND REPRESENTS THAT THE SOFTWARE WILL PERFORM SUBSTANTIALLY IN
ACCORDANCE WITH THE SPECIFICATIONS PERIODICALLY DELIVERED BY OSI TO LICENSEE.
OSI AGREES THAT IT WILL NOT WRONGFULLY DISABLE OR OTHERWISE RENDER INOPERABLE
THE SOFTWARE OR ANY OTHER HARDWARE OR SOFTWARE ON LICENSEE'S COMPUTER SYSTEM FOR
ANY REASON. ANY LIMITATION OF LIABILITIES SET OUT IN THIS SECTION AND WITH
RESPECT TO OSI WILL BE NULL AND VOID IF OSI BREACHES ITS AGREEMENT SET FORTH IN
THE IMMEDIATELY PRECEDING SENTENCE.
THIS AGREEMENT CONTAINS, AMONG OTHER THINGS, WARRANTY DISCLAIMERS, WARRANTY
LIMITATIONS, LIABILITY LIMITATIONS AND USE LIMITATIONS. EACH PARTY RECOGNIZES
AND AGREES THAT THE WARRANTY DISCLAIMERS AND LIABILITY AND REMEDY LIMITATIONS IN
THIS AGREEMENT AND ITS ATTACHMENTS ARE A MATERIAL BARGAINED FOR BASIS OF THIS
AGREEMENT AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND REFLECTED IN
DETERMINING THE CONSIDERATION TO BE GIVEN AND ACCEPTED BY EACH PARTY UNDER THIS
AGREEMENT AND IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT.
15. NOTIFICATION OF CHANGES
Licensee shall notify OSI prior to changes to or installation of hardware or
equipment in addition to the Designated Computer Hardware. Licensee also shall
provide a written report to OSI on or prior to each anniversary of an Effective
Date of Licensee's Asset and Account size. Provision of support and maintenance
by OSI to
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Licensee under the Support Services Terms and Conditions is conditioned upon
Licensee promptly notifying OSI of such changes to or installation of hardware
or equipment in addition to the Designated Computer Hardware.
Licensee: [CLICK HERE AND TYPE NAME]
--------------------------
Signature: _____________________________________ Date: ____________________
Name: __________________________________________ Title: ___________________
Address: [CLICK HERE AND TYPE NAME]
--------------------------
City: [CLICK HERE AND TYPE NAME] State: [CLICK HERE AND TYPE NAME] Zip:
-------------------------- --------------------------
[CLICK HERE AND TYPE NAME]
- --------------------------
OPEN SOLUTIONS INC.
Signature: _____________________________________ Date: ____________________
Name: [CLICK HERE AND TYPE NAME] Title: [CLICK HERE AND TYPE NAME]
-------------------------- --------------------------
Address: 300 Winding Brook Drive
-----------------------
City: Glastonbury State: CT Zip: 06033
----------- -- -----
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INITIAL PRODUCT ORDER
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IMPLEMENTATION FEE SCHEDULE
MAN DAYS FEES
-------- ----
CONVERSION SUPPORT SERVICES FEE:
- - Project Management
- - Project plan development and review
- - Status reporting
- - Kickoff meeting
DATA CONVERSION SERVICES FEE
- - Product mapping
- - Inventory products
- - Conversion programming
- - Testing and error resolution
HISTORY CONVERSION (Optional) ACCOUNTS FEES
Loans -- one year @ $.25 per account
Time Deposits -- one year @$.15 per account
Savings -- three months @ $.15 per account
DDA -- one month @$.15 per account
CLIENT SERVER IMPLEMENTATION FEE:
- - Verification of the operability of the
client server environment
- - Installation of Oracle, Data Replication
& Financial Printing Software, etc.
CERTIFICATION OF THE NETWORK BY
OSI-SANCTIONED ENGINEERS
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TRAINING FEE:
- - Allowance 52 Student Days
Curriculum
- - ERA Training
Product Manager/Product Setup
Workshop
- - Deposit Training
- - Loan Training
- - Operations Training
- - IRS Reporting
OPTIONAL OSI MODULES
Note: Training conducted at OSI (co-mingled with other clients)
Additional student days available at $250/day during pre-installation
period For training at OSI, rates do not include lodging, meals and
transportation for client personnel
Total Implementation Fee (excluding out-of-pocket expenses)
ADDITIONAL SERVICES PER DIEM: 800
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LICENSE FEE SCHEDULE
(EFFECTIVE JANUARY 1, 1998)
(License Fees are based on the higher of asset size or number of
actual accounts)
ASSET SIZE OR NUMBER OF ACCOUNTS LICENSE FEE FOR OSI BASE SYSTEM
- -------------------------------- -------------------------------
<$60M or 7,200 Accounts $140,000
<$100M or 15,000 Accounts $175,000
<$175M or 25,000 Accounts $225,000
<$250M or 40,000 Accounts $250,000
<$300M or 60,000 Accounts $300,000
<$400M or 75,000 Accounts $375,000
<$500M or 85,000 Accounts $450,000
<$600M or 100,000 Accounts $550,000
<$700M or 120,000 Accounts $650,000
<$800M or 140,000 Accounts $750,000
<$900M or 160,000 Accounts $825,000
<$1B or 180,000 Accounts $875,000
<1.1B or 200,000 Accounts $925,000
<1.2B or 220,000 Accounts $975,000
<1.3B or 240,000 Accounts $1,025,000
<1.4B or 260,000 Accounts $1,075,000
<1.5B or 280,000 Accounts $1,125,000
<1.7B or 320,000 Accounts $1,275,000
<1.9B or 360,000 Accounts $1,425,000
<2.1B or 400,000 Accounts $1,500,000
The License Fee Schedule, and the Annual Support Fee Rate are subject to change.
License fees based upon the number of accounts shall be adjusted after
conversion when the actual number of converted accounts has been determined, and
shall include both active and inactive accounts which are converted by OSI.
Additions to or changes in the Licensee's Designated Computer Hardware
subsequent to Conversion and Installation will result in additional Initial
License Fees.
The Higher Level License Fee shall be equal to the difference between the sum of
the Initial License Fee plus any subsequent Higher Level License Fees already
paid by Licensee under this Agreement and the then current License Fee for the
asset size or number of accounts according to OSI's then current License Fee
Schedule.
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Increases in Licensee's Asset or Account size may result in increases in Annual
Support Fees for OSI Proprietary Software, OSI Optional Modules and Third Party
Interfaces. Additions to or changes in the Licensee's Designated Computer
Hardware subsequent to Conversion and Installation may result in additional
Annual Support Fees for Third Party Software Licensed from OSI.
If the Licensee has grown to the next level or beyond then Licensee shall pay to
OSI the differential between the original license fee paid by Licensee and the
next level or levels of the then current "License Fee Schedule."
ADDITIONAL ATTACHMENTS FOLLOW
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END USER SOFTWARE LICENSE
This End User Software License (the "License Agreement") (Attachment #2) to this
Agreement relates to and is hereby incorporated into the Information System
Processing Agreement bearing the number set out in the heading to this page.
Capitalized terms not defined in this License Agreement have the same meaning as
defined elsewhere in this Agreement.
1. GRANT OF LICENSE
Subject to the terms and conditions set forth in this Agreement, OSI grants
Licensee and only Licensee, a restricted right (the "License") to use the
Licensed Software for its own internal business operations and operations of any
entity in the Licensee Group during the Term of this Agreement. This right does
not apply to acquired institutions or other entities in the Licensee Group
without payment of incremental License Fees calculated per the then current
"License Fee Schedule" which forms a part of the Initial Product Order
(Attachment #1).
1.1 RESTRICTIONS ON LICENSE
The License granted hereunder is a non-exclusive, non-transferable,
non-assignable, non-sublicensable right to use OSI's Proprietary
Software during the term of this Agreement to process its own data, and
the data of entities in the Licensee Group. The License granted
hereunder is also a non-exclusive, non-transferable, non-assignable,
non-sublicensable right to use the Third Party Software licensed from
OSI during the term of this Agreement to process its own data, and the
data of entities in the Licensee Group. Provided, however, Licensee may
process the data only of such entity in the Licensee Group for which
Licensee paid or pays, prior to commencement of processing for such
entity in the Licensee Group, License Fees at all times sufficient for
the aggregate asset size calculated in combination with the asset size
of Licensee, or the aggregate number of accounts calculated in
combination with the number of accounts of Licensee.
The License is subject to the further restrictions and limitations
provided in this Agreement and this License Agreement and OSI's master
licensing agreements with such third parties.
Except as otherwise provided in the Escrow Terms and Conditions,
Licensee has no right to receive, use or examine any Source Code (as
defined in the
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Escrow Terms and Conditions) or design documentation relating to the
Licensed Software and the License grants no such right.
The License gives Licensee the right to make such copies of the
Licensed Software and Documentation as are reasonably necessary for
Licensee's internal use of the Licensed Software and Documentation as
contemplated hereunder and for back up and archival purposes. In
exercising this right, Licensee shall reproduce and include the
copyright notice and any other proprietary right notices and
restrictions on use that appear on the original Licensed Software and
Documentation on any copies and any media therefor.
Licensee shall not, and shall not allow any third party to, without
OSI's prior written consent:
a) translate, interpret, decompile, disassemble, or otherwise
reverse engineer or attempt to reconstruct or discover any
source code, algorithms or underlying ideas incorporated in
the License Software,
b) remove any product identification, copyright or other notices
from the Licensed Software,
c) provide, lease, lend, use for timesharing or service bureau
purposes or allow others to use the Licensed Software to or
for the benefit of third parties,
d) except as specified in the Specifications or Documentation
provided by OSI, modify, incorporate into other software or
create a derivative work of any part of the Licensed Software,
e) load or use any portion of the Licensed Software (whether or
not modified or incorporated into or with other software) on
or with any machine or system other than Licensee's Designated
Computer Hardware,
f) except if, as and to the extent expressly authorized in the
applicable user Documentation provided by OSI, transmit or use
the Software over a network. This restriction does not
prohibit interfacing to external systems or networks used by
Licensee for its ordinary and necessary business operations,
g) disseminate performance information or analysis (including,
without limitation, benchmarks) to any other party relating to
the Licensed Software,
h) sell applications developed by Licensee which incorporate
access to, or work against OSI's Database Model,
i) make any modifications or additions to the Licensed Software
or Documentation without the prior written consent of OSI.
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2. OWNERSHIP OF SOFTWARE
As between the parties, OSI retains title to and ownership of and all
proprietary rights with respect to the Licensed Software and OSI's Database
Model and all copies and portions thereof, whether or not incorporated into or
with other software. The License does not constitute a sale of the Licensed
Software or any portion or any copy or reproduction of it. The License does not
constitute a sale or transfer of any ownership interest in the Licensed
Software, but merely constitutes a limited right to use the Licensed Software as
set out herein.
3. MAINTENANCE AND SUPPORT SERVICES
Maintenance and Support Services shall be provided under the terms and
conditions set forth in the Support Services Terms and Conditions (Attachment #3
to this Agreement), which forms part of and is incorporated into this Agreement.
OSI has no other obligations to provide support or maintenance or updates,
enhancements, modifications or new releases under this Agreement or this License
Agreement. No obligation of OSI under the Support Services Terms and Conditions
shall survive termination of the License granted hereunder.
4. TERMINATION OF LICENSE
4.1 During the Term of this Agreement, the License shall be
effective until terminated by termination of this Agreement.
In addition to automatic termination at the end of the Term or
any extension, termination can be effected as provided for in
subsections 4.2 and 4.4 below, and Section 4 "Term &
Termination" of the "Implementation Terms and Conditions."
OSI's remedies in the event of a breach by licensee shall
include an action for damages and, in the event of a material
breach of the provisions of Section 1 (relating to
restrictions) or Section 8 (relating to confidentiality)
hereof, equitable relief to enjoin the activity of Licensee
constituting the breach; provided, however, that as a
condition to either such remedy, to the extent that Section 6
below requires written notice of such breach prior to
commencement of a suit or legal action, OSI shall have first
given Licensee such notice.
4.2 In addition to other remedies, in law or equity, available to
OSI hereunder, in the event of a breach by License of the
provisions of sub- section (a) of Subsection 1.1 (relating to
reverse engineering) or Section 8 (relating to
confidentiality) which breach:
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a) threatens to have a material adverse impact on the
value of the Software Confidential Information (as
hereinafter defined), and
b) can be corrected by reasonable corrective steps
available to the Licensee,
OSI may terminate the License so long as it complies
fully with the provisions of this Section 4.2, as
follows:
i) OSI must notify Licensee in writing ("Notice
of Breach") specifying the actions
constituting the alleged breach and the
reasonable steps which it believes can and
must be taken by Licensee to correct such
breach.
ii) If Licensee, within thirty (30) days
following the date of such Notice of Breach,
implements the steps specified by OSI for
correcting the breach, or proposes other
similar reasonable steps calculated to
correct such breach and OSI agrees in
writing to the steps proposed by Licensee,
then OSI may not terminate the License until
Licensee has in good faith taken such steps
and has been unsuccessful in remedying the
breach.
iii) If Licensee fails or refuses, within thirty
(30) days following receipt of such Notice
of Breach, to commence taking the steps
required by OSI, or proposed by Licensee and
approved in writing by OSI, to correct the
breach and OSI elects to terminate the
License, OSI shall provide further written
notice (the "Notice of Termination") to
Licensee of its intention to terminate the
License effective no less than thirty (30)
days after the date of the Notice of
Termination.
iv) Such termination shall only take effect if:
(a) the thirty (30) day notice period
expires without the Licensee having
undertaken reasonable corrective
steps which have either been
concluded or are being continuously
pursued with all reasonable
diligence, and
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(b) the tolling period in effect as
provided in Section 4.3 below, if
any, has expired.
4.3 Any dispute which arises between the parties concerning the
interpretation and application of Section 4.2 or the
performance of the obligations thereof, which dispute cannot
be promptly resolved by the parties, may be submitted by
either party to mediation in Hartford, Connecticut, with the
parties sharing equally the cost of mediation. The termination
of the License provided for in Section 4.2 shall be tolled
pending the completion of and determination of the results of
such mediation.
4.4 Unless otherwise agreed to in writing by OSI, upon termination
of the License Licensee shall immediately cease all use of the
Licensed Software and all portions thereof (whether or not
modified or incorporated with or into other software), return
to OSI or destroy all copies of the Licensed Software and
Documentation and all portions thereof, and have an executive
officer of Licensee so certify in writing to OSI.
4.5 Unless this Agreement has expired, except for the License and
except as otherwise expressly provided herein, the terms of
this Agreement shall survive termination of the License.
5. NOTICE OF DEFAULT
Except as to a breach of the obligations contained in Section 8 (relating to
confidentiality for which no notice is required prior to commencement of a suit
or other legal action), neither party may commence a suit or legal action on
account of a default by the other party in the performance of any or its
obligations under this Agreement, unless the party seeking to bring such suit or
action shall first give the defaulting party written notice of the default,
specifying the nature and circumstances thereof. Such notice shall be given at
least the following number of days prior to the commencement of the suit or
legal action:
a) three (3) business days in the case of defaults under
Section 1;
b) ten (10) days in the case of non-payment; and
c) thirty (30) days in all other cases.
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6. FORCE MAJEURE
Neither party shall be deemed to have breached this Agreement or this License
Agreement by reason of any delay or failure in its performance arising from
events beyond its reasonable control, including, but not limited to, acts of
God, acts of war, riot, epidemic, fire, flood or other disasters.
7. INFRINGEMENT
7.1 OSI represents and warrants that it has the sole ownership of
and/or the right to license and sub-license the Licensed
Software as contemplated by this Agreement and this License
Agreement and has the full power to grant the rights granted
herein without the consent of any other person or entity.
7.2 OSI shall defend, indemnify and hold Licensee and its
officers, directors, agents and employees harmless from and
against any and all claims, suits, damages, liabilities, costs
and expenses (including reasonable attorneys' fees) arising
out of or resulting from any claim that Licensee's use of the
OSI Proprietary Software infringes a United States patent or
copyright, or trademark or misappropriates a trade secret of
any third party, provided OSI is:
a) promptly notified of any and all threats, claims and
proceedings related thereto,
b) given reasonable assistance (at OSI's sole cost and
expense), and
c) given the opportunity to choose counsel, assume sole
control over the defense and all negotiations for a
settlement compromise.
The provisions of this Section 7.2 do not apply to any Third Party Software.
7.3 In the event that the Licensed Software, or any portion
thereof, becomes the subject of a claim of infringement or
misappropriation, OSI may, at its expense, take any of the
following steps so that Licensee's use is not subject to any
claim of infringement or misappropriation and Licensee is
provided with functionally equivalent software, provided that
Licensee's use of the Licensed Software conforms with the
provisions of this Agreement:
a) procure for Licensee the right to continue using the
Licensed Software or
b) replace or modify the infringing portion of the
Licensed Software.
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7.4 The foregoing obligations of OSI do not apply with respect to
software and any other products or portions or components
thereof:
a) which are not the latest available release supplied
by OSI to Licensee,
b) which are modified by Licensee after shipment by OSI,
if the alleged infringement relates to such
modification, unless OSI has consented to the
modification in writing, or such modifications is
otherwise authorized, permitted or provided for under
the Specifications, Documentation or this License
Agreement, or
c) which are combined with other products, processes or
materials where the alleged infringement relates to
such combination, unless OSI has consented in writing
to such combination or such combination is otherwise
authorized, permitted or provided for under the
Specifications, Documentation or this License
Agreement.
7.5 THE FOREGOING STATES THE ENTIRE LIABILITY OF OSI WITH RESPECT
TO INFRINGEMENT OF ANY PATENTS, COPYRIGHTS, TRADEMARKS OR
MISAPPROPRIATION OF TRADE SECRETS BY THE OSI PROPRIETARY
SOFTWARE OR ANY PARTS THEREOF. NO COSTS OR EXPENSES SHALL BE
INCURRED FOR THE ACCOUNT OF OSI BY LICENSEE OR ITS AGENTS
WITHOUT THE PRIOR WRITTEN CONSENT OF OSI.
8. CONFIDENTIALITY
8.1 Licensee acknowledges that, in the course of using the
Licensed Software it may receive confidential information
relating to the Licensed Software including, but not limited
to, the Licensed Software's mode of operation, trade secrets,
know-how, inventions (whether or not patentable), techniques,
processes, programs, ideas, algorithms, schematics, testing
procedures, software design and architecture, computer code
and database model, internal documentation, design and
function specifications, product requirements, problem
reports, analysis and performance information, user
documentation and other technical information, plans and data,
all of which is confidential and of value to OSI's business
(the "Software Confidential Information"). Such Software
Confidential Information shall belong solely to OSI and
Licensee agrees that it will not use or disclose any Software
Confidential Information without OSI's prior written consent,
except as expressly allowed by this License Agreement.
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8.2 As part of the arrangements contemplated by this Agreement,
each party acknowledges that it will receive valuable
business, marketing, financial and other information, plans
and data from the other party which is the confidential
property of the disclosing party. All information and data
which is marked "Confidential" or, in the case of orally
conveyed information, which is confirmed in writing within
thirty (30) days of conveyance to be confidential (the
"General Confidential Information" of the disclosing party)
shall be treated as confidential thereafter. The following
types of information shall always be considered confidential
information (whether or not marked as "Confidential"):
financial information, marketing and business plans, software
products and systems and customer lists. Each of the parties
agrees that it shall not copy, use or disclose any General
Confidential Information of the other party without its prior
written consent, except as expressly allowed by this License
Agreement.
8.3 Each party agrees in respect of General Confidential
Information which it receives from the other party, OSI agrees
in respect of the Licensee Confidential Information and
Licensee agrees in respect of the Software Confidential
Information that it shall:
a) take all reasonable measures to maintain such
information in confidence,
b) disclose such information only to those of its
employees, agents and consultants who have a "need to
know", and only after such employees and consultants
have agreed in writing to be bound by all of the
confidentiality provisions of this License Agreement,
c) not use such information for any purpose other than
the purposes expressly provided herein, and
d) not copy such information except as expressly
provided herein.
Except as provided herein, Licensee shall not, without the
prior written consent of OSI disclose or otherwise make
available the Licensed Software or copies thereof to any third
party. The foregoing provisions shall not preclude Licensee
from operating the Licensed Software in the ordinary course of
Licensee's business for its intended purpose and for the use
licensed hereunder in the presence of third parties or from
providing copies of the output and reports of the Licensed
Software to such third parties.
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8.4 The confidentiality obligations set forth in this License
Agreement shall not apply with respect to information (except
Licensee's Confidential Information) which
a) is or has become readily publicly available without
restriction through no fault of the receiving party
or its employees or agents,
b) is received without restriction from a third party
lawfully in possession of such information and
lawfully empowered to disclose such information,
c) was rightfully in the possession of the receiving
party without restriction prior to its disclosure by
the other party, or
d) is independently developed by employees, consultants
or agents of the receiving party without access to
the Software Confidential Information or the
disclosing party's General Confidential Information.
8.5 The parties recognize and agree that there is no adequate
remedy at law for a breach of the provisions of this Section
8, that such a breach would irreparably harm the
non-disclosing party and that the non-disclosing party is
entitled to equitable relief (including, without limitation,
injunctions) with respect to any such breach or potential
breach in addition to any other remedies available to it at
law or in equity.
8.6 The provisions of this Section 8 shall survive termination or
expiration of the License and this License Agreement for any
reason whatsoever.
9. MISCELLANEOUS
9.1 This Section 9 applies to the entire Agreement of which this
License Agreement is a part as Attachment #2.
9.2 Any notice, report, approval or consent required or permitted
hereunder shall be delivered in writing, or mailed by
registered or certified US mail, postage prepaid or reputable
overnight carrier (e.g. Federal Express) to the address set
forth in the Initial Product Order for notices (or such other
address as a party may designate by ten (10) days written
notice delivered in accordance with this Section 9.2) and
shall be deemed given upon receipt.
9.3 No failure to exercise, and no delay in exercising, on the
part of either party, any privilege, any power or any rights
hereunder will operate as a waiver thereof, nor will any
single or partial exercise of any right or
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power hereunder preclude future exercise of any other right or
power hereunder. If any provision of this License Agreement or
this Agreement shall be adjudged by any court of competent
jurisdiction to be unenforceable or invalid, that provision
shall be limited or eliminated to the minimum extent necessary
so that this License Agreement and this Agreement shall
otherwise remain in full force and effect and enforceable.
9.4 The prevailing party in any action to enforce this License
Agreement or this Agreement shall be entitled to recover costs
and expenses including, without limitation, reasonable
attorneys' fees.
9.5 The price and terms of this License Agreement and this
Agreement are confidential and no press release or other
written or oral disclosure of any nature regarding the price
terms of this License Agreement or this Agreement shall be
made by either party without the other party's prior written
approval; however, approval for such disclosure shall be
deemed given to the extent such disclosure is required to
comply with governmental laws, orders, rules or regulations.
9.6 In the event of a conflict or ambiguity among any of the
documents constituting the Specifications, such conflict shall
be resolved first in favor of this Agreement, secondly in
favor of the Report, thirdly in favor of the Documentation and
lastly in favor of the other functional, technical and design
specifications, which have been provided to Licensee by OSI,
and are applicable to the Licensed Software.
ADDITIONAL ATTACHMENTS FOLLOW
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SUPPORT SERVICES TERMS AND CONDITIONS
This Support Services Terms and Conditions (Attachment #3) to this Agreement
relates to and is hereby incorporated into the Information System Processing
Agreement bearing the number set out in the heading to this page. Capitalized
terms not defined in Section 1 below have the same meaning as defined elsewhere
in this Agreement.
1. DEFINITIONS
Unless defined otherwise herein, capitalized terms used in these Support
Services Terms and Conditions shall have the same meaning as set forth in this
Agreement.
1.1 ACCOUNTS: The combined totals of Licensee's liability and
asset accounts processed on the Software.
1.2 ASSET SIZE: The total assets as described in the Licensee's
most recent quarterly report of condition ("Call report")
filed with the Primary Regulator.
1.3 ERROR: A condition in the Licensed Software which causes the
OSI Proprietary Software to fail to operate correctly.
1.4 ERROR CORRECTION: The use of commercially reasonably efforts
to correct Errors.
1.5 FIX: The repair of Licensed Software to remedy an Error.
1.6 PREVIOUS SEQUENTIAL RELEASE: The release of the Licensed
Software replaced by a subsequent release of the same Licensed
Software.
1.7 PRODUCT UPDATES: New releases of the Licensed Software which
support new regulations and provide product enhancements and
Fixes. Product Updates consist of one copy of published
revisions to the printed Documentation and one copy of
revisions the machine readable Licensed Software incorporated
in the Product Updates.
1.8 SUPPORT SERVICES: OSI support services as described in
Section 3.
1.9 TELEPHONE SUPPORT: Technical support telephone assistance
provided by OSI to the Technical Support Contact concerning
problem resolution
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and the use of the then current release of Licensed Software
and the Previous Sequential Release.
1.10 WORK AROUND: A modification of the Licensed Software or a
change in the procedures followed or data supplied by
Licensee.
2. SUPPORT COVERAGE
Subject to the terms hereof, OSI shall provide Support Services to Licensee for
the Licensed Software indicated on the Initial Product Order. OSI shall also
provide Support Services hereunder for each additional Installation of Licensed
Software, provided Licensee pays to OSI Initial License Fees and Annual Support
Fees for such additional Installations as specified in subsequent Product
Orders. Support Services must be obtained separately for each Installation of
Licensed Software.
3. SUPPORT SERVICES
Support Services consist of:
a) Telephone Support provided to the Licensee's Technical Support
Contact concerning the Installation and use of the then
current release of the Licensed Software and Previous
Sequential Release,
b) Product Updates of the Licensed Software that OSI in its
discretion makes generally available to its customer base.
Support Services do not include the physical installation of
Product Updates. Product Updates installation may be performed
by OSI upon Licensee's written request and shall be billable
to Licensee at OSI's then current applicable rate.
c) As part of the Support Services provided hereunder, OSI agrees
to provide Product Updates on a timely basis in order to
enable Licensee to comply with federal banking laws and
regulations pertaining to the subject matter of the Licensed
Software.
d) As provided in the Exclusions section of these Support Terms
and Conditions, as a condition precedent to continued Support
Services and Product Updates, and as a condition precedent to
any warranty of the Licensed Software specifically stated in
this Agreement, Licensee agrees to promptly implement such
modifications, updates and enhancements to the Licensed
Software (in the form of Product Updates) and to Third Party
Software Licensed From Third Party as OSI shall require from
time to time in its sole discretion.
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4. TERM AND TERMINATION
4.1 Support Services shall be provided for the duration of the
End-User Software License, unless terminated by either party
as provided in this Agreement.
4.2 OSI may suspend or cancel Support Services if Licensee fails
to make payments of Annual Support Fees in accordance with
Section 5 titled "Fees and Payment," other than payments being
disputed in good faith, within ten (10) days after Licensee
receives notice on non-payment.
4.3 OSI may suspend or cancel Support Services if Licensee fails
in a reasonably prompt manner to implement such modifications,
updates and enhancements to the Licensed Software (in the form
of Product Updates) and to Third Party Software Licensed From
Third Party as OSI shall require from time to time in its sole
discretion.
5. FEES AND PAYMENT
5.1 Licensee shall pay OSI an Annual Support Fee for the Licensed
Software, which shall be computed in accordance with the
License Fee Schedule. The Annual Support Fee shall be due and
payable upon the Live Production Date. The Annual Support Fee
shall be billed on an annual basis, payable in advance of
OSI's providing annual Support Services. Licensee's payment
shall be due upon receipt of OSI invoice. Licensee shall be
responsible for all taxes associated with Support Services
other than US taxes based on OSI's net income. In the event
Licensee fails to pay the Annual Support Fee to OSI by the due
date, then to reinstate or renew Support Services, Licensee
shall first pay OSI all unpaid prior Annual Support Fees, plus
a late charge of 1.5% per month from the date due to the date
of payment, prorated daily, and the then current Annual
Support Fee, as computed in accordance with the License Fee
Schedule of this Agreement.
5.2 OSI intends to provide certain Support Services via a remote
on-line connection to Licensee's Designated Computer Hardware.
Licensee hereby agrees to assist OSI in the creation of such a
remote on-line connection as part of the Implementation of the
Software and agrees to maintain and allow OSI access to its
Designated Computer Hardware and the Software through such
remote on-line connection. In the event that the remote
on-line connection is not available to OSI necessitating that
OSI's personnel have to attend Licensee's facility to perform
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Support Services that would otherwise have been provided via
the remote on-line connection ("Additional Support Services"),
Licensee agrees, in addition to the Annual Support Fee:
a) to pay a per diem charge for all Additional Support
Services at OSI's then standard rates for such
services and
b) to reimburse OSI for all reasonable travel and living
expenses incurred by or on behalf of OSI and its
personnel in providing the Additional Support
Services to Licensee at Licensee's facility, which
shall have been pre-approved by Licensee in writing.
Any such charges for Additional Support Services and
reimbursement for travel and living expenses shall be billed
by OSI to Licensee on a monthly basis.
6. RESPONSE, PROBLEM RESOLUTION STANDARDS AND ERROR CORRECTION
6.1 All reasonable efforts shall be made to resolve problems
promptly. Upon Licensee's notification to OSI of a problem,
OSI will investigate such problem to determine the nature and
origin of such problem and upon completion of such
investigation outline to Licensee in a telephonic
communication the procedures to be followed in reaching
resolution to such problem. OSI shall exercise commercially
reasonable efforts to correct any Error or non-conformance
reported by Licensee in the OSI Proprietary Software.
7. CONFIDENTIALITY
All information provided by either party to the other pursuant to these Support
Terms and Conditions shall be subject to the confidentiality obligations set
forth in the End User Software License.
8. EXCLUSIONS
8.1 A condition precedent to OSI's obligation to perform Support
Services shall be that the Software problems shall not be
solely the result of:
a) Licensees's wilful abuse or wilful misapplication of
the Software,
b) Use of the Software other than as specified in the
Documentation,
c) Use of the Software in conjunction with hardware
identified by OSI as incompatible with the Software,
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d) Licensee's failure to promptly implement such
modifications, updates and enhancements to the
Licensed Software (in the form of Product Updates)
and to Third Party Software Licensed From Third Party
as OSI shall require from time to time in its sole
discretion, or
e) Other causes beyond the reasonable control of OSI.
8.2 OSI shall have no obligation to support:
a) Altered, damaged or modified Licensed Software
(unless such modifications are consented to in
writing by OSI or otherwise authorized, permitted or
provided for under the Documentation, Specifications
or this Agreement) or any portion of the Licensed
Software incorporated with or into other software;
b) Licensed Software that is not the then current
release or immediately Previous Sequential Release.
8.3 Upon Licensee's request, OSI shall provide Support Services
for the Licensed Software which has malfunctioned as a result
of any of the causes described in this Section 8 at its then
current and standard rates for material and labor.
8.4 Support Services do not include physical installation of
Product Updates.
9. LIMITATION OF LIABILITY
Except for a breach of its confidentiality obligations under Section 7 or any
liability OSI may have for personal injury or damage or destruction of real or
tangible personal property, OSI's liability for damages from any cause of action
whatsoever relating to OSI's agreement to provide Support Services shall be
limited to the amount paid by Licensee as Annual Support Fee for applicable
year.
ADDITIONAL ATTACHMENTS FOLLOW
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MAINTENANCE AND SUPPORT SERVICES FEE SCHEDULE
(EFFECTIVE JANUARY 1, 1998)
Support Services for the Licensed Software shall be provided as specified in the
Support Services Terms and Conditions Attachment for the annual support services
fees (the "Annual Support Fee") for such services, to be calculated on the basis
of the Licensee's then current asset and actual account size, the then current
License Fee Schedule for the Licensed Software and the then current Annual
Support Fee Rate.
1998 ANNUAL SUPPORT FEE RATES
LICENSED SOFTWARE EXCLUDING ATM NETWORK MANAGEMENT AND INTERNET
HOME BANKING
Twenty Percent (20%) of applicable License Fee as determined above
ATM NETWORK MANAGEMENT
Twenty Five Percent (25%) of applicable License Fee
INTERNET HOME BANKING
Twenty Percent (20%) of applicable License Fee
ADDITIONAL ATTACHMENTS FOLLOW
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IMPLEMENTATION TERMS AND CONDITIONS
This Implementation Terms and Conditions (Attachment #5 to this Agreement)
relates to and is incorporated into the Information System Processing Agreement
bearing the number set out in the heading to this page. Capitalized terms not
defined herein have the same meaning as defined elsewhere in this Agreement.
1. IMPLEMENTATION
Licensee has requested that OSI provide certain implementation services and
processes (collectively "Implementation"). These services and processes need to
occur in order for the Licensed Software which the Licensee has ordered (as
indicated on the Initial Product Order) to be properly installed and operated.
a) OSI and Licensee shall each make qualified representatives
available to meet and to review required Implementation tasks,
set dates for such tasks, and establish a project plan (the
"Installation Project Plan") mutually agreeable to both
parties in accordance with OSI's then current guidelines for
installation and implementation of the Licensed Software (the
"Initial Review");
b) OSI shall, based upon information provided by Licensee to OSI,
provide to Licensee an initial equipment requirements
specification applicable to Licensee's information processing
system requirements as have been identified by Licensee to
OSI, and Licensee shall select hardware and network
installation providers ("Licensee's Consultants") who are
qualified to design and install the requisite equipment and
network meeting the equipment requirements specification.
Licensee shall submit the qualifications statements and
resumes of Licensee's Consultants to OSI for its review and
approval. OSI's review and approval of the qualification
statements and resumes shall not constitute an endorsements by
OSI of Licensee's Consultants, nor shall such review and
approval make OSI responsible in any manner for the
performance of Licensee's Consultants, but is merely intended
to allow OSI to give Licensee the benefit of OSI's experience
in reviewing the qualifications of consultants in the hardware
and network business. After selection of License's Consultants
by Licensee, and their review and approval by OSI, OSI shall
review with Licensee and Licensee's Consultants the necessary
preparations for the Licensee's business, technical, security
and equipment requirements for its information processing
system;
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c) Licensee's Consultants shall perform a survey of Licensee's
business, technical, security and equipment requirements for
its information processing system, per OSI's recommended
equipment configuration, (the "On-Site Survey"), and shall
prepare a report to Licensee as to the actions which Licensee
must take to make the necessary preparations for its bank
information processing system, including but not limited to,
reporting as to the specifications for the hardware, network
and software required by Licensee (the "Report");
d) Licensee shall submit the Report to OSI for its review and
approval. Licensee agrees and acknowledges that OSI's review
and approval of the Report is a necessary and indispensable
part of the Implementation process. OSI's review and approval
of the Report shall not constitute a warranty or guarantee by
OSI that if Licensee's Consultants, perform in accordance with
the Report that additional work or expense will not be
required, nor shall such review and approval make OSI
responsible in any manner for results of the performance of
the work specified in the Report, but is merely intended to
allow OSI to give Licensee the benefit of OSI's experience in
the Implementation process.
e) If applicable, Licensee shall obtain from its current data
processing provider the necessary information in such media
and at such time as OSI requests.
f) OSI shall provide Licensee with (the "Installation Project
Plan") at least sixteen (16) weeks prior to the Live
Production Date, which Licensee shall review, approve.
Licensee agrees that it shall assign the requisite personnel
resources to the task identified in the Installation Project
Plan as assigned to Licensee to ensure that the Live
Production Date can be met.
g) Licensee shall cause Licensee's Consultants to duly install
and configure and make fully operational the Designated
Computer Hardware and applicable Third Party Software Licensed
From Third Party Software Vendors in accordance with the
requirements of the Report no later than the Scheduled
Equipment Date specified in the Installation Project Plan (the
"Hardware Installation");
h) Licensee shall cause Licensee's Consultants to duly install
all required network components of the Designated Computer
Hardware and applicable Third Party Software Licensed From
Third Party Vendors in accordance with the requirements of the
Report no later than the
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Scheduled Equipment Date specified in the Installation Project
Plan (the "Network Installation");
i) If applicable, Licensee shall obtain from its current data
processing provider the necessary information in such media as
OSI requests to permit OSI to perform the Conversion.
j) OSI shall perform the conversion programming services required
to convert Licensee's existing core data to support the
information processing requirements of the Licensed Software
("Conversion") per the scheduled conversion dates specified in
the Installation Project Plan. IN NO EVENT SHALL OSI CONVERT
ACCOUNT OR TRANSACTION HISTORY, OR PERFORM CIF SCRUBBING
ACTIVITIES, UNLESS SUCH ACTIVITIES ARE COVERED IN AN AMENDMENT
TO THIS AGREEMENT.
k) OSI shall provide personnel to train Licensee's designated
personnel in the use of the Licensed Software, as specified in
and subject to the terms and conditions of the Training
Schedule.
2. IMPLEMENTATION SERVICES
2.1 Licensee shall be solely responsible for Equipment, Network
and Third Party Software Licensed From Third Party Providers.
As part of the Installation, Licensee shall acquire such
additional hardware, network components and systems software
as mutually agreed to and as indicated in a revised Initial
Product Order, if any, following the On-Site Survey, Licensee
shall exercise commercially reasonable efforts to timely
complete said Installations on or before the respective
scheduled date specified on the Initial Product Order.
2.2 OSI shall exercise commercially reasonable efforts to complete
the Licensed Software Installation on or before the Scheduled
live production date specified in the Initial Product Order.
OSI's completion of the Licensed Software Installation by the
Scheduled live production date, is conditioned upon the
Licensee completing those Implementation tasks not identified
as OSI's Implementation Services and, therefore, identified as
responsibilities of the Licensee, including without
limitation, Equipment Installation and Network Installation.
All Licensee and OSI tasks will be per the Installation
Project Plan, which OSI will prepare, and upon which Licensee
and OSI will mutually agree, and upon Licensee's acceptance
will be the schedule of tasks and
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responsibilities necessary to achieve live production by the
Scheduled live production date.
3. FEES AND PAYMENT
3.1 Licensee shall pay OSI the Implementation Service Fee
specified in the Initial Product Order.
3.2 If, as a result of the On-Site Survey and the Report, Licensee
determines that it desires OSI to perform additional services
not included in the Installation Project Plan, additional
services shall be documented in an amended Installation
Project Plan. In addition, if as a result of Licensee or
Licensee's Consultants failure to timely perform all Licensee
assigned tasks under the Installation Project Plan, OSI is
required to perform additional services beyond those which OSI
customarily and ordinarily performs in the Implementation
process for clients similarly situated as Licensee, OSI
reserves the right to charge Licensee for any such additional
services performed on behalf of Licensee, at the rates
specified in the Initial Product Order.
In the event that it is necessary for OSI to perform
additional services pursuant to an amended Installation
Project Plan, or as a result of Licensee or Licensee's
Consultant failing to timely perform Licensee identified tasks
in the Installation Project Plan, OSI and Licensee shall enter
into good faith negotiations in order to determine the amount
of additional days of Implementation Services that will be
required to complete Implementation (the "Additional
Implementation Service Days") and the rate for such days. The
Additional Implementation Service Days and applicable rates
agreed upon shall be documented by execution of an OSI Service
Work Order Form. Licensee shall pay for such Additional
Implementation Service Days at such rates as are evidenced in
the OSI Service Work Order Form.
4. TERM AND TERMINATION
4.1 Implementation Services shall be provided until completion of
Implementation as contemplated hereunder.
- 38 -
<PAGE> 42
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
4.2 Licensee may terminate the Implementation Services at any time
for any reason.
In the event of termination of the License by Licensee for any
reason Licensee shall pay to OSI the full Implementation Fee,
the full Initial License Fee, the full Training Fee, and any
other amounts that have accrued and are payable by Licensee
pursuant to the terms of this Agreement.
5. CONFIDENTIALITY
All information provided by either party to the other pursuant to these terms
and conditions shall be subject to the confidentiality obligations set forth in
the End User Software License.
6. EXCLUSIONS
OSI shall have no obligation to conduct Implementation Services in relation to
any software other than that specified in a Product Order and shall only be
obligated to conduct Licensed Software Installation, Pre-Conversion, if
applicable, Conversion, if applicable, and Training Services once Licensee has
completed Equipment and Network Installations in accordance with terms and
conditions of this Agreement.
7. LIMITATION OF LIABILITY
7.1 OSI REPRESENTS AND WARRANTS THAT ALL IMPLEMENTATION SERVICES
WILL BE PERFORMED BY DULY QUALIFIED PERSONNEL IN A
PROFESSIONAL WORKMAN-LIKE MANNER AND TO STANDARDS GENERALLY
ACCEPTED IN THE INDUSTRY.
7.2 THESE TERMS AND CONDITIONS CONSTITUTE A SERVICE CONTRACT AND
NOT A PRODUCT WARRANTY. THE SOFTWARE AND ALL MATERIALS RELATED
TO THE LICENSED SOFTWARE ARE SUBJECT EXCLUSIVELY TO THE
WARRANTIES SET FORTH IN THE END USER SOFTWARE LICENSE.
7.3 THE PROVISIONS OF THIS SECTION 7 SHALL SURVIVE TERMINATION OR
EXPIRATION OF IMPLEMENTATION SERVICES AND/OR THIS AGREEMENT
FOR ANY REASON WHATSOEVER.
- 39 -
<PAGE> 43
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
ADDITIONAL ATTACHMENTS FOLLOW
- 40 -
<PAGE> 44
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
TRAINING SCHEDULE
This Training Schedule (Attachment #6 to this Agreement) relates to and is
incorporated into the Information System Processing Agreement bearing the number
set out in the heading to this page. Capitalized terms not defined herein have
the same meaning as defined elsewhere in this Agreement. Training on the
Licensed Software shall be provided by OSI at OSI's facility to individuals
designated by the Licensee on a "Train-the-Trainer" basis, according to the
following plan. OSI recognizes that the training needs of individuals will vary
and are dependent upon different skill levels. Training shall be performed at
OSI's facility in classes or settings which include other party's employees and
will not be "private" to Licensee. Some aspects of the training schedule will be
basic to some employees while necessary for others. The schedule shall be as
follows:
TCBS TRAINING
Training on the OSI Proprietary Software shall be provided by OSI to individuals
designated by the Licensee on a "Training the Trainer" basis except for
audiences as stated otherwise. The prerequisite training requirement of basic PC
(Personal Computer) navigation skills and basic Microsoft Windows functionality
is a responsibility of the Licensee. TCBS Training is conducted at OSI,
Glastonbury, CT; exceptions to contract training allocations are defined below
following the course descriptions.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COURSES LENGTH OF TOTAL STUDENT DAYS
COURSE PER CONTRACT
- -----------------------------------------------------------------------------------------------------------
SM MD LG
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EXTENDED RELATIONAL ANALYSIS TRAINING 1 day 1 1 2
Seminar-style training for bank defined audience.
- - Concepts of basic and extended relational
analysis.
- - Tables and their role within the database.
- - Properties and interdependencies of a
relational database.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
- 41 -
<PAGE> 45
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COURSES LENGTH OF TOTAL STUDENT DAYS
COURSE PER CONTRACT
- -----------------------------------------------------------------------------------------------------------
SM MD LG
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRODUCT MANAGER TRAINING/PRODUCT SET-UP 5 days 10 15 20
WORKSHOP
Combined lecture and hand on training. Audience
should have full knowledge of their current products,
and be able to make business level decisions while
setting up their products on-line.
- - Two part training: a) Major/Minor product
concept combined with specific Deposit/Loan
Product training; and b) a workshop to set up
the banks' current products online.
- -----------------------------------------------------------------------------------------------------------
DEPOSIT TRAINING 4 days 4 4 8
Hands on system training restricted to TRAIN THE
TRAINER audience. Training is TCBS system
functionality; training is not tailored to Licensee's
specific products, business processes or procedures.
- - Conduct common monetary transaction
processing.
- - Teller administrative functions; account
inquiries; off-line processing; loan monetary
transactions.
- - CSR functions; customer and deposit account
opening and maintenance, account and
miscellaneous inquiries.
- - Branch operations functions; exception item
processing; cashbox management; and printer
management.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
- 42 -
<PAGE> 46
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
COURSES LENGTH OF TOTAL STUDENT DAYS
COURSE PER CONTRACT
- -----------------------------------------------------------------------------------------------------------
SM MD LG
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LOAN TRAINING 5 days 5 5 10
Hands on system training restricted to TRAIN THE
TRAINER audience. Training is TCBS system
functionality; training is NOT tailored to Licensee's
specific products, business processes or procedures.
- - loan account opening and maintenance;
establish persons and organizations.
- - process loan monetary transactions.
- - process loan escrow functions;
creating/maintaining property records, tax and
insurance information; escrow analysis and
invoices.
- - manage external loan interfaces, batch loan
payment coupon printing.
- - establish loan investor accounts and manage
the related activities.
- -----------------------------------------------------------------------------------------------------------
OPERATIONS TRAINING/WORKSHOP 5 days 5 10 10
Hands on system training restricted to TRAIN THE
TRAINER audience. Training is TCBS system
functionality; training is not tailored to Licensee's
specific products, business processes or procedures.
- - Perform general bank branch and department
level operations system functions.
- - Develop/maintain system authorization and
security structure.
- - Manage the network operating and remote
support systems.
- -----------------------------------------------------------------------------------------------------------
IRS REPORTING TRAINING 2 days 2 2 2
Hands on system training for bank employee
responsible for processing tax reporting and
regulatory compliance duties.
- - Extract and manage files related to the
reporting process.
- - Experiment with the reporting application.
- -----------------------------------------------------------------------------------------------------------
TOTAL TRAINING DAYS PER CONTRACT 27 37 52
- -----------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL ATTACHMENTS FOLLOW
- 43 -
<PAGE> 47
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
ESCROW TERMS AND CONDITIONS
This attachment related to and is incorporated into the below-referenced
Agreement. Capitalized terms not defined herein have the same meaning as defined
elsewhere in this Agreement.
1. SOURCE CODE AGREEMENT
Upon execution of this Agreement, OSI agrees to immediately place and thereafter
maintain the Source Code (as hereinafter defined) from the most current release
of the Proprietary Software and the last release of the Proprietary Software in
escrow with an agent pursuant to an escrow agreement which OSI shall provide to
Licensee for review prior to execution (the "Escrow Agreement"). The Source Code
shall be updated per each new release. This Agreement between the escrow agent
and OSI shall provide that in the event OSI ceases to do business in the normal
course, discontinues offering to provide support, is in default of its
obligations as set out in the Support Services Terms and Conditions, or in the
event of insolvency, bankruptcy, or assignment for the benefits of creditors of
OSI, Licensee shall have the right to secure the Source Code from said escrow
agent so long as the License remains in full force and effect and Licensee has
not materially breached the terms thereof and failed to cure such breach upon
timely receipt of proper notice required thereunder. The escrow agent shall be
authorized to release the Source Code to Licensee in accordance with these
Escrow Terms and Conditions and the Escrow Agreement. Licensee is (and said
Source Code agreement between OSI and Escrow Agent shall state that Licensee is)
an intended third party beneficiary and has a direct right of action to enforce
the provisions of said Source Code agreement between OSI and Escrow Agent.
2. LICENSE
In the event that Licensee obtains the Source Code pursuant to these Escrow
Terms and Conditions, the Source Code shall be deemed to be licensed to the same
extent as the Proprietary Software is licensed to Licensee pursuant to the End
User Software License, except that:
a) Licensee shall use the Source Code solely to maintain and
support, and for these purposes to modify, update and upgrade
the Proprietary Software; and
b) Licensee shall have the right to make such copies of the
Licensed Software and Documentation as are reasonably
necessary for Licensee's use of the Licensed Software and
Documentation as contemplated
- 44 -
<PAGE> 48
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
hereunder and for back up and archival proposes. In exercising
this right, Licensee shall reproduce and include the copyright
notice and any other notices that appear on the original
Licensed Software and Documentation on any copies and any
media therefor.
3. DEFINITIONS
For purposes of this Agreement, "Source Code" shall mean both machine readable
and human readable copies of the Proprietary Software consisting of instructions
to be executed upon a computer in the language used by is programmers (i.e.
prior to compilation or assembly) in a form in which the program logic of the
Proprietary Software is deducible by a human being, fully commented, and
including all available related flow diagrams and all other documentation and
manuals which would allow persons who are experienced computer programmers but
who are unfamiliar with the Proprietary Software to properly effect
modifications and support for the Proprietary Software.
ADDITIONAL ATTACHMENTS FOLLOW
- 45 -
<PAGE> 49
INFORMATION PROCESSING SYSTEM AGREEMENT #
- --------------------------------------------------------------------------------
AMENDMENTS TO AGREEMENT
The following shall constitute Amendments to this Agreement, and except for the
following amendments this Agreement shall in all other respects be the sole
agreement of the parties unamended hereby.
Licensee: [CLICK HERE AND TYPE NAME]
--------------------------
Signature: _________________________________ Date: _____________________________
Name: [CLICK HERE AND TYPE NAME] Title: [CLICK HERE AND TYPE NAME]
OPEN SOLUTIONS INC.
Signature: _________________________________ Date: _____________________________
Name: [CLICK HERE AND TYPE NAME] Title: [CLICK HERE AND TYPE NAME]
ATTACHMENTS FOLLOW
- 46 -
<PAGE> 1
Exhibit 10.17
BANK INFORMATION PROCESSING
SYSTEM AGREEMENT
BY AND BETWEEN
OPEN SOLUTIONS INC.
AND
[________________________]
AGREEMENT [____]
<PAGE> 2
BANK INFORMATION PROCESSING SYSTEM AGREEMENT
1. PARTIES
This BANK INFORMATION PROCESSING SYSTEM AGREEMENT (the "Agreement") is made by
and between Open Solutions, Inc., a Delaware corporation (OSI), and
[___________________________________] (the "Licensee"), as of the date of the
last signature below (the "Effective Date").
2. COMPONENTS
This Agreement incorporates the following attachments with the same Agreement
Number as specified below, each individually, an "Attachment" and collectively,
the "Attachments":
a) Initial Product Order,
b) End-User Software License,
c) Support Services Terms and Conditions,
d) Maintenance and Support Services Fee Schedule, which shall be
updated from time to time,
e) Implementation Terms and Conditions,
f) Training Schedule,
g) Escrow Terms and Conditions,
h) Conversion Acceptance.
This Agreement may also incorporate Additional Product Orders and Service Orders
with the same Agreement Number as specified below, provided that:
a) OSI has provided the Additional Product Order or Service Order
form to Licensee,
b) OSI and the Licensee both execute such Additional Product Order
or Service Order, and
c) attachments to an Additional Product Order apply only to that
Additional Product Order and attachments to a Service Order only
apply to that Service Order. Such attachments shall have no force
or effect on any other purchase order, confirmation or similar
form, whether pre-existing or subsequently entered into, even if
signed by the parties after the date hereof.
2
<PAGE> 3
3. DEFINITIONS
For purposes of the Agreement, capitalized terms wherever defined and used shall
have the same meaning throughout the Agreement, unless otherwise specifically
limited in an Attachment.
4. ENTIRETY OF AGREEMENT
Each party's acceptance of this Agreement (as indicated by execution hereof) was
and is limited to and expressly conditional upon the other's acceptance of the
terms contained in the Agreement to the exclusion of all other terms.
Accordingly, both parties agree that this Agreement is the complete and
exclusive statement of the mutual understanding of the parties and supersedes
and cancels all previous written and oral agreements and communications relating
to the subject matter of this Agreement.
5. CONVEYANCE AND SERVICES
Subject to all of the terms and conditions of this Agreement, OSI will provide
Licensee with the following:
a) OSI's Licensed Software as indicated on the Initial Product
Order,
b) a limited license to use the Licensed Software, subject to the
limitations, restrictions and other terms and conditions set
forth in the END-USER SOFTWARE LICENSE.
c) the initial review, on-site survey and software installation, as
set forth in the IMPLEMENTATION TERMS AND CONDITIONS, and
training services as set forth in the TRAINING SCHEDULE, subject
to the terms and conditions therein.
d) the maintenance and support services set forth in the SUPPORT
SERVICES TERMS AND CONDITIONS on the terms and conditions set
forth therein and subject to the MAINTENANCE AND SUPPORT FEE
SERVICES SCHEDULE.
e) a full and current version and previous version of the
Proprietary Software in escrow, pursuant to the ESCROW TERMS AND
CONDITIONS.
6. PRICING OPTIONS
In addition to the Initial License Fee indicated in the Initial Product Order,
Licensee shall be permitted to exercise the following special pricing option,
subject to the conditions herein provided.
a) The Licensee executes this Agreement prior to [_______________]
and
3
<PAGE> 4
If Licensee meets the aforementioned conditions, then Licensee shall:
a) pay as an Initial License Fee the discounted Fee of [ ] for
the Base System and
b) receive [ ] discount from OSI list price on any new
optional module of OSI Proprietary Software ordered during a
period of [ ] following Conversion.
7. TERM
Subject to termination by OSI or Licensee as herein provided the initial term of
the License with respect to the OSI Licensed Documentation and Licensed Software
hereunder shall be five (5) years. The License shall be automatically renewed,
after five (5) years and every subsequent five (5) years, without payment by the
Licensee if the Licensee has not grown in Asset Size or Number of Accounts
beyond the next level as listed in the "License Fee Schedule ." If the Licensee
has grown to the next level or beyond they will pay to OSI the differential
between their original list price and the next level or levels of the then
current "License Fee Schedule" or the present "License Fee Schedule," whichever
is lower.
8. TERMINATION
Licensee may terminate this License by giving OSI a sixty (60) day prior written
notice of termination. OSI, or Licensee, may terminate the License as provided
in the "End User Software License" the "Implementation Terms & Conditions", and
the "Support Services Terms & Conditions". However, except for the License and
except as otherwise expressly provided herein, the terms, conditions and
obligations of this Agreement shall survive Termination. Termination shall not
be an exclusive remedy and all other remedies shall be available whether or not
the License or the Agreement is terminated.
9. STATE LAWS
This Agreement shall be deemed to have been made in, and be construed pursuant
to the laws of the State of Connecticut and the United States without regard to
conflicts of laws provisions thereof.
10. WARRANTIES AND REPRESENTATIONS
THE AGREEMENT CONTAINS, AMONG OTHER THINGS, WARRANTY DISCLAIMERS, LIABILITY
LIMITATIONS AND USE LIMITATIONS.
Each individual signing this on behalf of an identified party below represents
that he or she has the authority and power to execute the Agreement on behalf
of the party so identified.
11. AMENDMENTS
This Agreement may only be changed or modified by a written agreement duly
signed by authorized representatives of both parties. Any waiver of any
provision of this Agreement shall be effective only if made in writing and
signed by a duly authorized representative of the waiving party.
12. ACCEPTANCE
By executing below through their duly authorized representatives, the parties
accept and enter into this Agreement and agree to be bound by its terms and
conditions. The undersigned individuals represent that each is duly authorized
to execute this Agreement on behalf of the respective organization.
Licensee:
---------------------------------------------------------------------
Signature: Date:
----------------------------------------------- ---------------
Name: Title:
---------------------------------------------------- --------------
Address:
----------------------------------------------------------------------
City: State: Zip:
------------------------------- -------------- ----------------
Licensor: Open Solutions Inc.
---------------------------------------------------------------------
Signature: Date:
----------------------------------------------- ---------------
Name: Title:
---------------------------------------------------- --------------
City: Glastonbury State: CT Zip: 06033
4
<PAGE> 5
INITIAL PRODUCT ORDER
OSI PROPRIETARY SOFTWARE - BASE SYSTEM
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
UNIT
DESCRIPTION QTY PRICE TOTAL
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Complete Banking Solution
CUSTOMER SERVICE REPRESENTATIVE
TELLER
LOAN CUSTOMER SERVICE REPRESENTATIVE
LOAN MONETARY
GL MANAGER
BRANCH OPERATIONS
BANK OPERATIONS
SYSTEM OPERATIONS
EXTERNAL MANAGER
PRODUCT MANAGER
BATCH SERVER
EXECUTIVE INFORMATION SYSTEM
MARKETING CIF
IRS/YEAR-END REPORTING MANAGER
AUTOMATED FORMS MODULE
FEDERAL AND STATE REGULATORY COMPLIANCE
DISASTER RECOVERY PLANNING
- --------------------------------------------------------------------------------------------------------------------
TOTAL
DISCOUNT
NET
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
For payment terms see the END USER SOFTWARE LICENSE section 4.1 Initial License
Fees
For pricing terms see the BANK INFORMATION PROCESSING SYSTEM AGREEMENT section
6 Pricing Options
OSI/ALLIANCE PARTNERS PROPRIETARY SOFTWARE - OPTIONAL MODULES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
UNIT
DESCRIPTION QTY PRICE TOTAL
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SECONDARY MARKET MANAGEMENT
COLLECTION MANAGEMENT SYSTEM
OSI ATM HANDLER TO INCL. ONE INTERFACE PC
DOCUMENT IMAGING
FTI ACCOUNTING SYSTEMS (LISTED BELOW)
THIRD PARTY INTERFACES:
IPS G/L interface
Voice Response interface
ATM Management System interface
ATM PBF (Positive Balance File) interface
Greatland Corp. Loan Origination Station interface
Fed Wire & ACH
Harland AEO--Create Outgoing file for check orders
- ---------------------------------------------------------------------------------------------------------------------
Total
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Scheduled delivery dates are subject to change.
*Pricing of the Collection System is per workstation
5
<PAGE> 6
THIRD PARTY SOFTWARE LICENSED FROM THIRD PARTY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
UNIT
DESCRIPTION VENDOR VERSION QTY PRICE TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DATA PROCESSING SOFTWARE
NT Server Microsoft 3.51 4
Data Replication Software Octopus 2
SQR Development System MITI 2.5 1
Tape Backup NT (Administrative Server) Arcada 034098TD 1
SQL Server (Network Server) Microsoft 4.21 1
System Management Server (Network Server) Microsoft 1 1
Powerchute (All Servers) APC NT 4
Anti-Virus Software InocLan Cheyene 150060TD 1
BRANCH OPERATIONS SOFTWARE
Nt Server Microsoft 3.5 2
Powerchute S/W (All Servers) 2
DOS Microsoft MS-DOS 6.22 16
MS Windows for Workgroups Microsoft 3.11 16
MS Office Microsoft 4 0
Windows NT Client License (20 User) Microsoft 0 1
System Management Server (Network Server) Microsoft 1 1
SMS Client License (20 User) Microsoft 1 1
Microsoft Office 20 User Client License Microsoft 0 0
Tape Backup NT (Br. Admin. Servers) Arcada Backup Exec. 1
Anti-Virus Software InocuLan (Br. File Servers) Cheyene 2.5 1
SQR Report Generator MITI 2.5.7 1
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Software configuration is based on a pre-sales marketing survey and is subject
to change following an on-site survey.
THIRD PARTY SOFTWARE LICENSED FROM OSI
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
UNIT
DESCRIPTION VENDOR MODEL QTY PRICE TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oracle RDBMS NT (7 Concurrent Users) Oracle 7
Forest & Trees Platinum EIS Rept
Data Replication Software Octopus 0
SQR Development System MITI 2.5
DWA Ptr. Manager DWA
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Third Party Software pricing is subject to change via the respective vendors
pricing policies.
LICENSEE'S DESIGNATED COMPUTER HARDWARE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION UNIT
VENDOR MODEL QTY PRICE TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DATA PROCESSING HARDWARE
DB Server Pent. Pro/200, (1) Proc., 256MB RAM, (4) Unisys AQUANTA 1
2GB Drives plus Raid 5 & hot swap drives, CD ROM,
dual power supplies & fans, DAT Backup, expandable to 4 proc.
DB Remote Site Backup Server, Pent. Pro/200, 190MB UNISYS AQUANTA 1
RAM, (4) 2GB DR., CD ROM, DAT Backup
- ----------------------------------------------------------------
WS Pentium Pro/200, 256K Cache, 40M RAM, 1GB SCSI UNISYS AQUANTA 1
DR., NIC PCI, EVGA Color, 4GB DAT,
CD ROM, System Admin. & Batch Workstation
- ----------------------------------------------------------------
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C> <C>
WS Pentium/100, 256K Cache, 72M RAM, 1GB Unisys AQUANTA 1
SCSI DR., NIC PCI, EVGA Color, CD ROM
- ----------------------------------------------------------------
Primary Network Management Server
UPS Unisys UP 909 1
UPS Unisys UP 970 3
Optical Storage/Retr. Worm Drive (From Microsoft) Panasonic 212209936 1
High Output Ptr. 16PPM Unisys AP9516 1
- ----------------------------------------------------------------
BRANCH OPERATIONS HARDWARE
Br. File Server Pent./100, 40m RAM, CD ROM, Unisys AQUANTA 0
NIC PCI, EVGA COLOR, (2) 2.1GB Dr.
UPGRADE TO CURRENT BR. FILE SERVER Azatar MISC. 1
SCSI Dr., EISA NIC, 14" SVGA Monitor,
Branch Admin. & NTWK Management
WS Pent./100, 256K CACHE, 40M RAM, 1GB SCSI Unisys AQUANTA 1
DR., 4GB DAT, NIC PCI, EVGA Color, Branch
Admin. Workstation & Secondary Network Manager.
DWA PTR. SVR., PENT./75, 256K CACHE, 16M RAM, Unisys AQUANTA 0
1GB IDE DR., NIC PCI, EVGA COLOR
UPS Unisys UP 970 1
Remote Access Modem 28.8KBPS AT&T V.34 1
Equipment Racks 1
CSU DSU Includes Cable (56KB to Seneca Falls) Codex 3512 2
Router (56KB to Seneca Falls) Cisco 2501 2
Intelligent Ethernet Hub Baystack 24 PORT 0
Expansion Hub Baystack EXP 24 PORT 0
WS Pent./75, 256K Cache, 16M RAM, 1GB Unisys***** AQUANTA 0
IDE DR., NIC PCI, EVGA Color, User Workstations
OR UPGRADE OLD PC'S to Pentium 75 MHZ/16MB)
UPS (OPTIONAL) Unisys UP 970 0
Flatbed B&W Scanner HP 4P 1
Passbook Ptr. Unisys EF 4600 0
Validation & Receipt Ptr. Unisys EF 4272 0
MICR PTR., 12PPM, 5 Drawers, Network Card SourceTech 4049-12R 1
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hardware configuration is based on a pre-sales marketing survey and is subject
to change following an on-site survey.
7
<PAGE> 8
THIRD PARTY SOFTWARE LICENSE FEES FOR SOFTWARE LICENSED FROM OSI
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
DESCRIPTION VENDOR ANNUAL MAINTENANCE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RDBMS Oracle
Forest & Trees Platinum
SQR Development System MITI
Data Replication Software Octopus
DWA Ptr. Manager DWA
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Maintenance rates are based on third party vendors present pricing and subject
to change.
LICENSEE ASSET SIZE/NUMBER OF ACCOUNTS
- -------------------------------------------------------------------------------
ASSET SIZE
NUMBER OF ACCOUNTS
DDA
Other Deposits
Loans
- -------------------------------------------------------------------------------
PRICING FOR SERVICES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
DESCRIPTION PRICE
- -------------------------------------------------------------------------------------------------
<S> <C>
Implementation Service Fee for Licensed Software and contracted interfaces
Additional Services per diem
Annual License Fee is 15% of current software list price
- --------------------------------------------------------------------------------
</TABLE>
Annual License Fee commences ninety (90) days following conversion to production
use.
SCHEDULED LIVE PRODUCTION DATE: _________________________________ 9-June-9
Tax Location: Sales Rep:
Bill to: Ship to:
SAME
- -------------------------------------------- ------------------
SAME
- -------------------------------------------- ------------------
SAME
- -------------------------------------------- ------------------
Phone: Phone: ( )_____________SAME
Billing contact: SVP _____ Phone: ( )_____________SAME
Technical Support Contact: __________________ SAME
8
<PAGE> 9
LICENSE FEE SCHEDULE
OSI shall provide Licensee with Support Services for the Licensed Software on
the terms and conditions set forth in the Support Services Terms and Conditions.
Annual support services fees (the Annual License Fee) for such services shall be
calculated on the basis of the Licensee's then current asset and account size,
the then current price schedule for The Complete Banking Solution and the then
current Annual License Fee Rate.
THE COMPLETE BANKING SOLUTION 1996 PRICING SCHEDULE
(Prices based on the higher of assets or accounts)
<TABLE>
<CAPTION>
ASSET SIZE OR NUMBER OF ACCOUNTS COST OF SYSTEM
<S> <C>
[ ] [ ]
</TABLE>
ANNUAL LICENSE FEE RATE
For purposes of determining the Licensee's annual support service fees, OSI's
pricing schedule for The Complete Banking Solution and the Annual License Fee
Rate are subject to change as provided in this Agreement.
9
<PAGE> 10
END USER SOFTWARE LICENSE
This End User Software License (the "License") is part of the Agreement
identified by the Agreement Number specified below. Such Agreement includes the
Initial Product Order and any other Additional Product Order(s) that reference
the same Agreement Number (collectively "Product Order(s)"). Capitalized terms
not defined herein have the same meaning as defined elsewhere in the Agreement.
1. GRANT OF LICENSE
1.1 SOFTWARE
"Software" means collectively, the version(s) of OSI's Proprietary
Software, and Third Party Software ordered through OSI, as set forth
in the Product Orders, in object code format or database code format,
together with the Documentation (as hereinafter defined) provided to
Licensee by OSI, including updates, modifications or new releases of
such software programs and documentation that may be provided by OSI
to the Licensee from time to time. "OSI's Proprietary Software" means,
collectively, the version(s) of software owned by OSI and OSI's
Database Model. "OSI's Database Model means the version(s) of the
model owned and developed by OSI and incorporated into OSI's
Proprietary Software. "Third Party Software" means, collectively, the
version(s) of:
a) Software owned by third parties and integrated by OSI into OSI's
Proprietary Software and provided and sub-licensed to Licensee by
OSI ("Third Party Software Licensed from OSI"), and
b) Software owned by third parties under which, or with which, OSI's
Proprietary Software operates and which is provided and licensed
to Licensee by third party providers ("Third Party Software
Licensed from Third Party").
"Licensed Software" means, collectively, the versions of OSI's
Proprietary Software and Third Party Software Licensed from OSI being
licensed under this Agreement to Licensee by OSI.
1.2 DOCUMENTATION
"Documentation" means all technical materials and documents, whether
in hard copy or magnetic media or machine readable form, regarding the
capabilities, operation, installation and use of the Licensed
Software.
1.3 SPECIFICATIONS
"Specifications" means the specifications set forth in:
a) the Documentation,
b) the Agreement,
c) the Report (as defined in the Implementation Terms and
Conditions)
and
c) all other functional and technical specifications applicable
to the Licensed Software.
10
<PAGE> 11
In the event of a conflict or ambiguity among any of the
documents constituting the Specifications, such conflict
shall be resolved first in favor of this Agreement, secondly
in favor of the Report, thirdly in favor of the
Documentation and lastly in favor of the other functional,
technical and design specifications, which have been
provided to Licensee, and are applicable to the Licensed
Software.
1.4 DESIGNATED COMPUTER HARDWARE
Designated Computer Hardware means the computer and network
equipment listed on the Initial Product Order which OSI
states is compatible, and such other computer and network
equipment which OSI agrees is compatible with the Licensed
Software.
1.5 LICENSE
Subject to the terms and conditions set forth in this
Agreement, OSI grants Licensee and only Licensee, a
restricted right (the "License") to use the Licensed
Software for its own internal banking operations and
operations of Licensee's subsidiaries during the Term of
this Agreement. This right does not apply to acquired
institutions without payment of incremental License Fees per
the then current "Support Services Fee Schedule."
2. OWNERSHIP OF SOFTWARE
As between the parties, OSI retains title to and ownership of and all
proprietary rights with respect to the Licensed Software and all copies and
portions thereof, whether or not incorporated into or with other software. The
License does not constitute a sale of the Licensed Software or any portion or
copy of it.
3. RESTRICTIONS TO LICENSE
The License is a non-sub-licensable, non-exclusive, non-transferable,
non-assignable right to use the Proprietary Software during the Term of this
Agreement for Licensee's and subsidiaries of Licensee's own internal operations,
and is subject to the further restrictions and limitations provided in this
Agreement. The License also is a non-sub-licensable, non-exclusive,
non-transferable, non-assignable right to use the Third Party Software licensed
from OSI during the Term of this Agreement for Licensee's and Licensee's
subsidiaries own internal operations (to exclude mergers and acquisitions of
Independent Financial Institutions) and is subject to the further restrictions
and limitations provided in this Agreement and OSI's master licensing agreements
with such third parties. Except as otherwise provided in the Escrow Terms and
Conditions, Licensee has no right to receive, use or examine any Source Code (as
defined in the Escrow Terms and Conditions) or design documentation relating to
the Licensed Software. Licensee shall have the right to make such copies of the
Licensed Software and Documentation as are reasonably necessary for Licensee's
use of the Licensed Software and Documentation as contemplated hereunder and for
back up and archival purposes. In exercising this right, Licensee shall
reproduce and include the copyright notice and any other notices that appear on
the original Licensed Software and Documentation on any copies and any media
therefor. Licensee shall not, and shall not allow any third party, to, without
OSI's prior written consent:
a) decompile, disassemble, or otherwise reverse engineer or attempt to
reconstruct or discover any source code, algorithms or underlying
ideas,
b) remove any product identification, copyright or other notices,
c) provide, lease, lend, use for timesharing or service bureau purposes
or allow others to use the Licensed Software to or for the benefit of
third parties,
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d) except as specified in the Specifications or Documentation provided by
OSI, modify, incorporate into other software or create a derivative
work of any part of the Licensed Software,
e) load or use any portion of the Licensed Software (whether or not
modified or incorporated into or with other software) on or with any
machine or system other than Licensee's Designated Computer Hardware,
f) except if, as and to the extent expressly authorized in the applicable
user Documentation provided by OSI, transmit or use the Software over
a network. This does not prohibit interfacing to external systems or
networks.
g) disseminate performance information or analysis (including, without
limitation, benchmarks) to any source relating to the Licensed
Software, nor
h) sell applications developed by Licensee against OSI's Database Model.
The restrictions set forth in this paragraph shall not restrict Licensee from
developing a program, application or database that is functionally similar to
the Licensed Software, provided that such development is demonstrably
independent of any OSI confidential information and does not violate OSI's
copyrights.
4. LICENSE FEES
License fees consist of an initial License Fee and Annual License Fees. All fees
are exclusive of shipping, taxes, ______ and the like, which shall be paid by
Licensee. Late payments shall bear interest at the rate of 1.5% per month to
cover OSI's costs of collections as well as interest, or, if lower, the maximum
rate allowed by law.
4.1 INITIAL LICENSE FEES
The Initial License Fees for OSI Proprietary Software and Third Party
Software Licensed From OSI are set forth in the Initial Product Order
and subsequent Product Order(s) and are based on the Licensee's
Designated Computer Hardware and Asset and Account size. Additions to
or changes in the Licensee's Designated Computer Hardware subsequent
to Conversion and Installation may result in additional Initial
License Fees for Third Party Software Licensed From OSI. Initial
License fees for OSI Proprietary Software are due and payable
according to the following schedule:
EVENT % PAYMENT
Sign Contract
Conversion Acceptance & Live Production
License Fees for Third Party Software Licensed From OSI are due and
payable thirty (30) days following installation of such software.
4.2 ANNUAL LICENSE FEES
Annual License Fees for Licensed Software are set forth in the Support
Services Terms and Conditions and are based on the Licensee's
Designated Computer Hardware and Asset and Account size. Annual
License Fees for Proprietary Software are also based on OSI's License
Fee Schedule in effect during the License Year. Increases in
Licensee's Asset or Account size may result in increases in Annual
License Fees for OSI Proprietary Software. Additions to or changes in
the Licensee's Designated
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Computer Hardware subsequent to Conversion and Installation may result
in additional License Fees for Third Party Software Licensed From OSI.
Annual maintenance for Third Party Software Licensed from OSI
commences at conversion to Live Production use. Annual maintenance for
OSI Proprietary Software commences ninety (90) days after conversion
to Live Production use. Annual License Fees are due and payable thirty
(30) days after receipt by Licensee of OSI's invoice.
4.3 NOTIFICATION
Licensee shall notify OSI prior to changes to or installation of
additional equipment for the Designated Computer Hardware. Licensee
also shall provide a written report to OSI on or prior to each
anniversary of Installation and Conversion of its Asset and Account
size.
5. DELIVERY AND INSTALLATION
Delivery and installation of the Licensed Software shall be made in
accordance with the Implementation Terms and Conditions.
6. SOFTWARE ACCEPTANCE
6.1 Within fifteen (15) days after the Licensed Software is installed and
the Licensee's data is converted to run under the Software, the
Licensee shall perform acceptance testing (the "Acceptance Tests").
The Acceptance Tests shall be conducted on Licensee's Designated
Computer Hardware at Licensee's site and shall consist of the Licensee
entering a series of transactions warranted to be representative of
its workload and balancing them through periodic reports to determine
whether the Licensed Software functions with Licensee's products and
performs substantially in accordance with the Specifications and the
Documentation. The tests shall be completed in a one-week period. If
during this testing period the Licensed Software does not function and
perform substantially in accordance with the Documentation and the
Specifications, Licensee shall notify OSI of the non-conformance and
OSI shall have thirty (30) days thereafter within which to correct the
errors in the Licensed Software and to provide such corrections for
Licensee's further testing. Licensee shall have five (5) days after
delivery of corrections to re-conduct the Acceptance Tests. Failure of
the Licensed Software to function and perform in accordance with such
Documentation and Specifications upon the second Licensee's Acceptance
Test shall, at the option of Licensee, be grounds for termination of
this Agreement by Licensee.
6.2 Licensee may accept the Licensed Software on a provisional basis,
subject to OSI's prompt correction of specified non-conformances or
omissions from full and complete delivery of the Licensed Software. A
provisional acceptance can be revoked by Licensee in the event of
non-performance by OSI in completing the required correction or
delivery, and such non-performance shall be grounds for termination of
this Agreement. Upon successful completion of the Acceptance Tests,
Licensee shall notify OSI in writing of its acceptance of the Software
("Conversion Acceptance"). In the event that Licensee fails to conduct
the Acceptance Test within thirty (30) days of installation of the
Software, usage of the Licensed Software in Live Production for thirty
(30) calendar days shall be considered as Conversion Acceptance by the
Licensee.
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As used herein, "Live Production" means the time when Licensee uses
the Licensed Software or portions thereof to produce reports or
retrieve information from the OSI Database Model on a regular or
routine basis in a production, non-test environment.
7. MAINTENANCE AND SUPPORT SERVICES
Maintenance and Support Services shall be provided under the terms and
conditions set forth in the Support Services Terms and Conditions, which forms
part of and is incorporated into this Agreement. OSI has no other obligations to
provide support or maintenance or updates, enhancements, modifications or new
releases under this Agreement. No obligation of OSI under the Support Services
Terms and Conditions shall survive termination of the License granted hereunder.
8. TERMINATION OF LICENSE
8.1 During the term of this Agreement, the License is effective until
terminated. In addition to automatic termination at the end of the
term, termination can be effected as provided in subsections 6.1 and
6.2 above, subsections 8.2, 8.4 below, section 4 "Term & Termination"
of the "Implementation Terms and Conditions ." OSI's sole and
exclusive remedies in the event of a breach by Licensee shall be an
action for damages and, in the event of a material breach of the
provisions of Section 3 (relating to restrictions) or Section 13
(relating to confidentiality) hereof, equitable relief to enjoin the
activity of Licensee constituting the breach; provided, however, that
as a condition to either such remedies, to the extent that Section 9
below requires written notice of such breach prior to commencement of
a suit or legal action, OSI shall have given Licensee such notice.
8.2 In addition to the other remedies, in law or equity, available to OSI
hereunder, in the event of a breach by Licensee of the provisions of
subsection (a) of Section 3 (relating to reverse engineering) or
Section 13 (relating to confidentiality) which breach:
a) threatens to have a material adverse impact on the value of the
Software Confidential Information (as hereinafter defined), and
b) can be corrected by reasonable corrective steps available to the
Licensee,
OSI may terminate the License so long as it complies fully with
the provisions of this Section 8.2, as follows:
a) OSI must notify Licensee in writing specifying the actions
constituting the alleged breach and the reasonable steps
which it believes can and must be taken by Licensee to
correct such breach.
b) If Licensee, within thirty (30) days following the date of
such notice, implements the steps specified by OSI for
correcting the breach, or other similar reasonable steps
calculated to correct such breach, OSI may not terminate the
License regardless of the efficacy of such steps.
c) If Licensee fails or refuses, within thirty (30) days
following receipt of such notice, to commence taking such
steps to correct the breach and OSI wishes to terminate the
License, OSI must provide further written notice of its
intention to terminate the License effective no less than
thirty (30) days after the date of this second notice.
d) Such termination shall only take effect if:
i) the thirty (30) day notice period expires without the
Licensee having undertaken reasonable corrective steps
which have
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either been concluded or are being pursued with
reasonable diligence, and
ii) the tolling period in effect as provided in Section 8.3
below, if any, has expired.
8.3 Any dispute which arises between the parties concerning the
interpretation and application of Section 8.2 or the performance of
the obligations thereof, which dispute cannot be promptly resolved by
the parties, may be submitted by either party to binding arbitration
before the American Arbitration Association in Hartford, Connecticut,
with the loser paying the costs and attorneys fees thereof. The
termination of the License shall be tolled pending the completion and
results of such arbitration.
8.4 Licensee may terminate the License by giving OSI a sixty (60) day
prior written notice of termination. Such termination shall not result
in any refunds of License Fees, except as otherwise provided for in
Paragraph 6 hereof, and the "Implementation Terms and Conditions"
subsection 4.3 and the "Support Services Terms and Conditions"
subsection 5.4 "Response, Problem Resolution Standards and Error
Priority Levels."
8.5 Unless otherwise agreed to in writing by OSI, upon termination of the
License, Licensee shall immediately cease all use of the Licensed
Software and all portions thereof (whether or not modified or
incorporated with or into other software), return or destroy all
copies of the Licensed Software and all portions thereof to OSI, and
so certify to OSI.
8.6 Unless the Agreement has expired, except for the License and except as
otherwise expressly provided herein, the terms of this Agreement shall
survive termination of the License.
9. NOTICE OF DEFAULT
Except as to a breach of the obligations contained in Section 13 (relating to
confidentiality for which no notice is required prior to commencement of a suit
or other legal action), neither party may commence a suit or legal action on
account of a default by the other party in the performance of any of its
obligations under this Agreement, unless the party seeking to bring such suit or
action shall first give the defaulting party written notice of the default,
specifying the nature and circumstances thereof. Such notice shall be given at
least the following number of days prior to the commencement of the suit or
legal action:
a) three (3) business days in the case of defaults under Section 1 and
Section 3;
b) ten (10) days in the case of non-payment; and
c) thirty (30) days in all other cases.
10. LIMITED WARRANTY AND DISCLAIMER
10.1 OSI represents and warrants that for a period of ninety (90) days
after the date of Live Production Use (the "Warranty Period") the
Licensed Software shall:
a. Function and perform substantially in accordance with the
Documentation and Specifications.
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b. Operate on the Licensee's Designated Computer Hardware or other
hardware generally recommended by OSI for use in connection with
the Licensed Software consistent with the Specifications and
Documentation.
c. Process Licensee's banking data in accordance with the minimum
data processing standards promulgated by state or federal banking
agencies which regulate Licensee, provided that Licensee provides
OSI prior written notice of such state agencies and if Licensee's
charter and/or regulator is changing.
d. Provide commercially reasonable response times.
If Licensee discovers that the Licensed Software does not meet the
warranty criteria set forth above, Licensee shall notify OSI and OSI
shall promptly take all commercially reasonable steps necessary to
bring the Software into compliance with the warranty criteria set
forth above. During the Warranty Period, OSI will respond in the
manner set forth in the Support Services Terms and Conditions at no
charge to Licensee.
10.2 OSI represents, warrants and covenants that the media on which
Licensed Software is recorded and delivered to Licensee hereunder is
free from defects in material and workmanship under normal use and
service for a period of ninety (90) days from the date of Live
Production use. OSI agrees to replace any defective media upon return
to OSI.
10.3 OSI represents and warrants that it has taken all steps necessary to
test the Proprietary Software for Disabling Code (as defined herein)
and to eliminate Disabling Code from the Proprietary Software. OSI
warrants that the Proprietary Software will be free of Disabling Code
as of the date of delivery by OSI to Licensee. OSI will continue to
take such steps with respect to future modifications and enhancements
to keep the same and the Proprietary Software free of Disabling Code.
Disabling Code shall mean computer instructions that:
a. Alter, destroy or inhibit the Proprietary Software or Licensee's
processing environment, including without limitation, other
programs, data storage, computer libraries, and computer and
communications equipment;
b. without functional purpose, self-replicate without manual
intervention; or
c. purport to perform a meaningful function but which actually
perform either a destructive or harmful function, or perform no
meaningful function.
OSI agrees that it will maintain a master copy of the Proprietary
Software and all modifications and enhancements made by OSI thereto,
and will take such steps as are necessary to keep the same free of
Disabling Code.
10.4 THESE EXPRESS WARRANTIES TAKE THE PLACE OF AND SUPERSEDE ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED AND WHETHER OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR OTHERWISE. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, OSI DOES NOT WARRANT, GUARANTEE, OR MAKE ANY REPRESENTATIONS
REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE LICENSED SOFTWARE
OR DOCUMENTATION.
THE LICENSEE UNDERSTANDS THAT OSI IS NOT RESPONSIBLE FOR AND WILL HAVE
NO LIABILITY FOR AND DOES NOT WARRANT HARDWARE, SOFTWARE, OR OTHER
ITEMS OR SERVICES PROVIDED BY ANY PERSONS OTHER THAN OSI.
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10.5 EXCEPT FOR OSI'S INDEMNITY OBLIGATIONS UNDER PARAGRAPH 12 (RELATING TO
INTELLECTUAL PROPERTY INFRINGEMENTS), A BREACH OF ITS CONFIDENTIALITY
OBLIGATIONS UNDER PARAGRAPH 13 AND ANY LIABILITY OSI MAY HAVE FOR
PERSONAL INJURY OR DAMAGE OR DESTRUCTION OF REAL OR TANGIBLE PERSONAL
PROPERTY, OSI'S LIABILITY TO LICENSEE FOR ANY CAUSE WHATSOEVER AND
REGARDLESS OF THE FORM OF ACTION AND WHETHER IN CONTRACT OR TORT, OR
AT LAW OR EQUITY, SHALL NOT EXCEED THE AMOUNTS ACTUALLY PAID TO OSI BY
LICENSEE HEREUNDER.
10.6 EXCEPT FOR OSI'S INDEMNITY OBLIGATIONS UNDER PARAGRAPH 12 (RELATING TO
INTELLECTUAL PROPERTY INFRINGEMENTS), A BREACH OF ITS CONFIDENTIALITY
OBLIGATIONS UNDER PARAGRAPH 13 AND ANY LIABILITY OSI MAY HAVE FOR
PERSONAL INJURY OR DAMAGE OR DESTRUCTION OF REAL OR TANGIBLE PERSONAL
PROPERTY, OSI SHALL NOT BE LIABLE TO LICENSEE FOR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR
IN ANY WAY RELATED TO THIS AGREEMENT, EVEN IF OSI KNOWS, SHOULD HAVE
KNOWN, OR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.7 EXCEPT FOR A BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER PARAGRAPH
13 AND ANY LIABILITY LICENSEE MAY HAVE FOR PERSONAL INJURY OR DAMAGE
OR DESTRUCTION TO REAL OR TANGIBLE PERSONAL PROPERTY, LICENSEE SHALL
NOT BE LIABLE TO OSI OR ANY THIRD PARTY FOR ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT EVEN IF LICENSEE KNOWS, SHOULD HAVE KNOWN OR HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.8 THE PROVISIONS OF THIS SECTION 10 SHALL SURVIVE TERMINATION OR
EXPIRATION OF THE LICENSE AND/OR THIS AGREEMENT OR ANY REASON
WHATSOEVER.
11. FORCE MAJEURE
Neither party shall be deemed to have breached this Agreement by reason of any
delay or failure in its performance arising from events beyond its reasonable
control, including, but not limited to, acts of God, acts of war, riot,
epidemic, fire, flood or other disasters.
12. INFRINGEMENT
12.1 OSI represents and warrants that it has the sole ownership of and/or
the right to license and sub-license the Licensed Software as
contemplated by this Agreement and has the full power to grant the
rights granted herein without the consent of any other person or
entity.
12.2 OSI shall defend, indemnify and hold Licensee and its officers,
directors, agents and employees harmless from and against any and all
claims, suits, damages, liabilities, costs and expenses (including
reasonable attorneys' fees) arising out of or resulting from any claim
that Licensee's use of the OSI Proprietary Software infringes a United
States patent or copyright, or trademark or misappropriates a trade
secret of any third party, provided OSI is:
a) promptly notified of any and all threats, claims and proceedings
related thereto,
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b) given reasonable assistance (at OSI's sole cost and expense), and
c) given the opportunity to assume sole control over the defense and
all negotiations for settlement or compromise.
OSI shall not, however, enter into any settlement without Licensee's
prior written consent, which shall not be unreasonably withheld, if
such settlement impairs any material right of Licensee under the
Agreement. Notwithstanding anything to the contrary contained herein,
Licensee shall have the right to defend and settle, at OSI's expense,
against any such infringement or misappropriation claim in the event
that OSI fails to assume or reasonably pursue such defense or
reasonably protect the rights of the Licensed Software, provided such
rights conform with the provisions of this Agreement.
12.3 In the event that the Licensed Software, or any portion thereof,
becomes the subject of a claim of infringement of misappropriation,
OSI may, at its expense, take on any of the following steps so that
Licensee's use is not subject to any claim of infringement or
misappropriation and Licensee is provided with functionally equivalent
software to the reasonable satisfaction of Licensee, provided that
Licensee's use of the Licensed Software conforms with the provisions
of the Agreement:
a) procure for Licensee the right to continue using the Licensed
Software or
b) replace or modify the infringing portion of the Licensed
Software.
12.4 The foregoing obligations of OSI do not apply with respect to software
and any other products or portions or components thereof
a) which are not the latest available release supplied by OSI to
Licensee,
b) which are modified by Licensee after shipment by OSI, if the
alleged infringement relates to such modification, unless OSI has
consented to the modification in writing or such modifications is
otherwise authorized, permitted or provided for under the
Specifications, Documentation or this Agreement, or
c) which are combined with other products, processes or materials
where the alleged infringement relates to such combination,
unless OSI has consented in writing to such combination or such
combination is otherwise authorized, permitted or provided for
under the Specifications, Documentation or this Agreement.
12.5 THE FOREGOING STATES THE ENTIRE LIABILITY OF OSI WITH RESPECT TO
INFRINGEMENT OF ANY PATENTS, COPYRIGHTS, TRADEMARKS OR
MISAPPROPRIATION OF TRADE SECRETS BY THE OSI PROPRIETARY SOFTWARE OR
ANY PARTS THEREOF. NO COSTS OR EXPENSES SHALL BE INCURRED FOR THE
ACCOUNT OF OSI BY LICENSEE OR ITS AGENTS WITHOUT THE PRIOR WRITTEN
CONSENT OF OSI.
12.6 The provisions of Sections 12.2 do not apply to any Third Party
Software.
13. CONFIDENTIALITY
13.1 Licensee acknowledges that, in the course of using the Licensed
Software it may receive information relating to the Licensed Software
which is confidential and of value to OSI's business (the "Software
Confidential Information"). Such Software Confidential Information
shall belong solely to OSI and includes, but is not limited to, the
Licensed Software's mode of operation, trade secrets, know-how,
inventions
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(whether or not patentable), techniques, processes, programs, ideas,
algorithms, schematics, testing procedures, software design and
architecture, computer code and database model, internal
documentation, design and function specifications, product
requirements, problem reports, analysis and performance information,
user documentation and other technical information, plans and data.
Licensee agrees that it will not use or disclose any Software
Confidential Information without OSI's prior written consent, except
as expressly allowed by this End User Software License.
13.2 As part of the arrangements contemplated by this Agreement, each party
acknowledges that it will receive valuable business, marketing,
financial and other information, plans and data from the other party
which is the confidential property of the disclosing party. All
information and data which is marked "Confidential" or, in the case of
orally conveyed information, which is confirmed in writing within
thirty (30) days of conveyance to be confidential (the "General
Confidential Information" of the disclosing party) shall be treated as
confidential thereafter. The following types of information shall
always be considered confidential information (whether or not marked
as "Confidential"); financial information, marketing and business
plans, software products and systems and customer lists. Each of the
parties agrees that it shall not copy, use or disclose any General
Confidential Information of the other party without its prior written
consent, except as expressly allowed by this End User Software
License.
13.3 OSI acknowledges and agrees that Licensee's confidential information
includes personal, private and financial information of Licensee's
customers, depositors, debtors and employees used or gained by OSI
during the performance of services under this Agreement or in any
other manner ("Bank Privacy Information"). OSI's obligations with
respect to the Bank Privacy Information are not subject to the
exclusions set forth in Section 13.5 and are not limited in any way.
OSI agrees that it shall not copy, use or disclose any Bank Privacy
Information without Licensee's prior written consent, except as
expressly allowed in this Agreement. OSI further agrees that it shall
not copy, disclose or use any Bank Privacy Information or any other
information in violation of applicable federal and state privacy laws
or regulations. OSI agrees to defend Licensee from any claim by any
third party relating to the disclosure or use by OSI, its employees,
agents and consultants of the Bank Privacy Information which is
protected under privacy statutes or other privacy laws, rules or
regulations (including applicable case law) and will indemnify and
hold harmless Licensee without limitation against any and all loss,
damage or expense arising from any such claim, including reasonable
attorneys' fees.
13.4 Each party agrees in respect of General Confidential Information which
it receives from the other party, OSI agrees in respect of the Bank
Privacy Information and Licensee agrees in respect of the Software
Confidential Information that it shall:
a) take all reasonable measures to maintain such information in
confidence,
b) disclose such information only to those of its employees, agents
and consultants who have a "need to know," and only after such
employees and consultants have agreed in writing to be bound by
all of the confidentiality provisions of this Agreement,
c) not use such information for any purpose other than the purposes
expressly provided herein and
d) not copy such information except as expressly provided herein.
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Except as provided herein, Licensee shall not, without the prior
written consent of OSI, disclose or otherwise make available the
Licensed Software or copies thereof to any third party. The
foregoing provisions shall not preclude Licensee from operating
the Licensed Software in the ordinary course of Licensee's
business for its intended purpose and for the use licensed
hereunder in the presence of third parties or from providing
copies of the output and reports of the Licensed Software to such
third parties.
13.5 The confidentiality obligations set forth in this End User Software
License shall not apply with respect to information (except Bank
Privacy Information) which
a) is or has become readily publicly available without restriction
through no fault of the receiving party or its employees or
agents,
b) is received without restriction from a third party lawfully in
possession of such information and lawfully empowered to disclose
such information,
c) was rightfully in the possession of the receiving party without
restriction prior to its disclosure by the other party, or
d) is independently developed by employees, consultants or agents of
the receiving party without access to the Software Confidential
Information or the disclosing party's General Confidential
Information.
13.6 The parties recognize and agree that there is no adequate remedy at
law for a breach of Section 13, that such a breach would irreparably
harm the non disclosing party and that the non disclosing party is
entitled to equitable relief (including, without limitation,
injunctions) with respect to any such breach or potential breach in
addition to any other remedies available to it at law or in equity.
13.7 The provisions of this Section 13 shall survive termination or
expiration of the License and/or this Agreement for any reason
whatsoever.
14. GOVERNMENT MATTERS
Licensee will not remove or export from the United States or re-export from
anywhere any part of the Licensed Software or any direct product thereof to
Afghanistan, the Peoples' Republic of China or any Group Q, S, W, Y or Z country
(as specified in Supplement No. 1 to Section 770 of the US Export Administration
Regulations, or a successor thereto) or otherwise except in compliance with and
with all licenses and approvals required under applicable export laws and
regulations, including without limitation, those of the US Department of
Commerce.
15. MISCELLANEOUS
15.1 This Section 15 applies to the entire Agreement of which this End User
Software License is a part.
15.2 The License and this Agreement are not assignable or transferable by
Licensee without the prior written consent of OSI; which shall not be
unreasonably withheld or delayed, and any attempt to do so shall be
void.
15.3 Any notice, report, approval or consent required or permitted
hereunder shall be delivered in writing, or mailed by registered or
certified US mail, postage prepaid or reputable overnight carrier
(e.g. Federal Express) to the address set forth in the Initial Product
Order for notices (or such other address as a party may designate by
ten (10)
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days written notice delivered in accordance with this Section 15.3)
and shall be deemed given upon receipt.
15.4 No failure to exercise, and no delay in exercising, on the part of
either party, any privilege, any power or any rights hereunder will
operate as a waiver thereof, nor will any single or partial exercise
of any right or power hereunder preclude future exercise of any other
right or power hereunder. If any provision of this Agreement shall be
adjudged by any court of competent jurisdiction to be unenforceable or
invalid, that provision shall be limited or eliminated to the minimum
extent necessary so that this Agreement shall otherwise remain in full
force and effect and enforceable.
15.5 The prevailing party in any action to enforce this Agreement shall be
entitled to recover costs and expenses including, without limitation,
reasonable attorneys' fees.
15.6 The price and terms of this Agreement are confidential and no press
release or other written or oral disclosure of any nature regarding
the price terms of this Agreement shall be made by either party
without the other party's prior written approval; however, approval
for such disclosure shall be deemed given to the extent such
disclosure is required to comply with governmental laws, orders, rules
or regulations.
EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS AND
LIABILITY AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL
BARGAINED FOR BASES OF THIS AGREEMENT AND THAT THEY HAVE BEEN TAKEN
INTO ACCOUNT AND REFLECTED IN DETERMINING THE CONSIDERATION TO BE
GIVEN BY EACH PARTY UNDER THIS AGREEMENT AND IN THE DECISION BY EACH
PARTY TO ENTER INTO THIS AGREEMENT.
ADDITIONAL ATTACHMENTS FOLLOW
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IMPLEMENTATION TERMS AND CONDITIONS
Thsi attachment relates to and is incorporated into the Agreement identified by
the Agreement number specified below. Capitalized terms not defined herein have
the same meaning as defined elsewhere in the Agreement.
1. IMPLEMENTATION
OSI and Licensee hereby agree that the following implementation activities and
processes (collectively "Implementation") need to take place in order to install
and operate the Software which the Licensee has ordered, as indicated on the
Initial Product Order.
a. OSI and Licensee shall make available representatives to meet and
to review required Implementation tasks, set dates for such
tasks, and establish a project plan (Installation Project Plan)
mutually agreeable to both parties in accordance with OSI's then
current guidelines for installation and implementation of the
Licensed Software (the "Initial Review");
b. OSI shall provide an initial equipment requirements specification
applicable to Licensee's bank information processing system to
Licensee's selected hardware and network installation providers,
and review with Licensee and the installation providers the
necessary preparations for the Licensee's business, technical,
security and equipment requirements for its bank data processing
system;
c. Licensee's hardware and network providers shall perform a survey
of Licensee's business, technical, security and equipment
requirements for its bank information processing system, per
OSI's recommended equipment configuration, (the "On-Site
Survey"), and shall prepare a report to Licensee as to the
actions which Licensee must take to make the necessary
preparations for its bank information processing system,
including but not limited to, reporting as to the specifications
for the hardware, network and software required by Licensee (the
"Report");
d. If applicable, Licensee shall obtain from its current data
processing provider the necessary information in such media and
at such time as OSI requests to permit OSI to perform the
Pre-Conversion.
e. OSI shall provide Licensee with (the "Installation project Plan")
sixteen weeks prior to the Live Production Date, which Licensee
shall review, approve and assign personnel resources accordingly.
f. Licensee shall cause its hardware installation provider to duly
install the Designated Computer Hardware and applicable Third
Party Software Licensed From Third Party Software Vendors in
accordance with the requirements of the Report no later than the
Scheduled Equipment Date specified in the Installation Plan;
g. Licensee shall cause its network installation provider to duly
install all required network components of the Designated
Computer Hardware and applicable Third Party Software Licensed
From Third Party Vendors in accordance with the requirements of
the Report no later than the Scheduled Equipment Date specified
in the Installation Plan; (the "Network Installation");
h. OSI shall install the Licensed Software on Licensee's Designated
Computer Hardware no later than the Scheduled Licensed Software
Installation Date specified in the Installation Plan ("Licensed
Software Installation");
i. If applicable, Licensee shall obtain from its current data
processing provider the necessary information in such media as
OSI requires to permit OSI to perform the Conversion.
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j. OSI shall perform the conversion programming services required to
convert Licensee's existing core data to support the information
processing requirements of the Licensed Software ("Conversion")
per the Scheduled Conversion Dates specified in the Installation
Plan;
k. OSI shall provide personnel to train Licensee's designated
personnel in the use of the Licensed Software, as specified in
and subject to the terms and conditions of the Training Schedule;
and
l. Licensee shall perform the requisite Acceptance Test and the
Conversion Acceptance of the completed Implementation by
Licensee, in accordance with the acceptance procedures set forth
in the End User Software License.
2. IMPLEMENTATION SERVICES
2.1 SUBJECT TO THE TERMS HEREOF, THE PARTIES AGREE THAT AS PART OF
IMPLEMENTATION, OSI WILL PROVIDE THE FOLLOWING SERVICES TO LICENSEE
(COLLECTIVELY, THE "IMPLEMENTATION SERVICES"):
a. Participate in the Initial Review,
b. Provide and Review the Installation Project Plan, review the
On-Site Survey and the Report,
c. Perform the Licensed Software Installation,
d. Perform the Pre-Conversion and Conversion, if required, and
e. Perform the Training set forth in the Training Schedule.
2.2 LICENSEE SHALL BE SOLELY RESPONSIBLE FOR EQUIPMENT, NETWORK AND THIRD
PARTY SOFTWARE LICENSED FROM THIRD PARTY PROVIDERS. AS PART OF THE
INSTALLATION, LICENSEE SHALL ACQUIRE SUCH ADDITIONAL HARDWARE, NETWORK
COMPONENTS AND SYSTEMS SOFTWARE AS MUTUALLY AGREED TO AND AS INDICATED
IN A REVISED INITIAL PRODUCT ORDER FOLLOWING THE ON-SITE SURVEY.
LICENSEE SHALL EXERCISE COMMERCIALLY REASONABLE EFFORTS TO TIMELY
COMPLETE SAID INSTALLATIONS ON OR BEFORE THE RESPECTIVE SCHEDULED DATE
SPECIFIED ON THE INITIAL PRODUCT ORDER.
2.3 OSI SHALL EXERCISE COMMERCIALLY REASONABLE EFFORTS TO COMPLETE THE
LICENSED SOFTWARE INSTALLATION ON OR BEFORE THE SCHEDULED LIVE
PRODUCTION DATE SPECIFIED IN THE INITIAL PRODUCT ORDER.
OSI's completion of the Licensed Software Installation by the
Scheduled Date, is conditioned upon the Licensee completing those
Implementation tasks not identified as OSI's Implementation Services
and, therefore, identified as responsibilities of the Licensee,
including without limitation, Equipment Installation and Network
Installation. All Licensee and OSI tasks will be per The Installation
Project Plan, the "Initial Review" which OSI will prepare for
Licensee, and upon Licensee's acceptance will be the schedule of tasks
and responsibilities necessary to achieve Live Production by the
Scheduled Date.
3. FEES AND PAYMENT
3.1 LICENSEE SHALL PAY OSI THE IMPLEMENTATION SERVICE FEE SPECIFIED IN THE
INITIAL PRODUCT ORDER, WHICH SHALL ENTITLE LICENSEE TO A TURNKEY
INSTALLATION TO INCLUDE TRAINING PER THE AGREED UPON INSTALLATION
PLAN. THE IMPLEMENTATION SERVICE FEE SHALL BE BILLED BY OSI UPON THE
LIVE PRODUCTION DATE. PAYMENT SHALL BE DUE IN ACCORDANCE WITH SECTION
3.4 BELOW.
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3.2 IF, AS A RESULT OF THE ON-SITE SURVEY AND THE REPORT, LICENSEE
DETERMINES THAT IT DESIRES OSI TO PERFORM ADDITIONAL SERVICES NOT
INCLUDED IN THE INSTALLATION PROJECT PLAN, ADDITIONAL SERVICES SHALL
BE DOCUMENTED IN AN AMENDED INSTALLATION PROJECT PLAN. OSI RESERVES
THE RIGHT TO CHARGE LICENSEE FOR ANY SUCH SERVICES PERFORMED ON BEHALF
OF LICENSEE, AT THE RATES SPECIFIED IN THE INITIAL PRODUCT ORDER.
3.3 IN THE EVENT THAT IT IS NECESSARY FOR OSI TO PERFORM ADDITIONAL
SERVICES PURSUANT TO THE AMENDED INSTALLATION PROJECT PLAN, OSI AND
LICENSEE SHALL ENTER INTO GOOD FAITH NEGOTIATIONS IN ORDER TO
DETERMINE THE AMOUNT OF ADDITIONAL DAYS OF IMPLEMENTATION SERVICES
THAT WILL BE REQUIRED TO COMPLETE IMPLEMENTATION (THE "ADDITIONAL
IMPLEMENTATION SERVICE DAYS") AND THE RATE OF SUCH DAYS.
The Additional Implementation Service Days and applicable rates agreed
upon shall be documented by execution of an OSI Service Work Order
Form. Licensee shall pay for such Additional Implementation Service
Days at such rates as are evidenced in the OSI Service Work Order
Form.
3.4 LICENSEE SHALL BE RESPONSIBLE FOR ALL TAXES ASSOCIATED WITH
IMPLEMENTATION SERVICES OTHER THAN TAXES BASED ON OSI'S NET INCOME AND
FRANCHISE TAXES. LICENSEE'S PAYMENT SHALL BE MADE WITHIN THIRTY (30)
DAYS OF RECEIPT OF OSI'S INVOICE.
3.5 LICENSEE AGREES TO REIMBURSE OSI FOR ALL REASONABLE TRAVEL AND LIVING
EXPENSES INCURRED (BEYOND FORTY (40) MILES FROM OSI'S ADDRESS AS
SPECIFIED IN THIS AGREEMENT) BY OR ON BEHALF OF OSI AND ITS PERSONNEL
IN FURNISHING THE IMPLEMENTATION SERVICES TO LICENSEE AT LICENSEE'S
FACILITY OR AT ANY OTHER LOCATION OTHER THAN OSI'S OWN FACILITIES. OSI
AGREES TO PROVIDE TO LICENSEE UPON REQUEST A GOOD FAITH ESTIMATE OF
SUCH REIMBURSABLE EXPENSES. ANY SUCH TRAVEL AND LIVING EXPENSES SHALL
BE BILLED BY OSI TO LICENSEE ON A MONTHLY BASIS.
4. TERM AND TERMINATION
4.1 IMPLEMENTATION SERVICES SHALL BE PROVIDED UNTIL COMPLETION OF
IMPLEMENTATION AS CONTEMPLATED HEREUNDER.
4.2 LICENSEE MAY TERMINATE THE IMPLEMENTATION SERVICES IF OSI FAILS TO
COMPLY WITH ANY MATERIAL PROVISION OF THESE IMPLEMENTATION TERMS AND
CONDITIONS AND OSI MAY TERMINATE THE IMPLEMENTATION SERVICES IF
LICENSEE FAILS TO REASONABLY COOPERATE WITH OSI'S PERFORMANCE OF THE
IMPLEMENTATION SERVICES OR FAILS TO COMPLY WITH ANY MATERIAL PROVISION
OF THESE IMPLEMENTATION TERMS AND CONDITIONS; PROVIDED, HOWEVER, IN
EACH CASE, THAT:
a. the non-defaulting party must first provide the defaulting party
with written notice of the default and give the defaulting party
a period of thirty (30) days in which to cure such default, and
b. in the event that the default is of such a nature that it cannot
be cured within thirty (30) days, the defaulting party shall be
given a reasonable period of additional time to cure such
default, further provided that the defaulting party promptly
commences work to cure such default and makes diligent efforts to
cure such default as soon as practicable.
4.3 ANY TERMINATION OF THE IMPLEMENTATION SERVICES SHALL ALSO BE DEEMED A
TERMINATION OF THE LICENSE AND THE AGREEMENT.
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In the event of termination of the Implementation Services or the
License for any reason other than a material default by OSI prior to
the Live Production Date, Licensee shall pay to OSI the full amount of
the Implementation Services Fee and twenty-five percent (25%) of the
Initial Software License Fee.
In the event of termination of the License by Licensee for any reason
after completion of the Conversion and a successful Acceptance Test,
Licensee shall pay to OSI the full Implementation Fee, the full
Software License Fee and any other amounts that have accrued and are
payable by Licensee pursuant to the terms of this Agreement.
5. CONFIDENTIALITY
All information provided by either party to the other pursuant to these terms
and conditions shall be subject to the confidentiality obligations set forth in
the End User Software License.
6. EXCLUSIONS
OSI shall have no obligation to conduct Implementation Services in relation to
any software other than that specified in a Product Order and shall only be
obligated to conduct Licensed Software Installation, Pre-Conversion, if
applicable, Conversion, if applicable, and Training Services once Licensee has
completed Equipment and Network Installations in accordance with the terms and
conditions of this Agreement.
7. LIMITATION OF LIABILITY
7.1 OSI REPRESENTS AND WARRANTS THAT ALL IMPLEMENTATION SERVICES WILL BE
PERFORMED BY DULY QUALIFIED PERSONNEL IN A PROFESSIONAL WORKMAN-LIKE
MANNER AND TO STANDARDS GENERALLY ACCEPTED IN THE INDUSTRY.
7.2 EXCEPT FOR A BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER SECTION 5
OR ANY LIABILITY OSI MAY HAVE FOR PERSONAL INJURY OR DAMAGE OR
DESTRUCTION OF REAL OR TANGIBLE PERSONAL PROPERTY, OSI'S LIABILITY FOR
DAMAGES FOR ANY CAUSE OF ACTION WHATSOEVER RELATING TO OSI'S AGREEMENT
TO PROVIDE IMPLEMENTATION SERVICES SHALL BE LIMITED TO THE AMOUNT PAID
BY LICENSEE FOR THE IMPLEMENTATION SERVICES. OSI'S LIABILITY SHALL BE
FURTHER LIMITED AS PROVIDED IN THE END USER SOFTWARE LICENSE.
7.3 THESE TERMS AND CONDITIONS CONSTITUTE A SERVICE CONTRACT AND NOT A
PRODUCT WARRANTY. THE SOFTWARE AND ALL MATERIALS RELATED TO THE
LICENSED SOFTWARE ARE SUBJECT EXCLUSIVELY TO THE WARRANTIES SET FORTH
IN THE END USER SOFTWARE LICENSE.
7.4 THE PROVISIONS OF THIS SECTION 7 SHALL SURVIVE TERMINATION OR
EXPIRATION OF IMPLEMENTATION SERVICES AND/OR THE AGREEMENT FOR ANY
REASON WHATSOEVER.
ADDITIONAL ATTACHMENTS FOLLOW
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TRAINING SCHEDULE
TRAINING ON THE LICENSED SOFTWARE SHALL BE PROVIDED BY OSI TO INDIVIDUALS
DESIGNATED BY THE LICENSEE ON A "TRAIN-THE-TRAINER" BASIS, ACCORDING TO THE
FOLLOWING PLAN. OSI RECOGNIZES THAT THE TRAINING NEEDS OF INDIVIDUALS WILL VARY
AND ARE DEPENDENT UPON DIFFERENT SKILL LEVELS. CONSEQUENTLY, SOME ASPECTS OF THE
TRAINING SCHEDULE WILL BE BASIC TO SOME WHILE NECESSARY FOR OTHERS. THE SCHEDULE
SHALL BE AS FOLLOWS:
CONCEPTS AND FACILITIES 2 DAYS
O INTRODUCTION TO THE COMPLETE BANKING SOLUTION
O OVERVIEW OF THE SYSTEMS TRULY RELATIONAL DATABASE CONCEPT
(PERSONS, ADDRESSES, ACCOUNTS, RELATIONSHIPS, ETC.)
O TRUE CLIENT/SERVER ARCHITECTURE
O APPLICATION COMPONENT OVERVIEW
O APPLICATION AND DATA SECURITY
O ON-LINE HELP AND DOCUMENTATION
APPLICATION TRAINING 15 DAYS
O DEPOSIT PRODUCT SET-UP AND MAINTENANCE
O LOAN PRODUCT SET-UP AND MAINTENANCE
O SECURITY
O TELLER
O SYSTEM ADMINISTRATION
O CUSTOMER SERVICE REPRESENTATIVE
O BATCH MANAGER
O BATCH SERVER
O LOAN MONETARY
O LOAN CSR
O GENERAL LEDGER INTERFACE
O BANK OPERATIONS
O INTERFACE PROCESSING
O BRANCH OPERATIONS
DATABASE TRAINING 1 DAY
O DATABASE SERVER BACKUP/RECOVERY
O DATABASE ROLE SETUP/USER SETUP
O SYNONYM CREATION
O ARCHIVING MODE
OPERATIONS TRAINING 1 DAY
O GENERAL OPERATION - BANK
O GENERAL OPERATION - BRANCH/DEPARTMENT LEVEL
O INTERFACES (ACH, ATM, ETC.)
O SECURITY
O TECHNICAL SUPPORT
SYSTEM MANAGEMENT 2 DAYS
O NETWORK
O OPERATING SYSTEM
O REMOTE SUPPORT
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ADDITIONAL ATTACHMENTS FOLLOW
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SUPPORT SERVICES TERMS AND CONDITIONS
THIS ATTACHMENT RELATES TO AND IS HEREBY INCORPORATED INTO THE BELOW-REFERENCED
AGREEMENT. CAPITALIZED TERMS NOT DEFINED IN SECTION 8 BELOW HAVE THE SAME
MEANING AS DEFINED ELSEWHERE IN THIS AGREEMENT.
1. COVERAGE
SUBJECT TO THE TERMS HEREOF, OSI SHALL PROVIDE SUPPORT SERVICES TO LICENSEE FOR
THE LICENSED SOFTWARE INDICATED ON THE INITIAL PRODUCT ORDER. OSI SHALL PROVIDE
SUPPORT SERVICES HEREUNDER FOR EACH ADDITIONAL INSTALLATION OF LICENSED
SOFTWARE, PROVIDED LICENSEE PAYS TO OSI INITIAL AND ANNUAL LICENSE FEES FOR SUCH
ADDITIONAL INSTALLATIONS AS SPECIFIED IN SUBSEQUENT PRODUCT ORDERS. SUPPORT
SERVICES MUST BE OBTAINED SEPARATELY FOR EACH INSTALLATION OF LICENSED SOFTWARE.
2. SUPPORT SERVICES
SUPPORT SERVICES CONSIST OF:
a) ERROR CORRECTION AND TELEPHONE SUPPORT PROVIDED TO THE TECHNICAL
SUPPORT CONTACT CONCERNING THE INSTALLATION AND USE OF THE THEN
CURRENT RELEASE OF THE LICENSED SOFTWARE AND PREVIOUS SEQUENTIAL
RELEASE,
b) PRODUCT UPDATES, AS DEFINED HEREIN, OF THE LICENSED SOFTWARE THAT OSI
IN ITS DISCRETION MAKES GENERALLY AVAILABLE.
"PRODUCT UPGRADES" MEANS NEW RELEASES OF THE LICENSED SOFTWARE WHICH
SUPPORT NEW REGULATIONS AND PROVIDE PRODUCT ENHANCEMENTS AND FIXES.
PRODUCT UPDATES CONSIST OF ONE COPY OF PUBLISHED REVISIONS TO THE
PRINTED DOCUMENTATION AND ONE COPY OF REVISIONS THE MACHINE READABLE
LICENSED SOFTWARE. SUPPORT SERVICES DO NOT INCLUDE THE PHYSICAL
INSTALLATION OF PRODUCT UPDATES; ALL SUCH INSTALLATIONS MAY BE
PERFORMED BY OSI UPON LICENSEE'S WRITTEN REQUEST AND SHALL BE BILLABLE
TO LICENSEE AT OSI'S THEN CURRENT APPLICABLE RATE.
AS PART OF THE SUPPORT SERVICES PROVIDED HEREUNDER, OSI AGREES TO
PROVIDE PRODUCT UPDATES ON A TIMELY BASIS IN ORDER TO ENABLE LICENSEE
TO COMPLY WITH STATE AND FEDERAL BANKING LAWS AND REGULATIONS
PERTAINING TO THE SUBJECT MATTER OF THE LICENSED SOFTWARE. AS PROVIDED
IN THE EXCLUSIONS SECTION OF THIS DOCUMENT, A CONDITION PRECEDENT TO
CONTINUED SUPPORT SERVICES, PRODUCT UPDATES AND ANY WARRANTY RELATING
TO THE SOFTWARE, LICENSEE AGREES TO PROMPTLY IMPLEMENT SUCH
MODIFICATIONS, UPDATES AND ENHANCEMENTS TO THE LICENSED SOFTWARE (IN
THE FORM OF PRODUCT UPDATES) AND TO THIRD PARTY SOFTWARE LICENSED FROM
THIRD PARTY AS OSI SHALL REQUIRE FROM TIME TO TIME IN ITS SOLE
DISCRETION.
3. TERM AND TERMINATION
3.1 SUPPORT SERVICES SHALL BE PROVIDED FOR THE DURATION OF THE END-USER
SOFTWARE LICENSE, UNLESS TERMINATED BY EITHER PARTY AS PROVIDED IN
THIS AGREEMENT HEREIN.
3.2 OSI MAY SUSPEND OR CANCEL SUPPORT SERVICES IF LICENSEE FAILS TO MAKE
PAYMENTS PURSUANT TO THE SECTION TITLED "FEES AND PAYMENT," OTHER THAN
PAYMENTS BEING DISPUTED IN GOOD FAITH, WITHIN TEN (10) DAYS AFTER
LICENSEE RECEIVES NOTICE OF NONPAYMENT.
3.3 OSI MAY SUSPEND OR CANCEL SUPPORT SERVICES IF LICENSEE FAILS IN A
REASONABLY PROMPT MANNER TO IMPLEMENT SUCH MODIFICATIONS, UPDATES AND
ENHANCEMENTS TO THE LICENSED SOFTWARE (IN THE FORM OF PRODUCT UPDATES)
AND TO THIRD PARTY SOFTWARE
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LICENSED FROM THIRD PARTY AS OSI SHALL REQUIRE FROM TIME TO TIME IN
ITS SOLE DISCRETION.
3.4 LICENSEE MAY TERMINATE SUPPORT SERVICES AND ITS PAYMENT OBLIGATIONS
HEREUNDER BY GIVING OSI A THIRTY (30) DAYS PRIOR WRITTEN NOTICE OF
TERMINATION. SUCH TERMINATION SHALL BE EFFECTIVE ONLY UPON THE
EXPIRATION OF THE SUPPORT PERIOD COVERED BY LICENSEE'S LAST PAID
ANNUAL LICENSE FEE.
3.5 OSI MAY TERMINATE IN ITS SOLE DISCRETION THE SUPPORT SERVICES RELATED
TO A SPECIFIC SOFTWARE VERSION, DESIGNATED COMPUTER HARDWARE, HARDWARE
CONFIGURATION OR NETWORK STRUCTURE OF THE SOFTWARE UPON A PRIOR THREE
(3) YEAR WRITTEN NOTICE OF SUPPORT SERVICE DISCONTINUANCE.
4. FEES AND PAYMENT
4.1 LICENSEE SHALL PAY OSI AN ANNUAL LICENSE FEE FOR THE LICENSED
SOFTWARE, WHICH SHALL BE COMPUTED IN ACCORDANCE WITH THE LICENSE FEE
SCHEDULE. THE ANNUAL LICENSE FEE COMMENCES NINETY (90) DAYS FOLLOWING
THE LIVE PRODUCTION DATE.
THE ANNUAL LICENSE FEE SHALL BE BILLED ON AN ANNUAL BASIS, PAYABLE IN
ADVANCE OF OSI'S PROVIDING ANNUAL SUPPORT SERVICES. LICENSEE'S PAYMENT
SHALL BE DUE WITHIN THIRTY (30) DAYS OF RECEIPT OF OSI INVOICE.
LICENSEE SHALL BE RESPONSIBLE FOR ALL TAXES ASSOCIATED WITH SUPPORT
SERVICES OTHER THAN US TAXES BASED ON OSI'S NET INCOME AND FRANCHISE
TAXES. IN THE EVENT LICENSEE FAILS TO PAY OSI BY THE DUE DATE, THEN TO
REINSTATE OR RENEW SUPPORT SERVICES, LICENSEE SHALL FIRST PAY OSI ALL
UNPAID PRIOR ANNUAL LICENSE FEES, PLUS A LATE CHARGE OF 1.5% PER MONTH
OVERDUE, AND THE THEN CURRENT ANNUAL LICENSE FEE, IF ANY, AS COMPUTED
IN ACCORDANCE WITH THIS AGREEMENT.
4.2 OSI INTENDS TO PROVIDE CERTAIN SUPPORT SERVICES VIA A REMOTE ON-LINE
CONNECTION TO LICENSEE'S DESIGNATED COMPUTER HARDWARE. LICENSEE HEREBY
AGREES TO ASSIST OSI IN THE CREATION OF SUCH A REMOTE ON-LINE
CONNECTION AS PART OF THE IMPLEMENTATION OF THE SOFTWARE AND AGREES TO
MAINTAIN AND ALLOW OSI ACCESS TO ITS DESIGNATE COMPUTER HARDWARE AND
THE SOFTWARE THROUGH SUCH REMOTE ON-LINE CONNECTION. IN THE EVENT THAT
THE REMOTE ON-LINE CONNECTION IS NOT AVAILABLE TO OSI NECESSITATING
THAT OSI'S PERSONNEL HAVE TO ATTEND LICENSEE'S FACILITY TO PERFORM
SUPPORT SERVICES THAT WOULD OTHERWISE HAVE BEEN PROVIDED VIA THE
REMOTE ON-LINE CONNECTION ("ADDITIONAL SUPPORT SERVICES"), LICENSEE
AGREES, IN ADDITION TO THE ANNUAL LICENSE FEE:
a) TO PAY A PER DIEM CHARGE FOR ALL ADDITIONAL SUPPORT SERVICES AT
OSI'S THEN STANDARD RATES FOR SUCH SERVICES AND
b) TO REIMBURSE OSI FOR ALL REASONABLE TRAVEL AND LIVING EXPENSES
INCURRED BY OR ON BEHALF OF OSI AND ITS PERSONNEL IN PROVIDING
THE ADDITIONAL SUPPORT SERVICES TO LICENSEE AT LICENSEE'S
FACILITY, WHICH SHALL HAVE BEEN PRE- APPROVED BY LICENSEE IN
WRITING.
ANY SUCH CHARGES FOR ADDITIONAL SUPPORT SERVICES AND REIMBURSEMENT FOR
TRAVEL AND LIVING EXPENSES SHALL BE BILLED BY OSI TO LICENSEE ON A
MONTHLY BASIS.
5. RESPONSE, PROBLEM RESOLUTION STANDARDS AND ERROR PRIORITY LEVELS
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5.1 ALL REASONABLE EFFORTS SHALL BE MADE TO RESOLVE PROBLEMS PROMPTLY.
UPON LICENSEE'S NOTIFICATION TO OSI OF A PROBLEM, OSI WILL INVESTIGATE
SUCH PROBLEM TO DETERMINE THE NATURE AND ORIGIN OF SUCH PROBLEM AND
UPON COMPLETION OF SUCH INVESTIGATION OUTLINE TO LICENSEE THE
PROCEDURES TO BE FOLLOWED IN REACHING RESOLUTION TO SUCH PROBLEM.
INITIAL CALL-BACK RESPONSE SHALL BE PROVIDED WITHIN ONE-HALF (1/2)
HOUR. OSI SHALL EXERCISE COMMERCIALLY REASONABLE EFFORTS TO CORRECT
ANY ERROR OR NON- CONFORMANCE REPORTED BY LICENSEE IN THE SOFTWARE,
WITH THE FOLLOWING PRIORITY LEVELS REASONABLY ASSIGNED TO SUCH ERROR
BY OSI IN ITS SOLE DISCRETION:
a) PRIORITY A ERRORS - OSI SHALL PROMPTLY COMMENCE THE FOLLOWING
PROCEDURES:
i) ASSIGN OSI PERSONNEL TO CORRECT THE ERROR;
ii) NOTIFY OSI MANAGEMENT THAT SUCH ERRORS HAVE BEEN REPORTED
AND OF STEPS BEING TAKEN TO CORRECT SUCH ERROR(S);
iii) PROVIDE LICENSEE WITH PERIODIC REPORTS ON THE STATUS OF THE
CORRECTIONS; AND
iv) INITIATE, WITHIN ONE (1) HOUR OF THE TIME THAT THE ERROR IS
REPORTED TO OSI, WORK TO PROMPTLY PROVIDE LICENSEE WITH A
WORK-AROUND OR FIX AND DILIGENTLY PURSUE A RESOLUTION OF THE
ERROR. IN THE EVENT OSI ADDRESSES ANY PRIORITY A ERROR BY
MEANS OF A TEMPORARY WORK- AROUND, OSI SHALL EXERCISE
COMMERCIALLY REASONABLE EFFORTS TO EFFECT A FINAL RESOLUTION
OF THE ERROR AS SOON AS POSSIBLE THEREAFTER.
v) WITH RESPECT TO PRIORITY A ERRORS THAT OSI BECOMES AWARE OF,
OSI SHALL PROMPTLY NOTIFY LICENSEE AND PROCEED TOWARDS
RESOLUTION.
b) PRIORITY B ERRORS - OSI SHALL EXERCISE COMMERCIALLY REASONABLE
EFFORTS TO INCLUDE THE FIX FOR THE ERROR IN THE NEXT REGULAR
PRODUCT UPDATE.
c) PRIORITY C ERRORS - OSI MAY INCLUDE THE FIX FOR THE ERROR IN THE
NEXT PRODUCT UPDATE.
5.2 IF OSI BELIEVES REASONABLY AND IN GOOD FAITH THAT A PROBLEM REPORTED
BY LICENSEE MAY NOT BE DUE TO AN ERROR IN THE LICENSED SOFTWARE OR DUE
TO AN ERROR IN THIRD PARTY SOFTWARE LICENSED THROUGH OSI, BUT MAY BE
DUE TO ANOTHER CAUSE (AS ILLUSTRATED HEREIN), OSI WILL SO NOTIFY
LICENSEE. SUCH OTHER CAUSE MAY INCLUDE BUT NOT BE LIMITED TO THE
FAILURE BY LICENSEE TO INSTALL OSI RECOMMENDED UPDATES TO THIRD PARTY
SOFTWARE LICENSED FROM THIRD PARTY, THE INSTALLATION BY LICENSEE OF
SOFTWARE, OR OF A RELEASE OR VERSION OF THIRD PARTY SOFTWARE, WHICH
HAS NOT BEEN CERTIFIED AND APPROVED BY OSI, OR LICENSEE'S INSTALLATION
OF HARDWARE OR NETWORK COMPONENTS WHICH HAVE NOT BEEN CERTIFIED AND
APPROVED BY OSI. AT THAT TIME, LICENSEE MAY
a) INSTRUCT OSI TO PROCEED WITH PROBLEM DETERMINATION AT LICENSEE'S
POSSIBLE EXPENSE AS SET FORTH BELOW, OR
b) INSTRUCT OSI THAT LICENSEE DOES NOT WISH THE PROBLEM PURSUED AT
LICENSEE'S POSSIBLE EXPENSE.
IF LICENSEE REQUESTS THAT OSI PROCEED WITH PROBLEM DETERMINATION
AT ITS POSSIBLE EXPENSE AND OSI DETERMINES THAT THE ERROR WAS NOT
DUE TO AN ERROR IN THE LICENSED SOFTWARE, LICENSEE SHALL PAY OSI,
AT OSI'S THEN CURRENT AND STANDARD CONSULTING RATES, FOR ALL WORK
PERFORMED IN CONNECTION WITH SUCH DETERMINATION, PLUS REASONABLE
RELATED EXPENSES INCURRED THEREWITH.
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LICENSEE SHALL NOT BE LIABLE FOR:
a) PROBLEM DETERMINATION OR REPAIR TO THE EXTENT PROBLEMS ARE DUE TO
ERRORS IN THE LICENSED SOFTWARE OR TO ERRORS IN THIRD PARTY
SOFTWARE LICENSED THROUGH OSI,
b) WORK PERFORMED UNDER THIS PARAGRAPH IN EXCESS OF ITS
INSTRUCTIONS, OR
c) WORK PERFORMED AFTER LICENSEE HAS NOTIFIED OSI THAT IT NO LONGER
WISHES WORK ON THE PROBLEM DETERMINATION TO BE CONTINUED AT ITS
POSSIBLE EXPENSE (SUCH NOTICE SHALL BE DEEMED GIVEN WHEN ACTUALLY
RECEIVED IN WRITING BY OSI).
IF LICENSEE INSTRUCTS OSI THAT IT DOES NOT WISH THE PROBLEM PURSUED AT
ITS POSSIBLE EXPENSE OR IF SUCH DETERMINATION REQUIRES EFFORT IN
EXCESS OF LICENSEE'S INSTRUCTIONS, OSI MAY, AT ITS SOLE DISCRETION,
ELECT NOT TO INVESTIGATE THE ERROR WITH NO LIABILITY THEREFOR. IN ALL
CASES WHERE THE PROBLEMS ARE DUE TO LICENSED SOFTWARE OR TO ERRORS IN
THIRD PARTY SOFTWARE LICENSED THROUGH OSI, OSI SHALL BE RESPONSIBLE
FOR CORRECTING SAME.
5.3 IN THE EVENT THAT OSI FAILS TO RESOLVE A PROBLEM OR CORRECT AN ERROR
WITHIN A REASONABLE TIME FRAME, THE PROBLEM SHALL BE ESCALATED TO OSI
SENIOR MANAGEMENT AND ADDITIONAL TECHNICAL SUPPORT RESOURCES OF A
LEVEL APPROPRIATE FOR RESOLUTION SHALL BE ASSIGNED TO THE PROBLEM ON A
PRIORITY BASIS. IN THE CASE OF A PRIORITY A ERROR, FOUR (4) HOURS FROM
THE TIME THE ERROR IS REPORTED SHALL BE DEEMED A REASONABLE TIME FRAME
TO ESCALATE OSI'S EFFORTS.
5.4 IN THE EVENT THAT OSI IS UNABLE TO RESOLVE OR CORRECT A PRIORITY A
ERROR IN OSI'S PROPRIETARY SOFTWARE WITHIN A COMMERCIALLY REASONABLE
PERIOD OF TIME, LICENSEE SHALL BE ENTITLED TO TERMINATE THE LICENSE AS
PROVIDED IN SECTION 8.4 OF THE END USER SOFTWARE LICENSE AND RETURN
THE LICENSED SOFTWARE WITH A PRO-RATED INITIAL LICENSE FEE REFUND
BASED ON AN UNEXPIRED TERM AMORTIZED USAGE SCHEDULE.
6. CONFIDENTIALITY
ALL INFORMATION PROVIDED BY EITHER PARTY TO THE OTHER PURSUANT TO THESE TERMS
AND CONDITIONS SHALL BE SUBJECT TO THE CONFIDENTIALITY OBLIGATIONS SET FORTH IN
THE END USER SOFTWARE LICENSE.
7. EXCLUSIONS
7.1 A CONDITION PRECEDENT TO OSI'S OBLIGATION TO PERFORM SUPPORT SERVICES
SHALL BE THAT THE SOFTWARE PROBLEMS SHALL NOT BE SOLELY THE RESULT OF
a) LICENSEE'S NEGLIGENCE, ABUSE OR MISAPPLICATION OF THE SOFTWARE,
b) USE OF THE SOFTWARE OTHER THAN AS SPECIFIED IN THE DOCUMENTATION,
c) USE OF THE SOFTWARE IN CONJUNCTION WITH HARDWARE IDENTIFIED BY
OSI AS INCOMPATIBLE WITH THE SOFTWARE,
d) LICENSEE'S FAILURE TO PROMPTLY IMPLEMENT SUCH MODIFICATIONS,
UPDATES AND ENHANCEMENTS TO THE LICENSED SOFTWARE (IN THE FORM OF
PRODUCT UPDATES) AND TO THIRD PARTY SOFTWARE LICENSED FROM THIRD
PARTY AS OSI SHALL REQUIRE FROM TO TIME IN ITS SOLE DISCRETION,
OR
e) OTHER CAUSES BEYOND THE REASONABLE CONTROL OF OSI.
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7.2 OSI SHALL HAVE NO OBLIGATION TO SUPPORT:
a) ALTERED, DAMAGED OR MODIFIED LICENSED SOFTWARE (UNLESS SUCH
MODIFICATIONS ARE CONSENTED TO IN WRITING BY OSI OR OTHERWISE
AUTHORIZED, PERMITTED OR PROVIDED FOR UNDER THE DOCUMENTATION,
SPECIFICATIONS OR THIS AGREEMENT) OR ANY PORTION OF THE LICENSED
SOFTWARE INCORPORATED WITH OR INTO OTHER SOFTWARE;
b) LICENSED SOFTWARE THAT IS NOT THE THEN CURRENT RELEASE OR
IMMEDIATELY PREVIOUS SEQUENTIAL RELEASE.
7.3 UPON LICENSEE'S REQUEST, OSI SHALL PROVIDE SUPPORT SERVICES FOR THE
LICENSED SOFTWARE WHICH HAS MALFUNCTIONED AS A RESULT OF ANY OF THE
CAUSES DESCRIBED IN THIS SECTION 7 AT ITS THEN CURRENT AND STANDARD
RATES FOR MATERIAL AND LABOR.
7.4 SUPPORT SERVICES DO NOT INCLUDE PHYSICAL INSTALLATION OF PRODUCT
UPDATES.
8. LIMITATION OF LIABILITY
EXCEPT FOR A BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER SECTION 6 OR ANY
LIABILITY OSI MAY HAVE FOR PERSONAL INJURY OR DAMAGE OR DESTRUCTION OF REAL OR
TANGIBLE PERSONAL PROPERTY, OSI'S LIABILITY FOR DAMAGES FROM ANY CAUSE OF ACTION
WHATSOEVER RELATING TO OSI'S AGREEMENT TO PROVIDE SUPPORT SERVICES SHALL BE
LIMITED TO THE AMOUNT PAID BY LICENSEE AS ANNUAL LICENSE FEE FOR THE APPLICABLE
YEAR.
OSI AGREES THAT IT WILL NOT WRONGFULLY DISABLE OR OTHERWISE RENDER INOPERABLE
THE SOFTWARE OR ANY OTHER HARDWARE OR SOFTWARE ON LICENSEE'S COMPUTER SYSTEM FOR
ANY REASON. ANY LIMITATION OF LIABILITIES SET OUT IN THIS SECTION AND WITH
RESPECT TO OSI WILL BE NULL AND VOID IF OSI BREACHES ITS AGREEMENT SET FORTH IN
THE IMMEDIATELY PRECEDING SENTENCE.
9. DEFINITIONS
UNLESS DEFINED OTHERWISE HEREIN, CAPITALIZED TERMS USED IN THESE SUPPORT
SERVICES TERMS AND CONDITIONS SHALL HAVE THE SAME MEANING AS SET FORTH IN THE
AGREEMENT.
"ACCOUNTS" MEANS COMBINED TOTALS OF LICENSEE'S LIABILITY AND ASSET ACCOUNTS
PROCESSED ON THE SOFTWARE.
"ASSET SIZE" MEANS TOTAL ASSETS AS DESCRIBED IN THE LICENSEE'S MOST RECENT
QUARTERLY REPORT OF CONDITION ("CALL REPORT") FILED WITH THE PRIMARY REGULATOR.
"ERROR" MEANS THE NON-CONFORMANCE OR ERROR IN LICENSED SOFTWARE, OR THE
APPLICABLE PORTION THEREOF, WHICH CAUSES THE OSI PROPRIETARY SOFTWARE TO FAIL TO
CONSISTENTLY, ACCURATELY AND RELIABLY OPERATE AND PERFORM THE FEATURES AND
FUNCTIONS DESCRIBED IN AND IN ACCORDANCE WITH THE SPECIFICATIONS AND THE
DOCUMENTATION.
"ERROR CORRECTION" MEANS THE USE OF COMMERCIALLY REASONABLE EFFORTS TO CORRECT
ERRORS IN ACCORDANCE WITH THE TERMS AND CONDITIONS CONTAINED IN THIS ATTACHMENT.
"FIX" MEANS THE REPAIR OR REPLACEMENT OF OBJECT OR EXECUTABLE CODE VERSIONS OF
LICENSED SOFTWARE TO REMEDY AN ERROR.
"PREVIOUS SEQUENTIAL RELEASE" MEANS THE RELEASE OF LICENSED SOFTWARE WHICH HAS
BEEN REPLACED BY A SUBSEQUENT RELEASE OF THE SAME LICENSED SOFTWARE.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, A PREVIOUS SEQUENTIAL
RELEASE WILL BE SUPPORTED BY OSI FOR A PERIOD OF NOT LESS THAN SIX (6) MONTHS
AFTER RELEASE OF THE SUBSEQUENT RELEASE.
"PRIORITY A ERROR" MEANS AN ERROR WHICH RENDERS OSI PROPRIETARY SOFTWARE
INOPERATIVE, CAUSES MATERIAL INACCURACIES IN THE DATA PROCESSED BY THE OSI
PROPRIETARY SOFTWARE, OR MATERIALLY RESTRICTS LICENSEE'S USE OF THE OSI
PROPRIETARY SOFTWARE.
32
<PAGE> 33
"PRIORITY B ERROR" MEANS AN ERROR WHICH DEGRADES THE FUNCTIONS AND FEATURES OF
THE OSI PROPRIETARY SOFTWARE OR RESTRICTS THE LICENSEE'S USE OF THE OSI
PROPRIETARY SOFTWARE.
"PRIORITY C ERROR" MEANS AN ERROR WHICH IS COSMETIC OR TRIVIAL IN NATURE AND
WHICH CAUSES ONLY A MINOR IMPACT ON THE LICENSEE'S USE OF THE OSI PROPRIETARY
SOFTWARE.
"SUPPORT SERVICES" MEANS OSI SUPPORT SERVICES AS DESCRIBED IN SECTION 2.
"TELEPHONE SUPPORT" MEANS TECHNICAL SUPPORT TELEPHONE ASSISTANCE PROVIDED BY OSI
TO THE TECHNICAL SUPPORT CONTACT CONCERNING PROBLEM RESOLUTION AND THE USE OF
THE THEN CURRENT RELEASE OF LICENSED SOFTWARE AND THE PREVIOUS SEQUENTIAL
RELEASE. CALLS WILL BE ACCEPTED DURING OSI'S NORMAL BUSINESS HOURS, EXCEPT THAT
IN THE EVENT OF AN EMERGENCY, OSI WILL ACCEPT ALL CALLS MADE TO THE EMERGENCY
OFF-HOURS TELEPHONE NUMBERS WHICH OSI SHALL SUPPLY TO LICENSEE AND ALWAYS
PROMPTLY UPDATE AS THEY CHANGE, 24 HOURS PER DAY, 7 DAYS PER WEEK, 365 DAYS PER
YEAR.
"WORK AROUND" MEANS A MODIFICATION OF THE LICENSED SOFTWARE AND/OR A CHANGE IN
THE PROCEDURES FOLLOWED OR DATA SUPPLIED BY LICENSEE TO AVOID AN ERROR WITHOUT
SUBSTANTIALLY IMPAIRING LICENSEE'S USE OF LICENSED SOFTWARE.
THESE TERMS AND CONDITIONS CONSTITUTE A SERVICE CONTRACT AND NOT A PRODUCT
WARRANTY. THE LICENSED SOFTWARE AND ALL MATERIALS RELATED TO THE LICENSED
SOFTWARE ARE SUBJECT EXCLUSIVELY TO THE WARRANTIES SET FORTH IN THE END-USER
SOFTWARE LICENSE. THIS ATTACHMENT IS AN ADDITIONAL PART OF THE AGREEMENT AND
DOES NOT CHANGE OR SUPERSEDE ANY TERM OF THE AGREEMENT EXCEPT TO THE EXTENT
UNAMBIGUOUSLY CONTRARY THERETO.
ADDITIONAL ATTACHMENTS FOLLOW
33
<PAGE> 34
ESCROW TERMS AND CONDITIONS
THIS ATTACHMENT RELATES TO AND IS INCORPORATED INTO THE BELOW-REFERENCED
AGREEMENT. CAPITALIZED TERMS NOT DEFINED HEREIN HAVE THE SAME MEANING AS DEFINED
ELSEWHERE IN THE AGREEMENT.
1. SOURCE CODE AGREEMENT
UPON EXECUTION OF THIS AGREEMENT, OSI AGREES TO IMMEDIATELY PLACE AND THEREAFTER
MAINTAIN THE SOURCE CODE (AS HEREINAFTER DEFINED) FROM THE MOST CURRENT RELEASE
OF THE PROPRIETARY SOFTWARE AND THE LAST RELEASE OF THE PROPRIETARY SOFTWARE IN
ESCROW WITH AN AGENT PURSUANT TO AN ESCROW AGREEMENT REASONABLY ACCEPTABLE TO
LICENSEE, WHICH OSI SHALL PROVIDE TO LICENSEE FOR REVIEW PRIOR TO EXECUTION. THE
SOURCE CODE SHALL BE UPDATED PER EACH NEW RELEASE. THE AGREEMENT BETWEEN THE
ESCROW AGENT AND OSI SHALL PROVIDE THAT IN THE EVENT OSI CEASES TO DO BUSINESS
IN THE NORMAL COURSE, DISCONTINUES OFFERING TO PROVIDE SUPPORT, IS IN DEFAULT OF
ITS OBLIGATIONS AS SET OUT IN THE SUPPORT SERVICES TERMS AND CONDITIONS, OR IN
THE EVENT OF INSOLVENCY, BANKRUPTCY, OR ASSIGNMENT FOR THE BENEFITS OF CREDITORS
OF OSI, LICENSEE SHALL HAVE THE RIGHT TO SECURE THE SOURCE CODE FROM SAID ESCROW
AGENT.
THE ESCROW AGENT SHALL BE AUTHORIZED TO RELEASE THE SOURCE CODE TO LICENSEE IN
ACCORDANCE WITH THESE ESCROW TERMS AND CONDITIONS. LICENSEE IS (AND SAID SOURCE
CODE AGREEMENT BETWEEN OSI AND ESCROW AGENT SHALL STATE THAT LICENSEE IS) AN
INTENDED THIRD PARTY BENEFICIARY AND HAS A DIRECT RIGHT OF ACTION TO ENFORCE THE
PROVISIONS OF SAID SOURCE CODE AGREEMENT BETWEEN OSI AND ESCROW AGENT.
2. LICENSE
IN THE EVENT THAT LICENSEE OBTAINS THE SOURCE CODE PURSUANT TO THESE ESCROW
TERMS AND CONDITIONS, THE SOURCE CODE SHALL BE DEEMED TO BE LICENSED TO THE SAME
EXTENT AS THE PROPRIETARY SOFTWARE IS LICENSED TO LICENSEE PURSUANT TO THE END
USER SOFTWARE LICENSE, EXCEPT THAT
a) LICENSEE SHALL USE THE SOURCE CODE SOLELY TO MAINTAIN AND SUPPORT, AND
FOR THESE PURPOSES TO MODIFY, UPDATE AND UPGRADE THE PROPRIETARY
SOFTWARE AND
b) LICENSEE SHALL HAVE THE RIGHT TO MAKE SUCH COPIES OF THE LICENSED
SOFTWARE AND DOCUMENTATION AS ARE REASONABLY NECESSARY FOR LICENSEE'S
USE OF THE LICENSED SOFTWARE AND DOCUMENTATION AS CONTEMPLATED
HEREUNDER AND FOR BACK UP AND ARCHIVAL PURPOSES. IN EXERCISING THIS
RIGHT, LICENSEE SHALL REPRODUCE AND INCLUDE THE COPYRIGHT NOTICE AND
ANY OTHER NOTICES THAT APPEAR ON THE ORIGINAL LICENSED SOFTWARE AND
DOCUMENTATION ON ANY COPIES AND ANY MEDIA THEREFOR.
3. DEFINITIONS
FOR PURPOSES OF THE AGREEMENT, "SOURCE CODE" SHALL MEAN BOTH MACHINE READABLE
AND HUMAN READABLE COPIES OF THE PROPRIETARY SOFTWARE CONSISTING OF INSTRUCTIONS
TO BE EXECUTED UPON A COMPUTER IN THE LANGUAGE USED BY ITS PROGRAMMERS (I.E.
PRIOR TO COMPILATION OR ASSEMBLY) IN A FORM IN WHICH THE PROGRAM LOGIC OF THE
PROPRIETARY SOFTWARE IS DEDUCIBLE BY A HUMAN BEING, FULLY COMMENTED, AND
INCLUDING ALL AVAILABLE RELATED FLOW DIAGRAMS AND ALL OTHER DOCUMENTATION AND
MANUALS WHICH WOULD ALLOW PERSONS WHO ARE EXPERIENCED COMPUTER PROGRAMMERS BUT
WHO ARE UNFAMILIAR WITH THE PROPRIETARY SOFTWARE TO PROPERLY EFFECT
MODIFICATIONS AND SUPPORT FOR THE PROPRIETARY SOFTWARE.
ADDITIONAL ATTACHMENTS TO FOLLOW
34
<PAGE> 35
CONVERSION ACCEPTANCE AGREEMENT
THIS AGREEMENT BETWEEN OSI AND LICENSEE SERVES TO DOCUMENT THE LICENSEE'S FINAL
ACCEPTANCE OF THE CONVERSION EFFORT. ANY PERSON REPRESENTING THE LICENSEE IN
THIS MATTER MUST BE VESTED WITH THE AUTHORITY TO DO SO. THIS AGREEMENT SIGNIFIES
THAT THE LICENSEE HAS REVIEWED THE FUNCTIONALITY OF THE LICENSEE'S INSTALLATION
AND IS SATISFIED THAT:
_THE LICENSED SOFTWARE IS INSTALLED CORRECTLY AND THAT ALL FUNCTIONALITY
PROMISED IS PRESENT AND AVAILABLE.
_ALL DEPARTMENTS WITHIN LICENSEE HAVE DEMONSTRATED THEIR ABILITY TO FUNCTION
SATISFACTORILY WITH THE SYSTEM.
_ALL COMMITMENTS MADE BY OSI HAVE BEEN FULFILLED AND NO ISSUES REMAIN. BY
SIGNING THIS DOCUMENT, THE LICENSEE ACKNOWLEDGES SUCCESSFUL INSTALLATION OF THE
LICENSED SOFTWARE AND AGREES TO RELEASE ANY MONEYS THAT ARE CURRENTLY UNPAID OR
HELD IN ESCROW.
LICENSEE: _____________________________________________________________________
SIGNATURE: _________________________________________________ DATE: ____________
NAME: ________________________________________________ TITLE: _________________
LICENSOR: OPEN SOLUTIONS INC.
----------------------------------------------------------------------
SIGNATURE: _________________________________________________ DATE: ____________
NAME: ________________________________________________ TITLE: _________________
ADDITIONAL ATTACHMENTS FOLLOW
35
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 6, 1998 relating to
the financial statements of Open Solutions Inc., which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedules for the three years ended December 31, 1997 listed under
Item 16(b) of this Registration Statement when such schedules are read in
conjunction with the financial statements referred to in our report. The audits
referred to in such report also included these schedules. We also consent to the
references to us under the headings "Experts" and "Selected Financial Data" in
such Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Data."
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Hartford, Connecticut
June 9, 1998
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<PERIOD-START> JAN-01-1997
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21,653
15,551,214
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<TABLE> <S> <C>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
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21,658
16,139,549
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